Except where a statutory demand is based on a judgement debt following a court order, careful consideration needs to be given as to the appropriateness of pursuing this way forward rather than issuing legal proceedings for the recovery of a ‘debt’ whether you are:
- A creditor contemplating serving a statutory demand (or giving reconsideration to having served a statutory demand in the light of an application to set aside the statutory demand)); or,
- As the recipient of a statutory demand considering the merits of making an application to set aside the statutory demand.
The implications of getting this consideration wrong can be costly.
The scheme of the bankruptcy legislation is that substantial disputes about indebtedness are not matters to be resolved by the bankruptcy courts as part and parcel of the bankruptcy process.
The court may grant an application to set aside a statutory demand where one of the following grounds apply:
- The debt is disputed on substantial grounds.
- The debtor appears to have a counterclaim, set off or cross demand which equals or exceeds the amount of the debt.
- The creditor holds security for the value of the debt.
- The court is satisfied on other grounds that the demand ought to be set aside.
Rule 10.5 Insolvency (England and Wales) Rules 2016 (SI 2016/1024)
By far the most common grounds for challenging / setting aside the statutory demand are that there the debt is disputed on ‘substantial grounds’ or that there is a set-off or counterclaim that equals or exceeds the value of the debt.
If there is a real dispute as to whether the debt is owing, pursuing the ‘debtor’ through the bankruptcy courts is not appropriate.
In this situation, the ‘creditor’ should pursue the debtor through the ordinary courts.
In the current circumstances we find ourselves in, with the lockdown due to coronavirus (covid-19) threatening livelihoods and affecting the financial resilience of businesses and individuals alike, it is important, arguably more than ever, to ensure that the appropriate steps are taken when pursuing or defending a claim to money owing.
Advice, drafting and legal representation is available as required, covering the full range of bankruptcy matters.
Direct access to a barrister enables you to reduce costs in the following ways. A barrister may be instructed without you first having to approach a solicitor. As barristers have lower overheads than firms of solicitors, we are generally cheaper.
Direct access also means that you need only seek – and therefore pay for – advice or other assistance as and when you need it.
Direct access is the perfect legal solution for individuals and organisations looking for quick, accessible and specialist advice on their rights and obligations and procedural steps to be undertaken in, and prior to, any legal proceedings.
- Require advice on a discrete point?
- Want advice on the procedure to be followed in a particular case?
- Need an opinion on your chances of success?
- Representation at a hearing in appropriate cases?
Please do not hesitate to contact Dominic at Barrister KnowHow for more information.