Setting aside a statutory demand (High Court)

The High Court has held that a District Judge’s decision to dismiss an individual’s application to set aside a statutory demand had been both wrong and unjust because of a serious procedural irregularity.

The decision was wrong because the District Judge had held that the debtor’s liability for a portion of the demand was sufficiently established because the debtor’s company (whose debts the debtor had guaranteed) had unsuccessfully attempted to pay the demanding creditor £60,000. Instead, this had merely been prima facie evidence that the debtor owed £60,000 and there was known to be other, unconsidered, evidence that might establish a counterclaim by the debtor. The debtor deserved to have this evidence considered even though it seemed unlikely that it would ultimately assist the debtor.

The decision was also unjust because it dismissed the application at a 15-minute hearing that all parties had expected to be simply a directions hearing. This was a serious procedural irregularity. It was not possible in that time for the District Judge to be taken through the evidence and decide that there was no triable issue.

The High Court accordingly proposed to order a re-hearing with a time estimate of two and a half hours once the debtor had filed a statement confirming details of the new evidence the debtor expected to obtain and reasons for the delay in examining it.

This case provides reminders that even applications that seem unlikely to succeed deserve a fair hearing; that an attempt to pay a debt is only prima facie evidence the debt is owing; and that debtors seeking to set aside a statutory demand should expect directions from the court at a first hearing, providing they establish a triable issue.

Case: Black v Sale Service & Maintenance Ltd [2018] EWHC 1344 (Ch) (15 May 2018).

PLC Practical Law 7.6.18