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“Problems and pitfalls in disputing statutory demands: the recent case law”

A. Introduction

1. This is an edited version of a paper given to the District Judges’ Chancery Meeting heldat the Rolls Buildings, London, on 20 March 2014. It is intended to give a quickoverview of the procedure for setting aside statutory demands in bankruptcyproceedings, and then comment on some trends in the recent case law.
   


2. In particular, it focuses on issues and developments arising out of the recent authoritieson two of the most commonly relied upon grounds for setting aside a statutory demand.It ends with discussion of the application of the ‘co-extensive’ principle, a novelapplication of the law that emerged from cases where guarantors sought to set asidestatutory demands served upon them.
   
   B. The general framework
   
   Grounds for a bankruptcy petition
   


3. The statutory demand is an integral part of the bankruptcy system. The grounds forpresenting a bankruptcy petition are as follows:
   

[IMG]http://file/page1image9440[/IMG] [IMG]http://file/page1image9600[/IMG] “...a creditor’s petition may be presented to the court in respect of a debt or debtsonly if, at the time the petition is presented —

(a) the amount of the debt, or the aggregate amount of the debts, is equal to orexceeds the bankruptcy level [which is presently £750], (b) the debt, or each of the debts, is for a liquidated sum payable to thepetitioning creditor, or one or more of the petitioning creditors, eitherimmediately or at some certain, future time, and is unsecured, (c) thedebt,oreachofthedebts,isadebtwhichthedebtorappe arseithertobe unable to pay or to have no reasonable prospect of being able to pay,and (d) there is no outstanding application to set aside a statutory demand served

(under section 268 below) in respect of the debt or any of the debts. (s. 267(2) IA 1986)

4. From the creditor’s perspective, it can be seen that the statutory demand plays a‘positive’ and ‘negative’ role in this scheme.

Attached Files

• Disputing_Statutory_Demands_-_M_Watson_apr14.pdf (413.1 KB)

Interesting info on Set aside for SD