CAN a debtor keep trotting out the same old story?
On 26 November 2015, the High Court (Harvey v Dunbar Assets Plc) heard an application to set aside a statutory demand. A statutory demand (in both corporate and personal insolvency) is a demand for a debt which is served on the debtor in a particular form: it is often an effective method of recovering a debt from someone (a person or a company) that has the means to pay, but chooses not to.
In both corporate and personal insolvency, if the debtor fails to pay the debt within 21 days of service of the statutory demand; does not satisfy/secure it to the creditors satisfaction; or take the appropriate steps to prevent the creditor from acting further on it, this will create a presumption of insolvency (on an inability to pay basis) of the debtor. From there, the next step is to ask the Court to make an order declaring a person bankrupt, or a company insolvent. This is sometimes known as presenting the petition with the aim not to make bankrupt, or wind-up (if a company) but to convince the debtor to pay, or at least come to the table for negotiation or discussion.
Where a debtor disputes the debt, the statutory demand route may be inappropriate. In the case of Harvey, the debtor had unsuccessfully raised an argument against an earlier statutory demand (and then abandoned that argument on appeal). The debt was the same and a second demand followed. Up until now there had been no direct authority (no case law, statute or other legal principle) on the point as to whether a debtor could repeat a previously flawed and unsuccessful argument. But did it make sense to hear the arguments all over again and delay matters further?
As there was no direct authority there were three ways that the Court could look at this. Whether the result was based on
1) Res judicata (you cannot try the same case twice);
2) Issue estoppel (an equitable, or fairness, principle); or
3) various case law
The result was the same: repeat litigation on the same point and the same material should be avoided in the public interest.
Knowing how, when (and when not) to serve a statutory demand, is part of the bread and butter of the modern, effective commercial litigator.
With a background in local industry, Stacy Jackson is ideally placed to give practical and pragmatic advice. Stacy works in the Commercial Litigation Team at Wilson Browne Solicitors, the NLS Large Law Firm of the Year 2015. She specialises in debt recovery and breach of contract and can be contacted on 01536 410014, by email at or by visiting www.wilsonbrowne.co.uk.