In re a Debtor (No 1 of 1987), ex parte the Royal Bank of Scotland: CA 1989

A statutory demand as served showed an incorrectly calculated sum owed and was in the wrong form.
Held: The application to set the demand aside was refused. A statutory demand should not be set aside for a mere technicality.
Lord Justice Nicholls said: ‘The question arising on this appeal concerns the exercise by the court of its power to set aside a statutory demand ‘on other grounds’ within sub-paragraph (d) [of rule 6.5(4)] In my view, the right approach to paragraph (4) of rule 6.5 is this. Under the Act, a statutory demand which is not complied with founds the consequence that the debtor is regarded as being unable to pay the debt in question or, if the debt is not immediately payable, as having no reasonable prospect of being able to pay the debt when it becomes due. That consequence, in turn, founds the ability of the creditor to present a bankruptcy petition because, under section 268(1), in the absence of an unsatisfied return to execution or other process, a debtor’s inability to pay the debt in question is established if, but only if, the appropriate statutory demand has been served and not complied with. When therefore the rules provide, as does rule 6.5(4)(d), for the court to have a residual discretion to set aside a statutory demand, the circumstances which normally will be required before a court can be satisfied that the demand ‘ought’ to be set aside, are circumstances which would make it unjust for the statutory demand to give rise to those consequences in the particular case. The court’s intervention is called for to prevent that injustice.’
and ‘When therefore the rules provide, as does rule 6.5(4)(d), for the court to have a residual discretion to set aside a statutory demand, the circumstances which normally will be required before a court can be satisfied that the demand ‘ought’ to be set aside, are circumstances which would make it unjust for the statutory demand to give rise to those consequences in the particular case. The court’s intervention is called for to prevent that injustice.
This approach to sub-paragraph (d) is in line with the particular grounds specified in sub-paragraphs (a) to (c) of rule 6.5(4). Normally it would be unjust that an individual should be regarded as unable to pay a debt if the debt is disputed on substantial grounds: sub-paragraph (b). Likewise, if the debtor has a counterclaim, set-off or cross demand which equals or exceeds the amount of the debt: sub-paragraph (a). Again, if the creditor is fully secured: sub-paragraph (c).’

and ‘Nevertheless, applying the approach which I have indicated above as the correct approach to these statutory provisions, in my view it by no means follows from the existence of these defects that this statutory demand ought to be set aside. The court will exercise its discretion on whether or not to set aside a statutory demand, having regard to all the circumstances. That must require a court to have regard to all the circumstances as they are at the time of the hearing before the court. There may be cases where the terms of the statutory demand are so confusing or so misleading that, having regard to all the circumstances, justice requires that the demand should not be allowed to stand. There will be other cases where, despite such defects in the contents of the statutory demand, those defects have not prejudiced and will not prejudice the debtor in any way, and to set aside the statutory demand in such a case would serve no useful purpose. For example a debtor may be wholly unable to pay a debt which is immediately payable, either out of his own resources, or with financial assistance from others. In such a case the only practical consequence of setting aside a statutory demand would be that the creditor would immediately serve a revised statutory demand, which also and inevitably would not be complied with. In such a case the need for a further statutory demand would serve only to increase costs. Such a course would not be in the interests of anyone.’ and
‘In these circumstances I am in no doubt that, despite the mistakes in this statutory demand and the use strictly of the incorrect form, and despite the debtor not being aware of the precise amount of the debt when the demand was served on him, justice does not require that this statutory demand should be set aside. I can see no injustice in the consequences which flow from non-compliance with a statutory demand being permitted to flow in this case, despite the existence of those features.’
Lord Justice Nicholls
[1989] 1 WLR 271, [1989] 2 All ER 46
Insolvency Rules 1986 (1986 No 1925) 6.1 6.5(4)(d), Police Act 1996 2
England and Wales
Cited by:
CitedCoulter v Chief Constable of Dorset Police CA 8-Oct-2004
The appellant had failed in his action against the police and been ordered to pay the costs. A statutory demand was issued in the name of the respondent, but as the new chief constable had no deed of assignment, he was only equitable assignee.
CitedTS and S Global Ltd v Fithian-Franks and others ChD 18-Jun-2007
Appeal against setting aside of statutory demand disputed as to amount of liability under contract.
Held: The guarantors’ liability under the guarantee was immediately payable by them, without the need for a demand, before service of the . .
CitedRemblance v Octagon Assets Ltd CA 17-Jun-2009
A statutory demand was served against the guarantor of the lease after rent arrears arose. He applied for the demand to be set aside, and now appealed against its refusal. He said that the court would have set aside such a demand against the tenant, . .
CitedBudge v AH Budge (Contractors) Ltd CA 1997
When being asked to set aside a statutory demand, and exercising the statutory discretion, the real question is whether the applicant can show ‘a substantial reason comparable to the sort of reason one sees in paras (a), (b) and (c) of r 6.5(4), why . .
CitedWhite v Davenham Trust Ltd ChD 1-Nov-2010
. .
CitedMahon and Another v FBN Bank (UK) Ltd ChD 6-Jun-2011
The claimants appealed against a refusal to set aside a statutory demand. . .
CitedWhite v Davenham Trust Ltd CA 28-Jun-2011
Appeal against order reinstating statutory demand. . .
CitedMoore (T/A James Moore Earth Moving) v Inland Revenue ChNI 5-Dec-2001
Appeal against conditional setting aside of statutory demand. . .
CitedOwo-Samson v Barclays Bank Plc, Boyden CA 21-May-2003
The appellant challenged a formal statutory demand which had led to his bankruptcy. The demand had included the anticipated cost of realising the charged property, and also had been inflated to allow for extra costs of dealing the appellant who was . .
CitedShaw and Another v MFP Foundations and Piling Ltd ChD 6-Jan-2010
The defendants appealed against a refusal to set aside statutory demands adjudicated due under the 1996 Act. They said that the judge had accepted that he was bound by MFO and that it was on all fours, but he had not followed it.
Held: The . .
CitedAllen v Burke Construction Ltd ChNI 25-May-2010
. .

These lists may be incomplete.
Updated: 02 June 2021; Ref: scu.220020