Key Facts
- •Mr. Conrad Clauson applied to set aside a statutory demand for £3,335,962.99 from Knowles Construction Limited.
- •The debt stemmed from a personal guarantee Mr. Clauson provided for Yarborough Management Limited's debt to Knowles.
- •Disputes arose from construction works at 55 Avenue Road, London, leading to a compromise agreement including a personal guarantee and a new contract.
- •Knowles initiated Part 7 proceedings against Yarborough for the settlement sum (£830,000).
- •Yarborough counterclaimed against Knowles for significant defects in the works, totaling approximately £2,104,779.50.
- •Mr. Clauson argued the debt was disputed, he had a counterclaim/set-off, and the demand was improperly served.
Legal Principles
To set aside a statutory demand, the debtor must demonstrate a genuine triable issue – a real prospect of success in defending the claim or succeeding on a counterclaim.
Insolvency Rules 2016, Rule 10.5(5); Swain v Hillman [2001] 2 All E.R. 91; CPR 24.2(a)
Overstating the debt in a statutory demand doesn't automatically justify setting it aside.
Re a Debtor [1992] 1 W.L.R. 507; Howell v Lerwick Commercial Mortgage Corpn Ltd [2015] 1 W.L.R. 3554
The court has residual discretion to set aside a statutory demand if it's unjust for it to lead to bankruptcy consequences.
Octagon Assets Ltd. v. Remblance [2010] Bus. L.R. 119; In re A Debtor (No 1 of 1987) [1989] 1 WLR 271
Service of a statutory demand is a jurisdictional prerequisite for a bankruptcy petition; it must comply strictly with rules or have irregularities cured.
IA 1986, sections 267(2)(c), 268(1); IR 2016, rule 10.2; PDIP, paragraphs 11.2, 12.7; Regional Collection Services Ltd v Heald [2000] BPIR 666; Canning v Irwin Mitchell LLP [2017] EWHC; Mandiri
Outcomes
Application to set aside the statutory demand dismissed.
While Yarborough's counterclaim created a substantial dispute regarding a portion of the debt, the court found sufficient evidence that the remaining portion (£1,231,183.49) was not substantially disputed. The court also determined that service, although not strictly personal, was sufficient to meet the requirements.