Canning v Irwin Mitchell LLP

A fundamental defect in the service of a statutory demand meant the court had no jurisdiction to entertain a bankruptcy petition

Personal insolvency – bankruptcy petition – statutory demands – service – deemed service – section 268 Insolvency Act 1986

The petitioning law firm presented a statutory demand based on a judgment debt. The demand was left by a process server at an address located by a tracing agent as the residential address of the debtor. The petitioner then presented a petition based on this demand. The debtor contacted the petitioner to tell it that he had never resided at the address at which the demand had been left.  At all times it would have been possible for the petitioner to contact solicitors acting for the debtor.

A district judge held that the petitioner had not done all that it reasonably could to bring the demand to the attention of the debtor but nonetheless allowed the petition to continue on the basis that the debtor had suffered no prejudice.

On appeal, the judge dismissed the petition. The judge accepted that the debtor had not received the demand on which the petition was based by the time the petition was presented. The petitioner relied on a number of authorities including Bush v Bank Mandiri (Europe) Ltd [2011] BPRI 19 in support of the argument that an irregularly served demand could form the basis of a petition where the debtor suffered no prejudice as a result.

The judge held that a petition must, as a result of section 268 of the Insolvency Act 1986, be based on a properly served statutory demand for the court to have jurisdiction to consider it.  The authorities relied on by the creditor were all cases, unlike this case, where the demand had in fact been received by, or come within the dominion of, the debtor.

The absence of prejudice or considerations of proportionality could not be used to remedy a fundamental defect in service of the demand. Mandiri was wrong to the extent that it suggested otherwise.

This case is a clear reminder that the court will not take an indulgent approach to a failure to serve a demand in accordance with the Rules and the Insolvency Practice Direction, even when that failure does not appear to have caused any prejudice.