Application to set aside statutory demand – adequacy of security – method of determining value of an asset
This was an appeal against an order setting aside a statutory demand on the basis that the creditor, the appellant, had the benefit of security of a greater value than the debt.
The appellant had served the statutory demand for the unsatisfied part of a money judgment entered against the respondent debtor, and had obtained a charging order over the debtor’s interest in a property. The charge ranked behind a mortgage and a charge in favour of another judgment creditor. It was common ground, therefore, that the property would have to be worth at least £2.9 million in order fully to secure the debt to the appellant.
At first instance the deputy registrar had set aside the statutory demand on the ground that the debt was fully secured. In so doing he had relied on expert evidence suggesting that the property was worth £3.35 million on the open market.
On the appeal, the appellant creditor sought to adduce fresh evidence showing that the property had in fact been marketed for £2.5 million (pursuant to an order for sale in favour of the other judgment creditor who had the benefit of the prior mortgage and charge), only one offer had been received in the sum of £1.615 million, and that, after six months of being marketed, the “floor price” for the purposes of the order for sale (i.e. the price below which the other judgment creditor would have to seek permission of the court in order to effect a sale) had been reduced to just £1.7 million.
The deputy judge found that the interests of justice demanded that the matter be approached with the most up-to-date and reliable facts available, so long as those facts were probative of the matter in issue, allowed the appellant to adduce fresh evidence and dealt with the matter by way of rehearing.
He further found that the best indication of the value of an asset at any particular time was what another person might be willing to pay for the asset after reasonable attempts to sell it. Accordingly, the fact that no offer had been made to purchase the property for anything close to £2 million, despite six months’ marketing by a well-known and reputable agent, was highly persuasive, if not conclusive, evidence that it was not worth enough to secure the appellant’s debt fully. This evidence was found to be far more persuasive than the expert valuation evidence given to the deputy registrar. The statutory demand should therefore not have been set aside.
The best indication of the value of an asset at any particular time is what someone is prepared to pay for it after reasonable attempts to sell the asset – rather than expert evidence.
