Bankruptcy – statutory demand – set aside – r.6.5(4)(b) Insolvency Rules 1986 – cross claim – undisputed debt less than £750
Lerwick served a statutory demand on Mr Howell based on two costs orders totalling £3,935. Mr Howell applied to set aside the statutory demand on the grounds that he had cross claims exceeding the costs orders. Although most of the cross claims were dismissed; the District Judge held that Mr Howell’s only remaining cross claims totalled £3,145 and since the sum demanded exceeded these by £790, it was not set aside. Mr Howell appealed.
Nugee J held that in fact Mr Howell’s cross claims totalled between £3,245 and £3,385 which were £690 to £550 short of the £3,935 in the statutory demand. Since the undisputed part of the debt in the statutory demand was less than £750, the issue was whether the statutory demand should be set-aside under the residual discretion in r.6.5(4)(d).
The court held, following Re a Debtor (Nos.49 and 50 of 1992) [1995] Ch 66, that a statutory demand should not necessarily be set aside under r.6.5(4)(d) simply because the undisputed debt was less than £750. Where the debtor relied on a cross claim which fell short of the debt by less than £750, then the petitionable debt was the full £3,935, not the difference between the debt and the cross-claim, which itself justified presenting a petition. Further, if there were suggestions of other debts owed by the debtor that might be relied upon in a bankruptcy petition, as was the case here, then the statutory demand should not be set aside as it could not be said that any petition would inevitably fail.
The decision is a helpful reminder that under r.6.5(4)(d) the mere fact that the undisputed debt is less than £750 is not sufficient to set-aside a statutory demand; much depends on whether there is a suggestion of other debts owed by the debtor which might be relied upon in a future bankruptcy petition.
