Setting aside a statutory demand—a question of jurisdiction

Setting aside a statutory demand—a question of jurisdiction

What does a debtor need to show in order to set aside a statutory demand on the basis that the creditor is fully secured? And does the court's power in insolvency proceedings to review an order extend to appellate decisions? Susannah Markandya of Enterprise Chambers comments on the recent decision in National Asset Loan Management Ltd v Cahillane.

Original news

National Asset Loan Management Ltd v Cahillane; Re John Christopher Cahillane [2015] EWHC 62 (Ch), [2015] All ER (D) 171 (Jan)

The claimant company served a statutory demand on the defendant. A judge dismissed the defendant's application to set aside the statutory demand and for an extension of time to adduce a supplemental expert report. The claimant presented a bankruptcy petition against the defendant. It appealed against orders by the Chief Registrar, adjourning the bankruptcy petition and making directions on the defendant's application to rescind or vary orders of the judge. The Chancery Division, in allowing the appeal, held that section 375(1) of the Insolvency Act 1986 (IA 1986) gave the court jurisdiction to review, vary or rescind the appellate orders of the judge. However, on the requirements imposed on the defendant by rule 6.5(4)(c) of the Insolvency Rules 1986 (IR 1986), the application under IA 1986, s 375(1) failed on the merits and was dismissed and the bankruptcy order was made.

Briefly, what was the background to the application?

The appellant (NALM) served a statutory demand on the debtor (Mr Cahillane), claiming to be a creditor for the shortfall between the debt which Mr Cahillane owed and the value of properties over which NALM had security. Mr Cahillane contended that there was no shortfall and that the statutory demand should be set aside. Mr Cahillane argued that NALM had a statutory duty to hold the properties for a certain period (possibly until 2020) in order to maximise the return to taxpayers.

Mr Cahillane sought to adduce evidence to show that by 2020 the value of the properties would have risen

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.