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What lessons can lawyers learn from the Chancery Division’s decision to allow an appeal against a decision of a deputy registrar setting aside a statutory demand that had been served on a guarantor? Faith Julian of 9 Stone Buildings analyses the decision in Dunbar Assets Plc v Butler.
Dunbar Assets plc v Butler  EWHC 2546 (Ch),  All ER (D) 138 (Sep)
The Chancery Division allowed an appeal against a decision of a deputy registrar setting aside a statutory demand that had been served on a guarantor, where an alleged representation that the guarantees would not be enforced was not arguably capable of giving rise to estoppel and there was no other ground for finding that the guarantee was not entitled to enforce the guarantees. Further, the deputy registrar had been wrong to conclude that there was a genuine triable issue as to the guarantor’s liability for the sums claimed. The defendant had had no realistic prospect of making out the factual basis of his case.
This was an appeal against an order setting aside a statutory demand based upon various personal guarantees given by Mr Butler. At first instance the deputy registrar found that there was a genuine triable issue as to whether the guarantees were enforceable on the basis of an alleged compromise reached between Dunbar Assets Plc (Dunbar) and Mr Butler.
The deputy judge was asked to consider whether or not:
The guarantees were provided for loans taken out by two property development companies with which Mr Butler was in some way affiliated. His case at first instance had been that since 2009 Dunbar had continually assured him that if he continued to manage the development properties the guarantees would not be called upon. Dunbar was thereby estopped from enforcing, because it would be unconscionable to allow Dunbar to go back on its word.
The deputy registrar dismissed any arguments relating to the period before 2012, but considered that what was said at a meeting between the parties in September 2012 was an issue requiring investigation at trial.
Dunbar’s evidence was that nothing approaching a compromise was reached at that meeting, and in support of that contention exhibited both a note of the meeting and also various documents postdating the meeting. Mr Butler’s evidence was that the meeting note contained a fundamental omission, namely that he was told that ‘any enforcement action under the guarantee would be postponed indefinitely if I continued to assist with the developments’—which he continued to do until the autumn of 2013.
The test for setting aside a statutory demand
Counsel for Dunbar submitted that the deputy registrar ought to have asked whether Mr Butler’s evidential case, taken at its highest, was capable of disclosing a defence to Dunbar’s claims (Macpherson v Wise  EWHC 141 (Ch),  All ER (D) 146 (Mar) at para ). In this vein, it was submitted that an evidential dispute must relate to a material issue between the parties.
Counsel for Mr Butler submitted that an appeal should only be allowed where the decision is ‘plainly wrong’. The deputy registrar’s decision was not plainly wrong because he reminded himself of the correct approach as outlined in Collier v P & M J Wright (Holdings) Ltd  EWCA Civ 1329,  All ER (D) 233 (Dec) at paras , —namely that ‘there has to be something to suggest that the assertion [that there is a genuine triable issue] is sustainable’.
Was the evidence capable of establishing the alleged promissory estoppel?
The law of promissory estoppel was not in dispute, and is set out at para  of the judgment. In brief, it requires:
Dunbar submitted that, even after making every evidential allowance in favour of Mr Butler, promissory estoppel was not a triable issue:
It was submitted on behalf of Mr Butler that the essential question was whether Dunbar’s conduct was unconscionable:
Did the deputy registrar attach sufficient weight to contemporaneous documentation postdating the alleged compromise?
Counsel for Dunbar contended that the deputy registrar relied upon the note of the meeting, and ignored documents which evidenced an absence of belief on the part of Mr Butler that he remained liable under the guarantees, ie:
It was submitted in opposition that the deputy registrar had clearly taken those documents into account when he referred to the inconsistencies in the evidence of both parties, and that the material point was that the matter required investigation at trial.
In order for an evidential dispute to give rise to a ‘triable issue’, the dispute must relate to a material matter, in the sense that, if accepted, such evidence would disclose a defence to Dunbar’s claim. The deputy registrar correctly proceeded on this basis but did not adequately consider whether the factual issues raised were capable of answering Dunbar’s claim.
No. If the September 2012 representation was indeed made, it would have been intended to affect the parties’ rights but only for the intended duration of the arrangement. The statement could not reasonably be interpreted to mean that Mr Butler could unilaterally prevent the taking of enforcement action by his continuing to undertake work on the developments even if Dunbar made it clear that it was not required.
There was nothing unconscionable in Dunbar’s actions. In taking steps to enforce the guarantees it had not resiled upon the disputed representation (assuming that it had been made)—this was because the period during which it was intended to operate had come to an end, both by Mr Butler’s cessation of work in Autumn 2013, and by the giving of the notice to him on 19 September 2013.
However, the simple absence of a fixed period for the suspension of Dunbar’s rights was not fatal to Mr Butler’s case (per Lord Tucker in Tool Metal Manufacturing at page 785 which, despite a submission to the contrary, is applicable in this case because the guarantees were given in the context of a commercial transaction).
No. Neither Mr Butler nor his solicitors asserted in contemporaneous documentation that the representations had been made. If Mr Butler had genuinely carried out a significant amount of work on the strength of such a promise, it would be remarkable that it was not asserted by him or on his behalf in the exchanges between the parties. Mr Butler’s factual case could not be reconciled with the terms of the correspondence exhibited by Dunbar, and was inconsistent with there being anything unconscionable in Dunbar proceeding to enforce the guarantees.
It is a timely reminder that raising an evidential dispute is, in itself, insufficient to see off an application for summary determination. The resolution of the dispute must be material to the outcome of the case. Voluminous documentation is of no use if it fails to disclose a valid defence.
It is a trite but valuable observation that when preparing to make or defend an application pursuant to rule 6.4 of the Insolvency Rules 1986, SI 1986/1925 (or indeed CPR 24), the evidence must match the law and, crucially, disclose a defence. Per Arden LJ in Collier at para :
‘The best evidence would be incontrovertible evidence to support the applicant’s case, but this is rarely available. It would in general be enough if there were some evidence to support the applicant’s version of the facts, such as a witness statement or a document, although it would be open to the court to reject that evidence if it were inherently implausible or if it were contradicted, or were not supported, by contemporaneous documentation…But a mere assertion by the applicant that something had been said or happened would not generally be enough if those words or events were in dispute and material to the issue between the parties.’
It was fatal to Mr Butler’s case that although he submitted a raft of evidence disputing that filed on behalf of Dunbar, none of it, when examined closely, disclosed a defence to Dunbar’s claim.
Faith Julian joined 9 Stone Buildings this year. She is developing a broad commercial chancery practice which encompasses personal and corporate insolvency, real property, landlord and tenant, company, commercial, and chancery.
Interviewed by Barbara Bergin.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
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First published on LexisPSL Restructuring and Insolvency
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