When can statutory demands for undisputed debts be upheld? (Howell v Lerwick Commercial Mortgage Corporation)

When can statutory demands for undisputed debts be upheld? (Howell v Lerwick Commercial Mortgage Corporation)

An appeal against a statutory demand where a cross-claim would reduce the sum to less than the bankruptcy level of £750 led to an interesting judgment. Marc Brown, a barrister with St Philips Commercial chambers, explains the issues surrounding the decision in Howell v Lerwick Commercial Mortgage Corporation Ltd.

Original news

Howell v Lerwick Commercial Mortgage Corporation Ltd [2015] EWHC 1177 (Ch), [2015] All ER (D) 42 (May)

The appellant appealed against a decision of a district judge dismissing his application to set aside a statutory demand. The debt itself was not disputed but the appellant relied on a cross-claim which did not equal the debt but fell short of it by less than £750. The Chancery Division held that a statutory demand should not necessarily be set aside under the residual discretion under rule 6.5(4)(d) of the Insolvency Rules 1986 (IR 1986), SI 1986/1925, simply because the undisputed part was less than £750. On the facts of the present case, the appropriate course was not to set aside the statutory demand under IR 1986, r 6.5(4)(d).

What was the background to the appeal, briefly?

The respondent had issued a statutory demand against the appellant in the sum of £4,736.43, being the sum of two costs orders totalling £3,935, plus interest and the costs of the demand.

The appellant sought to set aside the statutory demand on the grounds that he had a cross-claim. This cross-claim was the subject of an issued claim in the sum of £2,750. He also wished to amend that claim to claim a further £14,763.60. However, the application to amend and an appeal against it were dismissed, leaving just the cross-claim of £2,750.

On the hearing of the application to set aside the statutory demand, the district judge reduced the demand debt to £3,935 as the respondent was not entitled to interest on the costs orders (being for less than £5,000 in the

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