The demand must be signed and dated by the creditor or a person authorised to sign on the creditor’s behalf. It must state whether the debt is payable immediately or at a future date, the amount of the debt and the consideration for it (if there was no consideration, then it must detail the way in which the debt arose). It must state details of the unsatisfied judgment or, if none, the basis for the creditor’s belief that the debtor appears to have no reasonable prospect of being able to pay.

Any interest claimed must be detailed (ie the amount or rate and the grounds on which payment is claimed) and is limited to the amount accrued at the date of the demand.

 

 

 Where the creditor holds security, the full amount of the debt is included in the demand, but the nature of the security and the value of the assets needs to be stated, together with the unsecured element which is claimed for payment. Security referred to must be held over property of the debtor, not security in connection with a third party, for example held over company assets or the statutory demand may be set aside on the debtor’s application.

 

 

 The statutory demand must provide an explanation to the debtor of the purpose of the demand and the consequences for failing to comply within the three week time limit – that bankruptcy proceedings may follow. It must explain the time and manner in which the demand must be complied with and inform the debtor of his right to apply to the court to have the statutory demand set aside. The statutory demand must include details (name, address and telephone number) of a named individual with whom the debtor can communicate regarding the debt.

 

 

 The creditor is bound to do all that is reasonable to ensure that the demand is brought to the debtor’s attention, including personally serving the statutory demand on the debtor if practicable.

 

 

 Where it is not possible to effect prompt personal service, service may be effected by other means such as first class post or insertion through a letter box (Practice Direction, 18 December 1986, [1987] 1 All ER 604). For this to be acceptable to the court, the creditor must have taken similar steps to those which would persuade the court to grant an order for substituted service of a petition. The Independent 29 June 1992 it was confirmed by Blackett Ord QC that in some cases it may be appropriate to serve the statutory demand upon the Solicitors of the debtor.

 

 Where the statutory demand is based on a judgement or order and the creditor knows or has reasonable cause to believe that the debtor has absconded or is avoiding service, and there is no real prospect of progressing the debt by enforcement action, he/she may advertise the demand in such manner as he/she thinks fit. The time for compliance runs from the date of the advertisement. The above mentioned Practice Direction of 18 December 1986 specifies the form of such advertisement.

 

 Where a bankruptcy petition is to be presented based on a statutory demand, then an affidavit verifying service must be filed with the petition.

Except where there has been acknowledgement of service by the debtor, if the demand was personally served, then the affidavit must be made by the server.

Any acknowledgement of service by the debtor should be filed with the affidavit of service and if this is the case, the appropriate person to make the affidavit is the creditor or a person acting on his behalf.

 

If not personally served or if there has been no acknowledgement of service, then the steps taken to effect service must be detailed in an affidavit by a person with direct knowledge of the means adopted for serving the demand and specifying a date when the person considers the demand will have come to the debtor’s attention.

The court may refuse to file a petition if it is not satisfied that the creditor has discharged his obligations with regard to service.

 The debtor may, within 18 days of service of the demand on him (or of the date of the publication of the notice), apply to the court for the demand to be set aside.

The debtor must apply to the court in which he would present his own bankruptcy petition unless the petitioner is a Government department, the debt is subject of a judgment and the demand indicated the intention to present a petition in the High Court, in which case application should be made to the High Court.

If the 18 days has elapsed, the debtor may apply for an extension of time to a Judge in the High Court or to a District Judge in the county court in accordance with Practice.

 

As from the time the application is filed the 3 weeks deadline for compliance with the statutory demand ceases to run.

The application must be supported by an affidavit detailing when the statutory demand was served and the grounds on which the debtor believes it should be set aside. A copy of the statutory demand must be filed with the application.

 

Upon receipt of the application, the court may dismiss it without giving notice to the creditor if it is satisfied that there is no good cause shown for setting aside the demand. The time for compliance will start again immediately. If not dismissed immediately, the court will fix a time for hearing the application and give 7 days notice to the debtor (or his solicitor), the creditor and whoever is named in the statutory demand as the person whom the debtor may contact about the debt. In the High Court, and with the written consent of both parties, Registrars are willing to deal with an application to set aside a statutory demand without attendance by the parties.

 

As with all such matters, the court has discretion as to whether to set aside the demand. The court can determine the matter summarily or adjourn it, giving such directions as it thinks fit. It may grant the application if:

The ground on which a bankruptcy petition may be presented is not that the debtor has failed to pay a sum due, but that he has failed to comply with the terms of a statutory demand. In the case where the demand is for a greater amount than that actually owed or where part of the sum demanded is admitted to be disputed on substantial grounds, the debtor could not avert the presentation of a petition by paying the amount believed to be due. In these circumstances, under r6.5(4) (b) the debtor is entitled to have the demand set aside unless the whole of the debt demanded in the statutory demand is undisputed.

 

If the dispute is over the value of security only, the court may require the creditor to revalue its security for the purposes of the demand only.

 

If a statutory demand is based upon a judgment, then the court will not dispute the validity of the judgment debt. As a general rule the court will not adjourn the application to await the result of the application to set aside the judgment.

 

Technical or factual defects in a statutory demand will not necessarily persuade the court to set it aside. The court will only exercise its discretionary power to set aside a statutory demand ‘on other grounds’ if the circumstances are such that it would be unjust for the creditor to present a bankruptcy petition founded on the debtor’s non- compliance with the demand. Accordingly, in the absence of injustice to the debtor, any application to set aside a statutory demand would be dismissed.

 

If the court dismisses the application to set aside the statutory demand, it must make an order authorising the creditor to present a petition either forthwith or at a specified date.