Statutory demand against an individual – general procedure
September 1997
45.91 Form and content of statutory demand
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 (i.e. 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 [Note 1].
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 [Note 2]. 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 [Note 3], or the statutory demand may be set aside on the debtor’s application.
45.93 Information to be given in the statutory demand
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 [Note 4].
45.94 Service of the statutory demand
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 [Note 5].
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 [Note 6]. 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 [Note 7] (see paragraph 45.121). In Re A Debtor [Note 8] 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. The Rules do not allow for service of a statutory demand by electronic means [Note 9].
(Amended April 2009)
Where the statutory demand is based on a judgment 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 with the demand runs from the date of the advertisement [Note 10]. The Civil Procedure Rules 1998 (CPR) Practice Direction on Insolvency Proceedings specifies the form of such advertisement [Note 11].
(Amended October 2010)
A statutory demand is not a document issued by the court. Permission to serve out of the jurisdiction is not therefore required [Note 12]. When a statutory demand is served outside the jurisdiction, the time limits for compliance (21 days) and for application to set aside (18 days) must be amended. For this purpose reference should be made to the table set out in the practice direction supplementing Section III of CPR Part 6 [Note 13]. Further guidance is contained within the Insolvency practice direction [Note 14].
45.98 Date of effective service
(Amended April 2009)
Where notice of the demand is published, the time for compliance runs from when the notice first appears [Note 15]. Service by post is deemed to have taken place 7 days after sending by first class post [Note 16]. If personal service is effected before 4.30pm on a business day, the notice is deemed served on that day, if it is served after 4.30pm service is deemed to have been effected on the next business day after that day [Note 17].
45.99 Proof of service of statutory demand
(Amended October 2010)
Where a bankruptcy petition is to be presented based on a statutory demand, then a certificate or certificates proving service must be filed with the petition [Note 18]. Every certificate of service must be verified by a statement of truth and have attached to it a copy of the demand as served [Note 19].
Except where there has been acknowledgement of service by the debtor, if the demand was personally served, then the certificate must be authenticated by the person who effected that service [Note 20].
Any acknowledgement of service by the debtor should be filed with the certificate of service and if this is the case, the appropriate person to authenticate the certificate is the creditor or a person acting on his behalf [Note 21].
If not personally served or if there has been no acknowledgement of service, then the steps taken to effect service must be detailed in a certificate authenticated 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 [Note 22].
The court may refuse to file a petition if it is not satisfied that the creditor has discharged his obligations with regard to service [Note 23].
45.100 Application to set aside statutory demand
(Amended October 2010)
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 [Note 24].
The debtor may make an application to the High Court if the following apply [Note 25]:
a. the creditor issuing the statutory demand is a Minister of the Crown or a Government Department;
b. the debt in respect of which the statutory demand is made, or part of it equal to or exceeding the bankruptcy level, is the subject of a judgment or order of any court; and
c. the statutory demand –
i. specifies the date of the judgment or order and the court in which it was obtained; and
ii. indicates the creditor’s intention to present a bankruptcy petition against the debtor in the High Court.
If the above provisions do not apply the debtor must apply to the court in which he would present his own bankruptcy petition [Note 26][Note 27].
If the 18 days has elapsed, the debtor may apply to the court for an extension of time (see paragraph 45.9). If the debtor also wishes to apply for an injunction to prevent presentation of a bankruptcy petition, the application must be made to a judge [Note 28].
(Amended October 2010)
As from the time the application is filed the 3 weeks deadline for compliance with the statutory demand ceases to run [Note 29].
The application must be supported by a witness statement detailing when the statutory demand was served and the grounds on which the debtor believes it should be set aside [Note 30]. A copy of the statutory demand must be attached to the witness statement [Note 31].
45.102 Hearing the application to set aside statutory demand
(Amended October 2010)
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 [Note 32]. If not dismissed immediately, the court will fix a time for hearing the application and give 5 business days notice (7 days notice for pre 6 April 2010 petition cases) 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 [Note 33]. In suitable cases, and with the written consent of both parties, the courts are willing to deal with applications to set aside statutory demands without attendance by the parties [Note 34].
45.103 Grounds for setting aside the statutory demand
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 [Note 35]:
a. the debtor appears to have a counter claim, set-off or cross demand which equals or exceeds the amount specified in the statutory demand; or
b. the debt is disputed on grounds considered by the court to be substantial; or
c. it appears that the creditor holds some security which has not been disclosed in accordance with the rules or the court is satisfied that the value of the security is greater than or equal to the amount claimed; or
d. the court is satisfied on other grounds that the demand ought to be set aside.
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 the debtor is entitled to have the demand set aside unless the whole of the debt demanded in the statutory demand is undisputed [Note 36] [Note 37] [Note 38].
45.105 Dispute over value of security
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 [Note 39].
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 [Note 40] [Note 41].
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 [Note 42]. Accordingly, in the absence of injustice to the debtor, any application to set aside a statutory demand would be dismissed [Note 43].
45.108 Dismissing the application
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 [Note 44].
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