Set aside a Statutory Demand – What do I do?
If you’ve received a Statutory Demand, then it’s vital the right steps are taken in response. It should not be taken lightly or ignored as this could lead to an application in Court being made against you for Bankruptcy or Winding Up (if you are a company).
When you receive a Statutory Demand, this is usually the first step an individual or company has taken to commence a formal process.
What is a Statutory Demand?
A statutory demand is a document that claims a sum of money against you by the party that is claiming it. It is then relied upon by that party in subsequent legal proceedings to either apply for winding up (for a company) or bankruptcy (if you are an individual).
The document will set out the details of the claim, and the amount being sought, give you guidance on what to do in order to comply with it, and how you can challenge it.
There are very specific rules when it comes to issuing a Statutory Demand and therefore it must be served in accordance with the Insolvency Rules 1986.
How can I challenge and set aside a Statutory Demand?
You can elect to challenge a statutory demand and have it set aside pursuant to rule 10.4 of the Insolvency Rules 2016. The time limit is very short, and you must act quickly. If you wish to challenge it, you must apply to set it aside within 18 days of it being served on you.
The Court can set aside a statutory demand if any of the following reasons apply (pursuant to rule 10.5(5), Insolvency Rules 2016):
- the debtor appears to have a counterclaim, set-off or cross-demand that equals or exceeds the amount of the debt specified in the statutory demand;
- the debt is disputed on grounds which appear to the court to be substantial;
- it appears that the creditor holds some security in relation to the debt claimed by the demand, and either rule 10.1(9) is not complied with in relation to it, or the court is satisfied that the value of the security equals or exceeds the full amount of the debt; or
- the court is satisfied, on other grounds, that the demand ought to be set aside.
The Court will also consider other reasons to set aside a statutory demand including the statutory demand has not been issued in the correct manner, you owe less than £5,000 (as an individual) or in the alternative £750 (as a company), or you have a legal defence to court action being taken against you.
How do make an application to set aside Statutory Demand?
To make the application to set aside a Statutory Demand, you must suitably complete Form IAA. It’s important to seek legal advice when completing Form IAA as all the information must be included correctly and any mistake or omission could result in your application being dismissed by the Court.
You must also if appropriate submit a witness statement with Form IAA setting out the grounds for challenging the Statutory Demand and why you are asking for it to be set aside.
Again, legal advice should always be taken when putting together a witness statement. There are specific rules within the Civil Procedure Rules which govern the form and content of witness statements.
You’ll then need to take your completed application and witness statement file it with the relevant Bankruptcy Court in your district and ask for it to be issued. This could be either the High Court in your district or the County Court, but it should always be checked as it varies depending on your locality. Legal advice should be sought on this as delays in issuing your application because you filed it with the wrong Court could result in your application not complying with the 18-day time limit.
If you have properly issued your application, the Court will list the case for a hearing where it will be determined whether the Statutory Demand is set aside or not.
It is always recommended that you seek legal representation when in receipt of Statutory Demand. Often, there are technical grounds to challenge the demand which only skilled lawyers will be aware of. A successful application to set aside allows you to claim back your legal costs from the other party if you had to instruct a lawyer.
At Whiterose Blackmans, we’re specialists in dealing with these types of applications and giving legal advice on this area having obtained many successful results to date.
If you would like to discuss setting aside a statutory demand, contact us on 0113 216 5507 or email info@whiteroseblackmans.co.uk.
AUTHOR
Wakash Waheed
Head of Civil and Commercial Department
Whiterose Blackmans Solicitors LLP, Diamond House, 116 Brudenell Road, Leeds, West Yorkshire, LS6 1LS