The High Court in Ronald Martin v McLaren Construction Limited [2019] EWHC 2059 (Ch) exercised its discretion and set aside a statutory demand as the creditor had not demanded payment under the terms of a personal guarantee first.
In accordance with Section 268(1) of the Insolvency Act 1986 (“IA 1986”), a statutory demand can only be used for a debt that is payable immediately.
The Applicant had provided a personal guarantee for various corporate and individual liabilities which were ultimately not paid. The Respondent therefore served a statutory demand on the Applicant on 30 October 2018 pursuant to Section 268(1) IA 1986. The Applicant applied to set aside the statutory demand on the basis that the debt was not payable immediately as no demand for payment under the personal guarantee had been made.
It was argued that a prior emailed demand for payment constituted service of a written demand, or alternatively that a prior statutory demand for a larger sum that was served on the Applicant in or about June 2018 (which was later withdrawn) qualified as a written demand for payment.
The Court set aside the statutory demand. The terms of the personal guarantee did not permit service of demands by email. Further, the prior statutory demand did not qualify as a demand for payment because it stated that the debt was payable immediately. Construed as a whole, the statutory demand was “clearly not intended as a means of fulfilling contractual preconditions to making a debt immediately payable”. As no formal demand for payment under the terms of the personal guarantee had been made, the debt due under the personal guarantee was not payable immediately and the demand was “served prematurely” and “ought not to have been served”.
This case serves as a reminder that the technical subtleties of insolvency legislation must be complied with to avoid being on the wrong end of an application to set aside a statutory demand.
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