Statutory Demand in UK Law

It follows, also, that an application to set aside a statutory demand —where the demand has been served by a person who is not a creditor at the date of the hearing of the application —ought normally to be granted under paragraph (d) of rule 6.5(4); for the reason that no bankruptcy petition can properly be presented on the basis of that demand.

The only purpose in doing so would be for this demand to form the foundation for a bankruptcy petition. That being so, the very presentation of a petition would be oppressive and an abuse of process. Accordingly, at the earlier stage of the statutory demand the court should intervene. When able to foresee the inevitable the court will always intervene summarily to anticipate it. The court does not countenance parties proceeding to a blank wall.

There may be circumstances where the principal debtor's ability to pay is a relevant factor. But as Nicholls LJ said, the theme running through rule 6.5(4) is that a statutory demand will be set aside where it is just to do so. In my judgment, it is difficult to see how it can be just not to set aside a demand where the principal debtor satisfies one of the conditions in sub-paragraph (a) merely because he can afford to pay the debt.

The ability of a petitioning creditor to levy execution against the company does not entitle him to have it wound up. I emphasise that the cross claim must be genuine and serious or, if you prefer, one of substance; that it must be one which the company has been unable to litigate; and that it must be in an amount exceeding the amount of the petitioner's debt.