Nigel Stretton Woolsey v Russell Payne

JurisdictionEngland & Wales
JudgeMr John Male
Judgment Date28 April 2015
Neutral Citation[2015] EWHC 968 (Ch)
Docket NumberCase No: 48 SD of 2014, Appeal Ref: CH/2014/0458
CourtChancery Division
Date28 April 2015

[2015] EWHC 968 (Ch)







Royal Courts of Justice

Strand, London, WC2A 2LL


Mr John Male QC

(Sitting as a Deputy Judge)

Case No: 48 SD of 2014, Appeal Ref: CH/2014/0458

Case No: 501/2014, Appeal Ref: CH/2014/0459

Nigel Stretton Woolsey
Russell Payne
And Between:
Nigel Stretton Woolsey
Katie Susan Payne

Ms Sarah Clarke (instructed by Adie Pepperdine LLP) for the Appellant

Mr Philip Flower (instructed by Sills & Betteridge LLP) for the Respondents

Hearing date: 4 th March 2015

Mr John Male QC (Sitting as a Deputy Judge):



This is an appeal by the petitioning creditor, Nigel Stretton Woolsey, against two orders made by Chief Registrar Baister in insolvency proceedings against the Respondents, Russell Ian Payne and Katie Susan Payne. Permission to appeal was granted by the Chief Registrar.


In the case of Mr Payne, the Chief Registrar set aside a statutory demand dated the 10th June 2013 and served on the 11th June 2013. In the case of Mrs Payne, the Chief Registrar made an order under section 282(1)(a) of the Insolvency Act 1986 ("the IA 1986") annulling a bankruptcy order made against her on the 19th September 2013. Both the statutory demand and the bankruptcy order were based upon the same loan agreement and the same alleged debt claimed by Mr Woolsey.


The explanation for the different procedural positions of Mr and Mrs Payne appears from paras. [16] to [18] of the judgment below and is as follows.

"[16] Compliance with the repayment terms of the loan agreement was, according to Mr Woolsey, sporadic. Notices of default were given to the borrowers in May 2013, Mr Woolsey was told that Mr and Mrs Payne were selling their house in England, and an offer was made to settle out of the proceeds of sale, but there was no sale, so Mr Woolsey decided to bring proceedings. Statutory demands were served on Mr and Mrs Payne on 11 June 2013. There was no response from Mrs Payne, so a petition was presented on 7 August 2013 and personally served. There was no response to the petition either as a result of which a bankruptcy order was made on 19 September 2013. No petition was presented against Mr Payne as one had already been issued by another creditor. That was dismissed. On 23 December 2013 (well out of time) Mr Payne applied to set aside the demand served on him.

[17] Mrs Payne's explanation for failing to deal with the statutory demand and the petition served on her is that she abdicated responsibility to her husband. He failed to deal with the petition because he got the date of the hearing wrong. In paragraph 3 of her first witness statement she says,

"[A]fter I signed the paperwork which led to the bankruptcy petition against me, my husband continued exclusively to deal with matters in relation to the financial transaction with Nigel Woolsey. I was not involved."

[18] In paragraph 9 she confirms that she did nothing about the petition after she was served: "I left matters in the hands of my husband as he said he was dealing with it". In paragraph 22 of her third witness statements she sums up her position as this:

"[A]s far as I was concerned my husband was going to sort out the debt to Mr Woolsey. It was his problem not mine. That remains my position to this day. I expect my husband to get this matter resolved"."


On this appeal, as below, Mr Woolsey was represented by Ms Sarah Clarke. Mr and Mrs Payne were represented by Mr Philip Flower. In the court below, Mr Flower appeared on behalf of Mrs Payne alone and Mr Payne was represented separately.


I was provided by Counsel with skeletons for this appeal. Mr Flower incorporated into that skeleton his skeleton from below. Ms Clarke also provided me with a copy of her skeleton below so that I could see what arguments were put to the Chief Registrar. After the hearing I was provided with supplemental skeletons addressing a point which I had raised during the course of argument. I am grateful to both Counsel for their clear and helpful oral and written submissions.

The proceedings below


The applications below were dealt with by the Chief Registrar on the witness statements and without cross-examination. The main witness statements before the Chief Registrar were from Mr Woolsey (dated 12th December 2013 and 3rd March 2014), Mr Payne (dated 23rd December 2013 and 8th May 2014) and Mrs Payne (dated 4th October 2013, 21st November 2013 and 9th May 2014).


Before the Chief Registrar Mr and Mrs Payne submitted that there was no enforceable debt so the statutory demand should be set aside and the bankruptcy order should not have been made. They raised various challenges to the enforceability of the loan agreement under the Consumer Credit Act 1974 ("the CCA 1974"). There was also an allegation of undue influence or duress by Mrs Payne against Mr Payne. All but two of the challenges failed. The two successful challenges concerned the following issues. First, whether the loan agreement was a regulated agreement or whether it fell within the exception in section 16B of the CCA 1974. Secondly, whether, even if the loan agreement was a regulated agreement, it was exempt from the provisions relied upon by Mr and Mrs Payne as being a non-commercial agreement within section 74(1)(a) of the CCA 1974.


Three grounds of appeal were raised by Mr Woolsey. The first is whether the Chief Registrar should have applied a different or the same test to the applications by Mr and Mrs Payne. The second concerns the Chief Registrar's decision on the application of section 16B of the CCA 1974. The third concerns his decision on the application of section 74(1)(a) of the CCA 1974. I will take these grounds in turn.

The first ground


The first ground only applies in the case of Mrs Payne. Her application was to annul the bankruptcy order, whereas Mr Payne's application was an application to set aside the statutory demand.


An application to annul is made under section 282(1)(a) of the IA 1986 which provides that:

"(1) The court may annul a bankruptcy order if it at any time appears to the Court

(a) that, on any grounds existing at the time the order was made, the order ought not to have been made".


An application to set aside the statutory demand is made under rule 6.4(1) of the Insolvency Rules 1986 ("the IR") which provides that:

"The debtor may….apply to the appropriate court for an order setting the statutory demand aside."


Under rule 6.5(4) the Court may grant the application to set aside if, amongst other things:

"(b) the debt is disputed on grounds which appear to the court to be substantial".


In the case of Mr Payne's application, Counsel agree that the Chief Registrar applied the correct test in that he considered whether the points under the CCA 1974 amounted to a dispute on grounds that are substantial. However, Counsel disagree whether the Chief Registrar applied the correct test in the case of Mrs Payne's application. Ms Clarke submits that, in order to satisfy the test for annulment, it was not enough for Mrs Payne to show that the debt was arguably not enforceable at the time of the order. Instead, Mrs Payne had to show, on the balance of probabilities, that the debt was not due. Mr Flower submits that the test for annulment is the same as for an application to set aside a statutory demand.


There are two conflicting authorities on the test to be applied on an annulment application. They are Guinan III v. Caldwell Associates Ltd [2004] BPIR 531; [2004] EWHC 3348 (Ch) and Flett v. HMRC and Daly [2010] BPIR 1075; [2010] EWHC (Ch).


In Guinan Neuberger J (as he then was) held that there is no distinction between the test to be applied whether on an application to set aside a statutory demand, or on the hearing of a petition, or on an application to annul on the ground that it ought not to have been made. The test is whether there is a genuinely disputed debt.


Neuberger J's reasoning is at para. [16] of his judgment and is as follows:

"[16] I turn then to what at least to my mind is the central point in the case, which is whether or not Mr Caldwell has an arguable case. In this connection it is I think common ground, and consistent with what was said by Laddie J in para [60] of his judgment in Everard v The Society of Lloyd's [2003] EWHC 1890 (Ch) , [2003] BPIR 1286, that:

'The court's assessment of the seriousness of the challenge should [not] differ from one stage to the other.'

In other words, if there is what he called 'a genuine triable issue' then, whether it is raised at the statutory demand stage, the petition stage or the annulment stage, it is an equally valid point. However, as I mentioned, that is not the end of the matter in this case, because, even if there is a genuine triable issue, that does not automatically mean that I should annul the bankruptcy; I still have a discretion. But, subject to that, as I think Mr De La Rosa, albeit sub silentio has accepted, the test is the same: is there a genuine dispute?"


In contrast, in Flett Mr Anthony Elleray QC (sitting as a deputy High Court judge) held that, on an application to annul, the burden of proof was on the debtor to demonstrate that, on the balance of probabilities, he did not owe the petition debt. It was not enough for a debtor to say at the time of an application for annulment that he had an arguable defence to the petition debt; he had to establish that he did not in fact owe the money.


Mr Elleray QC's reasoning is at paras [45] and [46] of his judgment and is as follows:

"[45] A debtor who challenges the making...

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