Validly serving a Statutory Demand is a prerequisite for presenting a Bankruptcy Petition

Background

In Antony Canning v Irwin Mitchell LLP [2017] EWHC 718 (Ch) the High Court heard an appeal against a District Judge’s decision to transfer a petition hearing and extend the hearing in relation to a Bankruptcy Petition.

Mr Canning owed Irvin Mitchell almost £12,000 in legal fees. Irwin Mitchell sought to bring bankruptcy proceedings against him to recover this sum. The Statutory Demand was served on Mr Canning in the following manner:

• 10 April 2016: The Statutory Demand was served on Mr Canning by a third party process server. Irwin Mitchell had used a Trace Agent to locate Mr Canning, who apparently spoke to someone who confirmed that Mr Canning lived at an address in Cornwall. The process server hand delivered the Statutory Demand to the Cornwall address. Mr Canning was not home, so the process server posted the letter in a sealed envelope marked for his attention through the letterbox.
• 6 May 2016: Irwin Mitchell presented a Bankruptcy Petition.
• 16 June 2016: Mr Canning contacted the process server to say that he did not and never had lived at the Cornwall address (he actually lived in Essex) and asked that the Statutory Demand be re-served at his solicitor’s address in London. Indeed the connection with Cornwall was in fact where he was registered as a director for a company that had never traded.
• 17 June 2016: The process server personally served a second Statutory Demand at the solicitor’s address, but Mr Canning still did not receive this.

 The Bankruptcy Petition that Irwin Mitchell presented on 6 May 2016 was based upon the first Statutory Demand served on 10 April at the Cornwall address as the second had not yet been served at the time that it was presented. However, Irwin Mitchell argued that the service of the second Statutory Demand meant that they had taken all reasonable steps to bring the first Statutory Demand to Mr Canning’s attention.

Decision

The judge did not agree with Irwin Mitchell’s contentions. He found as a fact that Irwin Mitchell had not done all that was necessary to bring the Statutory Demand to Mr Canning’s attention. He pointed to the lack of cooperation between Irwin Mitchell and Mr Canning’s solicitors as fatal to their argument that they had done all that was reasonably required. The judge pointed out that a simple telephone call would likely have sufficed to bring the Statutory Demand to Mr Canning’s attention.

In order to validly serve a Statutory Demand, a creditor must do all that is reasonably possible to bring it to the debtor’s attention. As the judge held that this was not the case, the first Statutory Demand could not be held to have been validly served. Service of a Statutory Demand is a prerequisite for a creditor’s entitlement to present a Bankruptcy Petition and so, without it, the court has no jurisdiction to hear the statutory demand. Therefore Irwin Mitchell’s Bankruptcy Petition failed. The Insolvency rules and practice direction clearly set out what must be undertaken in order that the court has jurisdiction to hear the petition, otherwise costs will be wasted.