Latest Legal News - Personal Insolvency and Statutory Demands (October 2010)

It is commonly known that the bankruptcy courts do not look kindly on creditors who attempt to enforce their debts through the insolvency jurisdiction and where it can be shown that there is a serious dispute as to whether a debt is due, the court will set aside any statutory demand served in respect of that debt. This raises the question of what standard of proof an applicant seeking to set aside a statutory demand is expected to meet.

In the recent case of Feldman v Nissim it was held that in seeking to have a statutory demand set aside it was insufficient for the debtor merely to assert that if the debt was disputed at trial an expert witness would give evidence that would support his case. The court would expect the debtor to adduce evidence that would satisfy the tests of raising "a genuine triable issue" and "a real prospect" of success at trial if a claim were brought on the debt.

The facts of the case were as follows: Mr Nissim and Mr Feldman became friends on the basis of a mutual enjoyment of gambling. Mr Feldman, who was a professional poker player agreed that if Mr Nissim, an amateur gambler on the Wall Street stock exchange, made a number of investments on his behalf and agreed to account for any profit, he would indemnify him in respect of any losses. When Mr Nissim accumulated losses of £140,000, he sought to recover from Mr Feldman, who refused to pay. Accordingly, Mr Nissim issued a statutory demand.

Mr Feldman's application to set the statutory demand aside on the basis that Mr Feldman had been negligent in his investments was dismissed, prompting judge Richard Snowden QC to comment that Mr Feldman "ought at least to have produced some evidential basis for [his] suggestion, rather than bare assertion."

A debtor has only 18 days after service of a statutory demand to apply to have it set aside, which is a fairly tight deadline. As the Feldman v Nissim case shows, simply making an application with minimal evidence is not likely to suffice. The moral of the story is that it is vital that early advice is taken in any circumstance where a debt that is the subject of a statutory demand is to be disputed.

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