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Recent court case clarifies the law in relation to personal guarantees and statutory demands

A Statutory Demand is the first step towards bankruptcy proceedings against an individual.

There is no court involvement in the issue of the demand and the creditor can issue the demand as soon as the debt is due. If you ignore the statutory demand this is assumed to be an acknowledgement by you that the debt is valid and owing, and bankruptcy can follow.

However, the recent High Court case of Martin v McLaren Construction Ltd clarifies the law relating to Statutory Demands. In this case as the guarantor had not received a separate letter demanding payment of the personal guarantee before the personal insolvency proceedings had started then the guarantor could not be made bankrupt and the Statutory Demand was set aside.

In the eyes of the law, as a valid demand had not been served and the precondition for the presentation of a bankruptcy petition had therefore not been met. The Statutory Demand was therefore deemed to be invalid and the case was set aside under the Insolvency Rules pursuant to Rule 10.5 (5)(d).

If you receive a Statutory Demand it is essential to act quickly. You have an 18 day period from receipt of the Statutory Demand to challenge payment. The Commercial Litigation team at Wilson Browne Solicitors are experts in setting aside Statutory Demands and dealing with Personal Guarantees.

If you have recently been served with either a Statutory Demand or have an issue with a personal guarantee seek advice quickly. Call 0800 088 6004 .

David Farmer

Posted:

David Farmer

Associate

David is a Solicitor in the Commercial Litigation Team and advises on a variety of civil and commercial disputes including commercial property, (focusing on dilapidations and forfeiture disputes), debt recovery and both personal and corporate insolvency, breach of contract, shareholder disputes, professional negligence claims.