White v Davenham Trust Ltd [2010] EWHC 2748 (Ch) (01 November 2010)

White v Davenham Trust Ltd [2010] EWHC 2748 (Ch) (01 November 2010)

The statutory demand should not be set aside under rule 6.5(4)(d) because the existence of security over the principal debtor's property does not preclude bankruptcy proceedings against the guarantor, and while there is an arguable defence to part of the claim (penalty interest), there remains an undisputed debt above the bankruptcy threshold. The applicant could have paid the undisputed sum and disputed the balance, but chose not to do so. There is no injustice warranting the exercise of the court's residual discretion to set aside the demand.

Citation
[2010] EWHC 2748 (Ch)
Parties
Applicant (respondent to the Appeal): Mark Eugene White; Respondent (appellant): Davenham Trust Limited
Jurisdiction
England and Wales
Judgment Date
01 November 2010
Procedural Posture
Bankruptcy Appeal / Appeal From Deputy Registrar's Decision to Set Aside Statutory Demand
Outcome
Appeal allowed; statutory demand reinstated
Legal Topics
Statutory Demand, Guarantee Liability, Extortionate Credit Transaction, Penalty Interest, Bankruptcy Proceedings Against Guarantor, Residual Discretion Under Insolvency Rules
Insolvency Bankruptcy Guarantees Commercial Law Statutory Demand Guarantee Liability Extortionate Credit Transaction Penalty Interest +2 more

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Parties

Mark Eugene White

Applicant (respondent to the Appeal)

Davenham Trust Limited

Respondent (appellant)

Procedural Posture

Bankruptcy Appeal / Appeal From Deputy Registrar's Decision to Set Aside Statutory Demand

Legal Issues

  1. 1 Whether the statutory demand against a guarantor should be set aside under rule 6.5(4)(d) of the Insolvency Rules 1986
  2. 2 Whether the underlying facility agreements were extortionate credit transactions under section 244 of the Insolvency Act 1986
  3. 3 Whether the default interest rate constituted an unenforceable penalty at common law

Ratio Decidendi

The statutory demand should not be set aside under rule 6.5(4)(d) because the existence of security over the principal debtor's property does not preclude bankruptcy proceedings against the guarantor, and while there is an arguable defence to part of the claim (penalty interest), there remains an undisputed debt above the bankruptcy threshold. The applicant could have paid the undisputed sum and disputed the balance, but chose not to do so. There is no injustice warranting the exercise of the court's residual discretion to set aside the demand.

Court Disposition

Appeal allowed; statutory demand reinstated

Orders

  • Deputy Registrar's order set aside
  • Statutory demand against Mark White reinstated