White v Davenham Trust Ltd

White v Davenham Trust Ltd

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, there is no realistic prospect of a successful cross-claim under section 244, and although there is an arguable penalty defence to part of the claim, the undisputed debt exceeds the bankruptcy limit and Mr White could have paid the undisputed sum. The Deputy Registrar erred in exercising discretion to set aside the demand based on irrelevant considerations.

Parties
Respondent: Mark Eugene White; 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 Transactions, Penalty Clauses, Secured Creditors' Rights
Insolvency Law Bankruptcy Contract Law Statutory Demand Guarantee Liability Extortionate Credit Transactions Penalty Clauses Secured Creditors' Rights

Case Brief

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Parties

Mark Eugene White

Respondent

Davenham Trust Limited

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 the guarantor (Mr White) ought to be set aside under rule 6.5(4)(d) of the Insolvency Rules 1986
  2. 2 Whether the underlying facility agreements constituted 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, there is no realistic prospect of a successful cross-claim under section 244, and although there is an arguable penalty defence to part of the claim, the undisputed debt exceeds the bankruptcy limit and Mr White could have paid the undisputed sum. The Deputy Registrar erred in exercising discretion to set aside the demand based on irrelevant considerations.

Court Disposition

Appeal allowed; statutory demand reinstated

Orders

  • The appeal is allowed.
  • The statutory demand is not set aside.