Case study
The one where the
fraud victim had a statutory demand set aside
Who?
The client was a legal professional and the only “de jure” director (being a director properly appointed to the board and registered with Companies House) of a company who discovered that his signature appeared on multiple personal guarantees (“PGs”) arising from finance the company had procured.
What?
It was our client’s position that the PG’s were signed without his full knowledge and consent, or that they may have been placed before him for signature in circumstances where the nature of the document had been misrepresented to him and/or the PG had been procured by undue influence.
At the final hearing of the application to set aside the statutory demand, the opponent sought to rely on the recent case of Kerkar v Investment Opportunities IV PTE Ltd [2021]. In this case, Mr Kerkar had signed a PG in relation to one of his companies. As with our case, Mr Kerkar made allegations of misrepresentation in respect of the PG and also allegations of fraud. In Kerkar, the Court refused to set aside the statutory demand finding that there was an inadequate particularisation and lack of evidence underpinning the allegations. The Court found it “inherently implausible” that a man of Mr Kerkar’s extensive business experience would have relied on representations made to him by others in respect of the legal consequences of signing a PG.
However, we had been able to produce over 600 pages of documents and evidence to assist the Court in drawing a clear distinction between the facts of our client’s case and the facts of Kerkar. Despite our client being an intelligent individual and a member of the legal profession, the Court did not find this was the same as him being an experienced businessman and the Court accepted that misrepresentations may have been made, which would be a matter to be determined at trial.
Why?
The statutory demand was set aside. Because of the conduct of the opponent in refusing to agree to pre-application requests to withdraw the demand, the court made a significant 5-figure adverse costs award against the creditor, which in fact exceeded the debt the creditor said was due .
This is a stark reminder of the importance for parties to ensure they are embarking on the correct procedure for debt recovery. In particular, where a creditor is notified of significant grounds of dispute, the service of a statutory demand is open to challenge.
[1] It should be noted that setting aside the statutory demand is not the same as extinguishing liability of the underlying claim. Whether or not the matter will be pursued as a part 7 claim, remains to be seen.

- Case Study
- SectorMiscellaneous
- ServiceInsolvency