Stark warning for those issuing statutory demands

In a recent case, the High Court has upheld an appeal against a previous court decision to refuse to award costs to an Applicant who successfully set aside a statutory demand.

This is a clear warning for those issuing statutory demands. There is now a risk that if the demand is subsequently set aside and your conduct, in issuing the demand, is determined to have been inappropriate and/or unreasonable, then you will have to cover the legal costs of the other side.

Whilst the Court has discretion when looking at these issues, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party.

Background: Dunhill v Hughmans 

The Applicant, Ms Dunhill was the former client of Hughmans, a firm of solicitors. Hughmans  had obtained a money  judgment against Ms Dunhill which she successfully appealed. Whilst she was in the process of seeking permission to appeal that judgment, Hughmans served her with a statutory demand.

Whilst Hughmans were entitled to issue the statutory demand, the High Court decided that the lower court had failed to place sufficient weight on the  conduct of Hughmans when exercising its discretion in this case.

The High Court  decided that Hughmans had behaved unreasonably. Issuing a statutory demand whilst knowing that Ms Dunhill was intending to appeal the judgment upon which the alleged debt was based, and knowing that the action of serving a statutory demand would lead to further costs.

The High Court also decided that Ms Dunhill had not been unreasonable in refusing Hughmans’ offer to withdraw the statutory demand without paying her legal costs.

In the light of this the High Court said that she was entitled to her costs of her successful application to set aside the statutory demand.

For more information on this, advice on any aspect of a business or commercial dispute, please contact a member of our commercial disputes team or call us on 0115 9 100 200.

Posted on August 29, 2017