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The application to set aside a statutory demand failed in the case of Staveley v Restis [2024] EWHC 670 (Ch) (“Staveley”).

The statutory demand lodged by Victor Restis sought over £36 million from Louise Staveley.

The original loan was for £10 million. Interest was pushing up the outstanding balance with the judge recording that interest in the period 4 April 2023 to 26 May 2023 of £26,747,783.80. This seems to be interest at 5% a day being an interesting £514,380.46.

Application To Set Aside A Statutory Demand Failed

The application was based on various grounds:

  • No personal liability in respect of the documents leading to the debt demanded.
  • Duress
  • Undue influence
  • Fraudulent misrepresentation.

How To Set Aside A Statutory Demand

The statutory demand is one of the notable hurdles to vault if a creditor seeks to enforce their right to repayment of a debt that may culminate in a debtor’s bankruptcy.

Statutory Demand hurdle to vault to bankruptcy

To set aside a statutory demand Rule 10.5 of the Insolvency (England and Wales) Rules 2016 carves out four grounds for such an opportunity:

  • Counterclaim, set-off or cross demand at the sum equal to or more than the debt.
  • A substantial dispute exists over the debt.
  • The creditor has security greater than the debt.
  • The court considers the statutory demand should be set aside.

What Is A Substantial Dispute For A Statutory Demand?

The test for a substantial dispute has been articulated in various ways such as:

What is a substantial dispute for a statutory demand
  • Genuine triable issue.
  • Real prospects of success.

The judge in Staveley highlighted the need to consider the evidence and how it should be considered:

In the oft quoted case of Angel Group Limited v British Gas Trading Ltd 2012 EWHC 2702 Ch , Norris J summarised the various principles at paragraph 22, only two of which I need to quote

“(f) …the court will be alert to the risk that an unwilling debtor is raising a cloud of objections on affidavit to claim that a dispute exists which cannot be determined without cross examination” and at “g”

“the court will therefore be prepared to consider the evidence in detail even if, in performing that task, the court may be engaged in much the same exercise as would be required of a court facing an application for summary judgment”

Those comments are consistent with my earlier analysis of the test and with what I have had to do here.Finally, to conclude my brief journey through the authorities, Trower J in Integral Law v Jason 2020 EWHC 3698 Ch at paragraph 5 referred to the ‘manifest incredibility” of a defence being insufficient to refute a claim.

Admission Of Liability

The court in reasonably robust terms said that liability was established:

Application To Set Aside A Statutory Demand Failed

It follows that in my judgment liability on the Note is well founded, but if I am wrong and there are technical flaws in the Note which make it unenforceable in its own right, the Note is clearly a strong contemporaneous admission of liability particularly here where, with the Note containing no Entire Agreement clause, the agreement of 7 January 2021 remains in place as to payment of the liability. In any event the Note is a separate contract from the underlying agreement as the Note represents independently an obligation to pay – see Cardinal Finance Investment Corp v Central Bank of Yemen 2001 Lloyds Reports 1 at para 7. Liability is therefore in my judgment established. To state, as she does at paragraph 89.8 of her first witness statement, that Ms Staveley did not realise that she was personally liable until she was served by the Demand ventures into the realm of fantasy and is completely implausible. I reject her contention. I therefore now therefore turn to the duress, undue influence and misrepresentation points which have been raised on her behalf

Duress To Set Aside The Statutory Demand

What Is Duress?

duress in set aside of a statutory demand

In the case of Pakistan International Airline Corporation v Times Travel (UK) Ltd (Rev1) [2021] UKSC 40 Lord Hodge highlighted duress as follows:

If one focuses on the few cases in which a remedy has been provided for what would now be analysed as lawful act duress, there are to date two circumstances in which the English courts have recognised and provided a remedy for such duress. The first circumstance is where a defendant uses his knowledge of criminal activity by the claimant or a member of the claimant’s close family to obtain a personal benefit from the claimant by the express or implicit threat to report the crime or initiate a prosecution. The second circumstance is where the defendant, having exposed himself to a civil claim by the claimant, for example, for damages for breach of contract, deliberately manoeuvres the claimant into a position of vulnerability by means which the law regards as illegitimate and thereby forces the claimant to waive his claim. In both categories of case the defendant has behaved in a highly reprehensible way which the courts have treated as amounting to illegitimate pressure.

Duress In Staveley

The notion of duress as a ground to set aside the statutory demand was rejected:

duress in set aside of a statutory demand

… Did such duress exist here? In my judgment no. There were clearly commercial pressures on Ms Staveley but Mr Restis was perfectly entitled to press for payment. He may have thought, mistakenly or otherwise, that Ms Staveley was already personally liable and that by her signing the Facilitation Deed and all later documents she was simply confirming her personal liability, but there is no evidence that she was under duress either in January 2021 or April 2021. She herself suggested and agreed to arrange a Loan Facility by the Agreement of 1 February 2019. She clearly failed to do so and over two months later entered into the Facilitation Deed. She had ample time to seek to secure alternative finance – the evidence does not show what she tried to do over that period but, picking up on the principles outlined in Lord Hodges’s judgment above, the nature and justification for the claim is not one to be challenged in the context of commercial self-interest. As he said at paragraph 44 of his judgment

“As I have said (paras 26-30 above) there is no doctrine of inequality of bargaining power and no general principle of good faith in contracting in English law. A commercial party in negotiation with another commercial party is entitled to use its bargaining power to obtain by negotiation contractual rights which it does not have until the contract is agreed”

Undue Influence To Set Aside The Statutory Demand

What Is Undue Influence?

Undue influence as confirmed in the case of Royal Bank of Scotland v. Etridge (AP) [2001] UKHL 44 is occasioned by two key components:

What Is Undue Influence
  • Improper pressure such as unlawful threatening.
  • Unfair advantage taken by one party in a relationship over another.

The proposition of undue influence as a ground to set aside the statutory demand was rejected:

I do take into account that Ms Staveley suffers from Huntingdons Disease which can be a debilitating condition but she has shown throughout her business career a determination, a business- like attitude, and a resilience which I find quite remarkable. Sufferers of the disease do suffer periods of cognitive malfunction, impaired attention and concentration and poor judgment as the medical evidence before me shows, but those periods are transient by nature and manageable by medicine (see pages 406/407 of the application bundle). By June 2020 her condition had “stabilised”. Importantly Ms Staveley has not asserted in her own evidence that in January 2021 and April 2021, her ability to think clearly was affected. I put that point to Mr Loveday but he could offer nothing in the evidence to dissuade me that between the beginning of January 2021 to May 2021 there was anything which showed an impairment to her cognitive thinking. Furthermore, the 7 January 2021 agreement was with Ms Staveley for two weeks or so and the Note, the terms of which were amended by Ms Staveley herself, for over three weeks. I asked Mr Loveday to take me to any evidence which supported a contention that she was unwell at that time – he could not. It would have been very easy to cover that point in her witness statements but it is noticeably absent. In the absence of any such supporting evidence that she was unwell at the time, which incidentally she was happy to rely upon with regard to the Facilitation Deed in April 2019 (see paragraph 66 of her First Witness Statement), bearing in mind again that the burden of proof is upon her, I therefore reject any suggestion that her medical condition materially affected the signing of either of those two documents.

In those circumstances, the evidence fails to support a defence of undue influence. It is, in my judgment, unsustainable and does not pass the threshold test. It may be a matter of “he said, she said” but Ms Staveley’s case is unsupported by contemporaneous documentation. In fact, all the material documents point one way only and not in her favour – I make no apology for repeating in part the observations of Arden LJ in Collier at paragraph 21 earlier cited in this judgment when she said

“If the test in the Keller case 2002 BPIR 544 were applicable, the court would have to apply a lower threshold than real prospect of success and that would mean it would be enough on an application to set aside a statutory demand if the dispute were merely arguable. However, that approach would give no weight to the word “substantial” in the rule 6.5(4); nor would it give any meaning to the word “genuine” in para 12(4) of the Practice Direction. In my judgment, the requirements of substantiality of (if different) genuineness would not be met by showing that the dispute is arguable. There has to be something to suggest that the assertion is sustainable. The best evidence would be incontrovertible evidence to support the applicant’s case but this is rarely available. it would in general be enough if there were some evidence to support the applicant’s version of the facts, such as a witness statement or a document, although it would be open to reject that evidence if it were inherently implausible, or were not supported by contemporaneous documentation see also Lawrence Collins LJ in the Ashworth case, para 34. But a mere assertion by the applicant that something has been said or happened would not generally be enough if those words or events were in dispute and material to the issue between the parties…………..”

That last sentence I have just quoted wholly supports my conclusions in this case. I find a complete lack of credibility to her assertions both as to duress and undue influence, particularly when reading the 7 extracted exchanges I earlier quoted. There is nothing which gainsays these documents. The comments of Carnwath LJ in Mentmore International are pertinent. Furthermore, standing back and looking in the round at the extracted comments of Mr Justice Waksman at paragraphs 156 to 163 identified by me, for Ms Staveley to argue otherwise in fighting off the principal sum claimed in the Demand , is a doomed leap by her across the widening chasm of credibility, akin to Micawberism. It fails to support her contention that these particular issues require to be determined at trial.

Misrepresentation To Set Aside The Statutory Demand

A claim to one of the species of misrepresentation needs to have two key characteristics:

ingredients of misrepresentation
  • An untrue statement which it is reasonable would be relied upon to enter into an agreement.
  • The relevant statement must have induced the person to enter into the agreement.

The court did not seem to find these ingredients were in the mix:

Having reviewed the matter and bearing in mind that Ms Agnello only relies on the 7th January 2021 agreement and the Note dated 1 April 2021, I am firmly of the view that this particular alleged misrepresentation does not cover either the 7 January 2021 agreement or the Note…

Doubts As The Source Of Funds

The court dealt with a final ground to set aside the statutory demand. A point was expressed by the applicant about whether a payment should be made to the respondent and the court appeared unimpressed:

Is this serious to set aside statutory demand

Finally, I deal with the one further point raised by Mr Loveday as to other grounds to set aside the Demand, namely the concern that any payment made to Mr Restis may be a criminal offence as there is no evidence that the monies advanced were those of Mr Restis. The evidence before the court is that it came from Mr Restis (see paragraph 10 of his witness statement and the Bank transfer document at page 436 of the application bundle). To claim that Ms Staveley is entitled to withhold payment because of doubts as to the source of funds and the bona fides of Mr Restis, relying on anecdotal evidence, is wholly without merit and is being used as a screen to avoid payment. If it is seriously being argued to be a defence to the Demand I wholly reject it.

Result

The statutory demand was not set aside:

To conclude I therefore find that there was no duress or undue influence placed on Ms Staveley and there were no misrepresentations made which would support an argument that any triable issue has been raised. The 7 January 2021 Agreement and/or the Note are unimpeachable, each in their own independent right, showing a clear acknowledgment of liability to pay the balance of the primary loan. Claims under the Demand so far as it relates to the legal fees and interest accrued both before and after 3 April 2023 are not being pursued. The only part of the Demand which remains extant for the purpose of the application before me is therefore the balance of the primary loan. Having found that none of the grounds put forward by Ms Staveley is of sufficient weight to avoid liability, the Demand totalling £3,477,000 is sound and the application to set aside, confined to that figure only, is dismissed.

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Author: Elliot Green
Last Updated: June 12, 2024

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