Insolvency Rules - Application to Set Aside a Statutory Demand

Monday, 10th April 2017

Applications to Set Aside a Statutory Demand

Set Aside Applications were previously governed by rules 6.4 and 6.5. They are now governed by Rules 10.4 and 10.5 which largely replicate the old rules.

Time Period

The Set Aside Application must be made by the debtor, within 18 days (which will be clear days) from the date of service of the Statutory Demand. This is the same time period as the old rules.

The old rules also provided that, where the debt is advertised pursuant to (Old) Rule 6.3, the period may be 18 days from the date of the advertisement. The new rules contain no such provision, because there is no reference to an 'advertisement' in relation to service of a Statutory Demand. Rule 10.2 simply provides that the creditor must do "all that is reasonable" to bring the Statutory Demand to the debtor's attention.

Form and Content of the Application

Rule 10.4(3) sets out what information the Set Aside Application must contain. Briefly, the Application must:

  1. Identify the debtor
  2. State that the Application is for an order to have the Statutory Demand set aside
  3. Give the date of the Statutory Demand
  4. Be dated and authenticated by the debtor or someone authorised to act on their behalf

Rule 10.4(6) also provides that the Set Aside Application must be supported by a witness statement and a copy of the Statutory Demand (if the debtor has it in his possession). The witness statement must set out:

  1. The date the debtor became aware of the Statutory Demand
  2. The grounds on which the debtor claims that it should be set aside (see Rule 10.5 below)
  3. Any evidence in support

The previous rules provided only that the Set Aside Application should be accompanied by a witness statement - there were no provisions for the Application itself. The new rules also have something of a caveat for debtors in that the Statutory Demand must be exhibited "if it is in the debtor's possession" - the old rules did not make any such reference.

Appropriate court or hearing centre

Set Aside Applications must be made to the debtor's own hearing centre in accordance with Rule 10.48 (subject to the conditions outlined in that rule).

Rule 10.5 - Hearing of Application to Set Aside

Rule 10.5 sets out the procedure and the court's powers on receiving and dealing with a Set Aside Application. In short, the fundamentals have not changed at all and it will just be a case of knowing the new references. The only significant change is that the new rules now legislate for what an order setting aside a Statutory Demand must include (see below).

Court's power to dismiss

Rule 10.5(1) and (2) provide that a court may, on receipt of a Set Aside Application, dismiss it if it considers it to be baseless, without giving notice to the creditor. The time for the debtor to comply with the Statutory Demand will then run again from the date the Set Aside Application is dismissed. This was exactly the same under the old rules.

Venue

If the Set Aside Application is not dismissed on paper, the court must fix a venue for it to be heard, and must give at least 5 business days' (which will be clear days) notice to the debtor (or their solicitor), the creditor and "whoever is named in the Statutory Demand as the person with whom the debtor may communicate about the demand". Again, this is the same as the old rules.

Summary determination or adjournment

When the Set Aside Application is initially heard, the court will consider the evidence available and may either:

  1. summarily determine the Set Aside Application (i.e. rule in either party's favour on summary basis)
  2. adjourn the hearing giving appropriate directions

Again, the procedure has not changed. Usually a summary hearing will be listed for about 20 minutes, at which the court will adjourn with directions for a more substantial hearing. In practice the parties may agree their own directions and adjourn by consent.

Grounds for Setting Aside Statutory Demand

Rule 10.5 provides that the court may grant the Set Aside Application and set the Statutory Demand aside if. The grounds for granting a Set Aside Application are exactly the same as the previous rules.

Undervalued Security

If the creditor holds some security in relation to the debt, and this has been included within the Statutory Demand (as per Rule 10.1(9)), but the court concludes that the Statutory Demand undervalues this security, the court may order the creditor to amend the Statutory Demand. This will not affect the creditor's right to present a Bankruptcy Petition relating to the original Statutory Demand.

This provision is unchanged from the old rules.

Court Order - Dismissal

If the court dismisses the Set Aside Application, it must make an order authorising the creditor to present a Bankruptcy Petition either as soon as possible or at a date specified by the court.

This provision is unchanged.

Court Order - Setting Aside

Rule 10.5(6) provides that a court order approving a Set Aside Application must contain:

  1. identification details of the debtor
  2. the date of the hearing
  3. the date of the Statutory Demand
  4. an order that the Statutory Demand be set aside
  5. details of any further order made
  6. the date of the order

This provision was not included in the old rules and is the only significant change.

All orders, whether to set aside the Statutory Demand or to dismiss the Set Aside Application, must be delivered by the court to the creditor as soon as possible. 

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