If a Creditor intends to rely on non-payment of a Statutory Demand as evidence of a Debtor’s insolvency when presenting a Petition, then it is important for the Creditor to serve the statutory demand correctly and evidence such service.
The recent finding of ICC Judge Kyriakides on a preliminary issue in Emmott v Michael Wilson & Partners Ltd [2022] EWHC 2682 (Ch) reaffirms why an individual who effects service should keep a contemporaneous record and why in practice, process servers are engaged to deliver or effect personal service of a statutory demand.
A statutory demand is not a court document (Paragraph 5.5 of PDIP) and so CPR 6 is not relevant when serving a statutory demand. Instead Schedule 4 of the Insolvency Rules 2016 sets out the requirements for service of a statutory demand.
The Schedule states that the requirements for service of statutory demands on individuals are served (as "other documents") in accordance with Rule 10.20 of the Insolvency Rules 2016 which state:
“A creditor must do all that is reasonable to bring the statutory demand to the debtor’s attention and, if practicable in the particular circumstances, serve the demand personally.”
If personal service is not practicable, it may be appropriate to send the statutory demand by email, first class post or delivering it to the person's residence. The use of social media might also be considered.
In the present case, Michael Wilson & Partners Ltd (“MWP”) contended that service of the statutory demand was effected on 31 March 2021 by the following means:
- by sending a copy and accompanying letter on 31 March 2021 by first class post to Mr Emmott at Kemp House, 152-160 City Road, London EC1V 2NX ("City Road"), being the service address shown at Companies House for Mr Emmott in his capacity as a director of Scythian Mining Group Limited.
- by sending a copy and accompanying letter on 30 March 2021 by first class post to 4 The Courtyard, Sheffield Park, Uckfield ("The Courtyard").
A further copy of the statutory demand was sent by MWP to Mr Emmott's email address on 04 May 2021. Mr Emmott's evidence was that he did not receive the documents allegedly sent on 31 March 2021, but he did receive the email dated 04 May 2021.
Paragraph 11.2 of Practice Direction: Insolvency Proceedings [2020] BCC 698 ("IPD") provides:
"Rule 10.2 applies to service of a statutory demand whether within or out of the jurisdiction. If personal service is not practicable in the particular circumstances, a creditor must do all that is reasonable to bring the statutory demand to the debtor's attention. This could include taking those steps set out at para.12.7 below which justify the court making an order for service of a bankruptcy petition other than by personal service. It may also include any other form of physical or electronic communication which will bring the statutory demand to the notice of the debtor."
Paragraph 12.7 of the IPD states:
12.7.1 Where personal service of the bankruptcy petition is not practicable service by other means may be permitted. In most cases, evidence that the steps set out in the following paragraphs have been taken will suffice to justify an order for service of the bankruptcy petition other than by personal service:
(1) One personal call at the residence and place of business of the debtor. Where it is known that the debtor has more than one residential or business addresses, personal calls should be made at all the addresses.
(2) Should the creditor fail to effect personal service, a letter should be written to the debtor referring to the call(s), the purpose of the same, and the failure to meet the debtor, adding that a further call will be made for the same purpose on the [day] of [month] 20[ ] at [ ] hours at [place]. Such letter may be sent by first class prepaid post or left at or delivered to the debtor's address in such a way as it is reasonably likely to come to the debtor's attention. At least two business days' notice should be given of the appointment and copies of the letter sent to or left at all known addresses of the debtor. The appointment letter should also state that:
(a) in the event of the time and place not being convenient, the debtor should propose some other time and lace reasonably convenient for the purpose;
(b) )in the case of a statutory demand as suggested in para.11.2 above, reference is being made to this paragraph for the purpose of service of a statutory demand, the appointment letter should state that if the debtor fails to keep the appointment the creditor proposes to serve the demand by advertisement/ post/ insertion through a letter box as the case may be, and that, in the event of a bankruptcy petition being presented, the court will be asked to treat such service as service of the demand on the debtor;
(c) (in the case of a petition) if the debtor fails to keep the appointment, an application will be made to the court for an order that service be effected either by advertisement or in such other manner as the court may think fit
(3) When attending any appointment made by letter, inquiry should be made as to whether the debtor is still resident at the address or still frequents the address, and/or other enquiries should be made to ascertain receipt of all letters left for them. If the debtor is away, inquiry should also be made as to when they are returning and whether the letters are being forwarded to an address within the jurisdiction (England and Wales) or elsewhere.
(4) If the debtor is represented by a solicitor, an attempt should be made to arrange an appointment for personal service through such solicitor. The Insolvency Rules permit a solicitor to accept service of a statutory demand on behalf of their client but not the service of a bankruptcy petition."
In the present case, no attempt was made by MWP to serve Mr Emmott personally. Further, none of the procedure set out in paragraph 12.7 of the IPD was followed by MWP. Whilst MWP claimed that a statutory demand was sent to the City Road and The Courtyard addresses, no documents were produced to evidence this.
By reason of the matters referred to above, ICC Judge Kyriakides found that service of the statutory demand on Mr Emmott was not effected on 31 March 2021 as contended by MWP but rather on 04 May 2021 when Mr Emmott accepted, he received an email with the statutory demand from MWP and does not dispute that he was served on that day.
So, what does this mean for Creditors issuing statutory demands? It means Creditors should edge on the side of caution when serving statutory demands and either keep meticulous records, or adopt the approach taken in practice, which is to engage a process server to deliver or effect personal service of a statutory demand. The engagement of a process server will incur a fee for Creditors, but it may just thwart any unwanted dispute regarding service later.
Written by : Leonie-Robyn Murtagh, Associate Solicitor
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