Northcote v Wimbledon Bridge Club

Under rule 6.5(4)(d) of the Insolvency Rules 1986, a statutory demand may be set aside where the evidence shows that a bankruptcy petition founded on it would necessarily fail.

That may occur where an offer to compound the debt has been made and unreasonably refused under section 271(3) of the Insolvency Act 1986. The offer must be sufficiently certain to require acceptance or rejection. An uncertain proposal to negotiate the amount or payment period is not enough. Permission for a second appeal also requires an important point of principle or practice, or another compelling reason.

The Wimbledon Bridge Club served a statutory demand for £9,769, representing three taxed costs orders. Mr Northcote applied to set it aside, relying on his financial circumstances, the creditor’s conduct and proposals involving an immediate payment, monthly instalments and future negotiation.

The Croydon County Court dismissed the application. A deputy district judge later dismissed the application after hearing the parties, and the High Court dismissed Mr Northcote’s appeal. He applied to the Court of Appeal for permission to appeal from the High Court decision. The central issues were whether his proposals constituted an offer to compound the debt and whether the statutory demand should therefore be set aside.

1. Permission to appeal. Section 55 of the Administration of Justice Act 1998 applied to an appeal from a High Court judge’s decision on an appeal from a district judge. Permission could be granted only where the proposed appeal raised an important point of principle or practice, or where there was another compelling reason for hearing it. That threshold was not met.
2. Setting aside the statutory demand. Under rule 6.5(4)(d) of the Insolvency Rules 1986, the court asks whether the material shows that a bankruptcy petition founded on the demand would be bound to fail. If so, the demand ought to be set aside because it would serve no useful purpose.
3. Offers to compound. A petition may fail under section 271(3) of the Insolvency Act 1986 where an offer to compound the debt has been made and unreasonably refused. The offer must be in sufficiently certain terms for the creditor to address it and decide whether to accept or refuse it. An offer to negotiate, where the total payment and payment period depend on future agreement, does not satisfy that requirement.
4. Mr Northcote’s proposals were uncertain and did not amount to an offer whose refusal could be unreasonable. The creditor’s conduct did not provide a separate basis for setting aside the demand, and there was no statutory or procedural power to tell him what offer would be reasonable. Application refused; permission to appeal refused.

1. Court of Appeal (Civil Division): In [2001] EWCA Civ 123, Lord Justice Chadwick refused permission to appeal.
2. High Court: Mr David Oliver QC, sitting as a deputy judge in the Chancery Division, dismissed the appeal on 24 November 2000.
3. Croydon County Court, sitting in bankruptcy: The application to set aside the statutory demand was dismissed, including by Deputy District Judge Durman on 22 May 2000.