Macpherson v Wise

A statutory demand should be set aside where the debt is disputed on substantial grounds. A debtor alleging that payment was deferred must show a credible and enforceable agreement. A promise merely to pay an existing debt does not provide consideration for a creditor’s promise to postpone payment.

Unwaived solicitor-client communications disclosed in breach of confidence may be excluded from appellate evidence. The ordinary interest in discovering the truth, or in strengthening a party’s case, does not by itself override legal professional privilege.

The respondent served a statutory demand for £338,500 arising from loans and the proceeds of sale of a vehicle. The appellant accepted substantial indebtedness but alleged that the respondent had agreed to defer repayment until the sale of property owned by a company controlled by the appellant. He relied on a second charge executed over that property as consideration for the alleged deferral.

District Judge Devlin dismissed the application to set aside the demand. Norris J dismissed the appellant’s first appeal: [2011] EWHC 141 (Ch). The appellant then sought permission for a second appeal and wished to rely on a former solicitor’s letter said to corroborate the alleged agreement. The central issues were whether there was a substantial dispute as to the debt and whether the new, privileged material could be admitted.

1. Permission for a second appeal was refused. The appeal raised no important point of principle or practice. The only possible basis for permission was a compelling reason arising from the proposed new evidence, but that evidence was excluded.

2. Under Insolvency Rules r. 6.5(4)(b), a statutory demand may be set aside where the debt is disputed on substantial grounds. The appellant’s challenge to the £60,000 penalty did not suffice. The asserted January arrangement was unenforceable because the appellant gave no consideration for a promise to defer payment of debts already due: see Foakes v Beer (1883) 9 App Cas 605.

3. The execution of a charge could potentially have supplied consideration for a later agreement, but the appellant had to establish credible evidence that such a binding agreement was made. His evidence did not show an intention to create a new contract, an agreed open-ended postponement, or a material variation of the earlier informal arrangement. The evidence, including the expectation of payment by the end of March, was consistent with only a short opportunity to pay. The District Judge was entitled to find no genuinely triable dispute, and Norris J was entitled to dismiss the first appeal.

4. The solicitor’s letter contained information covered by legal professional privilege, which had not been waived. Although privileged communications can be tendered as secondary evidence, the court may restrain their use where they were disclosed in breach of confidence: see Calcraft v Guest [1898] 1 QB 759, Ashburton v Pape [1913] 2 Ch 469 and Goddard v Nationwide Building Society [1987] QB 670. The need to discover the truth or to assist a party’s defence was not, without a further public interest, sufficient to displace confidentiality. Applying Istil Group Inc v Zahoor [2003] 2 All ER 252, the court excluded the letter. There was consequently no compelling reason to permit a second appeal.

• Court of Appeal (Civil Division) Patten LJ refused permission to bring a second appeal and excluded the proposed new evidence: [2011] EWCA Civ 399.
• High Court, Chancery Division (Norris J) Dismissed the appellant’s appeal from the County Court: [2011] EWHC 141 (Ch).
• Slough County Court (District Judge Devlin) Dismissed the application to set aside the statutory demand.