Ludsin Overseas Ltd v Maggs

When deciding whether a statutory demand should be set aside because a debt is fully secured, the court must assess whether the security currently equals or exceeds the full debt. The most reliable evidence of value is ordinarily what a willing purchaser will pay after reasonable marketing efforts. Direct evidence of unsuccessful attempts to sell may be more persuasive than earlier expert valuation evidence. Where fresh evidence is genuinely probative of the security’s present value, the interests of justice may require the appeal to proceed by way of rehearing, enabling the court to determine the issue on the most up-to-date reliable facts.

The creditor obtained judgment against the debtor for fraudulent misrepresentation and later served a statutory demand for the unpaid balance. After obtaining a charging order over the debtor’s interest in Bellmans, the creditor applied to set aside the demand. The Deputy Registrar concluded that the property’s open market value, based principally on an expert valuation, equalled or exceeded the debt and set aside the demand.

On appeal, the creditor sought to adduce evidence of unsuccessful marketing and substantially lower subsequent valuations. The central issues were whether that fresh evidence should be admitted, whether the appeal should be by review or rehearing, and whether the security adequately covered the debt.

1. Fresh evidence and form of appeal. The appeal proceeded by way of rehearing. The interests of justice required consideration of the most up-to-date and reliable facts, provided that the evidence was genuinely probative of the value of the security. The debate between review and rehearing was therefore treated as secondary to identifying whether the debt was adequately secured at the relevant time.
2. Valuation of security. Under Rule 6.5(4)(c) of the Insolvency Rules, the question was whether the value of the security equalled or exceeded the full amount of the debt. The best indication of an asset’s value at a particular time was ordinarily what someone would pay after reasonable attempts had been made to sell it.
3. The property had been marketed for six months by a reputable agent at prices reduced from £2.5 million to £1.7 million, without an offer providing security for the creditor’s debt. That evidence was highly persuasive, if not conclusive, that the property was not worth the approximately £2.9 million required to secure the debt fully. It was more persuasive than the earlier expert valuation.
4. The fresh evidence was admitted. The evidence on the rehearing established that the statutory demand should not have been set aside. The appeal was allowed. The appeal against the costs order did not require determination.

• High Court (Chancery Division): On 28 March 2014, Deputy Registrar Lawson set aside the statutory demand, holding that the security equalled or exceeded the debt, and made a costs order.
• High Court (Chancery Division), on appeal: The appeal was allowed after fresh evidence was admitted and the matter proceeded by way of rehearing.