Canning v Irwin Mitchell Llp

Service of a statutory demand is a prerequisite to presenting a bankruptcy petition founded on inability to pay an immediately payable debt. A fundamental failure to bring the demand to the debtor’s attention cannot be cured as a formal defect or irregularity by the absence of prejudice or by proportionality. The demand must have reached, or come within the debtor’s dominion. Where service is defective, the court has no discretion to allow the petition to proceed. Presentation in the wrong court is ordinarily capable of cure by transfer, rather than striking out.

Irwin Mitchell LLP presented a bankruptcy petition against Antony Canning based on an unpaid judgment debt. A statutory demand had been posted through the letterbox of an address where the creditor believed Mr Canning lived, but the evidence showed that he had never lived there and probably never received the demand.

The District Judge found that Irwin Mitchell had not done all that was reasonably required to bring the demand to Mr Canning’s attention. Nevertheless, applying Bush v Bank Mandiri (Europe) Ltd [2011] BPIR 19, he declined to set aside the demand and transferred the petition to the proper court. The appeal concerned whether defective service was fatal to the petition and whether presentation in the wrong court required dismissal.

1. Appeal allowed. The statutory demand had not been properly served and the bankruptcy petition was dismissed.
2. Under ss 267(2)(c) and 268(1) of the Insolvency Act 1986, service of a statutory demand is a prerequisite to presenting a petition based on inability to pay an immediately payable debt. The words “but only if” in s 268(1) reinforce that requirement.
3. Rule 6.3(2) of the Insolvency Rules 1986 requires the creditor to do all that is reasonable to bring the demand to the debtor’s attention and, where practicable, to effect personal service. The high standard described in Regional Collection Services Ltd v Heald [2000] BPIR 661 had not been met.
4. The cases relied on by the creditor were materially different. In Andrews v Bohm [2005] EWHC 3520 (Ch), the demand had been brought to the debtor’s attention by a reasonable method. In Gate Gourmet Luxembourg IV Sarl v Morby [2016] Bus LR 218 and In re Anderson Owen Ltd [2010] BPIR 37, the document had reached, or informed, the intended recipient. Here, the demand never reached Mr Canning or came within his dominion.
5. That failure was fundamental, not a formal defect or irregularity capable of cure under rule 7.55. The court respectfully disagreed with Bush v Bank Mandiri (Europe) Ltd [2011] BPIR 19 to the extent that it suggested that absence of prejudice or proportionality could cure such a failure. The principle in Debtor (Nos 49 and 50 of 1992) [1995] Ch 66 supported intervention where a statutory demand could not properly found a petition.
6. Even if a discretion existed, it should not be exercised in the creditor’s favour. The misleading certificate of service, failure to attempt service through the debtor’s solicitors, and probable non-receipt of the demand were important factors. Presentation in the wrong court alone did not warrant striking out; transfer would have been available.

• High Court (Chancery Division): The appeal from the order of Deputy District Judge Healey dated 28 June 2016 was allowed. The petition was dismissed.
• Truro County Court: The District Judge extended the petition hearing, transferred the proceedings to Southend County Court and permitted amendment, despite finding that the statutory demand had not been properly served.