Wagner v White

To set aside a statutory demand, the debtor must show a genuine triable issue. An arguable assertion is insufficient where the contemporaneous evidence and inherent probabilities show that it is unsustainable. The test is practically equivalent to whether there is a real prospect of success under Civil Procedure Rules 1998, Part 24.

A surety is not discharged merely because the creditor’s conduct was irregular or generally prejudicial. The creditor’s conduct must fall within the recognised principle, including bad faith or conduct that causes or materially contributes to the principal debtor’s default and thereby prejudices the surety. Where the relevant default would have occurred independently, the surety remains liable.

Mr Wagner appealed against orders dismissing his applications to set aside statutory demands served by Mr White and Mr Roden. Each demand was based on a personal guarantee of loans made to Powa Technologies plc.

The appeals concerned whether Mr White had caused or materially contributed to Powa entering administration, so as to engage the principle in Bank of India v Patel, and whether Mr Wagner could rely on a possible claim by Powa against Mr White for breach of fiduciary duty or unlawful means conspiracy under the co-extensiveness principle. The Roden appeal was not argued separately because its outcome was agreed to follow the White appeal.

1. Disposition. The appeal concerning Mr White’s statutory demand was dismissed. It followed that the appeal concerning Mr Roden’s statutory demand was also dismissed.
2. Under rule 6.5(4) of the Insolvency Rules 1986, the court will not set aside a statutory demand unless there is a genuine triable issue. The practical distinction between that test and a real prospect of success under Civil Procedure Rules 1998, Part 24, is immaterial in this case. The applicant must show more than an arguable dispute. The assertion must be sustainable in light of contemporaneous documents and inherent probabilities. The court may reject an inherently implausible or unsupported account without conducting a mini-trial.
3. The principle in Bank of India v Patel did not assist Mr Wagner. Even assuming that a creditor’s material contribution to a default, or bad faith without breach of a separate duty, could engage the principle, there was no genuine triable issue that Mr White had caused or materially contributed to Powa’s administration. The evidence showed that Wellington had already concluded that administration was the only viable option unless substantial new equity was obtained.
4. Mr White’s conduct therefore did not alter the risk undertaken by Mr Wagner under the guarantee or unfairly prejudice him. The fact that Mr White may have wished to benefit from an administration did not establish that he caused the default.
5. The co-extensiveness argument also failed. Even assuming that Mr White had breached fiduciary duties owed to Powa, there was no genuine triable issue that his conduct caused Powa loss. Powa therefore had no viable cross-claim capable of answering the guaranteed debt. It was unnecessary to determine the precise scope of the co-extensiveness principle, the alleged fiduciary breach, or the conspiracy issues.

The judgment itself states that the appeals were from orders dated 15 November 2017 made by Deputy Registrar Garwood dismissing applications to set aside statutory demands. The High Court dismissed both appeals.