Hancock v Promontoria (Chestnut) Ltd

A debtor seeking to set aside a statutory demand must establish a substantial dispute. Speculation about redacted parts of an assignment deed will not meet that burden where the unredacted provisions, reliable evidence and the surrounding facts show that the debt was assigned.

When a court must construe a contract, the normal starting point is that it should see the document as a whole. Irrelevance alone does not justify redaction. A relevant provision cannot be withheld merely because it is confidential. Any exceptional redaction must be minimal, fully explained and convincingly justified. Those principles did not assist the debtor on the particular facts, because the redactions caused no injustice and did not raise a substantial dispute.

Clydesdale Bank plc made loans to Mr Hancock which were secured over his residential-property portfolio. Promontoria (Chestnut) Ltd asserted that it acquired the loans and the related security under a deed of assignment. It served a statutory demand for the unsecured balance.

The County Court rejected Mr Hancock’s application to set aside the demand. Barling J later permitted an appeal only on three new points concerning Promontoria’s title. His Honour Judge Hodge QC, sitting in the High Court, dismissed that appeal: [2019] EWHC 2646 (Ch).

On a second appeal, Mr Hancock contended that the heavily redacted deed, including provisions incorporated from a sale and purchase agreement, could not establish an effective assignment. The central question was whether the redactions gave rise to a substantial dispute about Promontoria’s title to the admitted debt.

Disposition

1. The appeal was dismissed unanimously. Lord Justice Henderson gave the reasons, with which Floyd and Flaux LJJ agreed.

2. Under rule 6.5(4)(b) of the Insolvency Rules 1986, Mr Hancock bore the burden of showing a substantial dispute. The applicable inquiry was materially similar to the summary-judgment standard. A creditor serving a statutory demand did not first have to prove title as it would in a Part 7 claim.

3. The unredacted deed identified Mr Hancock’s loans as relevant loan assets. Clause 2.1 made an apparently absolute assignment of the bank’s rights in those assets. The notice of assignment, simultaneous transfer of the charges and absence of any challenge by the bank reinforced that conclusion. The proposed qualifications arising from the redacted definition, clause 1.5 and the description of Promontoria as a novated buyer were speculative and raised no genuine triable issue.

4. Section 136(1) of the Law of Property Act 1925 gave legal effect to an absolute written assignment once notice was given. On the court’s findings, payment to Promontoria would discharge Mr Hancock. He had neither evidence of a competing claim nor any basis for a substantial dispute.

5. The court refused permission to adduce fresh evidence. The minor inaccuracy in the solicitor’s earlier evidence about a transfer form did not affect his credibility or the issue of title, and would not probably have influenced the result under Ladd v Marshall, [1954] 1 WLR 1489.

6. As a general matter, construction requires the court to consider the contractual document as a whole, consistently with Wood v Capita Insurance Services Ltd, [2017] UKSC 24. Redactions to a document put forward for construction should therefore normally be forbidden or kept to an absolute minimum. Irrelevance alone is insufficient; confidentiality cannot justify withholding relevant material. The party seeking redaction must give a full and particular explanation, while alternatives such as a confidentiality ring may protect genuine confidentiality.

7. Those general principles did not require the demand to be set aside. The issue was limited, Mr Hancock was not a party to the assigned transaction, and the available material safely established title. The court did not determine Promontoria’s alternative argument based on its registration as legal-charge proprietor.

• Court of Appeal (Civil Division): dismissed Mr Hancock’s second appeal: [2020] EWCA Civ 907.

• High Court, Chancery Appeals: His Honour Judge Hodge QC, sitting as a High Court judge, dismissed the appeal from the County Court and held that no substantial dispute had been shown: [2019] EWHC 2646 (Ch).

• High Court: Barling J granted permission to advance limited new arguments about proof of title, after refusing the other proposed grounds: [2018] EWHC 2934 (Ch).

• County Court at Liverpool: District Judge Wright dismissed the application to set aside the statutory demand on 15 June 2017.