Tina Chopra & Ors. v Katrin Properties Limited & Anor.

To set aside a statutory demand under rule 10.5(b) of the Insolvency Rules 2016, the debtor must show a genuine and substantial dispute with a real prospect of success. The court may scrutinise the evidence, although it must not conduct a mini-trial.

Assertions of undue influence, agency, oral variation or forgery must be supported by evidence capable of establishing a serious issue. A personal guarantee given by deed does not fail merely because the guarantor is said to be a volunteer. Where a guarantee requires demand, a letter concerning repayment by the borrowing company and reserving rights to enforce the guarantee may not constitute a demand under the guarantee.

The judgment determined seven applications by four individuals to set aside statutory demands issued by Katrin Properties Limited and KSEYE Capital Holdings Limited. The demands concerned debts allegedly due under personal guarantees securing loans made to companies connected with the applicants.

The applicants relied on alleged agency, undue influence, oral variations, lack of recourse to other security, defects in letters of demand and forgery. Most applications relied on the statutory ground that the debt was disputed on substantial grounds. The central issues were whether the evidence raised a genuine and substantial dispute and whether the relevant demand letters triggered liability under the guarantees.

1. Statutory-demand threshold. Under rule 10.5(b) of the Insolvency Rules 2016, the dispute must be genuine and substantial, meaning that it has a real prospect of success. The court must not conduct a mini-trial, but may scrutinise the evidence to determine whether the alleged dispute is sustainable. Mere assertion is insufficient.
2. Agency and alleged variations. The applicants failed to establish a real prospect that VS had actual authority to bind either lender. The invoices, correspondence and surrounding circumstances supported his role as an introducer for the borrowers. The alleged oral assurances and variations therefore could not bind the lenders. Arguments based on collateral agreement, waiver or variation consequently failed.
3. Undue influence. Actual undue influence requires evidence that pressure or coercion overrode the claimant’s will. The evidence that VS insisted on execution, without more, did not demonstrate undue influence. The alleged relationship and pressure were unsupported by sufficient evidence and did not raise a serious or genuine dispute.
4. Consideration and volunteer argument. A guarantee executed by deed does not require proof of valuable consideration. Even if the guarantor were a volunteer, that fact alone would not invalidate the guarantee.
5. Demand. The letters dated 16 March 2020 demanded repayment of loans made to the companies. Read objectively, they reserved the lenders’ right to enforce the personal guarantees and did not themselves make a demand under those guarantees. The demands were therefore ineffective to trigger liability against TC and PS in respect of NRD, and AC in respect of IOL.
6. Forgery. PS’s late and contradictory forgery case was inherently implausible and did not raise a genuine and substantial dispute. The evidence of TC and AC, although improbable, was sufficient to raise issues requiring determination at trial.
7. Other grounds. Rule 10.5(d) is not a free-standing discretion to prevent unfairness from the applicant’s perspective. It must be read consistently with the specific grounds in rule 10.5. The alleged failure to register security did not justify setting aside MS’s demand.
8. Disposition. Four applications against KP were granted. Two applications against KCH were adjourned. MS’s application against KCH was dismissed, and KCH was authorised to present a petition against MS.