Jenna Louise Howe v Leck Holdings Limited

A statutory demand is not set aside merely because it was defective, including because notice of an assignment was served late. The debtor must show an injustice requiring the court’s intervention.

Equitable set-off involves a single composite inquiry. The cross-claim must be so closely connected with the demand that it would be manifestly unjust to enforce payment without taking it into account. The inquiry is not confined to commercial disputes and requires consideration of both connection and justice.

Where a debtor has a realistic prospect of recovering an amount equal to or exceeding the debt, the statutory demand may be set aside under Rule 10.5(5)(a) of the Insolvency (England and Wales) Rules 2016.

The appellant challenged a statutory demand for £42,000 in costs arising from probate proceedings concerning her late father’s will. The debt had been assigned by the executrices to the respondent company, which served the statutory demand without separate notice of the assignment.

The appellant also had a pending claim under the Inheritance (Provision for Family and Dependants) Act 1975, seeking financial provision from the estate and including provision for the debt. The County Court dismissed her application to set aside the demand. Permission to appeal was granted on three grounds, but the substantive appeal proceeded on notice of assignment and equitable set-off.

The central issues were whether the demand should be set aside despite defective notice, and whether the pending 1975 Act claim constituted an equitable set-off under Rule 10.5(5)(a).

1. Notice of assignment. The appeal on the notice ground was dismissed. Applying Coulter v Chief Constable of Dorset Police [2005] 1 WLR 130, a defective statutory demand, including one served before notice of an assignment, does not by itself justify setting it aside. Injustice requiring the court’s intervention must be shown. The appellant realistically conceded this point.
2. Applicable test. Equitable set-off has a single composite test. The cross-claim must be so closely connected with the demand that it would be manifestly unjust to enforce payment without taking the cross-claim into account. The formal requirement of close connection and the functional requirement of justice cannot be divorced. The court applied the formulation in Geldof Metaalconstructie Nv v Simon Carves Ltd [2010] EWCA (Civ) 667, repeated in Bibby Factors North West Limited v HFD Ltd [2016] 1 Lloyd's Rep 517.
3. Connection and justice. The debt arose from the appellant’s probate challenge, followed by her claim for financial provision from the same estate. Her pending claim expressly sought provision for payment of the debt. The previous stay of that claim pending payment, and its later lifting after evidence of inability to pay, demonstrated a sufficient practical and substantive connection. The fact that the dispute was non-commercial did not prevent equitable set-off.
4. Real prospect and outcome. It would be inherently unjust for the assignee to enforce the debt without regard to the pending claim. There was a real prospect that an award under the 1975 Act claim, given the estate’s value and the appellant’s demonstrated needs, would equal or exceed £42,000. The appeal was therefore allowed on the equitable set-off ground. The statutory demand was to be set aside. The appellant’s appeal costs were summarily assessed at £7,500, payable within 14 days.

• High Court, Chancery Appeals. On appeal from the decision of District Judge Bishop in the Croydon County Court on 2 January 2024, the appeal was dismissed on the notice-of-assignment ground and allowed on the equitable-set-off ground.