Wayne Murfet & Anor v Property Lending LLP & Anor

On an application to set aside a statutory demand, the debtor must show a genuine triable issue, equivalent to a real prospect of successfully defending the claim. The court must avoid a mini-trial, but need not accept speculative assertions that further evidence may emerge. It may decide a short point of construction where the evidence and submissions are sufficient.

Clear wording that liabilities are repayable on demand permits repayment to be demanded at any time, absent an express contractual restriction. The factual matrix cannot contradict the language used. A broad contractual power to demand repayment is not ordinarily subject to a general Braganza-style requirement that it be exercised reasonably, although it may not be used for a purpose unrelated to legitimate commercial interests. A clearly expressed core repayment term was not invalidated under section 3 of Unfair Contract Terms Act 1977.

The appellants appealed against orders of Chief ICC Judge Briggs dated 3 October 2023, dismissing their applications to set aside statutory demands based on personal guarantees of loans made to a property development company.

Permission to appeal was granted on Grounds 2, 3, 4 and 11. The grounds concerned the construction of a clause stating that the liabilities were repayable on demand, the contra proferentem rule, whether the clause was a termination clause, implied restrictions on its exercise, and the application of section 3 of Unfair Contract Terms Act 1977.

The central issues were whether the clause created a substantial dispute requiring trial and whether its operation was restricted by implication or statute.

1. Statutory demands. The applicable question under rule 10.5(5) of the Insolvency (England and Wales) Rules 2016 was whether there was a genuine triable issue, or no real prospect of successfully defending the claim. The court should not conduct a mini-trial, but must assess the evidence with some analysis and may consider evidence reasonably expected to be available at trial. Speculation that something may turn up is insufficient. A short point of law or construction should be decided where the evidence and submissions permit it.
2. Construction of clause 7.2. The words stating that the liabilities were repayable on demand were clear. Clause 7.2 operated notwithstanding clause 7.1 and other provisions of the agreement. The provisions governing further advances could not be transposed into clause 7.2 as conditions precedent to repayment, particularly because the agreement contained no workable alternative repayment events for breach, insolvency or failure of the development.
3. The definition of liabilities, including present and future liabilities, did not restrict clause 7.2 to sums already otherwise due. The factual matrix and commercial considerations could elucidate, but not contradict, the clear contractual language. The contra proferentem rule therefore had no application to the relevant question, which was whether repayment was qualified by any restriction.
4. Implied terms. The court rejected an implied term requiring the power to be exercised fairly, honestly, in good faith and not arbitrarily, capriciously or unreasonably. The authorities concerning Braganza limitations did not make every contractual power subject to such a term, and a unilateral power to demand repayment differed from an evaluative power affecting ongoing contractual performance. Nevertheless, the power was at least arguably limited to legitimate commercial purposes and could not rationally be used for a purpose unrelated to the lenders’ legitimate commercial interests. The evidence showed a legitimate aim of minimising potential losses.
5. UCTA. Even if section 3 of Unfair Contract Terms Act 1977 could theoretically apply, clause 7.2 was a central and clearly expressed term defining the parties’ obligations, rather than a provision modifying the agreement. That was sufficient to defeat the argument. The further arguments concerning standard terms, bargaining position and reasonableness also lacked evidential support.
6. The appeal was dismissed. Costs and consequential matters were reserved for further submissions.

• High Court (Chancery Division) [2024] EWHC 2787 (Ch): appeal from the orders and judgment of Chief ICC Judge Briggs dated 3 October 2023; appeal dismissed.
• Chief ICC Judge Briggs: applications to set aside statutory demands dismissed.