AFP Assets Limited v Rachael Hugill, Robin Hugill and R & R Hugill (a partnership)

On an appeal concerning statutory demands, the applicant seeking to set them aside must show a genuine triable issue on substantial grounds. The test requires plausible evidence capable of supporting a real prospect of success; a bare assertion is insufficient. The court must avoid conducting a mini-trial. A contractual termination notice may rely on an existing event of default not expressly repeated in the notice, unless the contract requires specification of the default or the terminating party has waived the right to rely on it. Where an agreement provides that breach of any part of a contractual clause is an event of default, compliance with every subparagraph need not be considered before a default is established.

The appellant commercial finance company served statutory demands on the respondents, a farming partnership and its partners, for a debt arising principally under a livestock facility agreement. The County Court at Barnsley, District Judge Watson, set aside the demands on the basis that the debt was genuinely disputed on substantial grounds.

The appellant appealed on four grounds. It challenged the exclusion of additional contractual events of default, the approach to the burden and evidence required to establish a genuine triable issue, the finding concerning alleged compliance with the livestock-sale provisions, and the conclusion that all formalities under those provisions required examination at trial.

1. Appeal allowed. All four grounds succeeded.
2. Under CPR 52, an appeal may be allowed where the lower court’s decision was wrong or unjust because of serious procedural or other irregularity. On an application under rule 10.4 and rule 10.5(5)(b) of the Insolvency Rules 2016, the applicant seeking to set aside a statutory demand bears the burden of showing a genuine triable issue on substantial grounds. That standard is materially equivalent to a real prospect of success on summary judgment. The court must not conduct a mini-trial.
3. The District Judge was wrong to exclude events of default under clauses 23.1(c) and (o). The contract did not require the default relied on to be specified in the termination notice. The respondents had been notified of the alleged breaches before termination and had not remedied them. Applying Reinwood Ltd v L Brown & Sons Ltd, the appellant could rely on those existing defaults. No waiver or estoppel had been established.
4. The evidence raised a triable issue concerning clause 14 because the evidence about the condition of the livestock was conflicting. It did not raise a genuine triable issue concerning clause 18. The respondents’ evidence did not plausibly establish that the sale of 52 cattle had been approved, that the required notification had been given, or that the sale proceeds had been directed to the appellant as required by clause 18.8.
5. The livestock facility agreement required sales to comply with its own procedures. The fact that the herd size was not questioned on collection did not establish approval or create an arguable dispute. The contract could not reasonably be read as requiring compliance with every subparagraph of clause 18 before any event of default arose. A breach of one constituent requirement was sufficient.
6. The statutory demands were therefore not to be set aside. The judgment and costs order below were reversed to the extent necessary to give effect to the successful appeal.

• High Court, Chancery Appeals (ChD): Appeal from the decision of District Judge Watson dated 23 January 2024; appeal allowed on all four grounds.
• County Court at Barnsley: Statutory demands for £213,787.40 were set aside and the appellant was ordered to pay the respondents’ costs.