Statutory Demand: Service by Post

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Introduction The code relating to Statutory Demands (SDs) comprises [1] The Insolvency Act 1986 (IA) and The Insolvency Rules 1986 (IR).

A creditor may petition the court for a bankruptcy order against a debtor where he demonstrates the debtor is unable to pay his debts. One such way of demonstrating inability to pay is set out in section 268 of the IA.

Section 268 says:

268. Definition of “inability to pay”, etc.; the statutory demand.

(1) For the purposes of section 267(2)(c), the debtor appears to be unable to pay a debt if, but only if, the debt is payable immediately and either

(a) the petitioning creditor to whom the debt is owed has served on the debtor a demand (known as “the statutory demand”) in the prescribed form requiring him to pay the debt or to secure or compound for it to the satisfaction of the creditor, at least 3 weeks have elapsed since the demand was served and the demand has been neither complied with nor set aside in accordance with the rules, or

(b) execution or other process issued in respect of the debt on a judgment or order of any court in favour of the petitioning creditor, or one or more of the petitioning creditors to whom the debt is owed, has been returned unsatisfied in whole or in part.

In all cases, the debt due must be a debt which is for a sum equal to or exceeding the bankruptcy level. Currently that level is £750.00.

There are three types of SDs for service on individuals. They are:

[1] SD for debt payable immediately but not under a judgment of the court

[2] SD for debt payable immediately under a judgment of the court

[3] SD for debt payable in the future

This article is concerned with the postal service of type [1] SDs and considerations regarding applications to have .them set aside.

Practice and Procedure: Rules for the Service of Statutory Demands

Here's a very important rule. It’s IR 6.3(2). It applies to the service of all SDs but is commonly disregarded by debt collectors who use the insolvency regime as a means of collecting debts with no genuine intention of proceeding to bankruptcy.

Rule 6.3 Requirements as to service

(2) The creditor is, by virtue of the Rules, under an obligation to do all that is reasonable for the purpose of bringing the statutory demand to the debtor's attention and, if practicable in the particular circumstances, to cause personal service of the demand to be effected.

In short, the creditor is bound by obligation imposed by the rule, to do all that is reasonably practicable to cause personal service of the SD. To avoid the obligation the creditor is bound to demonstrate that it proved impractical to effect personal service. To achieve avoidance of the obligation he will be expected to attempt personal service, fail in that attempt and proceed to serve by some other way which he believes will cause the SD to come to the debtor's attention.

A debtor will invariably know the creditor wishes to attempt personal service because the creditor will tell him. Where a creditor has attempted but failed, the proper course is for the creditor to seek to make an appointment to meet the debtor. This is usually done by attending to serve personally, failing and pushing a letter through the letter box referring to the visit and leaving contact details by which the appointment may be fixed between the debtor and the person attempting to serve the SD.

The creditor has four months within which to serve the SD. Service after this time will require the creditor to explain himself and account for any dilatory conduct. If the method for service described above does not lead to personal service, then (and only then) service may be made by other means such as first class post or insertion through a letter box (Practice Direction, 18 December 1986, [1987] 1 All ER 604). For this to be acceptable to the court, the creditor must have taken similar steps to those which would persuade the court to grant an order for substituted service of a petition [See: Re A Debtor (Nos 234 & 236 of 1991) The Independent 29 June 1992] (in which it was confirmed by Blackett Ord QC that in some cases it may be appropriate to serve the statutory demand upon the Solicitors of the debtor).

Sometimes SDs may come through the post to be signed for. The debtor's signature on the receipt retained by the postman may be sufficient evidence of an acknowledgement of receipt whereby postal service in this way proved a reasonably practical way of effecting service. The risk from the creditor's point of view is that the acknowledgement may be signed by someone other than the debtor.

Absent an order for substituted service, if the SD comes by ordinary post, service can not be said to have corresponded with the obligation imposed by IR 6.3. Where purported service is effected in this way, the debtor should avoid writing to the creditor in a way which demonstrates receipt of the SD. He may if he cares, send a request for production of the agreement upon which the debt is based and/or a statement of account, but he would be very ill-advised to acknowledge receipt of a SD delivered in the ordinary course of post.

The reasoning against acknowledging receipt of a SD delivered in a way which would, apart from the debtor's acknowledgement of it, be incapable of demonstrating compliance with the IR 6.3(2) obligation is found in IR 6.11 which concerns the evidence the creditor must file at court proving service of the SD as a condition of his being allowed to present his petition.

Rule 6.11.Proof of service of statutory demand

(1) Where under section 268 the petition must have been preceded by a statutory demand, there must be filed in court, with the petition, an affidavit or affidavits proving service of the demand.

(2) Every affidavit must have exhibited to it a copy of the demand as served.

(3) Subject to the next paragraph, if the demand has been served personally on the debtor, the affidavit must be made by the person who effected that service.

(4) If service of the demand (however effected) has been acknowledged in writing either by the debtor himself, or by some person stating himself in the acknowledgement to be authorised to accept service on the debtor's behalf, the affidavit must be made either by the creditor or by a person acting on his behalf, and the acknowledgement of service must be exhibited to the affidavit.

(5) If neither paragraph (3) nor paragraph (4) applies, the affidavit or affidavits must be made by a person or persons having direct personal knowledge of the means adopted for serving the statutory demand, and must

(a) give particulars of the steps which have been taken with a view to serving the demand personally, and

(b) state the means whereby (those steps having been ineffective) it was sought to bring the demand to the debtor's attention, and

(c) specify a date by which, to the best of the knowledge, information and belief of the person making the affidavit, the demand will have come to the debtor's attention.

(6) The steps of which particulars are given for the purposes of paragraph (5)(a) must be such as would have sufficed to justify an order for substituted service of a petition.

(7) If the affidavit specifies a date for the purposes of compliance with paragraph (5)(c), then unless the court otherwise orders, that date is deemed for the purposes of the Rules to have been the date on which the statutory demand was served on the debtor.

(8) Where the creditor has taken advantage of Rule 6.3(3) (newspaper advertisement), the affidavit must be made either by the creditor himself or by a person having direct personal knowledge of the circumstances; and there must be specified in the affidavit

(a) the means of the creditor's knowledge or (as the case may be) belief required for the purposes of that Rule, and

(b) the date or dates on which, and the newspaper in which, the statutory demand was advertised under that Rule;

and there shall be exhibited to the affidavit a copy of any advertisement of the statutory demand.

(9) The court may decline to file the petition if not satisfied that the creditor has discharged the obligation imposed on him by Rule 6.3(2)

Thus a creditor wishing to proceed with a petition based upon a SD served in the ordinary course of post, will, without the debtor's written acknowledgement of its receipt, be incapable of satisfying the requirements of proof demanded by IR 6.11. By IR 6.11(9), the petition runs a serious risk of rejection at the filing stage.

In order to illustrate the extent of the obligation imposed, in Regional Collection Services Ltd v Heald [2000] BPIR 661 it was held that a creditor had not done all that was reasonable within IR 6.3(2) where despite having made several failed attempts to serve the debtor at his home, he had failed to visit the debtor’s business premises.

What does this all mean?

The service rules are not something new to debt collectors. They know this rule well. The reality of the situation where a debt collector sends out a SD in the post is that he has absolutely no intention of petitioning the court for bankruptcy. He has no intention because [1] to present a petition involves his putting up serious money up front and into court (currently, September 2008 - court fee on presentation: £190.00, deposit: £415.00, plus fees to process server and solicitor on the hearing of the petition, perhaps another £750.00ish), and [2] if the petition succeeds, the debt collector ceases to have any further control over the collection of the debt.

On the contrary, the debt collector wishes to retain control of the debt's recovery as cheaply as possible. His modus operandi is therefore to send out the scariest looking piece of paper imaginable in an envelope stuck to which is a second class stamp. If the debt collector genuinely intended to pursue the debtor by bankruptcy, was committed to paying the fees and losing control once a bankruptcy order had been made, he'd ensure he complied with the service rules from the outset and would not take any short cuts which would frustrate that genuine intention.

It is an abuse of the process of the court and harassment to send out a statutory demand by post with no intention of relying on it in bankruptcy proceedings. This sort of practice once cost a creditor its Consumer Credit licence (Credit Default Register Limited, licence number 0154753 terminated 5 May 1993).

Besides complying with the service rules he is required in his SD to

[1] properly particularise the debt by giving details of when the debt was incurred, how it arose, the consideration for the debt and where interest is claimed, the calculation for interest;

[2] state the name of someone at the creditor's office and that person's contact details to whom enquiries should be addressed;

[3] state the court and court office address at which any application to set aside the SD should be delivered, and

[4] provide particulars of any assignment and the identity of all assignees.

Check for compliance with [1] to [4] above too. Any deficiencies are further clues as to the seriousness of the debt collector’s intentions.

What to do when a SD arrives on your doormat

[1] Keep the SD and the envelope it came in safe

[2] See what the SD says about a person to contact or a court to present an application to set aside the SD. If either one of these is incomplete, that is a further indication the SD is not serious

[3] Check the particulars of the debt and the identity of the creditor. What does it say? Is there a proper statement of facts showing how and why the debt is payable? Does it give dates and any of the other required details?

[4] Ask yourself, do I owe this debt and if the creditor sued me for it, would I have any arguable legal defence to it? To be able to answer this question you will need to know what the court regards as grounds to set aside the SD.

What would be grounds to set aside the SD?

Grounds to Set Aside a SD

An application to set aside must be made within 18 days of the receipt of the SD. That isn’t very long.

IR 6.5(4) says:

The court may grant the application (to set aside the SD) if

(a) the debtor appears to have a counterclaim, set-off or cross demand which equals or exceeds the amount of the debt or debts specified in the statutory demand; or

(b) the debt is disputed on grounds which appear to the court to be substantial; or

(c) it appears that the creditor holds some security in respect of the debt claimed by the demand, and either Rule 6.1(5) is not complied with in respect of it, or the court is satisfied that the value of the security equals or exceeds the full amount of the debt; or

(d) the court is satisfied, on other grounds, that the demand ought to be set aside.

This article would run for ever if every conceivable type of defence situation was discussed exhaustively. I think it fair to presume that if the debtor believed the creditor owed him money that belief existed before the SD arrived, not immediately following. I therefore propose to limit this part of this article to just a handful of those situations coming under IR 6.5(4)(b), concentrating on common consumer debt situations.

Common examples would be:

1 Dispute Examples

[1] Amount of debt disputed in terms of quantum

The amount of the debt may be disputed in terms of the account and debit or credit payments applied to it, the inclusion of penalty charges, interest and so forth. May be you've paid the creditor more than he says you have. May be he's charged your account with money he ought not to have. If an argument of this kind is raised, it will be vital to demonstrate the issues reduce the amount of any admitted debt to below the bankruptcy level.

[Note: In a case where the SD was properly served (and therefore a little off topic for the purpose of this article) and where the extent of dispute is insufficient to reduce the admitted debt to below the bankruptcy level it would be advisable to pay the creditor sufficient to reduce the debt to beneath the bankruptcy level before the time allowed for the presentation of the petition since reduction to a sum below the level once the petition has been filed at court does not disable the court from making a bankruptcy order. See Lilley v American Express (Europe) Ltd [2000] BPIR 70.]

[2] Amount of debt disputed in terms of right to enforce.

In just about all regulated consumer credit agreements and debt, situations which will give rise to the possibility of a SD where there is default will involve the creditor or original creditor in having [a] served a default notice (DN), [b] terminated the agreement and [c] demanded payment. The requirement to serve a valid DN, owing to section 87(1) of The Consumer Credit Act 1974 (CCA 74), is a pre-requisite of the power to terminate and claim payment. Check the DN to ensure it complies with the requirements of Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983. If the DN does not comply, the power to terminate and make demand for payment will also dis-apply.

A second situation would exist where during the currency of the agreement the creditor failed to comply with a request delivered to him pursuant to sections 77-79 of CCA 74. The Act restrains a creditor from enforcing the agreement for so long as he shall neglect to comply with the request (more on which below under ‘Gathering the evidence’)

[3] Amount of debt disputed as statute barred. A consumer debt ceases to be actionable once a continuous uninterrupted period of 6 years has elapsed since the date on which the debtor defaulted under the agreement and during that period of six years, the debtor neither made payment in reduction of the debt nor acknowledged it in writing. Further, once the period of six years has run out, the debt can not be revived.

The status of such debts where the period of six years as defined above has run out is that they are statute barred. The statute is The Limitation Act 1980, the limitation is that cases must be brought before the six years have run out and the bar operates to prevent proceedings where the six years have run out.

2 Gathering the evidence

First a repeat of an earlier word of warning. In gathering evidence from the creditor or debt collector make sure nothing could be construed as an acknowledgment of receipt of the SD or of indebtedness.

Because the SD is simply a document in prescribed form delivered by the creditor, there is no involvement of the court or ‘court issue’. The Civil Procedure Rules (CPR) do not apply to the demand (with the exception of certain of the CPR cost rules). The rules which control the procedure are IR in which there is no provision corresponding to the CPR for disclosure of documents or Further Information.

I have seen it suggested that a means of obtaining evidence is to make a request for a copy of the agreement and statement of account under CCA 74 section 77(1) or 78(1), claiming the added sting that if the request is not complied with the creditor’s power to continue with enforcement will be restrained.Invariably by the time the creditor is thinking about bankrupting the debtor the agreement will have long since terminated. Sections 77 and 78 have teeth only in so far as requests are made during the currency of the agreement.

That is not to say a request for the information would be inappropriate and in most cases it would be reasonable to make such a request although without dressing up the request as if it were made under section 77(1) or 78(1). Add to the request a request for the provision of any default notice relied upon or subsequent notice of termination and demand. The difficulty is whether the information will be forthcoming within the requisite 18 days. Any application for the information should avoid disclosing that the SD has been received in the post or give the appearance of an acknowledgment of indebtedness so as to set a new period of limitation running.

The reality is that if the debtor does not have any of the necessary information to hand and which shows a substantial dispute according to IR 6.5(4)(b) he will be chancing his arm by proceeding. If the debtor was served by post, given the proof of service difficulties, I would not recommend chancing it.


This site is littered with examples of SDs being served by post and forum members then being encouraged to apply to the court to set the SD aside, often without any information about the creditor’s alleged debt. The member is encouraged to quote grounds for set aside as ‘debt in dispute’ but without any better information as to what that dispute might be about or how the application to set aid might be moulded to fit IR 6.5(4).

I’m in a minority for thinking that it is potentially dangerous for an individual to make a formal application to a court to set aside a SD in circumstances where he is incapable of demonstrating his application fits in with IR 6.5(4). An application which patently fails to meet the test is likely to be dismissed before it ever gets issued, just like the petition would under IR 6.11(9). This is because IR 6.5(1) says

On receipt of an application under Rule 6.4, the court may, if satisfied that no sufficient cause is shown for it, dismiss it without giving notice to the creditor. As from (inclusive) the date on which the application is dismissed, the time limited for compliance with the statutory demand runs again.

Nonetheless there are examples of application to set aside being made after postal service of a SD where no legally recognizable grounds for set aside are alluded to in the CAG thread. Notwithstanding, some of those applications get past IR 6.5(1) while others do not. There’s no hard and fast rule. IR 6.5(1) is permissive not mandatory. It says ‘the court may’.

Even so, of those that make it through the net and have a date for hearing fixed, a number of those go on to ‘succeed’ as well. I say ‘succeed’ in inverted commas, because on being served with the notice of hearing, the debt collector commonly withdraws. He does this by writing a letter to the court offering some form of excuse, saying he no longer wishes to proceed down the insolvency route and saying he will issue a claim in the county court. He often adds a line asking that there be no order as to costs or some such similar whimper designed to avoid and consequential cost liability for his abuse of process.

In short therefore, the forum member who applied without legally recognised grounds to set aside the SD served by post and ‘succeeded’ in the way described above, will probably imagine with hindsight that the route he took was the right one. I am glad of his success. But I have to say that success was the product of luck and no judgment. The result was achieved by a combination of the court declining to dismiss under IR 6.5(1) and the debt collector’s decision not to pursue the SD, none of which was ever in the applicant’s control.

Precisely the same result would have been achieved by the applicant doing nothing.

Related Pages

Statutory Demands