The importance of getting your statutory demand in order

October 20th 2023

A recent High Court decision in the matter of Sunset Ltd and another v Al-Hindi [2023] EWHC 2443 (Ch) (5 October 2023) concerning a bankruptcy petition issued by a landlord on a tenant for unpaid rent, is a useful reminder that bankruptcy petitions can only be founded on debts which are due at the time a statutory demand is served.

In this case the landlord had failed to serve the tenant with a section 48 notice, which means that under section 48(2) the Landlord and Tenant Act 1987, any rent outstanding from the tenant shall be treated as not being due until the landlord does so.

The fact that the landlord served the notice after the issue of the petition but before it was heard, could not remedy the defect, as at the time the statutory demand was served, the debt was not due. This meant that the landlord was unable to rely on non-compliance with the statutory demand as evidence of insolvency of the debtor and a ground for presenting the bankruptcy petition.

The principle underlying the decision also means that if further debts fall due for payment after the date a statutory demand is served, those further sums cannot be included when formulating the petition debt.

Care must be taken therefore to ensure that all steps necessary to ensure that a debt is due, whether that is the service of a statutory notice, demand under a personal guarantee or any other necessary contractual steps, are taken before a statutory demand is served.