You cannot set aside a statutory demand on jurisdiction alone

There has been an ongoing debate about whether a debtor can apply to set aside a statutory demand on the basis that there would be no jurisdiction to present a bankruptcy petition as the debtor was not domiciled or resident, nor carried on business, in England or Wales, in the prior three years to presentation of the petition.

That is because that ground to oppose a bankruptcy petition does not appear in the insolvency legislation as a ground on which to apply to set aside a statutory demand.

The closest ground, pursuant to rule 10.5(5)(d) of the Insolvency Rules 2016, is that there are “other grounds” on which the statutory demand should be set aside.

However, the court has previously held that that ground must be used in conjunction with the other grounds in that subsection, of which none relate to jurisdiction.

The judge in this case therefore refused to allow an application to set aside a statutory demand on the ground of jurisdiction alone, finding that there was no legislative authority on which to do so, failing to follow previous case law authority to the contrary.

This decision leaves a debtor in the unenviable position of having to wait for presentation of a bankruptcy petition, and all the consequences that that has, before disputing that petition on jurisdiction grounds.

The judge did, however, confirm that it is open to a debtor in those circumstances to apply for an injunction against presentation of a bankruptcy petition, a far less trodden path, and one that will involve the exact same arguments that would be heard on an application to set aside! Unless the law changes, however, that will be the answer to this issue.

Lyons v Bridging Finance Inc [2023] EWHC 1233 (Ch)

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