Note that it is not enough for a debtor to simply state that the debt is disputed; the court must be satisfied that there is a genuine dispute on substantial grounds. The PD on insolvency proceedings says, ‘where the debtor... disputes the debt... the court will normally set aside the demand if, in its opinion, on the evidence there is a genuine triable issue’. (Para 12.4). The burden on the debtor to show there is a genuine dispute is less onerous than that on an application for summary judgment (where the requirement is that the defendants show there is a ‘real prospect’ of successfully defending the claim). Insolvency courts treat the matter somewhat differently, and the benefit of the doubt is likely to be given to the debtor.

One point to note is that an incorrect amount of debt claimed is no longer a fatal bar. These days the courts take a more relaxed attitude and the creditor will generally not be prevented from proceeding if the debt claimed is not precisely accurate (provided the debtor can identify the debt and is not otherwise prejudiced). One possible way of thwarting a statutory demand is for the debtor to raise a genuine and serious cross-claim (which either exceeds the debt, or reduces the undisputed debt to below £750).

Finally, note that an individual who wants to dispute a statutory demand has 18 days in which to prepare and file an application for it to be set aside, supported by an affidavit or witness statement. There is no similar provision for corporate debtors; however, they can seek injunctive relief to restrain the creditor from proceeding to issue a winding-up petition (that application will be treated in the same way as one by an individual to set aside a statutory demand). Source: Insolvency Law Handbook by Vernon Dennis (2nd edition; Law Society; £69.95). © Practical Lawyer