Law Report: Solicitors could serve statutory demand for costs: Re a debtor (no 88 of 1991); Marshalls (a firm) v a debtor - Chancery Division (Sir Donald Nicholls, Vice-Chancellor): 25 June 1992

Section 69 of the Solicitors Act 1974 which prohibits an action being brought to recover costs due from a client to a solicitor within one month from the date on which the bill of those costs was delivered does not prohibit the solicitor from making a statutory demand for the payment of costs within one month since the service of a statutory demand does not constitutute the bringing of an 'action'.

Sir Donald Nicholls V-C allowed an appeal by Marshalls, Godalming, a firm of solicitors, from the decision of Judge Harris who on 28 January 1992 set aside a statutory demand served by Marshalls on Peter Ward, a director of Trafalgar Leasing and Co Ltd. On 30 April 1991 Mr Ward sought legal advice from Marshalls about an order that he attend court for examination by the liquidator of the company.

A summons was issued by agents for Marshalls, seeking disclosure of the liquidator's report. On 8 July the agents successfully applied for an adjournment of Mr Ward's examination to enable evidence to be filed in support of his summons. At the end of July Mr Ward instructed other solicitors.

Marshalls rendered two bills to Mr Ward. The first, dated 8 July, was for an interim payment of pounds 187 plus value added tax. The other, dated 31 July, totalling pounds 1,090 inclusive of vat, was for pounds 400 plus disbursements of pounds 530, of which pounds 500 was for the agent's charges.

No payment was received. A statutory demand dated 15 August for the amounts in the bills was served on Mr Ward on 21 August. There was no response. A bankruptcy petition was issued on 20 September. Judge Harris set aside the statutory demand and dismissed the bankruptcy petition. Marshalls appealed.

Marc Brittain (Marshalls, Godalming) for Marshalls; Angharad Start (Brown Turner Compton Carr & Co, Southport) for Mr Ward.

SIR DONALD NICHOLLS V-C said that under Insolvency Rule 6.5(4) the court had a wide discretion to set aside a statutory demand on an application by the debtor. The principles on which the court should exercise that discretion had been considered in two recent decisions: Re a Debtor (no 1 of 1987) (1989) 1 WLR 271 and Re a Debtor, ex parte the Debtor v Printline (Offset) Ltd (1992) 2 All ER 644. The consequences to which a statutory demand led if not complied with was a presumption that the debtor was unable to pay the debt in question. That, in turn, enabled the creditor to present a bankruptcy petition.

In general the court should exercise its discretion to set aside a statutory demand if, but only if, it would not be just for those consequences to apply in the circumstances. That approach was to be followed where the demand was for an excessive sum. Such a demand would not necessarily be set aside.

Miss Start contended that the demand should be set aside because it fell foul of section 69(1) of the Solicitors Act 1974 which provides that 'no action shall be brought to recover any costs due to a solicitor before the expiration of one month from the date on which a bill of those costs is delivered . . .' It was contended that the demand was premature because it was made and served before the expiration of a month from the 31 July bill.

However, the submission that service of a statutory demand constituted the bringing of an action within the meaning of section 69 could not be accepted. The phrase 'no action shall be brought' was referring to a legal process and used lawyers' language. Traditionally an 'action' was the name given to the legal process initiated by issue of a writ of summons. In the context of section 69 it was not to be construed so narrowly. It would include other forms of civil proceedings, for example, an originating summons.

However, although 'action' was to be construed liberally it was not wide enough to embrace a non-legal process such as a statutory demand. A statutory demand was one of the statutorily prescribed prerequisites to obtaining remedies afforded to creditors by a bankruptcy order.

The demand was not issued by a court. It did have legal consequences for a debtor and it was for that reason that the legislation provided a court process which debtors could invoke in order to have the demand set aside. Despite that framework, Parliament could not be taken to have intended that making a demand was within the scope of the prohibition on commencing actions.

The court, when exercising its discretion to set aside a statutory demand, would have regard to all the circumstances. In the case of a demand for payment of solicitors' costs, one of the circumstances would be the date when the bill was served and the client's attitude towards taxation of the bill. The court was able to give adequate protection to solicitors' clients without straining the language of section 69. Section 69 did not assist Mr Ward.

It was over 10 months since the bills were delivered. Nothing had been paid. The case had the hallmarks of a debtor who was unable or unwilling to make a payment, not of a debtor who genuinely thought or was advised that the amount charged by the solicitors was unreasonable.

The possibility that the amount of the bills might be reduced on a taxation which had still not been initiated was not a sufficient reason in this case for setting aside the demand.

Although the 31 July bill did not comply with section 67 by stating that the sum payable to the agents had not yet been paid, that did not afford Mr Ward a defence in respect of that sum.

There were no sufficient grounds for setting aside the demand. The demand and bankruptcy petition would be restored and the petition remitted to the district judge.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
filmIdris Elba responds to James Bond rumours on Twitter
Arts and Entertainment
Ellie Levenson’s The Election book demystifies politics for children
bookNew children's book primes the next generation for politics
Arts and Entertainment
Lena Headey as Cersei Lannister in Game of Thrones
film
News
i100
Sport
Yaya Sanogo, Mats Hummels, Troy Deeney and Adnan Januzaj
footballMost Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Operations Manager

£45000 - £55000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Panel & Cabinet Wireman

£20000 per annum: Recruitment Genius: Panel Wireman required for small electro...

Recruitment Genius: Electronics Test Engineer

£25000 - £27000 per annum: Recruitment Genius: An SME based in East Cheshire, ...

Recruitment Genius: Marketing Assistant

£18000 - £22000 per annum: Recruitment Genius: Do you have previous experience...

Day In a Page

War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?
Finally, a diet that works: Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced

Finally, a diet that works

Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced
Say it with... lyrics: The power of song was never greater, according to our internet searches

Say it with... lyrics

The power of song was never greater, according to our internet searches
Professor Danielle George: On a mission to bring back the art of 'thinkering'

The joys of 'thinkering'

Professor Danielle George on why we have to nurture tomorrow's scientists today
Monique Roffey: The author on father figures, the nation's narcissism and New Year reflections

Monique Roffey interview

The author on father figures, the nation's narcissism and New Year reflections
Introducing my anti-heroes of 2014

Introducing my anti-heroes of 2014

Their outrageousness and originality makes the world a bit more interesting, says Ellen E Jones
DJ Taylor: Good taste? It's all a matter of timing...

Good taste? It's all a matter of timing...

It has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
Olivia Jacobs & Ben Caplan: 'Ben thought the play was called 'Christian Love'. It was 'Christie in Love' - about a necrophiliac serial killer'

How we met

Olivia Jacobs and Ben Caplan
Bill Granger recipes: Our chef's breakfasts will revitalise you in time for the New Year

Bill Granger's healthy breakfasts

Our chef's healthy recipes are perfect if you've overindulged during the festive season
Transfer guide: From Arsenal to West Ham - what does your club need in the January transfer window?

Who does your club need in the transfer window?

Most Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
The Last Word: From aliens at FA to yak’s milk in the Tour, here’s to 2015

Michael Calvin's Last Word

From aliens at FA to yak’s milk in the Tour, here’s to 2015