Article
14 March 2023
Set-off Under Section 553C Not Available To Defend An unfair Preference Claim
John Davies breaks down a recent decision of the High Court regarding set-off under s 553C and unfair preference claims.
Regardless of a business’s size, there is no joy in reminding people they owe you money. So, why can’t we all just pay our invoices and get on with it? If only it were that simple.
Unfortunately, it seems to be an ever increasing trend in business that invoices remain unpaid due to dispute, inability to pay, forgetfulness or even sharp business practice. While it is relatively easy to remind a client who has just forgotten to pay an invoice, what do you do when they just won’t pay?
The good news is you always have a choice, subject to the size of the debt, the circumstances surrounding the fees and your relationship with the client.
So, what options do you have?
So, why is a Statutory Demand the preferred option?
If you issue a Statutory Demand and it is not dealt with by the debtor company within 21 days then that company is, as a matter of law, deemed insolvent. You can then apply to the Supreme Court for that company to be wound up by a liquidator. If the debtor wants to continue to operate then they can either pay the debt (usually the cheaper option) or prove to the Court that they are solvent (usually the much more expensive option).
In order to issue a Statutory Demand the following criteria must be met:
Criteria 4 is where the risk lies.
If you issue a Statutory Demand and the debtor claims that there is a genuine dispute, the debtor must file an application with the Supreme Court to have the Statutory Demand set aside. If the debtor can prove to the Court that a dispute as to the debt exists, then you may well be liable for their legal costs thrown away in the application which, given that it is a Supreme Court application, will be considerable.
A Statutory Demand though effective does come with associated risk. We strongly suggest to all clients that they speak to us first before taking any debt recovery action beyond their internal follow ups.
The information in this blog is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.