Mediation & other forms of ADR — practical guidance for resolving disputes outside of court
We discuss what mediation and other forms of ADR are, their benefits, when they’re most effective and how courts view parties who refuse to engage in them.
One of the ways in which a creditor may try and recover debt from an individual or company is through serving a statutory demand. Here, litigation specialist Suzi Gardener explains what a statutory demand is and what to do if you are served with one.
What is a statutory demand?
A statutory demand is a written demand that a creditor may serve on an individual or company where there is an outstanding debt. It is not a court document and does not start court proceedings, but it is important that the correct demand is used. The demand should show how the debt has arisen and — if there is any interest claimed — how this has been calculated.
Whether you are an individual or a business owner, your financial standing is of great importance and can be affected detrimentally when things go wrong. Increasing prices and bills, as well as reducing profit margins, are naturally a worry for many in the current climate, which carries an increased risk of falling into debt.
There are strict protocols that creditors should follow when trying to recover the payment of unpaid bills and costs. It may be that some alleged debts are disputed and if so — where an agreement cannot be reached between the creditor and the debtor — this may result in a claim being brought to recover the alleged debt.
When can a statutory demand be used?
A statutory demand can be used where there is an undisputed debt. If the debtor is an individual, then the value of the debt must be at least £5,000. If the debtor is a company, then the value needs only to be at least £750.
Can a statutory demand be served if the debt is disputed?
A statutory demand should only be served on a debtor where the debt is not disputed. Sometimes, if a debtor has been unresponsive to any previous requests for payment, serving a statutory demand may result in the debtor responding and raising a dispute that the creditor was unaware of.
In this instance, the parties can then look to resolve the dispute. A dispute may mean that the demand needs to be withdrawn. If the dispute cannot be resolved, it may be necessary to ask the courts to intervene.
Must I take action upon receiving a statutory demand?
Once a statutory demand has been served, it is important to act quickly — the debtor is required to make the payment within 21 days. Failure to do so may result in the non-payment being used as evidence to support a bankruptcy petition (for an individual) or winding-up petition (for a company).
To try and avoid bankruptcy or insolvency, communicating with the creditor at an early stage is key.
What to do after receiving a statutory demand — five key steps
- Read through the demand so that you know what it relates to.
- If you agree that the debt is due and are able to pay it, it should be paid within 21 days.
- If you agree that the debt is due but you are unable to pay it within 21 days, you should contact the person or company that served the demand. You may be able to negotiate payment terms over a period of time. This will deter any petition being made for your bankruptcy or your company’s insolvency.
- If you do not agree that the debt is due, you should contact the person or company that served the demand and set out why the debt is disputed. You may be able to obtain an undertaking (a promise) from the creditor to not apply for a bankruptcy or winding-up petition without giving further notice to you or your company. This will allow additional time to try and resolve any disputes without the immediate risk of bankruptcy or insolvency. Alternatively, the creditor may agree to withdraw the statutory demand.
- If, as an individual, you do not agree that the debt is due, you may (subject to certain restrictions) make an application to the court to set the demand aside. This would mean asking the court to treat the demand as though it was never served in the first place. This application must be made within 18 days of the demand being served. Once the application is made, the creditor is unable to petition for bankruptcy or insolvency until the court has given a judgment to allow it. This option is not available to a company.
Talk to us
Our litigation team understands that the risk of bankruptcy or insolvency can be a stressful and worrying time. In a recent case, our team was pleased to secure the withdrawal of a disputed statutory demand for a client by setting out to the creditor why the monies being claimed were not in fact due.
It is important to act quickly if you or your company are served with a statutory demand. If you do not dispute the debt but are unable to pay it immediately, our team is on-hand to help you negotiate a repayment plan. If the debt is disputed (whether fully or in-part), our team can advise you on your options and provide a considered way forward, enabling you to make a fully informed decision.
Get in touch with me at suzi.gardener@brabners.com or 0161 836 8935, or our Head of Litigation and Regulatory Jeff Lewis at jeff.lewis@brabners.com or 0161 836 8872, to find out more.
Related insights
How retailers can protect their business from false or misleading claims — key legal & practical considerations
We outline the steps that retailers can take to contain an emerging online issue and the legal remedies available for responding to false statements.
International arbitration — the scope of supervisory jurisdiction & anti-suit injunctions following Star Hydro
We outline the Court of Appeal’s decision, consider how the Supreme Court is likely to approach the appeal and highlight five key takeaways.
How the CJC’s litigation funding reforms aim to restore certainty after PACCAR
We examine the CJC’s recommendations and their implications for funders, claimants and practitioners navigating this evolving area.
3 potential ways generative AI could lead to defamation claims
We explain where generative AI has the potential to damage individuals’ reputations and examine relevant case law from other jurisdictions.
Brabners secures favourable policy construction judgment for Acasta
Our award-winning litigation team has secured a High Court judgment in favour of Acasta European Insurance Company Limited.
London expansion & record revenues drive next phase of growth at Brabners
We’re delighted to announce the opening of a new office in London, marking a major milestone at the end of a year defined by strong financial performance.
PR under fire — what happens when clients sue?
We explore the types of claims that PR firms can face when an initial complaint escalates and outline some practical steps to manage the risks.
Navigating partnership conflict in law firms — 10 top tips to prevent disputes
We share ten top tips for preventing partnership disputes and guidance on recognising the warning signs and responding effectively if conflict does arise.
HyNot judicial review decision highlights the importance of acting promptly
We explore how the Court considered the requirement of promptness, the arguments made and what this means for claimants considering judicial review.
Lights, camera, litigation — The Lost King case
We explore the legal and reputational implications of dramatising ‘real life’ events for the screen.
English Devolution & Community Empowerment Bill — what it means for retail leases
We explore what the English Devolution and Community Empowerment Bill means in practice and how its reforms may affect both retail tenants and landlords.
Employment tribunal early conciliation period doubles to 12 weeks
Individuals who want to take an employment case to a tribunal must first take part in a longer conciliation process.
Restrictive covenant dispute — Brabners secures successful judgment for Docutech Office Solutions Ltd
Our litigation team achieved a successful outcome for Docutech Office Solutions Ltd in a major claim against a former employee and his new employer.
How the courts treat online defamation — removal order dismissed against domain name registrar
Our litigation team look an online defamation case study and how to take legal action after being subject to online defamation or harassment.
Probate costs recoverable in litigation: SCCO clarifies its position in key costs ruling
Andrew Tindall examines new guidance from the Senior Courts Costs Office on recovering probate costs.
Post Office Horizon IT Inquiry announces publication of the first part of its final report
The Post Office Horizon IT Inquiry Chair has announced that the first part of his final report will be published this Summer.
Defamation and harassment on social media — what to do if you’re a victim of online abuse
Our litigation team explores recent cases and what to do if you’re subjected to online defamation or harassment.
Half-secret commissions and informed consent between brokers and customers
We explore how the Courts treat customers who have been charged “half secret” commissions by their energy brokers.
Solicitors Disciplinary Tribunal clarifies appropriate use of Without Prejudice labels and SLAPP guidance
Solicitor Ashley Hurst found himself at the centre of regulatory action brought by the SRA.
How to deal with a negative online review about your business
Our litigation team explores the options businesses have when it comes to dealing with negative online reviews — whether the review is honest or dishonest.
Media and communications claims — could pre-action dispute resolution become compulsory?
Here, commercial litigator Glyn Lancefield outlines the proposed changes to the pre-action protocol for media and communications claims.
Arbitration Act 2025 — new legislation to strengthen UK’s position as dispute resolution leader
Experienced commercial litigator Matthew Moy explains what arbitration is and how the AA 2025 will help to clarify and refine key aspects of the arbitration process by improving efficiency, fairness and legal certainty.
Adverse possession claims — significant judgment a ‘win’ for practicality in boundary disputes
The UK Supreme Court's judgment in Brown v Ridley and Another has important implications for adverse possession claims — particularly in boundary disputes.
High Court sides with claimants in shocking moth infestation fraud case
The High Court ruled in favour of Iya Patarkatsishvili and Yevhen Hunyak in their case against William Woodward-Fisher on claims of fraudulent misrepresentation concerning a severe moth infestation.