In Staveley v Restis [2024] EWHC 670 (Ch) ('Staveley'), Deputy ICC Judge Schaffer heard an application to set aside a statutory demand served on an individual/(alleged) debtor, on the ground (amongst others[1]) that, 'The debt is disputed on grounds which appear to the court to be substantial' (paragraph 26(a)) - as per rule 10.5 of the Insolvency Rules 2016, which contains the Court's power to set aside a statutory demand). 

Under the heading 'The Law', Deputy ICC Judge Schaffer considered both: (a) the level of substantiality to the dispute, required by this ground (the 'height of the hurdle'); and (b) how the Court should approach the evidence, when deciding whether this ground had been established. Deputy ICC Judge Schaffer said, at paragraphs 28 to 34:

'28. The law on what is considered to be substantial grounds is judge made. In Smith v Gregory 2022 EWHC 190 HHJ Stephen Davies Sitting as a Deputy High Court Judge said this at paragraph 5

"As held In Ashworth v Newnote Ltd 2007 BPIR Civ 1012 at para 31-34 there is no difference between expressions such as "substantial grounds" "genuine triable issue" or "real prospects of success"

29. These expressions are ones with which the court is familiar when dealing with statutory demand applications, to which I will make reference later in this judgment, but to make the point clear, the views expressed by Arden LJ in Collier v P & MJ Wright (Holdings) Limited 2007 EWCA Civ 1329 should be set out where she said at paragraph 21 when dealing with, like here, an application to set aside a statutory demand

"I note that in the recent case of Ashworth v Newnote Ltd 2007 BPIR 1012, para 33 Lawrence Collins LJ with whom Buxton LJ agreed, regarded the debate as to a difference between "genuine triable issue" and "real prospect of success" as involving "a sterile and largely verbal question" and that there is no practical difference between the two"

30. She then went on within the same paragraph

"I accept that the refusal to set aside a statutory demand is a serious step, but so is the grant of summary judgment. The court cannot grant summary judgment under CPR 24 (2) unless it is satisfied that the party against whom the order is to be made has no real prospect of success. To have a real prospect of success a party must have a case which is more than merely arguable: see Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc 1986 2 Lloyds Rep 221 . If the test in the Kellar case 2002 BPIR 544 were applicable, the court would have to apply a lower threshold than real prospect of success and that would mean it would be enough on an application to set aside a statutory demand if the dispute were merely arguable. However, that approach would give no weight to the word "substantial" in the rule 6.5(4); nor would it give any meaning to the word "genuine" in para 12(4) of the Practice Direction. In my judgment, the requirements of substantiality or (if different) genuineness, would not be met simply by showing that the dispute is arguable. There has to be something to suggest that the assertion is sustainable. The best evidence would be incontrovertible evidence to support the applicant's case but this is rarely available. It would in general be enough if there were some evidence to support the applicant's version of the facts, such as a witness statement or a document, although it would be open to reject that evidence if it were inherently implausible or if it were contradicted, or were not supported by contemporaneous documentation: see also Lawrence Collins LJ in the Ashworth case, para 34. But a mere assertion by the applicant that something had been said or happened would not generally be enough if those words or events were in dispute and material to the issue between the parties…….."

31. The court can take the view that what is said in a witness statement is inherently implausible if, for example, bare assertions are contradicted by contemporaneous documentation but that type of determination is confined for the main part to clear cases. As was made clear by Carnwath LJ in Mentmore International ltd v Abbey Healthcare (Festival) Ltd 2010 EWCA Civ 761, approved by the Supreme Court in HRH Emere Godwin Bebe Okpabi v Royal Dutch Shell plc 2021 UKSC 3, when referring to Lord Hope's judgment in Three Rivers District Council v Bank of England 2003 2 AC 1, Carnwath LJ said at para 23

"If Mr Reza was hoping to find in those words some qualification of Lord Hope's approach, he will be disappointed…… Lord Hope had spoken of a statement contradicted by "all the documents or other material on which it is based" It was only in such a clear case that he was envisaging the possibility of rejecting factual assertions in the witness statements. It is in my view important not to equate what may be very powerful cross-examination ammunition, with a kind of 'knock -out blow' which Lord Hope seems to have had in mind"

32. In any dispute of this nature the court has to examine the evidence critically. I caution myself not to reject lightly sworn evidence other than in a clear-cut case, particularly where some of the documents point one way or another. "Is this dispute real or fanciful" to quote the Vice Chancellor, Sir Andrew Morritt in Arena Corporation Limited 2004 BPIR 415 .

33. In the oft quoted case of Angel Group Limited v British Gas Trading Ltd 2012 EWHC 2702 Ch, Norris J summarised the various principles at paragraph 22, only two of which I need to quote

"(f) …the court will be alert to the risk that an unwilling debtor is raising a cloud of objections on affidavit to claim that a dispute exists which cannot be determined without cross examination" and at "g" [SIC]

"the court will therefore be prepared to consider the evidence in detail even if, in performing that task, the court may be engaged in much the same exercise as would be required of a court facing an application for summary judgment"

Those comments are consistent with my earlier analysis of the test and with what I have had to do here.

34. Finally, to conclude my brief journey through the authorities, Trower J in Integral Law v Jason 2020 EWHC 3698 Ch at paragraph 5 referred to the 'manifest incredibility" of a defence being insufficient to refute a claim.'

Then, under the heading 'Conclusions', Deputy ICC Judge Schaffer in Staveley said, at paragraphs 35 and 36:

'35. Drawing all this guidance together I turn to my conclusions.

36. In determining if there are grounds to set aside the demand the starting point is to consider whether there is a genuine triable dispute and not a fanciful argument advanced. That requires an assessment of all the material evidence and a consideration of all the relevant issues. The key point is – is the debt genuinely disputed on grounds which are substantial. I do not need to consider the prospects of success, nor do I need to decide the dispute. As indicated above, whilst I have to examine critically the evidence, I caution myself not to reject sworn evidence other than in a clear case where the documentation all points the other way.'

Separately, and as an aside, Staveley was decided on 25.3.24, prior to Sian Participation Corp (In Liquidation) v Halimeda International Ltd [2024] UKPC 16 ('Sian') being decided on 19.6.24. Sian overruled Salford Estates (no 2) Ltd v Altomart Ltd [2015] Ch 589 ('Salford Estates'), and so the references in Staveley to Salford Estates should be read with this in mind. 

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