“A claimant who discontinues a claim needs the permission of the court to make another claim against the same defendant if – (a) he discontinued the claim after the defendant filed a defence; and (b) the other claim arises out of facts which are the same or substantially the same as those relating to the discontinued claim”
“267 Grounds of creditor’s petition. “(1)A creditor’s petition must be in respect of one or more debts owed by the debtor, and the petitioning creditor or each of the petitioning creditors must be a person to whom the debt or (as the case may be) at least one of the debts is owed. “(2)Subject to the next three sections, a creditor’s petition may be presented to the court in respect of a debt or debts only if, at the time the petition is presented— (a)the amount of the debt, or the aggregate amount of the debts, is equal to or exceeds the bankruptcy level, (b)the debt, or each of the debts, is for a liquidated sum payable to the petitioning creditor, or one or more of the petitioning creditors, either immediately or at some certain, future time, and is unsecured, (c)the debt, or each of the debts, is a debt which the debtor appears either to be unable to pay or to have no reasonable prospect of being able to pay, and (d)there is no outstanding application to set aside a statutory demand served (under section 268 below) in respect of the debt or any of the debts.”
“268 Definition of ‘inability to pay’, etc.; the statutory demand. “(1)For the purposes of section 267(2)(c), the debtor appears to be unable to pay a debt if, but only if, the debt is payable immediately and either— (a)the petitioning creditor to whom the debt is owed has served on the debtor a demand (known as “the statutory demand”) in the prescribed form requiring him to pay the debt or to secure or compound for it to the satisfaction of the creditor, at least 3 weeks have elapsed since the demand was served and the demand has been neither complied with nor set aside in accordance with the rules…”
“10.5 Hearing of application to set aside “(4) On the hearing of the application, the court must consider the evidence then available to it, and may either determine the application or adjourn it, giving such directions as it thinks appropriate. “(5) The court may grant the application if— (a)the debtor appears to have a counterclaim, set-off or cross demand which equals or exceeds the amount of the debt specified in the statutory demand; (b)the debt is disputed on grounds which appear to the court to be substantial; (c)it appears that the creditor holds some security in relation to the debt claimed by the demand, and either rule 10.1(9) is not complied with in relation to it, or the court is satisfied that the value of the security equals or exceeds the full amount of the debt; or (d)the court is satisfied, on other grounds, that the demand ought to be set aside.”
“…in order to convert what is clearly an unliquidated sum to a liquidated sum there must be…clear and unequivocal conduct or agreement on the part of the debtor to demonstrate acceptance of those bills of costs such as to forego the right of assessment and to convert them to a liquidated sum.”
“Mr Macpherson, Counsel for the debtor, submitted that it was insufficient to find a bare admission, agreement or acknowledgement that Mr Truex's invoices were correct. Where a debt is of an unliquidated sum because it has not been judicially assessed or determined that sum can only become liquidated if the client is bound by the admission, agreement or acknowledgment relied upon. Thus Mr Macpherson said that one must look for a waiver of the right to assessment or determination. In order to constitute such a waiver, the client's conduct must be supported by consideration or give rise to an estoppel. “Doubtless a bare admission coupled with failure over a long period to challenge the bill would be strong evidence that the bill was reasonable. However, submitted Mr Macpherson, such conduct would not be enough to convert the amount of the bill from an unliquidated to a liquidated sum…”
“any admission, acknowledgment or agreement converting the amount claimed from an unliquidated to a liquidated sum must be one from which the client has bound himself not to resile. A mere acknowledgment would be insufficient to bind him to forego judicial assessment or determination.”
“However it seems to me that the fact (if such is the case) that public policy requires the client to be able to seek assessment of a solicitor's bill even after having reached an otherwise binding agreement is merely a reason why the court ought not to make a bankruptcy order on a petition likely to be the subject of assessment under the Act. The availability of assessment does not prevent an otherwise binding agreement converting what was previously the solicitor's mere estimate of proper costs into a liquidated sum capable of founding a petition under s.267 of the 1986 Act”
“it was ordered that the Applicant's claim be dismissed and he pay the Respondent's costs of the case, subject to detailed assessment on the standard basis if not agreed, and further that the Applicant make an interim payment on account of costs to the Respondent in the sum of£50,000 , to be paid by 4.00 pm on27 April 2012 .”
“The Applicant has put forward a number of grounds as the basis for setting aside the Demand. … In addition he maintains that the sum claimed is not a liquidated debt which can be relied upon for the purposes of a Demand. I do not agree[.][T]he district judge's order, a copy of which is in the papers before me, provided for an interim payment on account of costs in the sum of£50,000 to be paid by 4 pm27 April 2012 . There is no stay in place and no appeal in relation to that sum; therefore it is, for the purposes of a Demand, a liquidated debt.”
“…the order for the interim payment can form the subject matter of the bankruptcy petition, whether or not on the subsequent detailed assessment the order would be reversed. […] It is perfectly open to a judgment creditor in respect of an interim payment to enforce that (if that is the right word) by way of bankruptcy proceedings”
“107. I would emphasise "in general" because it is possible for a claim by a solicitor to be for a predetermined amount.For example, as was said by Evans LJ in Turner & Co v O Paloma SA[2000] 1 WLR 37 , 40 G: ‘If a solicitor wishes to be paid and is not in funds he will need to sue and prove that his charges were either expressly agreed or are reasonable charges’. (My emphasis)… “108. …if the amount of the fees has been expressly agreed, there is no reason why they cannot be for a liquidated sum. “109. I do not see that Truex v Toll[2009] 1 WLR 2121 decided other than in accordance with these principles… “110. Further, I would agree with Proudman J when she said that the "availability of assessment does not prevent an otherwise binding agreement converting what was previously the solicitor's mere estimate of proper costs into a liquidated sum capable of founding a petition": para 40… “111. It is clear to me that the basis or nature of a solicitor's claim for their charges is separate from the ability to seek an assessment. The existence of such a right does not turn what is otherwise a claim for a liquidated sum into a claim for an unliquidated sum.”
“In the present case I made an order on2 May 2021 that the Brakes pay the costs, to be assessed, if not agreed. That was a few days before the moratorium for Mr Brake began on 6 May. The order of 2 May undoubtedly created a contingent liability of uncertain amount. But it could not be enforced before being liquidated (by agreement or assessment) in a certain sum. Any order I make now will (partly) liquidate that contingent liability. In ordinary language a "debt" is a liquidated sum that is due and owing: see eg Webb v Stenton(1883) 11 QBD 518 , CA. In my judgment that is also its meaning in the regulations. Thus, the order of2 May 2021 did not create a debt for the purposes of the regulations. On the other hand, any order I now make ordering a sum to be paid on account will create a debt, which will be a qualifying debt…”
“…the word ‘cross’ in the expression ‘cross demand’ does not imply any kind of procedural or juridical relationship to the debt which is the subject of the statutory demand: all it means, in my judgment, is that the ‘demand’ is one which goes the other way, i.e. that it is a ‘demand’ by the debtor on the creditor. “…In my judgment, the meaning of the expression ‘cross demand’ in r.6.5(4)(a) cannot change according to whether the judgment or order on which the statutory demand is based was obtained in the same proceedings as those in which the claim relied on as a ‘cross demand’ is being advanced”
“If I may respectfully say so, I consider that the judge was in error in his general assertion that if A sues B to enforce a claim which he has in his personal capacity, B cannot make a counterclaim against A in the same action in respect of a liability to which A is subject in a capacity other than a personal one, for example, as a personal representative or trustee… “It follows, in my view, that the judge erroneously approached the matter on too narrow a basis. I consider that he should have held that the debtor did have a relevant cross demand, whose effect he had to consider. He should then have gone on to consider whether, in the circumstances of the case, the existence of the cross demand justified the setting aside of the statutory demand”
“As already explained, Mr Adair's submission is that the debt on which the statutory demand is based is due to the trustees in their capacity as such and the cross-claim which Mr Hurst raises is against them as partners, and therefore the claims lack mutuality. More precisely the amount in the statutory demand is due to the respondents personally whereas that due to Mr Hurst (if it is due) is due to him from all the other partners jointly. (Partnership Act 1890, s 9 and see generally Hurst v Bryk , above). If this submission is right that is the end of the case.”
“…Despite the generality of the language used [in rule 10.5(5)(a)] it is clear that limits must be implied. Thus, in the case of set-off the claims must exist between the same parties and, subject to immaterial exceptions, in the same right (see Halsbury's Laws (4 th ed. Reissue) para. 438). The set-off directly reduces the amount of the debt claimed by the creditor. But it was obviously thought that to limit claims to liquidated sums due between the parties at the time of the hearing of the application to set aside was unfair to the debtor and that other claims yet to be proved should be allowed to be taken into account. Hence, a counterclaim or a cross demand may be relevant. A counterclaim may be permitted procedurally even if the claim and counterclaim are not between the parties in the same right. However, as Rimer J. said in Re a Debtor (No. 87 of 1999) The Times,14 February 2000 , when the claim and counterclaim are heard, the court will not be compelled to set the claim and counterclaim off against each other and merely give judgment to one party for the balance, as in many cases that might produce a gross injustice. “The reference in r. 6. 5 (4)(a) to “cross demand” must be interpreted more widely than “counterclaim” or “set-off” (see Re a Bankruptcy Notice[1934] Ch. 431 , a case on the similar concatenation of “counterclaim, set off or cross demand” ins. 1 (1)(g) Bankruptcy Act 1914 and r. 140 (2)Bankruptcy Rules 1915 , replaced by r. 137 (b)Bankruptcy Rules 1952 ). But I am not aware of any case where a cross demand has been held relevant despite an absence of mutuality between the debtor and creditor in their rival claims… “If the creditor claims in one right and is claimed against in another right, it will by no means follow from the eventual establishment of the cross claim that the creditor's debt will be reduced accordingly”
“In this context mutuality means that the legal character in which the creditor is or may be liable to the debtor by virtue of the counterclaim or cross-claim raised by the debtor is the same as the legal character in which the creditor is entitled to the debt the subject of the statutory demand. It does not mean that the claims have to arise out of the same contract or transaction. An example of a situation in which there is no mutuality is where a person brings a claim in his personal right and the defendant seeks to set off a claim against him in his capacity as a trustee for others. But the courts are prepared in certain situations to look at the reality of the situation, as Rimer J was prepared to do: see also for example Re Chapman ex parte Parker (1887) 4 Morr. 109, where a defaulting trustee of a will was entitled to set off against a claim by the continuing trustees the amount to which he was entitled as a residuary legatee”
“The approach of the Judge is to be contrasted with that of Rimer J in In re a Debtor (No 87 of 1999) (Times Law Reports14 February 2000 )… “In fact, Rimer J's conclusion on the particular facts of the case was that he could regard the action as brought against the executrix personally. Accordingly the question whether it was a requirement of a counterclaim or cross-demand that there should be mutuality between the debtor and the creditor was not necessary for his decision.”
“I have no reason to doubt the point made by Rimer J that procedurally a party can raise a counterclaim against another party in some different capacity than that in which he is himself sued by that party. Insolvency Rule 6 5(4) is not, however, dealing with procedural matters but whether there is good reason to set aside a statutory demand. There is little point in setting aside a statutory demand if the debt on which it is based cannot be liquidated by the cross-claim. That this is the purpose of the provision is confirmed by the requirement that the cross-claim should equal or exceed the debt on which the statutory demand is based.”
“There is little point in setting aside a statutory demand if the debt on which it is based cannot be liquidated by the cross-claim. That this is the purpose of the provision is confirmed by the requirement that the cross-claim should equal or exceed the debt on which the statutory demand is based… “It would follow that in this case the court should not exercise its powers under Insolvency Rule 6.5(4) because the debt on which the statutory demand is based is one to which the respondents (alone) are entitled whereas the proposed cross-claim would be against all the partners jointly”
“I agree that this appeal should be dismissed. For my part I would not base that conclusion on lack of mutuality. The respondents are indeed trustees. But the demand that they make is not, as I see it, for trust money. They are asking for an indemnity, for compensation in respect of the losses they have suffered. If and when they receive any money from Mr Hurst, they will put it in their own pockets. On the other hand Mr Hurst's liability is as a partner, or a former partner.
“For the purposes of Rule 10.5(5)(a) therefore, I agree with Dr Mokal that: a. a set-off depends on establishing that the claims in question are between the same parties and in the same right; b. a counterclaim may exist even if the claim and counterclaim are not between the same parties in the same right; and, c. a cross-demand appears to be wider than either a set-off or a counterclaim (even if generally it has been found to exist where there is mutuality between the debtor and creditor in their respective claims). “In my judgment therefore, there is no requirement of mutuality…”
“…As to whether (if I am wrong about that) there is mutuality in the present case, Mr Heylin submitted that Mr Makki is comparing "apples and oranges". He said: a. that Mr Makki's discontinuance of the Private Prosecution in the Crown Court was in " a totally different venue and jurisdiction to the proceedings in Lebanon "; a criminal action, he said, is not a debt recovery exercise; b. that the existence of a disputed debt claim (the Makki Claim) between the same parties does not "have the effect of discharging Mr Makki's liability" under the costs order (the Makki Debt); c. that a liquidated sum is due under the costs order in England, but that no liquidated sum is due in the Lebanese proceedings, even if successful. “None of those submissions in my judgment affect the relevance of the Makki Claim to the Application, in the context of which Mr Makki must establish that he has (or that there is a genuinely triable issue in respect of) a "counterclaim, set-off or cross demand". a. First, whether or not required, there is mutuality between the parties' rival rights and claims - in both cases, the parties act or acted in the same right and capacity. The fact of different venues and jurisdictions is immaterial. b. Second, it is not necessary for the Makki Claim to "have the effect of discharging Mr Makki's liability", and it is not necessary for the Makki Claim to be for a liquidated sum – although in fact, as I understand it, and explain below, it is a claim for a liquidated sum (advanced in respect of various dishonored cheques).” a. that Mr Makki's discontinuance of the Private Prosecution in the Crown Court was in " a totally different venue and jurisdiction to the proceedings in Lebanon "; a criminal action, he said, is not a debt recovery exercise; b. that the existence of a disputed debt claim (the Makki Claim) between the same parties does not "have the effect of discharging Mr Makki's liability" under the costs order (the Makki Debt); c. that a liquidated sum is due under the costs order in England, but that no liquidated sum is due in the Lebanese proceedings, even if successful. a. First, whether or not required, there is mutuality between the parties' rival rights and claims - in both cases, the parties act or acted in the same right and capacity. The fact of different venues and jurisdictions is immaterial. b. Second, it is not necessary for the Makki Claim to "have the effect of discharging Mr Makki's liability", and it is not necessary for the Makki Claim to be for a liquidated sum – although in fact, as I understand it, and explain below, it is a claim for a liquidated sum (advanced in respect of various dishonored cheques).”
“Where the debt claimed in the statutory demand is based on a judgment, order, liability order, costs certificate, tax assessment or decision of a tribunal, the court will not at this stage inquire into the validity of the debt nor, as general rule, will it adjourn the application to await the result of an application to set aside the judgment, order, decision, costs certificate or any appeal”
“(1) There is no such hard and fast rule as Mr. Duveen suggested, namely, that any arrangement or agreement made by a petitioning creditor with his debtor, after the institution or under the shadow of bankruptcy proceedings, whereby the creditor is able to get more than that "to which he was legally entitled" (that is, more than he could have recovered at law at the time of the bankruptcy proceedings being started or threatened) amounts to extortion in bankruptcy law notwithstanding the absence of any mala fides or anything amounting to oppression in fact. In our judgment, the decision in In re Bebro involves necessarily the rejection of such proposition. “(2) There is equally no rule that extortion has in bankruptcy law a special and artificial significance divorced altogether from the ordinary implication of the word. “(3) The so-called "rule" in bankruptcy is, in truth, no more than an application of a more general rule that court proceedings may not be used or threatened for the purpose of obtaining for the person so using or threatening them some collateral advantage to himself, and not for the purpose for which such proceedings are properly designed and exist; and a party so using or threatening proceedings will be liable to be held guilty of abusing the process of the court and therefore disqualified from invoking the powers of the court by proceedings he has abused. “(4) On the other hand, having regard to what Jenkins LJ called "the potent instrument of oppression" which bankruptcy proceedings (with their potential consequences upon property and status) provide, the court will always look strictly at the conduct of a creditor using or threatening such proceedings; and if it concludes that the creditor has used or threatened the proceedings at all oppressively, for example, in order to obtain some payment or promise from the debtor or some other collateral advantage to himself properly attributable to the use of the threat, the court will not hesitate to declare the creditor's conduct extortionate and will not allow him to make use of the process which he has abused. “(5) In every case it is a question of fact in all the circumstances of the case whether there has been, in truth, extortion.”
“In the light of these authorities I conclude that the pursuit of insolvency proceedings in respect of a debt which is otherwise undisputed will amount to an abuse in two situations. The first is where the petitioner does not really want to obtain the liquidation or bankruptcy of the company or individual at all, but issues or threatens to issue the proceedings to put pressure on the target to take some other action which the target is otherwise unwilling to take. The second is where the petitioner does want to achieve the relief sought but he is not acting in the interests of the class of creditors of which he is one or where the success of his petition will operate to the disadvantage of the body of creditors. It is also clear from those authorities, and as a matter of common sense, that the jurisdiction of the court to dismiss a petition based on an undisputed debt on the grounds of collateral purpose must be exercised sparingly. Bankruptcy proceedings cannot be allowed to become the forum for a detailed investigation into past and present relationships or an exploration of what the petitioner hopes to gain from the insolvency of the company or individual, in financial or personal terms and a consideration of whether those hopes are legitimate or not.”
“…The sole argument presented to me on behalf of Mrs Hicks on this appeal is that under subs (3) of s 266, which I have read, the application should have been dismissed as an abuse of the court’s process because the intention of the petitioners was to stifle the proceedings against Mr Gosland and that that is not a legitimate purpose… “…if the presenter of a petition has two purposes, one of which is the lawful purpose of seeking to obtain a dividend in the bankruptcy, a second purpose, however important that might seem to the presenter, is insufficient to justify stigmatising the petition as an abuse of the court’s process. […] I think I am bound to hold that if at least one genuine purpose of the petitioner is to obtain a dividend in the bankruptcy if one is forthcoming, that is sufficient to justify the presentation of a petition… “Furthermore, I am not entirely satisfied that the stifling of an action in itself is an illegitimate purpose. It may well be legitimate for a creditor to take the view that the debtor ought not to be spending his money – or what is his money until the bankruptcy order is obtained – on an action which has no prospect of success and which may result in an entirely unjustified increase of the liabilities which will compete with the petitioning creditor eventually when the bankruptcy petition is presented”
“It also appears that a petitioner who has more than one objective or purpose in presenting and pursuing a petition may be able to avoid a finding of abuse of process if one of his purposes is legitimate, even though that is not his principal purpose. However, as regards the decision in Hicks v Gulliver , I would observe in passing that I do not think that it can be the law that just because a petitioner can say that one of its purposes is to obtain a dividend (however small) on its debt in the bankruptcy, its petition cannot be an abuse of process, no matter what its other purposes might be. As I observed in argument, and none of the counsel who appeared before me disagreed, the effect of a petitioner who is seeking a winding-up or bankruptcy order with the illegitimate purpose of obtaining a benefit for himself at the expense of the other creditors may well be merely to reduce, rather than eliminate altogether, the dividend payable on the unsecured debts in the bankruptcy. Such a case may be no less an abuse of the collective process because the petitioner can say that he would (in addition to obtaining the singular benefit for himself at the expense of the other members of the class) also wish to receive the (reduced) dividend on his debt”
“I also consider that Judge Watkin's conclusion could have been justified by analogy to the principles which apply when the Court is considering, under its inherent jurisdiction, whether a bankruptcy petition is an abuse of process. Bankruptcy proceedings are a class remedy, and even if a statutory demand is served in respect of a debt that is otherwise undisputed, if the bankruptcy process is being used to enable the petitioner to achieve an illegitimate purpose to the detriment of the class of creditors, this will constitute an abuse of the process of the court”