Whether you wish to issue or challenge a statutory demand, the costs of doing so should always be considered. ARC Costs assist those making and defending a statutory demand in recovering and negotiating their legal costs of the action.

What is a statutory demand?

A statutory demand is a formal written request for the payment of a debt within 21 days. If the debtor fails to pay the debt in full within this period, and does not apply to set aside the demand (for individuals), or to restrain the creditor from presenting a winding-up petition (for companies), the creditor can use the demand as a basis to petition the Court for a Bankruptcy Order or Winding-Up Order.

This type of debt recovery demand serves as a precursor to potential bankruptcy proceedings or winding-up proceedings if the debt is not addressed within the specified time frame.

Issuing a statutory demand

To issue a statutory demand in England and Wales, the following procedure should be followed:

• Complete the statutory demand form: The form should contain details of the debt, including the amount owed and the basis of the debt.
• Serve the statutory demand: The demand should be delivered (“served”) by giving it to the individual who owes the money or by sending it to the registered office of the company or partnership that owes the money. It can also be given to the company’s director, company secretary, manager, or principal officer. Alternatively, a ‘process server’ can be used to serve it1
• Keep records: It is important to keep a copy of the statutory demand and any evidence that confirms the time and date it was served, as well as proof that the debtor received the demand1
• Bankruptcy or Winding-up Proceedings: If the debtor does not respond to the statutory demand within 21 days, the creditor can use it as grounds to apply to the court for a bankruptcy petition (for individuals) or a winding-up order (for companies).

It’s crucial to ensure that the demand is served correctly, as incorrect service could be fatal to the debt claim. It is for this reason that we would advise you seek legal advice from an experienced solicitor.

Challenging or setting aside a statutory demand

If you have received a statutory demand would like to challenge or set aside the statutory demand, they can apply to have it set aside within the specified time frame.

To challenge or have a statutory demand set aside, the following steps can be taken:

• Apply to the Court: If you disagree with a statutory demand served on you, you can make an application to set aside or challenge it.
• Timeframe for application: You must apply to set aside the demand within 18 days of it being served on you if you are in the UK, or within 21 to 34 days if you were in another country when you received the demand.
• Application process: To set aside the demand, you need to complete form IAA, provide certain information, and submit a witness statement in support of your application. This should be done to the Court named on the statutory demand.
• Grounds for setting aside: The demand can be set aside on various grounds, such as disputing the debt, having a counterclaim, or if there is a defect in the demand. However, it’s important to note that a court judgment will be taken as evidence that you owe the debt, so disputing the demand on the basis of the debt itself may not be sufficient.
• Legal advice: It is advisable to seek legal advice promptly, as the process for setting aside a statutory demand has a short timeframe, and there may be potential costs involved.

Statutory demand costs

Recovering statutory demand costs from the debtor is possible, and it is always advisable to try to recover any legal costs from the debtor to minimise the overall costs of the action.

If a creditor serves a statutory demand for a disputed debt and refuses to withdraw it after a dispute is raised, the creditor may have to pay the debtor’s legal costs for setting aside the demand.

Moreover, if a debtor successfully has a statutory demand set aside, they may be able to recover their legal costs from the creditor.

If the value of the case is less than £100,000, fixed recoverable costs will likely apply.

If the case is allocated to the Multi Track, likely applicable in cases exceeding £100,000 in value, or involving complex circumstances, standard costs will apply, and Solicitors will be able to recover costs for their services at an hourly rate, in addition to disbursements such as Court fees and expert witness fees.

To claim statutory demand costs, the Detailed Assessment Procedure must be followed. To initiate the process of Detailed Assessment, the receiving party must serve their Bill of Costs alongside a Notice of Commencement upon the paying Party.

If the paying party wishes to dispute the costs listed within the Bill, the will be required to serve their Points of Dispute upon the Receiving party within 21 days. If Points of Dispute are not served within this period, the Receiving party can apply for a Default Costs Certificate. This will enable them to recover all costs listed within the Bill.

The receiving party can further negotiate costs with the paying party by serving replies to Points of Dispute to respond to the legal arguments made.

Parties should attempt to come to an agreement as to costs using this process before proceeding to Court. If an agreement cannot be reached, the receiving party will be required to make an application to the Court to arrange a Detailed Assessment or Provisional Assessment Hearing.

How can ARC Costs assist with statutory demand costs?

ARC Costs can assist will all aspects of claiming or defending statutory demand costs.

ARC Costs are a team of independent and experienced Costs Draftsmen and Costs Lawyers who regularly assist you in the recovery/contention of costs.

Whether you are the Paying Party or the Receiving Party, we hold vast experience in dealing with costs matters on both sides.

We can assist in fixed recoverable costs cases and cases where costs are awarded on the standard basis, including the preparation/challenging of Bills of Costs, conducting of detailed assessment proceedings, and the preparation of Points of Dispute/Reply.

Should you require our assistance or have any further queries regarding costs, please contact us on 01204 397 302 or email one of the team at info@arccosts.co.uk. Alternatively, please complete our online enquiry form, and we will contact you to discuss your query or speak to our staff using the live chat function.

If you would like to issue or defend a statutory demand, ARC Costs also maintain an extensive legal network of expert Solicitors in this area, and we would be happy to pass on your details to assist in recovering your outstanding debts. 

We may receive payments from third party solicitors on our panel to whom we may refer your claim. We will never charge you for any referrals made to our panel of third parties.