This case is within the Chestnut Portfolio acquired by the Cerberus global private investment group and has been one of its most hard fought cases, involving personal debts and security of over £12m and litigation spanning back to 2016.
Following the Court of Appeal decision handed down on 14 July 2020 (Court of Appeal Decision), Mr. Hancock made an application to the Supreme Court for permission to appeal against the Court of Appeal Decision (UKSC Application). Ultimately, a panel of judges (led by the Supreme Court President, Lord Reed) refused the UKSC Application.
Accordingly, the Court of Appeal Decision still stands, which offers helpful guidance to other creditors facing similar legal challenges. In particular, the fact that the Supreme Court dismissed the arguments raised in the UKSC Application on the basis that they are not "arguable points of law" is noteworthy. The conclusion that can be drawn from this latest decision is that UKSC has agreed and endorsed the view of the Court of Appeal, that there is no inherent unfairness of a debtor having an onus of proof in challenging a statutory demand, compared to a more stringent burden on the creditor in formal proceedings.
Mr Hancock contended that the UKSC Application raises two arguable points of law of public importance that warrant consideration by this Court:
- whether a party should be entitled, on grounds of relevance, to redact a document a court is asked to construe on the basis of a solicitor’s certification that such redacted material is irrelevant; and
- whether it should be ‘easier’ for a creditor to bankrupt an individual using the statutory demand and bankruptcy procedure than the normal Part 7 claim procedure.
The Lender's response to each point was as follows:
- To the extent that there ever was an arguable point of law of public importance in relation to the entitlement to redact on the grounds of irrelevance a document that the Court was asked to construe, it had been comprehensively answered by the Court of Appeal in Mr Hancock's favour. Thus, the position as it now stands in light of the clear and authoritative guidance given by the Court of Appeal is that a party cannot redact a document which the Court is being asked to construe on grounds solely of irrelevance and if it redacts for irrelevance and some other factor, the redaction may be defensible but only in clear-cut circumstances.
- Mr Hancock's second issue betrayed a fundamental misunderstanding of the settled scheme of the Insolvency Legislation. It is self-evidently necessary that individuals and companies who owe money in respect of which they have no substantial dispute should be subject to an insolvency procedure in the event of non-payment. Their failure to comply with the demand for payment entitles the court to conclude that the individual or company is insolvent such that it is in the interests of the debtor and his creditors generally that he be subject to an insolvency process. There is nothing unfair about this: all a debtor needs to show is that there is a dispute on substantial grounds – an exceptionally low bar as the authorities establish – to the debt claimed and the creditor will instead have to pursue the sum by way of Part 7 Proceedings. That Mr Hancock was not able to overcome this low bar on no fewer than three occasions speaks not to a fundamental unfairness that the Supreme Court needs to consider but simply the complete absence of any proper basis for Mr Hancock not to pay the sums due and owing to the Lender
Ultimately, the Supreme Court agreed with the Lender's arguments, concluding that the UKSC Application does not raise an arguable point of law of general public importance.
Practical Implications of the Decision
The Court of Appeal Decision remains a helpful guide to lenders facing similar challenges regarding the level of redaction to their disclosed documents. The fact that the Supreme Court reinforced the Court of Appeal Decision strengthens the position of other lenders in similar situations, and supports the approach of using a simplified and more straightforward route of a statutory demand.