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Loser pays the winner's costs? not when a statutory demand is served prematurely

21 August 2017

In Dunhill v Hughmans (a firm) [2017] EWHC 2073 (Ch) (12 June 2017) the High Court exercised its discretion when making a costs order relating to an application to set aside a statutory demand and made a cost order against the respondent solicitors based on their inappropriate and unreasonable behaviour.

At appeal the High Court considered that the Chief Registrar had not considered whether it was reasonable and appropriate for the solicitors to serve a statutory demand at the point in time that they did. It was held that the solicitors must have appreciated that further costs would be incurred by their conduct and they had therefore acted unreasonably. The Chief Registrar failed to place sufficient weight on the solicitors rejecting the appellant’s offer. The respondent had acted unreasonably by not accepting the offer made by the appellant.

It was held that the solicitor’s conduct was unreasonable and inappropriate and the costs of the application to set aside the statutory demand were awarded to the appellant.

The decision of this case reaffirms the potential cost consequences for parties who act unreasonably. Parties should not assume that the general rule that ‘the unsuccessful party will be ordered to pay the costs of the successful party’ will apply in every case. The courts will have regard to the conduct of the parties when making costs orders. Finally, making the decision to serve a statutory demand should not be taken lightly without exhausting all options available. Creditors should ensure that statutory demands are not issued prematurely – there are likely to be cost consequences as this judgment demonstrates.

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Mia Plume

Mia Plume

Associate (Chartered Legal Executive)

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