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Are Statutory Demands The Same as County Court Judgments?

It is a common mistake to think that Statutory Demands and County Court judgments are the same thing, but they are not. Both are used as tools to recover monies owed. 

As with any problem, it is always important to use the right tool for the job. Whether a Statutory Demand or a County Court judgment is the better option depends on numerous different factors — including the amount owed and if the debt is disputed. Professional advice is often necessary to evaluate the available and best options for debt recovery and to determine the best course of action and next steps.

Are Statutory Demands The Same as County Court Judgments?

The common link between a Statutory Demand and a County Court judgment is that they are both devices used to recover money in England and Wales. The similarity ends there. 

The two processes differ in their execution and implications. The costs attached for the creditor can vary considerably depending upon which method they choose. 

The Main Differences Between Statutory Demands and County Court Judgments

The first key difference that can be crucial to the creditor is that a Statutory Demand does not involve going to court. Delays and costs are minimised. 

Statutory Demands are a precursor initial step to either bankruptcy (where a debtor is an individual), or to winding up (where a debtor is a limited company). If the debt is not paid within 21 days of the date of service or the debtor has not made an application to the court to set aside the demand, the creditor can petition the court to issue a bankruptcy order against the debtor or petition for insolvency (winding up) if the debt is owed by a company. 

If a company receives a Statutory Demand the notice period is 18 days, and rather than applying to set aside the Statutory Demand it is necessary to apply to the court for an injunction to prevent a winding up petition being issued against the debtor company. For this reason Statutory Demands are serious and require urgent steps to be taken.

A Statutory Demand is a short, sharp shock but is really only suited to debts that are uncontested — meaning the individual or company will not apply to the Court to have the Statutory Demand set aside. A Statutory Demand cannot be used in all circumstances and if the debt is disputed using a Statutory Demand might be unsuccessful. 

For a Statutory Demand to be valid the amount that the creditor is claiming must be a minimum of either £5,000 against an individual or £750 in respect of a limited liability partnership or company. If the debt is disputed, or if there are genuine triable issues in dispute, usually the only option is to go to the County Court and commence court proceedings.

Issuing court proceedings needs to be carefully considered and advice should be obtained to avoid unknown risks and pitfalls. It is now possible to issue money claims online via a centralised system (MCOL) however where claims are issued in court for more than £10,000 usually the losing party will be ordered to pay the winners costs as well as their own. Mistakes or missed opportunities/overlooked issues can result in a claim being successfully defended, and creditors ordered to pay the debtor’s costs even where they might have won if they had pursued the claim correctly at the outset. 

For creditors often the threat of adding legal costs to the amount owed will in itself result in greater pressure on the debtor to reach a compromise. 


Being able to recover legal costs is an additional benefit of the court process (issuing a claim) in comparison to a Statutory Demand. The other obvious benefit is that although obtaining a County Court or High Court Judgment impacts the credit rating of the debtor, it does allow them to continue trading. Whereas with a Statutory Demand if a Creditor is successful in a winding up petition the best case outcome is that the Debtor will be wound up and will no longer exist. In most cases the Creditor won’t then be repaid- the benefit to the Creditor is the hope that the threat of winding up triggers payment.

In most claims above £10,000 MCOL will not be the best option. The online form is limited to 1,080 characters so it does not lend itself to fully explaining situations which cannot be easily explained. 

There are many enforcement options available with a Court Order, including proceeding with a charging order over the debtor’s property or instructing the Enforcement Officer at the High Court to seize some of the debtor’s assets.

Conclusion

A Statutory Demand is a formal demand for repayment of money. It is theoretically the first step towards insolvency proceedings for a partnership or limited company, or bankruptcy proceedings for individuals. 

However, in reality, a Statutory Demand is often used as a method of encouraging the debtor to resolve the situation. Often the creditor has no real intention of pursuing either insolvency or seeing the debtor made bankrupt. They simply want the matter resolved more quickly than going through the process of seeking a County Court Judgment. 

This is particularly true for situations where the debt is clearly owed and pressure needs to be exerted on the debtor to make payment. 

It’s strongly advisable to assess each individual debt, claim and demand on its merits — particularly if the sum is disputed. This will dictate which route of recovery is likely to be the most effective and whether going to court is the best option. 

We act for both Creditors and Debtors in claims seeking recovery of monies. We act routinely for individuals and companies across the country who have received a Statutory Demand that they dispute. 

Where we advise to apply to set aside the demand or to obtain an injunction from the court we can often recover our legal costs from the opponent if the Statutory Demand was inappropriate approach, even if monies are ultimately owed.

Posted by:

Jonathan Waters
Solicitor

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