Litigation Update: Inaccuracies Do Not Automatically Invalidate Demands

In a number of recent cases, borrowers have produced a detailed forensic analysis of the accrual of interest on their accounts by lenders alleging that any error in the calculation of interest invalidates the demand made by the lender and any appointment of a receiver on foot thereof.

The English case of County Leasing Limited -v- East1 is persuasive authority for the proposition that demands on foot of loan agreements do not have to be accurate in this regard.

While that case has been relied upon, on occasion, without attracting judicial comment, it was recently cited with approval in Flynn -v- National Asset Loan Management Ltd & Ors.2 In that case the court held:

"... it seems clear that the letter of demand, even if it did overstate the amount due from the defendants to NALM, is still a valid of letter of demand. In the circumstances, the submission of the defendants that the letter of demand is invalid is not well founded."

Statutory demands

In Flynn, the court distinguished the case before it from the case of a demand made pursuant to statute. With respect to statutory demands the position varies between demands to ground a bankruptcy summons and those intended to demonstrate that a company is unable to pay its debts to ground a petition to liquidate a company.

Bankruptcy

It has been clear for over a hundred years that a statutory demand to ground a bankruptcy summons cannot overstate the amount due from the debtor by even a token amount. In re A Debtor,3 where there was a miscalculation of interest that appears to have been between one and two pounds, Cozens-Hardy MR held:

"On principle I am not prepared to accede...