SD2 recieved

[legalnooby]

Hi Guys,
A friend has received a SD2 served on her becuase she as a director of a company signed a personal guarantee on an factoring agreement with a finance company.

The other director has gone rogue, raised a invoice against a fictitious company and the finance company have failed to do any due dilligence and paid the invoice.
The other director has cleared the business account and gone into hiding and left my friend to carry the can! She also has not had access to the company bank account.


She has contacted the police who have said the finance company have to make a complaint as she's not out of pocket. Although actually she is as the finance company expect her to cover all losses.


I have suggested that she applies for a set aside on the basis that the debt is disputed, and then defend any further action on the dilligence failure. I've suggested that
she get's the full T&C's of the agreement to see if credit checking (to ensure the invoices are from a real company)

And Also to push things with the police as I think the other director has obtained money by deception and as the finance company is holding her liable she has suffered a loss..

Are we on the right track or a hiding to nowhere? I'd appreciate any advice or insights.

Many thanks.

[Amethyst]

No you sound like you are on the right track. As the debt is disputed then she should file a set aside application asap, dealing with any further action later, and using the intervening time to obtain as much information as possible. She won't be able to do a SAR other than for a copy of the personal guarantee and anything directly related to her rather than to the business, but the company should have retained a copy of the agreement and terms with the factoring company which will need checking particularly as to the obligations on the factoring company to undertake basic due diligence ( like checking companies house that an invoice is from a bona fide company ) She should request a copy of it from the factoring company if not.

What's happening with the company now the other Director has gone AWOL ? Has she spoken with the bank and the accountants ?

[legalnooby]

Cheers.
She has resigned as a company director via companies house ( which I wouldn't have) and when she contacted the bank they were most unhelpful. They have refused to give her any information. i'll ask her about the accountant.

The date on the SD2 is Feb last year. Can we ask to have it struck out on that basis (date incorrect)? I realise that it can be re-served how ever it will add to the plaintiffs workload and also buy my friend more time.

[Amethyst]

The SD is dated Feb 2018 and only just served ? Include it in the set aside but it won't be enough of a reason to set aside on its own.

or was it served last year? There's only 18 days to file the set aside app after service so if so she needs to check what's happened since. They've obv not petitioned for bankruptcy or she would know about it.

[legalnooby]

I think they made a mistake on the form, as It was only served 5 days ago! I'm not sure how as the finance agreement was signed in June 2019!

I think like you it's another reason for a set aside and further demonstrates the finance companies lack of diligence .

[Amethyst]

Okay and being 2018 they can't blame being American or anything ( 10/2 vs 2/10 etc )

Yes get drafting the set aside application and get the defendant to be gathering as much information and documents as possible to help.

Does she recall if she was advised to seek independent legal advice before signing the personal guarantee ?


Some very brief bits from a recent case which might be useful to get started.

WITNESS STATEMENT

I, XXXXXXX of STREET ADDRESS, TOWN, POSTCODE will say as follows;

I make this statement in support of my application to set aside the statutory demand served by xxxxxxxxxxxx Finance Limited and dated xx Feb 2018. Except where I say otherwise, the facts stated in this witness statement come from my own knowledge and are true. Where the facts come other than from my own knowledge, I state the source of my information and I believe it to be true.

I became aware of the statutory demand on xxxth October

2019 when it was served on me at my address STREET ADDRESS, TOWN, POSTCODE.

I apply to set aside the statutory demand on the grounds that the debt is disputed on grounds which will appear to the court to be substantial. The matter is unsuitable for the bankruptcy court due to a dispute regarding the validity of any personal guarantee or other agreement relied upon and a dispute over the amount claimed.

I believe that the bankruptcy Court is not the appropriate place for such investigations to take place. I refer the court to the judgment of Mr Justice Warren in the High Court in the case of Hammonds (a firm) v Pro-fit USA Ltd [2007] EWHC 1998 (Ch) at Para 27.

27. So far as disputed debts are concerned, the practice of the court is not to allow the insolvency regime to be used as a method of debt collection where there is a bona fide and substantial dispute as to the debt. Save in exceptional cases, the court will dismiss a petition based on such a debt (usually with an indemnity costs order against the petitioner).

In respect of judgment of Mr Justice Warren as set out above I aver that there is a clear dispute in relation to this debt.

[legalnooby]

Thats awesome , ill put that together tonight.

Thanks for your help

[legalnooby]

theres been a development. The finance company have been in touch with the missing director and a settlement has been reached with him 'promising' to pay a percentage of the debt (essentially 1K to settle) The balance they claim left over will be 2k payable by my friend!
i think it looks like an offer to settle to me.
Which included in the statement looks bizzare. She has been given for differing amounts she owes SD2 states 5k, then its 3k, then 6k and now this development.

I think she has two choices. Settle at 1K or continue with the set aside and contest the debt fully.

[Amethyst]

Hmmm be careful ... don't let alleged settlement negotiations make you miss the set aside deadline. Any agreement needs to be in writing and include withdrawal of the SD and preferably cancellation of the PG and any liability. Those figures sound all over the place and particularly dodgy considering the factoring agreement and PG have only been in place a couple of months.

Have you seen all the documentation relating to this ?

[legalnooby]

I agree, I think she should continue with the set aside.

The only documentation I've seen are emails from the director of the company with all these all over the place figures and some excel spreadsheets chucked in.

[Amethyst]

To write the set aside you'll really need the contract and Personal guarantee that she signed. Plus the demand from the factoring company and the full statutory demand text of their claim ( the details of the debt part ).

All she has to show is that there is a dispute over the debt and its not suitable for bankruptcy court.

Does she own a property ? Does the PG include giving the company a charge over it ?

Its weird because if this were a single ( or multiple ) false invoice submitted by the other director and the money paid out by the factoring company then under the terms presumably there would be a period between paying out and the invoice being paid to the factor firm by the fictitious company - with the lack of due diligence it's unlikely it wouldn't have flagged up until payment was past due. Plus it'd be exact amounts claimed ( the invoices plus interest charges and any legal costs ) We are only just 4 months from when they signed up... there doesn't seem time to have done all this and get to a called in pg and then stat demand stage. I'm not doubting you, just be careful helping your friend without getting the full facts.

[legalnooby]

I've seen the contract and PG, but the finance company has refused to sent the full T & C's. My Friend has no property or assets which might be a blessing or not.

I'd agree the finance company have moved with some speed, they did claim an exact amount on the SD2 that was served, however during contact via email the finance company have changed the amount 3 or 4 times and are now stating they want 2k less than what was shown on the SD2. The director at the finance company stated that he'd removed charges and costs as he expects not to receive them and now just wants the original debt. The invoices were raised in July and because the other director (who ran things day to day) went awol I assume the FC decided to move as quickly as possible.
we've written a statement setting out why the set aside is requested, along with emails printed off to support the application and any other info we can find.


My friend is taking it all to court today so we will see what happens.

[Amethyst]

Okay good Just trying to look out for you with the limited info - it sounds like you have things in hand though. Let us know what happens xx

SD's are far too often issued as an intimidation and if anything other than payment takes place the claimant doesn't really know how to deal with it.

[legalnooby]

A massive thanks for your help especially with the statement I agree dealing with these demands are a nightmare.
I will keep you posted if my friend is able to get the set aside granted.

[legalnooby]

hey guys and girls, really pleased to say that the judge has granted the set aside that we applied for.

I guess the next step is for us to see the particulars the claimant may file along with his evidence and defend it. I will keep you all posted.