UK Construction and Law

A developer who signed a personal guarantee with independent advice cannot escape the statutory demand

By Staff Writer  |  30 August 2026

The Insolvency and Companies Court refused to set aside a statutory demand on a guarantee given for a property development company that later went into liquidation. Duress, undue influence and two cross-claims were all rejected, and the court ordered an account of a discrepancy in the sum demanded.

Two businessmen, both property developers, fell out over two ventures. The first was a development company whose shares were held by a family holding company. In October 2023 one lent it up to 250,000 pounds, repayable the following April, and on the same day the other gave a personal guarantee and indemnity for all its present and future payment obligations under the facility. The guarantee obliged him to pay on demand whenever the company did not.

He took independent legal advice before signing. The day before execution he wrote to his solicitors saying he was sure the agreement and personal guarantee should and was fair.

The company did not repay. A winding-up petition in August 2024 was compromised, and as part of that settlement the maximum facility was increased to 370,071 pounds, although nothing further was ever advanced. A restatement in December 2024, signed by both men and the company, confirmed the guarantee continued in full force. In April 2025 the company told its creditors it was going into creditors' voluntary liquidation. Demand was made on the company, then on the guarantor for 399,772 pounds. Neither was met. The liquidation followed on 28 April 2025.

Three routes out, all closed

An application to set aside a statutory demand can succeed where the debt is disputed on substantial grounds, where the debtor has a cross-claim equalling or exceeding the sum demanded, or on the residual ground that the court is satisfied on other grounds that the demand ought to be set aside. All three were tried.

The first was that the guarantee had been procured by duress or undue influence. The court held there was no relationship of trust and confidence of the kind that gives rise to a presumption, and that manifest disadvantage did not assist because the concept had not survived the leading House of Lords authority on guarantees. A director's guarantee of a facility to his own company is an ordinary incident of doing business and is not a transaction calling for explanation. Assertions of vulnerability were not backed by anything.

Had there been evidence, medical or contemporaneous, of a condition affecting D's capacity to make commercial decisions in October 2023, and of H's knowledge and exploitation of it, the position might have been different. There is none.

Chief Insolvency and Companies Court Judge Briggs

The judge added that the assertion stood alone and unsupported, and alongside the fact that the guarantor was at the time conducting substantial property transactions and instructing solicitors on them.

The cross-claims

The second route was a pair of cross-claims, in defamation and in unlawful means conspiracy, said to equal or exceed the debt. The conspiracy claim failed on every element. There was no substantial evidential basis from which an agreement between the lender and a third party could be inferred, no rational support for an intention to injure, no unlawful act identified with sufficient particularity, and on the applicant's own case the loss was caused by administrators rather than by the lender. The sum claimed was unsupported by any evidence from which a loss of chance could be valued.

The residual ground was not separately argued. The court noted that the earlier authority relied on for guarantors turned on liability being co-extensive with the principal debtor's, so that a guarantor could stand where the company itself could have resisted. Here the company had never disputed its liability, made no answer to the demand, and had gone into liquidation. There was no comparison to draw.

The loose end the court would not ignore

One point went the applicant's way in substance if not in outcome. The demand under the guarantee was for 399,772 pounds. The statutory demand and the respondent's skeleton put the figure at about 430,000 pounds with interest. A dispute about the precise amount does not defeat a demand where the creditor is plainly owed enough to found one. Even so, the judge said reasons for the increase should be provided so the debtor has a fair chance to meet the demand, and invited an order requiring an account of the discrepancy. Creditors serving on a guarantee should take that as a warning to reconcile the figures before the demand goes out.