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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> EDF Energy Customers Ltd v Re-Energized Ltd [2018] EWHC 652 (Ch) (28 March 2018) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2018/652.html Cite as: [2018] EWHC 652 (Ch) |
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CHANCERY DIVISION
BRISTOL DISTRICT REGISTRY
On appeal from District Judge Watkins
2 Redcliff Street, Bristol, BS1 6GR |
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B e f o r e :
(sitting as a Judge of the High Court)
____________________
EDF Energy Customers Ltd (formerly EDF Energy Customers plc) |
Petitioning Creditor/ Respondent |
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- and - |
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Re-Energized Ltd |
Debtor/ Appellant |
____________________
Daisy Brown (instructed by VWV) for the Respondent
Hearing dates: 25 January, 26 February 2018
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Crown Copyright ©
HHJ Paul Matthews :
Introduction
The alleged debt
The solicitors' emails
"Dear Mr Watson
I have been passed a copy of your email below as my colleague Nick Roberts is on annual leave. Although I note your comments below, I am afraid that it reflects a misunderstanding of the position that your company now finds itself in. As you know, you have already sought to challenge the validity of the monies owed by your company under the terms of its contract with EDF Energy. That challenge was unsuccessful and HHJ Matthews held that EDF Energy was entitled to proceed with its petition. As a result, EDF is confident that any future challenge to the petition is also bound to fail. There is also no onus on our client to provide the information that you seek below as the debt due to EDF is contractual.
[Redaction] our client would be willing to seek a final adjournment for 28 days from 22nd May.
Yours sincerely
Ed Husband."
"Thanks for the response Mr Watson.
You have not completely misunderstood the situation – the application to restrain advertisement is different to your right to contest the petition at the hearing. However, the considerations for the court on both applications are, in my experience, largely the same. You will of course need to seek your own advice on this.
We have requested a copy of the transcript of the hearing but are yet to receive this.
Regards
Ed Husband."
"That was the purpose of the hearing but the point you want to raise again it seems has already been decided and decided against you. Is there anything new you wish to raise? Having read your statement, I am not sure that there is but I may have misunderstood it so please correct me if you think I have got that wrong."
"Mr Watson, I have read the document you have submitted and I note the points that have been made. Is there anything else you want to say?"
Mr Watson's reply was "No."
"5. In summary, what is being sought by the respondent company today is an opportunity to reargue all of the points that were argued before Judge Matthews when he considered the application for an injunction. Judge Matthews has already decided all of those points against the respondent. I could do no more than, firstly, identify that the issues had been resolved but, in any event, I am satisfied, having looked at the documents I do have (I have the court file; I have got the documents provided today) that the conclusion that has been reached by Judge Matthews on the last occasion is unassailable. It has certainly not been the subject of any challenge and would have been, in any event, conclusions to which I would have come also. The 'issue' is simply a matter of construction and insofar as construction is concerned, Judge Matthews identified the salient points before coming to the conclusion that there was no substance in what was being said by the respondent debtor, before refusing an application for the injunction.
6. Nothing has changed. The arguments have not changed. The financial position has not changed. There is a significant debt that was subject to the statutory demand. The petition based on that failure to comply with the statutory demand, which was in a sum a little over £190,000. That of course exceeds the £750.00 that the petitioning creditor needs to satisfy me.
7. I understand from the documents that have been filed that there is no supporting creditor. The matter has been properly advertised.
8. In the circumstances of this case, the petitioning creditor is entitled to the order that is being sought. Turning that on its head, there is no basis upon which I could properly refuse to make the order that is sought today…"
The appeal
"The hearing on 18 July was procedurally and substantively unfair such that the debtor was not given a fair hearing or any proper opportunity to advance its opposition to the petition;
The District Judge fell into error by:
(i) concluding that the earlier determinations made by the Court on the debtor's unsuccessful application for an injunction restraining the advertisement of the petition rendered further consideration of the debtor's opposition to the petition unnecessary,
(ii) adopting the decision of the Court in relation to the advertisement without sight of the key documents (essentially the petitioner's pre-action letter and the contract between the parties) and without consideration of the debtor's contentions that its case in relation to its opposition to the petition had not been fully put before the Court on the Injunction application (due to lack of legal representation and the abridgement of time notice of the injunction hearing (1 1/2 days)),
(iii) refusing the debtor's request to consider the key documents (a spare copy of the key documents were available in Court and were offered to the District Judge),
(iv) failed to give any, or any proper consideration to the debtor's complaints that it had been (innocently but importantly) misled by the petitioner's solicitors who had assured the debtor that at the hearing of the Petition on 18th July the debtor would be entitled to argue the contract construction point that was the core of its opposition to the petition,
(v) failing to consider the debtor's alternate arguments (as set out in the debtor's Skeleton Argument);
(vi) proceeding with the hearing went key documents and papers were missing from the court file (the hearing had been transferred at late notice to the Bristol Magistrates Court due to a flooding problem in the building occupied by the Bristol District Registry),
(vii) such further grounds as Counsel may add to this application."
The appellant's arguments
"15.6 Buyers' Liquidated Damages shall be owed to the Buyer by the Seller for the following events of default only: i) Delivery Failure, ii) Reporting Failure, iii) Measure Failure, iv) Revocation, v) Bankruptcy Proceedings against the Seller that are not resolved within the time provided for in the definition of Bankruptcy Proceedings, and vi) a breach of the assignment restrictions under clause 16.6.
15.7 in an Event of Default where Liquidated Damages are owed under this clause 15, the Non-Defaulting Party shall acting reasonably and in good faith calculate the applicable Liquidated Damages (if any) and Notify the amount of such Liquidated Damages to the Defaulting Party, which shall include an explanation of the calculation of such Liquidated Damages. If the Liquidated Damages are a positive number, the Defaulting Party shall pay such Liquidated Damages as are not in dispute to the Non-Defaulting Party within ten (10) Calendar Days from receipt of the Notice of Liquidated Damages to the account of the Non-Defaulting Party as specified in writing by that Party. A Party is not required to enter into replacement transactions in order to determine the Liquidated Damages."
"(a) Subject to either Party's rights to adjudicate at any time, the Parties shall use their reasonable endeavours to resolve any dispute or difference between them through negotiation and/or, if the parties agree, mediation.
(b) Notwithstanding any other provision of this Agreement either party may refer a dispute arising under this Agreement to adjudication at any time in accordance with the Technology and Construction Solicitors Association Adjudication Rules which are deemed to be incorporated into this Agreement."
"We are currently taking our client's urgent instructions regarding the commencement of adjudication proceedings against [the company], to determine our client's claim.
To resolve this matter before the costs of adjudication proceedings are incurred … will you please [take one of two possible courses of action]."
(I comment only that this letter certainly recognises that adjudication was possible, and perhaps even desirable. But I do not agree that it shows that VWV thought that it was required. Moreover, as Ms Brown pointed out, no party has ever 'referred' the matter to adjudication.)
Litigants in person
"31. The implications of Mr Elliott being a litigant in person were considered by Sharp J to be significantly disadvantageous to him, in particular because he 'did not really understand that he could apply to set aside the judgment until he was refused permission to appeal in October 2011 where the fact that he could have made such an application was mentioned by Sir Richard Buxton'. Although he had received a copy of the transcript of the proceedings before Judge Tetlow (in which the possibility of an application to set aside was mentioned) in September 2011, 'even then he did not appreciate what he could do until after he received the reasons for refusing permission to appeal' in October.
32. I accept that there may be facts and circumstances in relation to a litigant in person which may go to an assessment of promptness but, in my judgment, they will only operate close to the margins. An opponent of a litigant in person is entitled to assume finality without expecting excessive indulgence to be extended to the litigant in person. It seems to me that, on any view, the fact that a litigant in person "did not really understand" or "did not appreciate" the procedural courses open to him for months does not entitle him to extra indulgence. Even if one factors in Mr Elliott's health problems, the evidence shows that between April and July 2010 he was active in this litigation. The fact that, if properly advised, he would or might have made a different application then cannot avail him now. That would be to take sensitivity to the difficulties faced by a litigant in person too far. In my judgment, this is where Sharp J went wrong. She regarded this to be 'a special case on its facts' but it could only be considered such if one goes too far in making allowances for a litigant in person. For these reasons, I do not consider that it was open to her to find the promptness requirement satisfied."
"49. From the authorities to which Mrs Drysdale referred (see above) I derive the following general principles:
(1) It is a long-established and obviously desirable practice of courts generally, and employment tribunals in particular, that they will provide such assistance to litigants as may be appropriate in the formulation and presentation of their case.
(2) What level of assistance or intervention is "appropriate" depends upon the circumstances of each particular case.
(3) Such circumstances are too numerous to list exhaustively, but are likely to include: whether the litigant is representing himself or is represented; if represented, whether the representative is legally qualified or not; and in any case, the apparent level of competence and understanding of the litigant and/or his representative.
(4) The appropriate level of assistance or intervention is constrained by the overriding requirement that the tribunal must at all time be, and be seen to be, impartial as between the parties, and that injustice to either side must be avoided.
(5) The determination of the appropriate level of assistance or intervention is properly a matter for the judgment of the tribunal hearing the case, and the creation of rigid obligations or rules of law in this regard is to be avoided, as much will depend on the tribunal's assessment and "feel" for what is fair in all the circumstances of the specific case.
(6) There is, therefore, a wide margin of appreciation available to a tribunal in assessing such matters, and an appeal court will not normally interfere with the tribunal's exercise of its judgment in the absence of an act or omission on the part of the tribunal which no reasonable tribunal, properly directing itself on the basis of the overriding objective, would have done/omitted to do, and which amounts to unfair treatment of a litigant."
"43. Mr. Benisi sought to explain part of the delay that had occurred in his case by asserting that he did not have sufficient funds at his disposal to enable him to instruct solicitors to file a notice of appeal at the right time. In my view shortage of funds does not provide a good reason for delay. I can well understand that litigants would prefer to be legally represented and that some may be deterred by the prospect of having to act on their own behalf. Nonetheless, in the modern world the inability to pay for legal representation cannot be regarded as providing a good reason for delay. Unfortunately, many litigants are now forced to act on their own behalf and the rules apply to them as well.
44. At the time when the decisions which they now seek to challenge were made Mr. Benisi and Mr. Robinson were both acting in person. It is therefore convenient to consider whether the court should adopt a different approach in relation to litigants in person. The fact that a party is unrepresented is of no significance at the first stage of the enquiry when the court is assessing the seriousness and significance of the failure to comply with the rules. The more important question is whether it amounts to a good reason for the failure that has occurred. Whether there is a good reason for the failure will depend on the particular circumstances of the case, but I do not think that the court can or should accept that the mere fact of being unrepresented provides a good reason for not adhering to the rules. That was the view expressed by the majority in Denton at paragraph 40 and, with respect, I entirely agree with it. Litigation is inevitably a complex process and it is understandable that those who have no previous experience of it should have difficulty in finding and understanding the rules by which it is governed. The problems facing ordinary litigants are substantial and have been exacerbated by reductions in legal aid. Nonetheless, if proceedings are not to become a free-for-all, the court must insist on litigants of all kinds following the rules. In my view, therefore, being a litigant in person with no previous experience of legal proceedings is not a good reason for failing to comply with the rules."
"53. I make it clear at the outset that, in my view, the fact that a party (whether an individual or a corporate body) is not professionally represented is not of itself a reason for the disapplication of rules, orders and directions, or for the disapplication of that part of the overriding objective which now places great value on the requirement that they be obeyed by litigants. In short, the CPR do not, at least at present, make specific or separate provision for litigants in person. There may be cases in which the fact that a party is a litigant in person has some consequence in the determination of applications for relief from sanctions, but this is likely to operate at the margins."
"39. In Hysaj v Secretary of State for the Home Department [2014] EWCA Civ 1633 this court took the opportunity to give guidance on the approach that should be taken to applications for extensions of time for filing a notice of appeal, in the light of the decisions of the court in Mitchell and Denton. In each case before the court in Hysaj the applicant had failed to file a notice of appeal within the time prescribed by CPR 52.4 (2), which made it necessary for him to seek an extension of time. At paragraph 43 of the judgment of Moore-Bick LJ it was pointed out that in the modern world inability to pay for legal representation cannot be regarded as a good reason for delay. At paragraph 44 it was pointed out that being a litigant in person with no previous experience of legal proceedings is not a good reason for failing to comply with the Civil Procedure Rules or, I would add, court orders."
"18. Turning to the reasons for Mr Barton's failure to serve in accordance with the rules, I start with Mr Barton's status as a litigant in person. In current circumstances any court will appreciate that litigating in person is not always a matter of choice. At a time when the availability of legal aid and conditional fee agreements have been restricted, some litigants may have little option but to represent themselves. Their lack of representation will often justify making allowances in making case management decisions and in conducting hearings. But it will not usually justify applying to litigants in person a lower standard of compliance with rules or orders of the court. The overriding objective requires the courts so far as practicable to enforce compliance with the rules: CPR rule 1.1(1)(f). The rules do not in any relevant respect distinguish between represented and unrepresented parties. In applications under CPR 3.9 for relief from sanctions, it is now well established that the fact that the applicant was unrepresented at the relevant time is not in itself a reason not to enforce rules of court against him: R (Hysaj) v Secretary of State for the Home Department [2015] 1 WLR 2472, para 44 (Moore-Bick LJ); Nata Lee Ltd v Abid [2015] 2 P & CR 3. At best, it may affect the issue 'at the margin', as Briggs LJ observed (para 53) in the latter case, which I take to mean that it may increase the weight to be given to some other, more directly relevant factor. It is fair to say that in applications for relief from sanctions, this is mainly because of what I have called the disciplinary factor, which is less significant in the case of applications to validate defective service of a claim form. There are, however, good reasons for applying the same policy to applications under CPR rule 6.15(2) simply as a matter of basic fairness. The rules provide a framework within which to balance the interest of both sides. That balance is inevitably disturbed if an unrepresented litigant is entitled to greater indulgence in complying with them than his represented opponent. Any advantage enjoyed by a litigant in person imposes a corresponding disadvantage on the other side, which may be significant if it affects the latter's legal rights, under the Limitation Acts for example. Unless the rules and practice directions are particularly inaccessible or obscure, it is reasonable to expect a litigant in person to familiarise himself with the rules which apply to any step which he is about to take."
"42. Although a number of the mitigating factors listed above are in a sense characteristics of Mr Barton being a litigant in person, that comes nowhere near saying that being a litigant in person constitutes a free-standing good reason why his botched attempt at service should be validated. In that respect I adhere to what I said in Nata Lee Ltd v Abid [2015] 2 P & CR 3, at para 53, to which Lord Sumption refers. Save to the very limited extent to which the CPR now provides otherwise, there cannot fairly be one attitude to compliance with rules for represented parties and another for litigants in person, still less a general dispensation for the latter from the need to observe them. If, as many believe, because they have been designed by lawyers for use by lawyers, the CPR do present an impediment to access to justice for unrepresented parties, the answer is to make very different new rules (as is now being planned) rather than to treat litigants in person as immune from their consequences. The good reason in the present case is not that he is a litigant in person, but rather the fact that Mr Barton's attempted service by email achieved all the underlying purposes of the relevant rules. His being a litigant in person, with the particular consequences described above merely mitigates, at the margin, the gravity of non-compliant conduct which, had it been done by a legal representative, would have been more serious as an impediment to validation."
1. There is a general duty on tribunals to assist litigants, depending on the circumstances, but it is for the tribunal to decide what this duty requires in any particular case and how best to fulfil it, whilst remaining impartial.2. The fact that a litigant is acting in person is not in itself a reason to disapply procedural rules or orders or directions, or excuse non-compliance with them.
3. The granting of a special indulgence to a litigant in person may be justified where a rule is hard to find or it is difficult to understand, or it is ambiguous.
4. There may be some leeway given to a litigant in person at the margins when the court is considering relief from sanctions or promptness in applying to set aside an order.
Discussion
"It is well settled that, if a creditor with standing to make the application wants to have the company wound up, and if the court is satisfied that the company is unable to pay its debts, a winding-up order will follow unless there is some special reason why it should not. It is sometimes said that in such a case, a petitioning creditor is entitled to a winding-up order 'ex debito justitiae'."
"[W]hile the appellate Court in the exercise of its appellate power is no doubt entirely justified in saying that normally it will not interfere with the exercise of the judge's discretion except on grounds of law, yet, if it sees that on other grounds the decision will result in injustice being done it has both the power and the duty to remedy it."
Lord Thankerton and Lord Roche agreed. Lord Russell and Lord Wright gave separate speeches, but did not dissent from what Lord Atkin had said.
"The appeal court will allow an appeal where the decision of the lower court was—
(a) wrong; or
(b) unjust because of a serious procedural or other irregularity in the proceedings in the lower court."
Matters already decided or which could have been decided
"35. It will be apparent from this summary of the relevant legislation that there are a number of different stages in the procedure governing personal bankruptcy at which the debtor may in principle be entitled to raise a dispute about his alleged indebtedness to the creditor. The first opportunity is on an application to set aside the statutory demand, when the debtor needs to demonstrate 'grounds which appear to the court to be substantial'. It is common ground that the test which the court applies on such an application is in substance the same as the test applied on an application for summary judgment or to strike out a defence, namely whether the debtor has a defence to the claim (or has a cross-claim) which has at least a real (as opposed to fanciful) prospect of success. The second opportunity, if the statutory demand is not set aside and a petition is presented, is on the hearing of the petition itself, when the court must still be satisfied as to the existence of the debt, and retains a residual discretion whether or not to make a bankruptcy order. A third opportunity may arise if the debtor asks the court under section 375 of the 1986 Act to review, rescind or vary any order which it has made, including an order refusing to set aside a statutory demand or a bankruptcy order. Finally, the question could arise on an application to annul the bankruptcy order under section 282. It is therefore unsurprising that a considerable body of authority has developed in which the courts have considered how far it is open to a debtor to rely, at one of the later stages in the bankruptcy process, on an argument relating to his liability for the debt which he either ran unsuccessfully at the initial stage (i.e. on an application to set aside the statutory demand), or which he failed to run on such an application but upon which he later wishes to rely.
36. The judge conducted a valuable review of this body of authority at [32] to [36] of his judgment. As he said in [34], 'the arguments have been well trod in these previous decisions'. He then set out the principles relevant to the present case which he derived from the authorities. The judge expressed the first and second of those principles as follows:
'First, the court, on the hearing of a bankruptcy petition at least, has a duty to consider, on the material before it, whether the conditions for the making of a bankruptcy order are satisfied …
Second, on such a hearing where there has been a previous hearing on the merits, whilst the court ought always to ask itself whether the arguments have been previously run and failed, and, why arguments now advanced have not been run before, absent a change of circumstances or some other special or good reasons or circumstances, the debtor can not go back on the hearing of the petition (or for that matter on an application to annul or review under s.375(1)) to re-argue or reiterate arguments presented earlier, or which he had an opportunity to present. The basis of this principle (which has been referred to in the recent cases as the Turner principle) is that to hold otherwise would be to encourage a waste of court time, a waste of the parties' money and defeat the obvious purpose of the statutory scheme which was that arguments on whether or not there was a genuine debt ought to be raised at the earliest stage i.e. on the application to set aside the statutory demand …'
37. In my judgment these two principles are firmly based on the authorities, and helpfully summarise the approach which the court should adopt when on the hearing of a petition the debtor seeks to rely on arguments which he presented, or had an opportunity to present, at a previous hearing on the merits (usually on an application to set aside the statutory demand). The leading authority is the decision of this court in Turner v Royal Bank of Scotland [2000] BPIR 683, CA. This was a case with a rather complex procedural history, in which the respondent bank sought to make the appellant debtor bankrupt on the basis of a summary judgment which it had obtained against him in 1992 for £8,277.78 plus interest. The proceedings based on the statutory demand included a re-hearing following a first appeal, and culminated in the dismissal of the debtor's application to set it aside. This refusal was upheld by the High Court on appeal, and the Court of Appeal subsequently refused the debtor permission for a second appeal. The bank then served a bankruptcy petition, upon which a bankruptcy order was made in the debtor's absence in June 1997. The petition proceedings then generated two further judgments, on an appeal from the bankruptcy order and a subsequent application for a stay, from which the debtor appealed to the Court of Appeal on the grounds that he had a cross-claim against the bank which equalled or exceeded the petition debt. The debtor's appeal was finally dismissed on 30 June 2000, nine and a half years after the bank had originally obtained summary judgment. The leading judgment was delivered by Chadwick LJ. Buxton LJ delivered a short concurring judgment, and the third member of the court, Aldous LJ, agreed with both judgments without adding to them.
38. In his review of the authorities, Chadwick LJ at 688C endorsed as 'a correct statement of position' the following observations of Vinelott J in Brillouett v Hachette Magazines Ltd, Re a Debtor (No. 27 of 1990) [1996] BPIR 518 at 520:
'There may be rare cases in which it can be said that a debt claimed in a statutory demand against which there has been an unsuccessful attempt to set it aside and which has not been paid or secured or compounded for is not payable at the date of the petition, for instance, if as a result of legislation it were to be become unenforceable between those two dates. But unless there is some change of circumstance of that kind it seems to me that all that the petitioning creditor is required to do is to show that he has made a statutory demand, that either no attempt has been made to set it aside or an unsuccessful attempt has been made, and that the amount of the debt has neither been paid nor secured nor compounded for. The debtor cannot go back and reargue the very grounds on which he unsuccessfully sought to have the statutory demand set aside.'
39. Later in his judgment, Chadwick LJ set out the relevant provisions of the bankruptcy legislation and stated the following conclusions at 694A-D:
'Rule 6.25 of the 1986 Rules provides that on the hearing of the petition, the court may make a bankruptcy order if satisfied that the statements in the petition are true and that the debt on which it is founded has not been paid or secured or compounded for. So the court is not bound to make a bankruptcy order; there is a residual discretion in the court to decide on the hearing of the petition whether or not to make the bankruptcy order. But it cannot have been intended, as it seems to me, that when exercising the discretion (which it undoubtedly has under r. 6.25), whether or not to make a bankruptcy order at the hearing of the petition, the court is required to revisit the arguments which have already been advanced on the hearing of the application to set aside the statutory demand; and which have already been rejected at that hearing. As Vinelott J pointed out in the Brillouett case, the debtor cannot go back and reargue the very grounds on which he unsuccessfully sought to have the statutory demand set aside. It will require some change of circumstance between the unsuccessful attempt to set aside the statutory demand and the hearing of the petition before the court (on the hearing of the petition) can be asked to go into the question which has already been determined at the hearing of the statutory demand. To hold otherwise would be to encourage a waste of court time, and a waste of the parties' money; and would defeat the obvious purpose of the statutory scheme.'
40. In the subsequent decision of this court in Coulter v Chief Constable of Dorset Police (No. 2) [2005] EWCA Civ 1113, [2006] BPIR 10, Chadwick LJ took the opportunity, at [19], to point out that estoppel and res judicata had not been canvassed before the court in Turner. Rather, the basis of his observations in Turner had been:
'… that it would be a waste of court time and the parties' money to allow a debtor, who had already failed on his application to set aside a statutory demand, to advance the same arguments by way of challenge to the petition debt on the hearing of the petition.'
41. Chadwick LJ then said that the same point had been made by Neuberger J in Atherton v Ogunlende [2003] BPIR 21 at 27, where he said:
'However, in general, it seems to me right in principle and in the public interest that, if a party has raised an argument in a proper forum, where it has been considered in connection with a particular process, in this case a bankruptcy or a prospective bankruptcy, and from which forum he had a right of appeal if he wished to exercise it, if that argument is rejected and he does not appeal, it requires exceptional circumstances before he can raise the same argument at a later stage during the same process.'
Neuberger J went on to say (ibid), that 'the principle should not be abrogated simply because the party has found a better way of putting the same point, or wants to put in more evidence to support the same point'."
Matters argued for the first time
"how far it is open to a debtor to rely, at one of the later stages in the bankruptcy process, on an argument relating to his liability for the debt … which he failed to run on such an application but upon which he later wishes to rely".
At [37] he referred to
"the approach which the court should adopt when on the hearing of a petition the debtor seeks to rely on arguments which he presented, or had an opportunity to present, at a previous hearing on the merits (usually on an application to set aside the statutory demand)."
"[T]he debtor cannot go back and reargue the very grounds on which he unsuccessfully sought to have the statutory demand set aside. It will require some change of circumstance between the unsuccessful attempt to set aside the statutory demand and the hearing of the petition before the court (on the hearing of the petition) can be asked to go into the question which has already been determined at the hearing of the statutory demand. To hold otherwise would be to encourage a waste of court time, and a waste of the parties' money; and would defeat the obvious purpose of the statutory scheme."
Conclusion