Swindon Town’s Turn For A Winding Up Order?
Statutory demands are curious documents which have caused some degree of controversy in recent months in the world of debt recovery. They are served under the Insolvency Act of 1986 and are the first step in the process of petitioning somebody’s bankruptcy or issuing a winding up order against a company. The demand gives twenty-one days for an outstanding debt to be paid in full, pay instalments which are satisfactory to the creditor or offer to secure the debt, again to the satisfaction of the creditor. The recipient can apply to set the judgement aside, but there have to be material grounds for doing so. Saying, “it’s not fair” in itself isn’t usually considered to be reasonable grounds to set the demand aside.
The controversy surrounding their use came earlier in the year when a couple of companies dealing with debt recovery were found guilty of sending them as what was seen to be a threat to get people to pay up unreasonably large amounts to clear debts. The Office of Fair Trading sent a fairly clear message during this summer that statutory demands shouldn’t be issued as a “collection tool” and the upshot of it all was that it is now commonly understood that statutory demands should only be issued where a creditor intends to issue proceedings.
All of this is bad news for Swindon Town, who, it has been said, had a statutory demand issued against them by one of their creditors a few weeks ago. The debt – a not-inconsiderable £2.45m – stretches back to 2005, when the money was lent to them by a property company called St Modwen. At the time, the club faced what might have been a third spell in administration because of an unpaid tax bill. The property company agreed to pay off this debt as part of a proposed deal to sell The County Ground with the club moving to a purpose-built community stadium to be owned by the local council. The deal went through, but the debt remained with a two year grace period. St Modwen claim that the deadline passed with no repayment proposal having been made by the club. They also claim that they have had no reply to the demand issued.
From a practical point of view, there was action that Swindon Town’s owner could have taken but whether it is too late or not is open to question. A consortium headed by Andrew Flitton took the club overat the start of 2008 but the debt is owed by the football club rather than the consortium or any holding company that is currently involved with the football club. Much will come down to the quality of the paperwork that was signed in 2005. Flitton could dispute the existence of the debt if the paperwork signed at the time is not up to scratch, but the dispute would have to be a substantial one. There is also talk that the money might actually be owed to a company called Shaw Park Developments, a holding company jointly owned by Swindon’s previous owners and St Modwens, but this opens up a whole new avenue of questions.
The debt has always shown on the accounts as being owed to Shaw Park Developments, but there is no legal reason why this debt couldn’t be passed to St Modwen. There’s nothing in law to prevent this. The paperwork, however, has to all be in order, but this could theoretically be disputed. Also, if £1.45m was the amount borrowed in 2005, the fact that the amount owed has risen to £2.45m in such a short period of time could also be an avenue to dispute the amounts owed but, again, this would be dependant on the paperwork at the time. When a statutory demand is issued, the defendant normally has eighteen days to apply to set the demand aside. The question is not (as the club’s official website says) whether they are disputing the debt, but whether they have actually responded with an application to set the demand aside. If they have, they should – in the interests of their sanity of their supporters – go public with when it is and what the nature of their dispute is.
Ultimately, it seems likely that the question of whether this demand can be seen through comes down to whether the deal was signed by the former holding company that owned the club or whether it was signed by the clubs itself. If it was, then this could be a very expensive mistake made by the lenders. It seems unlikely, however, that a large company would make such a mistake (although such a thing is far from unheard of) and that they would seek redress through such heavy-handed means if they believed that there would be grounds for any claim to be successfully defended. If an application to set aside is unsuccessful, then the way is free for the creditors to apply to have the company wound up, although there may still be room for negotiation. Whether they will be willing to negotiate, however, may depend on what the assets of the football club are. Swindon supporters will be keeping their fingers crossed that their club’s legal team has been through this with a fine toothcomb.