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Litigation Update: Inaccuracies Do Not Automatically Invalidate Demands

22 September 2014

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- East[1] 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

Related Expertise

Dispute Resolution
Banking Law
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