• In the case of Collier v Wright 2007 EWCA Civ 1329 2008 1 WLR 643, a statutory demand was set side where the debtor had an arguable case of promissory estoppel.

Facts of the Case

  • The appellant (C) appealed against a decision not to set aside a statutory demand served on hum by the respondent (W).
  • W had obtained a judgment by consent against three partners of whom C was one.
  • The partner’s liability was joint.
  • The consent order provided for the three partners to pay the judgment debt by monthly instalments.
  • C had paid a third of the debt by instalments by which time his partners became bankrupt.
  • As a result, W served a statutory demand on C for the balance of the judgment debt.
  • C then applied to set aside the demand and relied on an alleged agreement by W that if C continued to pay his share of the judgment, W would not look to him but look to his partners for the balance.
  • C submitted that the alleged agreement with W was binding as by agreeing to accept sole responsibility for his one third share he gave consideration for W’s promise to accept him as a debtor. Secondly, a promissory estoppel prevented W from proceeding against him for more than a one third share of the debt.

Issues in Collier v Wright 2007 EWCA Civ 1329 2008 1 WLR 643

  • Could C enforce and rely upon a promissory estoppel and prove it would be unconscionable for W to go back on the agreement.

Held by Court of Appeal

  • Appeal allowed

Lord Justice Longmore

  • Held that it was not an binding agreement when the creditor agreed with a joint debtor to accept payment from him alone of his proportionate share.
  • The alleged agreement between C and W was merely to accept a lesser sum from C that which was due and was not a binding agreement in law since it had no consideration to support it.
  • Promissory estoppel upheld.

“The first question is: what was the oral promise or representation made by Mr Wright to Mr Collier? Mr Collier says that Mr Wright’s promise was that if Mr Collier continued to pay £200 per month the company would look to Mr Broadfoot and Mr Flute for their share and not to Mr Collier. I agree that it is arguable (just) that that constitutes agreement or representation by Mr Wright never to sue Mr Collier for the full judgment sum. It is also arguable that it is no more than a promise that the Company will not look to Mr Collier while he continues to pay his share. One would expect an agreement permanently to forgo one’s rights (especially rights founded on a judgment) to be much clearer than the agreement evidenced in this case. The fact that it is impossible to see any benefit to Mr Wright, or detriment to Mr Collier, makes it all the more difficult to construe the agreement as a permanent surrender of Mr Wright’s company’s right to sue for the balance.

The second question is whether, even if the promise or representation is to be regarded on a permanent surrender of the company’s rights, Mr Collier has relied on it in any meaningful way. The judge could find no evidence that he had. The suggested reliance is that, but for the agreement, Mr Collier would (or might) have pursued his co-debtors. But, as the judge pointed out, there is no evidence that had he done so at the time when the promise or representation was being made to him, he would have been in a better position to do so than when the promise was revoked (or, as it might be, when the promise expired). Mr Flute became bankrupt in 2002 and Mr Broadfoot in 2004. The only realistic inference is that if Mr Collier had taken any action against them in 2001, they would only have become bankrupt earlier.  Nevertheless, as my Lady points out, it seems that on the authority of D & C Builders v Rees [1966] 2 QB 617 it can be a sufficient reliance for the purpose of promissory estoppel if a lesser payment is made as agreed. That does, however, require there to be an accord. No sufficient accord was proved in D & C Builders itself since the owner had taken advantage of the builder’s desperate need for money. For the reasons I have given, I doubt if there was any true accord in this case because the true construction of the promise or representation may well be that there was only an agreement to suspend the exercise of the creditor’s rights, not to forgo them permanently. There is then a third question, namely whether it would be inequitable for the company to resile from its promise. That cannot be inquired into on this appeal, but I agree that it is arguable that it would be inequitable. There might, however, be much to be said on the other side. If, as my Lady puts it, the “brilliant obiter dictum” of Denning J in the High Trees case of 1947 did indeed substantially achieve in practical terms the recommendation of the Law Revision Committee chaired by Lord Wright in 1937, it is perhaps all the more important that agreements which are said to forgo a creditor’s rights on a permanent basis should not be too benevolently construed.  I do, however, agree with my Lady that it is arguable that Mr Collier’s promissory estoppel defence might succeed if there were to be a trial and that the current statutory demand should therefore be set aside. I agree the appeal should be allowed.” [45-49]