Harvey v Dunbar Assets Plc

A debtor could not re-argue a point in an application to set aside a statutory demand where he had lost that argument on a previous application to set aside a prior demand

Personal insolvency – statutory demands – applications to set aside – abuse of process – issue estoppel – res judicata

The debtor guaranteed the liabilities of his company to the bank. The company defaulted. The bank served a statutory demand on the debtor for sums due under the guarantee. The debtor applied to set aside the demand on the basis that a promissory estoppel barred enforcement of the debt. A district judge dismissed the application.

Subsequently, the debtor discovered a co-guarantor had successfully set aside a demand on the grounds of forgery. The debtor sought to argue this new point before the district judge about whether he remained bound by the guarantee. The district judge refused to allow this, but gave permission to appeal. Ultimately, the Court of Appeal permitted the debtor to set aside the statutory demand on this ground There was no appeal on the promissory estoppel issue.

The bank succeeded at trial against the co-guarantor on the forgery issue, who was found liable on the guarantee. The bank served a fresh statutory demand on the debtor, who applied to set it aside on the same promissory estoppel argument. The district judge held the debtor was issue estopped from arguing the same promissory estoppel point again.

The debtor appealed, but the High Court dismissed the appeal, holding that even if issue estoppel or res judicata did not apply, the public policy principle in Turner v RBS [2000] BPIR 683 (preventing the re-litigation of identical arguments in bankruptcy proceedings absent change of circumstances) did apply.

Dismissing the debtor’s second appeal, the Court of Appeal held that the case was not one where issue estoppel or res judicata applied, as the original decision had been set aside on appeal (albeit on a different point). However, the prior judgment was still relevant to the question whether arguing the same point twice was an abuse of process. The decision in Turner was based on public policy considerations concerning wasted costs and time which applied in this case. The debtor elected not to appeal the promissory estoppel point. Nothing in his evidence suggested the position had moved on.

The case decides an important issue. It clarifies the circumstances in which debtors can run the same arguments in bankruptcy proceedings and the application of the abuse of process rules. The case serves also as a useful warning of the consequences of failing to seek permission to appeal on points which a party might wish to raise in the future in ongoing bankruptcy proceedings.