The Court of Appeal, in the case of Harvey v Dunbar Assets plc [2017] EWCA Civ 6, has held that it constitutes an abuse of process for a debtor to seek to set aside a second statutory demand on the basis of an argument previously raised and dismissed by the Court on its merits.

The background

In 2008, Mr Harvey gave a personal guarantee in favour of Dunbar Assets Plc (Dunbar) as security for the borrowing of a company. The guarantee was called in by Dunbar and a statutory demand accordingly served on Mr Harvey. Mr Harvey applied to set the statutory demand aside on the basis of a promissory estoppel argument to the effect that Dunbar had purportedly assured Mr Harvey that the guarantee would never be called in.

At first instance, the District Judge considered the argument but dismissed the application on its merits (or lack thereof). Mr Harvey was subsequently successful in his appeal against the dismissal of his application but his success at appeal stage was based on a completely separate argument relating to a technicality regarding the execution requirements of the guarantee. Mr Harvey’s promissory estoppel argument had been specifically abandoned.

Some years later, a second statutory demand was served on Mr Harvey for the same debt. Mr Harvey made an application to set aside this secondary statutory demand on the ground of the promissory estoppel argument which had previously been considered and dismissed by the Court. Mr Harvey’s application was dismissed at first instance, following which Mr Harvey appealed the decision to the High Court. In the High Court, Judge Kaye QC applied the principle laid down in the leading authority of Turner v Bank of Scotland plc [2000] BPIR 683 and held that where there had been a previous decision on the merits of an application, unless there had been a change of circumstances or other valid reasons to do so, the Court would not allow the debtor to re-raise arguments previously raised.

Mr Harvey was granted permission by Lewison LJ to appeal Judge Kaye QC ‘s decision to the Court of Appeal.

The Court of Appeal’s decision

The Court of Appeal upheld the decision made in the High Court and deemed it an abuse of process for a debtor to repeatedly dispute a debt through the course of a bankruptcy procedure where the debtor’s arguments had previously been considered and dismissed on their merits. For the Court to continually reconsider arguments previously heard and determined would be waste of the Court’s time and a waste of the parties’ money.

Henderson LJ also noted that during the course of a personal bankruptcy procedure, there are multiple stages at which a debtor has the opportunity to raise a dispute about his alleged indebtedness to the creditor. These stages include:

-An application to set aside the statutory demand;

-The bankruptcy petition hearing;

-An application under section 375 of the Insolvency Act 1986 to review, rescind or vary any order;

-An application to annul a bankruptcy order under section 282 of the Insolvency Act 1986.

In the circumstances of this case, the Court of Appeal upheld Judge Kaye QC’s finding that there were no special or exceptional circumstances which justified the re-opening or re-arguing of the promissory estoppel argument. Mr Harvey’s appeal was dismissed.

What we can learn from this

The Courts have now made it abundantly clear that barring any exceptional circumstances or a change in circumstances, they will not entertain an attempt by a debtor to raise arguments which have already been heard and dismissed on their merits, nor will they entertain an attempt by a debtor to raise arguments which should properly have been raised to the Court at an earlier stage.

This should be a sobering lesson to debtors who erroneously believe that the most effective method by which to put forward their position to the Court is to advance every argument available to them regardless of their prospects of success. Similarly, this case serves as a useful addition to a practitioner’s arsenal when faced with the possibility of re-litigating a point which has been raised (or should have been raised) previously.

Harvey v Dunbar Assets plc [2017] EWCA Civ 6