Harvey v Dunbar Assets Plc

The Court of Appeal dismissed the appellant's challenge to a district judge's refusal to set aside a second statutory demand (SD2). Key legal principles applied were the bankruptcy jurisprudence deriving from Turner v Royal Bank of Scotland: a debtor who has raised, or had the opportunity to raise, a defence to a statutory demand and has not succeeded will not normally be permitted to re-litigate the same point later in the bankruptcy process absent special, new or exceptional circumstances. The court held that the earlier setting aside of the first statutory demand (SD1) on an unrelated ground did not permit re-opening the identical promissory estoppel defence now mounted to SD2. The court further held that the promissory estoppel defence itself had no real prospect of success because (i) the doctrine ordinarily presupposes an existing legal relationship and (ii) the appellant’s factual account was inherently implausible given his business experience. A proposed consumer-law argument based on Directive 93/13/EEC (Tarcǎu) was refused permission as having no reasonable prospect of success on the facts.

Background and parties. The appellant, Mr John Spencer Harvey, had signed a deed of guarantee in 2008 in favour of the Bank (later Dunbar Assets Plc) guaranteeing Vision Development Ashbrooke Limited's liabilities up to £720,000. The Bank served a statutory demand (SD1) in 2011. Mr Harvey unsuccessfully applied to set aside SD1 in the county court on a promissory estoppel defence; permission to appeal was granted on a separate legal point (the Southgate-Sands issue) and the Court of Appeal allowed that appeal and set aside SD1. A subsequent Part 7 trial determined that a co-guarantor had in fact signed the deed, allowing the Bank to serve a second statutory demand (SD2) in 2014.

Procedural posture. Mr Harvey applied to set aside SD2 on substantially the same promissory estoppel grounds and with additional evidence. District Judge Pescod dismissed the application on issue estoppel/abuse grounds (and alternatively on the merits), permission to appeal was refused on paper and then refused on appeal by HHJ Kaye QC; Mr Harvey obtained permission to bring the present appeal to the Court of Appeal which dismissed it.

Nature of the relief sought and issues. The application sought to set aside SD2. The Court framed three principal issues: (1) whether it was permissible to re-litigate the previously-run promissory estoppel argument after SD1 had been set aside on an unrelated ground; (2) whether the promissory estoppel defence had a real prospect of success; and (3) whether a consumer-law challenge under Directive 93/13/EEC (invoking the ECJ decision in Tarcǎu) could be advanced.

Reasoning and holdings. The court applied the Turner principle and related authorities to conclude that, absent special or exceptional circumstances, a debtor may not re-argue the same defence later in the bankruptcy process; the fact that SD1 had been set aside on an unrelated appellate ground did not entitle the debtor to re-litigate the promissory estoppel point. The court accepted the lower courts’ assessment that the additional evidence added nothing material to alter that conclusion. On the merits, the court held that promissory estoppel normally presupposes an existing legal relationship and, in any event, Mr Harvey’s factual case was not credible and had no realistic prospect of success. Finally, the proposed consumer-law ground based on Tarcǎu was refused because Mr Harvey acted within a business context and so could not reasonably be treated as a consumer on these facts.

Subsidiary findings and wider implications. The court observed that an appellate setting-aside of an earlier order removes its capacity to found issue estoppel, but that principle does not prevent the court from applying bankruptcy-specific abuse-of-process/Turner reasoning to prevent repeat litigation. The judgment reiterates the salutary need in the bankruptcy jurisdiction to avoid re-hearing arguments previously run and rejected.

The appeal is dismissed. The Court of Appeal held that the Turner principle and related bankruptcy authorities bar re-litigation of the identical promissory estoppel defence absent special or new circumstances; the new material did not suffice and, on the merits, the promissory estoppel defence had no real prospect of success. Permission to rely on the consumer-law ground (Directive 93/13/EEC / Tarcǎu) was refused as unlikely to succeed on the facts.

County Court (District Judge Pescod) dismissal of application to set aside SD1 (judgment 20 March 2012); appeal on Southgate-Sands point heard by HHJ Kaye QC and dismissed at first instance ([2012] EWHC 2890 (Ch)); Court of Appeal allowed that appeal and set aside SD1 ([2013] EWCA Civ 952); Part 7 trial before Norris J found co-guarantor had signed ([2014] EWHC 2733 (Ch)); Bank served SD2 (3 September 2014); District Judge Pescod dismissed the application to set aside SD2 (reserved judgment 6 July 2015, order 20 July 2015); permission to appeal refused on paper and then granted to HHJ Kaye QC who dismissed the appeal ([2015] EWHC 3355 (Ch)); final appeal to the Court of Appeal dismissed ([2017] EWCA Civ 60).