Harvey v Dunbar Assets Plc

A debtor who has unsuccessfully disputed a debt at an earlier stage of the bankruptcy process cannot ordinarily advance the same argument at a later stage. This restriction rests on abuse of process and the efficient operation of the bankruptcy scheme, rather than res judicata or issue estoppel.

The principle may apply even where the earlier statutory demand was subsequently set aside on an unrelated ground. Reconsideration requires a material change of circumstances or another special or exceptional reason. Additional evidence which merely strengthens the same previously rejected case will not usually suffice.

An order set aside on appeal cannot itself support an issue estoppel, irrespective of the ground upon which it was set aside.

The creditor sought payment under a personal guarantee and served a statutory demand. The debtor's first application to set aside the demand failed on his contention that an assurance by the creditor's representative created a promissory estoppel. He successfully appealed on an unrelated question concerning another guarantor's signature, and the first demand was set aside.

After separate proceedings established that the other guarantor had signed the guarantee, the creditor served a second demand for the same debt. The debtor again relied on promissory estoppel, supported by further evidence concerning dealings between the creditor and third parties. The district judge dismissed the application. The High Court dismissed an appeal in Harvey v Dunbar Assets Plc [2015] EWHC 3355 (Ch).

The central issue was whether re-litigation of the promissory estoppel defence was barred by issue estoppel, res judicata or the bankruptcy-specific abuse-of-process principle derived from Turner v Royal Bank of Scotland. The debtor also challenged the summary rejection of his defence and sought permission to raise an EU consumer-law argument.

1. Appeal dismissed. The earlier order could not support res judicata or issue estoppel after it had been set aside on appeal. When an appellate court sets aside a lower court's order, that order ceases to have effect and there is no longer a substantive disposition from which an issue estoppel can arise. P & O Nedlloyd BD v Arab Metals Co (No. 2) [2006] EWCA Civ 1717 was applied.

2. The earlier judgment nevertheless remained relevant when deciding whether renewed litigation was an abuse of the bankruptcy court's process. The Turner principle is founded on avoiding repeated arguments, wasted court resources and wasted costs. It is independent of res judicata, issue estoppel and Henderson v Henderson abuse.

   The principle is capable of applying throughout the successive stages of the bankruptcy process. It is not confined to the hearing of a bankruptcy petition following an unsuccessful application to set aside the same statutory demand. A debtor who has presented, or had an opportunity to present, an argument at an earlier merits hearing cannot ordinarily raise it again without a material change of circumstances or another special, good or exceptional reason.

3. The debtor had deliberately declined several opportunities to pursue an appeal on promissory estoppel. His additional evidence concerned transactions between the creditor and third parties. It could not assist in interpreting the particular words spoken to him, especially because his account of those words had already been assumed to be true. There were no special or exceptional circumstances. Re-argument of the defence would therefore be an abuse of process.

4. Although unnecessary to the disposition, the promissory estoppel defence had no realistic prospect of success. Existing authority indicated that promissory estoppel normally requires an existing legal relationship, whereas the alleged assurance preceded the guarantee. The court expressed no concluded view on that legal question. Independently, an experienced businessman could not realistically have understood a standard guarantee, required as a condition of lending, as a solemn instrument which would never be enforced.

5. Permission to advance the proposed consumer-law ground was refused. Even assuming that the Unfair Terms in Consumer Contracts Regulations 1999 could apply to an individual's guarantee of a company's debt, the debtor was connected with the commercial venture and acted in a business capacity. No provision, including Regulation 7, plausibly afforded relief.

1. Court of Appeal (Civil Division): In [2017] EWCA Civ 60, dismissed the debtor's appeal from the High Court and refused permission to advance the additional consumer-law ground.
2. High Court, Chancery Division: In [2015] EWHC 3355 (Ch), granted permission to appeal but dismissed the appeal from the district judge's refusal to set aside the second statutory demand.
3. County Court: The district judge dismissed the application to set aside the second statutory demand, holding that the debtor could not re-litigate the promissory estoppel contention and that the contention would in any event fail on its merits.
4. Earlier proceedings concerning the first demand: The High Court dismissed an appeal in [2012] EWHC 2890 (Ch). The Court of Appeal subsequently allowed a further appeal on the unrelated co-guarantor-signature issue in [2013] EWCA Civ 952 and set aside the first demand.