23 March 2017 by

Do not waste court time by repeating previously failed arguments in bankruptcy proceedings

A recent Court of Appeal decision confirms a long established legal principle preventing a party to a legal action from having ‘two bites of the cherry’.

The so called Turner principle was established in the case of Turner v Bank of Scotland PLC [2000] BIPR 683 and broadly states that unless there is a change of circumstances or some other special reason, it is a waste of the court’s time and parties’ money to rehear arguments that had already been run and failed.

In the recent case of Harvey v Dunbar Assets PLC [2017] EWCA Civ 60, the Court of Appeal confirmed that the Turner principle additionally applies to bankruptcy proceedings.

Background

Mr Harvey along with two other individuals gave a guarantee to Dunbar Assets PLC (“Dunbar”) to guarantee the liability of Vision Development Ashbrooke Limited (“Vision”) up to the sum of £720,000.

Vision collapsed in the wake of the financial crisis and Dunbar called in its loan of £4.8 million. Vision did not repay the loan and Dunbar therefore served a statutory demand on Mr Harvey for the payment of £720,000 including specified interest, charges, costs and expenses.

Legal Proceedings

Mr Harvey applied to set aside the statutory demand on the basis that he had been induced into entering guarantee by an employee of Dunbar, who told him that Dunbar would not enforce the guarantee. Mr Harvey said this prevented Dunbar enforcing the guarantee as it created what is known as a promissory estoppel.

The set aside application failed. Mr Harvey then discovered that another individual who had given the same guarantee had succeeded in setting aside their statutory demand on the basis that their signature on the guarantee was a forgery. Mr Harvey decided to appeal the set aside order claiming that there was no binding contract between himself and Dunbar because his co-guarantor had not validly signed the guarantee. Mr Harvey’s appeal was successful and it was ordered that he could not be held liable under the guarantee, until his co-guarantors signature point had been determined by the court.

Subsequently, the signature point was determined in favour of Dunbar. Mr Harvey was again served with a statutory demand for £720,000 plus interest and he again sought to set aside the demand on the basis that he was induced into entering the guarantee by an employee of Dunbar. The set aside application was dismissed on the basis that Mr Harvey was attempting to re-litigate points which had already been dealt with in the first statutory demand.

The Appeal

Mr Harvey appealed the decision not to set aside the second statutory demand. Mr Harvey ran the same argument that he had been induced into entering the guarantee by an employee of Dunbar. The Court of Appeal ruled that Mr Harvey’s appeal fell foul of the Turner principle and it would be an abuse of process for Mr Harvey to re-argue the inducement point on the same grounds as before.

This case set down a new line of authority in bankruptcy proceedings: arguments that have previously been presented by a debtor and dismissed by the court, cannot be repeated at subsequent hearings in the bankruptcy procedure.

If you have any questions regarding the above article need insolvency advice, please contact one of our solicitors in the Dispute Resolution team here.

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