Going behind a judgment: It is not res judicata to set aside debts in insolvency even if the debt is based upon a judgment and even if that judgment has been upheld by the Court of Appeal. Here at IntelligenceUK.com we aim to provide invaluable insider knowledge that will help people avoid the pitfalls presented by the shockingly corrupt system and the judges who act contrary to the law. Knowledge is power. Insolvency duty of inquiry.
In this page, we aim to assist anyone that is facing insolvency proceedings, whether corporate or personal by citing useful passages and authorities from other cases that provide important reference for anyone that seeks to challenge the validity of a debt.
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Going behind a judgment in bankruptcy / insolvency proceedings – The test to evoke the doctrine
Put simply, in absence of a vitiating factor the court must be shown something from which it can conclude miscarriage of justice. To come to this conclusion the court applies a simple test:
“…had there been a properly conducted judicial process it would have been found, or very likely would have been found, that nothing was in fact due to the Claimant.”
Re Fraser ex parte v Central Bank of London (1892) 2 QB 633
In Fraser ex parte v Central Bank of London (1892), we have the classic and long established authority providing the example of the insolvency court’s duty of inquiry.
Fraser was a judgment debtor, who had exhaustively challenged the imposition of a judgment debt upon him, but without success. Fraser’s application to set aside the judgment debt had failed before a Master (twice), Judge (once), Divisional Court (once) and Court of Appeal (once), yet this presented no bar in the Bankruptcy Court.
Unlike in the Millinder v Middlesbrough FC case, Fraser’s applications were not maliciously certified as “totally without merit” to conceal the frauds. Fraser was afforded the duty of inquiry, Millinder was not.
Dawodo v American Express [2001] BPIR 983
In Dawodo v American Express [2001] BPIR 983, Sir Terence Etherton, the previous Master of the Rolls cited that:
“What in my judgment is required is that the Court be shown something from which it can conclude that had there been a properly conducted judicial process it would have been found, or very likely would have been found, that nothing was in fact due to the Claimant. It is clear that in those circumstances the Court can enquire into the judgment and the judgment debt, even though the debtor himself has previously applied to have the judgment set aside, and even though that application has been refused and that refusal has been affirmed by the Court of Appeal”
The judgment reiterates the same authority that formed the basis of a number of other 18th century judgments that all determine the insolvency courts can enquire into a judgment debt whenever there are prima facie grounds made out from which to impugn the judgment, even if the judgment has been ratified by the Court of Appeal.
Re Hawkins (1865) 1 QB 404
The authority was once again cited as:
“…the Court of Bankruptcy is not bound by a judgment at law, but is entitled to investigate all the facts of the case whenever, but not before, a prima facie case impeaching the judgment is made out. Otherwise a man might defeat all his just creditors by allowing judgment to be taken by default or consent”
Going forward in time:
Barclays Bank v Atay [2015] EWHC 319 (Ch)
The recent 2015 judgment by Registrar Briggs in Barclays Bank v Atay [2015] EWHC 319 affirms the ability to go behind a judgment in bankruptcy / insolvency proceedings, highlighting the test for exercise of the discretion and reiterating that exercise its duty of inquiry applies equally to judgments that are by consent.
“The ability of the Bankruptcy Court to go behind a judgment where necessary was well established by a series of 19th Century cases and although this species of scrutiny is not carried out as a matter of course, it is always possible for it to be done if it is expressly requested, whether by the debtor himself or by the trustee in bankruptcy”.
“Nor is it any obstacle to the invocation of this doctrine that the debtor has originally consented to the very judgment against himself which he is now attacking, or that his earlier appeal from the judgment was dismissed. One justification for the existence of this power is that a debtor might connive with others to allow a number of bogus default judgments to be entered against himself by his ‘allies’ who could rescue some of his estate on his behalf by later proving for the debts in the bankruptcy”
It is well estabished and affirmed that one can ask the insolvency court to exercise its duty of inquiry whenever a case has been made out to set aside the judgment underpinning a debt within the insolvency, even if there has been multiple unsuccessful attempts to do so.
It is not an abuse of process (res judicata) to do so, if there are genuine grounds made out to do so and the authority was again re-affirmed in the historic judgment in Ex parte Bryant (1815). Lord Eldon said:
“Proof upon a judgment will not stand merely upon that, if there is not a debt due in ‘truth and reality,’ for which the consideration must be looked to.” Can this judgment be treated as conclusive in bankruptcy because the debtor has unsuccessfully attempted to set it aside? I think not, and I cannot see how the matter is any more res judicata because there has been an unsuccessful appeal to this Court. I agree in all that the Master of the Rolls has said on this point”
