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Michael Phillis: Contested Petition Upheld

Contested petition upheld where underlying judgment debt procured by fraud, collusion, or miscarriage of justice

Michael Phillis (Call – 2017) of Forum Chambers appeared for John Kerr & Co in the High Court (Chancery Division) in a contested corporate insolvency, where it was alleged that the underlying judgment debt relied upon for  was procured by fraud, collusion, or a miscarriage of justice. The judgment in question had been granted on an admission which was signed by one of two partners in a partnership, where the other partner had not consented to the same (and had briefly purported to defend the action for the partnership).

In an unusual case, the judge held effectively as a preliminary issue that the basis for judgment was on its face either a product of collusion or a miscarriage of justice within the meaning of the test laid down (in the context of personal bankruptcy) in Dawodu v American Express Limited [2001] BPIR 984. There, Etherton J set out the current test for “miscarriage of justice”:

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.

The case before ICCJ Prentis proceeded on the basis of this test. While Dawodu and the other leading cases (McCourt and Siequien v Baron Meats Ltd [1997] BPIR 114 and Barclays Bank PLC v Atay [2015] EWHC 3198 (Ch)) were in matters of bankruptcy, the same test has been applied in corporate insolvency matters, in Bolsover District Council v Dennis Rye Ltd [2009] 4 All ER 1140.

In the present case, the majority of the hearing was on the application of Dawodu. Etherton J’s test creates a barrier which is extremely high, requiring a judge to hold that but for the miscarriage of justice, judgment in the case would have been, or very likely would have been entered for the complaining party. In practice, then, this relief is only available to an opposing creditor or related party of the Company whose documented case is so powerful that it would have met something like the summary judgment standard in the underlying case.

Opposing creditors or applicants in the jurisdiction must be mindful that what is required is not merely an arguable case as to fraud, collusion, or miscarriage of justice, but evidence and submissions which would have persuaded the underlying court at first instance that the case would meet something like the summary judgment standard. The precise probability of success required has never been pronounced on, and it can be anticipated may be tweaked upon contact with the Court of Appeal or Supreme Court. It is possible that the point may have been sidestepped had the argument been raised with the court giving judgment, rather than relying solely on the collateral attack in the insolvency jurisdiction.

Michael accepts instructions in company and insolvency cases, and has a strong practice in commercial and corporate litigation and arbitration generally.

You can contact Michael at: mphillis@forumchambers.com, see more about his practice and areas of expertise here, or contact our clerks by email: clerks@forumchambers.com, or by phone: 020 3735 8070.

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