REUTERS | Stephen Hird

No abuse please

I read an interesting article in the Law Society Gazette by Masood Ahmed about enforcing judgments.

He quotes Lord Bingham in Société Eram Shipping Co Ltd v Cie Internationale de Navigation on the subject of trying to enforce a judgment:

“As many a claimant has learned to his cost, it is one thing to recover a favourable judgment; it may prove quite another to enforce it …. But an unenforceable judgment is at best valueless, at worst a source of additional loss.”

Go for the jugular

It is not unusual to think that going through a formal dispute resolution process is just an expensive detour when, in reality, there is no dispute. There is just a debt.

Why not just “go for the jugular” with a statutory demand or winding up proceedings? That way, you get straight to the heart of the matter: can they pay? Or do they have the ultimate defence:

“You can’t kill me because I’m already dead”?

The problem is being sure that the debt really is undisputed.

Pandora’s box

If you are on the receiving end of a “stat demand” or a “winder”, and you do think there is a dispute about the debt, it’s time for immediate action. In the current market, any sniff of insolvency will open Pandora’s box.

Typically, you think about getting the petition withdrawn, or at least restraining advertisement. (You must start acting on that thought straight away.)

Well, anyway, most of us are familiar with how it goes…

The tort of abuse of process

However, there is an interesting twist to this story, which the courts considered in March 2009 in Land Securities v Fladgate Fielder.

On its face, the case is about an “improper” objection to an application for planning permission and whether this amounted to the tort of abuse of process (which would lead to a right to claim damages). The defendant tried to strike out the case as disclosing no cause of action and the judge dismissed the case because the underlying allegations were not proved.

The judge also stated that it was not necessary, for the purposes of his decision, for the court to prescribe the ambit of the tort of abuse of process. That was an area of law on which some clarification might be helpful, but was an issue for a higher court.

However, the Judge did say that:

“…almost all of the cases, in which the courts have determined that there has been an abuse, have involved actual or threatened extortion of property, either under threat of the issue, or by misuse, of writs or other process authorising the deprivation of liberty, the seizure of property, and the interference with credit, status, good name and personal liberty, or by the issue or threat of issue of criminal proceedings and/or bankruptcy process. It is perfectly understandable that the judges of the past would have been outraged at the thought that the court’s process, which alone would have authorised and legitimated actions which would otherwise be unlawful, should have been used improperly to achieve such ends, all of which were grossly improper ends in themselves.”

Malicious presentation of bankruptcy petition

There is another tort (or maybe another face of the same tort) referred to by HHJ Peter Coulson in Jacob v Vockrodt.

He considered the tort of malicious presentation of a bankruptcy petition. On the facts before him, there was no actionable abuse, because it was not proved that the petitioner knew or believed that the debt was, in truth, the subject of a substantial dispute.

(Chapter 16 of Clerk & Lindsell has a useful summary of this area of the law under the general heading of “malicious prosecution”.)

No successful claims?

So far, I haven’t found a case where somebody has succeeded in getting damages for abuse of this nature. However, I suspect that it’s only a matter of time, although how a successful party will go about proving the quantum of its losses remains to be seen…

Leave a Reply

Your email address will not be published. Required fields are marked *