Q&As

Is judgment in default obtained in respect of a fraudulent misrepresentation claim regarded as a debt gained by fraud under section 281(3) of the Insolvency Act 1986? If so, are there any steps that should be taken to ensure that the debt survives the bankruptcy?

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Produced in partnership with XXIV Old Buildings
Published on LexisPSL on 12/12/2018

The following Restructuring & Insolvency Q&A produced in partnership with XXIV Old Buildings provides comprehensive and up to date legal information covering:

  • Is judgment in default obtained in respect of a fraudulent misrepresentation claim regarded as a debt gained by fraud under section 281(3) of the Insolvency Act 1986? If so, are there any steps that should be taken to ensure that the debt survives the bankruptcy?

Is judgment in default obtained in respect of a fraudulent misrepresentation claim regarded as a debt gained by fraud under section 281(3) of the Insolvency Act 1986? If so, are there any steps that should be taken to ensure that the debt survives the bankruptcy?

This Q&A raises the status of a judgment in default for the purposes of section 281(3) of the Insolvency Act 1986 (IA 1986) and whether a fraudulent misrepresentation claim is a claim in fraud. If it is within IA 1986, s 281(3), does the creditor need to take any steps to preserve his position following the bankruptcy?

There is relatively little authority on IA 1986, s 281(3). A default judgment gives rise to a limited estoppel.

As, per Lord Maugham L.C. in New Brunswick Railway Co. v British and French Trust Corporation:

‘The true principle in such a case would seem to be that the defendant is estopped from setting up in a subsequent action a defence which was necessarily, and with complete precision, decided by the previous judgment; in other words, by the res judicata in the accurate sense.’

This was relied on by the Court of Appeal

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