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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Published on: 12 December 2018

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

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Jurisdiction(s):
United Kingdom
Key definition:
Fraudulent misrepresentation definition
What does Fraudulent misrepresentation mean?

A knowingly false assertion intended to mislead another and make them agree to a contract because of that misrepresentation.

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