The consequences of fraudulent misrepresentation survived a bankruptcy

It is often said that fraud unravels everything and, if proved, “vitiates judgments, contracts and all transactions whatsoever”. The litigation in Jones & Pyle Developments Ltd v Rymell [2021] EWHC 385 (Ch) illustrates that it can also be difficult to brush it aside or to relegate it to the past. The company had purchased a plot of land from the defendant in 2007 for £138,250, but then found itself embroiled in a boundary dispute with a neighbour, which it had to settle. It accused the defendant of having falsely represented to it that there were no such disputes and, in the proceedings that followed, was awarded damages of over £50,000, together with interest and costs. But the defendant petitioned for bankruptcy instead. When the defendant was discharged from bankruptcy, the company sought to enforce the judgment in its favour – even though the normal rule, under section 281(1) of the Insolvency Act 1986, is that discharge from bankruptcy operates to release debtors from all their bankruptcy debts. The company argued that the debt had survived the bankruptcy, thanks to section 281(3), which provides that “discharge does not release the bankrupt from any bankruptcy debt… incurred… by means of any fraud”. And because the trial judge in the original proceedings had decided that the defendant had knowingly made false representations to the company during the conveyancing process, it followed that the defendant’s discharge from bankruptcy did not discharge his liability for the judgment debt. The court agreed. But many years had elapsed since the original proceedings. And rule 83.2(3)(a) of the Civil Procedure Rules states that “a relevant writ or warrant must not be issued without the permission of the court where six years or more have elapsed since the date of the judgment or order”. However, Patel v Singh [2003] EWCA Civ 1938 is authority for the proposition that, although the court must start from the position that a lapse of six years will ordinarily justify refusing a judgment creditor permission to issue a writ of execution, the creditor may be able to show that the circumstances of the case take it out of the ordinary. For example, the judgment creditor may be able to point to the fact that “for many years the judgment debtor was thought to have no money and so was not worth powder and shot but that, on the judgment debtor winning the lottery or having some other change of financial fortune, it has become worthwhile for the judgment creditor to seek to pursue the judgment debtor”. That was enough for the court. The defendant had previously had no assets with which to satisfy the debt. But he was now of an age where he had access to his pension policies and could potentially pay the debt. He had always been acutely aware of the liability and the company’s previous attempts to enforce the debt showed that it had not given up. The defendant had not suggested that he would suffer any particular prejudice (apart from having to pay his just debts) if the court were to allow the company to proceed and, on the facts of this case, it would be demonstrably just to permit it to do so.   Allyson Colby is a property law consultant