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A Recall Too Far

MBM Commercial LLP’s dispute resolution team headed by Cat MacLean has achieved a significant result for a client by thwarting a bank’s attempt to recall an interim court order which had earlier suspended their charge for payment and prevented enforcement of it against the debtor. A recall of the temporary order would have had disastrous consequences for the client.

Lord Drummond Young handed down a judgement today in Kipling v Dunbar Bank Plc [2012] CSOH 40, which provides a useful reminder of the five general factors the Court must taken into consideration when deciding whether to recall an interim court order:

1.   No decision on the facts of the case
If the debtor has a reasonably sound argument against the recall of the court order, for example, a collateral warranty in the present case, then the facts supporting that argument cannot be decided without evidence being lead. Any attempt to recall an order in the absence of evidence will flounder.

2.   Interim court orders are temporary
An interim court order is of course temporary pending a final decision. In the present case the evidential hearing was only a few months away and the practical effect of recalling the order would be limited.

3.  Balance of convenience
The court must ask what prejudice will be caused to each party in the event that the interim order is maintained or recalled. In considering the question, the court must consider the likelihood and seriousness of any prejudice caused. In the present case, the prejudice to the debtor was obvious, if the order was recalled, then the charge would be enforced and the debtor made bankrupt. The prejudice suffered by the bank is less clear.

4.  Strength of Case
The debtor must have a prima facie case. This means that the case must be clear and convincing; in other words, it must be a good arguable case. While the debtor’s case was not considered strong by the court, it was not sufficiently weak that it could be said there was no prima facie case.

5. Likely prejudice v Strength of Debtor’s Case
Finally the court must weigh the likely prejudice to each party of recall of the order being maintained or recalled against the strength of the debtor’s case. If the likely prejudice is obvious and serious, the interim order may be maintained despite the debtor having a relatively weak case. Furthermore if the likely prejudice caused to the creditor is minor then the order may be maintained even if the debtor’s case is weaker.

Conclusion
The judge in the present case refused to recall the order having considered all five factors and reached the view that the combination of the debtor’s prima facie case and serious prejudice (the debtor would undoubtedly have been bankrupted had order been recalled) outweighed the bank’s relatively stronger case and minor, if any, prejudice.

Is your bank calling in your personal guarantee? If so, MBM Commercial LLP, may be able to assist you. For more information, please contact Cat MacLean
T:0131 226 8218
E:cat.maclean@mbmcommercial.co.uk

Link to the Scottish Courts website: http://www.scotcourts.gov.uk/opinions/2012CSOH40.html

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