Is a claim which could have - and arguably should have - been brought in earlier litigation an abuse of process?

Johnson v Gore Wood (2002) established that later actions which include claims that could have been included in earlier litigation may be an abuse of process. The House of Lords in Johnson considered that it was in the public interest that litigation should be final and that a litigant should not have to deal twice with the same matter. The court was, however, keen not to be dogmatic in its approach.

Therefore, when assessing whether such claims did amount to an abuse, the courts were directed to take a broad, merit-based approach to account for the public and private interests involved (including a citizen’s right of access to the court).

Cases in point

Two recent Court of Appeal decisions have shed light on applying the Lords’ direction in Johnson.

In the first decision, Aldi Stores v WSP Group and Aspinwall & Co (2007), it was held that Aldi’s decision to hold off litigation against a new defendant was made with good reason. The fact that the claim could have been brought at the same time as earlier related commercial litigation against other defendants did not automatically make the action an abuse of process.

In making his decision, Lord Justice Thomas weighed both the private and the public interests involved. The private interests effectively cancelled each other out. However, on the public interest side, the factor which appeared to influence the Court was the "real public interest in allowing parties a measure of freedom to choose whom they sue in a complex commercial matter and not to give encouragement to bringing a single set of proceedings against a wide range of defendants or to complicate proceedings by cross-claims against parties to the proceedings." The court went on to make clear that this freedom "can and should be restricted by appropriate case management."

The Court of Appeal has very recently applied this approach in Koshy v DEG-Deutsche Investitions und Entwicklungsgesellschaft MBH (2008). It held that a fair balance of public and private interests is struck once the litigant in question has had one effective opportunity to put his or her case. If a court identifies two options for a litigant to pursue and the litigant, legally advised and making a fully informed and autonomous decision, opts for one course of action over the other and loses, it will not be open for the litigant to seek to re-open the issues by commencing subsequent proceedings.

The second decision, Stuart v Goldberg Linde and Vardinoyannis (2008) reconfirmed the principles relied on in Aldi and Johnson. The Court of Appeal sent a strong signal that borderline cases will struggle to reach the threshold for abuse of process. It also made clear that what constitutes the abuse is proceedings that are brought as a second claim when the issues could have been raised as part of, or together with, the first claim. The court will therefore focus on this aspect rather than:

• the merits of the claim
• delay in bringing a claim
• or failure to use reasonable diligence in investigation

As a result, the correct focus of any application for strike-out is the substance of the claimant’s second action. If the issues in the second action are different from, or unrelated to, the first, it is less likely to be struck out.

This was a crucial point in Stuart. In this case, the claimant had initially proceeded against Goldberg Linde Solicitors to enforce an undertaking to pay start-up costs for a business enterprise with Vardinoyannis in Mongolia. At the trial, or shortly thereafter, the claimant became aware that representations made to him at the time when he was deciding whether to enter into the business enterprise were false. At the same time, he also became aware that he had a claim for inducement of breach of contract against Linde. While the undertaking claim could be resolved quickly and within self-contained proceedings, the misrepresentation and inducement claims were by no means straightforward. Neither were the claims so closely related they should necessarily have been combined.

Stuart offers a note of caution. In dealing with this case, the Master of the Rolls considered that a claimant should not keep secret a plan to bring a second claim in the future, but should inform the court of any such intention before the trial in the first claim. As a result, no-one would be taken by surprise and proper case management could be exercised by the court. Failure to do so would expose the claimant to the risk of any second action being held to be an abuse of process.

In conclusion, these cases present a commercial and practical approach to preventing misuse or abuse of the court by litigants seeking to raise issues which could have been raised before.

 

This article was first published in Legal Week.

For further information please contact Katherine Gregory, partner