The High Court’s recent decision in King and others v Kings Solutions Group Limited and others considered CPR 38.7 and re-examined the case law on abuse of process as set out in Henderson v Henderson. The case was heard by Tom Leech QC, sitting as a Judge of the Chancery Division of the High Court.
Background
The petitioners in this case had previously been involved in various proceedings against the respondents. Previous claims had been brought by the petitioners for misrepresentation against some of the respondents (the misrepresentation claim); some of the respondents had brought claims in bribery against one of the petitioners, and there had been a further claim by one of the respondents under Part 8 of the Civil Procedure Rules (CPR) for an order for sale of the petitioners’ shares in the company. There had also been a professional negligence claim brought by the petitioners against their former solicitors, and there was also a conspiracy claim brought by the petitioners against many of the respondents.
The application heard by the judge here related to a further claim brought by the petitioners under the Companies Act Section 997 for unfair prejudice (the unfair prejudice claim).
Issues relating to CPR 38.7
The petitioners had discontinued the misrepresentation claim in May 2017. The unfair prejudice claim was issued in early 2019.
The respondents’ solicitors made an application to the court under CPR 38.7 that parts of the unfair prejudice claim should be struck out as it contained a number of allegations that had been considered in the misrepresentation claim, but then discontinued by the petitioners.
It is of note that one of the respondents to the unfair prejudice claim, Mr Stiefel, had not been pursued by the petitioners in the misrepresentation claim.
Tom Leech QC considered the respondents’ application.
The starting point was CPR 38.7, which states:
“A claimant who discontinues a claim needs the permission of the court to make another claim against the same defendant if:
(a) He discontinued the claim after the defendant filed a defence; and
(b) The other claim arises out of facts which are the same or substantially the same as those relating to the discontinued claim.”
The judge considered the original misrepresentation claim and the current unfair prejudice claim. It was clear that a number of the parties in both cases were the same and that some of the issues in the unfair prejudice petition were identical to some of those in the discontinued misrepresentation claim.
The judge then considered the case law on this matter, in particular Westbrook Dolphin Square Limited v Friends Provident Life & Pensions Limited and Ward v Hutt.
The judge also considered abuse of process and the judgment in Henderson v Henderson. In particular he considered the case of Marex Financial Limited v Sevilleja and also quoted Lord Bingham, stating:
“The underlying public interest is the same: That there should be finality in litigation and that a party should not be twice vexed in the same matter. The public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all.”
The judge considered these points and, at paragraph 113 of his judgment, he stated that:
“In my judgment it remains open to a party to rely upon Henderson v Henderson abuse of process where the first claim has been discontinued as well as resulting in a judgment or compromises.
…
the point is of much more than academic significance in the present case because the Respondents to the petition include a number of parties (and in particular Mr Steifel) who were not Defendants in the misrepresentation claim.”
Judgment
In short, the judge agreed with the respondents that the facts used in the misrepresentation claim were similar enough to those in the unfair prejudice claim that CPR 38.7 applied, as did Henderson v Henderson.
This is interesting as some of the respondents to the petition were not involved in the original misrepresentation claim. The judge was very careful to outline this point, at paragraph 116 of his judgment:
“vi) In the case of Mr Stiefel, I am also satisfied that the Petitioners could and should have advanced these allegations against him in the Misrepresentation Claim. In paragraph 37 of the Amended Particulars of Claim the Petitioners stated that they suspected that Mr Stiefel had participated in their deception and in his cross- examination Anthony gave evidence that he was convinced that Mr Stiefel knew that the Transaction was fraudulent and was a party to it. It is also clear from counsel’s submissions on Day 1 of the trial that the Petitioners had made a preliminary decision (at the very least) not to join any further parties because they were seeking rescission rather than for any other reason.
vii) Furthermore, it is clear from the terms of the apology which counsel gave on Day 10 of the trial that the Petitioners were unreservedly withdrawing the allegations not only against the Primekings Parties but also against Mr Stiefel. If they had joined him as a party to the Misrepresentation Claim, he would have had the benefit of the protection provided by CPR Part 38.7 now. In my judgment, it would be unjust and an abuse of process if the Petitioners were able to pursue these allegations against him because they failed to join him as a defendant to the Misrepresentation Claim.”
Notes for practitioners
This judgment illustrates the pitfalls of acting for litigious clients. The petitioners had been involved in considerable litigation over the last ten years and had multiple opportunities to bring claims against the respondents.
It is often the case that clients will try to reopen already litigated or settled matters as they feel aggrieved by a perceived wrongdoing. It is therefore vital to take further instructions as to whether any previous litigation has taken place between the parties from a new client. Appropriate advice should be given to the client that they could end up bearing heavy costs bills should a case be struck out under CPR 38.7 or under the abuse of process rule.
