In a recent judgment, the Solicitors Regulation Authority (SRA) failed to recover £354,000 from a solicitor in intervention costs in what is an important ruling when considering the use of res judicata and abuse of process.
Mr Hugh Sims QC, sitting as a deputy High Court judge in The Law Society v Dua and another was asked to consider whether the solicitor, Ashoo Dua, and her husband Shashi Dua had a realisable beneficial interest in various properties despite an alleged trust in favour of their children. The SRA intervened into Mrs Dua’s practice in 2009 and, following an unsuccessful challenge, obtained judgment and a costs order in its favour.
In proceedings issued in 2013 for charging orders to secure the debt, Mrs Dua argued that the properties concerned were subject to an express trust in favour of the couple’s children, however Chief Master Marsh considered doubts raised with the authenticity of the trust deed and found that Mrs Dua had not discharged the burden of proof in this regard. Mr Dua assisted Mrs Dua as a McKenzie Friend in these proceedings.
The SRA duly obtained charging orders on five properties held in the couple’s joint names. The Chief Master made the charging orders final without trial of an issue, stating:
“On the evidence placed before me, for the reasons I have given, there is no reason to conclude that Mrs Dua has alienated her interest in these titles or her interest in them and there is no other good reason for declining to make these interim charging orders final such that would warrant a full investigation at the trial of a preliminary issue.”
The SRA issued proceedings in early 2019, necessarily against both Mr and Mrs Dua, seeking orders for possession and sale. This time, Mr Dua raised the trust deed as a bar to relief, relying on further evidence that established that the deed was authentic which had come to light after 2013 through no fault of their own. Mrs Dua relied upon her prior statements and Mr Dua’s statement in this regard.
This created the prospect of a trial on the basis of evidence that did not support the earlier decision by which the final charging orders had been obtained. The SRA sought to prevent the defendants advancing this evidence, relying on the principle of res judicata, and failing this abuse of process, rendering the couple’s argument as liable to strike out under the CPR or alternatively the court’s inherent jurisdiction.
Ultimately, on the facts, the judge found for the defendants, noting inter alia that:
- The arguments advanced in 2013 and 2019 were fundamentally the same, and Mr Dua was closely involved in the 2013 proceedings such that he could be vulnerable to being bound by the findings of those proceedings.
- That Mr Dua could have been joined into the earlier proceedings, or the court could have been invited to make a judgment binding on him as a non-party (CPR 19.8A), and that care must be taken not to bind individuals who are not parties to proceedings through such mechanisms.
- There was no suggestion that the Duas were “gaming the situation” to run the same defence twice.
- That decisions made in the earlier proceedings were made in their own context (and in this case was a decision that the Chief Master did not need to make at the charging stage) and were different to those made in the context of the proceedings for an order for sale.
- In the interests of the administration of justice, the fact that Mr Dua had assisted Mrs Dua in the 2013 proceedings should not prejudice his position in the 2019 proceedings.
- The claimant did not suffer unjust harassment or oppression in having to respond to the same defence twice, and could have sought to join or bind Mr Dua to the 2013 proceedings, or made a strike out application in advance of trial in 2019.
- The fact that Mrs Dua could benefit from Mr Dua running the same defence was not “a relevant, or sufficient, reason to conclude he should not be entitled to run the defence for his own benefit and reasons”.
- That beneficiaries of the trust had not been served or joined into proceedings and could also seek to argue that the trust was effective and that the charging order should accordingly not be enforced.
- It was an exceptional feature of the case that the judgment of the Chief Master in 2013 was no longer supported by the evidence available in 2019, nor was it supported by the claimant.
The courts’ approach to issue of res judicata and abuse of process has been well-litigated over the years in the context of repeated litigation, with established principles found by Lord Sumption in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd (formerly known as Contour Aerospace Ltd), and Lord Bingham in Johnson v Gore Wood are unaffected, but the present case demonstrates the relevance of the substantive merits where the evidence at trial does not support earlier findings.
While the court considered this case to be very much on its own facts and in its own context, it is undoubtedly a helpful exposition of the court’s application of case law to date.
To litigators accustomed to enforcement by charging order and subsequent orders for possession and sale, the outcome of this case might seem more than justifiable, if not just on the facts then on the basis of public policy and the fact that there is a substantive difference between the outcome of the two types of application.
In many cases, the evidence presented by the defendant at the charging order stage is minimal or non-existent. An order for possession and sale, however, is, in most cases, a remedy that has very substantial implications for the defendant, and so the court should perhaps be slow to impede a defendant’s ability to advance or develop a position intimated at the charging order stage, irrespective of whether the judge made any findings that may then prove inconsistent.
The case serves as a salient reminder for the litigator that, in preparing to plead out a case that shares issues with foreseeable later proceedings, a high degree of care should be taken to identify all evidence to substantiate the client’s position and that of any parties that are likely to be brought into later proceedings. Failing this, there is no guarantee that additional evidence identified at a later stage will be immune to strike out as res judicata or an abuse of process.
On the other side of the fence, if you foresee that a third party may become a party in later proceedings and seek to run the same case, then a prudent litigator should look to join them into proceedings, or in the very least put that third party on notice that they should take legal advice on the possibility that they will be barred from advancing their case at a later stage.
