Back to the drawing board: Do I have to
re-plead/re-prove my case?

15 June 2020

In a recent case, Ward & Ors v Savill  [2020] EWHC 1534 (Ch), the judge had to grapple with the question - can a claimant rely on an earlier judgment granted in one case involving different parties to enable it to bring a new claim against a different defendant without having to re-plead and prove the facts and matters it relied on in the first case?
 

Expressing surprise that this exact issue does not appear to be one which the courts have previously had to consider, the judge held that the defendant was entitled to require the claimants to prove each element of their claim against her, rather than them relying on declarations made in previous proceedings to which she was not a party.

Background

The factual background is long and complex but the relevant facts are these.

Claim One - Proceedings were issued in 2015 by a number of claimants who had invested in film schemes (promoted by three individuals) by paying monies to LLPs. The defendants to that claim were the three individuals and four LLPs. A hearing took place in March 2018 at which the claimants obtained default judgment (no defence having being entered) against all seven defendants. The order made at the March 2018 hearing included a declaration that the claimants had a beneficial interest in the monies paid by them to the LLPs.

Claim Two – In 2019 the claimants (a large subset of the claimants from Claim One) issued a claim against the wife of one of the individual defendants to Claim One, alleging that a property owned by her was purchased using funds which derived from their investments into the LLPs. In their Particulars of Claim the claimants relied on the declaration made in Claim One relating to their beneficial interest in the money invested in the LLPs as the foundation of their proprietary claim against the property owned by the defendant. The defendant argued that as she was not a party to Claim One, she was not bound by any judgment or declaration made in those proceedings meaning that the claimants must re-plead and prove in Claim Two that they have a beneficial interest in those funds. It is noteworthy to add that prior to the March 2018 hearing the claimants in Claim One had attempted to add the defendant to Claim Two as a party to Claim One by way of a joinder application which was due to be heard at the same March 2018 hearing at which default judgment was sought against the seven defendants. However, shortly before that hearing, a consent order was agreed between the claimants and the defendant dismissing the application to join her. That consent order provided for undertakings to be given by the Claim One claimants that she would not, in any future proceedings, be prevented from raising any arguments that she could have raised in Claim One had she been joined to Claim One.

Preliminary Issue in Claim Two

In May 2020 in Claim Two, the judge was asked by the claimants to determine by way of preliminary issue the question - do the declaratory judgments obtained by the claimants in Claim One have such legal effect (including against the defendant) to allow the claimants in Claim Two to found their proprietary claim against the defendant in relation to their alleged beneficial interest in the property held by her without re-pleading and proving the facts or matters which were relied on by them in order to obtain the declaratory judgments in Claim One? His answer was “No”.

The claimants put forward two reasons why they should be able to rely on the declarations made in Claim One:

  • The judgment made in 2018 in Claim One is a judgment in rem (in whole or, alternatively, the relevant part on which they relied upon was in rem) and so binds the whole world, and;
  • The effects and consequences of the declarations made in Claim One continue to have effect unless and until they are challenged by someone who has standing to do so by way of an application to set aside the relevant part of the judgment/order as part of the Claim One proceedings.

The judge rejected both reasons. He considered authorities on similar points, including:

  • In Hollington v F. Hewthorn & Company Limited [1943] 1 K.B. 587 the Court of Appeal held that there are two reasons why findings in previous proceedings cannot be used in evidence in subsequent proceedings. The first is that the previous judgment is simply an opinion, albeit the opinion of a court. The second, it would be unjust for a person to be bound by a decision in proceedings to which they were not a party.
  • In Calyon v Michailaidis [2009] UKPC 34 the Privy Council considered the reasoning in Hollington to be “compelling” saying that: “Unless a second court goes into the facts for itself, it cannot actually tell what weight it should properly attach to the previous decision. Which means that the previous decision itself cannot be relied upon.”
  • Mulkerrins v PricewaterhouseCoopers [2003] UKHL 41 could be distinguished because in that case the House of Lords was dealing with a different situation where the issue related to the ownership of the cause of action itself rather than the establishment of some fact which was essential to the claimant’s case. 

The judge also considered CPR 40.9 which provides: A person who is not a party but who is directly affected by a judgment or order may apply to have the judgment or order set aside or varied.”  The judge accepted that there would be no need for CPR 40.9 if a judgment were incapable of having any effect on a third party, but said that it does not follow from this that a judgment which is embodied by a declaration as to ownership can be relied on in subsequent proceedings as proof of that ownership unless the person affected by it applies under CPR 40.9 to set aside the order.

The judgment also provides a useful recitation of the in rem and in personam jurisdictions. Kingsley Napley LLP acted for the successful defendant in this case.

Further information

For further information, you may be interested in visiting our Dispute Resolution pages. If you would like to discuss any topics raised in this blog, please contact a member of our team.

 

About the authors

Fiona Simpson is a Partner in our Dispute Resolution team. Fiona specialises in civil fraud litigation, advising clients bringing or defending civil fraud proceedings, often with an international dimension. Fiona regularly advises on freezing orders and asset tracing. 

Daniel Staunton is an Associate in our Dispute Resolution team advising on a broad range of complex and high value commercial litigation matters with a focus on civil fraud, contentious insolvency and asset recovery matters

 

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