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Res judicata is the doctrine which prevents a party from re-litigating an issue or a defence which has already been determined (known as cause of action estoppel or issue estoppel) or which could have previously been litigated (the principle established in the 1843 case of Henderson v Henderson).
There is a degree of confusion in this area of law and, although a number of recent cases, explored in more detail below, have sought to bring clarity, Claimants and Defendants alike need to be alert to the practical application of res judicata.
Claimants seeking to plead an issue or cause of action that has either already been litigated or should have been raised in earlier proceedings, run the risk of having to defend a strike out action and possible adverse costs orders.
Equally, Defendants need to understand when it is appropriate to raise a res judicata challenge.
The doctrine of estoppel by res judicata has two principles: issue estoppel and cause of action estoppel. Each is defined below per the explanation in Arnold v National Westminster Bank plc:
Issue estoppel – “…may arise when a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant, one of the parties seeks to reopen the issues.”
Cause of action estoppel – “…applies where a cause of action in a second action is identical to a cause of action in the first, the latter having been between the same parties or their privies and having involved the same subject matter.”
Cause of action estoppel is an absolute bar (subject only to fraud, which would enable the earlier decision to be set aside). Issue estoppel permits an earlier decision to be re-examined if:
Cases on issue estoppel are relatively infrequent. A very recent 2014 Court of Appeal decision (Olympic Airlines SA (in liquidation) v ACG Acquisition XX LLC) analysed when the Court will permit an issue to be litigated even though a finding of issue estoppel had been made in relation to that issue.
In another 2014 case (Gaydamak v Leviev), the Court established that the starting point should first be to consider cause of action estoppel ahead of any abuse of process pursuant to Henderson v Henderson.
Henderson v Henderson sets out the public policy rule that prevents a party from advancing matters that should have been addressed in earlier proceedings. In Henderson, the Court noted the following:
The Court has held that the rule in Henderson, similar to issue estoppel, does not require separate proceedings, and may equally apply to later stages of the same action (Seele Austria GmbH Co v Tokio Marine Europe Insurance Limited).
However, parties are free to apply, at a late stage in litigation, for permission to amend in order to plead an issue(s), which might have been pleaded earlier.
The Court has held that Henderson should not apply in such circumstances, as the rule in Henderson was focused chiefly on re-litigation and aimed against the mischief of bringing a second action, when the first should have sufficed (Ruttle Plant Hire Ltd v Secretary of State for the Environment, Food and Rural Affairs).
While the above may seem to paint a rather gloomy picture for a Claimant seeking to bring fresh proceedings, the Court has held that it will not find abuse where there are good reasons for commencing concurrent proceedings. In Merrill Lynch Pierce and Fenner Inc v Raffa, the Claimant successfully brought proceedings in England having also instigated proceedings in Egypt.
The Court allowed the Claimant’s application for summary judgment in the English proceedings to go ahead first, with a view that issues regarding forum could be decided should the summary judgment application fail.
However, it is not as clear cut when considering pursuing a Defendant for damages or the same debt in different jurisdictions. The Court may exercise its discretion and, as with subsequent proceedings within the same jurisdiction, may carry out a balancing exercise to determine if an abuse of process has taken place.
Until the recent decision in Resolution Chemicals Ltd v H Lundbeck A/S, it was previously considered that the Court might be more accommodating with regards to subsequent litigation where group entities are involved.
The decision in Resolution, which concerned patent litigation, sought to clarify the position of “privity of interest”, which provides an exception to the general rule of estoppel that only the original parties are bound.
Under privity of interest there must be a sufficient overlap of identity between the original parties and the parties involved in the subsequent litigation.
The Court of Appeal noted the following which should be borne in mind when dealing with privity of interest:
In the 2013 Virgin Atlantic Airways Ltd v Zodiac Seats case, the Supreme Court set down very helpful guidance on the principles of res judicata, which the Court described as “…a portmanteau term which is used to describe a number of different legal principles with different legal jurisdictions”:
Whether a Defendant seeking to strike out a claim, which it considers to have been addressed in earlier proceedings, or a Claimant looking to plead an issue or cause of action, which is based on similar facts or against alternative defendants, the Court has sought to import greater clarity to avoid unnecessary repeated litigation. Care and advice should always be taken when seeking to bring further litigation in order to avoid strike out applications and wasted costs orders.
This article was written by Stewart Hey.
For more information please contact Stewart on +44 (0)20 7203 5018 or email@example.com.