To re-litigate, or not to re-litigate, that is the question
What is res judicata?
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.
When does res judicata apply?
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.”
Points to note regarding issue estoppel and cause of action estoppel:
- Should one party later claim that the original decision was incorrect, this will not enable a decision to be re-opened; instead the correct forum would be to have challenged the decision via appeal.
- Issue estoppel only applies when an issue has been decided. A default judgment creates a cause of action estoppel, not an issue estoppel as no issue has been decided.
- Res judicata may also apply to settlements, although consideration may be given to the circumstances in which the settlement was entered into.
- If a claim is discontinued, in opposition to being dismissed, it may be possible to bring subsequent proceedings based on the same facts, although permission of the Court would be required.
- It is not necessary for subsequent proceedings to be brought: issue estoppel can apply to preliminary issues or interlocutory matters, which are decided earlier in the same action.
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:
- there is fresh evidence, which completely changes that particular aspect of the case and which could not by reasonable diligence have been determined previously by the party who now wishes to rely on it
- there is a change in the law relating to the original decision, or
- fraud or collusion is alleged.
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: abuse of process
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:
- when a matter becomes subject to litigation, the parties are required to advance their whole case
- the Court will not permit the same parties to re-open the same subject of litigation regarding matters which should have been advanced in the earlier litigation, but were not owing to negligence, inadvertence, or error
- this bar applies to all matters, both those on which the Court determined in the original litigation and those which would have been advanced if the party in question had exercised reasonable diligence, and
- there may special circumstances to this rule, which the Court may take into consideration.
5 key points to consider when dealing with abuse of process:
- Strike while the iron is hot – as a Defendant, the Court will view strike out applications more favourably if the application is made promptly.
- Involve the Court – do not seek to exclude the Court if abuse of process is likely to arise. The earlier a Claimant sets out its case, the better.
- Respond promptly – if a Defendant receives any indication that the Claimant may bring a subsequent claim that could be an abuse of process, the Defendant should inform the Claimant of its concerns without delay.
- Same parties not required for abuse – abuse of process may be found where the parties to the actions are different, although it can be more difficult to establish.
- Special circumstances – the Court may take into account special circumstances that permit a party to bring a second claim, for example: limitation or lack of finances
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).
Double litigation: at home and abroad?
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.
Case law: seeking to un-muddy the waters
Group litigation: privity of interest
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:
- the degree of interest that the party to the subsequent litigation (the “new party”) had in the original proceedings
- whether the new party could be viewed as the original party in the original proceedings as a result of its relationship with the original party, and
- in light of the above, whether it is just that the new party should be bound by the decision in the original proceedings.
Supreme Court clarity on the principles of res judicata
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”:
- a party is prevented from bringing subsequent proceedings to challenge an outcome that has already been decided (cause of action estoppel)
- if a Claimant succeeds in a first action and does not appeal the outcome, he may not bring a subsequent action on the same cause of action, ie to recover further damages
- the doctrine of merger treats a cause of action as having been extinguished once judgment has been provided and accordingly the Claimant’s only right is the judgment itself
- a party may not bring subsequent proceedings on an issue that has already been determined (issue estoppel)
- a party may not bring subsequent proceedings which should have and could have been dealt with in earlier proceedings (the principle of Henderson v Henderson), and
- there is a general procedural rule against abusive proceedings.
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.
- Henderson v Henderson  3 Hare 100
- Arnold v National Westminster Bank plc  2 AC 93
- Johnson v Gore Wood & Co  UKHL 65
- Merrill Lynch Pierce and Fenner Inc v Raffa  CP Rep 44
- Ruttle Plant Hire Ltd v Secretary of State for the Environment, Food and Rural Afairs EWHC 1773 (TCC)
- Seele Austria GmbH Co v Tokio Marine Europe Insurance Limited  EWHC 255
- Virgin Atlantic Airways Limited v Zodiac Seats UK Limited  UKSC 46
- Resolution Chemicals Ltd v H Lundbeck A/S  EWCA Civ 924
- Gaydamak v Leviev  EWHC 1167 (Ch)
- Olympic Airlines SA (in liquidation) v ACG Acquisition XX LLC  EWCA Civ 821
This article was written by Stewart Hey.
For more information please contact Stewart on +44 (0)20 7203 5018 or email@example.com.
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