Practice – Striking out – Abuse of process
Michael Wilson & Partners Ltd v Sinclair and others: Queen's Bench Division, Commercial Court (Mr Justice Teare): 21 September 2012
The claimant company provided legal and business consultancy services. The Pt 20 defendant (E) was a director and employee of the claimant. E acted on the claimant’s behalf in connection with a transaction with the defendants (the transaction). The first defendant directed the issue of shares (the shares) to the third defendant company (EPIL). E left the claimant to work for a competitor. The claimant commenced arbitration proceedings against E for breach of contract and fiduciary duty on the basis that the shares were issued to EPIL for E’s benefit and should have come to it as E had acted as its agent and employee.
The first defendant was not a party to the arbitration but had given evidence before the arbitration tribunal (the tribunal). The tribunal found that the first defendant had not given E any shares, E had no interest in the shares and had not made a profit for which he would be made liable to account to the claimant. In June 2011, the court dismissed the claimant’s applications to challenge the award (see  All ER (D) 32 (Jun)). In September 2011, EPIL transferred the shares to the first defendant.
The claimant commenced proceedings for declarations, damages and equitable remedies alleging that the first defendant and the second defendant company (Sokol) procured the issue of the shares for E’s benefit knowing and intending that E would breach his duties. The defendants sought to strike out the claimant’s proceedings on the basis that the claimant was estopped from making allegations against the first defendant contradicting the tribunal’s findings and that it was an abuse of process to permit the claimant to challenge the tribunal’s findings.
It fell to be determined: (i) whether the claimant was estopped from challenging the tribunal’s findings; and (ii) whether the challenge to the tribunal’s findings was an abuse of process. The application would be allowed.
(1) It was a settled principle that the essence of estoppel per rem judicatam worked mutually. A person could only take the benefit of a decision if they would have been prejudiced by it had it gone the other way (see  of the judgment). In the instant case, if the decision of the tribunal had been in favour of the claimant, the first defendant would not have been bound by it because he had not be party to the arbitration. There would therefore have been no mutuality. In circumstances where it had not been disputed that estoppel per rem judicatam had worked mutually, the claimant could not be estopped, as against the first defendant, from alleging that which the tribunal had rejected (see ,  of the judgment). Powell v Wiltshire  3 All ER 235 applied.
(2) The doctrine of abuse of process could apply where the decision under collateral attack was that of an arbitral tribunal. However, it would probably be a rare case where an action in the court against a non-party to an arbitration could be said to be an abuse of process of the court. The special circumstances of the instant case had established that it would be an abuse of process of the court to permit the claimant to make the same factual allegations which it had made in the arbitration and which had been rejected.
Whereas many arbitrations had, and were intended to have, effect only between the parties to them, the instant arbitration had been different. The first defendant and Sokol had discharged the exacting burden of establishing that the claimant’s action was an abuse of process of the court (see , ,  of the judgment).
Charles Samek QC and David Mumford (instructed by Healys LLP) for the claimant; Michael Fealy and Nicholas Sloboda (instructed by DLA Piper UK LLP) for the defendants; Philip Shepherd QC (instructed by Michael Robins) for the Pt 20 defendant.