On Friday 11 September in the High Court in London, Mr E Murray (sitting as a Deputy High Court Judge), handed down a reserved judgment: Clutterbuck & Paton v William Cleghorn (as Judicial Factor to the Estate of Elliot Nichol Deceased), in which the entirety of the Claimants’ £97.5m claim was struck out as an abuse of process.
Squire Patton Boggs, acting for the Defendant, mounted a successful strike out on the basis that the Claimants had previously and unsuccessfully litigated virtually the same claim against another Defendant, Ms Sara Al Amoudi. The court held that it was an abuse to have a “dry run” against one possible defendant before bringing essentially the same action against another.
The case is relevant to insolvency practitioners, who are often faced with a series of possible defendants against whom they could bring proceedings, but choose to pursue the most financially viable targets in order to generate realisations which are then used to sue other possible defendants. Following the Clutterbuck & Paton decision, if there is sufficient overlap between the facts and the witness evidence in the first and second claim, then the second claim is open to being struck out as an abuse of process.
The Judge in this case considered the previous authority of Aldi Stores and then applied the decision in Gladman to hold that, when a claimant is faced with the prospect of bringing similar proceedings based on essentially the same facts involving the same witnesses being cross examined on the same issues, then the claimant must seek directions from the Court as to whether they should join the second defendant to the first action.
A failure to do so is likely to constitute an abuse of process, meaning that the subsequent claim against the second defendant is liable to be struck out. Even if the Claimant considers that the actions are sufficiently different to warrant separate proceedings, the Court confirmed that this is a question for the judge to determine when exercising general case management powers; it is not appropriate for the Claimant to second guess judicial discretion.
The Al Amoudi Litigation
The Claimants alleged that they had been the victim of a fraud committed by Ms Al Amoudi, causing them to transfer significant London property assets to her. They alleged that such transfers were made on the basis of Joint Venture Agreements which they had entered into with Ms Al Amoudi and Elliot Nichol.
The proceedings were the subject of a 6 week High Court trial and involved more than 25 witnesses taking the stand. The Claimants were unsuccessful; Asplin J found as a matter of fact that on balance the Joint Venture Agreements, as alleged, did not exist.
The Elliot Nichol Litigation
Following the death of Elliot Nichol, the Claimants intimated claims against the estate of Elliot Nichol, similar to those being advanced against Ms Al Amoudi. Squire Patton Boggs pressed the Claimants to issue proceedings against the Estate in order that the claim could be dealt with and the Estate distributed to the intended beneficiaries. The Claimants finally issued proceedings against the Estate, under threat of an application for a “Put up or Shut up” order. The claim was almost exactly the same as that issued against Ms Al Amoudi some two years earlier, in that they claimed that they had entered into Joint Venture Agreements with Elliot Nichol and that as such were entitled to 50% of his substantial property portfolio after his death.
Squire Patton Boggs were successful in striking out the entirety of the claim as an abuse of process. The Claimants should have sought directions from the Court in the Al Amoudi trial as to whether the Estate should be joined as a party to those proceedings. A failure to do so would result in substantially the same issues being re-litigated, and necessitated a second cross examination of the same witnesses.
A second trial would also have created the possibility of the judge in the second proceedings being asked to reach a different factual conclusion to Asplin J in the Al Amoudi trial. This amounted to a collateral attack on the Judgment of Asplin J, and was in danger of bringing the administration of justice into disrepute. In addition, the second trial would have used up a substantial amount of Court time which could have been better used by other Court users, and would have involved a significant duplication of cost.
Whilst this case did turn on its own facts, it does highlight the need for Litigants to exercise caution when faced with a number of potential defendants. If there is any doubt as to whether a defendant should be joined to an action, the Claimant should seek directions from the Court to that effect. A failure to do so does run the risk of any subsequent claim being struck out as an abuse, with the inevitable costs consequences that come with that.