Three recent judgments have focused on the abuse of process arguments in solicitors' negligence cases. Dan Stacey and Alice Nash investigate
Broadly speaking there are two types of abuse of process: based on manifest unfairness and/or unjust harassment (Johnson v Gore Wood abuse [2002] 2 AC 1, [2001] All ER 481) and/or bringing the administration of justice into disrepute (Hunter v Chief Constable of West Midlands [1982] AC 529). The former challenge often founders in solicitors' negligence cases because the solicitors are facing litigation for the first time.
The second type of challenge was raised by legal advisers in both Taylor Walton v Laing [2007] EWCA Civ 1146, [2007] All ER (D) 238 (Nov) and Nesbitt v CAB [2007] EWCA Civ 249, [2007] All ER (D) 414 (Mar).
Taylor Walton v Laing
Taylor Walton v Laing was a professional negligence claim against a solicitor arising out of allegations of negligent drafting and advice. Laing borrowed money from a Mr Watson to fund a property development project. A dispute arose as to the terms upon which the loan was made. In the original proceedings, Watson claimed to be entitled to a 12.5% share in the company set up for the purpose of the development (and a 12.5% profit share). This, he said, was the effect of an original agreement entered into in 1999 and a further agreement entered into in 2002. Each of these agreements was made orally but was followed by a written agreement drafted by Taylor Walton solicitors. Laing contended that in 1999, a 12.5% shareholding was transferred to Watson but only as security for an eventual 12.5% profit share. He contended that the 2002 agreement was intended to supersede the 1999 agreement so that Watson would hold the 12.5% shareholding beneficially, but would no longer be entitled to the 12.5% profit share.
At trial, Watson and Laing both gave evidence. HHJ Thornton QC found that Watson's case as to the agreement between the two men was the true version. Watson was therefore beneficially entitled to a 12.5% shareholding in the company as well as a 12.5% profit share. Laing did not appeal that decision, because counsel advised of the difficulty of appealing findings of fact made at first instance by a trial judge. Instead, Laing sought to recover what he had been ordered to pay to Watson from the solicitors through a professional negligence claim. He alleged that the solicitors had negligently failed to advise, in 1999, that the agreement must clearly record that Watson held his 12.5% shareholding as security only, and failed to draft the 2002 agreement to show that it superseded the 1999 agreement. This negligence, it was pleaded, had caused Laing to be exposed to the “adverse findings” of Judge Thornton.
To succeed against Taylor Walton, therefore, Laing had to establish that the terms of the agreements were as he had alleged in the first proceedings, and not, as Judge Thornton had found, as asserted by Watson. At first instance, Langley J found the matter finely balanced but refused Taylor Walton's application to have the claim struck out as an abuse of process. He concluded that on the basis of the documentary evidence, there was a reasonably compelling case that the decision of Judge Thornton as to the terms of the agreements was open to serious challenge. It would therefore be unfair to Laing not to permit him to pursue his case.
The Court of Appeal unanimously held that the professional negligence claim was an abuse of process, since it entailed a direct attack on the factual conclusions of Judge Thornton. Buxton LJ said that in the typical solicitor's negligence case, the claimant sought to show that evidence was negligently omitted, or legal arguments not run, in the first claim and that had the claim been conducted on a different basis, the judge would have reached a different conclusion.
Such proceedings would not necessarily or even usually be abusive. Laing, by contrast, sought to show not only that Judge Thornton had reached a wrong conclusion but that he had done so by a wrong assessment of exactly the same material as was now sought to be put before the court. If the judgment of a court at first instance was to be disturbed, the proper course was to appeal. Where, wholly exceptionally, a collateral first instance action could be brought, it must be on new evidence such as entirely changes the aspect of the case. Laing's second claim relied on no new evidence. Further, the alleged inadequacies of Taylor Walton arose not in the conduct of the earlier litigation but long before, so that Laing had had every opportunity at the trial of the first action of bringing those inadequacies to the court's attention to persuade the judge to reach a different conclusion. The solicitors could have been called to give oral evidence, but were not.
Nesbitt v Holt
By contrast, the Court of Appeal in Nesbitt v Holt had earlier that year allowed a claim in negligence against a CAB representative to proceed although a factual finding of the employment tribunal (ET) in earlier proceedings would have to be disturbed for it to succeed. Holt had represented Nesbitt in a claim under the Disability Discrimination Act 1995. The claim was compromised and Nesbitt then sought to argue before the ET that Holt had acted without his authority and that the compromise was invalid. The ET chairman held that Holt had ostensible authority to enter into a compromise and the agreement was therefore binding. He went on to add that (as the issue had been raised before him) Holt also had actual authority to compromise the proceedings.
Nesbitt's subsequent action against Holt was struck out by Patten J on the grounds that in the light of the chairman's findings on actual authority, the new proceedings were an abuse of process.
The Court of Appeal disagreed. It held unanimously that in a case where the parties to the later proceedings are not the same, it will only be an abuse of process to challenge the factual findings or conclusions of the earlier court if it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated, or if to permit such relitigation would bring the administration of justice into disrepute. Patten J had not applied that test. The issue of actual (as opposed to ostensible) authority had not been a necessary issue for determination by the ET and had not been properly determined on an inter partes basis. The issue could not be properly decided until there was disclosure of documents in the negligence action. That evidence had not been before the ET. It would not be manifestly unfair to the CAB to require it to defend the claim.
The court did not go on to consider whether the relitigation would bring the administration of justice into disrepute.
Laing demonstrates that the fact that certain issues have not been determined inter partes is not fatal to a contention of abuse of process. There is clearly something of a tension between Laing and Nesbitt. If, however, the ratio of Laing is that it is an abuse of process to bring a claim which seeks to upset the conclusion in earlier proceedings of a court of competent jurisdiction upon the basis of exactly the same material as was or could have been before the earlier court, Nesbitt can be brought within its scope.
The Court of Appeal in Nesbitt held on the facts that the trial of the negligence action would “not necessarily” be of the same issue on the same evidence. No doubt they were also influenced by the fact that Nesbitt had acted in person in front of the ET and had evidently been at a disadvantage in doing so.
Stuart v Goldberg
What then, of a claim against solicitors in which it is alleged that the issues sought to be litigated should have been ventilated in earlier proceedings in which the solicitors were defendants? The difficulties in the way of those wishing to allege abuse of process are made clear by Stuart v Goldberg [2008] EWCA Civ 2, [2008] All ER (D) 73 (Jan). The defendant solicitors sought to stop the claimant from asserting two fresh causes of action which it was said he could have brought in earlier (successful) proceedings against them.
The Court of Appeal held that the substantive merits of the fresh claims are not relevant to the question of abuse and neither was delay itself a relevant factor. Neither is there any general principle of law (i) that a potential claimant is under a duty to use reasonable diligence to find out facts relevant to whether he has a particular claim which he has not yet asserted and (ii) that he must warn the defendant that he is contemplating bringing an additional claim in future. The new actions were not manifestly unfair to the defendants.
