Summary

A claim that the defendants had dishonestly assisted a third party in committing a breach of fiduciary duty represented an abuse of process given that the relevant factual allegations had been determined against the claimant in arbitration proceedings between it and the third party. There could be no rule that the court could not strike out an action as an abuse of process merely because the tribunal whose decision was under attack was an arbitral tribunal.

Facts

The first and second defendants (S and C) applied for an order striking out the claim made by the claimant company (M).

S was the managing director of and a major shareholder in C, a company with interests in Kazakhstan. M provided legal and business consultancy services; at the material time, the Part 20 defendant (E) was a director and employee of M. C had engaged M in relation to a transaction involving the purchase and on-sale of interests in certain oilfields in Kazakhstan to a listed company. Shortly before the transaction was concluded, certain shares were issued to the third defendant (X), a company in which E had an interest. It was M's case that the shares were issued to X for the benefit of E as his reward for his participation in and contribution to the transaction; that as E had been involved in the transaction as its agent and employee, the shares ought to have come to it; and that, wrongfully and in breach of his contractual and fiduciary duties, E had connived with S and C to divert the shares to himself (through X). S and C asserted, on the other hand, that the shares were issued to X for the sole benefit of S; that X was used as an offshore vehicle to receive the shares because the offshore trust structure which S had asked E to set up had not been completed in time; and that the shares were held by X on bare trust for S. The dispute had been the subject of an arbitration award, M having commenced arbitration proceedings against E pursuant to the arbitration clause in his contract of engagement. The arbitrators found in favour of E, holding that M had no claim to the shares and that they were held to S's order. S was not a party to the arbitration but he did give evidence in it. He also funded E's defence. In the instant action, M alleged that S and C had dishonestly assisted E in committing a breach of fiduciary duty.

S and C argued, among other things, that (1) there was privity of estate between S and E such that M was estopped from making allegations against S which contradicted the findings of the arbitral tribunal; (2) it would be an abuse of the process of the court to permit M to challenge the findings of that tribunal.

Held

(1) It was not disputed that estoppel per rem judicatam worked mutually so that a person could only take the benefit of an estoppel if he would have been prejudiced by the decision had it gone the other way. If the arbitrators had decided in favour of M, that decision would not have been binding on S, as he was not a party to the arbitration. Accordingly, M could not be estopped, as against S, from alleging that which the arbitrators had rejected (see para.44 of judgment). (2) As to the doctrine of abuse of process, the first question was whether it could apply where the previous decision was that of an arbitral tribunal. There was high authority for saying that it was unwise to limit to fixed categories the circumstances in which it was the court's duty to prevent its processes from being abused,Hunter v Chief Constable of the West Midlands [1982] A.C. 529 and Arthur JS Hall & Co v Simons [2002] 1 A.C. 615 considered. There could therefore be no rule that the court could have no such duty merely because the tribunal whose decision was under attack was an arbitral tribunal. However, it would probably be a rare case where an action in this court against a non-party to an arbitration could be said to be an abuse of process. Where a claimant had a claim against two or more persons and was obliged to bring one such claim in arbitration, the defeat of that claim in arbitration would not usually prevent the claimant from pursuing his claim against the other persons in litigation. Arbitrations were private and consensual and non-parties could not, in the absence of consent, be joined or be affected by the decisions of the arbitral tribunal. The second question was whether M's claims in this action amounted to a collateral attack on the findings of the tribunal and were an abuse of the process of the court. The burden of proof was on S, and the test was "exacting",Calyon v Michailaidis [2009] UKPC 34 considered. That was especially so where the decision under collateral attack was that of an arbitral tribunal. There was no doubt that the factual allegations being made in this action as to E's conduct mirrored exactly the failed allegations in the arbitration; there was therefore a collateral challenge to the findings of the arbitral tribunal. On the other hand, S had not been a party to the arbitration; this action was therefore the only means by which M could bring its claim against him. Had those been the only material circumstances, a finding of abuse of process would not have been justified. However, special circumstances were present which did justify such a finding: first, S had been a witness in the arbitration and was cross-examined; second, no doubt because of his interest in the outcome of the arbitration, he funded E's defence; third, the arbitral tribunal concluded that the shares were held to S's order; fourth, the tribunal intended and expected that the effect of its award would be that X would transfer those shares to S. Also relevant was the unfairness that would be caused to E by the putting to him of allegations a second time (paras 49-50, 56-57, 59-60, 62, 67-68).

Judgment accordingly

Judgement reversed on Appeal