“(1) In this rule and rule 3.5, reference to a statement of case includes reference to part of a statement of case. (2) The court may strike out a statement of case if it appears to the court – … (b) that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings; … (3) When the court strikes out a statement of case it may make any consequential order it considers appropriate.”
“The court may give summary judgement against a claimant or defendant on the whole of a claim or on an issue if – (a) it considers that the party has no real prospects of succeeding on the claim, defence or issue; and (b) there is no other compelling reason why the case or issue should be disposed of at a trial.”
“15. As Ms Anderson QC rightly reminded me, the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows: (i) The court must consider whether the claimant has a ‘realistic’ as opposed to a ‘fanciful’ prospect of success: Swain v Hillman[2001] 2 All ER 91 ; (ii) A ‘realistic’ claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel[2003] EWCA Civ 472 at [8]; (iii) In reaching its conclusion the court must not conduct a ‘mini-trial’: Swain v Hillman (iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10] (v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5)[2001] EWCA Civ 550 ; (vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd[2007] FSR 63 ; (vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent’s case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant’s case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd[2007] EWCA Civ 725 .” (a) it considers that the party has no real prospects of succeeding on the claim, defence or issue; and (b) there is no other compelling reason why the case or issue should be disposed of at a trial.”
“Much of what the applicant has said and done appears designed only to create smoke and mirrors. In my judgment, the level of complexity put onto this commercial enterprise serves little useful purpose except to conceal and confuse.”
“Raazia Masood and Syed Azam describe FRENCHEYE (the company) as a clothing retailer that trades under the name FRENCHEYE. They seek to describe a franchise model that ‘licences the use of its brand and know-how to third-party Companies’, I have already indicated that, in my judgment, the companies cannot properly be regarded as third-party. However, the ‘franchise model’ the witnesses sought to portray did not make any sense either. [Counsel for the Company] observed in his final submissions that the franchise model is common in the retail industry and not dissimilar to that used in the fast food industry. I can see that. But companies like McDonalds started from small beginnings and branched out from a base outlet when they got bigger, more successful and had something to offer other people who wanted to take on the franchise. As far as I can see, FRENCHEYE only has its shop in Westfield. Though RIOTSI may have attracted business rates in other parts of the country in the past, I have not been presented with any evidence to suggest that there are FRENCHEYE stores up and down the country. [Frencheye (Oxford Street) Limited] exists as a company name, but I have only been shown dormant accounts for it. Westfield is FRENCHEYE’s home, its base shop. Why then would that be franchised out? What does a third party have to gain from taking over the base shop?”
“17. Res judicata is a portmanteau term which is used to describe a number of different legal principles with different juridical origins. As with other such expressions, the label tends to distract attention from the contents of the bottle. The first principle is that once a cause of action has been held to exist or not to exist, that outcome may not be challenged by either party in subsequent proceedings. This is ‘cause of action estoppel’. It is properly described as a form of estoppel precluding a party from challenging the same cause of action in subsequent proceedings. Secondly, there is the principle, which is not easily described as a species of estoppel, that where the claimant succeeded in the first action and does not challenge the outcome, he may not bring a second action on the same cause of action, for example to recover further damages: see Conquer v Boot[1928] 2 KB 336 . Third, there is the doctrine of merger, which treats a cause of action as extinguished once judgment has been given upon it, and the claimant’s sole right as being a right upon the judgment. Although this produces the same effect as the second principle, it is in reality a substantive rule about the legal effect of an English judgment, which is regarded as ‘of a higher nature’ and therefore as superseding the underlying cause of action: see King v Hoare (1844) 13 M & W 494, 504 (Parke B). At common law, it did not apply to foreign judgments, although every other principle of res judicata does. However, a corresponding rule has applied by statute to foreign judgments since 1982: seeCivil Jurisdiction and Judgments Act 1982, section 34 . Fourth, there is the principle that even where the cause of action is not the same in the later action as it was in the earlier one, some issue which is necessarily common to both was decided on the earlier occasion and is binding on the parties: Duchess of Kingston’s Case (1776) 20 St Tr 355. ‘Issue estoppel’ was the expression devised to describe this principle by Higgins J in Hoysted v Federal Commissioner of Taxation(1921) 29 CLR 537 , 561 and adopted by Diplock LJ in Thoday v Thoday[1964] P 181 , 197–198. Fifth, there is the principle first formulated by Wigram V-C in Henderson v Henderson (1843) 3 Hare 100, 115, which precludes a party from raising in subsequent proceedings matters which were not, but could and should have been raised in the earlier ones. Finally, there is the more general procedural rule against abusive proceedings, which may be regarded as the policy underlying all of the above principles with the possible exception of the doctrine of merger.”
“Res judicata and abuse of process are juridically very different. Res judicata is a rule of substantive law, while abuse of process is a concept which informs the exercise of the court’s procedural powers. In my view, they are distinct although overlapping legal principles with the common underlying purpose of limiting abusive and duplicative litigation. That purpose makes it necessary to qualify the absolute character of both cause of action estoppel and issue estoppel where the conduct is not abusive. As Lord Keith put it in Arnold v National Westminster Bank at p 110G, ‘estoppel per rem judicatam, whether cause of action estoppel, or issue estoppel is essentially concerned with preventing abuse of process.’”
“8. In my view these cases establish the following propositions: a) A collateral attack on an earlier decision of a court of competent jurisdiction may be but is not necessarily an abuse of the process of the court. … c) If the earlier decision is that of a court exercising a civil jurisdiction then it is binding on the parties to that action and their privies in any later civil proceedings. d) If the parties to the later civil proceedings were not parties to or privies of those who were parties to the earlier proceedings then it will only be an abuse of the process of the court to challenge the factual findings and conclusions of the judge or jury in the earlier action if (i) it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated or (ii) to permit such relitigation would bring the administration of justice into disrepute.” a) A collateral attack on an earlier decision of a court of competent jurisdiction may be but is not necessarily an abuse of the process of the court. … c) If the earlier decision is that of a court exercising a civil jurisdiction then it is binding on the parties to that action and their privies in any later civil proceedings. d) If the parties to the later civil proceedings were not parties to or privies of those who were parties to the earlier proceedings then it will only be an abuse of the process of the court to challenge the factual findings and conclusions of the judge or jury in the earlier action if (i) it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated or (ii) to permit such relitigation would bring the administration of justice into disrepute.”
“44. From this discussion of the cases, the following points emerge: i) The jurisdiction to strike out proceedings as an abuse of process is one that should not be tightly circumscribed by rules or formal categorisation. It is an exceptional jurisdiction, enabling a court to protect its procedures from misuse. Thus, a court is able to – indeed, has a duty to – control proceedings which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right thinking people: Hunter at 536 (paragraph 30 above); Bairstow at [38] (paragraph 34 above); Laing at [12] (paragraph 34 above). ii) Any further attempt to define the circumstances in which this power should be exercised is subject to this overriding formulation of the principle, and can only be helpful if seen in this light. Thus, there can be identified a class of abuse which involves the relitigation of issues which have already once been determined by a court of competent jurisdiction in earlier proceedings. There are a number of statements in the cases suggesting that such relitigation may be regarded as abusive: Hunter at 541 (paragraph 29 above); Hall @ at 702-703 (Lord Hoffmann, paragraph 33(iii) above); Walpole at 116 (paragraph 37(ii) above); Laing at [22] (Buxton LJ, paragraph 40 above) and [37]-[38] (Moses LJ, paragraph 41 above). iii) However, the cases make clear that to regard relitigation as even prima facie amounting to an abuse of process would be to adopt too rigid an approach and to disregard the importance of individual circumstance and the need to consider each case on its own facts: Hall at 702-703 (Lord Hoffmann, paragraph 33(iii) above); Walpole at 116 (paragraph 37(i) above). It is, to my mind, very significant that when articulating general principles regarding the abuse of process jurisdiction, Morritt V-C did not specifically mention relitigation: Bairstow at [38] (paragraph 34 above). iv) In terms of the facts and circumstances that render relitigation potentially abusive, the following points are of particular relevance: … c) … it is necessary to be very clear what is meant by ‘relitigation’. In my judgment, relitigation means arguing the same issue, that has already been determined in earlier proceedings, all over again in later proceedings. In civil proceedings, generally speaking, for an issue to be the same, it will arise as between the same parties (or their privies) That is why, in such cases, the doctrine of res judicata estoppel comes into play. The role of the doctrine of abuse of process is, correspondingly, much more limited… 45. In short, the doctrine of abuse of process is best framed, at least in the context of a ‘collateral’ attack on a prior civil decision, by reference to the test expounded by Lord Diplock and Morritt V-C: If the parties to the later civil proceedings were not parties to or privies of those who were parties to the earlier proceedings then it will only be an abuse of the process of the court to challenge the factual findings and conclusions of the judge in the earlier action if (a) it would be manifestly unfair to a party to the later proceedings that the same issues should be re-litigated or (b) to permit such relitigation would bring the administration of justice into disrepute.”
“Attempts to relitigate issues which have already been the subject of judicial decision may or may not amount to an abuse of process. Ordinarily such situations fall to be governed by the principle of estoppel per rem judicatam or of issue estoppel (admitted not to be applicable in the present case). It will be a rare case where the litigation of an issue which has not previously been decided between the same parties or their privies will amount to an abuse.”
“8. The question whether parties in successive litigation are in a relationship of privity, so as to give rise to estoppel per rem judicatam is not the subject of a wealth of authority. In Carl Zeiss Stiftung v Rayner & Keeler and ors[1967] 1AC 583 , Lord Reid said, at page 910 G: ‘It has always been said that there must be privity of blood, title or interest: here it would have to be privity of interest. That can arise in many ways, but it seems to me to be essential that the person now to be estopped from defending himself must have had some kind of interest in the previous litigation or its subject-matter. I have found no English case to the contrary.’ At page 936 G Lord Guest said: ‘“Privies” have been described as those who are “privy to [the party] in estate or interest.” (Spencer Bower on Res Judicata, p.130). Before a person can be privy to a party there must be community or privity of interest between them.’ 9. In Gleeson v J Wippell & Co Ltd[1977] 1 WLR 510 , at 515, having rejected mere curiosity or concern, including reputational concern, as sufficient to establish privity of interest, Megarry VC continued as follows: ‘…it seems to me that the substratum of the doctrine is that a man ought not to be allowed to litigate a second time what has already been decided between himself and the other party to the litigation. This is in the interest both of the successful party and of the public. But I cannot see that this provides any basis for a successful defendant to say that the successful defence is a bar to the plaintiff suing some third party, or for that third party to say that the successful defence prevents the plaintiff from suing him, unless there is a sufficient degree of identity between the successful defendant and the third party. I do not say that one must be the alter ego of the other: but it does seem to me that, having due regard to the subject matter of the dispute, there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party. It is in that sense that I would regard the phrase “privity of interest.”
“… it appears that for privity with a party to the proceedings to take effect, it must take effect whether that party wins or loses. As was said by Buckley J in Zeiss No. 3[1970] Ch. 506 , 541 (where the question was rather different) ‘The relationship cannot be conditional upon the character of the decision.’”
“to ask not merely whether it would be just to hold the losing party in the earlier proceedings bound, but whether it would be just if the decision in the earlier proceedings had gone the other way.”
“17. In my judgment Mr Potiwal and Red 12 were clearly privies in the context of the proceedings before the VAT Tribunal, even though he was neither asserting a personal claim of his own, nor was he exposed to personal liability for costs in the event (as occurred) that the appeal failed. He was only slightly less obviously in privity of interest with his company than Mr Johnson was with his company in Johnson v Gore Wood. In my judgment the fact that he was only a 40 per cent shareholder in Red 12 by no means undermines an otherwise clear case for privity of interest between the two.”
“23. It by no means follows from my conclusion that it would not be just to treat the Secretary of State and HMRC as privies that the relitigation of the issue as to Mr Potiwal’s knowledge is nonetheless not an abuse. That question requires an examination of the circumstances of the hearing before the VAT Tribunal, from which it appears that HMRC expended over£400,000 of taxpayers’ money in successfully resisting Red 12’s appeal, by the meticulous presentation of the intricacies of the MTIC fraud in a way sufficient to persuade the experienced tribunal that Mr Potiwal knew about it, notwithstanding his detailed and determined challenge, through Red 12, of every element of HMRC’s case. Red 12 went into creditors’ voluntary liquidation after the conclusion of the proceedings, and no part of that expenditure on costs was recouped by HMRC from Red 12, despite the Tribunal’s order that it should be. 24. The Secretary of State’s evidence on this application demonstrates that, if Mr Potiwal is to be permitted by a simple denial of the requisite knowledge to require the case to be proved against him a second time, hundreds of thousands of pounds of further costs, again funded by the taxpayer, will have to be incurred by the Secretary of State, again with no evidence that, if successful, a costs order will be practically enforceable against Mr Potiwal at the end of the day. 25. True it is that, as Miss Graham-Wells submits, Mr Potiwal does not now put in issue the existence of the underlying fraud. But proof against the management of an exporter of the requisite knowledge in an MTIC case is nonetheless an intricate process, requiring meticulous deployment of the underlying facts, and of the circumstances in which those facts were, or ought to have been, apparent to the company’s senior management. Taking a broad brush, I consider it reasonable to assume that the cost to the Secretary of State of relitigating the issue as to Mr Potiwal’s knowledge is likely to equal or exceed£200,000 . The question is whether it would be manifestly unfair to visit that expenditure upon the Secretary of State in all the circumstances. 26 Those circumstances include the fact that Red 12 pursued but lost an appeal against the decision of the VAT Tribunal, and was refused permission for a second appeal, and that Mr Potiwal’s evidence in the present proceedings, far from placing a different complexion on matters, consists of little more than a simple denial of knowledge. No challenge is or could be made to the substantive fairness of the proceedings before the VAT Tribunal. It is in my judgment nothing to the point that its procedure rules may be different and, in certain respects, less formal than those applicable to these disqualification proceedings. Furthermore, Mr Potiwal had every opportunity both in giving evidence and subjecting himself to cross-examination to defend himself against the allegations of knowledge which the Tribunal found to be proved, when rejecting swathes of his testimony as incredible. 27. In those circumstances I consider that it would indeed be manifestly unfair to impose the cost of relitigating that issue upon the Secretary of State. The critical distinction between this case and Secretary of State v Bairstow is that, prior to the disqualification proceedings against Mr Bairstow, the taxpayer had incurred no costs at all in relation to the issues which Mr Bairstow wished to relitigate. The previous proceedings had been between him and his solvent company. By contrast in the present circumstances, the taxpayer has been the funder of the litigation involving Red 12 and Mr Potiwal throughout, first for the purpose of defending the public purse from a fraudulent claim, and now for the purpose of seeking the disqualification of the sole director of a corporate participant in that fraud.”
“128. Ms. Masood observed that FRENCHEYE did not have a bank account. She claimed that FRENCHEYE was not trading at the premises and was not involved in the occupation by ‘the tenants’. She relied on the fact that ‘the tenants’ were limited companies and separate legal entities which themselves controlled the premises and traded from the premises.”
“Between1 November 2013 and31 March 2016 , the Company operated the Business from the Premises.” “The Business” is defined in paragraph 7 as follows: “Between1 July 2011 and1 November 2013 , Riotsi operated a clothing retail business (“the Business”) from premises at Unit SU0048a, 59 The Arcade, Westfield Stratford City, Montfichet Road, Olympic Park, London E20 1EH (“the Premises”) using the trading name ‘Frencheye’.”
“20. On or around1 November 2013 , Riotsi assigned the Lease to the Company. Thereafter, the Company took over the operation of the Business at the Premises. 21. As stated in paragraph 12 above, the Company did not operate a bank account. Instead, all monies payable to the Company in respect of the Business were paid into the ECL Account. 22. Following his appointment as the liquidator of the Company, the Applicant has analysed the bank statements for the ECL Account and has identified that in the Relevant Period trading receipts in the total sum of£3,834,769.57 were paid into the ECL Account, as particularised in Schedule 1 hereto (“the Trading Receipts”). 23. The Applicant has further identified payments from the ECL Account in the Relevant Period in the total sum of£1,670,098.52 which he is prepared to accept relate to legitimate expenditure in respect of the Business, as particularised in Schedule 2 hereto (“the Expenditure Payments”). 24. There is no obvious explanation for the remainder of the payments made from the ECL Account in the Relevant Period, which do not appear to relate to the Business. In the premises, the Applicant infers that the balance of the Trading Receipts in the total sum of£2,164,671.05 was applied by ECL otherwise than for the benefit of the Company.”
“Investigations into the Company’s trading has found that the Company was established to ‘hold’ a lease in respect of premises which it then sought to allegedly sublet/ licence to various other companies. This was despite the fact that the terms of the lease did not allow the sub-letting of the premises. The leasehold premises was: Unit SU0048a, Lower Ground Floor, 59 The Arcade, Westfield Stratford City, Monfichet Road, Olympic Park, London E20 1EH (‘the Premises’). It is understood that the Company granted licenses to connected companies to purportedly trade from the Premises. Further, the Company filed dormant accounts for the years ending30 September 2013 and 2014 respectively and filed small company accounts for the year ending30 September 2015 . The Company also did not operate a bank account. As a result, the Company was never in a position to receive income to meet its liabilities.”