The Court of Appeal allowed the defendant's appeal against an order striking out as an abuse of process his third party proceedings against the three third parties on the ground that they were inconsistent with a claim made by the defendant against the first third party in an earlier action.
The defendant had claimed damages for negligence and/or an indemnity against Mr Hancock, an accountant, in respect of a failed investment which Mr Hancock had advised him to fund by taking a mortgage loan from the plaintiff building society. Mr Hancock had admitted liability under the indemnity.
The defendant had entered judgment for the admitted sum, but had been unable to enforce the judgment against Mr Hancock as the latter had no money. As a result, the defendant owed the building society over pounds 180,000. When the building society instituted proceedings against him for possession of his mortgaged home, he sought by third party proceedings to revive the unsatisfied claim against Mr Hancock and to include in it two of his partners, Mr Walsh and Mr Rhodes.
The defendant expressed the third party claim in broader terms than the earlier action, seeking against all three third parties an indemnity against or contribution towards his liability to the building society and damages in respect of their failure to indemnify him and/or in negligence and/or for misrepresentation.
The third parties successfully applied to strike out the third party claim as an abuse of process. It was the judge's view that the third party proceedings were inconsistent with the earlier claim made by the defendant against Mr Hancock. The defendant appealed.
Michael Black QC (Putsmans, Birmingham) for the defendant; Mark Halliwell (Oldham Rust Jobson, Stafford) for Walsh; Philip Raynor QC (Lyons Wilson, Manchester) for Rhodes.
Lord Justice Auld said that it was important to distinguish clearly between res judicata and abuse of process not qualifying as res judicata. Abuse of process might arise where there had been no earlier decision capable of amounting to res judicata.
Mere re-litigation, in circumstances which did not give rise to cause of action or issue estoppel, did not necessarily amount to abuse of process. Equally, the maintenance of a second claim which could have been part of an earlier one, or which conflicted with an earlier one, should not per se be regarded as an abuse of process.
Some additional element was required, such as a collateral attack on a previous decision; some dishonesty; or successive actions amounting to unjust harassment. It followed that, in a case of re- litigation falling short of res judicata, the onus should be on the person alleging abuse of process to establish what made the further litigation an abuse.
The question in the present case was whether the obtaining of the earlier judgment against Mr Hancock, which was arguably inconsistent with some but not all of the allegations made in the third party proceedings, was an abuse of process in the circumstances. The judge appeared to have considered that inconsistency alone was enough to justify a finding of abuse.
He should, however, have been more hesitant before striking out the third party claim on a conclusion of inconsistency based on his construction of what were arguably equivocal pleadings and disposal by the court in the earlier action. More importantly, he should have looked beyond the inconsistency which he had found, and should have considered whether Mr Walsh and Mr Rhodes had shown that it and the other differences between the two claims made the third party claim in all the circumstances an abuse of the process.