Isle of Man: Court Confirms Law On Res Judicata And Abuse Of Process

Last Updated: 1 April 2015
Article by Tara Cubbon

In the recent case of The Slegaby Estate Limited and Samuel George Alder v Lloyds Bank International Limited (ORD 14/0027, judgment dated 16 March 2015), the Isle of Man High Court of Justice (His Worship the High Bailiff) confirmed that Isle of Man law is "on all fours" with the law of England and Wales in respect of the Court's powers to manage cases in order to ensure finality in litigation and avoid multiplicity of proceedings.

DQ's Tara Cubbon acted for Lloyds Bank International Limited (the "Bank") in successfully striking out the claim by The Slegaby Estate Limited ("TSEL") and Samuel George Alder ("Mr Alder") against the Bank pursuant to the doctrine of res judicata and as an abuse of process pursuant to Rule 7.3(2)(b) of the Rules of the High Court of Justice 2009 (the "2009 Rules").


The claim followed the conclusion of two years of litigation (ORD 12/0035 & ORD 12/0034) between the parties in respect of the Bank's contractual claim for amounts owed by TSEL to the Bank pursuant to certain business loans (the "First Proceedings"). The loans were granted by the Bank in respect of TSEL's property development venture in the Isle of Man and were personally guaranteed by Mr Alder.

In September and November 2013, the Bank obtained judgments against TSEL and Mr Alder on a joint and several basis for more than Ł2.5m.
Despite having exhausted their appeal rights in the First Proceedings (including an unsuccessful application for special leave to appeal to the Privy Council), in September 2014 TSEL and Mr Alder filed a claim for damages against the Bank on the ground that the Bank allegedly, by breach of contract, negligence or other breach of duty, caused or contributed to the losses that had occurred on TSEL's property development (ORD 14/0027, the "New Claim").

The Bank applied to strike out the New Claim on the basis that it raised matters that had been determined in the First Proceedings or ought to have been raised by TSEL and Mr Alder in the First Proceedings.

Legal Issues

The Court was required to consider the law on res judicata and abuse of process.

Having considered Isle of Man and English authorities, His Worship the High Bailiff confirmed that "the law to be operated in the Isle of Man is on all fours with the principles deriving from the courts in England and Wales...the enhanced powers of the court in the Isle of Man to manage cases since the advent of the 2009 Rules means that the court may in a variety of ways seek to ensure so far as possible that all matters in dispute between parties are completely and finally determined and that a multiplicity of legal proceedings is avoided."

His Worship referred to the recent review of the doctrines of res judicata and abuse of process by Lord Sumption in the UK Supreme Court in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd (formerly Contour Aerospace Ltd) UKSC 46, [2014] AC 160.

The following four principles referred to by Lord Sumption as falling under the general "portmanteau term" res judicata were considered:

1. once a cause of action has been held to exist or not, that outcome may not be challenged by either party in subsequent proceedings ("cause of action estoppel"). The bar is absolute in respect of all points decided unless fraud or collusion is alleged;

2. even where the cause of action is not the same as in the later action, if some issue necessarily common to both was decided on the earlier occasion then the decision is binding on the parties ("issue estoppel");

3. the preclusion of a party raising in subsequent proceedings matters which were not but could and should have been raised in earlier ones (Henderson v Henderson 3 Hare 100, per Wigram QC at 114 to 116) (the "Henderson v Henderson principle"); and

4. the existence of a general procedural rule against abuse of proceedings ("abuse of process").

Applying those principles to the circumstances in the Slegaby case, the Court struck out the New Claim on the basis that the New Claim raised points that were essential to the existence of the Bank's cause of action in the First Proceedings i.e. its contractual right to the amount outstanding under the business loan agreements. Those matters could and should with reasonable diligence have been raised in the First Proceedings and accordingly TSEL and Mr Alder were prohibited from now raising those points as a result of the application of the doctrine of cause of action estoppel.

If His Worship was wrong as to the application of cause of action estoppel, then he held the application of issue estoppel would be a prima facie bar to the New Claim for the same reasons.

His Worship further held that the case also fell within the ambit of the principle of abuse of process. Lord Bingham, in the well-known House of Lords case of Johnson v Gore-Wood & Co [2002] AC 1, confirmed that the Henderson v Henderson principle, whilst separate and distinct from cause of action estoppel and issue estoppel, has much in common with the two:

"The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied...that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all...It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court...".

In finding that the New Claim amounted to an abuse of process, His Worship held that the matters upon which the New Claim was based were all matters which were inextricably linked to the question whether, and if so how much, money was owed by TSEL and Mr Alder which had already been determined in the First Proceedings.

His Worship further held that TSEL and Mr Alder had failed to treat the First Proceedings as they should have done. They had no excuse for not pursuing matters fully and adopting an "unduly casual attitude" in their response. This was contrary to the onus in the 2009 Rules on the expedition of litigation and the avoidance of multiplicity of proceedings and in His Worship's view was an attempt to have "a second bite of the cherry" following the dismissal of their appeal in the First Proceedings.

Accordingly, the New Claim was struck out pursuant to the doctrine of res judicata and under Rule 7.3(2)(b) of the 2009 Rules as an abuse of process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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