Isle of Man: Appeal Court Confirms Strike Out Principles

Last Updated: 3 February 2016
Article by Tara Cubbon

Last year, leading offshore law firm DQ Advocates reported on the Isle of Man High Court's judgment in the case of The Slegaby Estate Limited and Samuel George Alder v Lloyds Bank International Limited (judgment dated 16 March 2015). That decision has now been upheld by the Island's Appeal Court, the Staff of Government Division (the "SGD"). DQ successfully represented the Bank before the SGD.

Strike Out at First Instance

In March 2015, the High Court struck out the claim brought in September 2014 by The Slegaby Estate Limited ("TSEL") and Sam Alder ("Mr Alder", together the "Appellants") against Lloyds Bank International Limited (the "Bank") on the grounds 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 venture in the Isle of Man (the "Claim").

The Claim followed the conclusion of two years of litigation between the parties in respect of the Bank's contractual claim for amounts owed by TSEL (and guaranteed by Mr Alder) pursuant to business loans granted by the Bank in respect of TSEL's property development venture in which the Bank obtained judgments against TSEL and Mr Alder of c £2.7m (the "First Proceedings").

The High Court struck out each part of the Claim pursuant to the doctrines of cause of action estoppel and/or issue estoppel and/or as an abuse of process. The Court held that the Appellants were in effect seeking "a second bite at the cherry" following the dismissal of their appeal in the First Proceedings.

Read DQ's previous publication: Court confirms law on res judicata and abuse of process

The Appeal

In May 2015, TSEL and Mr Alder filed an appeal against the High Court's judgment. DQ's Tara Cubbon represented the Bank at the hearing before the SGD in September 2015.

TSEL and Mr Alder appealed against the High Court decision on the grounds that:

  1. the Court's decision to strike out each part of the Claim constituted an error of law and/or was plainly wrong on the basis that the test for strike out of a statement of case was not met; and
  2. the Court's decision that there were no special circumstances which justified departure from the principles of issue estoppel or Henderson v Henderson abuse of process was wrong (the "Appeal").

Recusal of Appeal Judges

Prior to the Appeal being heard, the SGD (Judge of Appeal Tattersall QC and Deemster Christie QC) dismissed the Appellants' application for the Court to recuse itself. The fact that it had determined the appeal in the First Proceedings and that there were overlapping issues in both proceedings did not require them to recuse themselves. Further, the Appellants failed to put forward evidence which demonstrated any lack of objectivity or would lead a fair minded and informed observer to conclude that there was a real possibility that the Court was biased.

Thereafter, the SGD dismissed the Appellants' Appeal as having no merit.

Strike Out Principles

At the outset, the SGD clarified two points which arose in respect of the law of strike out pursuant to the doctrines of res judicata and abuse of process.

Firstly, it rejected the Appellants' argument that the Bank was required to prove that the Claim was "bound to fail" in accordance with the authorities dealing with strike out pursuant to Rule 7.3 of the Rules of the High Court of Justice (no reasonable grounds for bringing a claim). That was not the issue which the High Court had been required to address. The High Court had been required to consider whether as a matter of law the Appellants were precluded from pursuing the Claim because of some form of estoppel. The Claim might have disclosed a cause of action (which was denied by the Bank) but that was not the point.

Secondly, by reference to two English Court of Appeal cases, the SGD confirmed that when a Court strikes out a case as an abuse of process the Court is not exercising its discretion. Rather, it involves the assessment of a large number of factors to which there can only be one correct answer and which an appellate court will be reluctant to interfere with unless the judge has taken into account immaterial factors, omitted to take account of material factors, erred in principle or come to a conclusion that was impermissible or not open to him (Agbenowossi-Koffi v Donvand Ltd (t/a Gullivers Travel Associates) [2014] EWCA Civ 855 and Aldi Stores Ltd v WSP Group plc [2008] 1 WLR 748).

In response to the Appellants' argument that the High Court had been wrong to conclude that there were no special circumstances in this case justifying departure from the ordinary application of issue estoppel and/or Henderson v Henderson abuse of process, the SGD held that there was no error in the High Court's conclusion and the Appeal was dismissed.

The SGD's judgment represents the conclusion of a lengthy process for the Bank in order to enforce its rights under a secured loan facility. The Bank commenced the First Proceedings in May 2012 following TSEL defaulting on the loans in December 2008 and failing to repay the amounts owing.

DQ's Tara Cubbon and Giles Hill represented the Bank in these proceedings.

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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