Specialist Group International Ltd v Deakin & Anor

Claim finality bars a later claim only where it has the same cause of action as an earlier concluded claim between the parties. A claim for repayment of money lent is substantively different from a claim to recover unauthorised directors’ remuneration.

Issue finality and the wider Henderson principle require a flexible assessment of abuse of process. The fact that a point could have been raised earlier does not itself make later proceedings abusive. The court must make a broad, merits-based assessment of all the circumstances, including finality, fairness, oppression and access to justice. A claim should be stopped only where this is necessary to prevent a misuse of the court’s process.

The company had settled proceedings in which its former directors recovered loans made to it after the net amount of their 1998 remuneration had been credited back as directors’ loans.

The company later brought a separate action to recover both the 1997 and 1998 remuneration. It alleged that the payments had not been authorised by the ordinary resolution required by regulation 82 of its articles. For the strike-out application, the parties assumed that the remuneration had been improperly awarded.

Rimer J dismissed the directors’ application to strike out the later action. The directors appealed, relying on cause of action estoppel, issue estoppel and abuse of process. The central question was whether the settlement of the loans action barred the company’s claim for repayment of the remuneration.

Appeal dismissed. Aldous LJ gave the leading judgment, with which May LJ agreed.

1. The appeal proceeded on the assumption that the remuneration had been awarded without the ordinary resolution required by Companies (Tables A to F) Regulations 1985, regulation 82. The Court did not decide that issue. It treated the alleged want of authority as a viable basis for a separate claim to recover directors’ remuneration.

2. There was no cause of action estoppel. Applying [1991] 2 AC 93, the causes of action were not identical. The earlier action was for repayment of loans. The later action was for repayment of remuneration allegedly paid without authority. The 1998 book entries did not merge the payment of remuneration, deductions for tax and national insurance, and the loans into a single transaction. The alleged invalidity could at most have supported a counterclaim or equitable set-off; it was not a true defence to the loan claim.

3. There was no issue estoppel. The consent judgment established that loans had been made, but it did not determine whether the remuneration had been lawfully awarded. The 1997 payments were not part of the loan action at all. An issue must have been an express or implicit necessary element of the earlier determination before issue finality can arise.

4. The wider question was abuse of process. Following the broad approach in [2001] 2 WLR 72, the Court rejected a mechanistic rule that a point which could have been raised earlier must be barred later. The absence of a tactical decision, the rapid and virtually uncontested settlement of the loan action, the different subject matter of the claims, and the absence of unfair harassment meant that the later action was not abusive. Justice required the allegation of unauthorised remuneration to remain open for determination.

• Court of Appeal (Civil Division) — dismissed the directors’ appeal and upheld the refusal to strike out the company’s remuneration claim.
• Chancery Division — Rimer J, on 22 May 2000, dismissed the directors’ application to strike out the company’s later action.