Blackburn Chemicals Ltd v BIM Kemi AB

Cause of action estoppel, issue estoppel and the Henderson principle are distinct. A court must first decide whether a cause of action estoppel exists; if it does, only fraud or collusion can defeat it. If it does not, the court asks whether raising a point that could have been taken earlier would be an abuse of process under the Henderson principle. A judgment given while a pleaded competition-law defence has been stayed and expressly reserved is conditional. It does not bar later reliance on that defence. Raising the point is not abusive where it was first advanced by the opposing party and the prejudice consists only of ordinary irrecoverable costs. The court decided only the procedural entitlement to raise the Article 81 issue, not the agreement’s legality.

Blackburn and Bim entered into a 1994 agreement containing exclusive supply and sales provisions. Following earlier litigation, the Court of Appeal determined on 13 February 2003 that Bim had repudiated the agreement and that Blackburn was entitled to damages, while its order of 24 June 2003 expressly reserved the competition-law issue.

Cooke J, in the Commercial Court, refused to strike out Bim’s proposed defence that the agreement was void under Article 81 of the EC Treaty: [2004] EWHC 166 (Comm). Blackburn appealed, relying principally on cause of action estoppel and abuse of process. The central issue was whether Bim could raise an illegality argument which Blackburn had originally pleaded, but later abandoned, after the issue had been stayed.

1. Disposition. Longmore LJ delivered the leading judgment. May LJ and Kennedy LJ agreed. The appeal was dismissed, with the appellant to pay the costs of the appeal on the standard basis, subject to detailed assessment if not agreed.
2. Estoppel principles. Cause of action estoppel, issue estoppel and the Henderson principle are distinct. The Court adopted the classic definitions in Thoday v Thoday [1964] P 181. Cause of action estoppel concerns the existence or non-existence of a cause of action previously determined. Issue estoppel concerns an identical condition determined in earlier litigation. The Henderson principle extends res judicata to points which properly belonged to the litigation and which could, with reasonable diligence, have been raised at the time: Henderson v Henderson (1843) 3 Hare 100.
3. Order of analysis. Following Co-Flexip SA v Stolt Offshore MS Ltd [2004] FSR 708 and the approach in Kennecott Utah Copper Corp v Minet Ltd [2004] 1 All ER (Comm) 60, the court must first decide whether the alleged cause of action or issue estoppel exists. If a cause of action estoppel exists, it can be defeated only by fraud or collusion. The abuse-of-process approach discussed in Johnson v Gore Wood & Co [2002] 2 AC 59 applies only where the Henderson principle is engaged.
4. No cause of action estoppel. The earlier judgment in Blackburn’s favour was conditional. The counterclaim remained subject to the pleaded illegality issue, and Langley J had stayed proceedings on that issue. The stay concerned the subject matter of whether the agreement was void under Article 81 of the EC Treaty, not merely the literal pleading or the party who originally advanced it. The Court of Appeal’s order of 24 June 2003 also reserved the issue. Blackburn could not unilaterally convert the conditional judgment into a final judgment by withdrawing its own competition-law case.
5. No abuse of process. It was not abusive for Bim to raise the illegality point. Blackburn had itself insisted that the court should consider the point and had accepted that it could defeat both sides’ claims. The issue had been deliberately deferred, and the prejudice relied on consisted principally of irrecoverable costs, which are an ordinary litigation risk and did not amount to substantial unfairness. The merits of the Article 81 issue were not decided.
6. Obiter. Longmore LJ added that, had a true cause of action estoppel existed, it would have extended to the illegality point, subject only to fraud or collusion. Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993, concerning issue estoppel said to arise from a default judgment, was an unsafe guide to cause of action estoppel. These observations were expressly unnecessary to the decision.

• Court of Appeal (Civil Division): Dismissed Blackburn’s appeal against Cooke J’s refusal to strike out Bim’s Article 81 defence. Leave to appeal to the House of Lords was refused.
• High Court (Commercial Court): Cooke J held that it was not an abuse of process to permit Bim to raise the illegality point and dismissed Blackburn’s strike-out application: [2004] EWHC 166 (Comm).
• Earlier Court of Appeal proceedings: The court had determined that Bim repudiated the 1994 agreement and had made a final order reserving the competition-law issue. Bim’s petition for leave to appeal to the House of Lords was dismissed.