Soteriou v Ultrachem Ltd & Ors

Issue estoppel may prevent a claimant from relitigating the enforceability of a contract where that issue was determined by an Employment Tribunal, even though the later claim is for wrongful rather than unfair dismissal. The exception for special circumstances is narrow. A new argument, overlooked authority or inadvertence is insufficient.

Illegality arising from performance of an otherwise lawful contract depends on the claimant’s knowledge and active and sufficient participation. It is part of the substantive law governing enforceability, rather than a procedural immunity or blanket ban engaging Article 6. The same illegality may defeat a tort claim substantially founded on the contract. A striking-out order is appropriate where the issue has already been fairly determined and the claim has no real prospect of success.

The claimant appealed from Master Leslie’s order of 11 June 2003 striking out his claim for wrongful dismissal and refusing permission to amend to plead conspiracy, unlawful interference and wrongful inducement of breach of contract.

The claimant had worked for the defendants while representing to the revenue authorities that he was self-employed. An Employment Tribunal later found that he was an employee but that the employment contract was tainted by illegality because of his dishonest participation in the arrangements. The Employment Appeal Tribunal dismissed his appeal, and permission to appeal further was refused.

The central issues were whether the Tribunal’s findings created issue estoppel or abuse of process, whether special circumstances justified relitigation, whether the illegality doctrine was compatible with Articles 6, 14 and Article 1 of the First Protocol, and whether the proposed tort claims were arguable.

1. Issue estoppel and abuse. The Employment Tribunal determined the central issue on which the High Court claim depended: whether the contract was enforceable. The later claim was founded on the same contract, although wrongful dismissal was not itself pursued before the Tribunal. There was no cause of action estoppel, and the claim was not necessarily Henderson abuse merely because the later cause of action could have been brought earlier. Nevertheless, issue estoppel applied to the identical issue of contractual enforceability.
2. Special circumstances. The principles in Arnold v National Westminster Bank Plc and Johnson v Gore Wood & Co. did not assist the claimant. The proposed Human Rights Act arguments, estoppel arguments and tort arguments were new or alternative submissions which could have been advanced earlier. They did not involve a subsequent change in the law or newly discovered facts. Allowing the issue to be reopened would also constitute abuse of process.
3. Illegality. Applying Hall v Woolston Leisure Ltd and Colen v Cebrian (UK) Ltd, illegality in the performance of an otherwise lawful contract affects enforceability only where the claimant knew of the facts making performance unlawful and actively and sufficiently participated. The question is fact-sensitive. The Tribunal’s findings, substantially based on admissions, satisfied that test.
4. Convention arguments. The illegality doctrine was substantive, not a procedural immunity or blanket ban. The claimant had received a fair preliminary hearing of the relevant facts and law. Article 6 was therefore not engaged; alternatively, the rule pursued legitimate aims and its application was proportionate. The claim was not a possession of which the claimant had been deprived for Article 1 of the First Protocol, or, alternatively, the same proportionality conclusion followed. Article 14 disclosed no arguable discrimination.
5. Proposed tort claims. The pleading identified no material facts supporting conspiracy or inducement. The alleged tort claims were also substantially founded on the same illegally performed contract. They were therefore not reasonably arguable, and permission to appeal the refusal to amend was refused.
6. Disposition. The Master had not erred in striking out the claim. The appeal was dismissed. Permission to appeal the refusal to amend was refused. Liberty to apply was granted within 28 days for ancillary matters and corrections.

1. High Court (Queen’s Bench Division): The appeal from Master Leslie’s order was dismissed. Permission to appeal refusal of the proposed tort amendment was refused.
2. Employment Appeal Tribunal: The claimant’s appeal from the Employment Tribunal was dismissed.
3. Court of Appeal: Permission to appeal from the Employment Appeal Tribunal was refused.