Simms v Conlon & Anor

Findings of fact made in earlier proceedings between different parties are generally inadmissible as evidence of those facts. Preventing a party from challenging them as an abuse of process requires an additional factor showing manifest unfairness or harm to the administration of justice.

A defendant who merely denies serious allegations is not ordinarily mounting an abusive collateral attack. The claimant should plead and prove the particular misconduct relied upon.

Prospective partners must disclose material facts within their knowledge which are unknown to the other negotiating parties. A non-fraudulent breach generally supports rescission. Fraudulent non-disclosure is an implied representation that nothing relevant exists to disclose and may support damages in deceit.

The appellant solicitor had previously been found dishonest by the Solicitors’ Disciplinary Tribunal. The Divisional Court dismissed his appeal. His former partners subsequently alleged that his fraudulent failure to disclose his dishonest conduct had induced them to enter partnership agreements.

Lawrence Collins J held in [2006] EWHC 401 (Ch) that the disciplinary and Divisional Court findings were inadmissible as proof of the underlying facts. He nevertheless held that denying those findings was an abuse of process. He also made findings of dishonesty after the appellant had been cross-examined on selected, unpleaded parts of the disciplinary material.

The appeal concerned the duty of disclosure between prospective partners, the remedies for fraudulent non-disclosure, the admissibility of earlier findings, abuse of process and procedural fairness.

1. Appeal allowed unanimously. The order below was to be set aside and the court was minded, subject to further submissions, to direct a retrial of the non-disclosure issues.
2. Prospective partners owe each other a duty to disclose all material facts known to one party but not known to the others. Partnership agreements are contracts of utmost good faith, to which caveat emptor does not apply. Suspicion of misconduct does not amount to knowledge of it: per Jonathan Parker LJ, with whom Moore-Bick and Ward LJJ agreed, at paras 126–128.
3. Absent fraud, breach of that disclosure duty generally gives a right to rescission. Where non-disclosure is fraudulent and causes loss, damages are recoverable in deceit. Silence where there is a duty to speak amounts to an implied representation that there is nothing relevant to disclose: paras 129–131.
4. The rule in Hollington v Hewthorn remained binding. Findings of the disciplinary tribunal and the Divisional Court were therefore inadmissible as evidence of the underlying facts: paras 132–135.
5. Challenging earlier findings involving different parties is an abuse only where relitigation would be manifestly unfair or would bring the administration of justice into disrepute. The jurisdiction is fact-sensitive and no universal formula exists. Courts should be particularly cautious where a defendant merely continues to deny serious allegations and has not initiated proceedings to attack the earlier decision: paras 137–153 and 165–174.
6. No abuse was established. The respondents could have selected, pleaded and proved particular instances of dishonesty. Their interests did not justify preventing the appellant from defending allegations arising in different proceedings with different basic issues. Ward LJ added that preventing a defence altogether caused greater unfairness than requiring the claimants to prove fraud: paras 149–153 and 176–178.
7. The trial was procedurally unfair. The appellant had been cross-examined without prior warning about selected disciplinary findings whose supporting material was not before the court. An adverse credibility finding could not itself establish facts contrary to his evidence. There was insufficient admissible evidence to sustain the findings of dishonesty: paras 154–162.

• Court of Appeal (Civil Division): The appeal was allowed unanimously. The order below was to be set aside, with a proposed retrial of the non-disclosure issues.
• High Court, Chancery Division: Lawrence Collins J held in [2006] EWHC 401 (Ch) that the earlier findings were inadmissible but that denying them was an abuse of process. He declared that the appellant’s fraudulent non-disclosure had induced the partnership agreements and ordered damages to be assessed.