Koshy v Deg-Deutsche Investitions-Und Entwicklungsgesellschaft MBH & Anor

A litigant who knowingly chooses a limited appellate determination, after being offered a suitable first-instance fact-finding route, may be precluded from reopening the same matter in new proceedings. A technical election requires inconsistent courses and abandonment of one of them. Even without such an election, the informed procedural choice is material to abuse of process.

Material non-disclosure which might justify setting aside an interim freezing order does not automatically require a later reversal of a discretionary costs order. The costs question depends on all the circumstances in which the interim order was made and may require first-instance findings of fact. Finality, fairness to the opposing party and the public interest may make a further action abusive.

Mr Koshy brought a new action seeking to set aside Harman J’s 1998 costs order. The order followed the unsuccessful application by Mr Koshy and Lasco to discharge worldwide freezing orders obtained by DEG. He alleged that the orders had been procured by fraudulent misrepresentation or false evidence concerning DEG’s discovery of the true cost of Lasco’s investment.

Rimer J struck out the new action as an abuse of process in [2006] EWHC 17 (Ch). Mr Koshy appealed. The central issues were whether his choice to pursue an earlier, limited appeal against the costs order barred further proceedings, whether that earlier appeal had determined the claim on its merits, and whether the new action was in any event an abuse of process.

1. Appeal dismissed unanimously. Arden LJ, with whom Smith and Ward LJJ agreed, upheld the striking out of the new action.

2. A legal election requires a choice between inconsistent courses and abandonment of one of them. Mr Koshy’s choice was not necessarily an election in that technical sense. However, he had voluntarily accepted that the earlier appeal would be determined on the limited material he selected and, if unsuccessful, that he would not pursue alternative first-instance procedures. Read in context, that acceptance was wide enough to encompass a fresh action as well as remission of an issue to the Chancery Division.

3. The earlier Court of Appeal had determined the claim actually advanced on its merits. It rejected the contention that findings made at trial about the discovery of a telex automatically showed that Harman J’s discretionary costs order had been wrongly made. Although material non-disclosure may justify setting aside a without-notice freezing order, it does not necessarily follow that the costs of a failed application to discharge it must be reversed. A fair review of the costs discretion required defined factual issues and evidence from both parties at first instance. The claim to set aside the costs order therefore merged in the earlier appellate judgment and could not be brought again on the same or a wider basis.

4. Alternatively, the fresh action was a Henderson v Henderson abuse. Applying the broad, merits-based approach in Johnson v Gore Wood & Co, the court weighed the public interest in investigating alleged misinformation to a court and the substantial costs liability against finality, efficient use of resources and fairness to DEG. Mr Koshy had legal advice, time to decide, and an effective opportunity to pursue a fact-finding route. His financial position was not shown to have prevented that choice. Article 6 of the European Convention on Human Rights did not require further access to the court after that informed decision.

5. No further argument on the respondent’s notice was required, and no order was made on it.

• Court of Appeal (Civil Division): Dismissed Mr Koshy’s appeal and upheld the strike-out of the new action as an abuse of process: [2008] EWCA Civ 27.
• High Court (Chancery Division): Rimer J struck out the new action as an abuse of process: [2006] EWHC 17 (Ch).
• Court of Appeal (Civil Division): The earlier appeal against Harman J’s costs order was dismissed: [2003] EWCA Civ 1718.
• High Court: Harman J had ordered Mr Koshy and Lasco to pay, in any event, the costs of their unsuccessful application to discharge freezing orders.