Walbrook Trustees (Jersey) Ltd & Ors v William Simon Fattal & Ors

A later claim is not abusive merely because it could have been raised in earlier proceedings. The court must make a broad, merits-based judgment, considering all the circumstances and the public and private interests involved. Abuse will rarely be established without unjust harassment.

A party cannot ordinarily be criticised for omitting a claim which, on the information then available, would have been struck out. Disputed facts concerning subsequently discovered and allegedly concealed information should not be determined through an abuse application.

Election requires a choice between inconsistent rights or remedies and generally requires knowledge of all facts giving rise to that choice. Whether consent was sufficiently informed to waive a pre-emption right may therefore require a trial.

The appellants and respondents held interests, through family trusts, in a joint venture owning a substantial property. The joint venture agreement conferred pre-emption rights when a member wished to sell its share and separately restricted dispositions without consent.

The appellants consented in 1998 to a transfer ultimately benefiting one trust. They later discovered that an undisclosed sale to an intermediate purchaser had preceded that transfer. After Henderson J determined that the sale had occurred, the appellants advanced a claim seeking to enforce their pre-emption rights against the recipient trust.

Henderson J, in [2008] EWHC 991 (Ch), struck out that claim as an abuse because it could and should have been raised in proceedings begun in 2003. The appeal also raised an alternative case that the pre-emption rights had been waived by informed consent and a challenge to the allocation of trustees’ costs.

1. The appeals against the strike-out and the December 2007 costs order were allowed. The respondent’s notice asserting waiver was dismissed. The application for permission to appeal the July 2008 costs order was dismissed because it fell away following the substantive decision.

2. Whether successive proceedings are abusive requires the broad, merits-based judgment described in Johnson v Gore Wood & Co [2002] 2 AC 1. It is insufficient that the later claim could have been brought earlier. The court must consider all the circumstances, the burden resting upon the party alleging abuse. A trial judge’s evaluation may be disturbed on appeal where a relevant consideration was omitted, an irrelevant consideration was included, or the conclusion was clearly wrong.

3. The appellants could not fairly be criticised for failing to plead the pre-emption claim in 2003. On the facts then known, their consent to the transfer would have meant that such a claim disclosed no cause of action. They did not know, and could not reasonably have discovered, the alleged sale to the intermediate purchaser until 2006. That information had also been concealed from them. A party does not abuse the court’s process by waiting until it obtains information which prevents its claim from being struck out.

4. The alleged materiality of the intermediate purchaser’s involvement could not be rejected summarily. It raised disputed questions about the information necessary for informed consent and what the appellants would have done if correctly informed. Determining those questions on an abuse application would risk turning the application into a trial and generating costly satellite litigation.

5. The respondent had acquiesced in the trial of the preliminary issue establishing the intermediate sale, although that issue had no practical purpose except as a precursor to the new claim. The appellants had also disclosed the new claim promptly in their 2006 proceedings. These circumstances further supported allowing the claim to proceed.

6. Election is the exercise of a choice between inconsistent rights or remedies and generally requires knowledge of all facts giving rise to the choice. Fully informed consent under the disposition clause might have waived the pre-emption right. Whether the consent was informed and whether it covered one or two transactions depended upon evidence requiring a trial.

7. Under Civil Procedure Rules rule 48.4, trustees were generally entitled to recover properly incurred costs from the relevant trust funds. However, costs occasioned by the unreasonable conduct of the non-Fattal parties should not burden the Fattal trusts. The recoverable 80% of the trustees’ costs was therefore allocated equally among the three non-Fattal trusts.

1. Court of Appeal (Civil Division): Allowed the appeal against the order striking out the new claim and allowed the appeal against the December 2007 costs order. It dismissed the respondent’s notice and the application for permission to appeal the July 2008 costs order: [2009] EWCA Civ 297.

2. High Court of Justice, Chancery Division: Henderson J determined that a sale to the intermediate purchaser had occurred, but subsequently struck out the resulting pre-emption claim as an abuse of process: [2008] EWHC 991 (Ch). He also made the costs orders challenged in the Court of Appeal.