Smith & Anor v QBE Insurance (Europe) Ltd & Ors

A perfected final judgment remains final, even where it arose from an admission, default, consent or other procedure without adjudication on the merits. A party cannot use Civil Procedure Rules 1998, rule 3.1(7), simply to obtain a different judgment after deciding that the original case was wrongly formulated. Re-opening requires the established and exceptional grounds applicable to final judgments, including fraud proved with strict particularity and supported by qualifying fresh evidence. Facts admitted in earlier proceedings may found cause of action estoppel between the parties or their privies, and the estoppel applies even where the earlier judgment followed an admission or default.

The joint liquidators of Surety Guarantee Consultants Ltd sought directions concerning competing proprietary claims to mixed funds collected during the company’s liquidation. Templeton Insurance Ltd had previously obtained a judgment against Surety Guarantee Consultants Ltd for repayment of $371,498 and interest, based on an admitted claim that the money represented wrongly paid commission.

Templeton later advanced a different proprietary claim in the Companies Court, alleging that the same sum was a fraudulently diverted insurance premium. It obtained an order under rule 3.1(7) varying the earlier judgment. QBE and Markel applied to set that order aside and to strike out Templeton’s new pleading on the grounds of finality and cause of action estoppel.

1. QBE and Markel had standing under rule 40.9 of the Civil Procedure Rules 1998 because they were directly affected by the order varying the earlier judgment. Mr Justice Norris set aside Master Foster’s order, dismissed the application on which it was made, and restored the 2007 Judgment.

2. Rule 3.1(7), which permits an order to be varied or revoked, should not be used to reopen a perfected final judgment disposing of the case. The judge considered that the respondents were probably correct that the rule did not confer such jurisdiction, but decided the application on the alternative basis that exercising any such power would be wrong.

3. The established principles governing final judgments are limited and founded on the public policy that litigation must end. A party’s own mistake in selecting and pleading the wrong claim is not erroneous information misleading the court. Nor does it matter that the final judgment followed an admission rather than a contested adjudication: a final order remains final whether based on admission, default, consent or trial.

4. Templeton’s earlier pleaded case and its later proprietary case concerned materially different factual contexts, legal relationships and causes of action. Nevertheless, the admitted facts in the earlier proceedings were conclusive between the parties and their privies. Cause of action estoppel therefore prevented Templeton from advancing the inconsistent case while the 2007 Judgment stood. The guidance that the court should adopt a broad, merits-based approach did not displace the applicable rules of estoppel.

5. There was no real prospect of setting aside the judgment for fraud. The alleged dishonest book entry was not a statement made by SGC to Templeton on which Templeton relied in formulating its claim. Templeton had its own records, chose for tactical reasons not to investigate them, and pleaded the wrong transaction. Fraud sufficient to impeach a judgment had not been pleaded with the necessary particularity and could not be established on these facts. In any event, the material was available through reasonable diligence before judgment, so it did not satisfy the applicable fresh-evidence requirement.

6. Paragraphs 5 to 10 of Templeton’s Points of Claim were struck out because there was no real prospect of obtaining the relief sought on an inconsistent case barred by estoppel.

Not an appeal. The judgment determined applications in Companies Court proceedings arising from a prior Queen’s Bench judgment and set aside an order made by Master Foster under rule 3.1(7) of the Civil Procedure Rules 1998.