Otkritie Capital International Ltd & Anor v threadneedle Asset Management Ltd & Anor

The Aldi guidelines are mandatory. A party contemplating later proceedings arising from substantially the same facts against a person not joined to existing proceedings must seek case-management directions as soon as reasonably possible.

Non-compliance does not automatically make the later claim an abuse of process. The court must make a broad, merits-based assessment of all the circumstances. It may examine what probably would have happened had directions been sought, the seriousness of the breach, any specific prejudice or oppression, the public interest in efficient litigation, access to justice and proportionality. Generalised prejudice is insufficient.

Even where the later claim survives, the court may mark serious non-compliance through a substantial adverse costs order.

Otkritie successfully pursued proceedings against individuals involved in a fraud, including an employee of Threadneedle, but did not join Threadneedle or seek case-management directions concerning a possible later claim against it. Otkritie subsequently commenced a second action alleging Threadneedle's vicarious liability.

Knowles J, in [2015] EWHC 2329 (Comm), found that Otkritie had breached the Aldi guidelines. He nevertheless refused to strike out the second action because the Commercial Court probably would not have required Threadneedle's joinder had directions been sought. He ordered Otkritie to pay 75% of Threadneedle's costs of the unsuccessful application.

Threadneedle appealed against the refusal to strike out. Otkritie cross-appealed against the costs order and served a respondent's notice challenging the finding of non-compliance. The central issue was how breach of the Aldi guidelines affects the broad, merits-based assessment of whether later proceedings are an abuse of process.

1. Both appeals and the respondent's notice were dismissed. Arden LJ gave the leading judgment. Henderson LJ and Sir Christopher Clarke agreed, although Sir Christopher considered the costs order close to the boundary of the judge's discretion.

2. The Aldi guidelines are mandatory and admit no exception. Their absence from the Civil Procedure Rules or a Practice Direction does not reduce their force. A party contemplating a later claim arising from substantially the same facts against a person not joined to existing proceedings must seek management directions as soon as reasonably possible. Otkritie should have done so when it joined Threadneedle's employee and appreciated Threadneedle's potential liability: paras 47–50.

3. Breach of the guidelines does not mandate strike-out. Consistently with Johnson v Gore Wood & Co, the court must make a broad, merits-based judgment about whether the later proceedings are unfair, oppressive or otherwise abusive. The mandatory nature of the guidelines makes non-compliance an important factor, but it is not dispositive: paras 44 and 49.

4. The judge was entitled to assess the seriousness of the breach by asking what probably would have happened had directions been sought. That inquiry was permissible where it could properly be answered. The experienced Commercial Court judge was entitled to find that Threadneedle probably would not have been joined because an early trial was required and joinder risked delay: paras 50–52.

5. The court also had to assess actual prejudice. Generalised prejudice was insufficient. Threadneedle identified no specific prejudice warranting strike-out, knew of the first action and could have sought to intervene. Strike-out would confer a windfall by preventing adjudication of Otkritie's claim altogether. In those circumstances it would be neither appropriate nor proportionate: para 53.

6. The judge was entitled to mark Otkritie's serious litigation misconduct through costs. Although Otkritie successfully resisted strike-out, he could deny it its own costs and require it to pay 75% of Threadneedle's costs. That substantial order remained within the permissible margin of discretion: paras 63–67.

• Court of Appeal (Civil Division): In [2017] EWCA Civ 274, dismissed Threadneedle's appeal against the refusal to strike out, dismissed Otkritie's respondent's notice, and dismissed Otkritie's cross-appeal against costs.
• High Court, Queen's Bench Division, Commercial Court: Knowles J, in [2015] EWHC 2329 (Comm), refused to strike out the second action as an abuse of process but ordered Otkritie to pay 75% of Threadneedle's costs of the application.