Playboy Club London Ltd v Banca Nazionale Del Lavoro Spa

A later claim is not an abuse of process merely because it could have been raised in earlier proceedings. The court must make a broad, merits-based assessment of whether the claim should have been raised earlier and whether its pursuit amounts to misuse of the court’s process.

A party may reasonably refrain from pleading fraud where the available evidence provides only a speculative or inferential basis. Significant new evidence obtained after the earlier trial may justify subsequent deceit proceedings. The defendant bears the burden of establishing manifest unfairness or unjust harassment, and the court will rarely prevent litigation of an issue not previously decided between the parties.

The Club claimed that an employee of BNL had dishonestly signed and sent a false credit reference concerning a casino customer. The Club had previously sued BNL for negligent misstatement concerning the same reference. It succeeded before the High Court in [2014] EWHC 2613 (QB), but that decision was reversed by the Court of Appeal in [2016] EWCA Civ 457. The reversal was subsequently confirmed by the Supreme Court in [2018] UKSC 43.

The Club commenced separate deceit proceedings after evidence emerged at the negligence trial, and later from another casino incident, which materially strengthened the allegation of dishonesty. HHJ Bird struck out the deceit claim as an abuse of process because it could and should have been pleaded before the negligence trial.

The central issue was whether pursuing the later deceit claim amounted to an abuse of process.

1. Appeal allowed. The deceit claim was not an abuse of process and should not have been struck out. Sales LJ gave the judgment of the court, with which Gloster LJ agreed.

2. The applicable principle was the broad, merits-based approach in Johnson v Gore-Wood & Co Ltd [2002] 1 AC 1. The fact that a claim could have been raised in earlier proceedings does not necessarily mean that it should have been raised. The court must consider all the public and private interests and all the circumstances. The decisive question is whether the later claim misuses the court’s process.

3. Although the Club could professionally have pleaded deceit before the negligence trial, it was not incumbent upon it to do so. Pleading fraud is a serious step with reputational, costs and case-management consequences. Courts properly discourage speculative fraud allegations lacking a solid evidential foundation. The Club therefore acted reasonably in declining to plead deceit on the comparatively weak and inferential material then available.

4. BNL had in substance maintained before and during the negligence trial that its employee’s signature was forged. That position provided an honest explanation for the irregularities surrounding the reference and was relevant to the Club’s caution about alleging dishonesty.

5. The evidence obtained during cross-examination concerning the employee’s proven lie about her signature on other bank documents, together with evidence of a similar incident involving another casino, was highly material. It substantially strengthened the proposed deceit claim and became available only after the material time. This was not a case in which a claimant tactically withheld existing material until it knew the result of its earlier claim.

6. The Club was not required to waive legal professional privilege concerning its earlier advice. The application fell to be determined from fair inferences drawn from the objective and known facts.

7. BNL bore the burden of showing that the later proceedings were manifestly unfair. That burden was not discharged. Deceit and negligence are distinct issues, and dishonesty had not previously been decided between the parties. Permitting the deceit claim to proceed caused no unjust harassment and accorded with the overriding objective in Civil Procedure Rules 1998 Part 1.

1. Court of Appeal (Civil Division): Allowed the Club’s appeal and set aside the order striking out the deceit claim as an abuse of process.

2. High Court, Queen’s Bench Division: HHJ Bird struck out the deceit claim on 16 December 2016, holding that it could and should have been pleaded before the trial of the earlier negligence claim.