Baxendale-Walker v APL Management Ltd

Cause of action estoppel bars a direct challenge to the existence or enforceability of a cause of action already determined, including where the earlier result followed an admission. Issue estoppel requires identity of issue. The Henderson v Henderson principle separately prevents later reliance on matters which properly belonged to earlier litigation and could, with reasonable diligence, have been raised then, where doing so would abuse the court’s process. Reasonable diligence is assessed objectively by reference to what could have been discovered, not merely to the claimant’s personal knowledge or the understanding of his lawyers. A trustee’s breach of power does not generally make its contract void. On an illegality or public policy challenge, the court must consider proportionality. Procedural defects in possession proceedings are ordinarily governed by the court’s discretionary power to rectify procedural errors where this causes no injustice.

Two applications concerned proceedings brought by Paul Baxendale-Walker against APL Management Ltd. He sought to challenge the validity or enforceability of loans used to finance Amberleigh House and Burleigh House, and APL sought possession of Burleigh House for arrears under the Burleigh Loan.

The enforceability of the Burleigh Loan and mortgage had previously been determined in County Court proceedings. Mr Baxendale-Walker had admitted that he was bound by the relevant documents, subject to regulatory issues, and APL had obtained declarations that the loan and mortgage were binding and enforceable. The central issues were whether the new challenges were barred by res judicata or abuse of process, whether a separate profits claim had a real prospect of success, and whether procedural objections defeated the possession claim.

1. Burleigh Loan. The prior County Court declarations and Mr Baxendale-Walker’s admissions had the same effect, for res judicata purposes, as a judicial determination. His attempt to challenge enforceability was therefore barred by cause of action estoppel and issue estoppel. A direct challenge to the earlier determination would offend the policy against relitigating an identical claim.
2. Amberleigh Loan. Issue estoppel did not apply because its enforceability had not been decided in the County Court. Nevertheless, relying on the same allegations in later proceedings was an abuse of process. Those matters properly belonged to the earlier litigation and could have been raised with reasonable diligence. The diligence inquiry was objective. It was immaterial that the claimant personally did not know the evidence or that his lawyers had not appreciated its significance.
3. Merits. The alternative claims would also have been struck out or summarily dismissed. A contractual allocation of the risk of mistake prevented the alleged mistake from voiding the facility letters, and the alleged mistake did not make performance impossible. Any breach of APL’s powers as trustee would not make the loan contracts void. Even assuming defective constitution of the trusts, APL had capacity to contract and remained personally bound. Applying the proportionality approach in Patel v Mirza [2016] UKSC 42, illegality or public policy did not justify avoidance of the loans. The misrepresentation case had no reasonable prospect of proof.
4. Profits claim and possession claim. The profits claim was struck out, or summary judgment was granted, because standing required beneficiary status and the discretionary trusts gave no right to payment of profits. The pleaded procedural defects in the possession claim were either not defects or were rectifiable under CPR 3.10 without injustice. The possession order itself was left for determination at the consequentials hearing.