Ward (Liquidator of Brady Property Developments Ltd) v Hutt & Ors

After discontinuing a claim, a claimant must obtain permission under CPR rule 38.7 before issuing another claim against the same defendant arising from the same or substantially the same facts. Different capacities do not prevent defendants being the same where the alleged liability is personal. Failure to obtain permission makes the fresh claim an irregularity, not automatically a nullity, but the court may strike it out under CPR rule 3.4(2)(c).

Permission is discretionary and is governed by the public interest in finality, assessed through the circumstances of the case. A claimant who issues without permission before limitation expires should not thereby obtain a procedural advantage. The Henderson v Henderson principle does not apply where the earlier claim was discontinued without judgment. A fresh claim may nevertheless be an abuse of process where its practical economic effect provides no meaningful benefit to creditors.

The liquidator of Brady Property Developments Ltd brought an earlier misfeasance and breach of duty claim against the first and second respondents as directors. That claim was discontinued during trial after the liquidator accepted that the impugned transactions had caused the company no loss.

The following day the liquidator issued a fresh claim against the first and second respondents, and the third respondent, seeking recovery of a payment as a preference. The first and second respondents applied to strike out the fresh claim, relying on CPR rule 38.7, the rule in Henderson v Henderson, abuse of process and, alternatively, summary judgment. The central issues were whether rule 38.7 applied, the effect of non-compliance, whether permission should be granted retrospectively, and whether the claim was abusive.

1. CPR rule 38.7 applied. The first and second respondents were the same defendants despite being sued in a different capacity. An English partnership has no separate legal personality, so a claim against it is a claim against the individual partners. The fresh preference claim also arose from substantially the same facts as the discontinued claim. The distinction between the legal ingredients of misfeasance and preference was minor in the context of the underlying transactions.
2. Non-compliance was an irregularity, not a nullity. CPR rule 3.10 meant that failure to obtain permission did not automatically invalidate the fresh proceedings. The claim was nevertheless liable to be struck out under CPR rule 3.4(2)(c).
3. Permission under rule 38.7. The court’s discretion was informed by the public interest in finality. The phrase exceptional circumstances, appearing in commentary and earlier reasoning, was not a rule-imposed test. The relevant question was whether the explanation for reintroducing the abandoned claim overcame the court’s natural disinclination to permit it. A material change of circumstances, important new evidence, defendant misconduct or a retrospective change in the law might justify permission. Where limitation had expired, permission would normally be refused. A claimant could not improve its position by issuing without permission before limitation expired.
4. Res judicata and abuse. The rule in Henderson v Henderson forms part of the rules of res judicata and presupposes an earlier adjudication. It therefore did not apply to a claim discontinued without decision. CPR rule 38.7 supplied the relevant control in that situation. Independently, however, the fresh claim was an abuse of process because any recovery would largely circulate back to the respondents through the statutory distribution scheme, while the principal economic benefit appeared likely to be the liquidator’s recovery of fees.
5. The claim against the first and second respondents was struck out. The alternative summary-judgment application was not determined because the strike-out decision disposed of the matter.