Ward & Ors v Savill

A judgment in personam does not bind a stranger to the proceedings or prove, against that stranger, a fact which is fundamental to a later claim. This applies equally where the fact was embodied in a declaration of ownership. A non-party may be affected by an order in other respects, but must be allowed to contest an essential element of a separate claim. A declaration of beneficial ownership is capable of operating in rem, but this is exceptional and depends on analysis of the judgment and order. The order should make that effect clear. A default judgment will not ordinarily be treated as binding the whole world without clear indication that this was intended.

The claimants had invested in film development schemes and obtained default judgment against seven defendants in earlier proceedings. The order declared that they had beneficial interests in the invested monies and were entitled to trace into property representing those monies and their proceeds.

The defendant, who was not a party to the earlier proceedings, owned property which the claimants alleged had been acquired with traceable funds. The parties agreed that the court should determine whether the earlier declarations enabled the claimants to found their proprietary claim without re-pleading and proving the facts relied on to obtain them. The issues were whether the earlier order affected the defendant as a non-party and whether it operated in rem.

1. The preliminary issue was answered against the claimants. The earlier declaratory judgments did not enable the claimants to found their proprietary claim against the defendant without re-pleading and proving their beneficial interest in the invested funds.
2. A person who was not a party to earlier proceedings is not bound by the judgment in the sense of being estopped from challenging its conclusions. Under the principle explained in Hollington v F Hewthorn & Co Ltd [1943] 1 KB 587 and Calyon v Michailaidis [2009] UKPC 34, the earlier decision cannot be used as evidence proving a fact which is essential to a subsequent claim against that person.
3. No distinction exists between a fact found in reasoning and the same matter embodied in declaratory relief. The reasons for the rule—avoiding re-trial difficulties and procedural unfairness to a person who had no opportunity to defend the issue—apply equally in both situations.
4. Mulkerrins v PricewaterhouseCoopers [2003] UKHL 41 concerned ownership of a cause of action, not proof of an essential ingredient of the claim against the non-party. It therefore did not establish a wider principle that a declaration binds or affects a stranger unless set aside. Behbehani v Al Sahoud [2019] EWCA Civ 2301 concerned enforcement by receivership and did not make the underlying beneficial-ownership finding conclusive against a third party.
5. A judgment in rem determines the status, title or disposition of property against the whole world. A declaration of ownership is capable of having that effect, but such jurisdiction is rare because of the risk of injustice. The order must make the intended in rem effect clear, expressly or by necessary inference.
6. The 2018 Order was limited by its wording to property in the hands of the original seven defendants. The fact that the judge knew of possible claims against others, and considered prejudice to third parties, did not establish an intention to determine their rights. The order therefore operated in personam and could not establish the claimants’ beneficial ownership against the defendant.

First-instance determination of an agreed preliminary issue. No prior appellate decision is stated in the judgment.