Pricewaterhousecoopers LLP v BTI 2014 LLC

Where later proceedings involve different parties, relitigation of issues decided earlier is not, without more, an abuse of process. Abuse arises only where relitigation would be manifestly unfair to a party or would bring the administration of justice into disrepute. Such a finding will be rare or exceptional.

The court must undertake a close, merits-based assessment of all the circumstances. A party’s prior attempt to secure a joint trial, the other party’s opposition to that course, and subsequent consent orders may provide a compelling justification for separate proceedings despite the risk of inconsistent findings. A complex, fact-sensitive negligence claim should not be summarily dismissed where disclosure and materially different factual, expert and witness evidence may affect the result.

BTI, as assignee of a company formerly known as AWA, claimed damages from PwC for alleged negligence in auditing AWA’s 2007 and 2008 accounts. Large dividends had been paid to AWA’s parent company against the background of those audits. In earlier proceedings against the parent company and AWA’s directors, the High Court had held that the relevant accounts were properly prepared and that the dividends complied with the applicable statutory requirements.

Fancourt J dismissed PwC’s application to strike out BTI’s negligence claim for abuse of process or to grant summary judgment: [2019] EWHC 3034 (Ch). PwC appealed, contending that the claim improperly sought findings inconsistent with the earlier judgment and had no real prospect of success. The central questions were whether the claim was an abusive collateral attack and whether it should otherwise be summarily dismissed.

1. Appeal dismissed. Flaux LJ, with whom Coulson and Henderson LJJ agreed, held that BTI’s negligence claim was neither an abuse of process nor bound to fail.

2. Where the parties to the later proceedings differ from those in the earlier proceedings, issue estoppel and res judicata do not apply. Relitigation or a collateral challenge to earlier findings does not by itself constitute abuse. Applying the test stated in Secretary of State for Trade and Industry v Bairstow [2003] EWCA Civ 321, abuse arises only if relitigation would be manifestly unfair to a party to the later proceedings or would bring the administration of justice into disrepute. Only a rare or exceptional case will satisfy that test.

3. Manifest unfairness to PwC did not arise because PwC was not a party to the earlier proceedings. Nor would the administration of justice be brought into disrepute. BTI had promptly sought a joint trial precisely because it foresaw the risk of inconsistent findings. PwC opposed that course and later consented both to dismissal of the joint-trial application and to a stay of the negligence proceedings pending determination of the earlier claim. Those orders implicitly contemplated that the PwC proceedings might subsequently continue.

4. That procedural history supplied a good reason for permitting BTI to seek findings inconsistent with the earlier judgment. Having resisted the joint trial, PwC could not rely on the resulting risk of inconsistency to establish abuse. Lack of mutuality also weighed against PwC: the earlier findings bound neither party, and it would be unfairly asymmetric to treat BTI as effectively bound while leaving PwC free from adverse findings. Laing v Taylor Walton [2007] EWCA Civ 1146 and Art & Antiques Ltd v Richards [2013] EWHC 3361 (Comm) were distinguishable because they lacked the material case-management history and consent orders present here.

5. The summary judgment ground also failed. The earlier findings were neither binding nor admissible at the later trial. The later proceedings were likely to involve new allegations, PwC’s audit files, different expert evidence and evidence from PwC personnel who had not testified previously. The pleaded reliance and causation case was arguable, including the contention that the directors relied on the audited accounts and that an alleged error was carried into the interim accounts.

6. A complex and fact-sensitive auditors’ negligence claim should not be dismissed at its outset where disclosure has not occurred and no defence has been served. The complaints had to be assessed cumulatively. Nor was it appropriate to divide the interlinked claim and strike out only those allegations overlapping with the earlier proceedings.

1. Court of Appeal (Civil Division): The appeal was dismissed: [2021] EWCA Civ 9. The Court upheld the refusal to strike out the negligence claim or grant summary judgment.

2. High Court, Business and Property Courts, Business List (ChD): Fancourt J dismissed PwC’s application to strike out the claim under the Civil Procedure Rules 1998 or to grant summary judgment: [2019] EWHC 3034 (Ch).