ANTHONY KING & Ors v KINGS SOLUTIONS GROUP LIMITED & Ors

Issue estoppel and abuse of process are distinct doctrines. Issue estoppel is a substantive rule of law, while abuse of process is a procedural control exercised through a broad, merits-based assessment of all the circumstances.

A party may be prevented from pursuing a collateral attack on findings made in earlier proceedings, even where the later proceedings involve different parties, if relitigation would be oppressive or bring the administration of justice into disrepute. A company joined to an unfair-prejudice petition is ordinarily a nominal and neutral party, although it may make representations concerning its interests and disclosure.

A bad-leaver provision referring to being proved guilty of fraud or dishonesty is not confined to criminal convictions. A civil court finding of fraudulent or dishonest conduct may satisfy the provision.

The petitioners sought relief under section 994 of the Companies Act 2006 concerning the affairs of Kings Solutions Group Limited and its subsidiary. The respondents applied to amend their defence and to strike out, or obtain reverse summary judgment on, allegations concerning the removal of Anthony King, the conduct and cost of earlier bribery proceedings, alleged improper purposes, and exclusion from management.

The petitioners also sought an unless order against the subsidiary for failing to serve Points of Defence. The court had to determine the effect of findings in earlier bribery proceedings, the construction of the company’s bad-leaver provisions, the proper role of a company joined to an unfair-prejudice petition, and whether the pleaded allegations constituted collateral attacks or had any real prospect of success.

1. Collateral attacks and issue estoppel. The allegations seeking to challenge findings that Anthony King had accepted a bribe, committed breaches of fiduciary duty, was liable to dismissal for gross misconduct, and had pursued an unsuccessful abuse-of-process counterclaim were barred as against him by issue estoppel. The same allegations were also an abuse of process because they sought to relitigate matters finally determined after a contested trial and appeal, without new evidence. Permitting that course would be oppressive and would bring the administration of justice into disrepute.
2. The same result applied to James and Susan King. Although they were not parties to the earlier proceedings, their proposed case concerned their son’s relationship with the company, they had not given relevant evidence, and allowing the allegations would in substance provide Anthony King with another opportunity to challenge the earlier findings.
3. Scope of abuse of process. Abuse of process may arise in later proceedings against different parties where the later case constitutes a collateral attack on an earlier decision. The court’s power under CPR Part 3.4(2)(b) extends to striking out part of a statement of case. The court did not need to decide the alternative reverse-summary-judgment application except in relation to exclusion from management.
4. Bad leaver. Article 40 of the Articles operated when Anthony King ceased to be an employee or director. The word “guilty” was sufficiently wide to include a civil finding of fraud or dishonest breach of fiduciary duty. Anthony King became a bad leaver on 20 September 2017, when he ceased to hold office and had ceased to be an employee. The deemed transfer mechanism did not depend on acceptance or action by the company.
5. The petitioners’ claim that exclusion from management was unfairly prejudicial had no real prospect of success. Anthony King’s removal for gross misconduct and bad-leaver status meant that the company could require transfer of his shares for £201. Claims concerning management accounts and the appointment of a founder director or observer were not determined and remained outstanding.
6. Company’s role. A company, and by parity of reasoning its subsidiary, is ordinarily a nominal and neutral respondent to an unfair-prejudice petition. It should not generally spend company funds defending disputes between shareholders, but may participate on disclosure and make representations concerning relief, creditors, or the company’s interests.
7. The KSSL Application was dismissed because KSSL had not been ordered to serve Points of Defence. The respondents were given permission to make specified amendments to their defence, while amendments relying on earlier judicial findings as evidential proof of the facts were refused under the rule in Hollington v Hewthorn.

This was a first-instance decision. The judgment records earlier decisions in the same wider litigation, including [2020] EWHC 2861 (Ch) and the Court of Appeal decision at [2021] EWCA Civ 1943, but those decisions were not appeals from the present judgment.