ANTHONY KING & Ors v KINGS SOLUTIONS GROUP LIMITED & Ors

The court considered applications to strike out parts of an unfair prejudice petition under section 994 of the Companies Act 2006 and for amendments to the defendants' points of defence. It held that many of the contested allegations in the petition amounted to a collateral attack on findings reached in earlier litigation (the "Bribery Claim") and were therefore barred by issue estoppel and/or amounted to an abuse of process. The judge applied the principles of issue estoppel and Henderson v Henderson abuse of process, and addressed the interplay with the rule in Hollington v Hewthorn and the court's procedural powers under CPR Part 3.4 and CPR Part 24 (reverse summary judgment). The court also decided that, on the facts, Article 40 of the Articles operated to make Mr King a "bad leaver" from 20 September 2017 following the factual findings in the Bribery Claim.

Accordingly the Strike Out Application was granted in large part and numerous paragraphs of the Points of Claim were struck out; limited amendments to the Points of Defence were permitted; and the application that KSSL be ordered to file points of defence or be debarred from defending was dismissed.

This is a first-instance decision on interlocutory applications in an unfair prejudice petition under section 994 Companies Act 2006. The Applicants (the second to fifth respondents) sought permission to amend their Amended Points of Defence and applied to strike out particular paragraphs of the Petitioners' Amended Points of Claim (or in the alternative for reverse summary judgment) on the ground that those allegations were effectively a collateral attack on findings already made by the High Court and affirmed in part on appeal in related litigation known in this judgment as the "Bribery Claim". Separately, the Petitioners applied for an order that KSSL (the Sixth Respondent), which had been joined as a nominal respondent, should be required to file a defence or be debarred from defending.

Background and procedural posture:

• The petition arises in complex, related litigation between the shareholder parties; earlier decisions include the judge's prior judgment in this petition ([2020] EWHC 2861 (Ch)), parallel trials including the Bribery Claim (trial judge: Mr Andrew Lenon QC) and subsequent Court of Appeal decisions ([2021] EWCA Civ 1943 and [2021] EWCA Civ 1350). The Bribery Claim resulted in factual findings that Mr Anthony King had accepted a benefit under the Range Rover arrangement, had acted dishonestly and breached duties as a director, and the judge in that claim awarded KSSL compensation; the Court of Appeal refused permission to appeal on those findings.

Nature of the applications and relief sought:

• (i) The Applicants sought permission to amend their Points of Defence (the Amendment Application) and sought to strike out specified paragraphs of the Points of Claim (the Strike Out Application) or alternatively reverse summary judgment on those issues, on the basis that they were bound by the findings in the Bribery Claim.
• (ii) The Petitioners sought an order that KSSL should file a defence to the petition within 28 days or be debarred from defending (the KSSL Application).

Issues framed by the court:

• whether the contested allegations in the petition were impermissible collateral attacks on issues finally determined in the Bribery Claim and therefore barred by issue estoppel or were an abuse of process;
• whether the rule in Hollington v Hewthorn prevented pleadings from relying on findings in earlier litigation and how that rule should be applied to proposed amendments;
• whether KSSL, as a nominal respondent, should be ordered to file points of defence or be debarred if it did not;
• constructional questions arising under the Subscription Agreement and the Articles, in particular whether Article 40 rendered Mr King a "bad leaver" as a consequence of findings in the Bribery Claim.

Court’s reasoning and conclusions (concise):

• The judge reviewed the law of cause of action estoppel, issue estoppel and abuse of process, drawing on authorities cited in the judgment, and concluded that many of the pleaded allegations in the petition (in particular those that directly challenged the Bribery Claim findings or alleged the Bribery Claim was pursued for an improper collateral purpose) were barred. The court was satisfied that permitting those allegations to proceed would be oppressive, amount to a second bite at the cherry and risk bringing the administration of justice into disrepute.
• The court held that the rule in Hollington v Hewthorn prevented the admission of earlier judges' factual findings as evidence to prove the same facts at trial, and accordingly disallowed some amendments where the applicants sought to rely on those findings as evidential matter; but the judge also permitted limited pleading of material necessary for fair notice where it did not purport to admit the earlier judge's findings as evidence of the facts themselves.
• On construction of Article 40 of the Articles, the court held that the term "guilty" of fraud or dishonesty in the bad leaver definition covered civil findings of fraud/dishonesty; applying the Bribery Claim findings, Mr King was a bad leaver with effect from 20 September 2017 and (subject to the court's further directions) the Articles' transfer mechanism could be invoked.
• The court refused the KSSL Application: KSSL had been joined as a nominal, neutral respondent and there was no standing order requiring it to file points of defence; it would be inappropriate to penalise KSSL by debarment or by ordering it to spend company funds to take sides.

Practical outcome: The Strike Out Application was granted in large part and specific paragraphs identified in the judgment were struck out; limited amendments to the Points of Defence were permitted as identified in the judgment; the KSSL Application was dismissed; consequential directions and a further case management conference were ordered.

The court granted the Applicants' Strike Out Application in large part and struck out the identified parts of the Points of Claim as involving an impermissible collateral attack on findings reached in the Bribery Claim or otherwise constituting an abuse of process; it permitted a defined set of amendments to the Points of Defence and dismissed the Petitioners' application to require KSSL to file a defence or be debarred. The primary rationale was that the contested allegations sought to re-litigate issues already necessarily determined against Mr King (issue estoppel) or would constitute Henderson v Henderson abuse of process; the court also gave a construction of Article 40 making Mr King a bad leaver with effect from 20 September 2017 on the basis of the Bribery Claim findings.

This first-instance judgment follows and takes account of earlier decisions in the same litigation: the judge's earlier interlocutory judgment in this petition [2020] EWHC 2861 (Ch); the Court of Appeal’s decision striking out further contested allegations on appeal [2021] EWCA Civ 1943; and the Court of Appeal’s oral refusal of permission to appeal in the Bribery Claim (reported in transcript and cited as [2021] EWCA Civ 1350). The Bribery Claim itself was tried at first instance (judgment summarized in the present decision) and consequential costs hearings produced a costs judgment (reported at [2021] 1 Costs LR 191).