Nicholas William Nicholson v Raazia Masood & Ors

A collateral challenge to an earlier decision is not automatically an abuse of process. In later civil proceedings involving different parties, or parties whose interests were not sufficiently aligned, relitigation will ordinarily be abusive only where it would be manifestly unfair or would bring the administration of justice into disrepute.

The court must examine the issues decided earlier, the parties’ interests and control of the earlier proceedings, and the fairness and practical consequences of relitigation. A finding made as an alternative ground may still be a judicial determination. On summary judgment, a pleaded case should proceed where it has a realistic prospect of success and a trial may clarify the evidence; the court must not conduct a mini-trial.

The applicant, the joint liquidator of Frencheye (Stratford) Limited, brought a section 212 application against three former or alleged directors concerning trading receipts paid into a connected company’s bank account.

The respondents relied on a case that the company had not traded from premises at Westfield Stratford. The liquidator applied under CPR 3.4(2)(b) to strike out that defence as a collateral attack on findings made by a magistrates’ court in 2017 when refusing an application concerning the company’s liability for business rates. The respondents cross-applied to strike out parts of the points of claim for abuse of process or obtain reverse summary judgment under CPR 24.3.

The central issues were whether the earlier judgment determined that the company traded from the premises and whether relitigation was abusive, and whether the liquidator’s pleaded case had a real prospect of success.

1. The Liquidator’s Application dismissed. The district judge’s alternative findings that the company occupied the premises were judicial determinations, notwithstanding that earlier grounds were independently sufficient to dispose of the application. In context, the findings also established that the company, rather than the allegedly licensed companies, traded from the premises.
2. The respondents’ defence was not barred by issue estoppel because the parties and issues were not the same. The local authority in the earlier proceedings was not the applicant here. Although Mrs Masood was plainly a privy, Mr Azam’s status and control of the earlier proceedings were unresolved, and Ms Drozdziol had not participated in them.
3. Relitigation was not abusive under the collateral-attack principles. The earlier proceedings concerned rateable occupation, not the nature and extent of the company’s trading or the respondents’ personal liability for several million pounds. The respondents could not reasonably have anticipated that the earlier proceedings would determine the central issue in this claim. It was neither manifestly unfair to require the liquidator to prove the case nor likely to bring the administration of justice into disrepute. The fact that a trial would in any event be required, including as against Ms Drozdziol, reinforced that conclusion.
4. The Respondents’ Application also dismissed. The points of claim adequately pleaded that the company operated the business, identified the trading receipts and alleged the diversion of the balance. The earlier correspondence did not prevent the liquidator from advancing a revised understanding of the company’s affairs, since a liquidator’s knowledge may develop as investigations proceed.
5. The pleaded case raised a triable issue. The respondents’ denial that the company traded was a matter for trial, and the court could not resolve the evidential dispute on summary judgment. Draft directions were to be lodged for consideration at the consequentials hearing if not agreed.

First-instance decision. The judgment records earlier proceedings before a magistrates’ court, which made findings on rateable occupation on 3 March 2017, but this was not an appeal from that decision.