Estoppel

Res judicata - Cause of action estoppel - Issue estoppel - Claimant being debtor of defendant bank

Sarwar v Royal Bank of Scotland plc: Chancery Division (Robin Knowles QC): 27 July 2011

The claimant was a customer of the defendant bank. He became a debtor of the defendant and, in August 1997, the defendant demanded repayment of the claimant's debit balance (the balance) and subsequently appointed receivers under security it held over the claimant's property.

The claimant issued proceedings seeking, inter alia, declarations, damages and an account in respect of the parties' relationship as banker and customer (the first trial). In the course of the trial, at which the claimant was acting in person, the judge asked the defendant about the interest rate applied to the overdraft on the claimant's account. The defendant submitted in response to that question that it had not charged an interest rate of 25%. The court and claimant relied on that information. The claimant's claim was subsequently dismissed.

In February 2001, permission to appeal was refused. In May 2007, the claimant issued an application seeking an account of all sums charged against his account. In July 2007, the court ordered the defendant to commence a detailed assessment of the balance. In November 2009, the defendant disclosed that it had erred in the calculation of the balance. However, it submitted that the calculation was res judicata. The court accepted that submission and held that the calculation of the balance could not be re-opened. The claimant appealed on the issues of res judicata and estoppel.

The question arose as to whether the claimant was bound by the starting figure for the balance, as found in August 1997, or whether it was open to him to re-open the balance. The defendant submitted that the claimant was estopped from doing so, first, on the basis of cause of action estoppel and, secondly, on the basis of issue estoppel. The defendant further submitted that, whatever was said of the trial, the claimant had failed to pursue the point of the balance on appeal and that there was consequently a risk of conflicting parallel judgments being created.

It submitted that it would be complex to deal with the issue, many years on, and that many memories would have been lost in that time. The claimant contended that, under the overriding objective of CPR Pt 1, there had been a heavy duty on the defendant to ensure that information supplied to the court had been accurate, by reason of the fact that the claimant had been acting in person and without access to the information that the defendant held.

The defendant submitted that for the purposes of examining whether there was an estoppel there was no difference between a litigant in person and a professionally represented party. The issues were, therefore: (i) whether cause of action estoppel had occurred; (ii) whether issue estoppel had occurred; (iii) whether, given the claimant's failure to pursue the point of the charge on appeal and the complexity of the issue and the passage of time, it was appropriate to reconsider it; (iv) whether the claimant had been guilty of an abuse of process by failing to raise the issue of whether the defendant had been entitled to charge interest at 25% at an earlier stage in the proceedings; and (v) whether there had been an especially onerous duty on the defendant to ensure that the information supplied to the court had been accurate, given that the claimant had appeared in person.

The appeal would be allowed.

(1) Cause of action estoppel was that which prevented a party to an action from asserting or denying, as against the other party, the existence of a particular cause of action, the existence or non-existence of which had been previously determined by a court of competent jurisdiction in previous litigation between the same parties.

A cause of action would be a factual situation whose existence allowed one person to obtain from the court a remedy against another. It arose where the cause of action in the former and latter proceedings was identical. In such cases, the bar would be absolute to all points decided unless fraud or collusion was alleged such as to justify setting aside the earlier judgment (see [9] of the judgment).

On the evidence, the claimant did not seek only to challenge the charging of interest for the period involved in the first trial, but for the period afterwards as well. Consequently he was not simply pursuing a particular of the same breach but an allegation of further breach or a challenge to the defendant's claim to be entitled to bring later amounts of interest into the account.

Further, the factual situation did not depend on whether or not the defendant charged or had been entitled to charge interest at a rate of 25%. Furthermore, in relation to the claim for an account in the first trial, interest at 25% had not even featured in the claim, since the defendant had stated that it had not charged interest at that rate (see [11]-[13] of the judgment). There could be no cause of action estoppel (see [10] of the judgment).

Thoday v Thoday [1964] 1 All ER 341 applied; Arnold v National Westminster Bank plc [1991] 3 All ER 41 applied; Letang v Cooper [1964] 2 All ER 929 considered; India (Republic) v India Steamship Co Ltd, The Indian Endurance, The Indian Grace [1993] 1 All ER 998 considered.

(2) Issue estoppel arose where if in litigation upon one cause of action any separate issue as to whether a particular condition had been fulfilled was determined by a court of competent jurisdiction, either upon evidence or upon admission by a party to the litigation, neither party could, in subsequent litigation between one another on any cause of action depending on the fulfilment of the identical condition, assert that the condition had been fulfilled if the court had decided that it had not been in the first litigation, or denied that it had been fulfilled if the court in the first litigation had determined that it had (see [9] of the judgment).

On the facts, it was clear that the first trial had proceeded on the basis that the defendant had been entitled to charge interest at 25%. The finding of the balance of the account in August 1997 had not been a fundamental finding in a case where the balance of the account had been at issue. It had only been necessary to conclude that an amount was due from the claimant to the defendant and unpaid, but not the precise amount.

Further, if the fact that the issue of entitlement to charge interest at 25% at the relevant time was not distinctly pleaded had been material in the case, then its materiality was further to confirm that the issue had not been decided. Furthermore, even if the conditions had otherwise been present for an issue estoppel, both the claimant and the court had been misled by wrong information provided by the defendant.

Clearly further evidence had become available. In the circumstances, the further information could not have been adduced by reasonable diligence in the first trial. Further, in respect to estoppel, the defendant itself would not be so bound (see [15], [22] of the judgment). There would be no issue estoppel (see [14] of the judgment).

Thoday v Thoday [1964] 1 All ER 341 applied; Arnold v National Westminster Bank plc [1991] 3 All ER 41 applied. (3) It had been impossible for the claimant to pursue the matter on appeal, since he had not known the truth at the time of the appeal. There would be no risk, therefore, of inconsistent parallel judgments. As far as the complexity of the case and the possible loss of memories was concerned, that was a difficulty of the defendant's making.

Furthermore, it was likely that the defendant would rely on documents, and, now that it had accepted that it had charged 25% interest, the issue would be primarily a question of law as to its entitlement to do so (see [18], [19] of the judgment).

(4) On the facts, there could be no sensible question of the instant case being one of abuse of process by the claimant. The court could not be satisfied that the question whether the defendant had been entitled to charge interest at 25% ought to have been raised in the first trial if at all. It was the defendant that, by putting the wrong information before the court, had caused the court and the claimant to leave the issue aside.

There was no way that the claimant could be fairly characterised as having abused process by raising the issue in the instant proceedings (see [17] of the judgment). There had been no abuse of process on the part of the claimant (see [16] of the judgment). Henderson v Henderson (1843) 3 Hare 100 considered.

(5) On the facts, it was the case that, litigant in person or not, it had been for the defendant to take all reasonable steps to ensure the accuracy of information supplied to the court in response to a request from the court, and to correct any inaccuracy promptly (see [21] of the judgment).

Johnson v Gore Wood & Co (a firm) [2002] All ER (D) 52 (May) applied. Andrew Lenon QC (instructed by Goddard Smith) for the claimant. Luke Harris (instructed by DLA Piper) for the defendant.