Principle of Res Judicata

Philip Yang, 11th – 12th November 2017.

Principle of Res Judicata
 Thrasyvoulou v Secretary of State for the Environment (1990) 2 A.C.
273, Lord Simon said:
 “As a means of resolution of civil contention litigation is certainly
preferable to personal violence. … The law itself is fully conscious of
the evil of protracted litigation. Our forensic system, with its machinery
of cross-examination of witnesses and forced disclosure of documents,
is characterised by a ruthless investigation of truth. Nevertheless the
law recognises that the process cannot go on indefinitely. … the
fundamental principle that it is in society’s interest that there should be
some end to litigation is seen most characteristically in the recognition
by our law - by every system of law - of the finality of a judgment. If the
judgment has been obtained by fraud or collusion it is considered as a
nullity and the law provides machinery whereby its nullity can be so
established. If the judgment has been obtained in consequence of some
procedural irregularity, it may sometimes be set aside. But such
exceptional cases apart, the judgment must be allowed to conclude the
matter. That, indeed, is one of society’s purposes in substituting the
lawsuit for the vendetta.”
Principle of Res Judicata
 Fraser v HLMAD Ltd (2006) EWCA Civ 738, Moore-Bick J:
 “It has been recognised for centuries that it is neither just nor in
the public interest that a person should be allowed to litigate the
same issue more than once. The principle is encapsulated in the
well known maxims nemo debet bis vexari pro una et eadem
causa and interest reipublicae ut sit finis litium. Out of these
broad principles of justice and policy, however, there have
developed three distinct principles of law usually referred to as
‘cause of action estoppel’, ‘issue estoppel’ and ‘abuse of
process’. The first two are aspects of estoppel by record since
they both depend on a prior decision by a court or tribunal of
competent jurisdiction on matters before it. The third involves the
exercise of the court's inherent jurisdiction to prevent abuse of its
process. This appeal is concerned with cause of action estoppel. ”
Principle of Res Judicata
 Pre-requisites:
 1) Judicial decision by competent court or tribunal;
 2) Final and binding;
 3) A decision “on the merits” (See in Desert Sun Loan Corp v
Hill (1996) 2 All ER 847 (CA), a decision on procedural issues
[namely, non-substantive issues] could be “on the merits” where:
[i] There was express submission of the procedural or
jurisdictional issue to the earlier court;
[ii] The specific issue had been raised before and decided by
that court, and
[iii] Caution was exercised in relation to practical
considerations, such as whether the issue was or should have
been fully aired before the earlier court.)
Principle of Res Judicata
 4) A fair hearing;
 5) Earlier decision right or wrong is irrelevant (Lord Simon in
Committee for Privileges the Ampthill Peerage (1977) AC 547:
 “A line can thus be drawn closing the account between the
contestants. Important though the issues may be, how extensive
soever the evidence, whatever the eagerness for further fray,
society says, ‘We have provided courts in which your rival
contentions have been heard. We have provided a code of law by
which they have been adjudged. Since judges and juries are fallible
human beings, we have provided appellate courts which do their
own fallible best to correct error. But in the end you must accept
what has been decided. Enough is enough.’ and the law echoes:
‘res judicata, the matter is adjudged.’ The judgment creates an
estoppel - which merely means that what has been decided must
be taken to be established as a fact, …”
Principle of Res Judicata
 Foreign judgment:
 The Civil Jurisdiction and Judgments Act 1982.
 The Good Challenger (2004) 1 Lloyd‘s Rep 67:
 “ The authorities show that in order to establish an issue
estoppel four conditions must be satisfied, namely (1) that
the judgment must be given by a foreign court of competent
jurisdiction; (2) that the judgment must be final and
conclusive and on the merits; (3) that there must be identity
of parties; and (4) that there must be identity of subject
matter, which means that the issue decided by the foreign
court must be the same as that arising in the English
proceedings … ”
Doctrine of Merger
 Redcar and Cleveland BC v Bainbridge Surtees v Middlesbrough
BC (2008) EWCA Civ 885, Mummery LJ said:
 “The doctrines of res judicata and merger are rooted in the need
for finality in litigation, both in the public interest and in the
interests of the litigants themselves. Whether he has won a
case or lost a case, a litigant is not normally entitled to reactivate
the same case against the same party in another action. Subject
to a right of appeal, a litigant is entitled to one go at his claim,
but no more … Merger is a defence where the litigant has
won his case and obtained a final judgment on a particular
cause of action. In general, he is not entitled to bring
another case against the same party seeking a greater
remedy for the same cause of action, because it has
‘merged in the judgment’ and been extinguished.”
Doctrine of Merger
 The rational is that merger of a cause of action occurs
automatically upon the recovery of judgment. Thus
the cause of action has extinguished. The claimant has
recovered and he can recover only once, irrespective
who is or could have been sued for it. Double-recovery
is not allowed.
 Parke B in King v Hoare (1844) 13 M & W 494
(explained why the identity of parties for the merger
doctrine is irrelevant):
 “There is but on cause of action. The merger it be
against a single person or many.”
Doctrine of Merger
 Commercial contracts of multi-party or joint or concurrent tortfeasor;
claimant’s decision to go against one and not all (deep-pocket;
economy in litigation; not all defendants are known; etc).
 Sensible that the claimant, if recovered in that action by a judgment
(not just an out-of-court settlement) cannot re-run the same cause of
action against another defendant (say, another joint tortfeasor).
 The defendant in prior judgment seeks recourse, indemnity or
contribution (under the《Civil Liability [Contribution] Act》1978)
from another joint tortfeasor.
 The Act in section 3 reads:“Judgment recovered against any person
liable in respect of any debt or damage shall not be a bar to an action …
against any other person who is (apart from any such bar) jointly liable
with him in respect of the same debt or damage.”
Cause of action estoppel
 Difference with the Doctrine of Merger:
 See《Finality in Litigation》by Jacob V. Van Develden, p.45,
that:
 “Apart from the general requirements that the judgment
relied upon must stem from a court of competent
jurisdiction and must remain in force, and that the
defendant must duly invoke the doctrine, the only condition
for application is that the new claim is based on a case of
action for which judgment was previously recovered. In
addition to this ‘identity of cause of action’-requirement,
and in contract to the doctrine of estoppel per rem
judicatam, the merger doctrine does not require that the
same parties are involved in the new and in the prior case;
no ‘identity of parties’-requirement applies.”
Cause of action estoppel
 All claims which arise from the same event and rely on the
same evidence make up one cause of action.
 The general rule is, a claim involves different heads of
damage, even if varying in size and nature, does not mean
that the claim involves more than on cause of action.
Longmore LJ said in Berezovsky v Abramovich(2011) EWCA
Civ 153 :“the additional or substitution of a new loss is by
no means necessarily the addition or substitution of a new
cause of action”.
 Importance to claim the whole remedy in one and only one
action
 In rem and in personam actions: The “Indian Grace” & The
“Indian Endurance” (1998) 1 Lloyd’s Rep 1
Issue estoppel
 Lord Keith in Arnold v National Westminster Bank plc (1991) 2 AC 93 :
 “Cause of action estoppel arises where the cause of action in the later
proceedings is identical to that in the earlier proceedings, the latter
having been between the same parties or their privies and having
involved the same subject matter. In such a case the bar is absolute in
relation to all points decided unless fraud or collusion is alleged, such as
to justify setting aside the earlier judgment. The discovery of new
factual matter which could not have been found out by reasonable
diligence for use in the earlier proceedings does not, according to the
law of England, permit the latter to be reopened …
 Issue estoppel may arise where a particular issue forming a necessary
ingredient in a cause of action has been litigated and decided and in
subsequent proceedings between the same parties involving a different
cause of action to which the same issue is relevant one of the parties
seeks to reopen that issue. ”
Issue estoppel
 Issue estoppel – effect on commercial contracts:

 1) Danger to long-term contract; Price Review

clause”; “Escalation Clause”; etc…

 2) Confidentiality in arbitration? - Ali Shipping

Corporation v. Shipyard Trogir（1998）1 Lloyd’s Rep
643
Abuse of process
 Terence Etherton LJ in Price v Nunn (2013) EWCA Civ 1002:
 “Res judicata operates as a substantive rule of law. It is to
be distinguished from the court’s exercise of its procedural
powers to control the court’s processes from being abused.
They are juridically very different even though there are
overlapping legal principles with the common underlying
purpose of limiting abusive and duplicative litigation. In the
case of the exercise of the court’s procedural powers to
prevent abuse the court should take a broad, merits-based
judgment taking account of the public and private interests
involved and all the facts of the case, focusing on the crucial
question whether, in all the circumstances, a party is
misusing or abusing the process of the court by seeking to
raise before it the issue which could have been raised before.”
Abuse of process
 Abuse in the context of finality of earlier judgment:
 1) Collateral attack-abuse – Ex.: Smith v Linskills (1996) 1
WLR 763 (Mr Smith convicted of burglary, then Mr Smith sued
his lawyer for negligence); C v D (2008) 1 Lloyd’s Rep 239
(London award; US losing party setting aside in US Court on
“manifest disregard of law” (US law governs ); Anti-suit inj.

 2) Henderson v Henderson Rule – In Johnson v Gore Wood

& Co. (2002) 2 AC 1, Lord Bingham said: “ The bringing of a
claim or the raising of a defence in later proceeding may, without
more, amount to abuse if the court is satisfied (the onus being on
the party alleging abuse) that the claim or defence should have
been raised in the earlier proceedings if it was to be raised at all. ”
Abuse of process
 Examples:
 1) Yat Tung Investment Co. Ltd v. Dao Heng Bank
Ltd (1975) AC 581
 2) House of Spring Gardens Ltd v Waite and Others
(1991) 1 QB 241 (防弹衣; deceits; Claimant sued Waite
in Ireland and prevailed; Waite alleged perjury/fraud;
rejected by Irish Court and did not pursued in CA;
enforcement in England; Waite & McLeod (son-in-law)
raised fraud again and was dismissed as abusive)
 3) Barrow v Bankside Members Agency Ltd (1996) 1
WLR 257 (Lloyd’s litigations; special circumstance)
Res judicata in arbitration
 Applicable under English law to arbitration:

 1) C v D (2008) 1 Lloyd’s Rep 239

 2) Nomihold Securities Inc v Mobile Telesystems Finance

SA (No.2) (2012) EWHC 130 (Comm) (Share Purchase
Agreement of 51% at US$150m; Option Agreement of 59%
at US$170m (call & put option); shares became worthless;
Nomihold exercised option & demand payment of
US$170m; MTF failed in Option Agreement in LCIA
arbitration; MTF started 2nd LCIA arbitration under SPA for
misrep; fraud; money laundry; etc.)
Res judicata in arbitration
 How about International Arbitration?
 1) Messy and unclear
 2) Res judicata – broad in common law jurisdictions
(different) but narrow in civil law jurisdictions
 3) Arbitrators of different legal background
 4) What law to govern res judicata? (i) procedural law of
the seat? (ii) law of the 1st award or judgment? (iii)
governing law of the contract?
 Res judicata / abuse of process – substantive rights (Aegis v
European Reinsurance [2003] 1 WLR 1041 PC) or procedural?
Res judicata in arbitration
 Award not binding on third parties (e.g. privies)
 Dangers of “Issue estoppel” or “abuse of process” in
chain contracts and multi-party cases (ICC 2016
statistic of 43%)
 Abuse of process (Henderson v Henderson Rule) –
application in party-autonomy international
arbitration in doubt?
 Issue estoppel – should the second arbitral tribunal be
bound by the first arbitral tribunal or only “persuasive
evidence” in party-autonomy international arbitration?
Res judicata in arbitration
 The future:
 1) Hard law – international convention?
 2) Soft law – IBA Rules?

 ILA (International Law Association) , Final Report on

Res Judicata and Arbitration and Resolution No.
1/2006, Toronto Conference (2006), available at
http://www.ila-hq.org