Abuse of process and prior arbitral awards

The Court of Appeal has held that this could be an abuse of process in Michael Wilson & Partners Limited v Sinclair, but only very rarely. The significance of this decision is that it confirmed that for the purpose of determining whether the court's process was being abused, an issue that had been decided in arbitration had the same status as an issue decided in litigation.

Abuse of process

The doctrine of abuse of process has been used to prevent claims being brought where the principles of res judicata do not apply because, as in this case, the parties to the present proceedings may not be the same as in the prior proceedings. There is now a well established line of authority which holds that in certain circumstances, it is an abuse of process for a party to bring proceedings against a defendant based on an issue which has been decided against the claimant in prior litigation to which the present defendant had not been a party.

In this case, an issue had been decided against the Claimant in arbitration against another party. The Claimant then commenced litigation against the Defendants, who had not been parties to the arbitration, on a basis directly contrary to the finding of the tribunal in the previous arbitration. At first instance, the judge struck the claim out as being an abuse of the court’s process.

On appeal, it was argued by the Claimant that the judge was wrong because an issue decided in a prior arbitration award cannot form the basis of an abuse of process application. The Court of Appeal had little hesitation in confirming several first instance decisions that it could.

The award as evidence

A rather more ingenious argument was then raised by the Defendants. This was that the prior arbitration award was not admissible as evidence. This was based on long established case law that findings of fact made by a judge are not admissible as evidence of those facts in a subsequent trial. It was opinion evidence, which was inadmissible. The Court or Appeal was clear that this was not the position here; there was no impediment to the court reviewing an arbitration award to determine whether the subsequent proceedings were an abuse of process. In this case, the award could be reviewed to determine whether the court proceedings constituted an improper collateral attack on the previous award.

Having determined the principles applicable, the Court of Appeal then applied these to the facts and reversed the judge at first instance who had struck the claim out. What appears to have influenced the Court of Appeal was that the present Defendants had been given the opportunity to participate in the previous arbitration but had declined. It appears that one of the reasons why the Defendants had refused to participate in the previous arbitration was to avoid binding decisions being made against them. So the Court of Appeal took the view that the Defendants could not have their cake and eat it. If they refused to take part in the arbitration so as not to be bound by the result, they could not then argue in the litigation that the issue in play had been decided against the Claimant so as to prevent it being brought in the litigation.

What is, perhaps, slightly less clear is whether the Court of Appeal would have reached the same decision had the Defendants not deliberately chosen not to participate in the arbitration.

Be that as it may, the lesson from this case is that an issue decided in for arbitration will have the same effect the purposes of an abuse of process application as an issue decided in litigation.