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When is litigation after arbitration an abuse?

Michael Wilson & Partners Limited v Sinclair [2017] FICR 3

Court of Appeal clarifies interplay between arbitration and litigation.

The Court of Appeal has considered the use of findings in arbitral awards in later related litigation and whether that litigation is an abuse of process. The court said that findings in awards cannot be admitted in later litigation as conclusive of the facts, but can be admitted on an application that the litigation is an abuse of process: Michael Wilson & Partners Limited v Sinclair and others [2017] FICR 3; [2017] EWCA Civ 3.

Their lordships said prevention of abuse of process serves the twin polices of ensuring no person is vexed twice for the same reason and the public interest in not having issues repeatedly litigated. There is no prima facie assumption that proceedings on issues that have been already decided amount to an abuse, and the court’s power is only used where justice and public policy demand it. To determine whether proceedings are abusive the court must engage in a close ‘merits based’ analysis of the facts. This will take into account the private and public interests involved, and will focus on the crucial question: whether in all the circumstances a party is abusing or misusing the court’s process.

It will rarely be an abuse of process if the parties or their privies are different in the two proceedings, unless it would be manifestly unfair to a party in the later proceedings that the same issues should be relitigated, or if there is an element of vexation in the use of litigation for an improper purpose.

It will probably be a rare case, and perhaps a very rare case, where court proceedings against a non-party to an arbitration can be said to be an abuse of process.

There is no ‘hard edged’ rule that a prior arbitration award cannot found an argument that subsequent litigation is an abuse of process. Although a court will be cautious where the strike out application is founded on a prior arbitration award, that should not inhibit the duty to act in appropriate circumstances.

Plaintiffs here had previously lost an arbitration on the question of who owned shares. They then commenced this litigation against a defendant whom they had invited to be party to the arbitration but who had refused. In the litigation, they made allegations contrary to the findings of the arbitral tribunal in the award, and the defendant made an application that the proceedings be struck out as an abuse of process.

The Court of Appeal said the proceedings were not an abuse. It said there is no general rule preventing a party inviting a court to arrive at a decision inconsistent with one arrived at in another case. Highly material here, if not dispositive, was the fact that the defendant had been invited but had refused to be joined to the arbitration. Having declined the chance and not being bound by any adverse findings by the tribunal, he could not now claim the benefit of favourable findings. There was a lack of mutuality.