South Somerset District Council v Tonstate (Yeovil Leisure) Ltd; Tonstate (Yeovil Leisure) Ltd v South Somerset District Council

Issue estoppel – Abuse of process – Contract claim by council for breach of development agreement – Consent order made for payment of sums due under agreement – Developer seeking to amend defence to claim agreement unenforceable – Developer also bringing claim that agreement contravening competition legislation – Whether developer’s contentions barred by issue estoppel – Whether abuse of process – Amendments allowed – Application to strike out competition claim refusedIn the first action (the contract action), the claimant council brought proceedings against the defendant developer for breach of a development agreement, pursuant to which they had transferred land to the developer on which it was to construct and operate a new car park for shoppers. By a county court consent order of March 2008, the district judge ordered the defendant to pay specified sums to the council in respect of parking charges for the accounting periods from 2003 to 2007 and to provide audited accounts for those years, as required by the agreement. An issue remained as to whether an injunction should be granted to prevent the developer from closing the car park; it asserted that it was not obliged, under the agreement, to keep the car park open.The contract action was stayed after the developer indicated its intention to bring a second action (the competition action) against the council to establish that the agreement was void because it infringed the Competition Act 1998. In that action, it sought a declaration that, since the council independently operated their own car parks, an agreement that limited the developer’s freedom to set its own rates of charge restricted competition, contrary to the provisions of the 1998 Act. The developer also applied to lift the stay in the contract action and to make far-reaching amendments to its defence, claiming that the agreement was unenforceable on various other grounds, including that the council’s actions in entering into the agreement were ultra vires as a breach of the Road Traffic Regulation Act 1984 and the Local Government Act 1972.Both actions were transferred to the High Court. The council resisted the developer’s application to amend its defence in the contract action and applied to strike out the entire claim in the competition action. They contended that the developer’s contentions were barred by issue estoppel by reason of the consent order, which was based on the agreement being valid and enforceable, or were an abuse of process.Held: The application to amend the defence in the contract action was allowed and the stay was lifted; the application to strike out the claim in the competition action was dismissed.(1) Issue estoppel did not apply so broadly as to bar all the arguments now raised by the developer. The purpose of issue estoppel was to bring finality to litigation, and thus legal certainty, out of justice to the parties. The courts should not adopt an interpretation of the principle that ignored the practical realities of litigation and contributed to oppression rather than justice. Although a consent order was to be treated like a judgment, it was necessary to identify which issues the parties sought to advance and then consider in respect of each issue whether it had been “determined”, in the proper sense of that term, by the consent order. None of the grounds raised by the developer in objection to the agreement had been either expressly raised or implicitly determined in the county court prior to the consent order. That order could not be regarded as implying that the agreement was not ultra vires by reference to the 1984 or 1972 Acts or that it did not infringe the prohibitions of the 1998 Act. It would be fallacious to confuse the result that the party said to be estopped subsequently wanted to achieve with the determination of issues implicit in the previous judgment. Accordingly, none of the issues put forward as amendments to the developer’s defence were barred by issue estoppel, nor was the developer’s claim in the competition action: Re South American & Mexican Co, ex parte Bank of England [1895] 1 Ch 37 and Hoystead v Commissioner of Taxation [1926] AC 155 and Khan v Golechha International Ltd [1980] 1 WLR 1482 distinguished; Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 considered.(2) Although issue estoppel was distinct from abuse of process, the two were founded on the same underlying rationale of public policy. If the conduct of a party in the previous proceedings made it oppressive for that party to raise an issue in the later proceedings, seeking to advance that issue might constitute an abuse of process. Accordingly, the adoption of a strict, rather than a broad, approach to issue estoppel did not divest the court of the means to protect the party against whom a new issue was raised and thereby to achieve a just solution. Applying a broad, merits-based approach to abuse of process in the instant case, in the absence of any issue estoppel it was not oppressive to the council to have to confront, for the first time, arguments in the contract action based on construction of the agreement or arguments that entry into the agreement was ultra vires. The council had had the benefit of payments made for the first five years of the operation of the agreement and would retain those moneys under the consent order. If there were an objection in contract to their right to recover for further years or a statutory argument as to the validity or enforceability of the agreement, it did not amount to harassment of the council to require them to confront that argument. The same applied to the contention in the competition action, namely that the agreement infringed the 1998 Act: Johnson v Gore Wood & Co [2002] 2 AC 1 applied.Per curiam: Since the doctrine of issue estoppel was founded on a rationale of public policy, it might not bar a party from invoking a public policy exception and relying, in its own interest, on a legislative provision that was designed to promote or protect the interests of the public more widely.Nicholas Green QC and Tony Singla (instructed by DLA Piper UK LLP) appeared for the developer; Mark Brealey QC and Marie Demetriou (instructed by Veale Wasbrough) appeared for the council.Sally Dobson, barrister