Lemas and another v Williams

Civil procedure – Res judicata – Abuse of process – Appellant bringing successful claim for possession of property against defendants including first respondent’s father and second respondent – Respondents bringing second action claiming property beneficially owned by trust under which first respondent a beneficiary and his father and the second respondents acting as trustees – Whether second action barred by cause of action or issue estoppel or as abuse of process – Whether defendants to first action acting in capacity as trustees or personal capacity – Whether second respondent’s claim to a beneficial interest required to be brought in first action – Appeal dismissed The appellant was the registered proprietor of a property in Woodbridge, Essex, which he had purchased from the first respondent’s father in 2005 at a time when the two of them had planned to convert the property into a children’s home or a residential care home and run it as a business together with the second respondent. That did not initially happen and instead the property was let out. Meanwhile, in April 2005, the appellant executed a trust deed in favour of the first respondent and his sister, who were then minors, with the first respondent’s father and the second respondent as trustees. The appellant brought an action for possession of the property against the first respondent’s father, the second respondent and other persons to whom they had let part of the property. The first defendant’s father contended that the property belonged to the trustees of the April 2005 trust deed. Rejecting that contention and allowing the claim, the judge found that the trust did not extent to the property. As a result of that first action, the appellant obtained possession of the property, which he put to use as a residential care home. The respondents subsequently brought a second action, seeking a declaration that: (i) the trust beneficially owned the property by virtue of a later trust deed dated October 2005; or, in the alternative (ii) the second respondent was entitled to a beneficial interest in the property by resulting trust because of his financial contribution to its original acquisition.The appellant applied to strike out the second action as being either res judicata or an abuse of process. Dismissing that application, the judge held that the claims in the first action and the second action were different, that the first action had been for possession of the property based on superior title and that neither the first respondent’s father nor the second respondent had been sued in their capacity as a trustee, with the result that the first respondent should not be regarded as a “party” to that action. She further held that, although the second respondent had been a party to the first action, there had been procedural irregularities in those proceedings and it was not unfair for the appellant to have to face the second respondent’s claim in the second action. The appellant appealed. Held: The appeal was dismissed. (1) The principles of res judicata and abuse of process were based on the same policy considerations, namely that it was in the public interest that there should be finality in litigation and that a person should not be sued twice in the same matter. However, there was also an important private interest of a party in having access to justice and vindicating his rights. The principle of res judicata covered both cause of action estoppel and issue estoppel. The former applied where a cause of action in a second set of proceedings was identical to a cause of action in earlier proceedings between the same parties or their privies and involving the same subject matter, while the latter prevented a person suing twice in respect of issues that have been decided on the merits, or ought to have been so decided, even if the cause of action was not the same: Arnold v National Westminster Bank plc [1991] 2 AC 93; [1991] 2 EGLR 109; [1991] 30 EG applied.There would be privity between persons sued as trustees of a trust and beneficiaries of that trust, with the result that a decision that was binding on the trustees would also be binding on the beneficiaries and vice versa: Gleeson v J Whippell & Co Ltd [1977] 1 WLR 510 applied. CPR19.7A was also relevant so far as it provided that beneficiaries of a trust did not need to be joined in proceedings against a trustee, and that, if the trustees were sued in that capacity, the beneficiaries would be bound unless the court made some other order. (2) Abuse of process, unlike res judicata, was a procedural rule; in order for an action to constitute an abuse of process, the court had to be satisfied that it was not just for the action to proceed, on a broad merits-based judgment that took account of the relevant public and private interests and all the circumstances of the case: Johnson v Gore Wood & Co [2002] 2 AC 1; [2000] PLSCS 292 applied. It was not necessary that the parties should be identical in the two actions: Aldi Stores Ltd v WSP Group plc [2007] EWCA Civ 1260; [2008] 1 WLR 748; [2007] PLSCS 244 applied. (3) Another relevant principle was that a judgment against a party in one capacity did not bind that person in another capacity: Marginson v Blackburn Borough Council [1939] 2 KB 426 applied. (4) Applying those principles, no cause of action estoppel arose in the instant case. The first respondent’s father and the second respondent were parties to the first action in their personal capacity and not as trustees under the 2005 trust deed. There had been no statement that they were sued in their capacity as trustees. There was no evidence that the first respondent had represented the trustees at the hearing; the fact that he wanted a determination as to whether the trust had a beneficial interest was equally consistent with his defending the possession proceedings in his personal capacity. The second respondent was joined to the proceedings only because he was a landlord for some of the tenants sued by the appellant. Accordingly, CPR 19.7A was not engaged. Since the first respondent’s father and the second respondent were parties only in their personal capacity, they were not under any obligation to bring forward any claim, such as a claim based on the October trust deed, to which they were only entitled as trustees. The judgment in the first action did not decide any issue about the October trust deed. Therefore the second action was not barred by any cause of action or issue estoppel. (5) Nor was the second action an abuse of process. The first respondent’s father had been well aware that the question whether the property was held on the terms of the April trust deed could be determined in the first action. He could have, but had not, taken steps to ensure that it was so determined and adduced the October trust deed in evidence at the trial. However, it was not appropriate to visit the shortcomings of the trustees on the beneficiaries. In that regard, it was relevant that the first respondent derived his interest through the trustees and so had no independent interest. Since he had been a minor at the time of the first action, it was not realistic to expect him to have brought proceedings for directions that the trustees should join in the first action and put both the April and October deeds before the court. Accordingly, he had not had an effective opportunity of having his claim under the October trust deed determined by the court. The fact that his father did not defend the first action in his capacity as a trustee was highly significant. It meant that there could be no cause of action estoppel and no issue estoppel and, on the facts of this case no abuse of process either. (6) As to the second respondent, at most he had a partial beneficial interest in the property, which was superseded by that of the trusts of the October trust deed. His alleged partial beneficial interest was not said to have given him a right in law to give possession, or to be in possession, as against the appellant as the registered proprietor of the property. There was no reason why the second respondent’s claim should have been brought in the first action. The judge had made no finding in that action about the funding of the purchase price so as to preclude the second respondent from bringing his new claim in the second action. Nor could that claim amount to an abuse of process where there was no requirement to raise it in the first action. Abdul Gofur (instructed by Coldham Shield & Mace Solicitors LLP, of Chingford) appeared for the appellant; Richard Colbey (instructed by the first respondent) appeared for the first respondent; Martin Hutchings QC (instructed by the second respondent) appeared for the second respondent. Sally Dobson, barrister