A case perhaps best filed under the ‘Ooops’ category, which only took a trip to the Court of Appeal to sort out
Spicer & Anor v Tuli & Anor  EWCA Civ 845
Spicer and Shinners were Law of Property Act 1925 receivers, appointed under a charge in respect of a London flat. The charge had been granted by BRM Investments Ltd to Clydesdale Bank plc. When the receivers instructed solicitors to sell the property, it was discovered that Ms Tuli and her two daughters were in occupation.
The solicitors for the receivers issued a possession claim against trespassers, CPR 55.1. Ms Tuli defended claiming to be have been a tenant since 2003, under two successive tenancy agreements. A trial was set for 25 September 2008. However, Ms T did not provide the tenancy agreements to the receivers’ solicitors until 24 September 2008, although Ms T was represented.
In a series of telephone calls and exchange of a draft order with Ms T’s solicitor, solicitors for the receivers stated that they believed the tenancy agreements were not genuine, but that the receivers would need time to investigate and would therefore agree to the proceedings being ‘withdrawn’ on no order as to costs and the trial the next day vacated. The clear intention was to potentially bring fresh proceedings depending on investigation of the tenancy agreements. The first draft order, as per the discussions, stated that ‘proceedings be withdrawn’.
[This is a particular annoyance of mine. I often get opponents, particularly Local Authorities, insisting on orders stating proceedings are ‘withdrawn’. They are simply wrong…]
As the Court of Appeal notes, there is no such thing as ‘withdrawing’ proceedings:
Under the CPR an action cannot be withdrawn. It may either be discontinued under CPR Part 38 or it may be dismissed. If an action is discontinued rather than dismissed, it is clear that a second action may be brought even if it arises out of the same facts as the discontinued action, although the permission of the court would be needed under CPR Part 38.7 if the action is discontinued after the defendant has served a defence.
In any event, the consent order actually filed on 25 September 2008, approved by both parties’ solicitors, provided that the claim ‘be dismissed’. Lewison LJ in this appeal judgment took the view that “The underlying agreement, however, was that the proceedings would be withdrawn so as to give the receivers time to investigate the position, and on the basis that Mr Sharpe [receivers’ solicitor] had stated his belief that the tenancy agreements were not genuine.”
In November 2009, the receivers began fresh possession proceedings:
In their Particulars of Claim, they alleged (1) they had a right to possession of the property; (2) Ms Tuli remained in occupation without their consent or licence; (3) she had never been the tenant of the receivers, the bank or the mortgagors, nor had she held a sub-tenancy; (4) in the event that Ms Tuli were to be found to be a tenant, the tenancies do not bind the bank, because they were fraudulent and created after the charge had been entered into, or because the existence of the tenancies was fraudulently concealed from the bank; (5) the tenancies should have been granted by deed but were not, with the consequence that they created equitable interests only which the bank’s legal interest overrode; (6) alternatively, the tenancy agreements were not intended to have any effect in law.
The claim sought possession, use and occupation charges at £1500 per week and costs. Ms T applied to strike out this claim, on two grounds. Firstly that as the previous possession claim had been dismissed, the second claim was barred under a cause of action estoppel. Secondly, alternatively, the fresh claim was an abuse of process.
At first instance, the DJ decided that there was no abuse of process, as did the Circuit Judge on appeal. While the matters raised in the second action could have been raised in the first, the tenancy agreements suggested fraud. It was in the public interest to investigate fraud. Moreover, the receivers had made it clear that the ‘withdrawal’ of proceedings would not end their investigations. This overweighed Ms T’s private interest in a peaceful family life in the property.
On second appeal to the Court of Appeal noted that Johnson v Gore Wood & Co  2 AC 1 held that the question in such situations was what assumptions the parties proceeded under when settling the previous proceedings, looking in particular at the negotiations. Whether as ‘issue estoppel’ (Lord Bingham) or as abuse of process (Lords Goff and Millett), the precise legal nomenclature mattered little, the issue was the conduct of the parties in ending the first proceedings.
In this case, it was clear that the receivers had said that they would pursue a further claim and that was the basis on which the consent order was arrived at.
Although Lord Bingham analysed the matter as a question of estoppel by convention, neither Lord Goff nor Lord Millett were attracted by that analysis. I do not think that the precise legal analysis matters. The conduct of the parties in bringing an end to the first action is part of the broad merits-based approach to the question of abuse of process that Lord Bingham, with the agreement of the whole House, had commended. It was quite clear in the present case that the receivers said they would pursue their claim against Ms Tuli; that was the basis of the suggestion that the action be withdrawn. The accident that the draft consent order substituted “dismissed” for “withdrawn”, instead of “discontinued” cannot in my judgment alter the broad merits-based approach. It would, in my judgment, be unconscionable to allow Ms Tuli to take advantage of what was plainly a technical error. If, therefore, there is no cause of action estoppel, I would hold that there is no abuse of process.
On cause of action estoppel, Ms T argued that:
(1) an order made by consent dismissing the first action operates in the same way as a judgment on the merits of the claim, and gives rise to a cause of action estoppel; (2) the cause of action relied on in the first action was the receivers’ claim to possession against Ms Tuli; (3) the only question relevant to that cause of action was whether the receivers had a better right to possession than Ms Tuli; (4) the receivers asserted that their right to possession derived from the charge, while Ms Tuli asserted that her right to possession derived from the tenancy agreements; (5) thus the stage was set for a battle to determine which of the two asserted rights was the better one, and that directly raised the question whether the tenancy agreements were genuine, and if so whether the bank was bound by them; (6) once that action had been dismissed by consent, that cause of action was barred by a cause of action estoppel, and cannot be raised in a second action; (7) this is a rule of law, and is not a matter of discretion. There are only three limited exceptions to the rule: fraud, collusion, or where the construction of the order itself shows that no estoppel should arise.
But, assuming that the second cause of action was based on the same issues as the first – not decided at this point, it remains that cause of action estoppel is based on the principle “that there is a public interest in the finality of litigation, and that a person should not be unjustly harassed by a revival of proceedings that have already been disposed of. These principles must be applied to work justice and not injustice”. It is open to the courts to recognise that the inflexible application of an estoppel may cause injustice, Arnold v National Westminster Bank  2 AC 93. A res judicata estoppel is where a cause of action estoppel is essentially concerned with preventing absue of process, Arnold v Westminster.
The first step here is the effect of a consent order. In Ako v Rothschild Asset Management Limited  EWCA Civ 236, the Court of Appeal said that the court may have regard to the surrounding circumstances in order to determine the extent of the consent given to the making of the order, and this on grounds wider than the procedural difference between the lower courts and tribunals. This was an alternative ratio, not obiter. As Per Dyson LJ:
In my view, what emerges from these authorities is that there is no inflexible rule to the effect that a withdrawal or judgment by consent invariably gives rise to a cause of action or issue estoppel. If it is clear that the party withdrawing is not intending to abandon the claim or issue that is being withdrawn, then he or she will not be barred from raising the point in subsequent proceedings unless it would be an abuse of process to permit that to occur
Zurich Insurance Co Plc v Haywood  EWCA Civ 641 did not conflict with the approach of Dyson LJ. In addition Article 6 would support such an approach, where proceedings were dismissed without a hearing, the question is whether this was a friendly settlement such as would waive article 6 rights. Where a waiver of art 6 rights is alleged, a thorough analysis is needed to determine whether this was indeed a friendly settlement, including the surrounding circumstances.
In this case there was no friendly settlement, indeed the reverse. There was no intention to abandon the claim and this was made clear at the time to Ms T through her solicitors.
This case was indistinguishable from Ako, and it would be unjust not to allow the receivers to proceed with their second claim. There was no cause of action estoppel and no abuse of process.
Apart from the welcome (to me) aside on ‘withdrawal’ of a claim being non-existent, this is a curious case. The initial error in the consent order stating ‘dismissed’ rather than ‘discontinued’ led to a 3 year trek to the Court of Appeal, but the judgment does open the interesting prospect of being able to revisit the context of consent orders in some circumstances, where related proceedings are involved.