Issue Estoppel and Abuse of Process

Article by Simon Cooper And Laura Bee

The recent case of Kennecott Utah Copper Corporation (and others) -v- Minet Limited (and others) [2002] reminds litigants of the importance of carefully considering all aspects of a dispute and including all relevant issues in a claim at the outset. Once proceedings have been decided, it may be impossible to bring further claims in respect of the same circumstances in a fresh action. In Kennecott -v- Minet the claim against Minet was struck out in the Commercial Court because it was held that, in order for the claimant to succeed, it would have been necessary to reconsider issues which had already been decided in a similar action arising out of the same set of circumstances involving the same parties.

The issues to be determined in Kennecott -v- Minet arose out of the insurance and reinsurance of Kennecott’s copper smelter. Minet were brokers retained by Kennecott’s captive insurers to place the reinsurance cover for, inter alia, the smelter. Following damage to the smelter caused by a series of explosions in 1995, Kennecott, along with its captive insurers and parent company ("the Kennecott entities"), sought to recover their losses from reinsurers, who defended the claim on the basis that the damaged property had not attached to the reinsurance at the time of the accident so was not covered.

Proceedings were commenced in the High Court in 1996 on the basis that the Kennecott entities would seek to recover from reinsurers, with co-operation from Minet. During the proceedings, however, there was some discussion as to whether or not Minet should be joined as a party and, if so, in respect of what issues. The Kennecott entities wanted Minet to be joined in to the action for certain limited purposes. Minet sought to obtain the agreement of the Kennecott entities that, if it were to co-operate on the joinder, there would be no further proceedings against Minet in respect of the smelter cover.

Minet were in fact joined in on a limited basis but there was continued discussion throughout the proceedings as to whether or not the Kennecott entities could bring a fresh claim against Minet following determination of the original action. Minet’s stance was that the Kennecott entities should plead their entire case against Minet in the original proceedings to give Minet a degree of certainty during the trial. The Kennecott entities argued that as a result of an alleged oral agreement made between leading counsel for Kennecott and Minet prior to the joinder, they would be permitted to hold over certain matters to be tried against Minet at a later date. Minet did not agree that any such agreement had been made.

At the trial in 1999 Langley J held that, as argued by reinsurers, the property which had been damaged had not attached to the policy. He also dismissed the limited claim which had been pleaded against Minet. The Kennecott entities were given leave to appeal against Langley J’s decision and, although they appealed as against reinsurers, they did not appeal as against Minet. The claim against reinsurers was subsequently settled without the involvement of Minet.

The Kennecott entities then brought fresh proceedings against Minet (and other brokers) in 2000 in order to recover the shortfall between the losses claimed and the amount recovered in the settlement with reinsurers. Minet applied successfully for this second claim against it to be struck out on grounds of issue estoppel and abuse of process.

In Arnold -v- NatWest Bank [1991] Lord Keith stated that;

"Issue estoppel may arise when a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant, one of the parties seeks to reopen the issue."

Abuse of the court’s process has been described as "using that process for a purpose or in a way significantly different from its ordinary and proper use" (Attorney General v Barker (2000)). Accordingly, although the concept covers various circumstances, it can be an abuse of process to bring more than one action against a Defendant when the arguments brought in the second proceedings were or should have been raised in the original action.

In the recent case of Johnson -v- Gore Wood & Co (a firm) [2001] the House of Lords held that a decision should only be made to strike out a claim for abuse of process where such a decision would be fair in the circumstances.

Steel J agreed that the Kennecott entities were barred from bringing the second claim against Minet by reason of issue estoppel. He held that in order to make good their case on causation in the second action, the Kennecott entities would have to reopen issues which were a necessary part of the determination of the original action.

The Court held that there had also been an abuse of process. In so deciding, Steel J took into account the following considerations:

• It is proper practise for claims against brokers to be made in the same action as claims against insurers in coverage claims;
• The original action had involved a determination of all issues relating to the content and construction of the reinsurance policy and the attachment of the property;
• Widening the claim against Minet in the original action would not have enlarged the scope or length of the hearing before Langley J;
• Minet had made it clear that if it was to be joined in to the original action, it wanted all the allegations against it to be pleaded;
• Kennecott had suggested bringing into the original action the allegations which were made in the second action and Minet had rejected the idea; and
• Minet’s stance was justified as the ambit of the pleaded case against it in the original action might have had a bearing on its conduct in the trial (including its agreement to co-operate with the Kennecott entities).
• The Judge also found that there had been no agreement between leading counsel for Minet and Kennecott to defer claims against Minet to a later action as had been alleged by Kennecott.

This judgment is an important reminder to Claimants that they should take care to frame their case in such a way that further recourse to the Courts will not be necessary after judgment. It also gives Defendants a degree of comfort as it reinforces the principle that there should be finality in litigation.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.