Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2013] CSOH 5
CA81/12	OPINION OF LORD HODGE in the cause JOHN CAREW-REID Pursuer; against LLOYDS BANKING GROUP PLC AND LLOYDS TSB BANK PLC Defenders: ________________

Pursuer: Party

Defenders: Lumsdaine, Solicitor Advocate; Anderson Strathern LLP

15 January 2013

[1] This is an application by the defenders for decree of absolvitor on their plea of res judicata.

The defence of res judicata
[2] It is well established in our law that there are five elements in the defence. They are:

(i) That there is a judicial decree pronounced by a competent tribunal,

(ii) In a contested action ("in foro contentioso"), without fraud or collusion,

(iii) Between the same parties or their representatives,

(iv) Relating to the same subject matter, and

(v) Proceeding on the same grounds.

(Esso Petroleum Co v Law 1956 SC 33, Lord Carmont at 38, McPhee v Heatherwick 1977 SLT (Sh Ct) 46, Sheriff Macphail at 46). In relation to factor (ii), where fraud in obtaining the decree is alleged in opposition to a plea of res judicata, the pursuer must reduce the judgment he complains of before he can proceed with the second case (Stewart and Another v Stewart's Trustees (1906) 13 SLT 846). Factor (iii) is not essential if the prior decree is a decree in rem.

[3] The competent tribunal may be a foreign court, or a court of equal, inferior or superior jurisdiction (Hamilton v Dutch East India Company (1732) 3 ER 573; Hynds v Hynds 1966 SC 201). It may also be a statutory tribunal or an arbiter (Farrans v Roxburgh County Council 1969 SLT 35). A decree of absolvitor, including a decree by default, will support the plea but not a decree in absence (Esso Petroleum Co v Law (above) at 38). A decree of dismissal on an issue of relevancy is not a final determination that will support the plea (Russel v Gillespie (1859) 3 Macq 757; Waydale Ltd v DHL Holdings (UK) Ltd 2001 SLT 207 ). A decree following a compromise, by minutes of tender and acceptance of tender or otherwise, will also form the basis of the plea (Glasgow & South Western Railway Co v Boyd & Forrest 1918 SC (HL) 14 Lord Dunedin at 26; Smith v Sabre Insurance Co Ltd [2012] CSOH 14).

[4] The plea of res judicata has a practical purpose. It is to prevent parties from litigating the same issue repeatedly on substantially the same grounds. The court does not take a technical approach. Instead it looks at the parties' pleadings to ascertain the substance of the issues in dispute and asks "what was litigated and what was decided?" (Glasgow & South Western Railway Co v Boyd & Forrest (above) Lord Shaw of Dunfermline at 32; Grahame v Secretary of State for Scotland 1951 SC 368, Lord President Cooper at 387; Short's Trustee v Chung 1999 SC 471, Lord Prosser at 476H-477B; and my opinion in Primary Health Care Centres (Broadford) Ltd v Ravangave 2009 SLT 673, at paras [23] & [35]).

[5] The existence of additional pursuers or defenders will not elide the plea if the five elements are present (Primary Health Care Centres (Broadford) Ltd (above) at para 22]).

The present action
[6] Mr Carew-Reid is a self-represented party whom I authorised on 6 July 2012 to raise an action against Lloyds Banking Group plc and Lloyds TSB Bank plc. He alleges, incorrectly, that the latter company traded as Lloyds TSB Scotland plc. The action seeks payment of £3 million as damages for breach of contract. He avers that between March and about September 2008 he negotiated with employees of the defenders to obtain a loan of £506,500 (being a loan of £500,000 and an arrangement fee of £6,500) for the purchase of the Avante Hotel, 29-31 Albert Street, Blackpool. He asserts that the defenders approved the loan application and that he met all the conditions for the release of the loan. He signed the contract. But he asserts that in November 2008 the defenders in breach of contract refused to advance him the agreed sum.

[7] Mr Carew-Reid claims damages for the loss of a property in Australia which he had put up as a deposit on the hotel. He claims the loss of rental income under a twenty-year lease of the hotel to Yahoo Real Estate Ltd ("Yahoo"). He also claims the loss of profit on a contract of sale of the hotel to Yahoo if it had taken up an option to purchase the hotel for £1.2 million in 2010 or on a sale on the open market.

[8] Although Mr Carew-Reid sued both defenders it was clear from the loan documentation which the defenders produced that he had been negotiating with Lloyds TSB Bank plc ("the Bank") and not the Scottish subsidiary of the first defender, namely Lloyds TSB Scotland plc. There was no legal basis for his claim against the first defender.

The prior actions
[9] Unfortunately, when he sought authority to raise the present proceedings Mr Carew-Reid did not disclose that he had raised actions which included similar claims in England and Wales and that he had been made the subject of a general civil restraint order in that jurisdiction.

[10] First, in March 2011 Mr Carew-Reid raised an action in three capacities against "Lloyds TSB and Lloyds Banking Group" and all past and present directors of those companies since 1 January 2008. His three capacities were first as an individual, secondly as trustee of and under a power of attorney from "Mr Thomas Graham Allwood, Ingrid Pluktchy and International News USA" and thirdly on behalf of the UK Government and all the people of the UK. In his claim (paras 1 and 4-8) he pleaded his application for a loan to finance the purchase of the hotel and the defendants' breach of contract in refusing to advance the agreed sum to him. In respect of that claim ("the core claim") he sought in his first two capacities damages in excess of £100 million. In his third capacity he also claimed damages of £500 billion alleging that the defendants had conspired to defraud the UK Government and taxpayers in relation to the take-over of HBOS plc ("the wider claim").

[11] Mr Carew-Reid represented himself in hearings in the Chancery Division of the High Court in the Royal Courts of Justice in London before Master Bragge on 27 April and 29 June 2011. In his judgment on the latter date Master Bragge recorded the submissions of the parties and concluded that the documents showed that Mr Carew-Reid had failed to meet the conditions that the Bank had imposed within the time limits of the loan offer. He therefore concluded that the core claim was without merit. On the defendants' motion he struck out both the core claim and the wider claim. Mr Carew-Reid did not appeal this decision. I discuss Master Bragge's judgment in more detail in paragraphs [24] - [26] below.

[12] Secondly, on 7 December 2011 Mr Carew-Reid raised a fresh claim in the High Court, Chancery Division, in Manchester. He was the sole claimant. The defendants were Lloyds Banking Group plc, the Bank, Lloyds TSB Scotland plc and the directors and former directors of the corporate defendants since 1 January 2008. The claim again was for damages for breach of contract. It was asserted that the defendants had failed to implement a binding contract to lend him £506,500 to purchase the Avante Hotel. The damages claims included (a) loss of property ceded as a deposit, (b) loss of future rental income and (c) loss of profit on the future sale of the hotel. He also claimed unspecified damages from the failure of his intended tenants to gain possession of the hotel and their intended listing on the stock exchange, and detriment to the UK economy from the loss of employment of thousands of entertainers and loss of taxation and export revenue.

[13] On 7 February 2012 District Judge Khan struck out the claim as being devoid of merit. He had before him Master Bragge's judgment and founded on it. He stated that the claim was an abuse of process as it was essentially the same claim as the first action. In any event, he was satisfied that there was no real prospect of success; as presented it appeared that there was a loan agreement, that the offer was limited in time, and that its conditions had not been met. He concluded that the claim for breach of contract was unsustainable. Mr Carew-Reid did not appeal this decision.

[14] Mr Carew-Reid did not pay any of the costs awarded against him in either judgment. He applied on 8 March 2012 to the Chancery Division of the High Court to have the two judgments set aside and the defendants' barrister and solicitors answer charges of criminal contempt. At a hearing in the High Court on 24 July 2012 Vos J dismissed Mr Carew-Reid's application and on the application of the Treasury Solicitor granted a general civil restraint order against him. The proceedings before Vos J are part of the background to the present action. I therefore summarise the circumstances that led to this order.

[15] The defendants in four separate actions applied for the general civil restraint order. As well as the claims against the Bank and Lloyds Banking Group plc, Vos J considered actions raised by Mr Carew-Reid against (i) a Mr Jouai and others concerning a property at Haywicks Farm in Gloucestershire, (ii) the Chief Land Registrar and (iii) the UK Border Agency. Vos J's judgment reveals that on 12 July 2011 Morgan J made an extended civil restraint order against Mr Carew-Reid in another action and on 25 May 2012 Mann J made a second extended civil restraint order against him in respect of the Haywicks Farm action. Mr Carew-Reid, who was not able to attend the hearing on 24 July 2012, applied to stay all his applications on the ground that he intended to bring proceedings of exactly the same kind in Scotland. Vos J, who was aware that Mr Carew-Reid had been applying to me for permission to raise an action, directed that his judgment should be provided to me in Scotland to inform me about what had been going on in England. Unfortunately, nobody carried out the direction and I first became aware of the background when the defenders sought to advance the defence of res judicata.

[16] Vos J made the general civil restraint order under Practice Direction 3C of the Civil Procedure Rules 1998 ("CPR") because Mr Carew-Reid had persisted in issuing claims or making applications that were totally without merit in circumstances in which an extended civil restraint order would not be sufficient or appropriate. The order restrained him from issuing any claim or making any application in the High Court or county court without first obtaining the permission of a named Chancery judge (Newey J). The order is effective until 24 July 2014. It appears that in about August 2012 Mr Carew-Reid sought to obtain leave from Newey J to set aside Vos J's order but did not make progress in that application.

The earlier attempts to raise the present action
[17] Mr Carew-Reid applied to me on six occasions seeking permission to commence proceedings as a party litigant in Scotland. On the first occasion he sought to raise an action in his own name and (as in the first English action) in the capacity as trustee of and under a power of attorney from others. He claimed £1 billion from the Bank, Lloyds Banking Group plc and the directors of those banks from 1 January 2008. I refused to authorise the proceedings and gave reasons for my decision on 28 October 2011. He applied again having removed the additional capacities and the claim for £1 billion but left in averments in support of a claim of that magnitude. I refused the application on 30 November 2011 and drew attention to the law on foreseeability and remoteness of loss. Those issues remained a concern and underlay my refusals dated 30 January 2012, 24 April 2012 and 28 May 2012. I gave him leave to proceed with the action on 6 July 2012, having made it clear that I would exercise close judicial case management so that the parties focused on the allegations of breach of contract. I intended to leave the pleadings on quantification to be developed only after I had ruled on the issue of breach of contract. As I have said, I was not aware then of the prior English proceedings.

[18] The significance of those prior attempts to raise proceedings in Scotland is that as a result of my concerns about the issues of foreseeability and remoteness of loss, the summons that eventuated was confined to the core claim of loss to him alone occasioned by breach of contract. There had also been a parallel delictual case, which added nothing to the core claim and appeared to be irrelevant.

Discussion

[19] I turn therefore to consider the five factors relevant to a plea of res judicata and Mr Carew-Reid's answers to Ms Lumsdaine's submission that all five factors apply in this case.

(i) There is a judicial decree pronounced by a competent tribunal

[20] It is clear that the orders of both Master Bragge in the High Court in London and District Judge Khan in Manchester are judicial decrees on the merits of the action pronounced by competent courts in which Mr Crew-Reid had pursued his claims. He submitted that, as the courts were in England and thus in a foreign jurisdiction, the proceedings there could not support the plea of res judicata. But that is incorrect in law. See paragraph [3] above.

[21] Mr Carew-Reid submitted that as the English actions had been stopped by striking out orders, his claims had not been the subject of final judgments that could support the plea of res judicata.

[22] He also pointed out that the striking out orders had been made before disclosure of documents or the lodging of defences. He submitted that he was entitled to a trial of the facts and had been denied access to the courts.

[23] The power to strike out is contained in CPR 3.4, which empowers the court to strike out a statement of case if it appears to the court that the statement discloses no reasonable grounds for bringing the claim. A striking out order would not of itself bar another claim arising out of the same facts where the claimant has paid the defendant's costs. If the claimant does not pay the costs, the defendant may apply to have the second claim stayed. In deciding whether the striking out orders could support a defence of res judicata in this case it is necessary to examine what Master Bragge did.

[24] Mr Carew-Reid's case was that the Bank or Lloyds Banking Group plc had approved his credit by 11 September or at the latest by mid-October 2008 and that once his solicitors gave a report on title and created the legal securities he was entitled to draw down the loan. He asserted that the defendants had breached the contract because of the financial crisis which occurred in the autumn of 2008.

[25] In support of the motion to strike out the claim the solicitor for the defendants, Mr Gill, not only listed procedural deficiencies but also addressed the core issue, namely whether the Bank had breached an agreement to lend money to Mr Carew-Reid. Master Bragge had relevant contemporaneous documentation which counsel for the defendants analysed and which he discussed in his judgment. The transcripts of the hearings reveal that the signed business loan agreement dated 12 and 24 September 2008 was subject to conditions, including the provision of adequate security, the provision of a satisfactory valuation, the payment of the valuation fee and the confirmation of Mr Carew-Reid's personal income. Master Bragge also had several emails which the Bank sent Mr Carew-Reid in November 2008 chasing him to provide the required information. The documentation revealed that Mr Carew-Reid failed to pay the valuation fee and did not deliver satisfactory confirmation of his personal assets and liabilities to the Bank. He had claimed to have net assets of £107 million, a statement that raised questions in the minds of the Bank's employees, but did not produce bank statements which the Bank requested to support his assertion. He had sent information to his financial broker, Mr McMillan, and inferred that he would have passed that information on to the defendants but there was no evidence to counter the defendants' denial that they had received it. The documents also showed that the Bank was not satisfied with the vouching of the proposed rental income to support the loan and that the vacant possession valuation gave rise to an unacceptable loan to value ratio. Master Bragge accepted the Bank's position, which he considered had been vouched by the documents, that it had acted in accordance with its contractual rights in refusing to advance the loan.

[26] In this case therefore, Master Bragge made findings of fact based on documents which were not seriously contested and concluded (a) that the loan contract was subject to conditions and (b) that Mr Carew-Reid had failed to meet those conditions. Mr Carew-Reid did not appeal his judgment or make a timely application to set it aside.

[27] District Judge Khan's much shorter judgment in which he concluded that the claim was an abuse of process and had no real prospect of success was based on essentially the same reasoning.

[28] Mr Carew-Reid's belated attempt to set aside these judgments resulted in the general civil restraint order which I discussed in paragraphs [15] and [16] above.

[29] In the particular circumstances of this case I am persuaded that the judgments of Master Bragge and District Judge Khan are final decrees pronounced by a competent tribunal. Although Ms Lumsdaine did not address me on the specific characteristics of a striking out order, it appears that it can support the plea of res judicata in this jurisdiction. The striking out procedure under CPR 3.4 bears some similarities to a debate leading to the dismissal of an action, which would militate against the defence, but it has important differences. The English courts may look not only at the pleadings but also at documentary evidence when deciding whether there are reasonable grounds for bringing a claim (S v South Gloucestershire County Council [2001] Fam 313 (CA), May LJ at 341-342; Blackstone's Court Practice 2013 para 33.7). Master Bragge did so in this case. A judgment may be a final and conclusive disposal on the merits where it cannot be re-opened, varied or set aside by the court that determined it or by another court of co-ordinate jurisdiction; and the possibility of appeal to a court of higher jurisdiction does not prevent the plea of res judicata (Dicey, Morris & Collins, The Conflict of Laws (15^th ed.) paras 14.030-032; DSV Silo und Verwaltungs-gesellschaft mbH v Owners of the Sennar [1985] 1 WLR 490, Lord Diplock at 493-4; Zuckerman on Civil Procedure (2^nd ed. 2007), paras 24.71-2).

[30] In this case Master Bragge did not confine his attention to written pleadings but looked at the documentary evidence underlying the claim in an exercise of his case management powers which the CPR authorises. He reached a view on the merits of the action having regard to that evidence. District Judge Khan treated Mr Carew-Reid's attempt to raise the same issues in the second claim as an abuse of process. He did not need to give effect to the defendants' alternative application for a stay of proceedings for payment of the costs of the first claim. Their decisions were thus very different from a determination that written pleadings were insufficient or irrelevant which would result in our jurisdiction in a decree of dismissal.

[31] Mr Carew-Reid sought to support his contention that there was an unconditional agreement to lend by producing in this case an email from Phil Reid, an employee of the Bank dated 11 September 2008 and a letter dated the following day from Mr Mowbray of the Tunbridge Wells business centre of the Bank which was the covering letter for the business loan agreement that he signed. While it appears that this evidence was not before Master Bragge, it does not give any significant support to Mr Carew-Reid's contentions and in any event would not constitute res noviter veniens ad notitiam. See Phosphate Sewage Co v Molleson (1879) 6 R (HL) 113, to which Mr Carew-Reid referred in one of his written submissions.

[32] I am also not persuaded that he has been denied access to the courts in breach of his Article 6(1) ECHR rights. The European Court of Human Rights has recognised that the striking out procedure does not per se offend the principle of access to the courts (Z v United Kingdom (2002) 234 EHRR 3, para 97). In the particular circumstances of the case I do not see any breach of that principle. While Mr Carew-Reid repeatedly demanded a trial of the facts and an opportunity to cross-examine the bank's witnesses and others, I see no need in the interests of access to justice for the English courts to sanction such an expensive and time-consuming process. In any event, such a demand is not an answer in this court to the defence of res judicata. He also demanded proof of the accuracy of the official transcripts of the hearings before Master Bragge. But in the absence of any specific and vouched challenge to their terms I am prepared to treat them as accurate.

(ii) in a contested action ("in foro contentioso") without fraud or collusion

[33] In both actions the Bank and Lloyds Banking Group plc entered appearance and contested his claims. On their application the court struck out the claims because they lacked any merit.

[34] Mr Carew-Reid alleges that counsel and the solicitors acting for the defendants presented false and misleading information to both Master Bragge and District Judge Khan. He also alleges bias on the part of the English judiciary against himself and his business partner, the late Mr Thomas Allwood. I have seen no sound basis for those allegations. In any event, if it is his position that the striking out orders were obtained by fraud or some other irregularity, he should seek to have the judgments set aside in England in order to circumvent a plea of res judicata in Scotland (Stewart and Another v Stewart's Trustees (above)). He has not done so.

(iii) between the same parties or their representatives.

[35] The High Court proceedings in London were raised in the name of John Hastings Carew-Reid and the proceedings in Manchester ran in the name of John Carew-Reid. In each case Mr Carew-Reid, the pursuer in this action, appeared in court and presented himself as the claimant. At the hearing on this motion Mr Carew-Reid sought to get round the defence by arguing that he was not the same person as the claimant in the English proceedings. He asserted that the true claimant in the English proceedings was the now deceased Mr Thomas Allwood who, he said, had changed his name by deed poll to John Hastings Carew-Reid. He said that his own original name was Stephen Carew-Reid and that he also had changed his name to John Carew-Reid about six years ago. He produced no vouching of these assertions. He also alleged that the British Government had murdered Mr Allwood in June 2012 using Mossad-trained agents. In another written representation he extended his charge of murder to the defenders and their directors.

[36] As (i) Mr Carew-Reid appeared in person in the English proceedings as well as in these proceedings, (ii) in both he purported to act as a self-represented litigant and (iii) his claim against the defendants in England and the defenders in Scotland depended on a contract to which he was a party, I am not prepared to give any credence to those fanciful suggestions. It may be that someone other than Mr Carew-Reid signed the claim forms in the English proceedings. But he appeared as the claimant.

[37] I am not persuaded that there is any substance in the assertion that the defendants in the cases before Master Bragge and District Judge Khan did not include the Bank and Lloyds Banking Group plc. In the claim form submitted to District Judge Khan they were clearly stated as defendants along with Lloyds TSB Scotland plc. The claim form which Master Bragge dealt with was less clear as they were referred to as "Lloyds TSB and Lloyds Banking Group". Those designations were incomplete. But there was no doubt that the defendants who acknowledged service and who were represented before Master Bragge were the parties against whom Mr Carew-Reid was seeking his remedies and that the Bank was the party with which he contracted.

[38] I am satisfied that the English proceedings on which the defenders found for their plea of res judicata involved the same parties. The facts that there were additional defendants and that Mr Carew-Reid sought to act in several capacities in the first of the English actions are not relevant to the defence. See paragraph [5] above.

(iv) relating to the same subject matter and

[39] Both of the English actions and also these proceedings include the same subject matter, namely the negotiation of a loan of £506,500 to purchase the Avante Hotel, Blackpool and the Bank's refusal to allow the transaction to proceed. I am satisfied that the proceedings in England and here related to the same subject matter.

[40] It is correct that Mr Carew-Reid sought wider remedies against the defendants on behalf of the UK government and taxpayers in the first English action and also a larger sum of damages on behalf of his intended tenants of the hotel in the English proceedings. But that does not alter the fact that the core claim in each of the actions was his personal claim for damages for breach of contract.

(v) proceeding on the same grounds.

[41] The English proceedings were based on an alleged breach of contract by the Bank in its failure to make available the loan of £506,500. Mr Carew-Reid claimed damages for loss caused by that breach. He does so in this action. Mr Carew-Reid sought to argue that the statements of claim in the English proceedings were deficient. That does not matter because it is clear from the CPR that the court considers both the claim form and the particulars of claim when addressing a striking out application. Both Master Bragge and District Judge Khan understood the core claim. The fifth and final factor of the plea is accordingly present.

Conclusion
[42] I have considered Mr Carew-Reid's voluminous written submissions, his oral presentation at the hearing and also his further detailed written submissions which he successfully applied to lodge shortly after the hearing as he felt that he had not had time to develop his arguments. I do not discuss some of the wider issues which he raised in those submissions as they are not relevant to the task which I have to perform.

[43] I am satisfied that the defenders have made out their defence of res judicata. I therefore sustain the fourth pleas in law for both defenders and grant decree of absolvitor. I will have the case put out by order to deal with expenses.

Postscript
[44] Although it is not necessary for my decision I wish to make it clear that had I known of the two English actions on the same issue and the general civil restraint order and had I seen the signed contract, I would not have granted leave to proceed without the signature of counsel. Mr Carew-Reid is wrong to infer, as he does repeatedly in his submissions, that my granting of leave to proceed meant that I considered that his claim had merit. All that my grant of leave meant was that he had pleaded a basic case of breach of contract and a claim for damages resulting from that breach. I reached no firm view at that time on the strength or otherwise of his case on the limited evidence he adduced in support of his application for leave.