Rules against re-litigation and abuse of process: 'Aldi requirement' is not optional

27th July 2017

Lynsey Oakdene provides an update on the ‘Aldi requirement’/Otkritie Capital v Threadneedle litigation and highlights the practical importance of the rules against re-litigation and abuse of process.

Res Judicata and Abuse of Process: The Aldi requirement

Res judicata is the fundamental legal and public interest principle which states that there should be finality to litigation and that defendants should not face repeated litigation in respect of the same set of circumstances. This can be particularly relevant in complex commercial litigation and in cases involving multiple and/or related parties or group companies.  The courts also have the power, under rule 3.4 (2) (b) of the Civil Procedure Rules (CPR) to strike out claims which amount to an abuse of process. Although there is no specific definition of ‘abuse of process’ in this context, it is clear that this covers (non-exhaustively) re-litigation situations, advancing a case or issue that is inconsistent with an earlier judgment [1], and advancing claims or arguments that could and should have been made in earlier proceedings [2].

In the 2007 Aldi [3] case, the Court of Appeal ruled that, for reasons of public interest and the efficient use of court resources, parties should inform the court in ongoing proceedings of any possibility of bringing a related claim in subsequent proceedings.  That has become known as the ‘Aldi requirement’. Whilst the court acknowledged that parties must be allowed some measure of freedom to choose whom they sue in a complex commercial dispute and must not be forced into bringing a single set of proceedings against a wide range of defendants or to complicate existing proceedings by bringing [multiple] cross-claims, nevertheless that freedom should be restricted by appropriate case management, which can include the striking out of a claim for abuse of process.

An exception to the Aldi requirement?

In the 2015 case of Otkritie v Threadneedle [4], however, the High Court refused to strike out a claim where the claimant, in clear breach of the Aldi requirement, failed to inform the court in earlier related proceedings of its potential claim against the defendant.  In that judgment the court confirmed:

• Whilst there is no excuse for failing to comply with the Aldi requirement, such a breach is a case management issue which will not, of itself, suffice to strike out a claim.
• The crucial question is whether, in all the circumstances, a party is misusing or abusing the court process by using it to raise an issue which could have been raised before.
• To decide whether there has been an abuse of process, the court must adopt a broad, merits-based approach to the facts of the particular case.
• Where there has been a breach of the Aldi requirement, the court should attempt to decide what case management would have been undertaken had the requirement been complied with. If it is likely that, had the claimant informed the court of potential related litigation, that litigation would have been allowed to proceed, then it is unlikely that the Aldi breach and subsequent litigation will be an abuse of process.
• However, a breach of the Aldi requirement coupled with the possibility that the court would otherwise have taken a different approach might create a low threshold for the finding of abuse… and
• …even if an Aldi breach does not amount to abuse, an irresponsible approach to the issue and conduct of commercial litigation could put a claimant at real risk on costs.
• The Aldi requirement is not just a matter for claimants. Whilst a defendant is not expected to invite litigation against itself, nevertheless if it is concerned about the prospect of subsequent litigation and/or is concerned that, in breach of Aldi, a claimant is not informing the court about the possibility of bringing further, related proceedings, then a defendant can make an application to the court accordingly. In fact, as all parties are required to help the court to deal with cases justly and at proportionate cost [5], a court may actively expect the defendant to make such an application.

Earlier in 2017, this decision was appealed to the Court of Appeal [6]…

Court of Appeal confirmation

In a unanimous decision, the Court of Appeal upheld the High Court’s decision not to strike Otkritie’s claim, such that the principles set out above still stand.

However, the Court of Appeal took the opportunity to proffer a strongly worded warning to commercial parties and practitioners that this case is not to be seen as, or as permitting, an ‘exception’ to the Aldi requirement. In fact, the court stressed that:

• There are no exceptions to the requirements to inform the court of any possibility of bringing a related claim in subsequent proceedings and not to abuse the court process by using it to raise issues that could have been raised before.
• The Aldi requirement is not optional.
• The fact that the Aldi requirement has not been translated into a procedural rule or practice direction does not matter.
• While there can be no excuse for failing to comply with the Aldi requirement, failure of itself does not, however, mandate striking out. Rather, the Aldi requirement is one facet of the broad, merits-based assessment which a court should carry out to determine whether and when a strike out is appropriate.

WM Comment

The ‘Aldi requirement’ (Otkritie Capital v Threadneedle) litigation is a clear reminder of the need for commercial claimants to very carefully consider their approach when it comes to the bringing of claims involving multiple and/or related parties, group companies and/or complex issues, and the need for them not to skip the vital procedural step of seeking case management assistance from the court where there is any possibility of bringing a related claim in subsequent proceedings or raising issues that could have been raised before.

The case also reminds defendants, however, that whilst there can be significant time, cost and reputational savings for those who can successfully counter or strike out unmeritorious claims with res judicata and abuse of process arguments, a claimant’s failure to comply with the Aldi requirement will not, of itself, mandate strike out.

Whether you are a claimant facing strike-out or concerned not to prejudice your ability to bring future or additional claims, or whether you are a defendant seeking to avoid vexatious or repeated litigation, please contact Lynsey Oakdene or any member of the Commercial Dispute Resolution team for further advice and assistance.

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[1] This abuse of process is known as ‘collateral attack’
[2] This is known as the rule in Henderson v Henderson (1843) 3 Hare 100
[3] Aldi Stores Ltd v WSP Groups & Ors [2007] EWCA Civ 1260
[4] Otkritie Capital International Ltd & Anor v Threadneedle Asset Management Ltd & Anor [2015] EWHC 2329 (Comm)
[5] CPR 1.1 – the Overriding Objective
[6] [2017] EWCA Civ 27