| EVIDENCE — Judicial findings — Admissibility — Company successfully bringing claim against director for breach of fiduciary duty — Director failing to satisfy judgment and declared bankrupt — Trustees in bankruptcy bringing proceedings against director — Whether judgment in company’s action admissible — Whether trustees privies of director — Whether judgment conclusive as between trustees and director
Shierson and another v Rastogi [2007] EWHC 1266 (Ch)
Ch D: Sir Andrew Morritt C: 25 May 2007
The principle that judicial findings made in a previous case were not admissible in later proceedings as evidence of facts found only applied where a party in the second proceedings had not had opportunity, by himself or his privy, to challenge evidence adduced in the first hearing.
Sir Andrew Morritt C so held in the Chancery Division when allowing an appeal brought by Malcom Shierson and Jonathan Birch, trustees in bankruptcy of Viren Kumar Rastogi, from an order of Registrar Jacques dismissing their application for an order under s279 of the Insolvency Act 1986 delaying Mr Rastogi’s discharge from bankruptcy.
The liquidators of R plc brought proceedings against the bankrupt for alleged breaches of his duties as a director of the company. The judge found that the bankrupt had been party to a fraud against the company and gave judgment against him in the sum of US$307,463,954. A bankruptcy order was subsequently made on the company’s petition based on his failure to satisfy the judgment. Ordinarily he would have been discharged at the expiration of one year from the date of the bankruptcy order. However, the bankrupt’s trustees applied for an order under s 279(4) of the Insolvency Act 1986 to suspend the running of that period on the ground that he had failed to comply with his obligations under Part IX of the 1986 Act. One of the respects in which the bankrupt was said not have to have complied with his obligations was his failure to explain or account for the disparity between the amount of the judgment awarded by the judge and the value of the assets disclosed by him. On their application the trustees sought to adduce the judgment to prove that the bankrupt had been party to a fraud against the company. Relying on Secretary of State for Trade and Industry v Bairstow [2004] Ch 1 in which the Court of Appeal had held that judicial findings made in a previous case were not admissible in later proceedings as evidence of facts found, the registrar held that the judgment was inadmissible and dismissed the trustees’ application.
SIR ANDREW MORRITT C said that in Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510, 515 Sir Robert Megarry V-C considered that any constraint on a party, whether by cause of action estoppel or abuse of process, applied also to his privy. He held that the principle to be applied was whether having regard to the subject matter of the dispute, there was a sufficient degree of identification between the two to make it just to hold that the decision to which one was a party should be binding in proceedings to which the other was a party. That principle applied to proceedings between the trustees and the bankrupt. Accordingly, for the purposes of considering any cause of action estoppel, issue estoppel or abuse of process arising from the judgment the trustees were to be considered as privies of the bankrupt. The principle in Bairstow applied where the parties to the second case were not the parties or privies of the parties to the first. However, where they were, the judgment was relevant to establish the extent of the estoppel arising from the order. In the instant case the judgment established conclusively, as between the bankrupt and the trustees, that the bankrupt had participated in the fraud and was accordingly admissible in the trustees’ application.
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