Borrower’s attempt to avoid enforcement amounted to abuse of process

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Important principles

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 banking litigation cases and/or cases involving litigants in person who may not always be familiar with court rules and due process.

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’.

In the recent case of Dickinson v Acorn Finance [4] the lender raised these principles before the Court of Appeal, and succeeded in having the borrower’s attempt to avoid enforcement of a possession order dismissed as an abuse of process.

Particular case

The lender had obtained a possession order and the borrower’s application to set aside the order and subsequent appeal were dismissed. Then, as the lender was about to recover possession, the borrower issued entirely new proceedings, claiming that the charge was unenforceable pursuant to section 26 of the Financial Services and Markets Act 2000 (FSMA) [5]. That argument had not been raised before in any of the previous litigation. The question for the Court of Appeal was whether section 26 FSMA should ‘trump’ the rules against re-litigation.

Court of Appeal clarification

The Court of Appeal confirmed that the principles preventing re-litigation should be approached in a broad, merits based way. As such, there may be differences between transactions rendered illegal by statute and those rendered unenforceable and, further, there may be differences between cases where statute dictated a blanket unenforceability and those where there might be a nuanced unenforceability. When it came to FSMA, section 26 allowed the court to enforce if it was just and equitable to do so. That nuance meant that it could not be said that applying the rules against re-litigation would mean that the court was enforcing an unenforceable agreement. In addition, it would be consistent with the Aldi requirement not to interfere with another court’s decision in circumstances where the claimant had failed to inform the court of the new issue or claim. FSMA did not therefore ‘trump’ the rules against re-litigation, and the borrower’s claim amounted to an abuse of process.

WM Comment

The crucial question in any potential abuse of process situation is whether, in all the circumstances, a party is misusing or abusing the court process when raising 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. Res judicata and the rules against abuse of process exist for the protection of all. The certainty and finality of litigation; the authority and supremacy of a judgment of the court; and the cost-efficiency of the court process for individual parties and for the public as a whole all depend upon these important principles. So far as lenders are concerned, there can also be significant time, cost and reputational savings for defendants who can apply the rules to successfully counter or strike out unmeritorious or vexatious claims or repeated litigation.

Please contact any member of the Banking Litigation team for further advice and assistance.


[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, or the Henderson principle
[3] Aldi Stores Ltd v WSP Groups & Ors [2007] EWCA Civ 1260
[4] Dickinson and Anor v Acorn Finance Ltd [2015] EWCA Civ 1194
[5] The claimant alleged that most of the land included in the charge was used in connection with a dwelling, that the charge was therefore a regulated mortgage contract entered into by an unauthorised person, and that it was therefore unenforceable under FSMA.