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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Secretary of State for Trade and Industry v Bairstow [2003] EWCA Civ 321 (11 March 2003)
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Cite as: [2003] 1 BCLC 696, [2004] Ch 1, [2003] EWCA Civ 321, [2003] 3 WLR 841, [2003] BCC 682, [2003] CP Rep 46, [2004] 4 All ER 325

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Neutral Citation Number: [2003] EWCA Civ 321
Case No: A3/2002/0414

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM COMPANIES COURT
MR. JUSTICE PUMFREY

Royal Courts of Justice
Strand,
London, WC2A 2LL
11th March 2003

B e f o r e :

THE VICE-CHANCELLOR
LORD JUSTICE POTTER
and
LADY JUSTICE HALE

____________________

Between:
THE SECRETARY OF STATE FOR TRADE AND INDUSTRY
Claimant
- and -

BAIRSTOW
Defendant

____________________

(Transcript of the Handed Down Judgment of
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)

____________________

Mr. Michael Todd QC and Mr. Philip Gillyon (instructed by the Treasury Solicitor) for the Claimant
Mr. Charles Purle QC (instructed by Messrs Jones Day Gouldens) for the Defendant

____________________

HTML VERSION OF JUDGMENT
AS APPROVED BY THE COURT
____________________

Crown Copyright ©

    The Vice-Chancellor :

    Introduction
  1. The appellant, Mr John Bairstow, was the Chairman and joint managing director of Queen's Moat House plc ("QMH"). He was dismissed on 18th August 1993. Later that year he (and others of his co-directors) instituted proceedings against QMH claiming damages for wrongful dismissal. QMH claimed that he was rightly dismissed and alleged that he had been guilty of grave misconduct, neglect in the performance of his duty and breach of his service agreement. The action was tried by Nelson J between 6th October 1997 and 7th September 1998. Nelson J gave two judgments, the first on 23rd July 1999 and the second, after further argument, on 3rd December 1999. Limited leave to appeal was granted by Simon Brown and Rix LJJ to Mr Bairstow on 26th October 2000. That appeal was dismissed by the Court of Appeal on 17th May 2001. Leave to appeal was granted to Mr Bairstow by the House of Lords but, as the parties compromised their differences, has not proceeded.
  2. In the meantime, in February 2000, the Secretary of State for Trade and Industry commenced these proceedings under s.8 Company Directors Disqualification Act 1986 ("CDDA") seeking a disqualification order, as defined in s.1, against Mr Bairstow (and three of his fellow directors of QMH) on the ground that his conduct in relation to QMH made him unfit to be concerned in the management of a company. The application is supported by affidavits of Mr Adrian Burn, a chartered accountant and one of the persons appointed by the Secretary of State under s.432(2) Companies Act 1985 to investigate the affairs of QMH, and Mr J.R.Sibley, then a director and the Deputy Inspector of Companies in the Company Law and Investigations Directorate of the Department of Trade and Industry. Mr Burn sets out at length and in detail the criticisms of the conduct of Mr Bairstow on which the Secretary of State relies and the facts and documents on which they are based. Exhibit "BAFB 5" contains statements made by persons other than the respondents to the application and extracts from transcripts of interviews with them. Mr Sibley describes the involvement of the Secretary of State in the appointment of inspectors and other matters relating to his decision to institute these proceedings under s.8 CDDA. In paragraphs 5 to 9 he draws attention to the proceedings before Nelson J, the substantial identity of the issues in those proceedings and the conduct of Mr Bairstow on which the Secretary of State relies in these and the conclusions of Nelson J in relation to those issues in the two judgments to which I have referred.
  3. On 5th March 2001 Mr Bairstow swore an affidavit in answer to those of Mr Burn and Mr Sibley. It runs to 226 pages though much of it consists of quotations from transcripts of evidence given by others to the inspectors or to Nelson J. The various points made by Mr Bairstow (or other respondent) were dealt with by Mr Burn in a further lengthy affidavit sworn by him on 15th June 2001. On the same day Mr Gardner, the successor in office of Mr Sibley, swore another affidavit as to the course of Mr Bairstow's appeals from the judgments of Nelson J.
  4. On 4th December 2001 there was a pre-trial review before Pumfrey J. The Secretary of State was represented by Counsel, Mr Bairstow appeared in person. Pumfrey J ordered, amongst other things,:
  5. 1) that [The Secretary of State] and Mr Bairstow be not entitled to challenge but be bound by the findings made by [Nelson J] in proceedings between Mr Bairstow (and others) and [QMH] by judgments dated 23rd July 1999 and 3rd December 1999
    .....
    3) that Mr Bairstow be permitted to file and serve further evidence dealing with mitigation."

    On 20th February 2002 Pumfrey J granted Mr Bairstow permission to appeal on the ground that the principle on which he had relied should be examined by the Court of Appeal.

  6. Accordingly the issue for our determination is whether the judge was entitled to make the order he did. In his judgment Pumfrey J set out the basic facts, described the extensive overlap between the issues before Nelson J and these proceedings, considered the nature of disqualification proceedings and then turned to the principle on which the Secretary of State relies. That is the principle described and applied in Hunter v Chief Constable for the West Midlands [1982] AC 529 that it is an abuse of the process to initiate
  7. "proceedings in a court of justice for the purpose of mounting a collateral attack upon a final decision against the intending plaintiff which has been made by another court of competent jurisdiction in previous proceedings in which the intending plaintiff had a full opportunity of contesting the decision in the court by which it was made."
  8. Pumfrey J referred to a number of subsequent cases in which that principle has been considered and said:
  9. "In my judgment, the over-riding question is, what approach is most likely to achieve justice? In my view, the interests of justice are unlikely to require a second investigation of facts which have already been the subject of exhaustive examination over many days in closely fought civil proceedings and in circumstances where the potential unfairness of the proceedings has already been examined by a court competent to do so and which has rejected the suggestion that there was any substantial unfairness in those proceedings. Of course, in making any pre-emptive decision there is always a risk of injustice, but the magnitude of that risk has to be assessed against the whole background of the case and, in particular, the nature of the previous proceedings. Here I do not consider that the question is in any way difficult to decide."
  10. Pumfrey J considered particular submissions made to him by Mr Bairstow and concluded that
  11. "I have come to the conclusion that once the facts have been established in the judgment of Nelson J it would require very compelling fresh considerations before a re-examination of those facts could be justified."

    He determined that such a re-examination could not be justified and made the order under appeal.

  12. Counsel for Mr Bairstow submits that the judge was wrong. He contends that the judgments of Nelson J are not binding by way of estoppel as between the Secretary of State and Mr Bairstow and, relying on Hollington v F.Hewthorn & Co.Ltd [1943] KB 587 and subsequent cases, that the factual findings and conclusions of Nelson J are not evidence of those facts. He submits that the wide powers conferred on judges by CPR Rules 3.1 and 32.1 do not enable them to make admissible as evidence that which in law is not. He contends that the principle relied on by the Secretary of State does not apply to one, such as Mr Bairstow, who has not initiated proceedings for the purpose of mounting a collateral attack on a final decision of a court of competent jurisdiction. Why, he submits, should a defendant or respondent such as Mr Bairstow be stigmatised as abusing the process of the court because he insists that the serious allegations made against him are proved by legally admissible evidence?
  13. Counsel for the Secretary of State accepts that the judgments of Nelson J are not binding by way of estoppel as between the Secretary of State and Mr Bairstow. He contends that the decision of the Court of Appeal in Hollington v F.Hewthorn & Co.Ltd [1943] KB 587, insofar as it remains good law, applies only to prior decisions of a court exercising a criminal jurisdiction. But, he submits, even if the factual findings and conclusions of Nelson J are not admissible as evidence in these proceedings of facts so found the decision of the House of Lords in Hunter v Chief Constable for the West Midlands [1982] AC 529 and other cases to the same effect show that it can be and is an abuse of the process for Mr Bairstow to require the same issues to be relitigated.
  14. Proceedings under the Company Directors Disqualification Act 1986
  15. Before considering the extent and proper application of the principles on which each side relies it is necessary to explain the nature of the proceedings under CDDA and the procedure by which they are conducted. A disqualification order prohibits the person against whom it is made, otherwise than with the leave of the court, from acting as a director or liquidator of a company or as a receiver or manager of the property of a company or from being concerned or taking part, directly or indirectly, in the formation, promotion or management of a company. Such an order may be made in any of the circumstances prescribed by ss.2 to 8. In the case of applications under ss.6 to 8 an order may be made if the court is satisfied that the conduct as a director of a company of the person against whom the order is sought makes him unfit "to be concerned in the management of a company". (See ss.6(1)(b) and 8(2) CDDA)
  16. In determining whether a person's conduct makes him unfit to be concerned in the management of a company the court is required by s.9 to have regard to the matters specified in schedule 1 part I and, where the company in question has become insolvent to the matters specified in part II. As QMH has not become insolvent only the matters specified in part I could be relevant in these proceedings. In summary those matters are the director's own misfeasance, breach of fiduciary or other duty in relation to a company, his own misapplication or accountability for the money or property of a company and the extent of his responsibility for the company entering into any transaction liable to be set aside under the Insolvency Act or failing to keep proper accounts and other records. The issue for the court's determination, namely unfitness to be concerned in the management of a company, must be decided by reference to the totality of the conduct relied on. Such conduct has to be proved or admitted for there is no such thing as a default judgment in proceedings under CDDA.
  17. S.16 CDDA provides that the person against whom the order is sought "may appear and himself give evidence or call witnesses". S.20 provides for certain statements to be admissible in evidence but it is not suggested that it has any relevance to issues arising on this appeal. The procedure by which such claims are to be pursued is prescribed by Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987 (SI1987/2023) as amended. By rule 3 the claim is to be supported by one or more affidavits or, in the case of the Official Receiver, a written report. Such affidavit or report must (r.3(3)) include "a statement of the matters by reference to which the defendant is alleged to be unfit to be concerned in the management of a company". Rule 6 requires the defendant to file in court any affidavit evidence in opposition to the application which he wishes the court to take into consideration. It was decided by this court in Re Rex Williams Leisure plc [1994] Ch 350 that the provisions of rule 6 apply so as to require a defendant who seeks to exercise his right under s.16 to give evidence or call witnesses to do so by filing affidavits. It was recognised that the court enjoys a residuary discretionary control over its own procedure so as to allow a witness to supplement his affidavit evidence and to permit him to call as a witness on subpoena one who refuses to swear an affidavit. The circumstances in which the court will allow such evidence will be exceptional and a defendant has no right to insist on it.
  18. In Re Rex Williams Leisure plc [1994] Ch 350 the Court of Appeal also dealt with the question of hearsay evidence. But their conclusion in that respect has now been overtaken by the provisions of the Civil Evidence Act 1995. By s.1(1) evidence in civil proceedings can no longer be excluded on the grounds that it is hearsay of whatever degree. Hearsay is defined by s.1(2)(a) as "a statement made otherwise than by a person while giving oral evidence in the proceedings which is tendered as evidence of the matters stated". Where hearsay evidence is tendered and the party doing so does not intend to call the maker of the statement the opposing party may do so for the purpose of cross-examining him on that statement but only with the leave of the court. (S.3 and CPR 33.4)
  19. Accordingly as things stand the only witnesses at the hearing of the application to disqualify Mr Bairstow are Messrs Burn, Sibley and Gardner and Mr Bairstow himself. It may be that the court would permit Mr Bairstow to call for the purposes of cross-examination on their respective statements those whose statements are contained in exhibit "BAFB 5". Similarly Mr Bairstow may satisfy the court that he should be allowed to subpoena as a witness one who has refused to make an affidavit on his behalf. Notwithstanding these possibilities, all of which are within the control of the court, I regard the suggestion that the order under appeal is required to prevent a trial of a length approximating that before Nelson J as fanciful.
  20. Previous decisions as admissible evidence
  21. I turn then to the proposition on which counsel for Mr Bairstow relies. In Hollington v F.Hewthorn & Co.Ltd [1943] KB 587 the defendant had been involved in a road traffic accident in consequence of which the plaintiff's son had died. The defendant was convicted of careless driving and the plaintiff as the personal representative of his son sued the defendant for damages for negligence. The plaintiff sought to rely on the conviction as prima facie evidence that the defendant was driving carelessly at the time. The judge rejected the conviction as evidence but found for the plaintiff on other grounds. On the defendant's appeal the plaintiff claimed that the judge had been wrong to reject the conviction as such prima facie evidence. The judgment of the court was given by Goddard LJ. He recognised that relevance is the main consideration determining whether or not evidence is admissible.
  22. The Court ruled that the conviction was inadmissible on two grounds; first, that the opinion of the court exercising the criminal jurisdiction as evidenced by the certificate of conviction was not relevant; second, as hearsay evidence it did not comply with the best evidence rule. It is common ground that the second reason is no longer valid. Hearsay is now generally admissible under the Civil Evidence Act 1995. In any event a subsisting conviction is now evidence that the person in question committed the offence recorded in it in all civil proceedings. In the case of defamation actions it is conclusive evidence in all other civil proceedings it is prima facie evidence only, Civil Evidence Act 1968 ss.11 and 13. Accordingly the decision can only be authoritative if the first ground continues to be sustainable.
  23. The reasoning of the court on that first ground is clear from the following passage in the judgment:
  24. "In truth, the conviction is only proof that another court considered that the defendant was guilty of careless driving. Even were it proved that it was the accident that led to the prosecution, the conviction proves no more than what has just been stated. The court which has to try the claim for damages knows nothing of the evidence that was before the criminal court. It cannot know what arguments were addressed to it, or what influenced the court in arriving at its decision. Moreover, the issue in the criminal proceedings is not identical with that raised in the claim for damages. Assume that evidence is called to prove that the defendant did collide with the plaintiff, that has only an evidential value on the issue whether the defendant, by driving carelessly, caused damage to the plaintiff. To link up or identify the careless driving with the accident, it would be necessary in most cases, probably in all, to call substantially the same evidence before the court trying the claim for personal injuries, and so proof of the conviction by itself would amount to no more than proof that the criminal court came to the conclusion that the defendant was guilty. It is admitted that the conviction is in no sense an estoppel, but only evidence to which the Court or a jury can attach such weight as they think proper, but it is obvious that once the defendant challenges the propriety of the conviction the court, on the subsequent trial, would have to retry the criminal case to find out what weight ought to be attached to the result. It frequently happens that a bystander has a complete and full view of an accident. It is beyond question that, while he may inform the court of everything he saw, he may not express any opinion on whether either or both of the parties were negligent. The reason commonly assigned is that this is the precise question the court has to decide, but, in truth, it is because his opinion is not relevant. Any fact that he can prove is relevant, but his opinion is not. The well recognised exception in the case of scientific or expert witnesses depends on considerations which, for present purposes, are immaterial. So, on the trial of the issue in the civil court, the opinion of the criminal court is equally irrelevant."
  25. Such reasoning and conclusion, though criticised by Lord Diplock in Hunter v Chief Constable of the West Midlands [1982] AC 529, 543 and by Lord Hoffmann in Arthur JS Hall & Co v Simons [2002] 1 AC 615, 702, has been recognised as expressing the position at common law in a number of subsequent decisions to which I shall refer in chronological order. In Savings Bank Ltd v Gasco Investments [1984] 1 WLR 271 the issue was the admissibility in evidence of the report of inspectors appointed under s.35 Companies Act 1967. Peter Gibson J recognised that the decision of the Court of Appeal in Hollington v F.Hewthorn & Co.Ltd "still represents the position at common law" and concluded that the report was not relevant or admissible.
  26. In Hui Chi-Ming v R [1992] 1 AC 34 the Privy Council applied the principle of Hollington v F.Hewthorn & Co.Ltd to exclude the conviction of A in an earlier trial from being adduced in evidence in a later trial of B on a cognate charge. In delivering the advice of the Privy Council Lord Lowry referred to the observations of Goddard LJ in Hollington v F.Hewthorn & Co.Ltd which I have quoted (para. 17) as "greatly in point". Later, he added:
  27. "...it is the irrelevance of the outcome of the earlier trial, as illustrated by cases such as R v Turner (1832) 1 Mood. 347, that makes evidence of that outcome inadmissible."
  28. In Land Securities plc v Westminster City Council [1993] 1 WLR 286 the issue was whether an earlier arbitration award was admissible in later proceedings for the determination of a fair market rent. Hoffmann J applied the principle so as to exclude an earlier arbitration award. At p.288 he said:
  29. "An arbitration award, on the other hand, is an arbitrator's opinion, after hearing the evidence before him, of the rent at which the premises could reasonably have been let. The letting is hypothetical, not real. It is therefore no direct evidence of what was happening in the market. It is the arbitrator's opinion of what would have happened.
    In principle the judgment, verdict or award of another tribunal is not admissible evidence to prove a fact in issue or a fact relevant to the issue in other proceedings between different parties. The leading authority for that proposition is Hollington v F. Hewthorn & Co. Ltd [1943] KB 587, in which a criminal conviction for careless driving was held inadmissible as evidence of negligence in a subsequent civil action. There has been criticism of this decision, and important exceptions have since been created by statute, notably in the Civil Evidence Act 1968, but none of them would apply here."
  30. In Symphony Group plc v Hodgson [1994] QB 179 the Court of Appeal was concerned with the practice and procedure for making costs orders against one who was not a party to the proceedings in which the costs were incurred. Balcombe LJ formulated a number of principles of which the sixth is in these terms:
  31. "(6) The procedure for the determination of costs is a summary procedure not necessarily subject to all the rules that would apply in an action. Thus, subject to any relevant statutory exceptions, judicial findings are inadmissible as evidence of the facts upon which they were based in proceedings between one of the parties to the original proceedings and a stranger: see Hollington v F. Hewthorn & Co. Ltd. [1943] KB 587; Cross on Evidence, 7th Ed. (1990), pp 100 101. Yet in the summary procedure for the determination of the liability of a solicitor to pay the costs of an action to which he was not a party, the judge's findings of fact may be admissible: see Brendon v Spiro [1938] 1 KB 176, 192, cited with approval by this court in Bahai v Rashidian [1985] 1 WLR 1337 1343D, 1345H. This departure from basic principles can only be justified if the connection of the non-party with the original proceedings was so close that he will not suffer any injustice by allowing this exception to the general rule."
  32. In Three Rivers District Council v Bank of England (No.3) [2001] 2 AER 513 the House of Lords considered the extent to which the findings of Lord Bingham of Cornhill in an extra-statutory report into the collapse of BCCI could be relied on in subsequent proceedings. The issue before the House of Lords was whether the claim in the action had been properly struck out. A majority considered that it had not been. Three of the members of the Appellate Committee recognised that the findings would not be admissible in evidence at the trial of the action. Thus Lord Steyn described the report as being "ruled out by settled principles of law". Lord Hope of Craighead stated in paragraphs 31 and 32 that
  33. "[31] The first point that has to be borne in mind is that neither the report itself nor any of its findings or conclusions will be admissible at any trial in this case. At this stage, when the only material that is available for consideration apart from the pleadings is the report and an incomplete bundle of relevant documents, it is tempting to fill in the gaps by reference to Bingham LJ's findings and the conclusions which he was able to draw from his review of the evidence. Nevertheless a sharp dividing line must be observed between, on the one hand, his narrative of the evidence and, on the other hand, his findings and conclusions in the light of that evidence.
    [32] It can, as I have said, be assumed that if the claim is not struck out the claimants will in due course have access to the evidence, which provides the source material for that narrative, and that that evidence will be capable of being led by them at the trial. But, as Bingham LJ's findings and conclusions based on that narrative are inadmissible, they must be held to be incapable either of being led in evidence at the trial or being used by either side in any other way in support of the competing arguments."

    Lord Hutton expressed the same opinion in paragraph 132. I do not understand either Lord Hobhouse of Woodborough or Lord Millett to have disagreed with these opinions.

  34. In Hawaz v The Thomas Cook Group Ltd (27th October 2000) Keene J upheld the ruling of Judge Simpson, sitting in the Mayor's and City of London court that a decision of Ferris J in civil proceedings that Mr Hawaz had forged certain traveller's cheques was inadmissible in subsequent civil proceedings between him and another person. After setting out the rival arguments Keene J concluded:
  35. "..that the principles adumbrated in Hollington v Hewthorn remain applicable in cases where none of the statutory or common law exceptions operate. Those principles prevent the findings made in earlier civil cases from being used subsequently as evidence of the facts found. They do not in themselves operate as a bar to the findings being put by way of cross-examination as to credit, subject to the control of the court, but that is a different topic with which it will be necessary to deal later in this judgment. But in so far as it was sought to adduce the findings of Ferris J. in order to establish that the Respondent had committed fraud and forgery in fact against Sheikh Ahmed and had therefore been involved in a fraudulent claim on the travellers cheques in this action the learned judge was correct to rule that those findings were inadmissible in law."
  36. Finally I should refer to the CDDA proceedings heard by Jonathan Parker J reported as Re Barings plc (No.5) [1999] 1 BCLC 433. The proceedings arose out of the collapse of Barings plc due to the unauthorised trading activity of an employee of a subsidiary company in Singapore. There had been enquiries in both England and Singapore into what went wrong. These had led to a report of the Bank of England (the BoBs Report) and another from inspectors appointed by the Minister of Finance in Singapore (the SIR Report). The question arose as to the extent, if at all, to which the findings in either report were admissible in evidence. The Secretary of State did not seek to rely on "evaluative judgments or express criticisms". Evans-Lombe J had already determined that hearsay statements recorded in either report were admissible: Re Barings plc (No.2) [1998] 1 BCLC 590. This left findings of primary or secondary fact made by the authors of either report. As to these Jonathan Parker J said
  37. "It seems to me to be implicit in the decision of Evans-Lombe J. that findings of primary and secondary fact (as noted above, evaluative judgments are to be excluded for present purposes) are also admissible as evidence in these proceedings. But in any event, whether or not that may be strictly correct, I take the view that the implied statutory exception identified in Re Rex Williams Leisure plc, the wide-ranging nature of which was explained by Millett LJ in Ashcroft (at 81-82) a passage quoted by Evans-Lombe J in his judgment in Re Barings plc (in admin) (No 2) [1998] 1 BCLC 590 (see 594-595) covers findings of fact, as well as pure hearsay statements."

    The validity or otherwise of this conclusion was not challenged by Mr Baker in his subsequent appeal: Re Barings (No.5) [2000] BCLC 523, 537 para 41.

  38. Counsel for the Secretary of State contends that the principle established in Hollington v F.Hewthorn & Co.Ltd is applicable only where the earlier decision was made in criminal proceedings. He contends that this distinction is warranted by a comparison between certain features of a criminal and a civil trial. In a criminal case it is not possible to be sure as to the basis of the conviction or the factual finding on which it is founded. It is likely that the issues in the criminal trial will be substantially different to those in a civil action. The rules of evidence are more restrictive. By contrast, in a civil action the basis of the decision is, or should be, clear from the judgment. The issues and the evidence on which the facts were found will be readily ascertainable. The range of admissible evidence is much wider. Why, asked Counsel for the Secretary of State forensically, should the opinion of a judge in giving judgment in an earlier civil action be accorded no weight when the evidence of any other expert would be admissible? Counsel also relied on the criticism of Hollington v F.Hewthorn & Co.Ltd voiced by Lord Diplock in Hunter v Chief Constable of the West Midlands [1982] AC 529, 543 that it "is generally considered to have been wrongly decided".
  39. I am unable to accept the distinction on which counsel for the Secretary of State relies. Even if Hollington v F.Hewthorn & Co.Ltd could originally have been confined to cases in which the earlier decision was that of a court exercising a criminal jurisdiction, it has stood for over 60 years as establishing a much broader proposition. There was no criminal prosecution in any of the other cases to which I have referred except Hui Chi-Ming v R. The submission of counsel is inconsistent with the judicial statements made in each of the other cases to which I have referred, in particular of Lords Steyn, Hope of Craighead and Hutton in Three Rivers District Council v Bank of England. It is true that in most of them the decision in question was not that of a court, but of inspectors appointed under the Companies Act, an arbitrator or extra-statutory investigators. But that feature was not the basis of the decision in any of those cases and cannot account for the dictum of Balcombe LJ in Symphony Group plc v Hodgson or the decision of Keene J in Hawaz v The Thomas Cook Group Ltd.
  40. Accordingly I would accept the submission of counsel for Mr Bairstow that the factual findings and conclusions of Nelson J in the earlier proceedings are not admissible as evidence of the facts so found in these proceedings. Counsel for the Secretary of State accepted that he could not rely on any statutory or common law exception to render those conclusions admissible for the purpose of proving those facts. Thus it is unnecessary to consider further the decisions of Evans-Lombe or Jonathan Parker JJ in Re Barings plc. Counsel for the Secretary of State also accepted that if the factual conclusions of Nelson J are inadmissible there is nothing in the Civil Procedure Rules, in particular CPR Rule 32.1, to alter the position.
  41. Collateral challenge to an earlier decision as an abuse of the process
  42. Accordingly I turn to the principle on which the Secretary of State does rely. The lynch-pin of his argument is the decision of the House of Lords in Hunter v Chief Constable of the West Midlands [1982] AC 529. Before referring to it in any detail it is convenient to look at one of the earlier cases. In Reichel v Magrath (1889) 14 App. Cas. 665 Reichel had taken proceedings against the Bishop of Oxford and the patrons of a benefice for a declaration that he was still the vicar of the benefice and that an instrument of resignation was null and void. He lost before North J and his appeals to both the Court of Appeal and the House of Lords were dismissed. In the second action Magrath claimed to be the incumbent of the benefice, having been appointed to fill the vacancy caused by the resignation of Reichel, but that Reichel refused to vacate the parsonage houses or glebe lands. He sought declarations and injunctions designed to evict Reichel. In his defence to that claim Reichel sought to set up the same case as had been rejected by all three courts in the action he had brought against the Bishop. Magrath applied to have the defence struck out. He succeeded before the Queen's Bench judges on the grounds that the matter was res judicata and in the Court of Appeal on the basis that to set up the same defence was an abuse of the process of the court. Reichel appealed to the House of Lords. He failed. Lord Halsbury LC said:
  43. "It would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again. It cannot be denied that the only ground upon which Mr. Reichel can resist the claim by Mr. Magrath to occupy the village is that he (Mr. Reichel) is still vicar of Sparsholt. If by the hypothesis he is not vicar of Sparsholt and his appeal absolutely fails, it surely must be in the jurisdiction of the Court of Justice to prevent the defeated litigant raising the very same questions which the Court has decided in a separate action.
    I believe there must be an inherent jurisdiction in every Court of Justice to prevent such an abuse of its procedure and I therefore think that this appeal must likewise be dismissed."

    Lords Fitzgerald and Macnaghten agreed. Lords Watson and Herschell gave concurrent speeches. This decision is inconsistent with the submission of counsel for Mr Bairstow that the principle on which the Secretary of State relies cannot apply because Mr Bairstow has not initiated any attack on the earlier judgments of Nelson J.

  44. In Hunter v Chief Constable of the West Midlands [1982] AC 529 the plaintiffs had been arrested on suspicion of having caused bomb explosions in a crowded pub in Birmingham. They were remanded in custody from time to time in the course of which they signed statements admitting the charges, but were seen to have sustained serious facial injuries. The first question at the subsequent trial was whether the statements had been procured by violence and threats or whether they were admissible as voluntary. This was decided by Bridge J at a voir dire and the trial proceeded. At the trial the accused repeated their allegations as to how their statements came to be made and Bridge J gave the appropriate directions to the jury. The jury found them guilty. Leave to appeal to the Court of Appeal (Criminal Division) was refused. The policemen alleged to have been responsible for the alleged assaults were charged but acquitted. Four years later the plaintiffs commenced civil proceedings for damages for assault and personal injuries resulting therefrom relying on the same assaults as they had relied on at both the voir dire and the trial. The Chief Constable applied for an order under RSC Ord 18 r.19 or the inherent jurisdiction of the court striking out the statement of claim and dismissing the action. He failed before Cantley J but succeeded in the Court of Appeal and the House of Lords.
  45. Lord Diplock, with whom the other members of the Appellate Committee agreed, considered that the case exemplified an abuse of the process of the court in the terms I have already quoted (para 5 above). He noted that a collateral attack on a final decision of a court of competent jurisdiction may take a number of different forms and quoted the speech of Lord Halsbury in Reichel v Magrath. He observed that the case before the House was the first in which the issue arose in respect of a decision of a court of criminal jurisdiction and that the decision of the Court of Appeal in Hollington v F.Hewthorn & Co.Ltd had no bearing on it. He considered, at some length, the provisions of ss.11-13 Civil Evidence Act 1968 and their effect on the decision in Hollington v F.Hewthorn & Co.Ltd. He concluded that the fresh evidence by which the conviction might be challenged in subsequent civil proceedings without being an abuse of the process of the court is such as to satisfy the test laid down by Earl Cairns LC in Phosphate Sewage Co.Ltd v Molleson (1879) 4 AppCas 801. The test formulated by Earl Cairns in that case (p. 814) is as follows:
  46. "As I understand the law with regard to res judicata, it is not the case, and it would be intolerable if it were the case, that a party who has been unsuccessful in a litigation can be allowed to re-open that litigation merely by saying, that since the former litigation there is another fact going exactly in the same direction with the facts stated before, leading up to the same relief which I asked for before, but it being in addition to the facts which I have mentioned, it ought now to be allowed to be the foundation of a new litigation, and I should be allowed to commence a new litigation merely upon the allegation of this additional fact. My lords, the only way in which that could possibly be admitted would be if the litigant were prepared to say, I will shew you that this is a fact which entirely changes the aspect of the case and I will shew you further that it was not, and could not by reasonable diligence have been, ascertained by me before."

    In Hunter v Chief Constable of West Midlands there was no evidence which satisfied that test, with the consequence that it was an abuse of the process of the court to seek to relitigate the issues which had been determined by Bridge J and the jury in the earlier criminal proceedings. In those circumstances the claim had been properly struck out.

  47. This principle has been applied in a number of subsequent cases to which we were referred. Thus, in North-West Water Ltd v Binnie [1990] 3 AER 547 consultant engineers had been found to be liable for negligence in an action brought by the victims of an explosion in the underground tunnel they had designed. In a subsequent action for negligence brought by the water authority for whom they had designed the tunnel they denied the allegations of negligence. Drake J held that the consulting engineers were precluded by estoppel from doing so. He held also that it was an abuse of the process of the court for the consulting engineers to continue to deny that which had been decided against them, albeit in proceedings brought by different parties. Accordingly he struck out their defence.
  48. In Re Thomas Christy Ltd [1994] 2 BCLC 527 CDDA proceedings had been brought against a Mr Manson and gave rise to a number of factual findings against him. Subsequently two applications were issued, one by Mr Manson appealing against the rejection of his proof of debt, the other by the liquidator for misfeasance. There was a substantial overlap between the CDDA proceedings and the proof of debt appeal. Jacob J applied the principle established in Hunter v Chief Constable of West Midlands and declined to allow Mr Manson, who was appearing in person to relitigate the same issues. In Brinks Ltd v Abu-Saleh [1995] 1 WLR 1478 Jacob J applied the same principle in the case of an earlier conviction. In the absence of any evidence satisfying the test laid down by Earl Cairns in Phosphate Sewage Co.Ltd v Molleson he struck out the defence.
  49. In J v Oyston [1999] 1 WLR 694 the defendant had been convicted of raping and assaulting the plaintiff. The plaintiff then sued the defendant for damages in respect of the same rape and assault. The defendant denied the allegations. Smedley J refused to strike out his defence on the ground that by s.11 Civil Evidence Act 1968 the conviction was only prima facie evidence. In those circumstances the defendant was entitled, if he could, to persuade the judge at trial that he had not committed the acts of which complaint was made. A similar conclusion was reached by the Court of Appeal in McCauley v Vine [1999] 1 WLR 1977.
  50. In recent years the principle of Hunter v Chief Constable of West Midlands has also arisen in the context of actions by a party against his former legal adviser relating to the conduct of earlier civil or criminal proceedings or their settlement. In Walpole v Partridge & Wilson [1994] QB 106 the plaintiff had been convicted before the justices for obstructing a veterinary officer in the course of his duty. He instructed the defendants to advise him on the merits of an appeal but they failed to advise him to lodge his notice of appeal in time. When he then sued his solicitors for negligence they claimed that his action should be struck out as a collateral attack on the final decision of a court of competent jurisdiction. They were unsuccessful on the ground that the issues before the justices and in the civil proceedings were different. At page 116 Ralph Gibson LJ pointed out that the decision of the House of Lords in Hunter v Chief Constable of West Midlands was that the initiation of proceedings as described by Lord Diplock may be an abuse of the process of the court, not that it necessarily is. At page 117 he observed that the decision of two different courts may well be different if reached on markedly different evidence.
  51. In Smith v Linskills [1996] 1 WLR 763 the plaintiff had been convicted of burglary. He sued his solicitors for the negligent conduct of his defence. The court directed the trial of a preliminary point of law whether if the plaintiff had been convicted because of the negligence of the defendant the plaintiff's claim was sustainable in law. The question was answered in the negative by both the judge and the Court of Appeal because the evidence on which the plaintiff relied did not pass the test laid down by Earl Cairns in Phosphate Sewage Co.Ltd v Molleson.
  52. The issue arose again in the various appeals reported under the style of Arthur J.S. Hall & Co v Simons [2002] AC 615. The Court of Appeal was bound by the decisions of the House of Lords in Rondel v Worsley [1969] 1 AC 191 and Saif Ali v Sydney Mitchell & Co. [1980] AC 198 to recognise the advocate's immunity from suit in respect of acts or omissions in the conduct of proceedings in court. In paragraph 37 the Court of Appeal indicated that the principle of Hunter v Chief Constable of West Midlands should be applied first. If the proceedings were struck out or dismissed then the question of immunity did not arise; but if the action was not struck out or dismissed on that ground then the justification for the advocate's immunity must be sought elsewhere. In paragraph 38 the Court of Appeal repeated the observations made in both Walpole v Partridge & Wilson and Smith v Linskills that Hunter v Chief Constable of West Midlands did not decide that the initiation of proceedings collaterally challenging an earlier judgment is necessarily an abuse of the process, only that it might be. The Court of Appeal emphasised the importance of considering (1) the nature and effect of the earlier judgment, (2) the nature and basis of the claim made in the later proceedings and (3) any grounds relied on to justify the collateral challenge.
  53. The House of Lords decided that the advocate's immunity should be reconsidered. They held unanimously in relation to civil proceedings and by a majority of five to two in relation to criminal proceedings that the immunity of the advocate was not required to prevent collateral attacks on earlier criminal convictions or civil judgments. The relevance for present purposes lies in the observations made in respect of the application of the principle in Hunter v Chief Constable of West Midlands. Thus, Lord Browne-Wilkinson (p.685) confined it to cases where the prospective relitigation would be manifestly unfair to the defendant or would bring the administration of justice into disrepute. Lord Hoffmann (p.702) agreed that the principle only applied
  54. "in cases in which relitigation of an issue previously decided would be "manifestly unfair" to a party or would bring the administration of justice into disrepute."

    He specifically approved the observation of Ralph Gibson LJ in Walpole v Partridge & Wilson that the initiation of such proceedings is not necessarily an abuse of the process, but that it may be. Lord Hope of Craighead (p.722) accepted that all cases which can be treated as amounting to a collateral challenge to a subsisting conviction will be dismissed or struck out as an abuse of the process. Lord Hutton (p.727) and Lord Millett (p.752) agreed with Lord Hoffmann. Lord Hobhouse of Woodborough noted (p.742) that challenging a previous decision does not necessarily connote an abuse of the process. Later (p.743) he added:

    The "collateral attack" point is a species (or "sub-set") of abuse of process. There is no general rule preventing a party inviting a court to arrive at a decision inconsistent with that arrived at in another case. The law of estoppel per rem judicatem (and issue estoppel) define when a party is entitled to do this. Generally there must be an identification of the parties in the instant case with those in the previous case and there are exceptions. So far as questions of law are concerned, absent a decision specifically binding upon the relevant litigant, the doctrine of precedent governs when an earlier legal decision may be challenged in a later case.
    A party is not in general bound by a previous decision unless he has been a party or privy to it or has been expressly or implicitly covered by some order for the marshalling of litigation (Ashmore v British Coal Corpn [1990] 2 QB 338). This overlaps with the concept of vexation where the same person is faced with successive actions making the same allegations which have already been fully investigated in a previous case in which the later claimant had an opportunity to take part."
  55. In my view these cases establish the following propositions:
  56. a) A collateral attack on an earlier decision of a court of competent jurisdiction may be but is not necessarily an abuse of the process of the court.
    b) If the earlier decision is that of a court exercising a criminal jurisdiction then, because of the terms of ss. 11 to 13 Civil Evidence Act 1968, the conviction will be conclusive in the case of later defamation proceedings but will constitute prima facie evidence only in the case of other civil proceedings. (It is not necessary for us to express any view as to whether the evidence to displace such presumption must satisfy the test formulated by Earl Cairns in Phosphate Sewage Co.Ltd v Molleson, cf the cases referred to in paragraphs 32, 33 and 35 above.)
    c) If the earlier decision is that of a court exercising a civil jurisdiction then it is binding on the parties to that action and their privies in any later civil proceedings.
    d) If the parties to the later civil proceedings were not parties to or privies of those who were parties to the earlier proceedings then it will only be an abuse of the process of the court to challenge the factual findings and conclusions of the judge or jury in the earlier action if (i) it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated or (ii) to permit such relitigation would bring the administration of justice into disrepute.
    Conclusion
  57. In this case the earlier decisions are those of Nelson J in civil proceedings. It is common ground that his factual findings and conclusions are not binding on the parties to these proceedings as the Secretary of State was not a party or privy of a party to the proceedings before Nelson J. Accordingly the first question is whether to relitigate any of the issues before him would be manifestly unfair to either the Secretary of State or Mr Bairstow. I see no reason why it should be manifestly unfair to the Secretary of State that he should be required to prove the serious allegations he makes with regard to the conduct of Mr Bairstow. He has adduced evidence in the form of the affidavit of Mr Burn designed to prove his case by admissible evidence without the assistance of the judgment of Nelson J. No doubt the order of Pumfrey J would give him a short cut but I do not consider that to deny him that short cut would be unfair to the Secretary of State.
  58. Obviously it would not be manifestly unfair to Mr Bairstow to require the Secretary of State to prove his case. I cannot stigmatise the attitude of Mr Bairstow in requiring the Secretary of State to prove his case by legally admissible evidence as an abuse of the process of the court. He will have to deal with the evidence of Mr Burn and will be liable to be cross-examined in respect of the findings of Nelson J. And in the absence of any compelling evidence from Mr Bairstow the judge may well draw the same inferences from the evidence of Mr Burn as Nelson J did from the extensive evidence before him. But it is the judge hearing the CDDA application, not Nelson J, who has to be satisfied that Mr Bairstow is by reason of his conduct in relation to QMH unfit to be concerned in the management of a company.
  59. Then would permitting such relitigation bring the administration of justice into disrepute? I do not think so. First, the allegations made by the Secretary of State are serious. Second, they have to be proved to the satisfaction of the court hearing the application for a disqualification order by legally admissible evidence. This application is not like other civil proceedings in which a defence may be struck out and judgment be entered in default. As I said earlier there can be no default judgment in proceedings such as these. Third, these proceedings are in the control of the court. Mr Bairstow is not entitled to adduce any further evidence whether from himself or others without the court's leave. Mr Bairstow will have to satisfy the court that there are good grounds for challenging the evidence of Mr Burn and that the evidence he seeks to adduce is relevant to that issue.
  60. I would, in any event, conclude that the order of Pumfrey J went too far. If the earlier decision had been that of a court exercising a criminal jurisdiction then the conclusions of Nelson J would have been prima facie evidence only. I can see no reason why the decision of a civil court on a lower burden of proof, which is not binding as an estoppel per rem judicatem, should be treated as conclusive proof.
  61. For all these reasons I would allow the appeal and set aside the order of Pumfrey J. It will be necessary to hold a further pre-trial review to deal with the outstanding applications of Mr Bairstow for permission to adduce further evidence which became unnecessary in the light of the order Pumfrey J was prepared to make. I would emphasise again that it is incumbent on Mr Bairstow to identify which parts of the evidence of Mr Burn he challenges, to indicate why he does so and to demonstrate that the further evidence he seeks to adduce is clearly relevant to the issue. While CPR Rule 32.1 cannot render admissible evidence which is inadmissible, it can and should be used to confine the issues, exclude the marginal and limit the evidence Mr Bairstow seeks to adduce to that which is truly probative.
  62. I would allow this appeal, set aside paragraph 1 of the order of Pumfrey J and remit the matter to Pumfrey J for a further pre-trial review in the light of the conclusions of this court.
  63. Potter LJ

  64. I agree.
  65. Hale LJ

  66. I also agree.
  67. Order: Appeal allowed as per agreed draft minute of order.
    (Order does not form part of the approved judgment)


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