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Ally Tow,
SENIOR ASSOCIATE - CHARTERED LEGAL EXECUTIVE
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When to join additional defendants - The "Aldi requirement"
15 October 2015

In Aldi Stores Ltd V WSP Group Ltd [2007] the court considered the question of whether additional defendants should be added to existing proceedings or separate proceedings issued. In heavyweight commercial litigation in particular it is commonplace to find that the same or closely connected facts and circumstances can potentially apply to several parties.

The judgments in Aldi were handed down on 28 November 2007 with the court giving a strong direction that where there was an issue as to whether additional defendants should be added to existing proceedings or separate proceedings issued, the matter should be brought to the court’s attention.

In delivering his judgment, Lord Justice Thomas (as he was then) concluded as follows:

“… for the future, if a similar issue arises in complex commercial multi-party litigation, it must be referred to the court seized of the proceedings.  It is plainly not only in the interests of the parties, but also in the public interest and in the interest of efficient use of court resources that this is done.  There can be no excuse for failure to do so in the future.”

The issue has recently been explored again in two cases, Otkritie Capital International Ltd & another V Threadneedle Asset Management Ltd & Another [2015] (“Otrikie”) and Clutterbuck & Another V Cleghorn [2015] (“Clutterbuck”). In both cases, the court was asked to consider the consequences of breaching the so-called “Aldi requirement”with differing outcomes.

Otkritie

In Otkritie, proceedings had been issued against 19 defendants in 2011 (“the 2011 proceedings”). The claim was a complex commercial claim wherein the claimants sought to recover damages from the defendants, one of whom was a Mr Gersamia, following an alleged fraud perpetrated against the claimants. The matter came to trial in July 2013. Following the trial which lasted 45 days, judgment was handed down in February 2014. 

The judgment awarded the claimants sums “in principle” in excess of $150m against the defendants including Mr Gersamia. In November 2014, the claimants then issued a second set of proceedings for damages for $120m against alternative defendants, Threadneedle Asset Management Ltd and Threadneedle Management Services Ltd (“the Threadneedle defendants”) in their capacity as firstly Mr Gersamia’s former employer, and secondly a business who “exercised control” over Mr Gersamia and had a relationship with him akin to that of employer and employee (“the 2014 proceedings”).

Relying on the principles laid down in Aldi, the Threadneedle defendants made an application to strike out the proceedings on the basis that they should have been added to the 2011 proceedings and that accordingly, the 2014 proceedings were an abuse of process and should be struck out.  The Threadneedle defendants contended that Aldi made it clear that whether additional defendants should be added to proceedings was a matter for determination by the court and not the parties. Thus, they said, parties no longer had a “right” to bring two sets of proceedings rather than one.

The court did not agree that any breach of the so-called “Aldi requirement” meant that all cases where further proceedings had been issued would automatically be struck out. All any breach did was deprive the court of the ability to case manage the claims together.

The court said that the question whether there was an abuse of process was a concept which “informs the exercise of the court’s procedural powers” with the “underlying purpose of limiting abusive and duplicative litigation”. In determining whether a claim should be struck out for breach of the “Aldi requirement” the court should form a view, as best it can, on what the probabilities are had case management been undertaken.

Having regard to this, the court considered that the claimants realised that they might have a claim against the Threadneedle defendants by 1 March 2012 when they had sought to add Mr Gersamia as an additional defendant to the 2011 proceedings. Equally, the court could find no realistic basis for a contention, as was being suggested by the claimants, that they did not have the necessary evidence to sue the Threadneedle defendants at this time. The court found the evidence as to why the claimants did not sue the Threadneedle defendants at this time to be confusing and contradictory. However, the court was satisfied that the principal reason was because this would have necessitated a change in solicitors, the Threadneedle group of companies being a client of their existing solicitors at that time. Secondary to this was the fact that the claimants preferred to secure a positive outcome against Mr Gersamia before reaching a final decision with legal advice from a different firm of solicitors. There was no suggestion that the claimants were acting with any lack of honesty or were unjustly seeking to harass the Threadneedle defendants – the simple fact was that the claimants were focused on their own interests and not the interests of anyone else.

Having considered the submissions before him, Mr Justice Knowles found that had the claimants complied with the “Aldi requirement” it was likely, but not certain, that the court in the 2011 proceedings would, as a matter of case management, have allowed the claimants to have their choice which was to conduct two sets of proceedings. This was because the court would have been concerned with the delay in pursuing the 2011 proceedings if the Threadneedle defendants had been added at the time and also the fact that there were legitimate and objective reasons for bringing an action against Mr Gersamia (and others) first and only later (if successful against Mr Gersamia) against the Threadneedle defendants. Those reasons included the fact that adding the Threadneedle defendants would have resulted in bringing in two substantial parties and their legal team to little purpose if Mr Gersamia was not found liable in any event.

Having regard to the above, notwithstanding the breach of the “Aldi requirement”, the court did not consider that this was sufficient to amount to an abuse of process. Accordingly, the Threadneedle defendants’ application failed but in view of the claimants’ clear breach of the “Aldi requirement” Mr Justice Knowles said he would consider carefully any submission the Threadneedle defendants may make that the costs of the application should not follow the event and should be borne instead by the claimants.

Clutterbuck

In Clutterbuck, proceedings were issued in October 2013 in respect of three claims in relation to alleged joint venture agreements (“the Clutterbuck proceedings”). It was alleged that the agreements had been entered into by Mr Cleghorn who had unfortunately died in December 2009. Previous proceedings had been issued by the claimants against Sarah Mohammed Al Amoudi (“the Al Amoudi proceedings”) claimin fraudulent misrepresentation, deceit and breach of trust. In the Al Almoudi proceedings the claimants also alleged that she had been a party to some of the joint venture agreements referred to in the Clutterbuck proceedings. Furthermore, where she was not said to be a part to the agreements the claimants nonetheless sought to rely upon similar facts within the Al Amoudi proceedings. Judgment within the Al Amoudi proceedings had been handed down in February 2014 following 19 days of evidence wherein the claimants’ claims were dismissed in their entirety. That judgment was subject to appeal which had not yet been determined but in the meantime, the defendant in the Clutterbuck proceedings issued an application to strike out those proceedings as an abuse of process in view of the claimants’ failure to comply with the “Aldi requirement”.

The court found that it was “abundantly clear” that the “Aldi requirement” applied and that the claimants should therefore have applied for directions within the Al Amoudi proceedings. The court considered that allowing the claimants to proceed with the Clutterbuck proceedings would afford them the opportunity to re-argue various issues and also seek to challenge the credibility of witnesses once again in circumstances where that evidence had already been unsuccessfully challenged.  The court determined that for two different courts on two different occasions to reach inconsistent conclusions on the credibility of a witness in relation to the same issue would bring the administration of justice into disrepute.

In all the circumstances, the court upheld the defendant’s application within the Clutterbuck proceedings and struck out the claimants’ claim as an abuse of process.

Conclusion

These cases demonstrate clearly the importance of ensuring that consideration is given to the “Aldi requirement” and where appropriate to ensure that an application is made in the first set of proceedings for directions as regards the joining of additional defendants and/or issue of separate proceedings.

For more information about when to join additional defendants or to find out more about how the Dispute Resolution team can help you please contact Ally Tow on [email protected] or 0118 962 7206

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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