Takilla Ltd v Ernest Farley and Son Ltd, C.G. Farley and Keygrove Ltd

CourtCourt of Appeal
JudgeLe Quesne, Neill and Kentridge, JJ.A.:
Judgment Date25 February 1992
Date25 February 1992
Le Quesne, Neill and Kentridge, JJ.A.:

B.E. Troy for the appellant;

P.C. Sinel for the respondent.

Cases cited:

(1) Arnold v. National Westminster Bank PLC, [1991] 2 A.C. 93, applied.

(2) Brisbane City Council v. Att. Gen. for Queensland, [1979] A.C. 411; [1978] 3 All E.R. 30; (1978), 122 Sol. Jo. 506, dictum of Lord Wilberforce considered.

(3) Brunsden v. Humphrey (1884), 14 Q.B.D. 141; [1881-5] All E.R. Rep. 357; 51 L.T. 529; 53 L.J.Q.B. 476; 32 W.R. 944; 49 J.P. 4, distinguished.

(4) Caffoor v. Commrs. of Income Tax, Colombo, [1961] A.C. 584 ([1961] UKPC 15); [1961] 2 All E.R. 436.

(5) Channel Islands & Intl. Law Trust Co. Ltd. v. Pike, 1990 JLR 27.

(6) Dallal v. Bank Mellat, [1986] Q.B. 441; [1986] 1 All E.R. 239, applied.

(7) Fidelitas Shipping Co. Ltd. v. V/O Exportchleb, [1966] 1 Q.B. 630; [1965] 2 All E.R. 4; [1965] 1 Lloyd's Rep. 223; (1965), 109 Sol. Jo. 191, applied.

(8) Greenhalgh v. Mallard, [1947] 2 All E.R. 255, applied.

(9) Henderson v. Henderson (1843), 3 Hare 100; 67 E.R. 313, applied.

(10) Hoystead v. Commr. of Taxation, [1926] A.C. 155 ([1925] UKPC 107); [1925] All E.R. Rep. 56; (1925), 134 L.T. 354; 42 T.L.R. 207; 95 L.J.P.C. 79, applied.

(11) Saminathan v. Palaniappa, [1914] A.C. 618 ([1913] UKPC 75); (1914), 110 L.T. 913; 83 L.J.P.C. 131, distinguished.

(12) Vervaeke v. Smith, [1983] A.C. 145; [1982] 2 All E.R. 144; (1982), 126 Sol. Jo. 293.

(13) Yat Tung Inv. Co. Ltd. v. Dao Heng Bank Ltd., [1975] A.C. 581 ([1975] UKPC 6); (1975), 119 Sol. Jo. 273, applied.

Additional cases cited by counsel:

Abidin Daver, The, [1984] A.C. 398.

Finance & Econ. Cttee. v. Bastion Offshore Trust Co. Ltd., C.A., October 9th, 1991, unreported.

Showlag v. Mansour, 1991 JLR 367.

Legislation construed:

Royal Court Rules, 1982 (R. & O. 7026), r.6/13(d):

Text cited:

Spencer-Bower & Turner, Res Judicata, 2nd ed., at 376 (1969).

Estoppelchose jugescope of doctrineintended to prevent re-litigation of points which could and should with reasonable diligence have been raised previouslyfailure to plead all lines of argument precludes plaintiff from raising them in later action seeking determination of same fundamental issues unless exceptional circumstances

The appellant applied under the Royal Court Rules, 1982, r.6/13 to strike out the respondent's Order of Justice as an abuse of the process of the court.

The appellant sold property to the respondent but retained part of the original site in order to build a block of flats on it. Restrictive covenants in the contract of sale required, inter alia, the flats to be constructed in strict accordance with plans previously approved by the Island Development Committee. Following completion of the flats, the respondent brought an action against the appellant, alleging breach of covenant and seeking a reduction in the height of the block. The Royal Court found for the respondent but the decision was reversed by the Court of Appeal, which held that the lower court had misinterpreted the restrictive covenant, which was sufficiently clear and had not been breached. The Court of Appeal emphasized the unambiguous nature of the plans and stated that neither misrepresentation nor mistake had been pleaded before it, despite there having been ample opportunity to have done so. Indeed, the court had been obliged to exclude evidence which could have supported such allegations in the absence of a pleading to that effect. The respondent then alleged misrepresentation by the appellant and brought an action to rectify the contract of sale by altering the words of the restrictive covenant and to achieve the reduction in the height of the block of flats sought in the previous action. In response, the appellant successfully applied in the present proceedings under the Royal Court Rules, 1982, r.6/13 to strike out the respondent's Order of Justice as an abuse of the process of the court in attempting to re-litigate an issue on which final judgment had already been pronounced. On appeal, the Royal Court (Crill, Bailiff and Jurats Vint and Orchard) held, inter alia, that (a) the matters contained in the two actions could have been included in a single suit but were none the less distinct; and (b) since the doctrine of res judicata, even at its widest, was directed to securing the exhaustion of relief in respect of a cause of action and not to the inclusion of different causes in a single action, regardless of whether they arose from substantially the same factual situation, it had no application to the proceedings and the appeal would accordingly be allowed. The decision is reported at 1991 JLR 91.

On further appeal, the appellant submitted, inter alia, that (a) not only was the respondent seeking to bring a further action upon substantially the same facts as had been the basis of the previous action, but it was claiming the same remedy in respect of the same fundamental issue, namely, whether the appellant had been entitled to build as it had done; (b) since the matters raised in the second action could and should have been litigated in the first, the wider doctrine of res judicata applied and the respondent's Order of Justice had been rightly struck out by the Judicial Greffier as an abuse of the process of the court; and (c) since there were no special circumstances to mitigate against this conclusion, the Royal Court should have upheld the Judicial Greffier's order, which should now be restored.

In reply, the respondent submitted, inter alia, that (a) although it was seeking the same remedy as in the previous action, the case was essentially different; (b) whereas the previous action was for the enforcement of the covenant as it was originally worded, the later action sought to rectify the contract to mean that which the respondent had always understood it to mean and so the doctrine of res judicata had no application to the proceedings; and (c) in any event, the special circumstances of the first action, in which evidence which would have supported a claim for misrepresentation had been excluded, made it inappropriate and unjust now to deny the respondent access to the court.

Held, allowing the appeal:

(1) The respondent was attempting by its second action to re-litigate points which could and should, with reasonable diligence, have been raised in the first. The claim for rectification, though itself a new cause of action, was in the context of the whole action merely another attempt to establish that the appellant had covenanted not to build above a certain height and that it was in breach of that obligation. The matter had, however, been finally determined in the appellant's favour and could not now be re-opened (page 64, lines 10-31; page 66, line 13 - page 67, line 18).

(2) The failure of the respondent or its legal advisers to have laid down in its initial pleadings all the ways in which it sought to sustain its claims might have been inadvertence or accident but was not a "special circumstance" which permitted the respondent to raise them in a later action. It was, in fact, precisely the type of situation intended to fall within the extended doctrine of res judicata. Accordingly, the appeal would be allowed and the respondent's action struck out as an abuse of the process of the court (page 64, line 38 - page 65, line 6; page 68, line 26 - page 69, line 15).

KENTRIDGE, J.A.: This judgment, which I have prepared, is the judgment of the court.

This is an appeal from a judgment of the Bailiff given in the Royal Court on May 20th, 1991. The appellant, Ernest Farley & Sons Ltd., was the owner of a property in the vicinity of La Ruelle Vaucluse consisting of an extensive garden on which a substantial house stood. In June 1979 the appellant sold the house and a part of the garden to the respondent, Takilla Ltd. The respondent acted through its principal shareholder, Mr. F.J. Callaghan. The appellant retained the greater part of the garden. The contract of sale contained clauses in favour of the respondent restricting the development which could be carried out on the land retained by the appellant. Clause 3 of the contract restricted the permissible fenestration of any buildings which might be erected so as to overlook the existing house; and cl. 6 restricted the height of any building which might be erected on the appellant's portion. This restriction was defined by reference to a plan drawn up by the appellant's architect (Mr. Horne) referred to as "Plan 326/12."

Within a very few months there began a course of litigation between the parties which has occupied them for the past 12 years. The litigation between the parties arose from the two clauses referred to and especially from cl. 6. The main dispute concerned a block of flats which the appellant proposed to build on the property to a height of three storeys, which in due course it did build. The course of the litigation is summarized in a judgment of the Judicial Greffier of January 8th, 1991.

Like the Royal Court, we gratefully adopt the Judicial Greffier's summary of the history of the litigation.

On September 23rd, 1979 the respondent obtained an injunction in relation to the building which was, however, lifted within a few days. On February 18th, 1982 the appellant began an action against the respondent seeking a declaration in relation to the building to be erected. In early 1984 the court struck out the appellant's pleadings. On December 20th, 1984 the respondent began an action against the appellant claiming an injunction: this action was withdrawn by agreement on June 10th, 1985. Also on December 20th, 1984 the respondent began a further action against the appellant alleging a breach of the restrictive covenant and seeking an order that the height...

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