This was a dispute over a purported sale by a mortgagee (the second defendant) of a long lease of a partially completed penthouse development on the roof of a block of flats in London, United Kingdom. The claimants challenged the sale, arguing that either no power of sale existed or such power was exercised in bad faith, and/or that the defendants committed one or more economic torts. The claimants also sought damages for breach of contract against the first and second defendants. Among other things, the defendants argued the claimants were precluded from making allegations against the exercise of the power of sale because of res judicata, issue estoppel, or abuse of process.

Held: Judgment for the claimants against the first and second defendants only.

The claimants are precluded from advancing certain allegations concerning the exercise of the power of sale as a result of estoppel and abuse of process. A cause of action estoppel embraces all claims for breaches of those contracts arising out of the same incident: Republic of India v India Steamship Co Ltd (The Indian Endurance and The Indian Grace) [1993] AC 410 (HL) (The Indian Grace). In its discussion of cause of action estoppel, issue estoppel, and abuse of process, the Court analysed The Indian Grace as follows:

The scope of cause of action estoppel is demonstrated by [The Indian Grace]. During the carriage of a consignment of munitions to Cochin on board the defendants' vessel a fire occurred, as a result of which part of the consignment was jettisoned and the remainder was damaged. On 1 September 1988 the plaintiff cargo owners issued proceedings in India claiming damages for short delivery under the bills of lading. This claim encompassed the jettisoned cargo only. The Indian judge held that the defendants were liable for the value of the undelivered cargo, about [GBP] 6,000. On 25 August 1989 the plaintiffs issued a writ in rem in London claiming damages of some [GBP 2,600,000] for the total loss of the cargo. The pleaded claim in the Indian action was in respect of short delivery of the cargo delivered at Cochin, viz 51 shells (and a small item described as 'charge green bag'). The claim was advanced under one of the two bills of lading under which the consignment was shipped. In the plaint, it was alleged that the shipowners had been guilty of negligence while the cargo was in transit in the vessel, which was taken to refer to a breach of their duty as bailees (carriers for reward). It was either common ground (or found by the Indian judge) that the contract incorporated the Hague Rules. The claim in the English action was in the ordinary form for a damage to cargo claim, alleging against the shipowners: (1) breach of contract and/or duty as carrier by sea for reward to deliver the goods in like good order and condition as when shipped; (2) negligence, in breach of duty as carriers and/or as bailees for reward; and (3) breach of their obligations under article III(1) and (2) of the Hague Visby Rules, which apply to the contracts contained in or evidenced by the two bills of lading under which the goods were shipped. The first question that the House of Lords considered was whether the causes of action alleged in the two actions were the same. Lord Goff of Chieveley (with whom the other Law Lords agreed) said [in The Indian Grace] 420:

the goods in question were shipped under a contract of carriage the terms of which (as set out in the Hague Rules or the Hague-Visby Rules) regulate the respective rights and obligations of the parties. In these circumstances, the mere fact that the pleader can, so to speak, get the case on its feet by alleging short delivery or delivery of the goods not in the like good order and condition as when shipped, does not in my opinion assist. For it is wholly unrealistic to regard the cause of action as being other than a cause of action arising under the contract, which provides for the relevant duties of the shipowners regarding the seaworthiness of the ship and the care of the goods. Even if attention is concentrated on the liability of the shipowner as bailee, the fact remains that he is a bailee for reward, and that accordingly his liability will be governed by the terms of the contract of carriage … Here … it is necessary to identify the relevant breach of contract; and if it transpires that the cause of action in the first action is a breach of contract which is the same breach of contract which constitutes the cause of action in the second, then the principle of res judicata applies, and the plaintiff cannot escape from the conclusion by pleading in the second action particulars of damage which were not pleaded in the first.

Lord Goff concluded [in The Indian Grace] 421:

[The present case] is rather concerned with a single incident, i.e., the fire during transit which broke out in the cargo over which the plaintiffs' consignment of munitions was stowed, which resulted in the damage to that consignment and to loss (by jettison) of a small part of it. Furthermore, as appears from the pleadings, that loss or damage might have resulted from breach of more than one term of the contract, for example breach of the obligation to make the vessel seaworthy under article III, rule 1, of the Hague-Visby Rules, or breach of the obligation to load and stow, etc, the vessel carefully under article III, rule 2. However, for present purposes, there is no need to distinguish between the two breaches; because the factual basis relied upon by the plaintiffs as giving rise to the two breaches is the same, and indeed was referred to compendiously by the plaintiffs in the Cochin action as 'negligence'. In these circumstances, I am satisfied that there is identity between the causes of action in the two sets of proceedings.

[Thus,] where a single factual incident is alleged to amount to a breach of contract, and an action proceeds to judgment on that basis, it cannot be alleged in subsequent proceedings that the same incident amounted to a breach of a different obligation under the same contract. The judgment is res judicata as regards all causes of action for breach of the contract.