COURT OF APPEAL DECISION TODAY: “WAREHOUSING” A CLAIM IS NOT AN ALWAYS ABUSE OF PROCESS (AND SHOULD NOT HAVE BEEN STRUCK OUT IN ANY EVENT)

In the judgment today in Alibrahim v Asturion Fondation [2020] EWCA Civ 32 the Court of Appeal confirmed that the court should not have struck out a claim that had been left dormant for a period.

“Striking out was a disproportionate response.”

THE CASE

The claimant brought an action claiming £28 million, claiming that property had been gratuitously transferred to the defendant without authority. The claimant’s claim was struck out by a Deputy Master on the grounds that there had been an abuse of process by “warehousing” the claim (leaving it in abeyance without permission of the court or the agreement of the defendant).  That decision was overturned by the High Court Judge. The defendant appealed to the Court of Appeal.

THE DECISION IN THE COURT OF APPEAL

The Court of Appeal rejected the defendant’s appeal.

ABUSE OF PROCESS

The Court of Appeal held that delay, even inordinate delay, did not always lead to a conclusion that there had been an abuse of process.
    1. Abuse of process can take many forms. This case concerns the form which has become known as “warehousing”. While that is no doubt a convenient label, as counsel for Asturion submitted, it is necessary to be more precise in specifying what conduct amounts, or may amount, to abuse of process.
    2. The parties are sharply divided on this issue. Counsel for Ms Alibrahim submitted that it is always an abuse of process for a claimant unilaterally – that is to say, without either the consent of the defendant or the approval of the court – to decide not to pursue its claim for any period which is more than insignificant. He contended that this principle applied if the claimant decided not to pursue the claim for as little as a month, since a month was a not insignificant period, although he accepted that a day would be insignificant. He accepted, however, that a finding of abuse of process would not automatically lead to the conclusion that the claim should be struck out. I shall return to that point later.
    3. Counsel for Asturion disputed that a mere unilateral decision by a claimant not to pursue its claim for a period of time constituted, or was even capable of constituting, an abuse of process. He submitted that it was necessary to distinguish between four classes of case. The first was where the claimant had no intention ever to pursue the claim to trial (or other proper resolution, such as a settlement). The second class was where the claimant had no current intention to pursue the claim, but might pursue it in the future depending on contingencies which were extraneous to the claim (such as the claimant’s pursuit of other claims against other defendants). The third class was where the claimant always intended to pursue the claim, but decided temporarily to pause its progress for reasons legitimately connected with the claim. The fourth class was where the claimant always intended to pursue the claim, but failed to do so through incompetence (whether the claimant’s or its lawyers’). He submitted that the first and second classes of case would generally constitute abuse of process, but not the third and fourth. He further submitted that the present case fell into the third class.
    4. In considering these submissions, the starting point is that it is well established that mere delay in pursuing a claim, however inordinate and inexcusable, does not without more constitute an abuse of process: see Icebird Ltd v Winegardner [2009] UKPC 24 at [7] (Lord Scott of Foscote delivering the judgment of the Privy Council).
    5. In Grovit v Doctor [1997] 1 WLR 640 the claimant had commenced wide-ranging proceedings against the defendants in August 1989, but by March 1990 all that remained was an allegation of libel. The last activity of the claimant prior to the application to strike out had been on 20 September 1990. On 21 March 1991 and 23 September 1991 the defendants’ solicitors wrote to the claimant’s solicitors inviting the claimant to proceed with or abandon the claim. By the time of the application, the claimant had done nothing for over two years. In those circumstances the judge found that the claimant had no interest in actively pursuing the litigation: so far as he was concerned, it was dead in the water. The claimant did not challenge that finding before the Court of Appeal. The House of Lords held that this conduct constituted an abuse of process for reasons which Lord Woolf expressed at 647G-H as follows (emphasis added):

“The courts exist to enable parties to have their disputes resolved. To commence and to continue litigation which you have no intention to bring to a conclusion can amount to an abuse of process. Where this is the situation the party against whom the proceedings is brought is entitled to apply to have the action struck out and if justice so requires (which will frequently be the case) the courts will dismiss the action. The evidence which was relied upon to establish the abuse of process may be the plaintiff’s inactivity.”

    1. Two points should be noted about this reasoning. The first is that, as Leggatt LJ pointed out during the course of argument, the words “which you have no intention to bring to a conclusion” could embrace both (i) cases in which the claimant has no intention of ever bringing the claim to a conclusion and (ii) cases in which the claimant has no intention of bringing to a conclusion at present, but intends to do so in future, perhaps depending upon some contingency. On the facts, however, the case in question was of the first kind.
    2. The second point is that Lord Woolf was clear that such conduct “can” constitute abuse of process, not that it will automatically do so, and that it will “frequently” be the case that the court will strike out the claim, not that it will always do so. If that is the position with respect to cases of the first kind identified in the preceding paragraph, then it is difficult to see why cases of the second kind should be treated more stringently.
    3. In Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426 the Court of Appeal considered two appeals concerned with striking out on the ground of want of prosecution. The facts of the cases and the individual decisions do not matter for present purposes. What do matter are the statements of Lord Woolf MR delivering the judgment of the Court of Appeal in two passages.
    4. The first passage is as 1436F-H (emphasis added):

“It is already recognised by Grovit v Doctor [1997] 1 WLR 640 that to continue litigation with no intention to bring it to a conclusion can amount to an abuse of process. We think that the change in culture which is already taking place will enable courts to recognise for the future, more readily than heretofore, that a wholesale disregard of the rules is an abuse of the process as suggested by Parker L.J. in Culbert v Stephen G Westwell & Co Ltd [1993] P.I.Q.R. P54.

While an abuse of process can be within the first category identified in Birkett v James [1978] A.C. 297 it is also a separate ground for striking out or staying an action (see Grovit v Doctor at pp. 642-643) which does not depend on the need to show prejudice to the defendant or that a fair trial is no longer possible. The more ready recognition that wholesale failure, as such, to comply with the rules justifies an action being struck out, as long as it is just to do so, will avoid much time and expense being incurred in investigation [of] questions of prejudice, and allow the striking out of actions whether or not the limitation period has expired.”

    1. It can be seen from this that Lord Woolf again said that continuing litigation with no intention to bring it to a conclusion “can” amount to an abuse of process, not that it necessarily does so.
    2. The second passage is at 1437B-E (emphases added):

“It has been the unofficial practice of banks and others who are faced with a multitude of debtors from whom they are seeking to recover moneys to initiate a great many actions and then select which of those proceedings to pursue at any particular time. This practice should cease in so far as it is taking place without the consent of the court or other parties. If there is good reason for doing so the court can make the appropriate directions. Whereas hitherto it may have been arguable that for a party on its own initiative to, in effect, ‘warehouse’ proceedings until it is convenient to pursue them does not constitute an abuse of process, when hereafter this happens this will no longer be the practice. It leads to stale proceedings which bring the litigation process into disrespect. As case flow management is introduced, it will involve the courts becoming involved in order to find out why the action is not being progressed. If the claimant has for the time being no intention to pursue the action this will be a wasted effort. Finding out the reasons for the lack of activity in proceedings will unnecessarily take up the time of the court. If, subject to any directions of the court, proceedings are not intended to be pursued in accordance with the rules they should not be brought. If they are brought and they are not to be advanced, consideration should be given to their discontinuance or authority of the court obtained for their being adjourned generally. The courts exist to assist parties to resolve disputes and they should not be used by litigants for other purposes. This new approach will not be applied retrospectively to delays which have already occurred but it will apply to future delay.”

    1. Although this passage was strictly obiter, it was plainly intended to lay down the approach that the courts would adopt in future. It is clear from what Lord Woolf said that it is likely to be an abuse of process for the claimant unilaterally to decide not to pursue a claim for a substantial period of time, even if the claimant remains intent on pursuing the claim at some future point. In my view Lord Woolf cannot have meant that this will always constitute an abuse of process given what he had reiterated about the Grovit case. Nor is there any indication that Lord Woolf was differentiating between counsel for Asturion’s second and third classes of case.
    2. In Realkredit Danmark A/S v York Montague Ltd (The Times, 1 February 1999) the claimant lenders had brought a claim against the defendant valuers for alleged negligent valuation of seven hotels. The claim was struck out for alleged non-compliance by the lenders with an unless order for discovery even though the lenders had served in time a list of documents listing over 2,500 documents. Unsurprisingly, the Court of Appeal allowed the lenders’ appeal. The valuers had also applied to strike out the claim as an abuse of process, but the judge had dismissed that application and this was the subject of a cross-appeal. The valuers argued that there was an abuse of process because the lenders had taken a deliberate decision not to pursue the litigation, and to ignore the timetable laid down by the court in an order dated 24 July 1996 which was designed to lead to a trial which was later fixed for 2 June 1998. The lenders had taken no step after that order until they served a notice of intention to proceed on 21 November 1997. The lenders’ evidence was to the effect that the reasons for the delay were, first, a concern as to the valuers’ professional indemnity insurance, secondly, the fact that the valuers were placed into administrative receivership on 28 January 1997, and thirdly, the failure of the administrative receivers to respond to a query about the insurance position at a creditors’ meeting on 14 May 1997.
    3. The judge accepted that the lenders had warehoused the proceedings and that this was not permissible, but nevertheless concluded that it would not be right to strike out the claim on the ground of abuse of process. It is not clear whether he held that there was no abuse or whether he held that there was an abuse but nevertheless decided not to strike the claim out. Tuckey LJ, with whom Morritt LJ agreed, held that there was no reason to think that the judge had exercised his discretion in a wrong way, still less that he was plainly wrong. He added:

“What happened could be characterised as warehousing but one can well understand the lenders’ concern about the valuers’ insolvency. Had the administrative receivers responded to the request for information about the insurance position the delay would probably not have been such as to jeopardise the trial date. But the message in Arbuthnot that in such a circumstance, the authority of the court should be obtained for delay, particularly where this involves ignoring directions for trial which the court has already given, needs to be emphasised. Had the court been asked to sanction the delay in this case at an early stage it would, I think, certainly have done so. But more probably the application would have resulted in the lenders discovering, as is the case, that the valuers are insured against this claim.”

    1. In Braunstein v Mostafazan (unreported, 12 April 2000) the plaintiff was a solicitor who claimed for fees for work done for the defendant. The defendant denied that the plaintiff had acted as its solicitor. The writ was issued on 8 October 1992. After service of Further and Better Particulars of the Defence in November 1995, the plaintiff took no steps until service of notice of intention to proceed on 8 April 1997. The plaintiff’s evidence was that, during this period, he was negotiating a settlement with a Mr Jafari who he believed was acting on behalf of the defendant, although it subsequently transpired that Mr Jafari was not, and Mr Jafari had told him on several occasions that the defendant had requested that the action should not be progressed whilst negotiations were continuing.
    2. Although the defendant’s principal ground for applying to strike out the claim before the master, and its only ground before the judge, was inordinate and excusable delay causing serious prejudice to the defendant, on appeal to the Court of Appeal the defendant also contended that the claim should be struck out as an abuse of process. This contention was based on what Harrison J described at [26] as “the deliberate decision of the plaintiff to put his action on ice, or to ‘warehouse’ the proceedings, from mid-1995 to April 1997” while negotiating with Mr Jafari.
    3. The Court of Appeal rejected this contention for reasons which Harrison J, with whom Mance LJ agreed, expressed at [32] as follows:

“… I am not persuaded that the conduct of the plaintiff was sufficiently serious as to amount to an abuse of process. The length of time for which the negotiations were carried on by the plaintiff without progressing the action from mid-1995 to April 1997 was less than half the time involved in the case of Cooperative Retail Services Ltd v Guardian Assurance plc, and the overall period of inordinate and inexcusable delay in that case was 5 years and 5 months compared to the period of 3½ years in this case. Furthermore, it is implicit in the findings of the judge that the plaintiff believed that Mr Jafari was acting on behalf of the defendant, albeit that he can quite properly be criticised for failing to check the authenticity of Mr Jafari’s authority to negotiate, either with the defendant or with the defendant’s solicitor. Looking at the matter in the round, however, I do not consider that, as a matter of fact and degree, this is a case where it can be said that the plaintiff’s conduct was such as to amount to an abuse of process so that it should be struck out without prejudice having to be shown.”

    1. In my judgment the decisions in Grovit, Arbuthnot, Realkredit and Braunstein show that a unilateral decision by a claimant not to pursue its claim for a substantial period of time, while maintaining an intention to pursue it at a later juncture, may well constitute an abuse of process, but does not necessarily do so. It depends on the reason why the claimant decided to put the proceedings on hold, and on the strength of that reason, objectively considered, having regard to the length of the period in question. A claimant who wishes to obtain a stay of proceedings for a period of time should seek the defendant’s consent or, failing that, apply to the court; but it is not the law that a failure to obtain the consent of the other party or the approval of the court to putting the claim on hold automatically renders the claimant’s conduct abusive no matter how good its reason may be or the length of the delay.
    2. Although we were referred to a number of decisions of High Court Judges, both sitting at first instance and on appeal from Masters, it is only necessary briefly to mention two of these. The authority which comes closest to supporting the contention advanced by counsel for Ms Alibrahim is Société Générale v Goldas Kuyumculuk Sanayi [2017] EWHC 667 (Comm), in which Popplewell J (as he then was) held that the claimant’s conduct was an abuse of process for three reasons, one of which was that it had decided to recover the sums it claimed were due from the defendants not in the English proceedings, but in proceedings in Turkey, leading to a delay of some eight years which was only brought to an end by the defendants’ strike out applications. In that context (which is unaffected by the subsequent decision of the Court of Appeal [2018] EWCA Civ 1903, [2019] 1 WLR 346) Popplewell J stated at [63]:

“For a claimant unilaterally to warehouse proceedings is therefore an abuse of process, and may be a sufficiently serious abuse to warrant striking out the claim in appropriate cases under the line of authority from Grovit v Doctor [1997] 1 WLR 640; see Solland International Ltd v Clifford Harris & Co [2015] EWHC 3295 (Ch) at [54]. It is not necessary to decide in this case whether if Goldas had been validly served, the warehousing of the proceedings was an abuse of sufficient gravity to warrant striking out the claim. What is clear is that the decision to put the proceedings on hold for such a long period was an abuse, and a serious abuse, which militates against there being a good reason for granting the relief sought on this application.”

  1. Notwithstanding the phrasing of the first sentence, I do not think that Popplewell J can have meant to say that unilaterally putting proceedings on hold is always an abuse. Such a statement of the law would not be supported by his citation from Solland International Ltd v Clifford Harris & Co [2015] EWHC 3295 (Ch) at [54], where I said that “it may be an abuse of process for the claimant unilaterally to ‘warehouse’ the claim for a substantial period of time, even if the claimant subsequently decides to pursue it [emphasis added]” (and see also [69]). Furthermore, Popplewell J evidently regarded the length of the delay as germane to this question.
  2. Finally on the law, I should address a more minor dispute between the parties. Counsel for Ms Alibrahim suggested that an application to strike out on the ground of abuse of process by “warehousing” fell to be analysed in three stages. The first stage was to consider whether the claimant’s conduct was an abuse of process. The second stage, if an abuse of process was found, was to consider whether the abuse was sufficiently serious to entitle the court to strike out the claim. The third stage, if the abuse was sufficiently serious, was for the court to exercise its discretion as to whether in all the circumstances striking out was the appropriate remedy. In the course of argument, however, he accepted that an alternative view was that there were only two stages to the analysis: first, the court should determine whether the claimant’s conduct was an abuse of process; and if so, secondly, the court should exercise its discretion as to whether to strike out the claim. Counsel for Asturion supported a two-stage analysis. In my judgment the better reading of the authorities is that the analysis falls into two stages, and not three. Furthermore, this is supported by the structure of CPR rule 3.4(2)(b), which provides that the court “may” strike out a statement of case if it “is an abuse of the court’s process” (it is perhaps worth noting that the authorities have added the gloss “in all the circumstances of the case”, particularly the claimant’s conduct).

AN ABUSE OF PROCESS NEED NOT LEAD TO STRIKING OUT

The Court of Appeal rejected the argument that the High Court Judge had erred.  Further the striking out of the claim was a disproportionate response in any event.
    1. The first question under this heading is whether the Judge applied the correct legal test. The Judge expressed the test at [41] as follows:

“What these cases show, in my judgment, is that it is now established that delay may amount to abuse of process in circumstances short of a finding that the claimant has permanently abandoned any intention to pursue them, but that the court will examine all the circumstances in which the delay occurred, including the length of the delay, the degree of the claimant’s responsibility for that delay and the reasons given for it, and assess whether they amount to abuse of process, as distinct from ‘mere’ delay. ‘Warehousing’ may be descriptive of some circumstances that show abuse, primarily where for an extended period the claimant has no present intention of pursuing the claim but keeps it going in case it decides to do so in the future, but application of that term is not determinative one way or the other. If abuse is found, the question then arises whether striking out is an appropriate sanction.”

  1. In my view this statement of the law is substantially correct, although I would prefer to express the test in the manner in which I have done in paragraph 61 above.
  2. The next question is whether, applying that test, the Judge was entitled to conclude that Asturion’s conduct was not an abuse of process. The Judge’s assessment, in brief summary, was that Asturion’s reason for not pursuing the claim for 10 months was an objectively reasonable one, namely that the authority of the board of Asturion to bring the proceedings was under attack by Ms Alibrahim in Liechtenstein and in that context she had complained about the costs being incurred by Asturion in these proceedings. In my view that was an evaluative assessment which the Judge was fully entitled to make. As has been emphasised in a number of decisions now, Asturion should not have proceeded unilaterally. It should have sought Ms Alibrahim’s consent to a stay and, in the absence of consent, applied to the court. (If it had done so, it would have been very likely to succeed in obtaining a stay.) Nevertheless, the fact that Asturion did not take the proper course does not, in the circumstances of this case, necessarily lead to the conclusion that its conduct was an abuse of process.
  3. Even if the Judge was wrong to conclude that Asturion’s conduct was not an abuse of process, the question would remain as to whether he was entitled to exercise his discretion not to strike out the claim. The Judge held that, even if there was an abuse, it was of a relatively minor nature and did not justify the sanction of striking out. In my judgment the Judge was fully entitled to take that view. Although neither the Master nor the Judge gave any detailed consideration to alternatives to striking out, there were lesser sanctions available to the court which were more proportionate to the abuse, if abuse there had been. For example, the court could have imposed tight directions to trial, including unless orders against Asturion, and it could have imposed a costs sanction. Striking out was a disproportionate response.