CASE STRUCK OUT DUE TO CLAIMANT’S INACTIVITY: YOU CAN’T “WAREHOUSE” A COURT ACTION

January 14, 2022 · by · in Abuse of Process, Applications, Striking out

In Alfozan v Quastel Midgen LLP [2022] EWHC 66 (Comm) HHJ Pearce (sitting as a High Court judge) struck out an action on the grounds of the claimant’s delay.  The case had been “warehoused” and the claimant had not adduced sufficient evidence to show that he intended to pursue the action.

 

“Once it is possible to show that the intention to pursue does not exist, it is not necessary for the defendant to show that it is no longer possible to have a fair trial or that the defendant has otherwise suffered prejudice”

THE CASE

The claimant brought an action against two defendants. The claim was issued in 2018. In May 2021 the case against the first defendant was struck out as an abuse of process on the grounds that the action was commenced without any present intention of progressing the matter to trial.  The judge was hearing an application by the second defendant to strike out the action on the same gorunds.

THE RELEVANT LAW

The judge reviewed the legal principles.
    1. It is not in dispute that the commencement of litigation with no intention to bring matters to a conclusion can amount to an abuse of process. A claimant’s inactivity may demonstrate the lack of intention to pursue the claim. Once it is possible to show that the intention to pursue does not exist, it is not necessary for the defendant to show that it is no longer possible to have a fair trial or that the defendant has otherwise suffered prejudice – see Grovit v Doctor [1997] 1 WLR 640. As Lord Woolf put it at p.647G-H of his judgment in that case, “the courts exist to enable parties to have their disputes resolved.”
  2. Lord Woolf expanded upon both why such conduct is an abuse of process and why the courts would not tolerate it in Arbuthnot Latham v Trafalgar [1998] 1 WLR 1426:

“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 and 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…” (p.1437C-E).

  1. In this passage, Lord Woolf identified a different type of “warehousing” than that in Grovit v Doctor. The first instance Judge and the Court of Appeal in that case had concluded that the Claimant had no interest in having the case heard. Lord Woolf considered this to be a conclusion that they were entitled to come to. But in the passage from Arbuthnot Latham v Trafalgar cited above, he expressly acknowledged that the principles relating to “warehousing” might apply also to the situation where the Claimant had no intention for the time being of pursuing the claim, albeit that they might do so in the future.
  2. This type of case was considered by Arnold LJ in two cases from which the following principles can be drawn:
  3. a)It may be an abuse of process for the Claimant to “warehouse” a claim by taking a decision not to pursue it for a substantial period of time, even if the Claimant subsequently decides to pursue it (Solland International Limited v Clifford Harris [2015] EWHC 3295 or even is intent on pursuing the claim, albeit at some later time (Asturion Fondation v Alibrahim [2021] 1 WLR 617);
  4. b)However, mere delay in pursuing a claim, however inordinate and inexcusable, does not, without more, constitute an abuse of process (Asturion Fondation v Alibrahim);
  5. c)In deciding whether to strike out a claim for “warehousing” as an abuse of the court’s process, it is necessary for the court to undertake a two-stage analysis, considering first whether the conduct is an abuse of process and second whether, if it is, it is proportionate to strike out on the basis (Asturion Fondation v Alibrahim).
  6. In considering the issue of proportionality, the court should have regard to the various powers in its armoury to avoid unnecessary delay. In Quaradeghini v Mishcon de Reya [2019] EWHC 3523, Mr Philip Marshall QC, sitting as a deputy High Court Judge put it this way:
“[17] … under the present procedural regime, it will be a relatively rare case in which the court will strike out proceedings for abuse of process based on delay in the first instance. The much more likely remedy is relief of a lesser form proportionate to the default. Cases of striking out are more likely to follow only after an “unless” order has been sought and obtained and breached. Although ‘warehousing’ of claims or the bringing of proceedings without an intention to prosecute will constitute an abuse of process that may warrant the striking out of a claim, it seems to me likely that in many cases the court will wish to test the lack of any intention to prosecute by, for example, making a peremptory order or imposing conditions rather than proceeding to rely on inferences drawn from an absence of activity. Such an approach is in line with observations of the Court of Appeal in cases such as Walsh v Misseldine, where Brooke LJ, at para 69, viewed the court’s jurisdiction to protect its process from abuse as ‘a residual long-stop jurisdiction’ and noted that ‘The main tools the courts have now been given to exterminate unnecessary delays are to be found in the rules and practice directions and in orders they may make from time to time.’ It is also in line with the need to recognise the right of access to the court under article 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (a point made in Annodeus, The Times, 3 March 2000) and with the approach taken in decisions such as that of Olatawura v Abiloye [2002] EWCA Civ 998; [2003] 1 WLR 275, para 25, in which the Court of Appeal considered in order for the provision of security for costs to be a potentially suitable order in cases where a lack of good faith was suspected, ‘good faith for this purpose consisting of a will to litigate a genuine claim or defence as economically and expeditiously as is reasonably possible in accordance with the overriding objective’.”
  1. The Second Defendant contended that the decision of Mr Marshall QC in Quaradeghini is something of an outlier and that it suggests a more restricted approach to abuse of process applications that is appropriate having regard to the earlier cases, especially the judgments of Arnold LJ in Solland International Limited v Clifford Harris and Asturion Fondation v Alibrahim. The Claimant responded by pointing to the judgment of Nicklin J in London Borough of Havering v Persons Unknown [2021] EWHC 2648, where at paragraph 84 he said, “As Arnold LJ noted in Asturion Foundation, “abuse of process can take many forms” ([44]). Grovit is an example of one type of abuse. It is not the only form. Following the advent of the CPR, the ability of a claimant to delay prosecuting a claim was much reduced. Modern case management means that the Court should set a case management timetable towards an ultimate trial. In multi-track cases, any significant departure from that timetable (and always in respect of any adjustment that might jeopardise key dates) must be sanctioned by the Court: CPR 29.5. It should therefore not now be possible for a claimant to ‘warehouse’ a civil claim. In addition, in normal inter partes litigation, if a claimant delays prosecuting the claim, the defendant can obtain orders from the Court to ensure that the claim is properly progressed.”
  2. It is clear from both the judgment of Mr Marshall QC in Quaradeghini and that of Nicklin J in London Borough of Havering v Persons Unknown that it is important to bear in mind the court’s powers to take steps short of striking out the claim when considering the exercise of the power to strike out once an abuse of process is established. But the availability of such powers is not relevant to the prior issue identified by Arnold LJ in Asturion Fondation v Alibrahim as to whether the conduct amounts to abuse of process. Establishing whether the conduct is an abuse involves examining the state of mind of the Claimant, not the powers available to the court to change that state of mind.
  3. Further, even in respect of the exercise of the judgment as to whether to strike out the claim, the availability of alternative powers can only be one factor. As Lord Woolf noted in the passage from Arbuthnot Latham v Trafalgar cited above, the investigation of why a party has not prosecuted the claim is itself a drain on the court’s resources. It would be inconsistent with the overriding objective to disregard the diversion of resources that arises when the court needs to investigate a party’s procedural failings in particular if the evidence suggests a continuing reluctance by that party to comply with the norms of litigation. I accept that the power to strike out is a long-stop jurisdiction, only to be invoked where other powers appear insufficient to achieve the purpose of progressing the claim, but where the court is satisfied that a claimant has no intention at all to progress the litigation I would not see the doctrine of proportionality or the need to consider alternative less draconian orders first as necessarily a bar to striking out the claim.
  4. The court must also bear in mind that the obligation is on all parties to progress litigation, not simply the claimant. As Clarke LJ put it in Asiansky Television plc v Bayer-Rosin [2001] EWCA Civ 1792:
“[48] It is no longer appropriate for defendants to let sleeping dogs lie: cf Allen v McAlpine (Sir Alfred) & Sons [1968] 2 QB 229. Thus a defendant cannot let time go by without taking action and then later rely upon the subsequent delay as amounting to prejudice and say the prejudice caused by the delay is entirely the fault of the claimant. Such an approach would in my judgment be contrary to the ethos underlying the CPR, quite apart from being contrary to paragraph 2.7 of the Part 23 Practice Direction. One of the principles underlying the CPR is co-operation between the parties.”
  1. The Claimant says that this is of particular significance in the context of this case because of the failure of the Second Defendant to exercise its undoubted right to request a Case and Costs Management Conference. I deal with that point below, but would simply note again that the focus of the type of abuse of process with which we are here concerned focusses on the state of mind of the Claimant. Whether the Second Defendant has suffered prejudice is a matter that is likely to go to the proportionality of striking out, but does not affect the prior question as to whether the Claimant is guilty of issuing the claim with no (or at least no present) intention to litigate it to conclusion.
  2. CPR 3.4(2)(c) provides, “The court may strike out a statement of case if it appears to the court…that there has been a failure to comply with a rule, practice direction or court order.” In respect of this power, my attention is drawn to paragraph 3.4.18 of the White Book, which states:
“Rule 3.4(2)(c) gives the court an unqualified discretion to strike out a claim or defence where a party has failed to comply with a rule, practice direction or court order…In Walsham Chalet Park Ltd v Tallington Lakes Ltd [2014] EWCA Civ 1607, the Court of Appeal held that, in exercising its discretion under r.3.4(2)(c), the court is entitled to have regard to the Mitchell/Denton principles (which apply to applications under.3.9, as to which, see para.3.9.2). However, in that case, the Court of Appeal stressed that the ultimate question for the court in deciding whether to impose the sanction of strike-out is materially different from that in deciding whether to grant relief from a sanction that has already been imposed. In a strike-out application under r.3.4 the proportionality of the sanction itself is in issue, whereas an application under r.3.9 for relief from sanction has to proceed on the basis that the sanction was properly imposed….”

 

THE EXERCISE OF THE DISCRETION IN THE CURRENT CASE

Applying those principles to this case the judge held that the striking out of the action was an appropriate step.

DISCUSSION
  1. It is a striking feature of the chronology in this case that the Claimant has throughout done little more than the minimum necessary to keep the claim alive. Thus:
  2. a)The claim was issued late on, close to the expiry of the limitation period;
  3. b)There was no pre-action correspondence;
  4. c)The claim was served at the very end of the period of the validity of the Claim Form;
  5. d)The claim as pleaded contained inconsistencies which led the Claimant to concede that amendment was required, yet draft Amended Particulars of Claim were not supplied until about 17 months after the Claimant originally conceded the need to amend, the Claimant having in the meantime having failed to meet his own stated times within which draft Amended Particulars of Claim would be provided and an application to amend would be made.
  6. e)The Claimant failed to request a CCMC after service of the Defence;
  7. f)The Claimant failed to respond with evidence to the Second Defendant’s application until very shortly before it was heard.
  8. It is true to say that, if one looks only at delay after the service of the Defences (the Second Defendant’s Defence having been served in October 2019 and the First Defendant’s in July 2020), it might be difficult to criticise the Claimant for any delay other than that between resolving the issue of security for costs in October 2020 and the First Defendant’s application to strike out in March 2021. I accept that there is a reasonable explanation for the failure to request a CCMC once the Defendants had issued applications to strike out in March and May 2021 and the delay in requesting a CCMC after those application had been issued and until they were resolved cannot be criticised.
  9. But the reality is of inactivity prior to issue of the claim, during the period of the stay and indeed in the failure to serve the First Defendant more quickly, this being the underlying reason for the delay in the service of the Defence of the First Defendant. The picture is of almost complete inactivity by the Claimant beyond the basics of issuing and serving the claim. It is of course implicit in any application to strike out of this kind that the claim has been issued and served. Had it not, either no strike out would be necessary or the application would be brought on different grounds. So those basics provide little assistance to the Claimant where other evidence of inactivity is present.
  10. As to the relevance of the Second Defendant not having applied for a Case Management Conference, the Claimant’s point has little weight. If the Claimant is in fact guilty of warehousing a claim, it is difficult to see that it is incumbent on a Second Defendant to incur cost so as to try to force the Claimant to change its approach, at risk of the court failing to act on the Claimant’s abuse of process. Of course, in any practical case, the court might conclude that the failure of the Second Defendant to take steps that it could have taken to progress the case mean that the inference of warehousing is not a proper inference to be drawn, but if the inference is in fact drawn from other material, the fact that the Second Defendant could have driven matters forward by itself applying for a CMC would go only to the exercise of the discretion and in particular the question as to whether the Second Defendant had acquiesced in the Claimant’s inaction so as to make striking out a disproportionate response. But in this case, the Second Defendant has done anything other than acquiesced. It has sought to drive matters forward, arguably doing more than might be expected of the reasonable party in its position to press the Claimant to progress the claim. In those circumstances it would be indeed harsh to penalise the Second Defendant for not incurring greater cost so as to provoke action in a Claimant who appears to have no desire to progress matters.
  11. The Claimant’s only positive acts (other than issue and service of the claim itself) appear to have been the provision of some further information and disclosure and the agreement to pay security for costs. Even that followed an initial refusal to provide security and in reality had the effect of simply keeping alive a case that might otherwise have been liable to be stayed because of the non-provision of security.
  12. This history cries out for some explanation if the court is not to infer from it that the Claimant issued this case with no real intention of pursuing it. If the true reason for what has gone on here is that the Claimant has been diverted from pursuing this claim by the need to give attention to other matters, one would expect to have seen an explanation of that. Such an explanation might persuade the court that this was not a case of warehousing at all and that the Claimant had merely neglected to pursue the litigation with appropriate dispatch rather than held an intention not to pursue the claim at all (at least for some time). Alternatively, the evidence might not have been sufficient to dissuade the court from the conclusion that the claim had been “warehoused” but at least it might go to support an argument that the delays are in the past and that the Claimant intends to progress the claim now, clearly a relevant factor in deciding whether striking out is proportionate.
  13. However the court has no such reassurance in the evidence that has been provided. All that the Claimant’s evidence does it to show that he has now taken steps that could and should have been taken a year ago or more.
  14. On behalf of the Claimant it is argued that the kind of delays that have arisen in this case are not sufficient for the court to draw an inference of warehousing. But in my judgment that is exactly the appearance of what has gone on. Absent any explanation for the prolonged period of inactivity until the Claimant was spurred into some kind of action by the Defendants’ applications to strike out the claim, the most obvious inference is that the Claimant did not for a prolonged period of time intend to pursue this claim.
  15. There are two features of the case which provide some assistance to the Claimant on the exercise of the discretion if not on the primary finding of warehousing itself. The first of these is the Claimant’s agreement to pay money by way of security for costs. In reality the Claimant may have had little alternative but to agree to this if he wished to pursue the claim, but the very fact that he did agree it to it is evidence that may support the conclusion of an intention to pursue the claim. Moreover, the Claimant can rely on the giving of security on issues relating to the exercise of the discretion both in that it provides an obvious motivation to the Claimant to pursue the claim and that it provides some protection to the Second Defendant against further default by the Claimant.
  16. However, the provision of security cannot provide an overwhelming argument to dismiss this application.
  17. a)The Claimant has failed to pursue this claim with any diligence notwithstanding the provision of security. This must be an indication that the provision of further security in the future may not act as an incentive to progress the litigation.
  18. b)Whilst the Second Defendant has some protection against losses caused by delay, it may be difficult for it to obtain adequate costs orders to cover all of the expense that flows from a claim which is not being pursued in an efficient and proportionate manner.
  19. The second feature of the case that may assist the Claimant is that he has now, if very belatedly, provided draft amended Particulars of Claim. This points to a desire to pursue the claim, both because it is an indication that he seeks to put his case in order and is intrinsically an act consistent only with an intention of pursuing the claim.
  20. In this respect however the Second Defendant draws attention to the inadequacies of the draft amended pleading noted above. Even now, it is said, the Claimant is not properly setting out his case, an indication that he does not hold a true intention to progress the claim. In any event, if this case survives, there will be further cost and delay in dealing with the inadequacies of the amended Particulars of Claim. Thus the provision of the draft amendment cannot be taken as evidence that the Claimant has mended his ways such that, whatever defaults there may have been in the past, he now demonstrates an intention to pursue the claim which should lead to a result other than the striking out of the claim.
  21. Again, I do not see the Claimant’s action in providing a draft amendment as an overwhelming argument in favour of dismissing the action. There are clear problems with the Particulars of Claim as amended in draft. The Second Defendant would be entitled to better particularisation of parts of the case (for example the identity of the properties original pleaded to have been purchased by the First Defendant but now said to have been purchased by Mr Sbitan) and an explanation for apparent inconsistencies as to the Claimant’s understanding and approval of the activities of Messrs Alrasheed and Al-Gaith which are central to the issue as to whether they were conspiring to harm him.
  22. In my judgment, the chronology of this litigation strongly points to the conclusion that the Claimant is guilty of warehousing in that this claim was issued at a time when the Claimant had no current intention of pursuing it. This is demonstrated by the fact that it was issued belatedly, that the Claimant then agreed to a stay during which time he took no meaningful steps to progress the claim and has thereafter only taken steps to do so when pressed by the Second Defendant or (latterly) when threatened with the claim being struck out. It is now more than 3 years since the claim was issued and the Second Defendant is still not in receipt of Particulars of Claim which adequately set out the case against it. The Claimant has not taken the opportunity to explain why the claim has been progressed in such a dilatory fashion and, without some explanation, the natural inference is that there is no good explanation at all.
  23. I should add that the judgment of Miss Dias QC is of little significance to the determination of whether the Claimant is guilty of warehousing. Whilst her finding that the Claimant was guilty of warehousing in respect of the claim against the First Defendant on similar (though not identical) facts to those here might be thought to be supportive of a finding of an underlying abuse of process here, in reality, each case must turn on its own facts. It would be perfectly possible for the court to find that the conduct of a claim against one party amounted to warehousing whereas the conduct of a related claim against another did not.
  24. However, her judgment is relevant to the exercise of the discretion. If the proceedings against the Second Defendant have been conducted in a manner that amounts to an abuse of process, the court is entitled to have regard to the fact that a related claim against another Defendant has been struck out on the same grounds for several reasons:
  25. a)A party who shows a pattern of abusing the process of the court is more likely to be one against whom the ultimate power of strike out is exercised because of their tendency to waste the time and resources of others on litigation which is not being properly conducted;
  26. b)On the cases advanced by the Claimant against the Defendants here, the First Defendant is by far the more culpable since he is alleged to have conspired to harm the Claimant, whereas the Second Defendant is alleged to have committed the lesser wrongdoing of failing to protect the Claimant against that conspiracy. Yet the claim against the greater alleged wrongdoer has been lost, leaving the Second Defendant in a position where, if the claim proceeds against it, it must defend itself without the necessary involvement of the First Defendant who might have a strong defence that he was not guilty of wrongdoing at all. Of course, it is relatively frequently the case that professional advisors find themselves the subject of an accusation that they have failed to protect a client against the wrongful acts of third parties and often the fact that the third party is not joined in the action (perhaps because they are untraceable or impecunious) will not avail the professional in defending the claim. But where the absence of the third party from the litigation is itself caused by the Claimant’s abuse of the process of the court, the Second Defendant is in my judgment clearly entitled to point to the potential prejudice that flows from this as a relevant feature to the exercise of the discretion to strike out the claim against it where that claim itself is an abuse of the process of the court.
  27. As to the exercise of the discretion and the question of the proportionality of striking out, the difficulty faced by the Claimant is that, even now, the claim is not in an adequate state to proceed. The Second Defendant is entitled to proper particularisation of the claim yet does not have this. In those circumstances, to permit the Second Defendant to continue to be exposed to a liability that requires it to commit time and cost to defending itself is not consistent with the overriding objective.
  28. I bear in mind that draconian nature of a striking out order. However it is not immediately obvious what order(s) could adequately ensure that the Claimant now is taking its responsibility to progress this case seriously. It does not appear that the claim would be stifled by ordering the payment of costs and/or further security for costs and accordingly it would be possible to fashion future orders so that the Claimant’s continued right to prosecute the case was conditional upon the payment of any costs orders made against it forthwith and the continuing provision of security to meet the Defendant’s costs exposure. But the fact that the Claimant has agreed to provide security for costs but still has not progressed the claim with any dispatch is a strong indicator that the ordering of security for costs (or the securing of payment of costs orders) will not act as an incentive to the Claimant to progress the case in an orderly fashion. In this respect the claim is somewhat unusual.
  29. I have considered whether the creative use of other case management powers could provide an adequate test of the Claimant’s true willingness to litigate and/or adequate protection for the Second Defendant and other court users if it does not. The court might make unless orders to cover further steps in the litigation so that any further default by the Claimant would risk causing the litigation to be brought to a conclusion. But in circumstances where the Claimant has failed to get his case in order notwithstanding an application to strike out his claim as an abuse of process, I can have no confidence that the making of such orders will change the Claimant’s attitude to this litigation. The Claimant’s neglect of it leads to the conclusion that he has forfeited the usual right to have the court determine his case on the merits.
  30. For these reasons I am satisfied that the Claimant’s abuse of the process of the court by warehousing this claim should lead to an order that it be struck out.
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