AN ACTION THAT HAS BEEN “WAREHOUSED” WILL NORMALLY BE STRUCK OUT AS AN ABUSE OF PROCESS: COMPELLING REASONS TO THE CONTRARY ARE REQUIRED

In Watford Control Instruments Ltd v Brown [2024] EWHC 1125 (Ch) Mr Justice Richards struck out the claimants action on the grounds that it had “warehoused” the action for several years and this amounted to an abuse of process. Such an abuse would normally lead to an action being struck out.

 

“Once the action came to amount to an abuse of the process of the Court, it required to be struck out unless compelling reasons to the contrary could be demonstrated. There are no such reasons in this case.”

 

THE CASE

The claimant brought proceedings against the defendant in 2019. A CMC was listed and adjourned. Nothing happened thereafter until July 2022 when the claimant applied to relist the CMC. The defendant applied to strike the action out as an abuse of process, on the grounds the the claimant’s “warehousing” of the claim amounted to an abuse of process.

THE JUDGMENT AT FIRST INSTANCE

At first instance the judge refused to strike out the claim on the basis of abuse. He found that the claimant’s delay amounted to an abuse of process of the type identified in  Grovit v Doctor [1997] 1 WLR 640 (“Grovit“). He found that it was disproportional to strike out the claim.  The claimant was ordered to provide security for costs.

The judge also found that the claimant had to make various applications to ensure that they were the right party to the action.

THE DEFENDANT’S  SUCCESSFUL APPEAL

Both parties appealed the judgment. The defendant appealed arguing that the action should have been struck out on “Grovit” grounds.  That appeal was successful. The action was struck out.

THE JUDGMENT

 

The law on sanctions for Grovit abuse

    1. Even before the judgment of the House of Lords in Grovit, the court had power, in accordance with the principles formulated in Birkett v James [1978] AC 297 to dismiss a civil action for want of prosecution. However, in the absence of “intentional and contumelious default” or conduct amounting to an abuse of process, that power could be exercised only where there had been inordinate and inexcusable delay on the part of a claimant with that delay giving rise to either (i) a substantial risk that a fair trial is not possible or (ii) serious prejudice to the defendant.

 

    1. Those requirements meant that, prior to Grovit, it was perceived that in a strike-out application based on the Birkett v James principle, the court could not take into account certain objectionable consequences of a claimant’s non-progression of a claim. At 639B to F of his speech in Grovit, foreshadowing an approach that would ultimately be reflected in CPR, Lord Woolf MR pointed out that delay on the part of a claimant did not just affect the defendant, but also affected other court users. First, it could result in other users having to wait longer for their own actions to be dealt with. Second, widespread delay gives rise to the undesirable general impression that litigation is a long drawn-out process with which they should try to avoid becoming involved. Lord Woolf also considered that the Birkett v James approach applied too narrow a concept of what amounts to “prejudice” suffered by a defendant in cases of undue delay, with the increased anxiety inevitably caused by a protracted action often falling out of account.

 

    1. Accordingly, in Grovit, their Lordships quite deliberately and consciously extended the law so that a claimant’s unilateral decision not to progress a civil claim could result in that claim being struck out in a wider category of circumstance. They did so by means of the law on abuse of process with their reasoning captured in the following extract from page 243 of the speech of Lord Woolf:

 

I am satisfied that both the deputy judge and the Court of Appeal were entitled to come to the conclusion which they did as to the reason for the appellant’s inactivity in the libel action for a period of over two years. This conduct on the part of the appellant constituted an abuse of process. 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 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. The same evidence will then no doubt be capable of supporting an application to dismiss for want of prosecution. However, if there is an abuse of process, it is not strictly necessary to establish want of prosecution under either of the limbs identified by Lord Diplock in Birkett v. James [1978] A.C. 297. In this case once the conclusion was reached that the reason for the delay was one which involved abusing the process of the court in maintaining proceedings when there was no intention of carrying the case to trial the court was entitled to dismiss the proceedings.

    1. Lord Woolf thereby held that it “can” be an abuse for a claimant to commence and continue litigation without having an intention to bring that litigation to a conclusion. The existence of that intention alone can therefore in principle be sufficient to constitute the abuse irrespective of whether the defendant has suffered any prejudice.

 

    1. That raised the natural question when the formation of that intention “would”, rather than “could”, cause the claim to become abusive. Some guidance on that question was given by the Court of Appeal in Asturion Fondation v Alibrahim [2020] 1 WLR 1627. At [55] of his judgment, Arnold LJ noted that:

 

It is clear from what Lord Woolf MR 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 MR cannot have meant that this will always constitute an abuse of process …

    1. This introduced the conclusion that the relevant intention was not to pursue a claim for a “substantial” period of time. At [61], after considering Grovit and other authorities, Arnold LJ explained that the dividing line between “abuse” and “non-abuse” involves a consideration of the reason why the claimant decided unilaterally to put the proceedings on hold for a substantial period of time and on the strength of that reason, objectively considered, having regard to the length of the period.

 

    1. Pursuant to CPR 3.4(2)(b), a court “may” strike out a statement of case if it appears to be an abuse of the court’s process. On a literal reading, CPR 3.4(2)(b) could perhaps be thought to be dealing with situations where there is something about the claim itself that is abusive (for example if it seeks to re-litigate matters already determined). Arnold LJ did not, however, apply this literal interpretation, concluding that CPR 3.4(2)(b) applies to cases of Grovit abuse as well.

 

    1. At [64] of his judgment, Arnold LJ held that an allegation of Grovit abuse requires the court to undertake a two-stage analysis:

 

i) First, it must decide whether the claimant’s conduct was an abuse of process in the sense explained above.

ii) Second, if it is, the court must decide what sanction to impose.

    1. In Board of Governors of the National Heart and Chest Hospital v Chettle (1998) 30 HLR 618 the Court of Appeal gave some guidance on how to approach the second question relating to sanctions for Grovit abuse. The parties referred to this authority as “Chest Hospital” before me and I will do the same.

 

    1. In Chest Hospital, the claimant had started proceedings in 1987 and had pursued them up until disclosure was given in September 1990. However, between 1990 and 1996 the claimant took no steps to prosecute its claim. The defendant (Mr Chettle) sought to have the claim struck out under Birkett v James principles. However, that approach failed for the reasons alluded to in Grovit itself: he could not point to any prejudice that he had suffered, beyond the “normal anxiety of an action for possession” which was insufficient and nor could he establish that a fair trial would be impossible. However, the Court of Appeal held that Grovit abuse was made out.

 

    1. At page 628 of the report, Aldous LJ summarised the nature of Grovit abuse, and the sanction for it, as follows:

 

As stated by Lord Woolf M.R. in Grovit, the Courts exist to enable parties to have their disputes resolved. It follows that any proceedings not started for that purpose or, which once started are not maintained for that purpose, abuse the system. Such proceedings will normally be struck out as being an abuse of process.

    1. Thus far, Aldous LJ said only that proceedings involving Grovit abuse would “normally” be struck out. However, in the passages that follow, he went further. He concluded, first, that after discovery in September 1990 the claimant “allowed the action to drift pending new facts coming to light”. The claimants had decided that their chances of success were so poor that their action could not succeed without fresh evidence and so that they would not prosecute the action unless new facts came to light. Aldous LJ held that this on its own did not involve an abuse of process. Although he did not use the language of an “objectively good reason” that Arnold LJ used in his later judgment in Asturion Fondation, Aldous LJ foreshadowed that approach by looking at the reason why the claimant put the proceedings on hold concluding that “delay to enable fresh investigations to be made does not in itself amount to an abuse”. Aldous LJ concluded, however, that this adequate reason eventually ran out in a passage that is instructive:

 

One year passed, then another, another, another and another. The result was that the action passed from being a genuine action to resolve a dispute over possession of a house into one which was moribund and only to be re-activated if something turned up. It is right to infer that at least by 1992, the plaintiffs had no real intention of bringing the action to trial, or even progressing it for purposes of settlement. They had had ample time to investigate and had found nothing. At that stage the action became an abuse of the process of the Court. It was an action kept hanging over the head of Mr Chettle without any intention of bringing it to trial either upon the facts known in or upon the facts known after a reasonable time had elapsed to enable further investigations to be made. I therefore would strike the action out upon the basis that it came to be an abuse of the process of the Court. I realise that the plaintiffs can and may well start a fresh action, but that is to my mind not determinative. Once the action came to amount to an abuse of the process of the Court, it required to be struck out unless compelling reasons to the contrary could be demonstrated. There are no such reasons in this case.

    1. I add the emphasis to the passage quoted above to bring out what Mr Brown submits is a statement of principle, binding on this court and on the Judge.

 

    1. The Claimant does not suggest that Aldous LJ was expressing an evaluation only on the facts of the case before him. Accordingly, I take the Claimant to accept that the highlighted passage is capable of amounting to a binding statement of principle although it does not accept that it actually does so.

 

    1. The Claimant’s first argument is that the apparent statement of principle is not binding because it was inconsistent with the speech of Lord Woolf in Grovit itself in which he held only that strike-out will “frequently” be the appropriate sanction for the identified abuse. I do not accept that there is any such inconsistency. In Chest Hospital, the Court of Appeal provided further guidance on the nature of the “frequent” situations which Lord Woolf had identified in which strike-out will be appropriate. That is guidance as to the proper interpretation of Grovit which is binding on this court.

 

    1. Next, the Claimant argues that Chest Hospital has scarcely been cited since and that the principle that I have quoted has been diluted in subsequent cases.

 

    1. The Claimant’s first argument is based on [79] of Arnold LJ’s judgment in Asturion Fondation. In that paragraph, having concluded at [78] that the judge at first instance was entitled to find Asturion’s conduct fell short of amounting to Grovit abuse (because it had an objectively good reason for not pursuing its claim for 10 months), Arnold LJ said:

 

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.

I am quite unable to accept that this passage involves any “dilution” of the principle that Aldous LJ formulated in Chest Hospital. The passage is clearly obiter, as the Claimant accepts, since it is dealing with the position on the hypothesis that, contrary to Arnold LJ’s conclusion, Asturion was guilty of Grovit abuse. Chest Hospital was not cited to the Court of Appeal as authority for any proposition relating to the determination of an appropriate sanction in cases of Grovit abuse. Indeed, Chest Hospital did not need to be cited for that proposition since, as Arnold LJ observed at [1] of his judgment, the issue of principle that was raised in Asturion was what kind of conduct amounts to Grovit abuse, and not the sanction that should be applied in cases where such abuse is present.

 

    1. In short, Arnold LJ made obiter statements as to the sanction that might be appropriate in the particular case before him if, contrary to his finding, it did involve Grovit abuse. These statements are incapable, as a matter of precedent, of altering the principle that Aldous LJ formulated in Chest Hospital. They are entirely consistent with the proposition that where a claimant is engaged in Grovit abuse the claim will be struck out absent “compelling reasons” with Arnold LJ simply expressing the obiter view that, since any abuse was minor in nature, the necessary compelling reasons were present in the case before him.

 

    1. The Claimant’s next argument is based on the judgment of Philip Marshall QC, sitting as a judge of the High Court, in Quaradeghini v Mishcon de Reya Solicitors [2019] EWHC 3523 (“Mishcon de Reya“). In that case, a Deputy Master had found that a claimant was guilty of Grovit abuse and struck the claim out. That order was, however, reversed on appeal with Mr Marshall QC holding that the introduction of CPR in 1999 had changed the landscape since Grovit was decided. At [14], the judge quoted a lengthy extract from the judgment of the Court of Appeal in Biguzzi v Rank Leisure plc [1999] 1 WLR 1926 for the proposition that, following CPR, courts had an array of sanctions available to them to deal with cases of delay and should exercise a power to strike out with circumspection. At [16], he noted, by reference to the judgment of the Court of Appeal in Asiansky Television plc v Bayer-Rosin [2001] EWCA Civ 1792 (“Asiansky Television“) that it was incumbent on defendants who felt that they were on the receiving end of excessive delay, to apply for an “unless” order as soon as reasonably practicable rather than “letting sleeping dogs lie”.

 

    1. Mr Marshall QC did not refer to Chest Hospital, no doubt because it was not cited to him, and concluded, following his review of the authorities at [17]:

 

In the light of the above, in my judgment, 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.

    1. Of course, as a matter of precedent, a judgment of the High Court cannot vary or qualify a binding statement of principle made by the Court of Appeal. However, the Claimant’s argument is that it was CPR that operated to cause the principle set out in Chest Hospital no longer to be good law.

 

    1. I do not accept that analysis. In the first place, as Lloyd LJ observed at [23] of UCB Corporate Services Ltd v Halifax (SW) Ltd (Court of Appeal, unreported 6 December 1999), Biguzzi should not be read as “some landmark decision which throws all of the [law previous to CPR] on its head”. Moreover, he noted that thought-processes that informed pre-CPR judgments should not be “completely thrown overboard” particularly judgments that had in mind the direction of travel under CPR when given.

 

    1. In my judgment, CPR did not “throw overboard” the judgments in either Grovit or in Chest Hospital. Both before, and after, CPR a court had power to strike out a claim that involved an abuse of process with the post-CPR power being found in CPR 3.4(2)(b), as Arnold LJ explained in Asturion Fondation. At its heart, Grovit simply expanded the category of claims or behaviour that involve abuse. While CPR clearly resulted in a step-change in the courts’ attitude to non-compliance with rules, practice directions and orders (which can lead to strike out under CPR 3.4(2)(c)), I have not been referred to material that suggests a similar step-change in relation to the courts’ attitude to strike-out in cases of abuse of process which are dealt with under CPR 3.4(2)(b). Biguzzi itself, on which the conclusions in Mishcon de Reya were based, was squarely a case involving a possible strike-out under CPR 3.4(2)(c)).

 

    1. I am reinforced in that conclusion by the fact that the Court of Appeal has already considered the role of Grovit abuse in a post-CPR world. In Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426, in a section of his judgment headed “The Future”, Lord Woolf MR emphasised the consistency between the recognition in Grovit that delay has consequences that affect court users generally, and not the particular parties to the action, and the “change of culture” that CPR sought to effect. If CPR truly were intended to water down the proposition set out in Grovit that strike-out would “frequently” follow in cases of such abuse, the comments he made in that section would be misplaced.

 

    1. In conclusion, therefore, I consider that the proposition in Chest Hospital that “compelling reasons” are needed to prevent a claim involving Grovit abuse from being struck out remains good law. It is true that CPR stresses the proportionality of any sanction that the court imposes. Chest Hospital does not cut across that, but rather decides that in cases of Grovit abuse, strike out will be a proportionate sanction unless “compelling reasons” to the contrary are shown. After all, two obvious points that might be made in objection to strike-out in cases of Grovit abuse are that the defendant has suffered no severe prejudice and that a fair trial remains possible. However, as Grovit itself stresses, the abuse can still be present in these cases. While it is not for me to expand on the reasons that Aldous LJ gave in Chest Hospital, I respectfully consider that the approach of requiring “compelling reasons” to enable a defendant to resist strike out is consistent with the nature of the abuse identified in Grovit.

 

Whether the Judge applied the correct test

    1. I have had the luxury of full written and oral submissions on both the nature of Grovit and the appropriate sanctions where it is present. The Judge did not have that luxury. The entire hearing before him on 1 November 2022 lasted some four hours in which he had to deal with a number of other difficult questions, including questions of construction of the SPA. Most of the argument on Grovit abuse before the Judge concerned the question whether the abuse was present and not the sanction that should be applied if it was. Chest Hospital was cited in a footnote to counsel’s skeleton argument and the Judge was not referred to the other authorities on sanction to which I have been referred.

 

    1. With the benefit of the fuller submissions that I have had, I conclude that the Judge did not apply the correct test. That is evident first from FJ[49] in which the Judge explains that the starting point for his analysis “is that it is always a draconian step to strike out an apparently arguable claim”. However, as Chest Hospital demonstrates, having found that there was Grovit abuse, the Judge should have proceeded from the starting point that the claim would be struck out unless “compelling reasons” could be shown for a different course.

 

    1. The same error is demonstrated at FJ[61] in which the Judge directs himself that, before deciding what sanction to impose, he first needed to consider whether “there is some more appropriate alternative to striking out”. In the light of Chest Hospital, that was not correct: the Judge should instead have asked whether there were “compelling reasons” that would make the sanction of strike-out inappropriate. FJ[68] is to similar effect. In that paragraph, the Judge considered that his task was to see if there was a “more proportionate and less draconian sanction” than strike-out whereas he should, instead, have been seeking to apply the sanction that the Court of Appeal has determined, in Chest Hospital, to be proportionate at least in the absence of compelling reasons to the contrary.

 

Re-exercising the discretion

    1. Having concluded that the Judge followed the wrong approach, it is appropriate for me to re-exercise the discretion. I have the materials necessary to enable me to do so and no one suggested that the matter should be remitted back to the Judge. Given my conclusions in the two previous sections of this judgment, my task is to identify whether there are “compelling reasons” why the claim should not be struck out.

 

    1. The Claimant argues that one “compelling reason” why the claim should not be struck out arises out of Deputy Master Henderson’s case management order of 29 July 2019. After dealing with matters of disclosure in paragraphs 3 to 7, paragraph 8 provided that:

 

The CCMC shall be adjourned to the first open date after 30 September 2019 with a time estimate of 2 hrs.

    1. At the time that order was made, the Claimant was not legally represented. It argues that paragraph 8 of the order was unclear as it did not say in terms that the Claimant positively needed to apply to relist the CCMC. The Judge accepted that there was something in that point at FJ[20]. I agree, but it only takes the Claimant so far. As the Judge found at FJ[21], while it was perhaps excusable for the Claimant to think for a while that the court would itself relist the CCMC, that excuse ran out. Indeed on the Judge’s unchallenged conclusion as to the presence of Grovit abuse, the Claimant’s belief that the court would itself relist the CCMC came to be replaced by a unilateral decision on the part of the Claimant, without an objectively good reason, not to continue to pursue the claim for a period of over two years. A slightly unclear formulation of a case management direction, the effect of which was undone in a relatively short period, does not begin to constitute a “compelling reason” why the claim should not be struck out.

 

    1. Next the Claimant submits that it started the proceedings with the intention of continuing them up to trial if necessary. Therefore, this is not a case where there was never an intention to prosecute the claim. I accept that. However, Grovit abuse can consist of forming an intention, after proceedings have commenced, to put the claim on hold for a lengthy period without good reason, just as in Chest Hospital itself. There is no suggestion in the authorities that any distinction is to be made between cases where the intention is formed initially and cases where it is formed subsequently. Both types of conduct involve Grovit abuse and both attract the sanction of strike-out unless there are compelling reasons to the contrary.

 

    1. The Claimant argues that Mr Brown’s conduct has resulted in a viable company that provided employment for a number of individuals going into administration. It submits that he should not be able to get away with such conduct on a “technicality”. Of course the fundamental difficulty with that argument is that those assertions about Mr Brown’s conduct have not yet been proved or disproved at least partly because the Claimant has chosen to put its claim on hold for such a long period of time. However, even putting that point to one side, the argument involves nothing more than an assertion that if the claim is struck out, the Claimant will not be able to pursue it. That is true whenever a claim is struck out and is not indicative of a compelling reason why the claim should not be struck out in this case.

 

    1. Next the Claimant argues that Mr Brown was partly to blame as he should himself have applied for an “unless” order rather than simply allowing the delay to mount up and applying to strike out the claim once he considered that the delay was sufficiently long. It argues that, under CPR, Mr Brown was under an obligation to cooperate with the Claimant in bringing the matter to trial efficiently and, as was said at paragraph [47] of Asiansky Television it was not permissible for him simply to “let sleeping dogs lie”.

 

    1. The narrow objection to that point is that Asiansky Television was concerned with the power of the court to strike out a claim under CPR 3.4(2)(c) where there has been a breach of the rules, an order or a practice direction and is not concerned with strike out under CPR 3.4(2)(b) in cases involving an abuse of process. CPR 1.3 imposes on the parties a duty to help the court to further the overriding objective of dealing with cases justly and at proportionate cost. It can readily be seen that a party who “lets sleeping dogs lie” in the hope that its opponent will in due course breach a rule or order which can then justify a strike-out application may well not be complying with that duty. However, the present case is concerned with the Claimant forming an objectionable unilateral subjective intention to put the proceedings on hold for a substantial period without any good reason. Mr Brown had no control over whether the Claimant formed that intention. There was not any upcoming case management milestone which Mr Brown was obliged to help to achieve. The principles set out in Asiansky Television are not engaged.

 

    1. Nor do I consider the argument in paragraph 56 to disclose a “compelling reason” why the claim should not be struck out. Cases of Grovit abuse necessarily involve a claimant failing to progress a claim for a significant period of time. That lack of progress will necessarily be apparent to the defendant. If a defendant’s perceived culpability in allowing the delay to mount up is a “compelling reason” why the claim should not be struck out, that reason would be present in most cases. It would be difficult to see how claimants engaging in Grovit abuse would “frequently” see their claims struck out (as Lord Woolf MR held in Grovit itself that they should be).

 

    1. The wider objection to the point is that it focuses entirely on the actions of Mr Brown and so ignores the emphasis in Grovit on the implications of delay for court users generally.

 

    1. I am unable to see any “compelling reason” why the claim should not be struck out given the Judge’s finding that it involved Grovit abuse.

 

    1. Mr Brown urges me to go further and points out factors that he suggests amply justify the claim being struck out. I consider, however, that it would be undesirable for me to engage in a weighing up of the various points on which Mr Brown relies. That would involve me performing the kind of analysis that the Judge performed, in my view following an application of the wrong test. That said, Mr Brown’s points do satisfy me that the abuse in this case is not of the “relatively minor nature” that Arnold LJ identified in his obiter comments in Asturion Fondation. If it went to trial, the claim against Mr Brown would require a detailed examination of a large number of payments made on YZMA’s credit card. It may also require an examination of whether particular payments were made for the business purposes of YZMA. Mr Brown’s pleaded case is that others had access to the YZMA’s credit card. Therefore, in addition to considering what a large number of payments made up to 15 years ago were spent on, it may be necessary to consider whether Mr Brown, or someone else, actually used YZMA’s credit card on the relevant occasion. Matters such as this cannot simply be answered by reference to entries on YZMA’s credit card statements which set out the familiar details of date, amount and payee in relation to each transaction. Therefore, while I do not disagree with the Judge’s assessment at FJ[58] and [59] that a fair trial remains possible, I do conclude that the Claimant’s delay has made it materially more difficult for Mr Brown to advance his defence. I also consider that the delay has had a material effect on Mr Brown’s mental health. While I agree with the judge’s conclusion at FJ[56] that the delay did not cause the mental health problems, that delay certainly meant they persisted for longer.

 

  1. My conclusion that there are no compelling reasons why the claim should not be struck out disposes of the matter. Mr Brown’s appeal succeed