In Watford Control Instruments v Colin Brown [2024] EWHC 1125 (Ch), the English High Court made clear that, once a claimant has unjustifiably delayed progressing its claim for an extended period, it is very difficult for the claimant to avoid its claim being struck out altogether.
Background
The underlying dispute between Watford Control Instruments Limited (WCI) and Mr Brown began after WCI purchased a company out of administration, of which Mr Brown had previously been a director. WCI alleged that Mr Brown had acted in breach of the fiduciary duties he had owed the company in that he knowingly and dishonestly appropriated the company's money for his own purposes.
The claim was issued in June 2018. A Case Management Conference took place in July 2019, but was adjourned to be re-listed after September 2019. However, that never occurred, and from September 2019 until July 2022, WCI did not take any steps to pursue its claim. When steps were taken by WCI to relist the CMC in mid-2022, Mr Brown applied to the court with the primary purpose of striking out the claim on the grounds that WCI's delay in progressing the claim amounted to an abuse of process (sometimes referred to as "warehousing" claims). There were also disputes in relation to whether the claim had been properly assigned from the company to WCI.
The first instance court found that the warehousing constituted an abuse of process. However, the court found that a strike out of WCI's claim would be disproportionate and instead ordered WCI to provide Mr Brown with security for his costs. Mr Brown therefore appealed the decision on the grounds that, while the court had been right to deem the delay in progressing the claim an abuse of process, the court had applied the wrong sanction and should have struck out WCI's claim.
Back to the 90's: the key authorities on warehousing claims
The judgment found that, while the key authorities on this topic date back to the late 1990s before the Civil Procedure Rules were introduced, they remain good law and are still relevant today.
Grovit abuse principles
In Grovit v Doctor [1997] 1 WLR 640, Lord Woolf pointed out that delay on the part of a claimant did not just affect the defendant, but also affected other court users on the basis that:
- it could result in other court users having to wait longer for their own actions to be dealt with; and
- 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.
Accordingly, the House of Lords, in Grovit, "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."
Lord Woolf 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.
That raises in turn the question of when that intention "would", rather than "could", cause the claim to become abusive. After considering Grovit, Lord Justice Arnold explained, in Asturion Fondation v Alibrahim [2020] 1 WLR 1627, 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.
What sanction should the court impose for Grovit abuse?
Board of Governors of the National Heart and Chest Hospital v Chettle (1998) 30 HLR 618 (Chest Hospital) provides guidance on how the courts should sanction instances of Grovit abuse. In that case, the Court of Appeal held that "once the action came to amount to an abuse of process of the Court, it required to be struck out unless compelling reasons to the contrary could be demonstrated" (emphasis added).
Therefore, the starting point for the court is that the claim would be struck out unless there are "compelling reasons" that would make that sanction inappropriate.
If we fast forward to the period since the introduction of the CPR, the approach in Chest Hospital chimes with the contemporary CPR 3.4(2)(b) which provides that the court "may" strike out a statement of case if it appears to be an abuse of the court's process. Indeed, in Asturion Fondation,the Court of Appeal concluded that Grovit abuse principles apply to CPR 3.4(2)(b).
Over 25 years on, are Grovit and Chest Hospital good law?
The judge was clear that the introduction of the CPR did not "throw overboard" the judgments in either Grovit or Chest Hospital. The court's power to strike out a claim that involves an abuse of process can be found in CPR 3.4(2)(b) and the judge recognised that "at its heart, Grovit simply expanded the category of claims or behaviour that involve abuse." In any event, the recognition in Grovit that delay to the progress of claims has consequences that affect court users generally in line with the change of culture that the CPR sought to effect.
The court found that while the "CPR stresses the proportionality of any sanction that the court imposes, the court concluded that 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, Grovit itself stresses, the abuse can still be present in these cases."
In the present case, the court held that there were no compelling reasons as to why the claim should not be struck out given the first instance judge had found that the delays incurred amounted to Grovit abuse. While a fair trial in this case remained possible, the judge concluded that WCI's "delay has made it materially more difficult for Mr Brown to advance his defence" and "has had a material effect on Mr Brown's mental health ... [even though] the delay did not cause the mental health problems, that delay certainly meant they persisted for longer."
Conclusion
For claimants, there is a salutary reminder not to let sleeping dogs lie and to drive forward their claims.
For defendants, this judgment provides useful confirmation that, where they are faced with a claimant who has taken a unilateral decision not to pursue a claim for a substantial period of time such as to have "warehoused" the claim, the court is willing to undertake the following two-stage analysis.
- The court will first decide whether the claimant's conduct was an abuse of process.
- If it is, the court will strike out the claimant's claim unless there are compelling reasons to the contrary.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.