In what is likely to become a leading authority in this area, Mr Justice Richards has considered the law relating to abuse of process by warehousing in his recent judgment in Watford Control Instruments v Brown [2024] EWHC 1125 (Ch).
In the underlying claim, the claimant, WCI, seeks to sue as assignee of a cause of action originally vested in a different company, YZMA. It contends that the Defendant, a former director of YZMA, acted in breach of fiduciary duty by knowingly and dishonestly appropriating YZMA monies for his own purposes. The claim was commenced on 15 June 2018. From 27 September 2019 until 5 July 2022, WCI did not take any steps to pursue the claim. In July 2022, it wrote to the Court requesting that the claim be relisted. The Defendant then issued an application to strike out the claim on the ground of abuse of process and that the assignment upon which WCI relied did not in fact enable it to bring these proceedings.
At first instance, Master Pester found that abuse of process was established under the principle in Grovit v Doctor [1997] 1 WLR 640, sometimes referred to as “warehousing”. But he held that that the appropriate sanction for the Grovit abuse was not strike out but an order requiring WCI to provide security for the Defendant’s costs. In the event, the claim was struck out on a different ground, namely that WCI did not have title to sue as assignee, but WCI and YZMA then commenced fresh proceedings. The Defendant then appealed Master Pester’s decision on the ground that the claim should have been struck out as an abuse (and not merely for want of title to sue).
On appeal, Mr Justice Richards accepted the Defendant’s central argument that a claim that has been abusively warehoused should be struck out unless there are ‘compelling reasons’ to the contrary. The ‘compelling reasons’ test derives from Grovit itself and in particular from the subsequent decision of the Court of Appeal in Board of Governors of the National Heart and Chest Hospital v Chettle (1998) 30 HLR 618. In that case, Aldous LJ held that once an action comes to amount to an abuse of process under the Grovit principle, it ‘required to be struck out unless compelling reasons to the contrary could be demonstrated’.
WCI argued that Chest Hospital is no longer good law because it was decided under the RSC, not the CPR, and relied in support of this on the judgment of Philip Marshall QC in Quaradeghini v Mishcon de Reya [2019] EWHC 3523 (Ch), which suggested that ‘it will be a relatively rare case in which the court will strike out proceedings for abuse of process’ under the Grovit principle.
Mr Justice Richards rejected WCI’s contention and confirmed that Chest Hospital remains good law under the CPR: [47]. Neither subsequent authority nor the CPR ‘throw overboard’ that principle, not least because Grovit and Chest Hospital only expanded the category of claims or behaviour that involve abuse of process, a concept that is unaffected by the introduction of the CPR: [45]. There is in this respect a distinction between applications made under CPR 3.4(2)(c) (strike out for non-compliance with rules or orders) and applications made under CPR 3.4(2)(b) (strike out for abuse): [45].
Since the Judge below had not applied the ‘compelling reasons’ test, the discretion was re-exercised on appeal; and since there was no compelling reason not to do so,WCI’s claim was accordingly struck out on the ground of abuse of process: [51]-[60].
This judgment suggests that once a finding of abuse of process under the Grovit principle is made, it is very difficult for a claimant to avoid strike out. It also confirms that neither the arguability of a claim, nor the absence of prejudice to the defendant, nor the fact that a fair trial is still possible constitutes a ‘compelling reason’ not to impose the sanction of strike out.
Niranjan Venkatesan appeared for the successful defendant, instructed by Buckles Solicitors LLP.
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