(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4 A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
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Mr James Guthrie QC and Mr P Knox (instructed by Messrs Coldham
Shield & Mace for the Appellants)
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Mr Anthony Mann QC and Mr A de Garr Robinson (instructed by
Messrs Sheridans for the Respondents)
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Judgment
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As Approved by the Court
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Crown Copyright ©
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LORD JUSTICE CHADWICK:
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| 1. |
This is an appeal in proceedings brought by Securum Finance Limited
against Mr Peter Ashton and his wife, Mrs Pauline Ashton, in relation
to monies advanced more than ten years ago by Arbuthnot Latham Bank
Limited to Trafalgar Holdings Limited, a company incorporated in the
Turks and Caicos Islands. The appeal is against so much of an order
made on 10 June 1999 by Mr Ian Hunter QC, sitting as a deputy judge of
the High Court in the Chancery Division, as dismissed an application by
Mr and Mrs Ashton that the proceedings be struck on the grounds that
they are an abuse of the process of the court. The present proceedings
can fairly be regarded as the sequel to the decision of this Court
(Lord Woolf, Master of the Rolls, Lord Justice Waller and Lord Justice
Robert Walker) on 16 December 1997 in Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd[ [1998] 1 WLR 1426].
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The claims in the present action
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| 2. |
On 28 January 1987 Mr and Mrs Ashton signed a guarantee of the
obligations of Trafalgar Holdings Limited to Arbuthnot Latham Bank
Limited. In August 1989 the bank commenced proceedings against them to
enforce their obligations under that guarantee. It was those
proceedings which were struck out by this Court in December 1997. The
present proceedings were commenced in September 1998. These proceedings
are brought to enforce the rights of the bank under a legal charge
dated 7 March 1989 given by Mr and Mrs Ashton to secure their
obligations under the guarantee. The property charged - a dwelling
house known as "St Just", at Buckhurst Hill in Essex - was and is the
Ashtons' home. The claimant, Securum Finance Limited is the successor
in title to the rights of the bank under the guarantee and the legal
charge. In the present proceedings the claimant seeks payment under the
covenant in the legal charge; and, further, seeks to enforce the
security by orders for possession and sale of the mortgaged property.
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| 3. |
The legal charge is dated 7 March 1989. It is made between Mr and
Mrs Ashton (together described as "the Mortgagor") and Arbuthnot Latham
Bank Limited ("the Bank"). Clause 1 contains both an all monies
covenant and the charge to secure performance of that covenant. It is
in these terms:
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"The Mortgagor covenants to discharge on demand the Mortgagor's
Obligations together with interest to the date of discharge and
Expenses and as a continuing security for such discharge and as
beneficial owner charges the Property to the Bank (to the full extent
of the Mortgagor's interest in the Property or its proceeds of sale) by
way of legal mortgage of all legal interests and otherwise by way of
specific equitable charge"
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In that context "the Property" means the property known as "St Just",
Buckhurst Hill; "Expenses" means all expenses (on a full indemnity
basis) incurred by the Bank or any receiver at any time in connection
with the Property or the Mortgagor's Obligations or in enforcing any
power under the mortgage (with interest thereon from the date on which
they are incurred); and "the Mortgagor's Obligations" means:
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"All the Mortgagor's liabilities to the Bank of any kind (whether
present or future actual or contingent and whether incurred alone or
jointly with another) including banking charges and commission"
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| 4. |
Securum Finance Limited claims as successor in title to Arbuthnot
Latham Bank Limited under (i) an assignment dated 2 May 1991 and made
between the bank and Nordbanken London Branch, and (ii) an assignment
dated 21 December 1992 and made between Nordbanken London Branch and
Securum Finance Limited. For convenience (save where the context
requires a distinction to be made) I will refer to Arbuthnot Latham
Bank Limited and its assignees as "the Bank".
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| 5. |
It is common ground that, in the context of the Mortgagor's
Obligations in the legal charge, the only relevant liabilities (if any)
that Mr and Mrs Ashton have, or have had, to the Bank are their
liabilities as guarantors under the guarantee dated 28 January 1987.
Clause 1 of the guarantee is in these terms, so far as material:
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"In consideration of the Bank at the request of the Guarantor granting
or continuing to make available banking facilities or other
accommodation for so long as it may think fit to . . . the Customer,
the Guarantor hereby guarantees on demand to pay to the Bank all monies
and to discharge all obligations and liabilities whether actual or
contingent now or at any time hereafter due owing or incurred to the
Bank by the Customer . . . in any manner whatsoever . . ."
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In that context "the Guarantor" means Mr Ashton and Mrs Ashton, and
"the Customer" means Trafalgar Holdings Limited.
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| 6. |
The Bank made demand on Mr and Mrs Ashton under the guarantee, in
the sum of £737,928.40, by letters dated on 31 July 1989. It made
a further demand under the guarantee, in the sum of
£1,527,205.23, by letters dated 15 January 1998. The difference
between the two sums represents accrued interest. The letters dated 15
January 1998 included a demand under clause 1 of the charge; but to
meet any argument that a separate demand under the charge was required
after a demand had been made under the guarantee, a separate demand
under the legal charge was made by letters dated 16 January 1998.
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| 7. |
In my view the Bank is plainly correct to assert, as it does, that
its cause of action in the present proceedings is distinct from the
cause of action which it was pursuing in the earlier proceedings. The
elements which comprised the cause of action in the earlier proceedings
may be summarised as (i) the debt owed by Trafalgar Holdings Limited to
the Bank, (ii) the agreement to guarantee that debt, contained in
clause 1 of the guarantee, and (iii) the demand made under the
guarantee by letter dated 31 July 1989. The elements which comprise the
cause of action in the present proceedings may be summarised as (i) the
debt owed by Trafalgar Holdings Limited to the Bank, (ii) the agreement
to guarantee that debt, contained in clause 1 of the guarantee, (iii)
the demand made under the guarantee by letter dated 31 July 1989,
alternatively by letter dated 15 January 1998, (iv) the covenant,
contained in clause 1 of the legal charge, to discharge the obligations
under the guarantee, and (v) the demand made under the covenant by
letter dated 15 January 1998, alternatively by letter dated 16 January
1998. But it is important to appreciate that, although it is true to
say that the cause of action in the present proceedings is not the same
as that upon which the earlier proceedings were based, there are two
common elements - (i) the debt owed by Trafalgar Holdings Limited to
the Bank and (ii) the agreement to guarantee that debt, contained in
clause 1 of the guarantee. In order to succeed in the earlier
proceedings the Bank had to establish those two elements; the same is
true in the present proceedings.
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| 8. |
Each of those elements is in issue in the present proceedings - see
paragraphs 12 and 13 of the amended defence and counterclaim. That was
the position, also, in the earlier proceedings - see paragraph 4 of the
amended defence and counterclaim:
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The Defendants by their defence in the first proceedings served on
21st December 1989:
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| (1) |
Denied that Trafalgar owed any sum at all to Arbuthnot;
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Denied in any event the Guarantee was enforceable at all
against them by virtue of various contractual warranties; and, also,
in the case of the Second Defendant, by virtue of undue influence
exercised over her by Arbuthnot.
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The Ashton's counterclaim
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| 9. |
By counterclaim in the present proceedings, as originally served, Mr
and Mrs Ashton sought redemption of the legal charge. By amendment to
their counterclaim, they seek an declaration that they are entitled to
have their property discharged from the legal charge; and an order that
the legal charge be delivered up for cancellation. The basis upon which
that claim to relief is founded is that there is no Mortgagor's
Obligation capable of being the subject of the covenant in clause 1 of
the legal charge and so no obligation capable of being secured by the
charge over the property. To put the point another way, if either (i)
there was no debt owed by Trafalgar Holdings Limited to the Bank or
(ii) the guarantee was unenforceable, there is nothing for which the
legal charge can stand security and the Ashtons, as owners of the
property, are entitled to have it discharged.
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The Limitation Act 1980Acts
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| 10. |
The present action was commenced on 29 September 1998, some three
years or more after the expiry of the six year limitation period
applicable to a claim based on a simple contract debt under the
guarantee. A claim to payment under the guarantee in the present action
would be met by an insuperable defence of limitation. But a claim to
payment under the covenant in the legal charge is made in an action
upon a specialty to which the twelve year limitation period, prescribed
by section 8(1) of the Limitation Act 1980Acts, applies. Further, it is a
claim brought in an action to recover money secured by a mortgage or
charge, to which, also, a twelve year period of limitation applies -
see section 20(1) of that Act. It is now common ground - at least for
the purposes of this appeal - that a claim to payment under the
covenant in the legal charge is not barred by limitation.
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| 11. |
Further, the claims in the present action are not limited to a
claim for payment. They include a claim, as mortgagee, for possession
of the property charged; for the appointment of a receiver of that
property; and for orders for foreclosure or sale. Those, also, are
claims to which the twelve year limitation period applies - see
sections 15 and 20 of the Act of 1980.
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The relief claimed on the application to strike out
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| 12. |
Mr and Mrs Ashton, having obtained an order striking out the
earlier proceedings, applied (as it was to be anticipated that they
would) for an order striking out the present proceedings. They did so
on the grounds that it was an abuse of the process of the court for the
claimant to seek to pursue, in these proceedings, what they see
(understandably) as, in essence, the same claim as that which the court
has already struck out in the earlier proceedings.
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| 13. |
The application to strike out was made by summons dated 10 March
1999. The substantive relief sought by that summons was set out under
five heads:
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| (1) |
An order that the claim be struck out on the grounds that it was an
abuse of process; in that it sought to relitigate the same issues as
were litigated, or could have been litigated, between the claimant and
the defendant in the earlier proceedings.
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An order that the claim be struck out on the grounds that it
disclosed no reasonable cause of action; in that (a) the claimant's
cause of action was founded on a simple contract and, accordingly, was
barred by section 5 of the Limitation Act 1980Acts or (b) that on a proper
construction of the legal charge there were no liabilities secured by
it, because the only liability which could be the subject of the
covenant in clause 1 was the liability under the guarantee which was,
itself, statute barred.
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An order that so much of the claim as was in respect of interest
accruing before 29 September 1992 be struck out on the grounds that it
disclosed no reasonable cause of action; in that a claim for interest
accruing more that six years before the commencement of the action was
barred by section 20(5) of the Limitation Act 1980Acts.
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Determination under what was then Order 14A of the Rules of the
Supreme Court 1965 of the two issues raised under head (2).
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Summary judgment on the counterclaim; which, as it then stood, was
a claim for redemption of the legal charge.
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| 14. |
The judge, in a thorough and careful judgment, held (i) that the
claimant's cause of action was not founded on a simple contract - and
so was not barred by section 5 of the Limitation Act 1980Acts - and (ii)
that, on a proper construction of the legal charge, the liabilities (if
they existed under the guarantee) were liabilities secured by the legal
charge. He determined those issues under CPR 24.2, and made
declarations accordingly. It followed that he refused relief under head
(2) of the summons. He refused permission to appeal against that part
of his order. As to head (3), the claimant conceded that the claim to
interest accrued before 29 September 1992 could not be pursued; and has
amended its claim accordingly. That left heads (1) and (5). The judge
decided those matters against the applicants; but he gave leave to
appeal against his decision.
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Issue estoppel
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| 15. |
I have pointed out that two of the issues which (on the face of the
pleadings) would arise at a trial of the present action - that is to
say, (i) whether there was a debt owed by Trafalgar Holdings Limited to
the Bank and (ii) whether the guarantee was enforceable - were issues
in the earlier action. The judge held, correctly in my view, that no
question of res judicata or estoppel arose in relation to those issues.
The reason was that there had been no adjudication upon those issues.
Whether it is an abuse of process to seek to litigate, in subsequent
proceedings, issues which have been raised (but not adjudicated upon)
in earlier proceedings which have themselves been struck out (whether
on grounds of delay or on other grounds) is a question which I shall
have to address later in this judgment; but that is a different
question from the question whether a party should be allowed to raise,
in subsequent proceedings, issues which have already been determined or
"laid to rest" (whether by adjudication, or by concession, or as the
result of a decision to withdraw) in earlier proceedings. The judge was
right to hold that the Ashton's could gain no support from cases such
as Kahn v Kolechha International Ltd [[1980] 1 WLR 1482],
SCF Finance Co Ltd v Masri (No.3) [[1987] QB 1028] and Barber v Staffordshire County Council [[1996] 2 All ER 748].
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Henderson v Henderson
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| 16. |
It was argued before the judge that "the issues raised in the
second action based on the covenant for repayment and the property
rights of the mortgagee could and should have been raised in the first
action"; and that, accordingly, the claimant was precluded by the
principle in Henderson v Henderson[ (1843) 3 Hare 100] from
raising them in the present proceedings. The judge rejected that
contention. In my view he was right to do. For my part, I find it
difficult to see how the principle in Henderson v Henderson, as
explained by Sir Thomas Bingham, when Master of the Rolls, in Barrow v Bankside Agency Ltd [[1996] 1 WLR 257, at page 260A-C], has any
application to issues arising from a claim on the covenant for
repayment. The question whether a liability under the guarantee which
was statute barred could be a Mortgagor's Obligation for the purposes
of the covenant in the legal charge could not have arisen in the
earlier action. At the time when that action was commenced the
liability under the guarantee was not statute barred. Nor could the
question whether the relevant period of limitation for the purposes of
an action on the covenant was six years (rather than twelve years) have
arisen in the earlier action. And it is, to my mind, bizarre to suggest
that, in the earlier proceedings, it would have been appropriate to
rely both on the cause of action founded on the guarantee alone and on
a cause of action (theoretically distinct, but in the circumstances as
they then were indistinguishable from) founded on the covenant in the
legal charge. For the reasons explained by Lord Justice Schiemann in
National Westminster Bank Plc v Kitch [[1996] 1 WLR 1316] there are
good reasons for choosing not to sue on the covenant in a mortgage
when it is unnecessary to do so.
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| 17. |
Nor, as it seems to me, can it be argued that a secured creditor
who chooses, in the first place, to sue for payment alone, is
thereafter precluded from seeking to enforce his security in a separate
action on the grounds that that was a claim that could have been
advanced in the first action. As the judge put it, in a passage at page
24 of his written judgment:
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"Indeed, it does not seem to me that it is in the interests either of
the bank or of the bank's customers that the bank should be obliged to
rely on all of its rights under the mortgage when proceedings are first
issued if it would prefer to limit itself to a claim under the
guarantee. Having decided to confine itself in the first action to a
claim under the guarantee, that seems to me to be a perfectly proper
course of action for the bank to take and I do not regard it as an
abuse of the process of the court for the claimant to rely subsequently
on its rights under the mortgage. No one could sensibly suppose that by
suing on the guarantee the bank is to be taken to be waiving its right
to rely, if need be, on the security which it enjoys."
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I agree.
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Some other abuse of process
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| 18. |
The real question under head (1) of the summons of 10 March 1999,
as the judge appreciated, is whether it is an abuse of process to seek
to litigate, in subsequent proceedings, issues which have been raised
(but not adjudicated upon) in earlier proceedings which have themselves
been struck out. The question arises because, in order to succeed on
its claim for payment under the covenant in the legal charge, the
claimant must establish the two points which I have already identified
- namely (i) whether there was a debt owed by Trafalgar to the bank
and (ii) whether the guarantee was enforceable - which were in issue in
the earlier proceedings but which were not adjudicated upon in those
proceedings because those proceedings were struck out.
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Birkett v James
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| 19. |
The judge held that, in the circumstances of the present case, the
reasoning of the House of Lords in Birkett v James [[1978] AC 297]
required that that question receive a negative answer. He reminded
himself of the well known passage in the speech of Lord Diplock, at
page 318F-G:
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"The power [to strike out for want of prosecution] should be exercised
only where the court is satisfied either (1) that the default has been
intentional and contumelious, e.g. disobedience to a peremptory order
of the court or conduct amounting to an abuse of the process of the
court; or (2) (a) that there has been inordinate and inexcusable delay
on the part of the plaintiff or his lawyers, and (b) that such delay
will give rise to a substantial risk that it is not possible to have a
fair trial of the issues in the action or is such as is likely to have
caused serious prejudice to the defendants either as between themselves
and the plaintiff or between each other or between them and a third
party."
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| 20. |
The judge continued, at page 15 of his written judgment:
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"[Lord Diplock] then went on to consider whether an action ought to be
dismissed for want of prosecution before the expiration of the
limitation period and he observed that crucial to that question is
whether the plaintiff whose action has been so dismissed may issue a
fresh writ for the same cause of action. He then answered that question
by concluding that, exceptional cases apart, where all that a claimant
has done is to let the previous action go to sleep the Court would have
no power to prevent him starting a fresh action within the limitation
period and proceeding with it with all proper diligence,
notwithstanding that his previous action had been dismissed for want of
prosecution.
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Lord Diplock acknowledged that it was an attractive argument that if
the Court has power to dismiss an action already started because it
considers that the time which the claimant has allowed to elapse since
his cause of action first accrued has resulted in a substantial risk
that justice may not be done to the defendant at trial, the Court by
parity of reasoning should also have the power to prevent a fresh
action being started. But he declined to accede to the contention,
despite its admitted attractiveness, because to do so would be to
assume that the Court has the power to treat as amounting to inordinate
delay in proceeding with the action, a period shorter than that which
the legislature has prescribed in the Limitation Act that a claimant
should have as a matter of right in order to commence proceedings."
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| 21. |
The reason why the question whether a plaintiff whose action has
been dismissed for want of prosecution can commence within the
limitation period and thereafter pursue fresh proceedings founded on
the same cause of action is crucial to the question whether an action
ought to be dismissed for want of prosecution before the relevant
limitation period has expired was explained by Lord Diplock in
Birkett v James[[1978] AC 297, at page 320A-C]:
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"Crucial to the question whether an action ought to be dismissed for
want of prosecution before the expiry of the limitation period is the
answer to a question which lies beyond it, viz. whether a
plaintiff whose action has been so dismissed may issue a fresh writ for
the same cause of action. If he does so within the limitation period,
the effect of dismissing the previous action can only be to prolong the
time which must elapse before the trial can take place beyond the date
when it could have been held if the previous action had remained on
foot. Upon issuing his new writ the plaintiff would have the benefit of
additional time for repeating such procedural steps as he had already
completed before the action was dismissed. This can only aggravate; it
can never mitigate the prejudice to the defendant from delay."
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| 22. |
It was the fact that, as it appeared to him in 1978, the dismissal
of the first action for want of prosecution (in a case which fell under
head (2) of his classification - conduct not amounting to an abuse of
process) would lead to additional delay and aggravation of prejudice
(because the plaintiff could commence and pursue a fresh action), that
led Lord Diplock to observe, at page 322D-E:
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"For my part, for reasons that I have already stated, I am of opinion
that the fact the limitation period has not yet expired must always be
a matter of great weight in determining whether to exercise the
discretion to dismiss an action for want of prosecution where no
question of contumelious default on the part of the plaintiff is
involved; and in cases where it is likely that if the action were
dismissed the plaintiff would avail himself of his legal right to issue
a fresh writ the non-expiry of the limitation period is generally a
conclusive reason for not dismissing the action that is already
pending."
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| 23. |
It is important to keep in mind why Lord Diplock rejected the
contention that a court which had dismissed an action under head (2) of
his classification - "because it considers that the time which the
plaintiff has allowed to elapse since his cause of action first accrued
has resulted in a substantial risk that justice may not be done to the
defendant at the trial" - should have power to dismiss a fresh action.
The reason is found in the double condition that is imposed under head
(2): (a) inordinate and inexcusable delay and (b) a substantial risk
that it will be impossible to have a fair trial of the issues or
likelihood of serious prejudice. Where an action had been dismissed
under head (2), it could be assumed that the court which dismissed it
had been satisfied that both conditions had been met. But, on an
application to strike out a fresh action commenced within the
limitation period, it was necessary to re-examine the position. The
question whether there had been inexcusable and inordinate delay had to
be determined in the context of the fresh action. Delay which had taken
place before the commencement of the fresh action could not be regarded
as inordinate delay; because it was permitted by the statute - see the
observations of Lord Diplock in Birkett v James [at page 320E,
and at page 322F-G]:
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". . . time elapsed before the issue of a writ within the limitation
period cannot of itself constitute inordinate delay however much the
defendant may already have been prejudiced by the consequent lack of
early notice of the claim against him, the fading recollections of his
potential witnesses, their death or their untraceability. To justify
dismissal of an action for want of prosecution the delay relied upon
must relate to time which the plaintiff allows to lapse unnecessarily
after the writ has been issued."
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There are observations to the same effect in the speech of Lord Salmon,
at pages 328H-329A:
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". . . the second action could not be dismissed as an abuse of the
process of the court whatever inexcusable delay there may have been in
the conduct of the first action."
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and in the speech of Lord Edmund-Davies, at page 334A-B:
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". . . a plaintiff is free to issue within the limitation period a
further writ claiming the same relief and based on the same grounds as
an earlier writ dismissed for want of prosecution, and it is irrelevant
to the competency of the second action that by the time it comes on the
defendant may well be even more prejudiced than he would have been had
the first action been permitted to proceed to trial."
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| 24. |
If delay which had taken place (in the conduct of the first action)
before the issue of the writ in the second action could not be regarded
as inordinate in the context of an application to strike out the second
action (because it was permitted by the statute), then the application
could not succeed under head (2). First, because sub-condition (a)
would not be satisfied; and, secondly, because if sub-condition (a)
were not satisfied then sub-condition (b) could not be satisfied.
However substantial the risk to a fair trial, or however serious the
prejudice to the defendant, that risk or that prejudice could not be
said to be the result of inordinate delay in the prosecution of the
second action.
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| 25. |
If the approach set out in those passages continues to be
applicable, notwithstanding the introduction of the Civil Procedure
Rules 1998, the judge was plainly correct to reach the conclusion which
he did.
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The Civil Procedure Rules 1998
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| 26. |
The principles laid down in Birkett v James were described
by Lord Justice Kerr in Westminster City Council v Clifford Culpin & Partners [(unreported, 18 June 1987; C.A. Transcript 592 of
1987]) - in a passage set out by Lord Griffiths in Department of Transport v Chris Smaller (Transport) Ltd [[1989] AC 1197, at page
1204C-1205B] - as "unsatisfactory and inadequate". The House of Lords
was invited, in the Chris Smaller case, to reconsider those
principles. But the invitation was declined. Lord Griffiths, with whose
speech the other members of the House agreed, expressly endorsed the
proposition that "the plaintiff cannot be penalised for any delay that
occurs between the accrual of the cause of action and the issue of the
writ provided it is issued within the limitation period" - see
[
AC 1197, 1207B]. In relation to cases where the limitation period had
expired he said this, at page 1207F-G:
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"To extend the principle [to cases in which it was not shown that there
was a substantial risk that a fair trial was impossible, nor that the
defendant had suffered serious prejudice] purely to punish the
plaintiff in the illusory hope of transforming the habits of other
plaintiff solicitors would, in my view, be an unjustified way of
tackling a very intractable problem. I believe that a far more radical
approach is required to tackle the problems of delay in the litigation
process than driving an individual plaintiff away from the courts when
his culpable delay has caused no injustice to his opponent. I, for my
part, recommend a radical overhaul of the whole civil procedural
process and the introduction of court controlled techniques designed to
ensure that once a litigant has entered the litigation process his case
proceeds in accordance with a time table as prescribed by Rules of
Court or as modified by a judge: see the Civil Justice Review, Report
of the Review Body on Civil Justice (1988) (Cmnd. 394)."
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| 27. |
The criticism of the Birkett v James principles was
considered, again, by the House of Lords in Grovit v Doctor
[[1997] 1 WLR 640]. Lord Woolf, with whom the other members of the
House agreed, referred, at page 643B, to the fact that the requirement
laid down by the second limb under head (2) prevented the court taking
into account the adverse effect which delay can have on the reputation
and efficiency of the civil justice system as a whole. He referred to
the passage in the speech of Lord Griffiths in the Chris Smaller
case which I have just set out. He went on, at page 644D-F:
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"The period which has elapsed since Lord Griffiths' speech has not seen
any improvement in the problems caused by delay in the conduct of civil
proceedings. In the county court a response to the corrosive effect of
delay has been to introduce the automatic strike out (County Court
Rules, Ord. 17, r. 11(9)). However this has proved to be crude remedy
the effects of which have not been wholly beneficial. It has founded an
industry of satellite litigation. Furthermore there is now on the
horizon the introduction of the sort of process of reform to the rules
of procedure which Lord Griffiths thought was required. In this
situation it is at least open to question whether it is not preferable
to await the outcome of the implementation of the new rules before
making a substantial inroad on the principles endorsed by Lord Diplock
in Birkett v James [[1978] AC 297]. They should by case management
prevent the delay happening. If delays do happen they provide the court
with wider powers to mitigate the consequences."
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| 28. |
The decision in Grovit v Doctor was handed down by the House
of Lords in April 1997. Some nine months later this Court had to
consider the appeal in Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [[1998] 1 WLR 1426]. The Court reminded itself, at page
1431G-H, of the principles in Birkett v James [[1978] AC 297] to
which I have already referred. It pointed out that the reason why the
question whether the limitation period had expired was of such
significance was that, in the absence of some conduct which means the a
second action could be stayed, it would not benefit the defendant to
have the first action struck out since this would only result in
further proceedings which would inevitably cause more expense and delay
- see [ [1998]
1 WLR 1426, at page 1432C-D, paragraph 17]. It observed that
the fact that the limitation period had not expired was of less
significance in a case where the proceedings which were being struck out
constitute an abuse of process. "In such circumstances, the plaintiff may
well find that if he brings fresh proceedings after the original
proceedings are struck out they are stayed because of his conduct." - see
[ [1998] 1 WLR
1426, at page 1432G-H, Paragraph 19]. In a section of the judgment headed
"the future" the Court said this:
|
| |
| |
"In his speech in the Chris Smaller [case [1989] AC 1197], Lord
Griffiths identified the advantages which would accrue from a civil
procedural process which was subject to "court controlled case
management techniques". This process is now being introduced. The new
unified rules are intended to come into force in April 1999. However,
many aspects of the process can be introduced while the existing
Supreme Court and County Court Rules are in force. Most of the powers
which the court requires for the purpose of case management are already
contained in the existing rules.
| | |
The gradual change to a managed system which is taking place does
impose additional burdens on the courts, involving the need for
training and the introduction of the necessary technological
infrastructure. It is therefore in the interests of litigants as a
whole, that the court's time is not unnecessarily absorbed in dealing
with the satellite litigation which non-compliance with the timetables
laid down in the rules creates. . . . In Birkett v James [[1978]
AC 297] the consequence to other litigants and to the courts of
inordinate delay was not a consideration which was in issue. From now
on it is going to be a consideration of increasing significance.
Litigants and their legal advisers, must therefore recognise that any
delay which occurs from now on will be assessed not only from the point
of view of the prejudice caused to the particular litigants whose case
it is, but also in relation to the effect it can have on other
litigants who are wishing to have their cases heard and the prejudice
which is caused to the due administration of civil justice. The
existing rules contain time limits which are designed to achieve the
disposal of litigation within a reasonable time scale. Those rules
should be observed.
| | |
It is already recognised in 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 the courts to
recognise for the future, more readily than heretofore, that a
wholesale disregard of the rules is an abuse of 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] AC 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."
|
|
| 29. |
The new rules - to which anticipatory reference was made in
Grovit v Doctor and in the Arbuthnot Latham case - are the
Civil Procedure Rules 1998, made under section 84(1) of the Supreme
Court Act 1981. They came into force on 26 April 1999. They were
applicable to the application to strike out the present proceedings -
which was heard after that date - by virtue of the Practice Direction
(PD 51) made under CPR Part 51. In particular, PD 51 paragraph 12
required that CPR Part 1 (the overriding objective) applied to all
existing proceedings from 26 April 1999 onwards; and PD 51 paragraph
15(3) incorporated the general presumption that, where an application
had been issued before 26 April 1999 for a hearing date after 26 April
1999 (as in the present case), the application will be decided in
accordance with the CPR.
|
| 30. |
The power to strike out a statement of case is contained in CPR
Rule 3.4. In particular, Rule 3.4(2)(b) empowers the court to strike
out a statement of case (which includes part of a statement of case -
see Rule 3.4(1)) if it appears to the court that the statement of case
is an abuse of the court's process; but that does not limit any other
power of the court to strike out - see Rule 3.4(5). In exercising that
power the court must seek to give effect to the overriding objective
set out in CPR Rule 1.1 - see Rule 1.2(a). The overriding objective of
the procedural code embodied in the new rules is to enable the court
"to deal with cases justly" - see Rule 1.1(1). Dealing with a case
justly includes "allotting to it an appropriate share of the court's
resources, while taking into account the need to allot resources to
other cases".
|
| 31. |
In the Arbuthnot Latham case this court pointed out, in a
passage at page 1436E which I have already set out, that:
|
| |
| |
"In Birkett v James [[1978] AC 297] the consequence to other
litigants and to the courts of inordinate delay was not a consideration
which was in issue. From now on it is going to be a consideration of
increasing significance."
|
|
| |
The effect on other litigants of delay in the proceedings in which that
delay has occurred is, now, a factor to which the court must have
regard when considering whether to strike out those proceedings. But,
equally, the fact that earlier proceedings have been struck out on the
grounds of delay is a factor to which the court must have regard when
considering whether to strike out fresh proceedings brought to enforce
the same claim. The reason, as it seems to me, is that, when
considering whether to allow the fresh proceedings to continue, the
court must address the question whether that is an appropriate use of
the court's resources having regard (i) to the fact that the claimant
has already had a share of those resources in the first action and (ii)
that his claim to a further share must be balanced against the demands
of other litigants.
|
| 32. |
The House of Lords recognised, in
Birkett v James [[1978] AC 297], that the power to strike out a first
action could be exercised where the plaintiff's conduct amounted to an
abuse of process - see at page 318F - and, further, recognised that the
court would have power, in an appropriate case, to strike out a second
action (founded on the same claim) notwithstanding that it was
commenced within the limitation period "on the grounds that, taken as a
whole, the plaintiff's conduct amounts to an abuse of the process of
the court" - see at page 320H-321A. But the House did not accept that
the necessary ingredient of abuse would be present where "all that the
plaintiff had done has been to let the previous action go to sleep". In
the Arbuthnot Latham [case [1998] 1 WLR 1426, at page 1436G, Paragraph 33], this
Court spoke of "the change in culture which is already taking place
will enable the courts to recognise for the future, more readily than
heretofore, that a wholesale disregard of the rules is an abuse of
process"; and, at page 1436H [, Paragaph 33], of "the more ready recognition that
wholesale failure, as such, to comply with the rules justifies an
action being struck out, so long as it is just to do so". Following the
Arbuthnot Latham case there have been numerous observations in
this court which are to the same effect - see Lord Justice Nourse and
Lord Justice Thorpe in Choraria v Sethia [(unreported, 15 January
1998; CA Transcript 7 of 1998)], Lord Justice Auld (with whom Lord
Justice Robert Walker agreed) in Miles v McGregor [(unreported,
23 January 1998; CA Transcript 51 of 1998)], Lord Justice Hirst and Lord
Justice Peter Gibson in Lace Co-ordinates Ltd v Nem Insurance Co Ltd [(unreported, 19 November 1998; CA Transcript 1717
of 1998)], Lord Justice Henry (with whom Lord Justice Pill agreed) in
Shikari v Malik [(unreported, 5 May 1999; CA Transcript 922 of
1999)], Lord Justice May (with whom Lord Justice Waller agreed) in
Co-operative Retail Services Ltd v Guardian Assurance Plc[
(unreported, 28 July 1999; CA Transcript 1319 of 1999)], and
Lord Justice Ward and Lord Lloyd of Berwick in UCB Corporate Services Ltd v Halifax (SW) Ltd [(unreported, 6 December
1999)].
|
| 33. |
The judge was alive to the need to revisit the principles in
Birkett v James[ [1978] AC 297. At page 13] in the transcript of his
judgment he said this:
|
| |
| |
"The fact that the legislature has determined that a claimant is
entitled to a particular period of time within which to commence
proceedings does not seem to me necessarily to mean that if he chooses
to commence an action well within that period and then conducts the
action in such a dilatory fashion that the claim is ultimately struck
out for want of prosecution he should be able to conduct himself in
that way safe in the knowledge that, provided he issues fresh
proceedings within the limitation period, those proceedings cannot be
struck out as an abuse of process. Court time is precious and there is
an important public interest in its proper use."
|
|
| |
But the judge did not think it right to pursue those thoughts, having
regard to the way in which the application had been argued before him.
Understandably, perhaps, he took the view that the task of revisiting
Birkett v James in the light of the developments in this area of
the law since Grovit v Doctor [[1997] 1 WLR 640] was best left to
an appellate court.
|
| 34. |
For my part, I think that the time has come for this Court to hold
that the "change of culture" which has taken place in the last three
years - and, in particular, the advent of the Civil Procedure Rules -
has led to a position in which it is no longer open to a litigant whose
action has been struck out on the grounds of inordinate and inexcusable
delay to rely on the principle that a second action commenced within
the limitation period will not be struck out save in exceptional cases.
The position, now, is that the court must address the application to
strike out the second action with the overriding objective of the CPR
in mind - and must consider whether the claimant's wish to have "second
bite at the cherry" outweighs the need to allot its own limited
resources to other cases. The courts should now follow the guidance
given by this Court in the Arbuthnot Latham case - in a passage
[ at page 1436H-1437B, Paragraph 33]:
|
| |
| |
"The question whether a fresh action can be commenced will then be a
matter for the discretion of the court when considering any application
to strike out that action, and any excuse given for the misconduct of
the previous action: see Janov v Morris [[1981] 1 WLR 1389]. The
position is the same as it is under the first limb of Birkett v James. In exercising its discretion as to whether to strike out the
second action, that court should start with the assumption that if a
party has had one action struck out for abuse of process some special
reason has to be identified to justify a second action being allowed to
proceed."
|
|
|
| 35. |
It follows from the preceding paragraphs of this judgment that I am
satisfied that the judge adopted the wrong approach to the question
whether the claim in the present action (or any part of it) should be
struck out on the grounds of abuse. Although he recognised (correctly)
the important public interest in the use of court time, he failed to
give any weight to that interest in reaching the conclusion which he
did. In those circumstances it is for this Court to exercise its own
discretion.
|
| |
The course of events in the first action
|
| 36. |
In deciding how that discretion should be exercised it is necessary
to examine the events which led to the striking out of the first
action; at least in so far as they appear from the judgments delivered
by Sir Ronald Waterhouse on the application to the High Court and by
this Court on appeal from his decision.
|
| 37. |
The following statement of the course of events is set out, at
[ pages 1429E-1430B,
Paragraph 5] in the judgment of this Court in the
Arbuthnot Latham case:
|
| |
| |
"By letter dated 8 June 1989, the bank demanded from Trafalgar payment
of the money then due amounting to over £720,000 plus interest.
When that sum was not paid, on 31 July 1989, the bank demanded from the
Ashtons the somewhat larger sum which by that time was allegedly due.
Nothing was paid and on 23 August 1989 the bank issued a writ endorsed
with a statement of claim against Trafalgar and the Ashtons. Trafalgar
did not serve a defence but the Ashtons did so. In the defence they
contended that (i) no debt was due from Trafalgar, (ii) the guarantee
was subject to collateral warranties which made it unenforceable in the
circumstances, and (iii) in the case of Mrs Ashton the guarantee was
obtained by undue influence.
| | |
Trafalgar took no further part in the proceedings but in relation to
the Ashtons' pleading closed on 29 May 1990 and discovery was completed
on 6 June 1991. On 7 June 1991, an order was made substituting
Nordbanken London Branch as the plaintiff. Thereafter no step was taken
until Securum Finance Ltd wrote to the Ashtons on 20 March 1996. This
was followed by the Ashtons on 3 May 1996 issuing a summons to strike
out the claim against them on the grounds of delay.
| | |
Sir Ronald Waterhouse dismissed the summons to strike out, gave the
plaintiffs leave to join Securum Finance Ltd as the third plaintiffs,
gave the plaintiffs leave to issue a summons before the master seeking
leave to amend the statement of claim and refused the Ashtons leave to
appeal.
| | |
On 9 October 1996 Master Trench gave the plaintiffs leave to amend
their statement of claim so as to include a claim based on the covenant
in the mortgage."
|
|
| 38. |
The explanation for what Sir Ronald Waterhouse was to conclude was
inordinate and inexcusable delay is described in the judgment of this
Court at page [1430C-E, Paragraph 8]:
|
| |
| |
"In their evidence, the plaintiffs explained the delay by stating that
the debt was assigned to the company now known as Securum U.K. Ltd on
21 December 1992. After that assignment, that company became "in
essence an asset recovery and debt collection company". It had
inherited a large portfolio of bad debts some of which ran into seven
figures. It was therefore decided that the plaintiffs would deal only
with those loans within their portfolio which required urgent action
and, as in this case they had security, it was not regarded as an
urgent situation and so it was not initially actively pursued. In
addition Mr and Mrs Ashton were not only defending but also
counter-claiming against the plaintiffs and they appeared not anxious
to pursue their counterclaim."
|
|
| 39. |
Leave to appeal in the first action was granted by this Court (Lord
Justice Potter) on 12 January 1997. The appeal was heard at the end of
November and the judgment of the Court was handed down on 16 December
1997. Before examining that judgment, and the judgment of Sir Ronald
Waterhouse which it reversed, it is pertinent to have in mind the basis
upon which claims were made against Mr and Mrs Ashton in the first
action. That appears from the statement of claim endorsed on the writ,
a copy of which was made available to us during the course of the
hearing.
|
| 40. |
Paragraph 2 of the statement of claim in the first action
sets out the terms of clause 1 in the guarantee of 28 January 1987.
Paragraph 3 contains the assertion that, as at 23 January 1987, the
amount owing to the Bank by Trafalgar was £705,000. Paragraph 4
sets out the terms of a letter dated 21 May 1987 under which, it is
said, the parties agreed that the Bank would allow Trafalgar to make
use of certain US Dollar deposits as margin cover for foreign exchange
and futures trading for a period of five years; and contains the
allegation that it was in consideration of that arrangement that Mr and
Mrs Ashton agreed that the guarantee of 28 January 1987 should be
supported by an undated legal charge executed by them over their joint
property at Buckhurst Hill. Paragraph 6 refers to a demand made on 8
June 1989 by the Bank on Trafalgar; and paragraph 7 refers to letters
of demand, for payment within 14 days of the sum of £737,928.40
then said to be due from Trafalgar, dated 31 July 1989 and served on Mr
and Mrs Ashton. It is clear that, although reference is made to the
legal charge (in paragraph 4(iv) of the statement of claim), the claims
are claims under the guarantee alone.
|
| 41. |
Sir Ronald Waterhouse approached the application before him with
the principles identified by Lord Diplock in Birkett v James
[[1978] AC 297] well in mind. At the hearing before him each party
sought to rely on Lord Diplock's observation that, in a case not
involving contumelious default, the expiry (or non-expiry) of the
relevant period of limitation was likely to be determinative of an
application to strike out. The primary submission for the Ashtons was
that the six year limitation period had expired. Counsel for the
plaintiff sought to meet that submission with an argument that the
applicable period was twelve years. As the judge put it, at page 10F-G
in the transcript of his judgment:
|
| |
| |
"[Counsel] has sought to persuade me that essentially the action is on
the covenant contained in the mortgage deed, being a covenant by way of
specialty for which the limitation period is 12 years by virtue of the
provisions of Section 8(1) of the Act of 1980 . . . [Counsel] argues,
that having regard to the express reference in the Statement of Claim
to the legal charge, this is essentially a claim based on a promise
made in a deed, and that the basic submission on behalf of the second
and third defendants that it is a simple contract debt is
misconceived."
|
|
| 42. |
Sir Ronald Waterhouse rejected that contention - see page 11C-D in
the transcript of his judgment. But he then had to deal with the
converse argument, advanced by counsel for Mr and Mrs Ashton, that the
limitation period applicable would continue to be six years even if an
amendment to plead reliance on the covenant in the mortgage were
allowed - or a new action based on that covenant were commenced. He
explained the argument at page 12C-F of his judgment:
|
| |
| |
"The nature of the argument may be briefly summarised in this way: the
second and third defendants submit that, although there was a covenant
in general terms in the mortgage deed whereby the second and third
defendants undertook to meet all liabilities, the reality of the matter
is that the plaintiff's claim is founded upon a debt arising from a
simple contract. It is suggested, therefore, that, however the
plaintiff chooses to present its claim, whether on the present basis or
on an amended basis, or indeed in a new action, the same limitation
period of six years will apply because the plaintiff cannot rely on the
promise contained in the legal charge as giving rise to a debt under
specialty."
|
|
| 43. |
Sir Ronald Waterhouse rejected that contention, also - see page
15C-D of his judgment. That led him to the conclusion, which he
described as "fundamental to the question that I have to decide", that:
|
| |
| |
". . . if the second and third defendants were to succeed in their
present application, it would be open to plaintiff to issue a writ
forthwith claiming the amount now claimed in the proceedings before me
as a debt due under the promise contained in the legal charge. The
plaintiff would also be entitled to enforce the mortgage, to obtain an
order for sale of the second and third defendants' home and, in
accounting in those proceedings, to allot all the amounts claimed,
including interest, to itself before paying any balance over to the
second and third defendants.
| | |
Equally, it would be open to the plaintiff, if the application by the
second and third defendants failed, to make immediate application to
amend the statement of claim to include an alternative basis for
repayment of the amount set out in the writ and statement of claim,
namely the promise contained in the legal charge, the plaintiff's
alternative claim therefore being a claim under specialty."
|
|
| |
It was on the basis of that conclusion that he went on to hold that
there was no purpose in striking out the existing action; Mr and Mrs
Ashton would gain no advantage from that course because the plaintiff
would immediately commence a new action to enforce its security which
would be within the relevant limitation period; whatever prejudice the
Ashtons might have suffered from the delay in prosecuting the first
action would not be significantly allayed or mitigated, but would
remain largely as before.
|
| 44. |
I have set out those passages from the judgment of Sir Ronald
Waterhouse in the first action because they are part of the background
against which the judgment of this Court in that action must be read
and understood. As a further preliminary to an examination of that
judgment, it is relevant to note that, by the time that appeal came
before this Court, the plaintiff had obtained leave to amend its
statement of claim so as to include a claim based on the covenant in
the mortgage - see [ [1998] 1 WLR 1426, at page 1430B, paragraph 7].
|
| |
The judgment of this Court in the first action
|
| 45. |
It was common ground in this Court that the plaintiff's original
claim on the guarantee was a claim to which the six year limitation
period applied; and that the plaintiff's amended claim, based on the
covenant in the mortgage, was a claim to which the twelve year
limitation period applied - see [ [1998] 1 WLR 1426,
at page 1430B-C, paragraph 8].
There had been no appeal against the decision of Sir Ronald Waterhouse
on those points.
|
| 46. |
The Court reminded itself, at pages 1432H-1433B, that delay alone
does not amount to abuse of process - see Barclays Bank Plc v Maling
[(unreported, 23 April 1997; CA transcript 849 of 1997)]. It reminded
itself, also, at page 1432D-E, that the reasoning which had led the
House of Lords, in Birkett v James[ [1978] AC 297], to the
conclusion that the fact that the limitation period had not expired
would (save in exceptional circumstances) be determinative against
striking out in a case in which there was no allegation of contumelious
conduct was inapplicable - or, at least, of much less weight - where
there was a serious question whether the cause of action to be asserted
in any new action would be statute-barred if new proceedings were
commenced. "In such a case the interests of justice might be best
served by dismissing the action and leaving the party whose action has
been struck out to bring fresh proceedings if he chooses to do so", and
the reference to another decision of this Court, Barclays Bank Plc v Miller [[1990] 1 WLR 343]. Further, the fact that the limitation
period had not expired was of less (if any) significance in a case
where the proceedings were being struck out on the basis of abuse of
process.
|
| 47. |
In applying the authorities to the facts before them in the first
action, the Court said this, at [ [1998] 1 WLR 1426,
1433H-1434B, paragraph 24]:
|
| |
| |
"The previous authority which is closest to the bank case is the
decision of this court in Barclays Bank Plc v Miller[ [1990] 1
WLR 343]. Sir Ronald Waterhouse distinguished Miller case
because if fresh proceedings were commenced, he took the view that the
bank would succeed. There was not the same uncertainty as to the
outcome of the fresh proceedings as there was said to be in Barclays Bank Plc v Miller.
| | |
Was the judge right in adopting this approach? We do not think so, for
reasons advanced by Mr Strachan on behalf of Mr and Mrs Ashton."
|
|
| |
The Court set out those reasons at pages 1434B-1435D. It is, I think,
sufficient to summarise them:
|
| |
| (1) |
There was no dispute that, in relation to the only cause of action
pleaded by the bank, any fresh proceedings would be statute barred.
When considering whether or not to apply to strike out a claim on the
basis of delay, the defendant is entitled to assume that, normally,
the court will determine that question on the basis of the cause of
action which has been pleaded.
| | (2) |
In seeking to enforce their rights in a mortgage action (by sale or
foreclosure) the bank would be taking a wholly different course from
that which it had chosen to take thus far and it was inappropriate to
take into account possibilities of this sort in determining what should
be the outcome of the very different action which the bank had relied
on so far.
| | (3) |
If the existing action were dismissed, Mr and Mrs Ashton would have
a number of defences to an action based on the covenant contained in
the mortgage: (a) that the statute-barred claim under the guarantee
would not be a "liability" within the covenant in the mortgage; (b)
that it would not be open to the bank to rely on a cause of action in
the second action which it chose not to advance in the first action -
"a plaintiff should bring forward at the outset his whole case"; (c)
that the bank would not be able to recover in the second action any
interest in relation to which six years had expired from the date upon
which it became due prior to the commencement of the action - see
section 20(5) of the Limitation Act 1980Acts and (d) that the Ashtons would
be entitled to their costs of the first action which the bank would
have to pay before it could bring a second action. These were defences
which could not be dismissed out of hand; and the court should not, in
deciding whether to strike out the first action be required to explore
issues which needed careful examination.
|
|
| 48. |
Those reasons attracted this Court in the first action; and led it
to the view that Sir Ronald Waterhouse had been wrong to dismiss the
application to strike out on the basis that the Ashtons could obtain no
benefit from the order which they sought. In the events which have
happened, the point under section 20(5) of the Limitation Act 1980Acts has
been conceded by the Bank; and the Ashtons' costs of the first action
have been paid. The defences identified under (a) and (b) of head (3)
have been determined against the Ashtons by the judge in the present
action.
|
| 49. |
It is, perhaps, easier to see why this Court held that Sir Ronald
Waterhouse had been wrong to dismiss the application to strike out the
first action, for the reason that he gave, than it is to see why (if
he were wrong on the "no benefit" point) it was an application which
should succeed. Sir Ronald Waterhouse had approached the application on
the basis that it was for the applicant to establish the two elements
under head (2) of Lord Diplock's formulation - that is to say (a)
inordinate and inexcusable delay and (b) a substantial risk to a fair
trial or serious prejudice. The first of those elements was not really
in issue - as the judge pointed out at page 7G-H in the transcript of
his judgment. The judge summarised the applicants' arguments on element
(b) at pages 4E-7F. But he reached no conclusion on the question
whether the risks to a fair trial that the applicants had identified
were substantial, or on the question whether the prejudice which they
alleged was serious. The reason why he did not find it necessary to do
so was that he was persuaded, even if element (b) were otherwise
satisfied, striking out would serve no purpose. The applicants had
suffered no prejudice by the delay because the Bank was still within
the twelve year period applicable to its claims under the legal charge.
The real prejudice was caused by the existence of the legal charge -
which fettered their ability to fund other business ventures or to move
house - not by the Bank's delay in prosecuting the action.
|
| 50. |
Nevertheless, this Court took the view that element (b) had been
established before the judge. The Court said this, at [ [1998] 1 WLR 1426,
1430E-G, paragraph 9]:
|
| |
| |
"Mr and Mrs Ashton's defence turned substantially on oral evidence and
the judge records that it is conceded by the plaintiff that the passage
of time may have affected their recollection of events and this would
impinge upon their oral evidence. But he drew attention to the fact
that many important matters were recorded in correspondence and it is
part of the Ashtons' case that the proceedings against them should have
been deferred until 1994 because of an undertaking they have been
given. It was however, on the basis that a fresh action could be
brought by the plaintiffs based on the mortgage which could not be
statute barred that the judge dismissed the defendants' application. By
inference it appears that the judge would have come to a different
decision, because of the anxiety to which the Ashtons have been
subjected and their dimming recollection, if a fresh action could not
have been brought."
|
|
| 51. |
In my view it is correct to say, as counsel for the Bank has
contended before us, that this Court took the view that the application
in the first action should be allowed on the ground that it fell within
head (2) of Lord Diplock's formulation in Birkett v James; and
not on the basis that the Bank's conduct should be treated (in the
context of the application before them) as an abuse of process.
Nevertheless, it is clear enough that the Court did regard the practice
of issuing proceedings which there was no immediate intention to pursue
- which had occurred in the present case - as unacceptable. The Court
said this, at [ page 1437B-D, Paragraph 34]:
|
| |
| |
"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."
|
|
| |
Should the present action be struck out
|
| 52. |
In my view, for the reasons which I have sought to give, it is open
to this Court to strike out the claim for payment made in the present
action. That is a claim which, in substance, is indistinguishable from
the claim for payment made in the first action. If that claim stood
alone it could be said with force that to seek to pursue it in a second
action when it could and should have been pursued, properly and in
compliance with the Rules of Court, in the first action is an abuse of
process. It is an abuse because it is a misuse of the court's limited
resources. Resources which could be used for the resolution of disputes
between other parties will (if the second action proceeds) have to be
used to allow the Bank a "second bite at the cherry". That is an
unnecessary and wasteful use of those resources. The Bank ought to have
made proper use of the opportunity provided by the first action to
resolve its dispute in relation to the claim for payment.
|
|
| 53. |
But the claim for payment does not stand alone. It is conjoined
with claims to enforce the security under the legal charge. It is
important to keep in mind that, by striking out the claim for payment,
the court does not extinguish the underlying debt. Nor, of course, is
the underlying debt extinguished by the expiry of a limitation period.
The debt (if it exists) remains secured on the mortgaged property. I
can see no basis on which the claims to enforce the security under the
legal charge can be struck out on the grounds of abuse of process.
Those claims were not made in the first action; and, for the reasons
which I have already given, there was no reason why they should have
been.
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| 54. |
The Bank does not need to establish its claim for payment in order
to obtain an order for possession. It is entitled to possession by
virtue of its legal estate; subject to the court's powers under section
36 of the Administration of Justice Act 1970Acts - in a case to which that
section applies. The defence to the claim for possession - and to the
claims for the appointment of a receiver, for sale and foreclosure - is
that the mortgage ought to be discharged on the basis that there is no
debt. That, also, is the basis of the Ashtons' counterclaim. The
effect, as it seems to me, is that the issue whether or not there is a
debt secured by the legal charge will have to be resolved whether or
not the claim for payment under the covenant is struck out. That issue
will have to be fought on the claim for possession; it will have to be
fought on the counterclaim if Mr and Mrs Ashton are to achieve their
objective of freeing their property from the fetter of the mortgage.
That, of course, is an objective which they could have pursued at any
time by pursuing their counterclaim, either in the first action or in
the present action. If they are prejudiced by delay, the delay in
pursuing the counterclaim to obtain the discharge of the mortgage is
delay for which they must bear responsibility.
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| 55. |
If the issue whether or not there is a debt secured by the legal
charge will have to be resolved in litigation in any event, then the
need to have regard to the appropriate allocation of resources as
between the litigation between these parties and litigation between
other parties has little weight. Whether or not the claim for payment
is struck out makes little or no difference to the resources which will
be needed in relation to the litigation between these parties.
|
| 56. |
I have considered whether the claim for payment should be struck
out, nevertheless, in order mark the court's disapproval of the delay
that occurred in the prosecution of the first action. There would, or
might, be some benefit to the Ashtons in that course; in that the Bank
would not then obtain a money judgment on which to found a petition for
bankruptcy. It would be unable to recover more than the value of its
security. But I am satisfied that to strike out the claim for payment
on that basis would be a wrong exercise of discretion in the present
case. It would, I think, be seen as a further punishment inflicted on
the Bank for a course of conduct which, although the subject of
disapproval by this Court in the first action, was not then stigmatised
as an abuse; in circumstances in which it was said by this Court that
the new approach would not be applied retrospectively to delays which
had already occurred.
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| |
Article 6(1) of the European Convention on Human Rights
|
| 57. |
It was submitted that to refuse to strike out the these proceedings
would be to infringe the Ashton's rights under Article 6(1) of the
European Convention on Human Rights, soon to become of direct
application as part of domestic law under the Human Rights Act 1998.
Article 6(1) confers a right, in the determination of civil rights and
obligations, to a fair hearing within a reasonable time. In my view,
the Article provides the appellants with no assistance in the present
case. I have explained that there has been no impediment in the way of
a trial, at any time since the commencement of the first action, of the
Ashtons' claim to have the legal charge discharged. The reason why that
claim has not been tried is because the Ashtons have chosen not to
pursue it. They have chosen, no doubt for reasons which have seemed
sound, to leave that claim until after the question whether or not the
Bank's claim for payment should be struck out has been determined. But,
as I have pointed out, striking out of the payment claim would not have
the effect of extinguishing the debt. There was, as it seems to me,
never any realistic possibility that, even if the Ashtons were
successful in having the payment claim struck out, they would not have
to pursue their own claim for the discharge of the legal charge to
trial. The court has placed no impediment in their way in that
respect. The reason why the payment claim in the present proceedings
should not be struck out is that the question whether there is a debt
secured by the legal charge will have to be decided in any event. I am
not persuaded that that course involves any infringement of the
Ashtons' rights under Article 6(1). Indeed, as it seems to me, they
would have more solid grounds for complaint if the court had declined
to allow their own claim to proceed, leaving the question whether or
not their home is encumbered by the legal charge unresolved.
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| |
Conclusion
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| 58. |
For those reasons I would dismiss this appeal.
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| |
MR JUSTICE RATTEE:
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| 58. |
I agree.
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| |
Order: Appeal Dismissed with costs subject to detailed assessment;
permission to appeal to House of Lords refused.
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(Order does not form part of the approved judgment)
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