Striking out 'warehoused' claims - the Court of Appeal adopts a new approach

In a leading judgment handed down today in Alibrahim v. Asturion Fondation [2020] EWCA Civ 32, the Court of Appeal had reviewed the principles on which claims that have been ‘warehoused’ may be struck out for abuse of process.

The Court has distanced itself from the approach and tone adopted by Lord Woolf in the earlier appellate cases of Grovit v. Doctor [1997] 1 WLR 640 and Arbuthnot Latham Bank v. Trafalgar Holdings [1998] 1 WLR 1426, in which ‘Grovit abuse’ in ‘warehousing’ claims had been identified and the Court’s discretion to strike out such claims established.

Striking out for Grovit abuse had marked a departure from the earlier remedy of dismissal for want of prosecution under Birkett v. James [1978] AC 297, which had involved consideration of wider issues including reasons for delay and a risk of prejudice.

Where a party commenced or continued proceedings with no intention for the time being to pursue them to trial, that ‘warehousing’ of the claim could of itself amount to abuse of process and the Court then had a discretion to strike out the claim.

The new approach approved by the Court of Appeal is broadly consistent with the new approach to granting relief from sanction under Denton v. TH White [2014] EWCA Civ 906. The Court must now consider, in deciding whether there has been an abuse of process, the length of any delay, the reasons for that delay and any other relevant circumstances.

The bright lines of Grovit abuse appear to have been discarded. The Court is left, in considering both the allegation of abuse and the exercise of its discretion to strike out, to conduct a broad enquiry into all of the now relevant circumstances.

That both reduces the deterrent effect of those bright lines under Lord Woolf’s approach and substantially increases the risk of satellite litigation.

The approach in Grovit and Arbuthnot

In Grovit, Lord Woolf had highlighted the ineffectiveness of the Court’s jurisdiction under Birkett v. James to strike out for delay, including the difficulty in showing prejudice. It was further implicit that the applicant had to show that the delay was inordinate (long) and inexcusable (without good reason).

Where the claimant commenced or continued its claim without an intention to bring it trial, that could be an abuse of process. Where the reason for any delay was one involving such abuse, namely a lack of the required intention, the Court could strike out the claim.

Lord Woolf’s reasoning contained heavy suggestion that justice would ‘frequently’ require that a claim be struck out, because the Courts ‘exist to enable parties to have their disputes resolved’ and not for other purposes.

In Arbuthnot, Lord Woolf again emphasised the relative simplicity of the new approach in no longer requiring an investigation of prejudice or the reasons for the claimant’s delay. He identified a specific problem of banks suing a number of debtors but then proceeding against them in order of preference. 

His clear implication was that ‘for a party …to, in effect, ‘warehouse’ proceedings until it is convenient to pursue them’ constitutes an abuse of process. It harms the administration of justice because claims become stale and the Court is required to investigate the inaction.

These decisions reflect some of the initial zeal of the procedural revolution following the introduction of the CPR in 1998. They are consistent with the early cases in which the Court declined relief from sanction for the breaches of the CPR and procedural orders.

A number of more recent decisions at first instance appeared to follow Lord Woolf’s approach. Notably, in Société Générale v. Goldas [2017] EWHC 667 (Comm), in which a claimant had warehoused claims in England while it pursued claims for the same sums in Turkey, Popplewell J confirmed that ‘[f]or a claimant unilaterally to warehouse proceedings is therefore an abuse of process, and may be a sufficiently serious abuse to warrant striking out the claim…’ [63].

In the language of US Courts, the strong implication of these decisions was that ‘warehousing’ if found was per se abusive, or almost so.

Judicial reluctance to strike out ‘warehoused’ cases

Where the Courts found abusive warehousing but did not consider it sufficiently serious, they tended to exercise their discretion against striking out the claim: see, for example, Realkredit Danmark A/S v. York Montague (The Times, 1 February 1999). 

In Realkredit, as in Alibrahim, the claimant’s misconduct could be re-characterised as a failure to obtain a stay of proceedings that the Court would almost certainly have granted.

In other cases, the Courts interposed an intermediate stage in their reasoning in asking whether the warehousing that had been found was sufficiently serious to amount to an abuse of process: Braunstein v. Mostafazan (Unreported, 12 April 2000) [32]. 

In that case, the Claimant believed it had the support of the Defendant for its delay and its failure was in failing to check the authority of the purported agent of the Defendant.

Issues as to scope of ‘warehousing’

On an assumption that ‘warehousing’ was in general abusive and that the Courts would frequently strike out warehoused claims, the focus of argument and judicial consideration was often on what constituted ‘warehousing’. 

The question was asked, as by the Claimant in Alibrahim, whether having no intention to pursue the claim for the time being was warehousing in circumstances where the claimant still intended ultimately to pursue the claim to trial.

This produced a semantic debate as to whether ‘warehousing’ involved having for the time being no intention to proceed or having no intention to proceed for the time being. It had in fact been clear since Grovit that putting claims on hold but with a continuing intention ultimately to proceed could be abusive. That was precisely what banks had been doing abusively and what had informed the metaphor of ‘warehousing’ claims for future use.

The approach now taken in Alibrahim

In Alibrahim, Arnold LJ has clarified the scope of the abuse formerly called ‘warehousing’. He found that the leading cases ‘show that a unilateral decision by a claimant not to pursue its claim for a substantial period of time, while maintaining an intention to pursue it at a later juncture, may well constitute an abuse of process’.

He explained that whether it does constitute an abuse of process ‘depends on the reason why the claimant decided to put the proceedings on hold, and on the strength of that reason, objective considered, having regard to the length of the period in question’ [61].

He emphasised that where there were good reasons for putting a claim on hold, but the claimant had failed to apply for a stay, the claimant’s conduct may not be abusive.

The departure from the implication and tone of Grovit was so marked that Arnold LJ felt able to dismiss the relevance of that decision of the House of Lords as being ‘a case in which the claimant had no intention ever to bring the claim to trial’, and thus not a ‘warehousing’ case at all. If it had been merely a case of informal discontinuance, a decision to strike out such a dead claim would hardly have been draconian or even worthy of note.

As to process, Arnold LJ helpfully clarified that there are only two stages to the analysis, namely a determination of whether there was an abuse of process and then an exercise of the Court’s discretion as to whether it should strike out the claim. That approach was found to be consistent with the structure of CPR 3.4(2)(b).

Difficulties with the Alibrahim approach

The importance of ‘warehousing’ as a label has been diminished. It may be little more than a shorthand for the action or inaction of a claimant in unilaterally putting its claim on hold.

The Court is left with a two-stage process: first, an evaluative assessment of whether that pausing is an abuse; and secondly, the exercise of a discretion to strike out for that abuse.  Both exercises appear to be informed by a broad assessment of the significance of the delay, the strength of the claimant’s reasons for it, and any other relevant circumstances.

As a result, the Court is required to indulge in precisely the investigation of prejudice and reason that Lord Woolf had been so anxious to avoid in drawing his bright lines.

Moreover, an appellate court may interfere with the Court’s evaluation and its exercise of discretion where the Court is found not to take into consideration only and all the relevant circumstances. Given the broad enquiry at each stage, it will be relatively easy for parties and an appellate court, as in Alibrahim, to identify factors which the first instance judge ought or ought not to have taken into account in their evaluation and exercise.

Once an appellate court has identified such circumstances in justifying its interference, it is then able to take its own view, essentially as to the proportionality of striking out the claim as a sanction for the claimant’s conduct seen objectively in its conduct. The risk of significant satellite litigation and appeals of procedural decisions is self-evident.

Rupert Reed QC and Simon Atkinson, instructed by Simmons & Simmons LLP, acted for the Appellant

David Mumford QC and James Kinman, instructed by Bryan Cave Leighton Paisner LLP, acted for the Respondent