Harbour Castle Ltd v David Wilson Homes Ltd

Hearing dates: 7 March 2019

Approved Judgment

This is an appeal against the order of William Trower QC, sitting as a Deputy High Court Judge, to strike out proceedings as an abuse of the process of the court.

Harbour Castle Limited (HCL) commenced proceedings in June 2009 (the first action) in which, after extensive amendments, it claimed damages of £27.5 million for the alleged breach of a covenant by the defendant (DWHL) to use all reasonable endeavours to obtain planning permission as soon as reasonably practical for two adjoining parcels of land (the property) owned by HCL. The covenant was contained in an option agreement dated 26 October 2004 whereby HCL granted to DWHL an option to purchase the property for £27.5 million. HCL's case was that if DWHL had used all reasonable endeavours, the requisite planning permission would have been obtained and either it would have exercised the option or, if it did not, HCL would have sold the property to a third party at that price. On either basis, it claimed £27.5 million as damages for breach of contract. In addition, HCL included two further claims, for approximately £1.69 million as a debt payable under an alleged oral agreement and for £16,800, as costs incurred by HCL in assisting DWHL in its efforts to obtain planning permission.

On 20 December 2012, the first action was struck out under the terms of an unless order for failure to provide security for the costs of DWHL in the sum of £201,000. On 21 September 2012, Burnett J had ordered security in a total amount of £1.3 million to be provided in four instalments, with the first due within 28 days. The first instalment of £201,000 was not provided and, on 15 November 2012, Master Marsh ordered that unless the first instalment was provided by 20 December 2012 the claim be struck out and DWHL's costs of the action be paid by HCL.

On 12 December 2016, just within the limitation period (or, at any rate, HCL's understanding of the relevant period), HCL issued its claim form in the present proceedings (the second action). The cause of action is the same as in the first action, as are the sums claimed by way of damages and debt, save that HCL has added a claim for consequential losses amounting to £186.4 million. HCL accepts that the addition of this claim does not alter the essential characteristic of the second action as a repetition of the first: see the judgment at [154]. The claim form was served on 12 April 2017, on the last day of the period of four months permitted for service under the Rules.

DWHL relied on eleven factors in support of its application to strike out the second action as an abuse of process but the principal ground was that it sought to revive a claim that had already been advanced in the first action which had been struck out pursuant to the unless order made by Master Marsh.

The burden of showing that the second action is an abuse lies on the party asserting it, in this case DWHL, and it must be clearly shown to be an abuse. Whether an action is an abuse is not a question of discretion, but an evaluative assessment to which there can be only one answer. These propositions are established by several decisions of this court, including Stuart v Goldberg Linde [2008] EWCA Civ 2, [2008] 1 WLR 823 and Atkas v Adepta [2010] EWCA Civ 1170, [2011] QB 894. If it is an abuse, the court has a discretion whether to strike it out, but, as Rix LJ said in Atkas v Adepta at [53], once satisfied that the second action is an abuse of process it is likely that the court will strike it out, but it does not necessarily follow. The Judge had these principles well in mind, as appears from his judgment.

Because the assessment is fact-sensitive and involves taking account of and giving appropriate weight to all relevant factors, an appeal court will not interfere with the judge's assessment unless the judge has taken account of irrelevant factors, ignored relevant factors, applied a wrong principle, come to a decision that was not properly open to the judge or was, in the view of the appeal court, plainly wrong: see Stuart v Goldberg Linde per Sir Anthony Clarke MR at [81]–[82] and Sedley LJ at [76].

The inherent power to strike out proceedings as an abuse of process is one “which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people”: Hunter v Chief Constable of West Midlands Police [1982] AC 529 at 536 per Lord Diplock. Lord Diplock went on to observe that “the circumstances in which abuse of process can arise are very varied”.

Where, as in the present case, the question is whether to strike out a second set of proceedings raising the same issues as in the first, the authorities establish that a proper basis for finding the second action to be an abuse will be shown if (but this is not intended to be an exhaustive list) the first action was struck out for a deliberate failure to comply with a peremptory order or for inordinate and inexcusable delay in its prosecution or for a wholesale disregard of the rules: see Janov v Morris [1981] 1 WLR 1389, Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426, Securum Finance Ltd v Ashton [2001] Ch 291, and Aktas v Adepta.

In the present case, the first action was struck out for failure to comply with a peremptory order for the provision of security for costs. Such an order will not normally be made if security cannot be provided and the order would stifle a legitimate claim. On that basis, one would expect HCL's second action to be regarded as an abuse of the process. HCL accepts that this would be so, were it not for the decision of the Supreme Court in Goldtrail Travel Ltd v Onur Air Tasimacilik AS [2017] UKSC 57, [2017] 1 WLR 3014 ( Goldtrail). This decision made a significant change to the legal test for determining whether a claim would be stifled by an order for security. Goldtrail concerned an order for an appellant to pay a judgment sum into court as a condition for an appeal, but it is common ground that in this respect it applies equally to the provision of security for costs. It was decided after the first action had been struck out under the terms of Master Marsh's unless order.

Decisions of this court before Goldtrail established that where a corporate claimant or appellant could not itself provide security or make a payment into court, but its owners or controllers who stood to benefit from success in the action or appeal could reasonably be expected to do so, a claim or appeal was not to be taken as stifled by an order for security or payment into court. These decisions were overruled in Goldtrail and replaced...