Navigating Commercial Disputes | Abuse of Process Explained
The conduct of procedure for business and commercial disputes in the Civil Courts is governed by The Civil Procedure Rules 1998 ('the CPR'), which introduced the 'overriding objective' to ensure, among other things, that:
- all parties are dealt with on an equal footing,
- cases are dealt with proportionately to the value of the dispute, their importance and complexity and the financial standing of each party,
- they are dealt with expeditiously and fairly.
However, contrary to the requirements of the CPR, parties frequently seek to stall or permanently delay, the process without a credible explanation.
In many instances such activity amounts to ‘an abuse of process.’ Whilst there is no fixed definition, the phrase is often used to describe an action, or series of actions, by a party to proceedings, to misuse the Court’s process.
Lord Woolf in Arbuthnot Latham Bank v Trafalgar Holdings Ltd [1998] stated: “If, subject to any directions of the court, proceedings are not intended to be pursued in accordance with the rules they should not be brought.”
Where a Claimant commences litigation with no intention to bring matters to a conclusion or allows the case to become unreasonably inactive, is commonly referred to as 'warehousing.'
The Claimant may use the lawsuit as a strategic tool to gain advantage, delay the process, or simply to keep the matter unresolved to the detriment of the opposing party, who faces ongoing legal uncertainty and potential costs.
Courts often address warehousing through procedural rules and sanctions designed to encourage timely and substantive litigation.
The Judge in Morgan Sindall Construction and Infrastructure Ltd v Capita Property and Infrastructure Ltd [2023], when describing ‘warehousing’, stated: “it is a useful description of a range of conduct where an action is deliberately not being pursued.”
The CPR 3.4 provides for such proceedings to be ‘struck out’ by way of application to the court for a declaration of an abuse of process by a potentially prejudiced party.
Stuart Southall comments generally upon abuse of procedure and applications to strike out.
The Relevant Law | Civil Procedure Rules 1998
At the commencement of proceedings, the Claimant has to serve on the Defendant a Claim Form together with the more detailed Particulars of Claim, setting out the facts of the claim and the relief sought from the court, which are collectively referred to as ‘Statement of Case.’
Rules 3.4 of the CPR provides as follows;
The court may strike out a statement of case if it appears that:
- the statement of case discloses no reasonable grounds,
- the statement of case is an abuse of the court’s process or likely to obstruct the just disposal of the proceedings,
- there has been a failure to comply with a rule, practice direction or court order.
When the court strikes out a statement of case it may make any consequential order it considers appropriate, such as for payment of the successful party’s costs.
Rule 3.5
In certain circumstances where:
- the court makes an order which includes a term that the statement of case of a party shall be struck out if the party does not comply with the order and
- the party against whom the order was made does not comply with it,
the other party may obtain judgment with costs by filing a request for judgment.
Striking Out in Commercial Disputes
Striking out a claim is generally regarded as a last resort for the courts as it is such a draconian measure whereafter the claim ceases.
Each application to strike out will very much depend upon its own facts. Simple lack of progress or delay will probably be insufficient to amount to abuse and a further element will be required.
Circumstances where a claimant has issued or pursued proceedings with no intention of bringing them to a conclusion will almost certainly constitute an abuse of process. For example, it is not uncommon for proceedings to be issued shortly before the expiration of a period imposed by The Limitation Act 1980 to preserve the ability to proceed in the future.
The case of Alfozan v Quastel Midgen LLP demonstrates that commencing proceedings and failing to do any more than the bare minimum to keep those proceedings alive, may amount to an abuse of process enabling the defendant to seek to strike out the claim.
Whether or not it constitutes abuse in circumstances where a claimant initially intended to pursue proceedings, but subsequently decided not to actively pursue them in the short term but retained the intent to possibly do so in the future, will very much depend on the specific circumstances.
In the aforementioned case of Morgan Sindall Construction and Infastructure Ltd v Capita Property and Infastructure Ltd it was stated ‘warehousing of a claim can be an abuse of process justifying the striking out of a claim, even in the absence of prejudice to the defendant.’
In that case it was decided that there had not been an abuse because:
- the Claimant, Morgan Sindall was awaiting clarification on matters that were important to the case, namely, whether it should be joined with another claim and, in any event,
- the Defendant had previously agreed with the approach adopted by the Claimant.
This case also highlighted that a defendant cannot actively engage in a course of action and then, without any change in the prevailing circumstances, subsequently seek to strike those proceedings out.
How Can We Assist?
Strict compliance with ‘the overriding principle’ is essential for the governance of disputes brought before the civil courts. Accordingly, where abuse of process is alleged, including the practice of ‘Warehousing’ Judges still must ensure equality and fairness between the parties.
These requirements present considerable problems given that each case will heavily depend upon its own facts and it will be down to each Judge to decide whether delays/actions are justified or whether there has been an abuse of process.
The Team at KANGS is highly experienced in handling business and commercial disputes of every nature and will be pleased to provide you with immediate and professional assistance and support.
If we can be of assistance, please do not hesitate to contact our Team using the details below:
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through live conferencing or telephone.
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