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01 April 2019

From warehouse to courthouse: when delay may amount to abuse of process

In Asturion Foundation v Alibrahim the court saved a claimant that allegedly warehoused its claim for over nine months from having its claim struck out. This post considers that decision as well as when delay may amount to an abuse of process; why there wasn’t a delay amounting to abuse in Asturion; and what a party should do if it wants to “pause” proceedings and avoid the risk of strike out on the grounds of abuse.

Background

Statements of case were served in 2015. In parallel, at the end of 2015, the defendant initiated proceedings in Liechtenstein as a “collateral attack” (in the words of the court) on the claimant. In the English proceedings, the parties agreed directions but, for reasons unknown, the court did not make those directions or list any case management conference.

There was no progression in the claim until August 2017, when the defendant’s solicitors wrote saying that, in the circumstances, the claim had been abandoned and invited the claimant to discontinue. The claimant’s solicitors denied that the claim had been abandoned and instead explained the lack of activity by stating that as “the parties have been involved in separate court proceedings in Liechtenstein”, they had considered that “unless [the defendant] requested, there was no immediate need to push ahead with directions to trial”.

The defendant’s solicitors believed that the claimant’s solicitors’ letter contained an admission of “warehousing” and applied to strike out the claim. The court at first instance granted the application and the claimant appealed.

When is delay an abuse?

The court may strike out a claim for want of prosecution, where inordinate and inexcusable delay causes a real risk of prejudice to the defendant or to a fair trial. However, even if delay has not caused prejudice to the defendant, the delay may still amount to an abuse of process justifying strike out.

When considering whether delay amounts to an abuse, the court will examine all the circumstances in which the delay occurred, including:

  • The length of the delay.
  • The degree of the claimant’s responsibility for that delay.
  • The reasons given for it.

Launching or continuing proceedings that the claimant never intends to continue to trial can be abuse. In this case, the judge noted that delay may amount to abuse, even where the claimant only intends temporarily to cease pursuing the proceedings.

Warehousing

Much of the submissions in the case focused on whether or not the conduct of the claimant constituted “warehousing”. The court noted that there was no defined test for “warehousing” in the authorities. It concluded that while “warehousing” may be descriptive of some circumstances that show abuse (for example, where for an extended period the claimant has the intention of pursuing the claim but keeps it going in case it decides to do so in the future), categorising something as warehousing is not determinative of whether it is an abuse of process.

Why wasn’t this an abuse?

The court held that the claimant’s decision to suspend the progress of its claim against the respondent should not have led to the striking out of the claim. The master at first instance had been wrong to characterise the claimant’s conduct as involving warehousing rather than mere delay.

Integral to this decision was the fact that the court considered that the claimant had a legitimate reason to pause. That reason was that the outcome of the concurrent proceedings in Liechtenstein could have a significant impact on the English proceedings since, through them, the defendant sought to undermine entirely the legitimacy of pursuing the English claim.

The defendants had relied on the court’s ruling in Société Générale v Goldas Kuyumculuk Sanayi and others. However, there, the claimant had sought to recover the same loss through alternative proceedings in Turkey with the English proceedings as a fallback, and had maintained a worldwide freezing order improperly obtained for the benefit of the Turkish proceedings and not those in England. The facts were quite different to the present case.

What to do when you want to pause…

While the claimant in these proceedings avoided strike out, the case still serves as a warning to claimants to be careful when making the decision not to actively pursue a case. To avoid abuse arguments, if you have a legitimate reason for delaying the pursuit of proceedings, you should seek the express agreement of the defendant(s) or the approval of the court. The court observed that this would be the “proper course”.

While the case was distinguished, it is worth bearing in mind these comments from the court in Société Générale:

“Even before the introduction of the CPR and the overriding objective, a party was not allowed simply to put proceedings on hold and to await the outcome of developments or litigation abroad without the sanction of the Court. In Batterbsy v Anglo-American Oil Co Ltd Lord Goddard giving the judgment of the Court of Appeal said ‘It is for the court and not for one of the litigants to decide whether there should be a stay’.”

It follows that, even where agreement can be reached between the parties, it would be sensible to embody this in a consent order and submit this to the court.


This blog was first published on the Practical Law Dispute Resolution blog.

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