Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd (Chishty Coveney & Co v Raja)

A delay application is normally determined by reference to the cause of action pleaded. The possibility that the claimant could begin a different, unpleaded claim within a longer limitation period will not ordinarily prevent strike-out. The court should not undertake a detailed inquiry into speculative defences to that future claim unless they are obviously unfounded.

Inordinate and inexcusable delay may justify dismissal under the established principles. In addition, wholesale disregard of procedural rules can amount to an abuse of process. That is a separate ground for strike-out and does not require proof that a fair trial is impossible or that the defendant has suffered prejudice.

The judgment concerned a bank’s appeal and a separate application for leave to appeal by a firm of accountants. Both raised the effect of serious delay on the court’s power to strike out proceedings.

In the bank action, the pleaded claim was on a guarantee and was time-barred if fresh proceedings were required. The bank had also taken a mortgage containing a covenant with a longer, unexpired limitation period under the Limitation Act 1980. The High Court had refused strike-out because a fresh claim on that covenant could be brought.

In the accountants’ action, fee claims had remained unresolved for nearly 11 years. They had previously been struck out, restored, consolidated and then struck out again for delay. The central issue was whether the prospect of further proceedings, or the absence of an unless order, prevented dismissal for delay or abuse of process.

Disposition

1. The Ashtons’ appeal was allowed. The order refusing strike-out was set aside, the bank’s claim was dismissed, and the counterclaim was also dismissed.
2. The application for leave to appeal in the accountants’ case was refused. The proposed costs appeal was not determined.

Delay and the pleaded claim

The court followed the established principles in Birkett v James (1978) AC 297. An action may be dismissed for intentional and contumelious default, or for inordinate and inexcusable delay creating a substantial risk of an unfair trial or serious prejudice. Before expiry of the limitation period, the availability of fresh proceedings for the same cause of action will normally tell against dismissal.

The High Court had erred by treating the possible mortgage-covenant claim as decisive. A defendant is normally entitled to have a strike-out application decided on the pleaded cause of action. Exceptional circumstances may justify a different course, but a court should not explore the merits of defences to a prospective and unpleaded claim unless they are obviously unfounded. The reasoning in Barclays Bank v Miller (1990) 1WLR 348 supported that approach.

Abuse of process

In the accountants’ case, the overall and repeated disregard of procedural rules, following an earlier strike-out and restoration, amounted to an abuse of process. The absence of a peremptory order did not prevent that conclusion. The claimant could not rely on the defendant’s own procedural shortcomings to excuse an abuse. Consistently with Grovitt v Doctor [1997] 1 WLR 640, abuse is a separate basis for striking out or staying proceedings and does not depend on proving prejudice or an impossible fair trial.

Prospective guidance

The court stated that future delay would be assessed also by its effect on other litigants and the administration of justice. The practice of issuing and then warehousing proceedings without consent should cease. This change was prospective and was not applied retrospectively to past delay. Where an action has been struck out for abuse, a later fresh action should begin with the assumption that a special reason is needed to permit it to continue.

• Court of Appeal: Allowed the Ashtons’ appeal, set aside the High Court order, and dismissed the bank’s claim and counterclaim; refused leave to appeal in the accountants’ case: [1998] 1 WLR 1426.
• Queen’s Bench Division: Sir Ronald Waterhouse had dismissed the Ashtons’ strike-out summons, permitted joinder and a proposed amendment, and refused permission to appeal.
• Accountants’ proceedings: The Master struck out the consolidated actions. A Deputy High Court judge dismissed the plaintiff’s appeal and struck out the defence and counterclaim. The Court of Appeal refused the renewed application for leave to appeal, save that a costs appeal had earlier received leave.