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

An application to dismiss proceedings for delay should normally be determined by reference to the pleaded cause of action. The availability of a different, unpleaded cause of action with a longer limitation period does not itself prevent dismissal. Courts should avoid investigating arguable defences to hypothetical fresh proceedings.

Abuse of process provides an independent ground for striking out. It requires neither proof of prejudice nor expiry of the limitation period. Mere delay is insufficient, but wholesale disregard of procedural rules can constitute abuse, particularly after proceedings have been struck out and restored.

Prospectively, delay must also be assessed against its effects on other litigants and the administration of justice. Unauthorised warehousing of proceedings can constitute abuse. A second action following dismissal for abuse requires a special reason to justify its continuation.

Arbuthnot Latham Bank Ltd brought proceedings against Trafalgar Holdings Ltd and Mr and Mrs Ashton. The Ashtons had guaranteed Trafalgar's liabilities and subsequently granted a mortgage over their home containing a covenant to discharge their liabilities to the bank. They disputed liability under the guarantee, and Mrs Ashton alleged undue influence. After more than four years of inactivity, they applied to strike out the claim for delay.

Sir Ronald Waterhouse found inordinate and inexcusable delay but refused dismissal because the bank's successors could bring a fresh claim under the mortgage covenant. The six-year limitation period applicable to the pleaded guarantee claim had expired, whereas the twelve-year period applicable to the mortgage claim remained open. A Master subsequently permitted amendment to introduce the mortgage claim.

In the related proceedings, Chishty Coveney & Co, a firm of accountants, sought fees from its client, Mr Raja, through three actions. Mr Raja disputed the charges and alleged fraud and breaches of duty. The actions were struck out, restored on appeal and later dismissed again after prolonged delay. A deputy High Court judge upheld dismissal and struck out the counterclaim. The accountants renewed their application for leave to appeal; a separate costs appeal remained outstanding.

The common issue was whether an available alternative cause of action with a longer limitation period should prevent dismissal of delayed proceedings.

The Ashtons' appeal was allowed, and the accountants' renewed application for leave to appeal was refused. Lord Woolf MR delivered the joint judgment of the court, comprising himself, Waller LJ and Robert Walker LJ.

1. The ordinary principles in Birkett v James, (1978) AC 297, remained applicable. Dismissal for want of prosecution required intentional and contumelious default, or inordinate and inexcusable delay producing a substantial risk of an unfair trial or serious prejudice. Before limitation expired, dismissal for ordinary delay was normally inappropriate where fresh proceedings on the same cause of action could be brought.

2. That protection did not ordinarily extend to a different cause of action which had not been pleaded. The defendant was entitled to have the strike-out application determined by reference to the claim before the court, although exceptional circumstances might justify another approach. The guarantee claim would be time-barred if brought afresh. Possible recovery through mortgage remedies involved a different enforcement course and did not justify preserving it.

3. The court should avoid examining the merits of defences to hypothetical proceedings unless those defences were obviously unfounded. The Ashtons' proposed defences to a mortgage claim could not be dismissed out of hand. The reasoning in Barclays Bank v Miller, (1990) 1WLR 348, supported leaving such questions to fresh proceedings. The accepted restriction on interest under section 20(5) of the Limitation Act 1980, together with the costs consequences of dismissal, also showed that the Ashtons could benefit from striking out.

4. The accountants' proceedings constituted abuse through their overall conduct and total disregard of procedural rules. Mere delay was insufficient, but an unfulfilled peremptory order was not essential. Restoration after an earlier strike-out imposed a heavier duty to comply with the rules. Unlike Barclays Bank v Maling, the normal timetable had not been suspended by a general adjournment. The defendant's own defaults did not excuse abuse; his counterclaim was also correctly struck out.

5. The court gave prospective guidance. Delay would increasingly be assessed by its effect on other litigants and the administration of justice. As recognised in Grovit v Doctor & Ors and supported by the approach in Culbert v Stephen Westwell Co Ltd, abuse was an independent ground for striking out or staying proceedings. Wholesale disregard of the rules could justify dismissal where just, without proof of prejudice and irrespective of limitation. A court considering a second action should start from the assumption that a special reason was required to permit it after dismissal for abuse.

6. Unauthorised warehousing of claims should cease. Proceedings which were not to be advanced should be discontinued or made subject to an authorised adjournment. This approach applied to future delay, rather than retrospectively. The bank appeal was allowed with costs, the judge's order was set aside, and the claim and counterclaim were dismissed. Leave to appeal in the accountants' case was refused; the separate costs appeal was not determined.

• Court of Appeal: In this joint judgment, [1997] EWCA Civ 2999, the court allowed the Ashtons' appeal, set aside the refusal to strike out, and dismissed the claim and counterclaim. It refused the accountants' renewed application for leave to appeal. Their separate costs appeal remained undetermined.
• High Court, Queen's Bench Division — Bank Case: On 31 July 1996 Sir Ronald Waterhouse dismissed the Ashtons' strike-out application, permitted joinder of another plaintiff and an application to amend, and refused leave to appeal. On 9 October 1996 Master Trench permitted amendment to add the mortgage covenant claim.
• High Court — Accountant's Case: Judge Roger Cox, sitting as a deputy High Court judge, dismissed the accountants' appeal against the Master's dismissal of their actions. He also struck out the defence and counterclaim and varied the treatment of the costs orders.
• Earlier proceedings — Accountant's Case: The three actions were struck out on 2 December 1992, reinstated on appeal on 22 October 1993 and subsequently consolidated. Master Hodgson later dismissed all three actions. Schiemann LJ granted leave to appeal on the costs point; the renewed application concerning dismissal came before this court.