Securum Finance Ltd v Ashton

After the introduction of the Civil Procedure Rules, a claimant whose earlier action was struck out for inordinate and inexcusable delay cannot assume that a fresh action issued within the limitation period will be allowed to continue. The court must exercise its discretion under the overriding objective, including the proper allocation of limited court resources and whether a further action would give the claimant an unjustified second opportunity.

A secured creditor is not ordinarily required to pursue every remedy under a mortgage when first suing on a personal guarantee. Where enforcement of the security and a counterclaim for discharge of the charge require the underlying debt to be decided in any event, striking out a related payment claim may achieve no material saving of court resources.

The respondent, as assignee of a bank’s rights, sought payment under a covenant in a legal charge over the appellants’ home and sought possession, sale and related mortgage remedies. An earlier action to enforce the appellants’ guarantee had been struck out for delay. The appellants applied to strike out the new proceedings as an abuse of process and counterclaimed for discharge of the charge on the basis that no secured debt existed.

A deputy judge in the Chancery Division rejected the abuse application and the counterclaim, while granting permission to appeal on those issues. The appeal concerned whether the creditor could pursue the fresh payment and security claims after the earlier action had been struck out.

1. Appeal dismissed. Lord Justice Chadwick, with whom Mr Justice Ratte agreed, held that the deputy judge had adopted the wrong general approach to a fresh action following the earlier strike-out. Nevertheless, the Court exercised the discretion afresh and declined to strike out any part of the claim.

2. The former approach in Birkett v James [1978] AC 297 could not be treated, after the Civil Procedure Rules 1998, as giving a claimant an effective entitlement to bring a second action within the limitation period. Under CPR r 3.4 and the overriding objective, the court must decide whether allowing the fresh action is justified, taking account of the claimant’s earlier use of court resources, the explanation for the earlier misconduct, and the demands of other litigants.

3. The claim for payment under the charge was, in substance, substantially the same payment dispute as in the first action and could in principle have been struck out as an abuse. A secured creditor was, however, not obliged by Henderson v Henderson (1843) 3 Hare 100 to advance all mortgage remedies in the first guarantee action. The possession, sale, receivership and foreclosure claims were distinct and there was no proper basis for striking them out.

4. Whether a debt was secured by the charge had to be determined for the mortgage remedies and for the appellants’ counterclaim seeking discharge of the charge. Striking out the payment claim would therefore make little or no difference to the resources needed for the dispute. It would also be wrong to impose a further retrospective punishment for conduct which the earlier Court of Appeal had criticised but had not then treated as an abuse. Article 6(1) did not require a strike-out, since the appellants remained able to pursue their claim for discharge of the charge.

The appeal was dismissed with costs, subject to detailed assessment.

• Court of Appeal: dismissed the appellants’ appeal. Although the deputy judge’s general approach to a second action after a strike-out was held to be wrong in light of the Civil Procedure Rules 1998, the Court exercised the discretion afresh and refused to strike out the claim.
• High Court, Chancery Division: on 10 June 1999, Mr Ian Hunter QC, sitting as a deputy judge, rejected the application to strike out the proceedings as an abuse of process and rejected the counterclaim for discharge of the legal charge. He granted permission to appeal on those issues.