Bennett v Bank of Scotland

An action on an existing judgment is not inherently an abuse of process. A judgment creditor may bring such proceedings within the six-year period allowed by the Limitation Act 1980, including to preserve the possibility of later bankruptcy proceedings.

The court must examine the circumstances when the action was begun and ask whether it served a legitimate purpose. Potential objections concerning limitation, interest, enforcement restrictions, costs or the eventual insolvency application should ordinarily be dealt with in the action or later proceedings. They do not, without more, justify striking out the action as abusive.

The Bank obtained a default judgment against Mr Bennett in 1995 under a personal guarantee securing a company loan. It did not enforce that judgment while pursuing possession proceedings against Mrs Bennett’s interest in the matrimonial home.

Shortly before the six-year limitation period expired, the Bank issued a second action based on the 1995 judgment. It later obtained a default judgment in that action and served a statutory demand. The second judgment was set aside because it included interest barred by section 24(2) of the Limitation Act 1980, but the judge refused to strike out the proceedings as an abuse of process.

Mr Bennett appealed, contending that the second action merely circumvented the limitation consequences of the first judgment. The central issue was whether the Bank’s commencement and continuation of the second action was abusive.

1. Appeal dismissed. The refusal by Patten J to strike out the second action as an abuse of process was upheld.
2. An existing domestic judgment creates a new debt. A judgment creditor may sue on that judgment independently of the original cause of action. Under section 24(1) of the Limitation Act 1980, the action may be commenced within six years from the date on which the judgment became enforceable.
3. A second action on an existing judgment is not abusive per se. The court must examine the particular circumstances and whether the action serves a legitimate and justifiable purpose. The principles stated in ED & F Man (Sugar) v Haryanto (Court of Appeal Transcript 17 July 1996) required judicial scrutiny, with the defendant bearing the burden of establishing abuse.
4. The Bank had a legitimate purpose in issuing the second action: preserving its position in case the possession proceedings failed and bankruptcy proceedings became available. At the time, it could not sensibly pursue bankruptcy proceedings while asserting that it held security, and the six-year period could not be extended merely because the security position remained uncertain.
5. The later decision in Ridgeway Motors (Isleworth) Ltd v Altis (LTL 21 May 2004), suggesting that Re A Debtor ([1977] Ch 310) was wrongly decided in light of Lowsley v Forbes ([1999] AC 329), did not make the second action pointless or abusive. The legal position remained unsettled.
6. Objections concerning interest barred by section 24(2), execution restrictions, compound interest, successive costs orders, standing or limitation affecting a future application under section 423 of the Insolvency Act 1986 were matters for the defence or later proceedings. They did not justify striking out the action altogether.
7. Lord Justice Mummery gave the judgment. Lord Justice Scott Baker and Mr Justice Lawrence Collins agreed. The appellant was ordered to pay the respondent’s appeal costs on the standard basis, subject to detailed assessment if not agreed.

• Court of Appeal (Civil Division): [2004] EWCA Civ 988. Appeal from Patten J’s order dated 11 November 2003 dismissed.
• High Court, Chancery Division: Patten J refused Mr Bennett’s application under CPR Part 3.4 or Part 24 to strike out the second action as an abuse of process. The judgment obtained in that action was separately set aside under CPR 13.3.