Hateley v Morris & Ors

Under the Civil Procedure Rules, striking out for delay or abuse is governed by a flexible, proportionate assessment of all the circumstances. Relevant considerations include the length and explanation of the delay, responsibility for it, compliance with orders, prejudice, the prospect of a fair trial, the effect on other litigation, and the parties’ conduct.

Defendants should co-operate in progressing proceedings and should not passively allow delay to develop before relying on it as prejudice. A claimant’s acquisition of an additional shareholding does not necessarily make an unfair-prejudice petition abusive where other independent relief remains available.

Brian Peter Hateley appealed from the decision of Mr Registrar Jaques, who struck out his petition under section 459 of the Companies Act 1985 as an abuse of process. The petition concerned alleged unfair prejudice in the management of a quasi-partnership company, including exclusion from management, diversion of business, misuse of company resources and non-payment of dividends. It also sought a share buy-out.

The Registrar relied principally on delay, the failure to re-fix a case management conference, the passage of time and Mr Hateley’s acquisition of another shareholder’s shares. The central issues were whether the Registrar had erred in exercising his discretion and, if so, whether strike-out was proportionate in all the circumstances.

1. The appeal succeeded to the extent necessary to reconsider the strike-out application. The Registrar had treated the buy-out claim as the principal claim and had therefore regarded the acquisition of Mr Thaker’s shares as undermining the petition. That was erroneous. The petition contained substantial claims capable of standing independently of the buy-out claim.

2. The Registrar had also placed undue weight on an alleged undertaking by Mr Hateley’s solicitors to re-fix the case management conference. The evidence did not establish such an express assumption of responsibility.

3. The jurisdiction arose under CPR 3.1(2)(m), CPR 3.4(2)(b) and the preserved inherent jurisdiction in CPR 3.4(5). Earlier jurisprudence under the former procedural rules no longer governed the question rigidly. The court must make a broad judgment directed to justice and the overriding objective, with proportionate relief.

4. The relevant considerations included the length of delay, explanations, responsibility, compliance with rules or orders, prejudice, the effect on a fair trial, effects on other litigants, contribution by the defendants, the parties’ conduct and other special factors. The defendants’ own failure to progress the case was relevant. Following Asiansky Television Plc v Bayer-Rosin, defendants should not simply let proceedings lie and later rely on the resulting delay.

5. Although Mr Hateley had caused delay and had failed to disclose the share purchase promptly, the delay was not shown to create an impossibility of fair trial. The counterclaim would also require litigation of some of the factual background. The independent relief sought meant that the share purchase did not render the petition illogical or abusive.

6. Strike-out would therefore be disproportionate. The petition was not struck out. Directions were to be made for the prompt restoration of the case management conference.

• High Court (Chancery Division): appeal from Mr Registrar Jaques’s decision of 23 July 2003. The court reconsidered the strike-out issue and declined to strike out the petition.