TAG Capital Ventures Ltd v Potter

Continuing proceedings amount to an abuse of process where a claimant maintains them without intending to bring them to trial. Delay alone is insufficient. The court must assess the length and cause of the delay, the claimant’s intention, and whether strike-out would be proportionate.

A claimant who obtains a freezing order must prosecute the action promptly. In assessing delay, the court should consider delay attributable to the claimant and allow reasonable time for an insolvency office-holder to assess the proceedings and, where appropriate, arrange a change of liquidator.

The claimant company, in liquidation, brought proceedings against its former controlling director for breach of statutory and fiduciary duties and related equitable relief. A freezing order had been granted at the commencement of the action.

Following the company’s restoration to the register and winding-up, the Official Receiver initially indicated that he was not in a position to continue the action. A private liquidator was subsequently appointed and wished to pursue it. The defendant applied to strike out the proceedings as an abuse of process and to discharge the freezing order.

1. Strike-out. The application was dismissed. The principle in Grovit v Doctor [1997] 1 WLR 640 applies under the Civil Procedure Rules. Maintaining proceedings without an intention to bring them to trial may amount to abuse of process.
2. There had been some delay, but the period before the Official Receiver’s appointment was not attributable to the claimant. The period thereafter was short. The Official Receiver required reasonable time to consider the litigation, and steps were promptly taken to appoint a private liquidator.
3. The Official Receiver’s statement that he was not in a position to continue did not necessarily establish an intention by the company, under any future liquidator, not to proceed. The defendant knew that the petitioning creditors were interested in continuation and that a private liquidator was possible. In those circumstances, the proceedings had not become abusive.
4. Even if abuse had been established, it was at the lowest end of the scale. Strike-out would have been disproportionate. The court applied the guidance in Habib Bank Ltd v Jaffer The Times, 5 April 2000 that abuse does not invariably require strike-out.
5. Freezing order. The application to discharge was also dismissed. A party obtaining a freezing order must get on with the action and prosecute it without unnecessary delay, as stated in Lloyds Bowmaker Ltd v Brittania Arrow plc [1988] 1 WLR 1337 at 1349H–1350A.
6. Only delay caused by the company was relevant. Reasonable time had to be allowed for the insolvency process, the Official Receiver’s assessment, and the appointment of a private liquidator. The delay attributable to the company was at most two months and did not justify loss of the injunction.