Odutola v Hart & Ors

The court had earlier struck out the petitioners unfair prejudice petition under the Companies Act 2006 section 994 as disclosing no reasonable grounds and certified it as totally without merit pursuant to CPR rule 3.4(2)(a) and CPR rule 3.4(6)(a). The issue before the court in this judgment was whether to impose an extended or a general civil restraint order under Practice Direction 3C, having regard to the requirements of CPR rule 3.1 and the need for proportionality in regulating access to the courts.

The judge concluded the petition was a scattergun pleading: it contained many allegations irrelevant to the conduct of the company's affairs, many claims that could only be pursued by the company itself or against parties not before the court, and multiple allegations unsupported by evidence and inherently implausible. Although the petition (and earlier applications) had been found to be totally without merit, the judge was not satisfied on the evidence that the petitioner had persistently issued totally without merit claims to the degree required by Practice Direction 3C; accordingly an extended or general CRO would not be a proportionate response and was refused.

Background and nature of the proceedings:

• The petitioner, a former director and company secretary and a current shareholder of Cremorne Mansions Residents Association Limited, brought an unfair prejudice petition dated 9 April 2018 under Companies Act 2006 section 994.
• The respondents were other residents and directors of the company. The respondents applied to strike out the petition and sought an extended or general civil restraint order (CRO) against the petitioner.

Procedural posture and relief sought: The petition was struck out on its face under CPR rule 3.4(2)(a) and certified as totally without merit under CPR rule 3.4(6)(a). The respondents sought an extended or general CRO under Practice Direction 3C; the court also considered whether to permit amendment to the Part 23 application to seek such an order in light of prior notice given to the petitioner.

Issues framed:

1. Whether the petition was bound to fail and therefore "totally without merit" for the purposes of CPR rule 3.4(6).
2. Whether the petitioner had "persistently" issued claims or applications which were totally without merit such that an extended CRO (PD 3C para 3.1) or a general CRO (PD 3C para 4.1) was justified.
3. Whether, if persistence were established, a CRO would be a proportionate regulation of the petitioners access to the courts.

Courts reasoning and findings:

• The court found many pleaded facts to be legally irrelevant to an unfair prejudice claim under section 994, including alleged wrongs that could only be pursued by the company or claims against third parties not before the court.
• Many allegations were unsupported by evidence and in places inherently implausible (for example, assertions that meetings had not occurred, or wide-ranging allegations of cyber-crime and illegal surveillance without evidential basis).
• The judge accepted authorities on the law of CROs and the minimum threshold for persistence (including the rule of thumb of three unmeritorious claims), and noted earlier rulings in these proceedings (including an earlier strike-out judgment and an injunction application dismissed by Morgan J). However, on balance the judge concluded that the requisite quality of persistence had not been satisfactorily demonstrated for the purposes of ordering an extended or general CRO.
• Because the evidential showing of repeated, persistent totally without merit applications fell short, and because a CRO is a significant restriction on access to the courts requiring a proportionate response, the judge declined to make an extended or general CRO but warned that future repetition would be unlikely to be treated so leniently.

This was a first instance decision declining to impose an extended or general civil restraint order against the petitioner. The court accepted that the unfair prejudice petition was totally without merit and that many allegations were legally irrelevant, unsupported or implausible, but concluded that the petitioner had not been shown to have "persistently" issued totally without merit claims to the standard required by Practice Direction 3C, and that an extended or general CRO would not be a proportionate response on the evidence.