HURRICANE ENERGY PLC & Ors v RICHARD PAUL CHAFFE & Ors

Proceedings commenced without a company’s authority, including proceedings purportedly brought against its directors, are liable to be struck out. Injunctions restraining future litigation must respect Article 6 rights and should generally operate through established vexatious-litigant and civil-restraint mechanisms. A broader injunction may be justified against proceedings arising from the existing dispute, provided it is subject to a permission procedure. A person who orchestrates unauthorised litigation may be joined for the purpose of costs, particularly where that person has notice and declines to participate. Indemnity costs are appropriate where conduct goes beyond the norm expected in civil or commercial litigation.

The first to ninth claimant companies and the first to fourth defendants applied to strike out proceedings purportedly brought in the companies’ names against their directors. They also sought declarations concerning the companies’ true directors and officers, injunctions against the tenth and eleventh claimants and Rizwan Hussain, and costs against Mr Hussain.

The court found that the proceedings had been initiated without corporate authority and that the purported signatory was unauthorised. It therefore considered the scope of declaratory and injunctive relief, whether Mr Hussain should be joined, and the appropriate basis and assessment of costs.

1. Disposition. The proceedings and the application for default judgment were struck out. Declarations were granted confirming that the proceedings and the purported acts of Mr Hussain and his nominees were unauthorised, void and of no effect. Mr Hussain was joined for the purposes of injunctive relief and costs.
2. The commencement of proceedings in a company’s name requires proper authority. The evidence established that the proceedings had been commenced without authority against the companies’ directors and that the purported signatory had no authority. That was a fundamental defect requiring strike-out.
3. Under Civil Procedure Rules Part 19, a person may be joined where joinder is necessary or desirable to resolve the relevant issues. Mr Hussain’s joinder was appropriate because the evidence showed that he had orchestrated the conduct and that effective injunctive relief could not otherwise be obtained.
4. The proposed injunction prohibiting Mr Hussain and the corporate claimants from commencing proceedings of any nature in any jurisdiction was impermissibly global and unlimited. It risked infringing Article 6. The proper mechanisms for controlling abusive litigation were the Attorney-General’s vexatious-litigant jurisdiction and the carefully formulated civil-restraint provisions. The court therefore refused the injunction in that unqualified form.
5. An injunction against proceedings targeting the claimants’ solicitors and counsel was justified by the evidence of repeated attempts to disrupt legal representation. It had to be limited to proceedings arising from or relating to the present proceedings and include a procedure allowing an application for permission, served on the proposed defendants.
6. Mr Hussain could be joined under Civil Procedure Rules Part 41 for the purpose of a costs order. He had notice of the application and chose not to attend. The costs order was therefore made subject to his right to apply within 14 days to vary or discharge it.
7. Indemnity costs were justified under the Excelsior test because the conduct went beyond the norm expected in civil or commercial litigation. The costs were summarily assessed. On the indemnity basis proportionality did not arise; the court considered whether costs were reasonably incurred and reasonable in amount, resolving doubt in favour of the receiving party. Counsel’s fees were reduced by £10,000.
8. The proceedings were declared entirely without merit. No further civil restraint order was made because the existing general order remained in force and any additional order against the dissolved overseas companies would serve no useful purpose. The evidence was directed to the Attorney-General for consideration of vexatious-litigant proceedings.