Adjoin Limited v FortyTwo House S.A.R.L

When exercising a general case-management power to stay proceedings, the court should not apply the American Cyanamid test. Once a proper basis for a stay is established, prejudice to each side is relevant. However, a stay or refusal of an amendment based on litigation misconduct requires a sufficiently serious threat to the fairness of the trial. The relevant question is whether the conduct has rendered further proceedings unsatisfactory or made it impossible for the court to do justice. Relevant evidence remains generally admissible in civil proceedings despite the manner in which it was obtained, subject to exceptional cases such as torture. Where alleged misuse of confidential information would not realistically justify refusing an amendment, a stay has no practical utility and should be refused.

The defendant sought to amend its defence in a rights-of-light dispute concerning a proposed development. The proposed amendment alleged that entities connected with the claimant or its beneficial owners had previously released rights of light for financial compensation, which was said to bear on whether damages would be an adequate remedy.

The claimant applied to stay the proceedings while investigating whether the defendant’s former solicitors had misused confidential information obtained while acting for related entities. The central issue was whether any further evidence of such misuse could realistically lead the court to refuse the proposed amendment or otherwise affect the proceedings.

1. The application was dismissed. The court held that the American Cyanamid test was inappropriate for the exercise of a general case-management power to grant a stay. The adequacy of damages was irrelevant. Prejudice to both parties could be considered once a proper basis for a stay had been established.
2. The court preferred the Court of Appeal’s approach in Ras Al Khaimah Investment Authority v Azima [2021] EWCA Civ 349: relevant evidence is generally admissible in civil proceedings regardless of how it was obtained, subject to exceptional cases such as evidence procured by torture. The approach in Mustard v Flower [2019] EWHC 2623 (QB) could be reconciled with that principle by reference to the court’s power to prevent an unfair trial.
3. Drawing on Arrow Nominees Inc v Blackledge [2000] 2 BCLC 167, and the summary in Masood v Zahoor [2010] 1 WLR 746, the court held that a claim, or part of a claim, may be struck out or an amendment refused where the litigant’s conduct has rendered further proceedings unsatisfactory, created a substantial risk of injustice, or made a fair trial impossible.
4. On the evidence, there was no realistic prospect that a stay would reveal circumstances sufficiently serious to justify refusing the amendment. The former solicitors denied disclosing confidential information and had ceased to act. The claimant had not suggested that low-level inadvertent leakage would prevent a fair trial or the court from doing justice.
5. The court added that a wrong committed against a third party might, in an appropriate case, justify preventing the wrongdoer from continuing proceedings. That issue did not determine the application. A stay might also have been appropriate earlier if there had been a real possibility of an injunction restraining the solicitors from acting, but that consideration had fallen away.