Watford Control Instruments Ltd v Colin Brown

Where a claimant deliberately puts proceedings on hold for a substantial period without an objectively good reason, the conduct may constitute Grovit abuse even if the claim was initially issued with an intention to proceed. Once such abuse is established, the claim should ordinarily be struck out unless compelling reasons justify a different sanction. The court must first determine whether abuse exists and then determine the appropriate sanction. The proportionality principle under the Civil Procedure Rules 1998 does not displace that approach. A defendant’s lack of severe prejudice, or the continued possibility of a fair trial, will not ordinarily amount to a compelling reason against strike-out.

Watford Control Instruments Ltd and Colin Brown appealed against orders made by Master Pester following judgments dated 12 January and 23 June 2023. The underlying claim alleged that Mr Brown, while a director of YZMA 0043453 Ltd, had dishonestly misappropriated company funds.

The Master found that the claimant had committed Grovit abuse by failing to pursue the claim between September 2019 and March 2022, but imposed lesser sanctions. He later refused applications to join YZMA’s administrators and amend the particulars of claim, principally because of limitation concerns, and the claim was struck out. Mr Brown appealed against the sanction; the claimant appealed on standing, assignment, joinder, amendment and limitation issues.

1. Mr Brown’s appeal allowed. The claimant’s failure to pursue its claim for more than two years, while maintaining it for possible future use and without an objectively good reason, constituted Grovit abuse. An intention formed after proceedings began to put them on hold may constitute the same abuse as an intention existing when proceedings are issued.

2. The court must undertake a two-stage analysis under CPR 3.4(2)(b): first, determine whether the conduct is an abuse of process; secondly, determine the sanction. Following Board of Governors of the National Heart and Chest Hospital v Chettle, once Grovit abuse is established the claim should be struck out unless compelling reasons to the contrary are shown. The court should not begin from the assumption that strike-out is an exceptional or draconian remedy requiring a lesser sanction to be preferred.

3. The introduction of the Civil Procedure Rules 1998 did not dilute the principles in Grovit or Chest Hospital. Proportionality remains relevant, but strike-out is treated as proportionate in Grovit abuse cases absent compelling reasons. The possibility of a fair trial, the absence of severe prejudice, the defendant’s failure to seek an unless order, and the claimant’s inability to pursue the claim if struck out did not provide such reasons. The delay materially impaired the defence and prolonged the defendant’s mental-health difficulties.

4. The court re-exercised the discretion and ordered strike-out. The claimant’s appeal did not need to be determined because the Grovit abuse was independently decisive.

5. As additional, non-dispositive conclusions, the court held that the SPA transferred the Colin Brown Claim to the claimant. The Deed of Variation altered the regime governing that claim but did not undo the existing transfer. Notice given under s136 of the Law of Property Act 1925 perfected the assignment before proceedings were issued. Ground 3 of the claimant’s appeal would therefore have succeeded, while Grounds 1 and 2 would have failed.

• High Court (Business List): appeals from orders made by Master Pester following judgments dated 12 January and 23 June 2023. Mr Brown’s appeal was allowed and the claim was struck out. The claimant’s appeal was not determined because the result was already disposed of by the Grovit abuse finding.