England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(Mr Justice Davis)

		Royal Courts of Justice Strand, London, WC2A 2LL
		10 December 2003

LORD JUSTICE THOMAS :

1. In July 1993 the respondent deposited three items of luggage at Luton Airport containing over £390,000. In due course the appellant's police force took possession of the luggage and the cash and arrested the respondent. He remained silent when interviewed. No charges were pursued against him, but the appellant (the Chief Constable) declined to return the significant amount of money seized. In May 1994 the respondent commenced proceedings against the Chief Constable. Pleadings were exchanged and the last step in the proceedings took place three months later, September 1994, when the Chief Constable sought key information from the respondent.
2. Nothing then happened for the next eight years. In September 2002 the Chief Constable applied to the Court for the purpose of being able to dispose of the funds under regulation 6(4) of the Police (Property) Regulations 1997; he sought to have the action struck out and for that purpose sought to have the automatic stay imposed in April 2000 under CPR 51 PD.19 (1) lifted. The respondent also asked for the lifting of the automatic stay and that summary judgment be entered in his favour. The Deputy District Judge before whom the application came granted the Chief Constable's applications. She granted leave to appeal and Davis J reversed her decision. He lifted the stay and permitted the action to continue. The Chief Constable appeals to this Court. It is the respondent's intention if the appeal fails to apply for summary judgment under CPR 24.

Background

3. It is necessary to explain the facts in a little more detail.

i) On 30 July 1993 the respondent, who is a resident of the Republic of Ireland, deposited three items of luggage with Group 4 at Luton; he alleged they contained mortgage documents belonging to his parents. Subsequently Group 4 discovered that the luggage contained over £390,000 in cash. They contacted the Bedfordshire Police. The respondent was arrested on the 4 September 1993 on suspicion of money laundering contrary to the Drug Trafficking Offences Act 1986. The luggage was seized. When he was interviewed by the Police, he made, as was his right, a "no comment" answer to each of the questions asked.

ii) He was subsequently informed that no prosecution would be pursued against him.

iii) He sought the return of the luggage and cash, but the Chief Constable refused.

iv) On 11 May 1994 the respondent commenced proceedings against the Chief Constable in the Luton District Registry seeking delivery of the three cases and their contents as well as damages. He also sought exemplary damages arising out of conduct of the Police and special damages including a claim for the loss of opportunity to enter into a contract, loss of business and loss of reputation. The claims for exemplary and special damages were abandoned during the course of the hearing of the appeal before the Deputy District Judge. On 28 June 1994, the Chief Constable served his defence which set out the circumstances of arrest; it did not admit that the respondent had any right to the suitcases or the property.

v) On the 4 August 1994 further and better particulars of the statement of claim were served. These set out the respondent's account of how he had come into possession of cash. They were as follows:

"The Plaintiff is and was at all material times a Director of Eurohide and Skin Co Ltd. By reason of a contract on or about the 19/7/93 between the said company and Danlami Hamza, the said company agreed to supply 15814 steer hides to Danlami Hamza for the sum of £419,000. On or about the 28^th July 1993 pursuant to the terms of the said contract the Plaintiff in his fiduciary capacity as a Director of Eurohide and Skin Co Ltd received a cash sum from Danlami Hamza for the said hides. When this said sum was counted it amounted to £421,000 of which £145,000 was in the brown pilot briefcase, £126,000 was in the black antler bag and £150,000 was in the Samsonite briefcase.

By an oral agreement on or about the 23^rd July 1993 Eurohide and Skin Co Ltd agreed to lend to the Plaintiff the sum of £419,000 which sum came into the Plaintiff's possession and ownership on or about the 28^th July 1993."

These particulars were verified by affidavit on 12 August 1994.

vi) On the 27 September 1994 the Chief Constable gave further particulars of the defence and wrote a letter to the respondent's solicitors inviting them to provide additional information and documentation. Among the pertinent questions were the following:

"1. Further details of the identity, address and position of Danlami Hamza.

2. The name of the Eurohide Officer authorising loan of the monies to the Plaintiff and the circumstances surrounding that loan."

There was no reply.

vii) Nothing then happened in the action until September 2002.

viii) On the 26 April 2000 the action was automatically stayed as a result of the transitional provisions of CPR 51 PD.19 (1).

4. The respondent's explanation for the inaction provided in a witness statement dated 21 November 2002 was as follows:

"At the time the proceedings were first underway I spent significant sums of money with my then solicitors in dealing with Requests for Further and Better Particulars and the case did not seem to be progressing. I was becoming continually stressed by the case and I ran out of money to pay my solicitors because my business folded. I was advised that to proceed to trial would be an expensive and drawn out process and I could be liable for a significant amount of costs both those of my own lawyers and the Defendant's lawyers if I lost."

5. On the 19 September 2002 the Chief Constable applied for an order that the stay imposed under CPR 51 PD 19 "be lifted and the action be restored for the purposes of this application". He also applied for an order that the respondent's claim be struck out "for want of prosecution under CPR 3.4". He also applied to be permitted to dispose of the cash in accordance with Regulation 6(4) of the Police (Property) Regulations 1997. The grounds of the last application were that the respondent had no right to the cash (which by 2002 was over £500,00 because of the accrual of interest) and it could be put to good use.
6. The application was served upon the solicitors who had brought the claim for the respondent; they contacted the respondent. After making various enquiries, he instructed new solicitors who applied for an Order that the automatic stay be lifted and judgment be entered in his favour. The grounds of that application were that in the light of the decision in Costello v The Chief Constable of Derbyshire [2001] 1 WLR 1437, the only basis on which the Chief Constable could defend the claim was to show that another person had better title to the cash than the respondent and that the Chief Constable had no real prospect of successfully doing so.

The hearing before the Deputy District Judge

7. The application was heard by Deputy District Judge Fine at the Luton District Registry on 22 November 2002. In a clear and careful Judgment she decided that as both parties wanted the stay lifted it would be lifted; it would not be right to leave things in a state of limbo.
8. She then went on to consider whether the claim could be struck out under CPR 3.4(2)(b) and (c). She referred to Grovit v Doctor [1997] UKHL 13 and Neo Investments Inc v Cargill International SA [2001] 2 Lloyd's Rep 33; she then asked herself the question as to whether there was a considerable risk that a fair trial of the action was impossible. She then considered eight factors identified by Aikens J in Neo Investments and expressed her conclusion on them:

"(1) the length of the delay (8 years) is inordinate; (2) the excuse for the delay is, at the very least flimsy (namely that the claimant was unable to pursue the claim due to lack of funds); (3) the extent to which the claimant complied with rules and any other orders of the court - even the stay had not activated the claimant, which it was intended to do; (4) the prejudice to the defendant – the defendant will be prejudiced by the delay after this length of time and it is most doubtful that this matter can be properly investigated by the defendant; (5) an effective trial is no longer realistic; (6) does not apply; (7) whilst the defendant has not brought the matter back to court before today the onus before CPR lay upon the claimant; (8) the conduct of the claimant and defendant – again pre CPR the onus lay heavily upon the claimant to prosecute his claim.

9. She expressed her conclusion in the following terms.

"Having considered all the circumstances including those set out in CPR 3.9(1), and in the light of the authorities which I have discussed, I find that it is in the intrinsic justice of this particular case, in the light of the overriding objective, that the statement of case is struck out under CPR 3.4."

10. An Order was drawn up under which the stay imposed pursuant to CPR 51 PD 19 was lifted, the claim struck out under CPR 3.4 and the Chief Constable permitted to dispose of the cash. She granted leave to appeal.

The first appeal

11. The first appeal was heard by Davis J. He came to the view that the Deputy District Judge had been led into error because of the way in which she had considered that Eurohide and Skin Company Ltd might have been the true owners of the money; that she had concluded that that was an important matter in deciding whether or not there was a considerable risk that a fair trial was impossible. He decided that, as she had been led into error on this point, he was therefore entitled to interfere with her exercise of the discretion under the CPR. The Judge's decision on that point is not challenged; it is therefore not necessary to set out in any greater detail the reason by which he justified interfering with the way in which the Deputy District Judge had exercised her discretion.
12. The Judge then proceeded to consider the matter afresh, as he was entitled. He rejected the Chief Constable's submission founded on Grovit v Doctor [1997] UKHL 13, [1997] 1 WLR 640 that the claim had been abandoned by the respondent; that even if, contrary to his view, it could be said the claim had been abandoned, the question of whether a fair trial was possible remained a highly relevant consideration. He concluded:

"The question that still remains is: should the claim in so far as it relates to the return of the money itself, whether with or without the accrued interest, be struck out? Considering all the circumstances, I have come to the conclusion that in the exercise of my discretion it is not fair or just that this claim should be struck out. As matters stand, the Claimant seems to have the legal right to the money. Certainly no better title has been identified and certainly the Defendant itself has no title or right to the money. Notwithstanding the very long delay there is at least some explanation, albeit certainly not the most powerful, for that delay, and furthermore I take the view that no significant unfairness or prejudice has been caused to the Defendant by reason of the delay. In so far as the Defendant may wish to initiate further enquiries with regard as to who else might be the owner – and it is not said, I might add, that the Defendant initiated any further enquiries after 27^th September 1994, - there seems no reason to think that the Defendant is not still free to initiate these enquiries if it thinks it is necessary at all to do so.

Accordingly, and notwithstanding the great delay that has occurred, I take the view that there would be no substantial risk of a fair trial not being had if this action were allowed to proceed. I take the view, exercising my discretion afresh and considering all the circumstances, that the balance of justice requires this claim should be allowed to continue. As I hope will be apparent from what I have said in the course of my judgment, I have taken into account all the matters set out in Rule 3.9 in reaching my conclusion."

13. He therefore allowed the appeal and remitted the respondent's application for summary judgment to the District Judge. Permission to appeal against his decision was granted by this Court.

The nature of the application and the approach which should have been taken

14. The Deputy District Judge and the Judge approached the applications on the basis that, as both parties had wanted the automatic stay lifted, the stay should be lifted. Each then proceeded to consider the application on the basis that the question was whether the action should, with the automatic stay lifted, be allowed to continue.
15. However, with respect, the application made by the Chief Constable was one merely to seek to have the stay lifted for the purpose of having the action struck out and obtaining the release of the funds. It was the respondent who wanted the stay lifted generally so that he could continue the action. It was not common ground that the stay should be lifted generally, as the Chief Constable only wanted it lifted for the limited purpose described. It was the respondent who wanted the stay lifted generally and whether that general stay should be lifted was in fact the real and substantial issue before the court. In those circumstances, it was the task of the court to determine the matter before it in accordance with the principles laid down by this Court for applications to lift the automatic stay imposed by CPR 51 PD 19 (1).
16. The principles to be applied in the application to lift the automatic stay are set out in Audergon v La Baguette [2002] EWCA Civ 10 and Woodhouse v Consignia plc [2002] EWCA Civ 275; this Court made it clear that a court should take into account the provisions of CPR 3.9 when determining whether to lift the automatic stay. This Rule provides that the court must consider all the circumstances including:

"(a) the interests of the administration of justice;

(b) whether the application for relief has been made promptly;

(c) whether the failure to comply was intentional;

(d) whether there is a good explanation for the failure;

(e) the extent to which the party in default has complied with other rules, practice directions and court orders and any relevant pre-action protocol;

(f) whether the failure to comply was caused by the party or his legal representative;

(g) whether the trial date or the likely date can still be met if relief is granted;

(h) the effect which the failure to comply had on each party; and

(i) the effect which the granting of relief would have on each party."

17. In Woodhouse this Court directed judges to submit themselves to the discipline of considering each of the matters listed in CPR 3.9 which appeared to them relevant to the case before them; that Judges should also bear in mind that if the stay remained in place, they were depriving the claimant of access to a court, a concept that had particular resonance under ECHR Article 6. None of these authorities was drawn to the attention of either Judge on the applications before them.
18. If each of the factors in CPR 3.9 had been considered in accordance with the guidance of this Court, then the decision on this application was clear. However, as neither Judge proceeded on this basis and as the appellant did not seek to present his appeal in this way, it would not be fair to the respondent to do so now.

The approach taken by the courts below

19. I therefore approach the matter on the same basis as the Judge approached the matter by considering whether in all the circumstances the action should not be struck out and therefore be allowed to continue. In doing so, it is important to bear in mind that the Judge exercised a discretion; if the appeal is to succeed, it is necessary to point to some mistake of law, disregard of principle or some misapprehension of the facts.

The procedural regime prior to April 1999

20. As is clear from the decisions of this Court in Biguzzi v Rank Leisure [1999] 1 WLR 1926 and Purdy v Cambran (CAT 17 December 1999) and Walsh v Misseldine [2000] EWCA Civ 61, a court must, when looking at the conduct of the parties have regard to the procedural regime in force at the time of the conduct complained of. In the four and a half years between September 1994 and April 1999, the procedure of the courts was governed by the RSC as applied by Grovit v Doctor; Lord Woolf in giving the only speech made clear (at page 647 of the report in WLR) what the then procedural law was:

"The courts exist to enable parties to have their disputes resolved. To commence and to continue litigation which you have no intention to bring to conclusion can amount to an abuse of process. Where this is the situation the party against whom the proceedings is brought is entitled to apply to have the action struck out and if justice so requires (which will frequently be the case) the courts will dismiss the action. The evidence which was relied upon to establish the abuse of process may be the plaintiff's inactivity. The same evidence will then no doubt be capable of supporting an application to dismiss for want of prosecution. However, if there is an abuse of process, it is not strictly necessary to establish want of prosecution under either of the limbs identified by Lord Diplock in Birkett v. James [1978] A.C. 297. In this case once the conclusion was reached that the reason for the delay was one which involved abusing the process of the court in maintaining proceedings when there was no intention of carrying the case to trial the court was entitled to dismiss the proceedings"

21. In my view, the respondent's conduct during that period of four and a half years was at least a flagrant breach of the ordinary rules set out in the RSC; there was no attempt to progress the action; the delay was inordinate and inexcusable. The explanation which the respondent gave for his inactivity (as set out at paragraph 4 above) does not begin to explain why, if the respondent genuinely believed that he had a good claim to over £390,000, he would simply give up seeking to progress the claim only a few months after commencing proceedings. As the Deputy District Judge observed, the excuse was at "the very least flimsy". In my experience, a person in the position of the respondent who has a genuine reason for inaction will be at pains to set out in his evidence to the court the detail of what has happened, his financial circumstances and the correspondence with his lawyers. There is no such evidence from the respondent.
22. In the circumstances, I would infer that by far the most likely explanation is that, when it became apparent that the Chief Constable would ask numerous questions which the respondent would be obliged to answer, the respondent decided, some time shortly after September 1994, that he would not answer such enquiries and that therefore he would not pursue the claim.
23. It was contended on behalf of the Chief Constable that the respondent's decision not to pursue the claim amounted to an abuse of process, as he had effectively abandoned it. It was therefore not necessary for the Chief Constable to have to prove any prejudice. It was contended that this was the position not only during the period of time during which the RSC governed the procedure, but that was the position under the CPR.

The position under the CPR

24. The jurisdiction of the court is now set out in CPR 3.4; this provides:

"(2) The court may strike out a statement of case if it appears to the court-

(b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings; or

(c) that there has been a failure to comply with a rule , practice direction or court order.

(5) Paragraph (2) does not limit any other power of the court to strike out a statement of case."

25. It was argued on behalf of the Chief Constable that the principles in Grovit v Doctor remained good law and that by reason of CPR 3.4 (5), the court had, under its inherent jurisdiction, power to strike out a claim where there had been an abuse of process.
26. The CPR is a new procedural code; it is not generally necessary to refer to decisions prior to it coming into force. Nonetheless it is self evident that if the conduct of a party is an abuse of the process of the court, then the court may strike out the statement of case.
27. The contention advanced by the Chief Constable that there was an abuse of process was one based on two submissions;

i) the inference should be drawn that the respondent's conduct was not evidence of mere inactivity, but evidence that he had decided not to pursue the claim; as set out at paragraph 22, I am prepared to draw that inference.

ii) the court should conclude that the respondent was therefore maintaining an action he never intended to bring to trial. I find this a more difficult conclusion to accept, as the respondent was not doing anything. His conduct in fact amounted in reality to the abandonment of his claim.

It is not, in my view, necessary to determine whether in the circumstances the respondent's conduct in abandoning his claim, without taking steps to discontinue the claim, amounted to an abuse of process. That is because it is clear that there would have been by April 1999 sufficient prejudice under the procedural rules then in force and that by September 2002, under the CPR, applying the test used by the Judge, a fair trial of the action was not possible.

Prejudice and a fair trial

28. In the light of the decision in Costello, the only issue in the action was whether the Chief Constable could prove that another person had a better title to the money than the respondent.
29. The respondent had, when arrested, exercised his right to remain silent. It was only in August 1994 (when the further and better particulars referred to in paragraph 3.v) were served) that he had given an account of how he came into possession of this very large sum in cash which he had left at Luton in circumstances giving rise to obvious suspicion. The account then given called out for further information which the Chief Constable sought promptly.
30. If the respondent had provided in September or October 1994 the information which had been asked for and should have been given, there was a real prospect that enquiries could have been made into the truth of the matters put forward by the respondent. In my own experience, once sufficient information is provided about the transactions underlying a fund of money, it is usually possible to trace back the origin of the fund; that is one of the reasons why the disclosure provisions of freezing orders are so important. However banks and other institutions do not always keep or have available such records after the passage of years. By April 1999, there would have been little prospect of the Chief Constable making such enquires, as it would have been very difficult to obtain the necessary information. By the time the Chief Constable issued his application in September 2002, such enquiries would have been wholly impracticable; nine years had by then passed from the time the money had been left at the airport and there would be virtually no prospect of the documents being available
31. The Judge, in the passage in the judgment which I have set out at paragraph 12 referred to the fact that the Chief Constable made no enquiries after 27 September 1994 and that there was no reason that the Chief Constable could not have made such enquiries at the present time. However, for the reasons I have given the Chief Constable could not make enquiries until his questions were answered; they have not even now been answered. The Judge was in error in his view.
32. The Judge was, as he recorded in his judgment, told that Eurohide and Skin Company had indeed existed, but that it had been struck off the register and had been dissolved; he was also told that company had been controlled by the respondent and his father. The Judge observed that this was not evidence. Indeed it is a striking feature of the respondent's conduct that no attempt has been made (as I have noted) to provide to the court the answers to the questions that had been raised in 1994 or to give a full and detailed account of the origin of the cash and of all the transactions associated with it.
33. There can only be two explanations for the absence of such evidence from the respondent; either the information is not now available or that the respondent does not wish to provide it. The absence not only of the information, but also of any explanation of the failure to provide it, means that there is nothing to displace the conclusion which I have set out at paragraph 30. That absence therefore reinforces my conclusion that the Chief Constable would be gravely prejudiced now in any attempt to inquire into the circumstances in which the funds came into the possession of the respondent and therefore whether there was another person with better title than the respondent.
34. The Judge, in my view, misunderstood the essential fact that the Chief Constable was unable to make enquiries as to whether there was a person with a better title than the respondent because of the respondent's failure to provide the necessary information in 1994 and to persist in that failure even in 2002. The Chief Constable was gravely prejudiced and a fair trial of the action is clearly impossible.
35. Because the Judge exercised his discretion on the mistaken basis which I have set out, this Court must exercise the discretion afresh. There is no doubt that the respondent was in flagrant breach of the procedural provisions under the RSC and the CPR; his conduct has made the fair trial of this action impossible. I would therefore exercise my discretion to strike out the claim. This would have been the same result as if the proper procedure laid down by this court (and to which I referred at paragraph 16) had been followed.
36. In my view the appeal succeeds, the action should be struck out and the Chief Constable be given the necessary permission to apply the funds in accordance with the application made.

MR JUSTICE RIMER:

37. I agree

LORD JUSTICE MANTELL:

38. I also agree
Order: Appeal allowed and claim struck out. (Order does not form part of approved judgment)