England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		23 March 2007

Mr Justice Cooke :

The Application

1. The first to third and fifth defendants to whom I shall collectively refer as Granada, issued an application on 9 October 2006 to strike out the Claim Form issued on 21 June 2006 by the claimant, to whom I shall refer as Nomura. As a result of a slightly convoluted history, connected with another action brought by West LB AG (West) against Nomura, no Particulars of Claim have yet been served. Granada contends that Nomura's Claim Form and therefore the action, should be struck out as an abuse of the process of the court.

Background

2. In December 1999 West entered into a Commitment Letter in relation to the lending of £860 million to a vehicle for the merger of two consumer goods rental businesses owned by Thorn (itself owned by Nomura) and Granada. That vehicle was Box Clever Finance Ltd (Box Clever). The loan was drawn down in June 2000 but was subsequently the subject of re-financing in a securitisation arranged by West and CIBC in June 2002. In 2003 Box Clever went into receivership and proceedings were subsequently commenced against West and CIBC by CDC IXIS, alleging that it had been induced to take up notes issued in the securitisation on the basis of false information relating to the profitability of the goods rental business.
3. On 15 December 2005, West issued a Claim Form against Nomura. The endorsement set out the claim as for "damages for negligent misstatement and/or negligence and/or breaches of duty arising out of the defendant's financial models and/or projections and/or advice and/or information provided to the claimant between about October 1999 and June 2000 and in reliance upon which the claimant agreed to and did provide £860 million of loan finance to Box Clever Finance Limited to fund the merger of the businesses of UK Consumer Electronics Limited (formerly Granada TV Rental Limited) and TUK Holdings Limited (formerly Thorn UK Limited)." Having issued a Claim Form, West took no steps to serve it but in March 2006 invited Nomura to agree to a twelve month standstill. In consequence on 31 March 2006 a form of Standstill Agreement was concluded between them. This provided that any limitation period expiring during the currency of the agreement should be deemed to expire on a date thirty days after notice of termination or, at latest, on 31 March 2007.
4. On 20 April 2006 Nomura's solicitors (Ashurst) contacted Granada's solicitors (Travers Smith) by telephone, explained that a Standstill Agreement had been concluded with West and said that Nomura considered itself to have claims over against Granada which it was anxious to protect by a similar Standstill Agreement (so as to protect its limitation position).
5. On 28 April 2006 Ashurst emailed a draft Standstill Agreement to Travers Smith. That Standstill Agreement referred to the potential claims of Nomura in the following way:-

"Whereas

(A) West….have asserted that they have claims against Nomura….for alleged negligent misstatement and/or negligence and/or breaches of duty arising out of Nomura's financial models and/or projections and/or advice and/or information provided to West….in reliance upon which West agreed to and, in June 2000, did provide £860 million of loan finance to Box Clever Finance Limited to fund the merger of the businesses of UK Consumer Electronics Limited (formerly Granada TV Rental Limited) and TUK Holdings Limited (formerly Thorn UK Limited) (the "West LB claim")

(B) Nomura asserts that if, contrary to its belief, Nomura is liable to West…in connection with the West LB claim, the Granada Parties may in turn be liable to Nomura either directly or by way of contribution, in respect of any part of the financial models and/or projections and/or advice and/or information provided to West LB which related to the business of Granada TV Rental Limited (whether alone or in conjunction with the business of Thorn UK Limited) and/or which was provided by, or on behalf or at the instruction of, Granada Parties or a Granada Parties Affiliate either to West….or to Nomura (the Nomura claim)."

6. On 18 May 2006 Travers Smith wrote to Ashurst asking for a proper explanation of Nomura's claims. On 23 May 2006 Ashurst replied in the following way:-

"…In the interests of avoiding the issuing of proceedings against your client, Nomura is happy to provide an outline of the potential claims, but you must appreciate that this is subject to the uncertainty of the detail of the claim that West LB may seek to pursue against Nomura.

We have set out the nature of West LB's asserted claims in the draft Standstill Agreement. It is made clear that West LB asserts that it relied upon certain information supplied by Nomura such that "West LB agreed to and in June 2000 did provide £860 million of loan finance to Box Clever Finance Limited to fund the merger" that led to the creation of the Box Clever business. The information in question is said to have been financial models and/or projections and/or advice and/or other information.

Your clients will be well aware that information of that nature was supplied to West LB in the context of negotiations between West LB, Granada and Nomura. In the case of the model of the proposed merged business, information to prepare it was provided to Nomura by both joint venture partners including, of course, Granada. That information related to various aspects of the Granada rental business, including data as to the profile and behaviour of its customers, data as to termination rates, information as to historical and projected working capital requirements and other balance sheet and profit and loss information. This information was supplied by individuals within the Granada Group Companies identified in the draft Standstill Agreement all of whom I understand to be clients of yours in this matter (but perhaps you could confirm the position in respect of UK Consumer Electronics Limited which is currently in receivership).

To the extent that West LB makes any claims or pursues any legal remedies in connection with the provision of any information which was supplied by Nomura to West LB, but which was obtained from one or more of the Granada companies identified in the Standstill Agreement……then Nomura may need to make a claim against one or more of those Granada companies…..at this stage however and until West LB makes out a case against Nomura we are not in a position to identify the detail of Nomura's case and nor would it be appropriate, or in our clients' respective interests, to do so for the purposes only of presenting Nomura's rights against your clients.

….However I believe that the substance of Nomura's claims should be understandable to you and your clients and will help to explain why, particularly bearing in mind the delay since we spoke on 20 April 2006, we are unable to wait any longer to obtain your agreement to enter into a standstill. Therefore if I do not hear from you with a substantive response along those lines by close of business on Friday 26 May 2006, we will issue the claim in order to protect Nomura's position. It may then be that there is still scope within the usual 4 month period for service in which to enter into a Standstill Agreement, broadly along the lines of the agreement that I have told you Nomura was willing to enter into with West LB to avoid unnecessary litigation. It follows that I do not agree that in these circumstances it is necessary for my clients to be in possession of full Particulars of Claim before issuing proceedings."

7. It will be noted that whereas the draft Standstill Agreement referred to potential claims by Nomura against Granada "in respect of any part of the financial models and/or projections and/or advice and/or information provided to West LB which related to the business of Granada TV Rental Limited and/or which was provided by or on behalf of or at the instruction of Granada", the letter of 23 May was more limited in referring to the supply of information relating to various aspects of the Granada Rental business alone. At paragraph 35 of the first statement of Mr Sparrow of Ashurst (Sparrow 1) he states that during the conversations which took place regarding the West Claim Form, it had not been made clear to Ashurst or Nomura which particular information it was that West alleged had been provided to it by Nomura which was said to be inaccurate. Nomura and Ashurst were however aware that, in the context of the commercial discussions and due diligence which took place prior to West providing the loan facilities in June 2000, Granada provided information to parties including Nomura. Mr Sparrow states that Nomura and West were reliant on Granada for information about the past performance and projected future performance of the Granada Television Rentals business.
8. On 1 June 2006 Ashurst sent Travers Smith a draft Claim Form which Nomura was considering issuing to protect its ability to bring claims against Granada in respect of the Box Clever financing or merger. In that letter Mr Sparrow stated that the nature of Nomura's claim had been clearly set out in the letter of 23 May (see paragraph 6 above). The draft Claim Form referred to both tortious and contractual claims and stated that in relation to any tortious claims, the limitation period would not start to run until any loss or damage was suffered by Nomura and that it could not be said to have suffered any such loss or damage until West had issued proceedings against it, relying on the House of Lords decision in Law Society v Sephton & Co and Others [2005] QB 1013, as authority for that proposition. In the letter he referred to a conversation with Mr Kingston of Travers Smith the previous Friday when the latter had stated that Nomura could not issue proceedings against Granada because it had not yet suffered any loss or damage and to Granada's stance that if proceedings were issued, it would call for service of those proceedings and apply to strike them out on that basis. In reliance on the House of Lords decision, Mr Sparrow contended that Nomura would be treated as having suffered loss or damage when the claim was issued by West against Nomura. The letter also referred to contractual claims which appeared to be related in some way to the contribution agreement signed on 17 December 1999 between Thorn and Granada (to which Nomura was not a party) and which contained no express terms about the provision of information. The letter referred to some agreement between "the groups" by which Nomura would produce a model for the merged businesses, resulting in Granada's production of information to Nomura for that purpose.
9. Doubt was expressed by Ashurst as to the particular Granada parties that might be liable to Nomura and again the wish was expressed for the respective clients to take the opportunity to save further costs by reaching a Standstill Agreement. The terms of the draft Claim Form only differed from the Claim Form later issued, by the absence, in the draft, of the fifth defendant.
10. Nothing further of substance occurred although there were exchanges between the solicitors until, on 21 June 2006, without complying with the pre-action protocols, Nomura issued a Claim Form against Granada. The endorsement shows a claim for

"damages and/or indemnity and/or contribution….for breach of contract and/or negligence and/or breach of duty and/or negligent misstatement and/or negligent misrepresentation arising out of the provision by the defendants (or any of them)…..of financial models and/or projections and/or advice and/or information……to the extent that Nomura has incurred and/or incurs any liability and/or has suffered and/or suffers any loss or damages as a result of West LB's claim."

11. On 26 June 2006 Ashurst sent Travers Smith a copy of the Nomura Claim Form, but not by way of service. Nomura had of course four months for such service but on 26 September Ashurst wrote to Travers Smith, stating that they were preparing an application pursuant to CPR Rule 7.6 to extend time for service of Nomura's claim until 30 April 2007 or such earlier date as the parties might agree. Granada's consent was sought.
12. On 27 September 2006 Ashurst wrote to West's solicitors (Simmons & Simmons) asking them to set out the basic components of the claim that West LB believed it had against Nomura. West was asked to "identify the particular financial models and/or projections and/or advice and/or information referred to in West's Claim Form" and to explain what loss it was alleged that West had suffered.
13. Granada did not agree to an extension of time for service of Nomura's Claim Form and on 28 September 2006 Nomura issued its application for such an extension supported by Sparrow 1. In that statement, it was stated that Nomura would not be in a position to particularise its claim against Granada nor serve its Particulars of Claim against Granada until West had particularised its claim against Nomura and served its Particulars of Claim in the other action. In that statement, it was accepted that Nomura's purpose in issuing the Claim Form in June 2006 had been to prevent limitation defences accruing to Granada thereafter. Further details of the content of that statement appear later in this judgment.
14. Thereafter, on 13 October Nomura terminated its Standstill Agreement with West and on 17 October it served its Claim Form on Granada. On 9 November West served its Claim Form on Nomura and an Order was made on 1 December 2006 for West to serve its points of claim in that action by 22 December 2006 which it duly did.
15. Directions were also given by the court in relation to an application by Nomura dated 23 November 2006 to strike out West's claim, an application which was abandoned at the end of January 2007, about one month after service of evidence by West in the shape of a statement from Mr Kelly of Simmons & Simmons. There was, as between Mr Sparrow and Mr Kelly, an issue as to whether West had, when issuing its Claim Form, the present intention of pursuing Nomura and had knowledge at that time of valid grounds to make a claim. By abandoning its application, Nomura effectively (whilst maintaining the contrary) accepted West's position on this as set out in Mr Kelly's second statement, which was part of the material placed before the court for the current hearing. Mr Kelly maintained that West had always intended to pursue its claim against Nomura and had only sought Nomura's agreement to a standstill in March 2006 because of the existence of the securitisation litigation which it was fighting against CDC IXIS. It maintained that it had all the key documents in its possession well before the issue of the West claim, had good grounds for making its claim and was well aware of those grounds at the time.

Sparrow 1

16. Sparrow 1 included the following:-

"…6. Nomura has not yet served the Nomura Claim Form on the defendants (as matters presently stand, time for service expires on 20 October 2006), although a copy has been provided informally to, Travers Smith, the solicitors acting for four of the defendants. The reason why Nomura has not served the Nomura Claim Form and is seeking an extension of time in which to do so is that Nomura's claim against the defendants (the "Nomura Claim") is inextricably linked to, and conditional upon, a separate claim which has been issued in relation to the same or substantially the same subject matter by West LB AG ("West LB"), a German bank, against Nomura (the "West LB Claim").

7. The Claim Form issued by West LB against Nomura ("the West LB Claim Form") was issued in December 2005 but Nomura (through Ashurst) was only informed of its existence by West LB (through Simmons & Simmons) in March 2006. A copy of the West LB Claim Form is exhibited at page 5-6 of "ECAS1". Ashurst were informed that the West LB Claim Form had been issued in order to protect any claims which West LB might have against Nomura in connection with a commitment letter issued by West LB in December 1999 in relation to the proposed merger of the television rental businesses of the Granada Group and the Thorn Group of companies ("the Thorn Group") (the Thorn Group was then owned by Nomura). I explain the circumstances of this merger in more detail below. Simmons & Simmons requested that Nomura enter into a Standstill Agreement with West LB in relation to the West LB Claim on the basis that West LB had not decided definitively to proceed against Nomura and might decide not to do so.

…

9. Nomura subsequently took steps to protect its position against certain Granada group companies in relation to the subject matter of the West LB Claim by issuing the Nomura Claim Form against them.

10. I understand from discussions with Simmons & Simmons in March 2006 that West LB had not, at that point, decided whether or not to pursue the West LB Claim against Nomura. I am not aware of any change to that position. If West LB decides not to pursue the West LB Claim, there will be no need for Nomura to pursue the Nomura Claim against the Granada defendants, and significant costs and effort on the part of West LB, Nomura and the Granada defendants will be avoided. Moreover, for reasons explained below, until such time as the West LB Claim is particularised against Nomura, Nomura will not be in a position to particularise its claim against the Granada defendants.

11. In the above circumstances, Nomura seeks an order for an extension of time in which to serve the Nomura Claim Form. The effect of the order sought by Nomura would be to bring the Nomura Claim into line procedurally with the West LB Claim and would mean that Nomura was not required to press on with its claim against the Granada defendants before West LB has committed to pursuing its claim against Nomura. As I have already stated, my understanding is that it may be that West LB will in due course decide not to pursue the West LB Claim, in which case, the Nomura Claim will not be needed.

12. If, on the other hand, Nomura's application is not granted and Nomura is required to press on with the Nomura Claim, Nomura will have no option but to terminate the Standstill Agreement with West LB (as Nomura is entitled to do under the terms of that agreement on 30 days' notice, such notice not to be given before 29 September 2006) and to require West LB to serve the West LB Claim Form and thereafter Particulars of Claim. In other words, Nomura will have no option but to invite proceedings which might not otherwise be brought. Nomura would then in turn need to consider any Particulars of Claim served by West LB and to investigate the allegations made by West LB before it would be in a position to serve its Particulars of Claim in the Nomura claim upon the Granada defendants. As explained below, the costs of this exercise would in all likelihood be very substantial because the issues that would arise for consideration are complex and the documentation is substantial.

………

29. West LB's solicitors, Simmons & Simmons, informed Ashurst that the West LB Claim Form had been issued on 15 December 2005 in an attempt to protect any claims which might have arisen out of the commitment letter, referred to above in paragraph 19, which was executed almost six years earlier on 17 December 1999. Ashurst were also informed that, whilst West LB believed that it had claims against Nomura, it had not resolved definitively to sue Nomura and, furthermore, there were good commercial reasons why West LB might ultimately choose not to pursue its claims against Nomura. However, if Nomura did not enter into a Standstill Agreement, then West LB would have no option but to commence litigation against Nomura: the West LB Claim Form would be served on Nomura and the litigation process would begin.

30. Given that, on the basis of what Ashurst were told by Simmons & Simmons, it was not inevitable that West LB would pursue its claim against Nomura, and preferring to avoid the litigation process where possible, Nomura chose to enter into a Standstill Agreement. Nomura's decision was informed by the complexity of the financial modelling and projection issues which were likely to be the subject of any dispute and the volume of materials which would need to be reviewed to understand the issues in question. Nomura anticipated (and continues to anticipate) that any litigation in relation to these issues would inevitably be very complex, costly and protracted. Indeed it is instructive to note how the related Securitisation Litigation has unfolded, with multiple parties, Part 20 claims and a trial set down for some 24 weeks commencing on a date three years after the proceedings were initiated.

…..

34. During the conversations which took place regarding the West LB Claim Form, it was not made clear to Ashurst or Nomura which particular information it was that West LB alleged had been provided to them by Nomura and which was in some way said to be inaccurate. The claims alleged by West LB were only outlined in very general terms. Ashurst has recently written to Simmons & Simmons requesting further information about the West LB Claim. A copy of that letter is exhibited at pages 9-10 of "ECAS1".

35. Although the West LB Claim has never been outlined in any detail to Nomura, Nomura is aware that, in the context of the commercial discussions and due diligence which took place prior to West LB providing the Loan Facilities in June 2000, the Granada Group provided information to parties including Nomura. The Box Clever project was designed to realise the potential benefits and synergies to be obtained from merging Granada Group's own television rental business with that of Thorn's (and therefore ultimately Nomura's) Radio Rental business. It was therefore natural that the Granada Group would be closely involved in the commercial negotiations and due diligence process during which information was passed to West LB in 1999 and 2000. In particular, Nomura and West LB were reliant on the Granada Group for information about the past performance and projected future performance of the Granada television rentals business. The nature of the information that was provided by the Granada Group, and the manner in which it was provided, is set out in more detail in section C below.

36. In light of the above, Nomura wished to preserve its rights against the Granada Group if it became clear that any information which West LB alleged was (i) inaccurate and (ii) supplied by Nomura had originated from the Granada Group. Nomura also recognised that on 28 June 2006 it would be six years since West LB had provided the Loan Facilities. This raised at least the possibility that, unless action was taken by Nomura before that date, the Granada Group might try to raise a limitation defence against any claims subsequently brought by Nomura."

17. Further, Mr Sparrow set out at paragraph 42 the information which he had obtained, in part from research conducted by Ashurst and in part from information supplied by solicitors who acted for Terra Firma, a related party in the securitisation litigation. Preliminary interviews with relevant witnesses who were employed by Terra Firma but had previously been employed by Nomura had been effected and a review had been carried out of a limited selection of relevant documents. He made it plain that no attempt had been made by Ashurst or Terra Firma's solicitors to undertake a comprehensive review of the relevant documents or to take detailed proofs of evidence from the relevant witnesses. He then made the point that, because he understood West had not committed itself definitively to pursuing its claim against Nomura, the particulars of that claim were unknown and the need for Nomura to pursue its claim against Granada was therefore uncertain, he did not believe that it was proportionate or cost efficient for Nomura to undertake such work. He then set out in general terms the basis of Nomura's claim in paragraph 43 of the statement. This paragraph is of some importance and I set it out in full:-

"43. As set out above, Nomura's claim is essentially that, to the extent that Nomura is liable to West LB for information about Granada that was provided to West LB, the defendants are in turn liable to Nomura. To understand the defendants' potential liability to Nomura, it is necessary to describe how the negotiations and due diligence in relation to the Box Clever merger was conducted in 1999/2000. I am not in a sufficiently informed position to say with certainty how this process unfolded. However, on the basis of the limited information that I currently have, the process appears to have developed as follows:

(a) discussions regarding a potential merger took place between Guy Hands of Nomura PFG and Charles Allen, the Chief Executive of Granada Group plc, the first defendant, during 1999;

(b) of the two rental businesses, Granada's business was the larger. This was reflected in the terms that emerged out of the negotiations. Whereas the Granada Group received approximately £500 million cash and £100 million Loan Notes for the sale of its rental business to Box Clever, the Thorn Group (and therefore Nomura PFG) received approximately £330 million cash and £50 million Loan Notes for the sale of its business. Furthermore, although the equity in Box Clever was shared 50/50 between Granada and Thorn, Granada had operational control of Box Clever. In particular, Granada supplied the CEO (Mike Neal) and CFO (Roger Mavity) of Box Clever Finance Limited, whilst the Thorn Group provided a non-executive director in Laurence Cooklin;

(c) Nomura PFG had expressed reservations about the availability of finance for the proposed merger. Granada suggested that their existing bankers, West LB, may be prepared to lend money. It was agreed that Granada would approach West LB to see if they were prepared to finance the Box Clever project. Granada appears to have made this approach in Autumn 1999 and received the in principle agreement of West LB to providing the necessary funding;

(d) West LB wished to conduct due diligence prior to providing the Loan Facilities. West LB instructed PwC and Allen & Overy, amongst others, to assist with that due diligence. Information about the respective rental businesses appears to have been provided directly to West LB from a number of sources, including the Granada Group;

(e) part of the information provided to West LB took the form of a financial model. The financial model was prepared in relation to the combined future performance of the merged businesses, for example, as to future cash flow levels. The financial model was to be prepared by Nomura PFG taking into account input and instructions from the other parties to the transaction. Therefore, whilst the financial model was, it appears, largely prepared by Ian Dyke, a financial analyst with Nomura PFG, the Granada Group, not surprisingly, provided the relevant information about its television rental business that was necessary to produce the financial model. This information related to various aspects of the Granada Group's rental business, including data as to the profile and behaviour of its customers, data as to termination rates, information as to historical and projected working capital requirements and other balance sheet and profit and loss information;

(f) Nomura believes that this information was supplied by individuals operating on behalf of some or all of the defendants. Until Nomura is provided with the particulars of the West LB Claim, however, it cannot confirm the exact role that each defendant played. In my letter of 1 June 2006, before the Nomura Claim Form was issued, I invited Mr Kingston to comment on the parties that we had identified as potential defendants. No response was received. Against this background, it may be that, in due course, Nomura may choose not to pursue claims against some of the defendants. However, as matters stand, I note the following points:

(i) Roger Mavity and Mike Neal, then both directors of, and acting on behalf of, Granada UK Rental and Retail Limited (the third defendant) and UK Consumer Electronics Limited (the fourth defendant), were the senior personnel responsible for providing the Granada inputs and approved certain figures that were used for the financial model, such as capital expenditure levels;

(ii) the relevant assumptions upon which the financial model was based were agreed between Nomura PFG and the Granada Group; and

(iii) it appears that the financial model was also the subject of consideration from the Granada Board, including Henry Staunton (a director, of Granada Group Limited (from 1993), Granada Limited (from June 2000) and Granada Media Limited (from May 2000)), and other employees within the Granada Group, such as James Tibbits;

(g) in early December 1999, West LB confirmed that they had formal board approval to provide the Loan Facilities. On 17 December 1999, the commitment letter referred to earlier was executed. Given the potential impact of the merger on competition within the rental market, the merger was subject to receiving clearance from the Secretary of State for Trade & Industry. This was received on 23 June 2000. The merger was completed on 28 June 2000. The relevant financing documentation in relation to the Loan Facilities was executed that day."

18. Although the statement did not so say, I was told on instructions that the work which had been done to which reference was made in these paragraphs of the statement was work done prior to the issue of the Claim Form. A supplementary statement following the argument, was served which confirmed this except that it could not be said that it was known, prior to issue of the Claim Form that the assumptions for the Model had been agreed by Granada or that the Model had been the subject of consideration by the Granada Board.

The basis of Granada's application

19. Granada relies essentially upon two pre-CPR decisions of the Court of Appeal which, Granada contends, set out principles which apply following the introduction of the CPR. In essence Granada submits that these decisions establish that it is an abuse of the process of the court to issue a Claim Form where there is no intention to pursue the proceedings by serving Particulars of Claim and where the claimant has no reasonable evidence or grounds upon which to serve that statement of claim, or where, although there may be an adequate intention, there is no known valid basis for the claim.
20. Furthermore, it is said that decisions under RSC Order 6 Rule 2 establish that a Writ (and therefore a Claim Form) must be endorsed with a concise statement of the nature of the claim made, which means that it is necessary to set out the date and place of the occurrence and the nature of the tort alleged. Likewise, in a claim for breach of contract it is necessary to identify the contract which has allegedly been broken. Irregularities can be cured in a later Statement of Claim or Particulars of Claim but the court has always been careful to distinguish between cases "where the Writ is defectively seeking to initiate a known genuine cause of action" and other cases which amounted to an abuse of process.
21. RSC Order 6 Rule 2 has been superseded by CPR Rule 16.2(1) which also provides that "the Claim Form must contain a concise statement of the nature of the claim". CPR 22.1, in requiring verification of the originating process, necessitates a statement of truth being "a statement that…the party putting forward the document…believes the facts stated in the document are true". This, according to Granada gives weight to the need for some specificity in the Claim Form. CPR 22.0.2 states that verification is required to diminish the likelihood of speculative and fanciful assertions. (See also CPR 22.1.2.) Reliance was also placed by Granada upon cases relating to delay as an abuse of process as supporting the propositions for which it contended.
22. Nomura submits that Granada is taking the wrong starting point. Whilst it accepts that the thought processes of previous decisions under the RSC may be of some relevance, the proper starting point in considering whether there has been an abuse of process is the decision of the House of Lords in Johnson v Gore Wood & Co [2002] 2 AC 1 at page 22 D-F. Abuse is:-

"Misuse of its [the court's] procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right thinking people".

23. Nomura submits that it does not fall foul of this concept and that even if it did, striking out would be an inappropriate draconian remedy since it will be in a position to give full details of its claims in Particulars of Claim which it wishes to serve in June 2007, following an extension of time which it seeks from this court, should it succeed in resisting the striking out application. By then it will have had the opportunity to carry out a major review of the documents both hard copy and electronic, to interview likely witnesses and to relate the matters raised to the West Particulars of Claim.
24. Furthermore Nomura maintains that, even on the pre-CPR principles, Granada cannot make good its basis for striking out since, at the time of the issue of the Claim Form, Nomura did have an intention to pursue the proceedings and was aware of valid grounds for bringing them.

The Law

25. It is clear from numerous authorities that the CPR represents a departure from the Rules of Court previously in existence and that detailed reference to decisions on particular provisions of the RSC are of little value in interpreting provisions of the CPR where the wording and substance of a particular rule is different. Nonetheless, there are numerous instances where the courts have drawn upon decisions relating to the RSC where the new rule under the CPR follows the same form and appears to have the same underlying intention. In this context I was referred to CPR 1.3.9 and CPR 2.3.1. In UCB Corporate Services Limited v Halifax (SW) Limited QBENI 99/0827/A2 Ward LJ at paragraph 24, when referring to the Master of the Rolls' statement in Biguzzi v Rank Leisure plc [1991] 1 WLR 1926, that "earlier authorities are no longer generally of any relevance once the CPR applies", stated that the Master of the Rolls was not saying that the underlying thought processes that informed those judgments should be completely thrown overboard.
26. Whilst therefore Mr Iain Milligan QC, acting for Nomura, is right to say that the starting point must be the CPR and in particular CPR 3.4.2(b) which refers to "an abuse of the courts' procedure", it is plainly right that, when considering abuse, regard should be had to the principles which the court has previously applied in considering when an abuse of process has taken place. The underlying thought processes that informed those judgments are thought processes which must be taken into account when considering whether there has been misuse of the court's procedure under the CPR, particularly in the context of the institution of proceedings where limitation is a potential issue.
27. In Johnson v Gore Wood & Co [2002] 2 AC 1 at page 22, Lord Bingham referred to the "inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right thinking people". At page 31 he referred to the need to make a "broad, merits based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court…". Whilst these comments were in the context of arguments about issue estoppel and the principle enunciated in Henderson v Henderson, the dicta of Lord Bingham carry weight regardless. Regard must be paid to the overriding objective of the CPR.
28. May LJ (obiter) in Steamship Mutual UnderWriting Association Limited v Trollope & Colls Limited (1986) 6 ConLR 11, at page 25, disapproved the course of action which had been adopted by the plaintiff vis à vis the fifth defendants (Jampel) who were structural engineers. The Writ had been issued against four other defendants but also against Jampel though no action was intended to be taken, at any rate for the time being and perhaps never on that particular Writ. The proceedings had been issued against Jampel with no known cause of action against it, in case the other defendants should raise defences which suggested that there was a cause of action against Jampel. At page 27 (obiter) he stated this:-

"In my opinion, to issue a Writ against a party even in connection with a building dispute where cross-claims may subsequently be made, when it is not intended to serve a statement of claim, and where one has no reasonable evidence or grounds on which to serve a statement of claim against that particular party, is an abuse of the process of the court."

29. He went on at page 27 to invite consideration of the position if, in the particular case, Jampel had called for a statement of claim when the Writ was first issued against it. It was entitled to do that and, to that request, the plaintiffs would have had to respond by either declining to serve a statement of claim and having the proceedings struck out for failure to do so or, alternatively, serving a statement of claim which they knew had no foundation. That very dilemma demonstrated that an improper use of the process of the court had taken place.
30. At the following page, page 28, May LJ expressed the matter thus:-

"If there is no arguable case at the time the Writ is issued, and one cannot reasonably be expected, then it is an improper use of the procedure just to issue a Writ, with no present intention whatsoever of following it up, merely ex abundanti cautelae."

31. On either formulation, Mr Milligan QC maintains that there is a necessity for two elements before the issue of a Writ could be said to be abusive. The first element is the lack of intention to serve a statement of claim whilst the second is the absence of any reasonable evidence or grounds on which it could be served. Mr Andreas Gledhill contends however that this is a dictum, not a statute and that there is no necessity for both heads, the real point being whether or not, as appears from the passage at page 27, the claimant knew enough and had grounds which would enable him, given appropriate time, to marshall the facts of which he knew, in a statement of case which he could properly serve on the defendant in question.
32. I was referred to the decision of Evans-Lombe J and the Court of Appeal in West Bromwich Building Society v Mander Hadley & Co. Transcripts were provided and the reference for the latter is CHANI 97/1098/CMS3. As appears from paragraphs 8 and 13, the Court of Appeal took the view that, on the facts of that case, the building society was unable to plead a claim for indemnity or contribution against the defendant solicitors until a claim had actually been made against it since, until then, it would be unaware of any valid basis for its own claim. The building society was unaware of any basis for its claims because the liability of the solicitor would have to arise from its own default and the loss which this might cause to the Society in the shape of third party liability. It was that default and that loss which the Society could not identify and which made the issuing of the proceedings an abuse of process. At the end of paragraph 15 Millett LJ (as he then was) said that "it is an abuse of process to bring proceedings when there is no present intention of prosecuting them and when the plaintiff is unaware of any valid basis for its claim. An individual Writ would be struck out as a matter of course in such circumstances". He also made the point, by reference to an earlier decision of Saville J (as he then was), that it is not for the courts to extend the limitation period by permitting Writs to be issued at a time when the plaintiff is unaware of any valid basis for the claim.
33. Once again Mr Milligan QC says that the test set out there for striking out a claim as an abuse of process has the same two elements, as shown by Millett LJ's dictum. There is a need for an absence of present intention to prosecute proceedings and a lack of awareness of any valid basis for the claim. Mr Gledhill maintains the converse and both relied upon the decision of Saville J in Barton Henderson v Merrett and Ernst & Young [1993] 1 LL.LR 540. In that case the Judge accepted the defendant's concession that it would not be an abuse of process to issue proceedings with no present intention of prosecuting them unless the plaintiff was also unaware of any valid basis for the claim. Millett LJ referred to this without disapproval in the West Bromwich case. What Saville J was saying was that there could be good reasons for not wishing immediately to pursue litigation which had been begun and that it would not therefore be enough to issue proceedings with no present intention of prosecuting them. It was also necessary that the plaintiff should be unaware of any valid basis for the claim in order for there to be an abuse. What he did not deal with and what none of these decisions deal with is a situation where it could be argued that there was some intention of prosecuting proceedings albeit that the plaintiff/claimant was ignorant of any valid basis for pursuing a claim.
34. In Barton Henderson Saville J said the following:-

"To my mind at least in the absence of very special circumstances, it could hardly be suggested that it would be a proper use of the processes of the court to issue a Writ with no intention of following it up with a statement or points of claim, in circumstances where the plaintiffs were unaware of any basis on which they could bring proceedings against the defendants. The reason for this is simply that in contentious matters the courts and court procedures exist for the purpose of determining claims. If a plaintiff starts an action with no present intention of pursuing it, being unaware of any basis for a claim, then on the face of it that plaintiff is not using the processes of the court for the purposes for which they were designed."

35. The Learned Judge pointed out that there were plenty of cases where a Writ was issued on valid grounds but where at the time it was considered inappropriate for a whole variety of acceptable reasons forthwith to pursue the case. If the case was not pursued, then court procedures allowed a defendant to apply to strike it out on the expiry of the time required for further steps to be taken, so that there was no question of indefinite delay. The absence of intention to pursue the claim immediately was therefore insufficient justification for striking out a claim, if standing on its own. There was a necessity for more.
36. At page 542 he referred to Steamship Mutual and said that, in that case, the reason the plaintiffs had no intention at all of serving a statement of claim or prosecuting the action was because "they were clearly quite unaware of any grounds at all on which they could advance a claim against those defendants". The reason for issuing proceedings was "the off chance that something might turn up in the future which would enable a claim to be made under the Writ that had been issued". That was clearly an improper use of the procedure. By contrast, on the facts in Barton Henderson, the Judge found that "the material before me demonstrates that at the time when the Writs were issued there were grounds for advancing a claim against the auditors sufficient to enable points of claim to be served… The question to be asked is in my view whether, when the Writs were issued, it can be showed that the plaintiffs were unaware of any material upon which points of claim disclosing a cause of action against the auditors could properly be formulated." As he found that was not the case, there was no abuse.
37. In my judgment, when regard is had to these authorities the key question must always be whether or not, at the time of issuing a Writ, the claimant was in a position properly to identify the essence of the tort or breach of contract complained of and if given appropriate time to marshall what it knew, to formulate Particulars of Claim. If the claimant was not in a position to do so, then the claimant could have no present intention of prosecuting proceedings, since it had no known basis for doing so. Whilst therefore the absence of present intention to prosecute proceedings is not enough to constitute an abuse of process, without the additional absence of known valid grounds for a claim, the latter carries with it, as a matter of necessity, the former. If a claimant cannot do that which is necessary to prosecute the claim by setting out the basis of it, even in a rudimentary way, a claimant has no business to issue a Claim Form at all "in the hope that something may turn up". The effect of issuing a Writ or Claim Form in such circumstances is, so the plaintiff/claimant hopes, to stop the limitation period running and thus deprive the defendant of a potential limitation defence. The plaintiff/claimant thus, unilaterally, by its own action, seeks to achieve for itself an extension of the time allowed by statute for the commencement of an action, even though it is in no position properly to formulate a claim against the relevant defendant. That must, in my judgment, be an abuse of process and one for which there can be no remedy save that of striking out the proceedings so as to deprive the claimant of its putative advantage. The illegitimate benefit hopefully achieved can only be nullified by this means. Whatever powers may be available to the court for other abuses, if this is an abuse, there is only one suitable sanction.
38. The concept, as exemplified by this line of authority, is further reinforced by the terms of CPR 16.2(1) which provides that "the Claim Form must (a) contain a concise statement of the nature of the claim". CPR 22.1(4) provides that the Claim Form must be verified by a statement of truth being "a statement that..the party putting forward the document..believes the facts stated in the document are true".
39. Because of the similarity of the terms of the rule and because the policy underlying it must be the same as for the equivalent rule in the CPR, there is room for reference to authority relating to RSC Order 6 Rule 2. This rule required a Writ to be endorsed either with a statement of claim, or with "a concise statement of the nature of the claim made or the relief or remedy required in the action begun thereby". Court of Appeal authority (Lord Denning MR in Sterman v EW & WJ Moore [1970] 1 QB 596) held that the word "or" in that Rule was conjunctive so that it was necessary to state both the nature of the claim and the relief or remedy required. The relevant commentary in the RSC which was the result of an earlier Court of Appeal decision in Marshall v London Passenger Transport Board [1936] 3 AER 83, provided that "a concise statement of the nature of the claim" meant that, where the claim arose out of a contract, the endorsement should give details of the relevant contract and where the claim arose out of a tort it should give the date and place of the occurrence and the nature of the tort alleged. It is necessary to at least give some idea or indication of the duty which it is alleged the defendant has failed to perform.
40. Although defectively endorsed Writs could be cured by subsequent statements of claim in the ordinary way, such cure depended upon the plaintiff having a known genuine cause of action at the time of the issue of the Writ and the irregularity merely being the failure properly to set it out. As appears from the decisions discussed earlier, that principle is of no application where the plaintiff had no known basis for making the claim at the time when the Writ was issued.
41. In my judgment therefore if Nomura, at the time of issuing its Claim Form, was not in a position to do the minimum necessary to set out the nature of the claim it was making, it would be seeking an illegitimate benefit, namely the prevention of further time running under the Limitation Acts for a claim which it could not properly identify or plead. That would be an abuse of the process of the court. Insofar as it sought to make any claim in contract, it would be necessary for it to be able to identify the particular contract and the alleged breach. In the case of any breach of tortious duty, it would be necessary for it to be in a position to identify the essential acts or omissions which constituted the breach of duty, negligence or negligent misstatement. For the purposes of negligent misstatement, Nomura would have to be able to identify what advice or information was inaccurate and what was given negligently, at least in essence. If Nomura was not in a position to do this, it was not in a position properly to issue a claim, since it could not have proceeded properly to plead Particulars of Claim without the off chance occurring that something would turn up. In such circumstances it could have no present intention to pursue a claim since it had no sufficient idea of the claim it wished to pursue.

Conclusions on the facts

42. Sparrow 1 is clear in its effect in saying that Nomura's understanding was, prior to the issue of its Claim Form, that West had not yet decided whether or not to pursue proceedings against it. In those circumstances it likewise had not decided to pursue a claim against Granada. The issue of the Claim Form by Nomura on 21 June 2006 was therefore a step "to protect its position" against Granada in relation to the subject matter of the West Claim, should it be pursued against Nomura. If West decided not to pursue its claim against Nomura, Nomura would not pursue any claim against Granada.
43. Furthermore, Sparrow 1 is clear in saying that Nomura would not be in a position to particularise its claim against Granada or to serve Particulars of Claim on Granada until such time as West's claim was particularised in the shape of the service of West's Particulars of Claim. In the context of Nomura's approach to Granada from late April 2006 onwards, Sparrow 1 states that it was not made clear to Ashurst or Nomura what particular information it was that was said to be inaccurate when supplied by Nomura to West. Without that information Nomura was in no position to say whether or not there was any inaccurate information given by Granada, whether directly to West or to Nomura, who passed it on or used it to supply information which to West.
44. All that Nomura could say at the time of the issue of the Claim Form was that there had been a common effort to produce information to West for the purpose of obtaining loan facilities. The focus prior to the issue of the Claim Form appears to have been on Granada's provision of information relating to Granada's own business rather than to the merged business. Paragraph 43 of Sparrow 1 however suggests that in addition to information relating to its own business Granada had input into the financial model of the merged business, approving figures which were used for capital expenditure of the merged business. It could not, on the evidence, necessarily say at that time that the relevant assumptions upon which the financial model was based were agreed between Nomura and the Granada Group or that the model itself was the subject of consideration by the Granada Board. Until West particularised what it said was inaccurate, Nomura could not specify any particular information or advice given by Granada as inaccurate or negligently given. If asked to identify any instance of breach of contract, negligence, breach of duty or negligent misstatement or negligent misrepresentation, Nomura could not have done so until West had made its allegations as to Nomura's breach. Until West had specified what was alleged to be wrong with the financial models and/or projections and/or advice and/or information given by Nomura, Nomura could not identify anything which it could say was wrongly provided by Granada in the context of such models, projections, advice or information. Nomura maintains as against West that there has been no negligence or breach of duty on its part and was not able or prepared to identify anything which it could say was negligent or a breach of duty on Granada's part, except by way of claim over, once West had set out its case. The very terms of the draft Standstill Agreement and the endorsement on the Claim Form reveal that this is a true claim over, albeit based upon independent breaches of duty to Nomura as opposed to seeking a contribution for a breach of duty on the part of Granada to West, equivalent to the alleged breach of its duty to West.
45. It was not suggested that the claims which Nomura wished to advance against Granada were not claims which could be advanced by way of Part 20 proceedings in the West action, nor that the Civil Liability (Contribution) Act 1978 would be inapplicable. Where section 1 of that Act applies, section 10 of the Limitation Act 1980 provides for a two year limitation period starting from the date upon which judgment is given or agreement is made accepting liability. Given the reliance placed upon the decision of the House of Lords in Law Society v Sephton & Co and Others, it is hard to see how any limitation difficulties are likely to arise since the contractual claim which was set out in the endorsement to the Claim Form has been abandoned because of accrued limitation problems prior to the issue of the Claim Form in late June 2006. The parties have nonetheless proceeded on the basis that the issue of the Claim Form matters because there may be some residual limitation difficulty which has yet to be articulated or to emerge out of the facts alleged by West or to be alleged by Nomura.
46. Mr Milligan QC submits that Nomura's position is different from that of the plaintiffs in the Steamship Mutual and West Bromwich cases since at the time of the issue of Nomura's Claim Form, Nomura knew that a claim had been made against it by West. It therefore had a genuine intention of passing on that claim, should that claim raise matters which were capable of being passed on. In that connection reliance is placed upon the alternative formulation of abuse of process at page 28 in the Steamship Mutual decision where May LJ said that "if there is no arguable case at the time the Writ is issued and one cannot reasonably be expected…..it is an abuse of process to issue the Writ with no present intention of following it up". In that context Nomura relies upon Sparrow 1 paragraph 45 where the belief was expressed that "there is a real prospect that if West proceeds to particularise its claim, the information that West will seek to rely on as inaccurate will in turn be shown to be information which the defendants either provided to Nomura or approved or otherwise owed a duty of care to Nomura in relation to" (sic). Further, in a letter of 10 October 2006, Ashurst informed Travers Smith that there was "a real prospect that Nomura will in turn serve Particulars of Claim" on Granada, if the standstill arrangement with West terminated and West served Particulars of Claim. Nomura's case was that it was enough for them to have the bare bones of a claim to make, without being in a position to identify any constituent elements of that claim at the time the Claim Form was issued. It was enough for there to be a real prospect of a claim over from the claim which had been made.
47. I am unable to accept this submission which is reminiscent of that put forward and accepted at first instance by the Judge in the West Bromwich case and which was rejected by the Court of Appeal. In my judgment, if a claimant cannot point to any particular instance of negligence, breach of duty, negligent misstatement or negligent misrepresentation at the time of the issue of the Claim Form, he cannot have any valid basis for his claim at that point and has no business issuing a Claim Form to stop the running of time in respect of some claim which he hopes in the future to be able to formulate. That is the key element of abuse in this case. Whether or not there is any difficulty with limitation in fact, is beside the point since the issue of the Claim Form was specifically done in order to protect the limitation position at a time when Nomura could not identify any particular act of which it could validly make complaint.
48. Even now it has not identified any specific acts but has merely stated in its skeleton, after doing further work that a presentation on 10 November, pleaded by West as being made by Nomura, was a joint presentation by Nomura and Granada where the content was agreed between them and that the Combined Based Case Model, a modified version of it and the 18 Month Projections were prepared jointly with assumptions agreed between Nomura and Granada and discussed with the proposed management of the merged business, the Senior Executive members of which mainly came from Granada. Whether or not Nomura is now in a position to allege acts of negligence, breach of duty, misstatement or misrepresentation, it was not in a position to do so in June 2006, as is plain on its own evidence. Whether or not there is a reasonable expectation of an inward claim (as per West Bromwich), a reasonable expectation of that claim being pursued, a reasonable expectation or real prospect of the need to formulate a claim over and of pursuing it, is neither here nor there. The wording used by May LJ is not, as both parties recognise, the wording of a universal formula - it is wording used to describe the particular abuse of process on the facts of that case. When regard is then had to the Barton Henderson and West Bromwich decisions, it becomes clear that it is the absence of knowledge of any basis for a claim and the inability properly to formulate a claim at the time of the issue of the Writ/Claim Form which is decisive. If there is insufficient knowledge to begin the process of putting together Particulars of Claim, without the need for "something to turn up", there is no known or valid basis for a claim to be made. The generality of an endorsement may or may not show the absence of any ability to formulate a claim and an investigation of the underlying position may often be necessary in order to establish whether there is a known basis for a claim which can properly be pleaded in Particulars of Claim, on the knowledge then available, given time to put what is known into a pleading.
49. The point is exemplified by the ethos which underlies the requirements for pre-action protocols to be observed. Where there is no specific protocol in relation to the type of proceedings in question, what is envisaged is an exchange of correspondence between the parties on the merits of the claim in order to ascertain whether or not there is room for negotiation. If a Claim Form has to be issued for limitation reasons, the claimant should then apply for a stay so that these exchanges of correspondence can take place with a view to avoiding litigation. This was not possible in the circumstances because there was no possibility of formulating the necessary claim for discussion. Everything was being done with a view to protecting the limitation position as is plain from the request for a Standstill Agreement and the issue of proceedings which have always been referred to as "protective". The inability to formulate a claim is revealed therefore in all the materials leading up to the issue of the Claim Form, the Claim Form itself and the history thereafter, right up to the service of West's Particulars of Claim.

The Remedy or Relief to be granted

50. Nomura has submitted that, even if there was an abuse of process, this does not mean that the Claim Form should be struck out and the action with it. Reference was made to the decision of the Court of Appeal in Asiansky Television plc and Others v Bayer-Rosin [2001] EWCA Civ 1792 and the decisions cited therein by Clarke LJ with whom the other Lords Justices agreed. What is required, is a broad judgment, concentrating on the intrinsic justice of a particular case in the light of the overriding objective. Striking out is a draconian remedy and the CPR allows for a much more flexible approach. Whilst that is undoubtedly true in a case where there has been some abuse of process in the conduct of a claim which has been properly initiated, I cannot see how those decisions help Nomura if the very commencement of proceedings was in itself an abuse of process. As mentioned earlier in this judgment, I cannot see how any remedy is appropriate save striking out, where the claim should not have been brought when it was. The only proper sanction for a claim improperly brought in the first place, is to strike it out. Mr Milligan QC argued that Granada had been playing a "game of chess", seeking to magnify limitation difficulties for Nomura by procrastination but as Cresswell J remarked, it appeared that a game of chess was being played on both sides, with each firm of solicitors doing its best to protect its own client's position. In the end, all that Nomura's submission amounted to, in the context of appropriate remedy, was the point that a contribution claim was not time barred and could be pursued in any event and that in the circumstances of this case, Granada was exposed to a trial on all the facts, whether or not there was a direct claim. That appears to be no reason for doing anything other than striking out the claim and leaving Nomura with its Part 20 claim over, or as and when properly formulated, in a separate action, or by way of Contribution Act proceedings.

Conclusion

51. For the reasons set out above, Granada's application to strike out succeeds and I have no need to deal with Nomura's application for an extension of time for service of Particulars of Claim.
52. At first blush, it would appear that costs should follow the event but there may be matters of which I have no knowledge or which have not been drawn to my attention. If costs can be agreed before the final handing down of this judgment so much the better. If not the issues can be debated then.