England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		29 January 2013

Mr Justice Eady :

Introduction

1. There is now before the court an appeal from an order of Master Eyre dated 21 August 2012, whereby he struck out the claim under CPR 3.4(2)(b). The Master himself granted permission to appeal, having concluded that the merits of the application were finely balanced.
2. The proceedings concern a dispute which is now rather stale. It is focused upon the termination of an agency relationship between the parties by way of a letter from the Defendant dated 31 October 2005. The Claimants, who are now the Appellants, dispute the Defendant's right of termination. There was an earlier claim by Barnett Fashion Agency Ltd ("BFAL") against the present Defendant claiming compensation pursuant to the Commercial Agents (Council Directive) Regulations 1993, which was dismissed by His Honour Judge Seymour on 13 April 2011, without any hearing on the merits, simply on the basis that BFAL lacked any standing to bring the claim. The present proceedings are based on essentially the same complaint, and seek similar relief, but now the Claimants are David Barnett, Jeanette Barnett and David Barnett Associates. By this means it is sought to achieve the same objective as the original proceedings.
3. The Defendant had flagged up in its defence in the original proceedings, served in May 2010, precisely the point on which Judge Seymour ultimately struck out the claim. The Claimants were therefore warned by letter on 15 March 2012 of the Defendant's intention to apply for the new claim to be struck out as an abuse of process in accordance with the doctrine expounded long ago in Henderson v Henderson (1843) 3 Hare 100 and further explained in the House of Lords in Johnson v Gore-Wood [2002] 2 AC 1. It is submitted that the present Claimants should have taken the opportunity to seek their remedies in the earlier proceedings, if necessary by way of amendment to add or substitute new parties, once the Defendant had taken the point on BFAL's lack of standing. It is argued that they should not be permitted a further opportunity by way of "vexing" the Defendant twice over. The Claimants, on the other hand, submit that their Article 6 rights under the ECHR are such that they must be allowed the opportunity to have their claims tried on the merits.

The modern approach to Henderson abuse

4. The principle relied upon by the Defendant before the Master was summarised by Lord Bingham in Johnson v Gore-Wood, cited above, at p.31:

" … Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all."

5. On such an application, it is necessary for the court to carry out a balancing exercise, having regard to all the circumstances of the particular case, in order to decide whether it is just that the defendant in question should be "vexed" twice by suffering the stress, inconvenience and expense of having to contend with a second set of proceedings. (It is worth emphasising that this process is to be distinguished from that of exercising a discretion.) In this case, as I have said, the Master came to the conclusion, on balance, that the Defendant should not be so vexed.

The grounds of appeal

6. The grounds of appeal were identified in the following order:

"1. The grounds which he gave for reaching his conclusion were contradicted by the evidence before him and/or were factors which he should not have taken into account:

(i) The first and decisive factor on which he based his conclusion was that the claimants 'whether on advice or otherwise, twice and with the benefit of advice consciously decided not to bring forward …' in the first action the claims made in the present action. In so holding he disregarded the evidence of Mr and Mrs Barnett which was to the contrary effect. Their evidence was that up until the dismissal of the first action they believed that BFAL was the agent and the sole party entitled to sue and the joinder of the present claims was never suggested to them. Hence they did not at any point consciously decide to omit the present claims; they never considered it at all.

(ii) the second factor was that six months elapsed between the dismissal of the first action and the commencement of the present action. The authorities establish that no criticism ought to be made of such delay.

(iii) the third factor was the prejudice which would result to the defendant if the present action were to proceed. The prejudice the defendant complained of was (a) the amount of the costs of the first action in excess of the amount the defendant agreed that the claimant should pay in satisfaction of its costs liability, (b) the present alleged parlous state of the defendant's finances and (c) the estimated legal fees of over £100,000 which the defendant would have to pay if the present proceedings were to proceed. The Master was in error in attaching any significant weight to these complaints because:

First, it is wrong in principle to take prejudice to the defendant into account in deciding whether an action is an abuse of the process of the court;

Secondly, even if such prejudice is to be taken into account, the Master paid no or no sufficient regard to the facts that the cost complaint relating to the first action was on any view irrelevant, that there was no evidence at all supporting the defendant's assertion that its finances were in a parlous state, and that the defendant's costs estimate was manifestly excessive.

2. In reaching his conclusion the Master paid no or no sufficient regard to the following:

(i) that the omission of the present claims from the previous action was something for which Mr and Mrs Barnett were not personally responsible;

(ii) that Mr and Mrs Barnett had at no stage acted deviously, tactically or in any manner deserving of criticism.

5. In reaching his conclusion the Master paid no or no sufficient regard to the fact that there had been no trial of the claims on their merits, and that the effect of his order was to shut out the claimants from ever being able to bring the claims forward to trial."

The nature of this appeal

7. It is necessary to bear in mind that I am called upon to exercise an appellate jurisdiction, which is by way of review and not re-hearing. When reviewing a decision to strike out under the abuse of process doctrine, I need specifically to have in mind the tests identified by Thomas LJ in Aldi Stores Ltd v WSP Group Plc [2007] EWCA Civ 1260 at [16]:

" … an appellate court will be reluctant to interfere with the decision of the judge in the judgment he reaches on abuse of process by the balance of the factors; it will generally only interfere where the judge has taken into account immaterial factors, omitted to take account of material factors, erred in principle or come to a conclusion that was impermissible or not open to him."

8. On the other hand, Mr McCue, on the Appellant's behalf, has drawn attention to the words of Lloyd LJ in Stuart v Goldberg Linde [2008] EWCA Civ 2 at [43]:

"On a question of abuse of process of this kind raised at a preliminary stage such as this, with no oral evidence, it seems to me that the appellate court is often likely to be, and in the present case is, in as good a position as the court below to assess whether the proceedings are or are not an abuse of process."

He would thereby appear to be inviting me, to all intents and purposes, to conduct the appeal on the basis of a re-hearing, but I do not take Lloyd LJ to be sanctioning such a course. This would not accord with the modern approach to the appellate jurisdiction, whether it is being exercised by a High Court Judge or by the Court of Appeal, and I will accordingly follow the approach adumbrated by Thomas LJ in Aldi.

9. Having considered carefully what the Master had to say, following the balancing exercise he carried out, I cannot see that he erred in any of the respects identified by Thomas LJ.

Mr and Mrs Barnett's evidence as to state of mind

10. There was evidence from Mr and Mrs Barnett before the Master to the effect that no positive decision had been taken by them or anyone else, in the earlier proceedings, to proceed to trial in reliance upon BFAL's right of action and locus standi. Nevertheless, that is what happened. It appears that the relevant persons had not addressed the point. This was clearly a matter at the heart of the Master's reasoning. Mr Barnett may well be right that no such positive decision was taken, but what seemed to be of significance to the Master (in my view rightly) was the lack of any evidence as to why it had been decided to go ahead without adding the present Claimants – despite the point having been raised fairly and squarely in the defence 11 months before trial. I would agree with the Master that it seems quite unfair, at least as a matter of first impression, that the Defendant should be subjected to two sets of proceedings based on the same complaints. All will depend, however, on a close analysis of the facts of the particular case. There may be circumstances, for example, where some explanation is forthcoming that will overcome such a first impression. As the Master noted, here there was none.
11. Generally, when considering where responsibility may lie for the conduct of litigation, or some particular strategy or tactic, the court will draw no distinction between a party and his or her legal advisers. They are effectively regarded as a "team". The sensible thing to do in this case would have been to seek permission to amend, promptly, once the contents of the defence had been digested in May 2010 or shortly thereafter. That is what could and should have been done (as Mr McCue has effectively conceded). There is no need here for a minute analysis of the communications between the parties between 2002 and 2005. Judge Seymour took the view that there had been no effective transfer of the agency to BFAL (from Mr Barnett personally) despite internal changes in their business effected by Mr and Mrs Barnett on the basis of tax advice. That was a decision which Judge Seymour was plainly entitled to reach and, what is more important, no attempt was made to appeal his determination.
12. In all the circumstances, it may be thought unwise not to have reacted to the Defendant's pleaded contentions about BFAL's lack of status. It matters not where the responsibility for that inactivity may lie, whether with Mr and Mrs Barnett or with their legal advisers.
13. I thus reject the first ground of appeal, which is to the effect that the Master must have ignored or failed to give sufficient weight to the Barnetts' evidence. The point is also relevant to another ground of appeal (the fourth, albeit numbered 2). It does not seem to me to be of great importance that neither Mr or Mrs Barnett was personally responsible for not pursuing their claims first time round. Nor does it greatly assist their case on abuse that their conduct cannot be characterised as "devious" or "tactical" (which I will assume).

Is there an unqualified right to a full trial on the merits?

14. It is true that the merits of the Claimants' cause of action, stale though it may now be, are unlikely to be determined unless this appeal is allowed. A litigant's rights under Article 6, however, cannot possibly mean that he is immune from the disciplines of civil procedure, whether arising out of the CPR or under well established common law principles. A litigant is not necessarily entitled to have his claim determined at a trial come what may. My attention was drawn to the words of Arden LJ (with whom Ward and Smith LJJ agreed) in Thomas Koshy v Deg-Deutsche Investitions-Und Entwicklungsgesellschaft MBH [2008] EWCA Civ 27 at [34]:

" … Even though the allegations which Mr Koshy raises are of such seriousness and importance, nonetheless the justice system is not bound to provide more than one opportunity to run these issues. That is because the courts have to strike a fair balance between the interests of Mr Koshy on the one hand and of the other parties and the general interest on the other hand. That fair balance in my judgment is struck once Mr Koshy has had one effective opportunity to put his case."

In other words, the modern doctrine of abuse, as explained in the House of Lords in Johnson v Gore-Wood, appears to be compliant with the ECHR and, in particular, with a litigant's rights under Article 6.

15. Arden LJ was clearly not intending to lay down some general rule to the effect that no litigant can ever be entitled to more than one "bite at the cherry". That would be unduly prescriptive and incompatible with authority. It would seem to be reasonably clear that a balancing act is required whenever a court is invited to allow a "second bite": the outcome will not always result in its being granted. As so often, the court's determination is likely to be fact-sensitive.
16. The Master decided that on the present facts it would be unfair to allow the Claimants a second bite. I consider that he was entitled to do so and I would reject the final ground of appeal (numbered 5) based on the contention that he paid insufficient regard to the fact that their claims would never be tried on the merits. He was well aware of that, but came to his conclusion nonetheless.

The relevance of the impact on the Defendant's business

17. Mr Hall has provided evidence to the court explaining his business and financial circumstances, at least in general terms, and the stresses which would be imposed upon the Defendant if these proceedings were allowed to go ahead. No doubt the Claimants could have challenged his account or pressed for further details before the Master. In the event, they did not do so. It seems to me, therefore, that the Master was entitled to take into account that evidence, in so far as it was relevant, untested though it was.
18. Mr McCue has suggested either that Mr Hall's evidence was not relevant or that it should have been discounted. He argues that either the proceedings are an abuse or they are not. A claim which is not abusive cannot, he submits, become so merely because of the relevant defendant's financial circumstances. I am by no means satisfied, however, that the position is quite so black and white. It is necessary for the court, in carrying out its balancing exercise, to adopt "a broad merits based approach". In the nature of things, this will often involve a consideration of the extent to which a claimant's conduct towards the particular defendant in question can be characterised as unjust or oppressive.
19. It may be helpful to have in mind the general summary given by Clarke LJ, as he then was, in Dexter v Vlieland-Boddy [2003] EWCA Civ 14, at [49] (and cited in Aldi by Thomas LJ at [6]):

"(i) Where A has brought an action against B, a later action against B or C may be struck out where the second action is an abuse of process.

(ii) A later action against B is much more likely to be held to be an abuse of process than a later action against C.

(iii) The burden of establishing abuse of process is on B or C or as the case may be.

(iv) It is wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive.

(v) The question in every case is whether, applying a broad merits based approach, A's conduct is in all the circumstances an abuse of process.

(vi) The court will rarely find that the later action is an abuse of process unless the later action involves unjust harassment or oppression of B or C."

Against this background, it seems to me impossible to contend that the Defendant's financial circumstances are necessarily irrelevant on an application of this kind. How much weight should be attached to them, in the overall scheme of things, will be a matter for the individual tribunal seized with the responsibility of making the decision.

20. This point is closely linked to the second ground of appeal, which was that the Master was in effect penalising the Claimants for the six months delay between Judge Seymour's dismissal and the commencement of these proceedings. I do not believe he did so. It is accepted by the Defendant that delay in itself does not demonstrate abuse of process. Nevertheless, any deterioration in the Defendant's commercial or financial circumstances (including any which occurs in a period of "delay") is part of the relevant background, as I have just explained.
21. The third ground of appeal is to the effect that the Master should not have taken into account any prejudice to the Defendant (financial or otherwise). I do not understand how this can possibly be right, since the underlying public policy concern is to try to ensure that defendants are not unjustly or unfairly vexed twice over. The impact upon the particular defendant must be central to the court's balancing exercise.

Conclusions

22. It would in my judgment be quite unjust here to permit the Claimants to proceed when they, or their legal advisers, as the case may be, took no steps to respond to or to address the Defendant's pleaded case in May 2010, specifically raising BFAL's locus standi. They did not even serve a reply on its behalf. Having had that opportunity, and having let it go by, I cannot accept that it would now be fair to subject the Defendant to the stress and expense of having to address the merits of a claim under the 1993 Regulations for a second time – especially as Mr Hall has provided evidence to the effect that the Defendant could not now afford legal representation. No explanation or excuse for letting the first opportunity go by has been provided. Not only am I satisfied that there is no good reason for an appellate tribunal, proceeding by way of review, to interfere with the Master's decision on the facts. Even if I were proceeding by way of re-hearing, on that same evidence, I would myself have come to the same conclusion.
23. This appeal is accordingly dismissed.