Craig Lloyd v Richard Hayward & Anor
[2024] EWHC 2033 (Ch)
Watford Control Instruments Ltd v Colin Brown
13 May 2024
[2024] EWHC 1125 (Ch)
High Court
A company sued a former director, but took a long break from the case. The judge said this was an abuse of the court system, but didn't throw the case out. The appeal court disagreed, saying the case should be thrown out because the company wasted too much time. The court also decided who legally owned the claim (the company), but that didn't change the main result.
Key Facts
- •Watford Control Instruments Ltd (Claimant) acquired the business of YZMA, including its 'Book Debts', in 2016.
- •A dispute arose concerning whether the Claimant had standing to pursue a claim against Colin Brown (the 'Colin Brown Claim') for breach of fiduciary duty.
- •The Claimant issued proceedings in 2018 but took no steps to pursue the claim between September 2019 and March 2022.
- •The Judge found the Claimant guilty of 'Grovit abuse' (abuse of process due to inaction) but declined to strike out the claim, instead ordering security for costs.
- •The Claimant applied to amend its claim and join YZMA's administrators, but the Judge refused, ultimately striking out the claim due to limitation issues.
- •Both parties appealed.
Legal Principles
Grovit abuse: Unilateral decision not to pursue a claim for a substantial period, while maintaining intent to pursue it later, constitutes an abuse of process.
Grovit v Doctor [1997] 1 WLR 640
Sanctions for Grovit abuse: Strike-out is the 'normal' sanction unless compelling reasons exist; proportionality is key.
Board of Governors of the National Heart and Chest Hospital v Chettle (1998) 30 HLR 618
CPR 3.4(2)(b): Court may strike out a statement of case if it's an abuse of process.
CPR 3.4(2)(b)
Assignment of choses in action: Section 136 of the Law of Property Act 1925 requires notice of assignment before proceedings are commenced for a legal assignment.
Law of Property Act 1925, s136
Limitation Act 1980, s21(3): Six-year limitation period for restitution claims, subject to extensions.
Limitation Act 1980, s21(3)
CPR 19.6 (formerly 19.5): Absolute bar on joinder if limitation period expired when proceedings commenced.
CPR 19.6 (formerly 19.5)
Outcomes
Mr Brown's appeal allowed; Claimant's claim struck out.
The Judge applied the wrong test for sanctions in Grovit abuse, failing to find compelling reasons to avoid strike-out. The Claimant's delay was substantial and caused prejudice to Mr Brown, outweighing any other factors.
Claimant's appeal dismissed as academic.
Even if the Claimant's arguments on standing were successful, the Grovit abuse necessitated strike-out.
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