Barton, Henderson, Rosen etc v Merrett and Ernst & Young Etc

Queen's Bench Division


HEARING-DATES: 12 January 1993

S Moriarty for the Plaintiffs; T Walker QC and M Howard for the Defendants

PANEL: Saville J


SAVILLE J: In these proceedings the Plaintiffs (who were Names at Lloyds) allege that their Managing and Members' Agents at Lloyds were in breach of contract or duty in closing the 1983 and 1984 years of account into the respective following years. In essence their case is that the liabilities of the years in question were so uncertain that it was wrong to close them and that they should have been kept open. The Plaintiffs contend that the Auditors of the Syndicates concerned were also in breach of contract or duty in making or approving the decision to close the years in question. In summary the Plaintiffs' case is that this alleged improper closure of years has caused them very substantial loss. I have before me applications by the Auditors to strike out the proceedings against them on the grounds that they amount to an abuse of the process of the Court.

The basis for these applications is that at the time when the Writs were issued the Plaintiffs had no present intention to serve Points of Claim and prosecute the litigation nor any reasonable evidence or grounds for serving Points of Claim.

In Steamship Mutual Underwriting Association v Trollope & Colls 33 Build LR 77, there is support (persuasive if not binding) for the proposition that to issue a Writ in such circumstances, does amount to an abuse of the process of the Court. As May LJ observed in that case, the phrase "abuse of the process" is not necessarily a pejorative expression, but includes an improper use of the process of the Court. 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.

In the present case there is no doubt that the Writs were issued when they were in order to avoid a possible defence of limitation. To my mind this alone would not prevent the Writs from being struck out, given there was no present intention of pursuing the matter nor any known basis for the claim. Parliament has stipulated the periods within which proceedings must be begun so that unless the proceedings are begun within the relevant period (or the Plaintiff can bring himself within one of the exceptions) then it is nothing to the point that he may have wished to protect the position in case something turned up at a later stage. To allow him to do so would in effect be to extend the period beyond that thought appropriate by Parliament.

In the case cited it is clear that when the Plaintiffs issued the Writ against the Defendants in question they had no intention at all of serving a Statement of Claim or prosecuting the Action against those Defendants since they were clearly quite unaware of any grounds at all on which they could advance a claim against those Defendants. There was no doubt that the reason for issuing proceedings against these Defendants 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. It is hardly surprising that the Court of Appeal regarded this as an improper use of the procedure.

In my judgment the present cases are far removed from the circumstances of the case cited. It is true that the Writs were "protective" Writs issued in order to stop time running and that at the time many of the numerous Plaintiffs had not decided whether or not to proceed with the claims, since the cost of the litigation was likely to be very heavy, many of them had found themselves in straitened circumstances and they were awaiting a report from their experts. In my judgment, however, the Plaintiffs were not simply issuing the Writs on the off-chance that later inquiries might turn up something on which a claim might be based. The material before me demonstrated 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. Whether or not the Auditors did in fact fail to perform any obligations or duties owed to the Names is not, to my mind, a matter that can or should be considered at this stage. The question to be asked is, in my view, whether, when the Writs were issued, it can be shown that the Plaintiffs were unaware of any material on which Points of Claim disclosing a cause of action against the Auditors could properly be formulated. In my judgment that has not been shown in this case.

In this context the Auditors sought to rely on the fact that at the time the Writs were issued the Plaintiffs had not received any expert advice on the question whether the Auditors had acted incompetently and it was suggested that it was improper to make such allegations in the absence of supporting expert advice. It was further suggested that the correspondence revealed that the Plaintiffs were awaiting their experts' report after issuing the Writs in order to decide whether or not there were grounds for pursuing the claim against the Auditors. I do not accept either of these suggestions. As to the first, I know of no authority for the proposition that it is improper to make allegations of incompetence against a professional body without supporting expert evidence. Whether or not such allegations can be sustained at trial in the absence of such evidence is another matter altogether. As to the second, it seems to me to be clear from the material before me, not that the Plaintiffs were awaiting their experts' report in order to know whether or not there were any grounds for suing the Auditors, but in order to assess the strength of their case and to ensure that it was formulated in a proper way. There is, to my mind, a world of difference between a Plaintiff who is unaware of any grounds on which to sue a Defendant yet does so in case something turns up later and a Plaintiff who does have grounds for suing but who wants to be as certain as possible that he has a good chance of success. In the former case there is likely to be an abuse of the process of the Court since there is no basis known to the Plaintiff for a claim. In the latter case there are grounds for a claim so that the Writ is not simply a wholly speculative venture.

The Auditors accepted in argument that it would not be an abuse of the process to issue proceedings with no present intention of prosecuting them unless the Plaintiffs were also unaware of any valid basis for the claim. This in my view must be right. There are plenty of cases where a Writ is issued on valid grounds but where at the time it is considered inappropriate (for a whole variety of acceptable reasons) forthwith to pursue the case. If the case is not pursued, of course, then the procedures of the Court allow the Defendant to seek on the expiry of the time for further steps to strike out the proceedings, so that there is no question of the Plaintiff being allowed to delay indefinitely. It so happens in the present case that the Plaintiffs have now served Points of Claim and it was not suggested before me that these do not reveal a cause of action against the Auditors. The point that is sought to be made is that at the date of the Writs the Plaintiffs could not have served Points of Claim based on reasonable evidence or grounds of which they were then aware. As I have said, I am not persuaded that this is the case; on the contrary I am of the view that the Plaintiffs, at the time of the issue of the Writs, were aware, through those acting on their behalf, that there were grounds for suing the Auditors and could have formulated Points oŁ Claim which could not have been described as without any proper foundation. The Plaintiffs may not have been aware of the strength of their case, or whether it would be supported by expert evidence, but to my mind it is impossible to categorize the issuing of the Writs in the circumstances I have described as amounting to an improper use of the processes of the Court. Accordingly in my judgment the applications must be dismissed.

Applications dismissed

Richard Butler; McKenna & Co