TWO PROCEDURAL POINTS: A SECOND ACTION IS NOT ALWAYS AN ABUSE OF PROCESS & A BANKRUPT CANNOT BRING PROCEEDINGS

The judgment of Master Bowles in Khan -v- Khan & Ambala Foods Limited [2015] EWHC 2625 (Ch) contains a reminder of two important procedural points.

KEY POINTS

(1) The issue of a second set of proceedings is potentially an abuse of proceedings. However the court will not always find it to be an abuse.

(2) A bankrupt cannot issue proceedings.

THE CASE

The claimant was bringing an action claiming he held a share in a business. The claimant had earlier attempted to obtain relief  and issued proceedings in, essentially, the same form. The earlier proceedings had been struck out on the basis that the claim form had not been served within the four month period. The claimant was ordered to pay costs in those proceedings, however costs had not been paid.

THE APPLICATION TO STRIKE OUT FOR ABUSE OF PROCESS

The defendant applied to strike out these second set of the proceedings as an abuse of process. The Master found that he had a discretion to strike out the action but declined to strike it out on these grounds.

  1. The abuse argument, so far as it arose from the issue of new and substantially similar proceedings following the striking out of the earlier proceedings, was advanced primarily having regard to the well known decision of the Court of Appeal, in Securum Finance .v. Ashton [2001] Ch 291. In that case Chadwick LJ, giving the only judgment, held that, contrary to earlier and pre-CPR authority, that where a claim had been struck out, but where limitation had not yet expired, a new and substantially similar claim was, potentially, abusive, because it gave rise to a misuse of the court’s limited resources, which, properly used, would have resulted in matters being dealt with within the first, or earlier, proceedings.
  2. That decision, reflected, among other things, the overriding objective, as then laid down, and the need to weigh, against an individual’s wish to pursue a second case, the need to allot the court’s limited resources to other cases. That latter consideration has, as I see it, even greater force, in the current litigation climate, given that the overriding objective now makes specific and explicit reference to the need to allot only an appropriate share of court resources to any particular case.
  3. Mr Willmer sought to limit the width of the decision in Securum to cases where the striking out was on grounds of delay (taking, understandably, as his text the first paragraph of the headnote in Securum). That headnote, however, does not, in my view, accurately set out the statement of principle in Securum, which is not, in terms, or at all, limited to cases of striking out for delay.
  4. That said, one can well see why the principle may well be particularly apt to apply in cases of delay, where, very often, there will have been, associated with delay, a number of unnecessary applications and hearings.
  5. In this case, however, because of the failure of service and because the Claim was struck out at an early stage, albeit following one, apparently, abortive application by the Claimant in respect of which he was ordered to pay costs, no very significant part of the resources of the court were used, or misused, in the earlier proceedings. Accordingly, although the jurisdiction to strike out for abuse was undoubtedly brought into play, in respect, at least, of those parts of the new claim that substantially replicated the original Claim, I would not have been minded to strike out the Claim upon this ground alone.

THE FACT THAT THE CLAIMANT WAS BANKRUPT

The action was struck out, however, on the grounds that the claimant was bankrupt and had no authority to issue proceedings.

  1. The second ground of abuse, however, is one that I find to be made out. That ground stems from the bankruptcy of the Claimant and the consequent vesting of his causes of action, if any, in his trustee in bankruptcy.
  2. The Claimant was declared bankrupt on his own petition, in respect, I gather, of credit card debts, on 20th February 2013. It is common ground that all the Claimant’s claimed causes of action had accrued by that date and, accordingly, that they constituted ‘property’ of the bankrupt, for purposes of his bankruptcy and formed part, therefore, of his estate, for that purpose.
  3. The consequence of that, by reason of section 306 of the Insolvency Act 1986, is that, upon the appointment of a trustee in bankruptcy taking effect, or upon the official receiver becoming trustee, all the Claimant’s causes of action vested in his trustee and the Claimant, himself, was, correspondingly, divested of those causes of action.
  4. In this case, no trustee was appointed, as such, but, rather, as was confirmed upon behalf of the Claimant, the official receiver became the trustee in bankruptcy, pursuant to the procedure set out in section 293 of the Insolvency Act, whereby, if the official receiver elects not to call a meeting of creditors within the twelve week period prescribed by that section, he serves notice of that decision upon the court and upon known creditors and whereby, upon that service, he becomes the trustee.
  5. The result, or consequence, of the foregoing is that, as from, at latest, May 2013, the Claimant has not retained the causes of action upon which, in these proceedings, commenced in October 2014, he purports to rely, and that, inevitably, these proceedings fall to be struck out as an abuse of process, as being proceedings doomed to failure. For the same reason, the proceedings, likewise, have no realistic prospect of success and the Defendants are, in consequence, entitled to judgment against the Claimant upon his Claims.
  6. In the face of this situation, Mr Willmer made the only submission open to him, namely that, rather than, at this stage, striking out the Claim, or giving judgment upon the Claim to the Defendants, I should, instead, stay the Claim, in order to give the official receiver, as trustee, the opportunity, if so advised, to adopt the Claim.
  7. I declined that invitation. For the reasons given later in this judgment, I am satisfied that the Claimant’s Claim has no realistic prospects of success and, therefore, that there is no realistic prospect of the official receiver adopting the Claim.

RELATED POSTS

Second set of proceedings

Bankruptcy

 

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