Factual and Procedural Background
This opinion concerns an application by the Defendant, a firm of solicitors, to strike out claims brought by multiple Claimants for alleged negligence in relation to buy-to-let property transactions. The Claimants acquired properties from a property group and obtained mortgage loans, with the Defendant acting for both the Claimants and their mortgagees. The transactions involved "gifted deposits" which were not disclosed to the mortgage lenders. The Claimants allege the Defendant knew of these deposits and should have warned them and the lenders; the Defendant denies knowledge and responsibility.
The claims arose from transactions in 2006 and 2007, with pre-action letters sent in 2008 claiming substantial damages totaling approximately £9 million. The claims were issued near the end of the limitation period between August 2012 and April 2013. However, the Court fees initially paid corresponded to much lower claim values than those stated in the pre-action letters. The Claimants subsequently amended their claims shortly before service to reflect the higher values and paid the balance of the fees. The Defendant alleges this was a deliberate scheme to avoid paying correct Court fees on issue and alternatively seeks summary judgment on limitation grounds in some claims.
Legal Issues Presented
- Whether the Claimants' conduct in understating the value of their claims on issue and paying lower Court fees constituted an abuse of process justifying striking out the claims under CPR 3.4(2)(b).
- Whether summary judgment should be granted on the basis that some claims are barred by limitation due to non-payment of the appropriate Court fees at the time of issue.
Arguments of the Parties
Defendant's Arguments
- The Claimants deliberately understated their claim values on issue to pay reduced fees and avoid limitation running, constituting an abuse of process.
- The Claimants knew of previous court decisions condemning this conduct but persisted regardless.
- The Claimants did not pay the appropriate Court fees at the time of issue, undermining the validity of the claims and justifying summary judgment on limitation grounds.
- The public interest requires claimants to pay correct fees at the outset to protect Court administration and fee flow.
Claimants' Arguments
- The conduct was not an abuse of process but a permissible limitation of claims, relying on Court of Appeal authority allowing claimants to limit claims for various legitimate reasons.
- The Claimants intended to pay the full fees eventually and had no dishonest intent; lack of disbursement funding initially prevented paying full fees.
- The statements of value in claim forms were not false but reflected a genuine interpretation of the form and circumstances.
- Striking out would be disproportionate and unjust as the claims are arguable and the Defendant would avoid trial on the merits.
- Alternative remedies such as costs sanctions are available and preferable to striking out.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Attorney-General v. Barker [2000] 1 FLR 759 |
Definition of abuse of process as misuse of court procedure for an improper purpose |
Cited for guiding the assessment of whether the Claimants' conduct was an abuse of process |
| Johnson v. Gore Wood & Co [2002] AC 1 |
Limits on striking out claims; litigants entitled to bring genuine claims |
Used to balance the right to litigate with the power to strike out for abuse |
| Hunter v. Chief Constable of the West Midlands Police [1982] AC 529 |
Inherent court power to prevent misuse of procedure |
Supports broad discretion to prevent abuse of process |
| Khiaban v. Beard [2003] EWCA Civ 358 |
Permissibility of limiting claims to reduce costs and simplify proceedings |
Distinguished as involving no improper intent to avoid fees or limitation |
| Summers v. Fairclough Homes Ltd [2012] 1 WLR 2021 |
Scope and discretion of striking out claims for abuse of process |
Cited for the principle that striking out is a last resort and requires justification |
| Modhvadia and another v. Bannister Bates Solicitors (District Judge Atherton, 2012) |
Finding of abuse of process for artificially low claim value to avoid fees |
Reinforces that similar conduct was previously condemned |
| Partridge and Others v. Blacks Solicitors LLP (District Judge Troy, 2012) |
Abuse of process found for deliberate under-claiming and false statement of truth |
Supports Defendant’s contention of abuse but no strike out ordered |
| Rogers-Holmes v. Blacks Solicitors LLP (District Judge Goldberg, 2014) |
Abuse of process and strike out for fee avoidance scheme |
Supports finding of abuse and strike out in analogous case |
| Tsioupra-Lewis v. Blacks Solicitors (District Judge Pescod, 2015) |
Abuse of process found but strike out declined as disproportionate |
Supports proportionality considerations in deciding sanctions |
| Adams v. Ford [2012] 1 WLR 3211 |
Serious breach and false statement of truth do not necessarily require strike out |
Supports reluctance to strike out despite serious procedural shortcomings |
| Page v. Hewetts [2012] EWCA Civ 805 |
When a claim is "brought" for limitation purposes; requirement for appropriate fee payment |
Applied to determine that failure to pay correct fee means claim not properly brought |
| Barnes v St Helens Metropolitan Borough Council [2007] 1 WLR 879 |
Meaning of "bringing" a claim and allocation of risk when delivering claim form to court |
Supports that claim is brought when claimant delivers form and fee to court office |
| Aly v. Aly (1984) |
Risk allocation and fairness in procedural time limits |
Supports that claimant must do all in their power to bring proceedings |
| Masood v. Zahoor [2009] 1 WLR 746 |
Serious misconduct may justify striking out claim |
Guides consideration of whether misconduct affronts the court to justify strike out |
| Alpha Rocks Solicitors v. Alade [2015] EWCA Civ 685 |
Court not easily affronted; caution in striking out claims |
Supports high threshold for striking out claims |
| Arrow Nominees Inc. v. Blackledge [2000] 2 BCLC 167 |
Misconduct justifying strike out |
Referenced for standard of misconduct amounting to affront to the court |
| Biguzzi v Rank Leisure Plc [1999] 1 WLR 1926 |
Flexibility of CPR powers and proportionality in sanctions |
Supports discretion and proportionality in deciding strike out |
| Asiansky Television v Bayer-Rosin [2002] CPLR 111 |
Case management powers and striking out |
Supports court's flexible approach to strike out applications |
| Aktas v Adepta [2011] QB 894 |
Sanctions fitting the breach; proportionality |
Supports tailored sanctions rather than automatic strike out |
Court's Reasoning and Analysis
The Court carefully analysed the Claimants' conduct in understating the claim values on issue to pay lower Court fees, which they always intended to amend upward later. This was found to be a deliberate scheme to reduce fees and avoid limitation effects, constituting an abuse of process under CPR 3.4(2)(b). The Court relied on established principles that abuse of process involves misuse of Court procedures for improper purposes, citing authoritative cases such as Attorney-General v. Barker and Johnson v. Gore Wood.
The Court distinguished the Claimants' conduct from legitimate claim limitation scenarios, such as in Khiaban v. Beard, where no improper intent existed. Here, the Claimants knowingly engaged in a fee avoidance scheme despite prior judicial condemnation of similar conduct by their solicitors in earlier cases.
The Court rejected the Claimants' argument that the statement of truth did not relate to the understated claim values, holding that the statement of truth applies to the entire claim form including value statements. It found the Claimants did not do all that was in their power to bring their claims properly before the Court, as required by the Limitation Act 1980 and the Court of Appeal’s interpretation in Page v. Hewetts.
However, when considering whether to strike out the claims, the Court balanced the severity of the abuse against the substantial merits of the claims, the absence of fraud or dishonesty, and the prejudice to the Claimants if struck out. It noted that the full fees were eventually paid and that the Defendant’s prejudice was limited. The Court also considered that striking out would deny the Claimants their substantive rights without a trial and that alternative sanctions could be imposed.
Consequently, the Court concluded that striking out would be disproportionate and unjust, applying the guidance from Summers v. Fairclough Homes Ltd and Masood v. Zahoor that striking out is a last resort requiring justification that the misconduct affronts the Court. The Court therefore refused the strike out application but granted summary judgment on limitation grounds for those claims where the appropriate fees were not paid in time.
Holding and Implications
The Court's final decision was as follows:
The application to strike out the claims was refused.
Summary judgment was granted in favour of the Defendant in twelve claims on limitation grounds, with the parties agreeing that one claim was barred and the Court granting summary judgment in eleven others.
This decision means that while the Claimants' fee avoidance conduct was found to be an abuse of process, the Court declined to impose the severe sanction of striking out all claims, preserving the Claimants' opportunity to have their claims heard on the merits. The ruling reinforces the principle that abuse of process sanctions must be proportionate and that substantive justice should not be denied lightly. The summary judgment ruling confirms that failure to pay the correct Court fees at the time of issue can bar claims under limitation rules, emphasizing the importance of compliance with procedural requirements in litigation.