Factual and Procedural Background
The appellants ("Threadneedle") appealed against the refusal by Knowles J to strike out proceedings brought against them by the respondents ("Otkritie") as an abuse of process. Otkritie had previously brought a successful action ("Action 1") against several individuals, including an employee of Threadneedle, but not against Threadneedle itself. In the current proceedings ("Action 2"), Otkritie sought to hold Threadneedle liable on the basis of vicarious liability.
Otkritie did not seek management directions in Action 1 concerning the possible joinder of Threadneedle, contrary to the guidelines established in Aldi Stores Ltd v WSP Group plc ("the Aldi guidelines"). Action 1 was a complex trial lasting 46 days, resulting in a judgment against several defendants for over $150 million, with more than $100 million remaining unpaid.
Threadneedle argued that the failure to join them in Action 1 and the failure to follow the Aldi guidelines warranted striking out Action 2 as an abuse of process. Otkritie challenged this and also appealed the judge's costs order.
Legal Issues Presented
- Whether the failure to join Threadneedle in Action 1 and the consequent bringing of Action 2 amounts to an abuse of the court's process justifying striking out the proceedings.
- Whether the Aldi guidelines require mandatory compliance and whether non-compliance mandates striking out.
- The appropriateness of the costs order made against Otkritie for failure to comply with the Aldi guidelines.
Arguments of the Parties
Appellant's Arguments (Threadneedle)
- The judge erred in law by considering a hypothetical scenario regarding what would have happened if management directions had been sought in Action 1; Aldi was a "game changer" mandating strict adherence.
- Non-compliance with the Aldi guidelines alone should suffice to strike out Action 2 as an abuse of process.
- There is a risk of inconsistent findings and prejudice to Threadneedle due to separate proceedings.
- The public interest supports striking out to avoid unnecessary duplication and burden on the court system.
- Subsequent case law, including Stuart v Goldberg Linde and Gladman Commercial Properties v Fisher Hargreaves Proctor, confirms the mandatory nature of the Aldi guidelines.
- It was inappropriate for the judge to speculate on the hypothetical outcome of management directions.
- The failure to comply was deliberate and unjustified, amounting to abuse of process.
Respondent's Arguments (Otkritie)
- The Aldi guidelines concern case management and do not equate to abuse of process.
- The judge was correct to consider the hypothetical scenario and did so without speculation.
- It is unlikely the court in Action 1 would have ordered Threadneedle's joinder due to the complexity and delay it would cause.
- A litigant generally has the right to choose when and whom to sue unless abuse of process is clearly established.
- Non-compliance with the Aldi guidelines is a factor in the broad merits-based assessment but does not automatically amount to abuse.
- There must be a clear causative link between non-compliance and prejudice to establish abuse.
- Case management discretion should not be conflated with the legal question of abuse of process.
- There were legitimate reasons for initially suing the individuals before Threadneedle.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Aldi Stores Ltd v WSP Group plc [2008] 1 WLR 748 |
Established mandatory guidelines for seeking management directions when a second action may be brought against a non-joined party to avoid abuse of process and inefficient use of court resources. |
The court reaffirmed the mandatory nature of these guidelines and emphasized no excuse for non-compliance; however, non-compliance does not mandate automatic striking out but must be assessed in a broad merits-based judgment. |
| Johnson v Gore Wood & Co [2002] AC 1 |
Set out principles for abuse of process, emphasizing a broad merits-based judgment considering private and public interests and the importance of access to courts. |
The court applied these principles to reject a hard-edged rule that a claim must be struck out if it could have been raised earlier, requiring assessment of unfairness or oppression. |
| Stuart v Goldberg Linde [2008] 1 WLR 823 |
Developed Aldi guidelines and emphasized the importance of disclosure of intention to bring further claims for case management efficiency. |
Used to support the importance of compliance with Aldi guidelines but recognized that failure does not automatically lead to striking out. |
| Henley v Bloom [2010] 1 WLR 1770 |
Confirmed that a claim is not abuse of process simply because it could have been brought earlier, protecting the right of access to court under Article 6 ECHR. |
Supported the view that abuse of process requires more than failure to raise a claim earlier; it requires unjust harassment or oppression. |
| Gladman Commercial Properties v Fisher Hargreaves Proctor [2013] EWCA Civ 1466 |
Held Aldi guidelines to be mandatory and failure to comply could amount to abuse of process warranting striking out. |
The court recognized mandatory nature of guidelines and the importance of avoiding wasteful duplication of court time and costs. |
| Clutterbuck v Cleghorn [2017] EWCA Civ 137 |
Applied Aldi guidelines mandatorily but held failure to follow them was an important factor, not necessarily dispositive, in strike out applications. |
The court upheld strike out on two claims due to non-compliance but allowed a third claim where no abuse was found. |
| Football Datco v Stan James Abingdon Ltd [2014] EWHC 504 (Ch) |
Applied Aldi guidelines in the context of amendments to pleadings after trial on liability. |
The court disallowed amendments introducing new claims for failure to comply with Aldi guidelines. |
| Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2014] AC 160 |
Confirmed abuse of process as a procedural concept guiding the exercise of court powers. |
The court relied on this framing to emphasize the procedural, not substantive, nature of abuse of process. |
| Dexter v Vlieland-Boddy [2003] EWCA Civ 14 |
Summarized principles applicable to striking out actions for abuse of process based on prior authorities. |
The court applied these principles to guide the broad merits-based assessment in this case. |
Court's Reasoning and Analysis
The court began by reaffirming the principle that striking out a claim as an abuse of process is a power exercised after comprehensive evaluation of all circumstances, not a discretionary choice with multiple outcomes. The Aldi guidelines, established in Aldi Stores Ltd v WSP Group plc, require parties to seek management directions in the first action when a second action against a non-joined party might be brought, to ensure efficient use of court resources and avoid abuse.
Despite Otkritie's failure to comply with these guidelines, the judge found that even if management directions had been sought, the court would likely not have ordered Threadneedle's joinder due to the complexity and urgency of the trial. This hypothetical scenario was properly considered as part of a broad merits-based judgment assessing whether pursuing Action 2 was unfair or oppressive to Threadneedle.
The court rejected the submission that non-compliance with the Aldi guidelines automatically mandates striking out. Instead, the guidelines are a factor within the broader abuse of process framework established in Johnson v Gore Wood, which balances private and public interests, including access to justice.
The judge also considered the risk of inconsistent findings and prejudice to Threadneedle, concluding that the prejudice was not sufficiently specific or severe to justify strike out. Threadneedle's knowledge of Action 1 and ability to intervene if desired weighed against finding abuse.
Regarding costs, the judge found Otkritie's conduct in failing to comply with the Aldi guidelines fell below acceptable standards and justified a costs order requiring Otkritie to pay 75% of Threadneedle's costs of the application. The court upheld this as within the judge's discretion.
In sum, the court dismissed the appeals, agreeing that the failure to comply with the Aldi guidelines was serious but did not amount to abuse of process warranting strike out, and that the costs order was appropriate to mark disapproval of Otkritie's conduct.
Holding and Implications
The court DISMISSED both the appellants' and respondents' appeals, thereby:
- Affirming that failure to comply with the Aldi guidelines, while serious, does not automatically constitute abuse of process mandating striking out of proceedings.
- Confirming that the court must undertake a broad merits-based assessment, including consideration of hypothetical scenarios and prejudice, before deciding abuse of process.
- Upholding the costs order against Otkritie as a legitimate exercise of judicial discretion to mark disapproval of conduct breaching procedural obligations.
The decision clarifies the procedural importance of the Aldi guidelines but confirms they are not a rigid rule overriding the broader principles of abuse of process and access to justice. No new precedent was created beyond reinforcing existing principles and the mandatory nature of the Aldi guidelines. The direct effect is that Action 2 may proceed and Otkritie must bear a significant portion of the costs related to the strike out application.