The Court of Appeal reminded first instance judges that the decision to strike out a claim is a last resort, which should only occur after consideration of a two stage test in which showing an abuse of process is only the first step.
Full judgment, dated 31 July 2020
C’s case had been struck out on an application to transfer it to part 7 after a significant delay in recognising that the claim was no longer suitable for part 8. The CoA, despite recognising that C’s solicitors’ conduct was an abuse of the court’s process, reiterated that abuse was not enough in and of itself to justify strike-out and that in fact it was a last resort, only to be used after considering a two-stage test that assessed the proportionality of strike-out as against other, financial sanctions. The appeal was allowed and C’s claim was reinstated.
These proceedings arose out of C’s solicitors issuing C’s claim under Part 8 and requested a stay of proceedings on the false premise that the claim remained a low value RTA claim, when in fact they knew it was extremely valuable. A district judge had struck out C’s claim when he sought to have his claim transferred to part 7 – the question was whether she was right to do so.
Coulson LJ gave the judgment of the court. He started by setting out the relevant features of the pre-action protocols (para 5 onwards). Notably he raised the fact that the PI protocol (for PI claims of more than £25,000) encourages early selection of joint quantum experts save for cases likely to be allocated to the multi-track (11). It was also noted that the part 8 procedure permits ex parte applications for stays post-issue, in contrast to other PAPs that allow for on notice applications for stays where there is a limitation issue. Finally, Coulson LJ cited paragraph 16 of the practice direction on pre-action conduct and protocols, which provides that non-compliance with the protocols will be considered when deciding on costs and interest.
From paragraph 16 the facts of the case are set out. C, who earned a pre-accident salary of £130,000 a year, suffered whiplash injuries in an accident on 1 September 2014. A CNF was properly submitted pursuant to the RTA protocol (because at that point the value of the claim was not obvious) and liability was admitted. By November 2014 there was no definitive prognosis and a neurologist was recommended. C was still off work (though being paid) with headaches and dizziness.
Because of C’s solicitors’ delay no stage 2 pack was sent. No progress was made over 2015 and 2016 despite D chasing an update. In January 2016 a neurologist provided a report on C noting that C was struggling with light and high-pitched tinnitus and was unfit for work. He prognosed a full recovery. However, a further report in early 2017 was more negative in prognosis, stating that C’s condition had deteriorated and was now chronic. C had been dismissed from his job in December 2015.
At this point Coulson LJ notes that “it can be said with confidence that [C’s solicitors] knew or ought to have known that the claim was worth far in excess of £25,000. They therefore needed to rethink their PAP strategy and they needed to tell the respondent what had happened. For reasons which are not explained, they did neither of those things.” (23)
Instead they issued a part 8 claim form claiming damages in excess of £1,000 and asking for a stay to complete the RTA protocol. This was granted on 31 July 2017, on the proviso that the claim form and order must be sent to D’s solicitors by 20 August 2017. This was not done until 15 February 2018. On 1 September 2017 the limitation period expired.
On 16 August 2018, four days before the expiry of the stay, C’s solicitors emailed D’s solicitors and told them for the first time about the termination of C’s employment and his unfitness for work. The next day the medical reports and a witness statement were served. C then applied to lift the stay and for transfer to part 7. This was permitted ex parte but D made an application to set aside that order and strike out the claim.
DJ Campbell, hearing that application, concluded that there had been an abuse of process, which caused D prejudice by way of being unable to set a proper reserve, not being able to go through the proper PI protocol, including having C examined by its own expert and by being deprived of a limitation defence by the part 8 claim form. She therefore struck out the claim rather than transfer it to part 7. She also pointed out that C’s solicitors had failed to serve the amended claim form and particulars until 26 September 2018 (out of time) and that had she needed to she would have denied them relief from sanctions, resulting in a strike-out in any case (31-36).
Judge Wood QC, hearing the first appeal, agreed. He found that the judge had a discretion to strike out a claim stayed under part 8 because there was a discretion in whether or not to lift the stay. He therefore found that the judge was entitled to consider abuse of process. He said that the categories of abuse of process are various and not closed and that deceit was not a prerequisite (37-40).
However, he disagreed with the approach on relief from sanctions, saying that where the stay had been lifted, it would have been disproportionate to refuse relief (41).
Coulson LJ set out the relevant legal principles from paragraph 42. He stated that the “classic summary of abuse of process” derives from Hunter v Chief Constable of West Midlands Police  AC 529, in which Lord Diplock stated that any court of justice must have an inherent power to use of its procedure rules that is manifestly unfair or would “bring the administration of justice into disrepute amongst right-thinking people.” He acknowledged that the categories of the same would be varied. In the instant case, both parties had adopted the definition from Her Majesty’s Attorney General v Paul Evan John Barker  1 FLR 759, namely “a use of the court process for a purpose or in a way which is significantly different from the ordinary and proper use of the court process” (43).
Clearly a failure to comply with the CPR or its practice directions could amount to an abuse (44), but a claim must be clearly an abuse before it can be struck out and strike-out should be seen as a last resort (see Summers v Fairclough Homes Limited  UKSC 26) (45).
Coulson LJ noted that in Alpha Rocks Solicitors v Alade  EWCA Civ 685 the CoA overturned a strike-out order where an abuse of process was made out, because “the remedy should be proportionate to the abuse.” It was noted that refusing to allow a citizen to litigate their case is, on its face, a denial of their right of access to the courts (47-48).
From paragraph 49 onwards the court considered the only authority on lifting a part 8 stay under PD8B, being Lyle v Allianz Insurance PLC (2017), unreported, where there had been lengthy delay post-limitation and a stay that had lasted over two years.
Coulson LJ confirmed that the court in Lyle was right to conclude that the court had a wide discretion to give directions that a claim be transferred to part 7 even where limitation had elapsed (51). HHJ Pearce had then gone on to refuse to lift the stay, and had struck out the claim, on the grounds that the claimant’s solicitor’s conduct had been so bad, and the prejudice to the defendant sufficient, that compensation by costs alone was not appropriate.
Coulson LJ found that two issues arose – first, the approach to the substantive issue of lifting the stay or not, and, second, the assumption that abuse of process applies to the RTA protocol process.
In relation to the second, at para 55 onwards he confirmed that it was correct that the concept of abuse of process applied to the RTA protocol process. The court expects the parties to comply with the protocol, so non-compliance can constitute an abuse of process (56-57). The protocol is a detailed set of rules that it would be counter-intuitive to exclude from the abuse of process doctrine (58). The protocols are indivisible from the CPR (59). And the availability of contempt of court proceedings for pre-action statements (see Jet 2 Holidays Limited v Hughes and Another  EWCA Civ 1858) meant that abuse of process must also, by analogy, be applicable (60).
In relation to the correct approach to disputed stays, transfers and applications to strike-out, Coulson LJ was concerned that the focus on the question of whether or not to lift the stay and transfer, which is entirely discretionary, tended to obscure what should be the real focus in such situations, namely whether or not the court should strike out the claim. That question is not a single stage question (namely, has there been an abuse of process) but also involves a further stage (given the abuse of process that has occurred, is it right to strike out the claim). In particular, the concept or proportionality was important to bear in mind (62-63).
Coulson LJ did not believe DJ Campbell had applied this two-stage process, and HHJ Wood QC clearly had not because he had held that it did not apply (65). This led to a flawed approach because it led her to decide not to exercise her discretion to lift the stay, and therefore, because she had no other option, to strike the claim out. Coulson LJ stated that strike-out should not become an “administrative afterthought”, but should be the result of a two-stage test (66-67).
This test was applied at paras 68 onwards. Coulson LJ found that DJ Campbell had more than demonstrated abuses of process. He dismissed the idea that one had to show “manifest unfairness” to the other side in order to show an abuse of process. Manifest unfairness is relevant to the second limb of the test (69-72).
From para 73 he considered the exercise of the discretion (the second stage). He described strike-out as an option, but “not the only, or even the primary, solution.” He found that DJ Campbell, as well as not having explicitly considered the second stage, had made findings as to the prejudice to D that were not evidenced and were unjustified, as well as failing adequately to balance the prejudice to D against the prejudice to C if his claim was struck out (75). He identified the principle abuse and prejudice to D here as the delay of one year in knowing the full value and detail of the claim (76). He stated that usually such delays are capable of being compensated for in costs or other financial circumstances. He therefore framed the question as whether there was evidence of “any wider prejudice” to D that would justify strike-out (77).
Coulson LJ addressed the purported prejudices in turn. In terms of the use of the wrong protocol, that was only evident from autumn 2017. Further, the use of the different protocol would not have resulted in any significantly different management of the case. The parties would always have had their own experts and nothing else about the case management would have been done differently had the claim been brought earlier. Earlier medical examination would not have made any difference to the treatment or rehab offered. There was no actual prejudice in the use of the different protocol for that year (78-83).
Further, Coulson LJ found that there had not been any abuse of the limitation provisions. Had the delay not occurred a part 7 claim would have been issued when the part 8 claim was. He concluded that D was not deprived of a limitation defence because a claim form was issued in time. Moreover, the claim had been admitted before the claim form was issued. There was “delay, but not deprivation.” (85)
In relation to the prejudice with regards to the insurer’s reserve, the DJ had no evidence of the same and accordingly it was not appropriate for her to bear it in mind (86-87).
By contrast the prejudice to C was significant. A professional negligence claim against his solicitors would involve significant risk, uncertainty and cost and would have been an “inferior” loss of a chance claim when compared to the original claim against a defendant that had admitted liability (89-90).
None of those matters had been considered by DJ Campbell and accordingly she erred in law. The strike-out was disproportionate in all the circumstances (91).
As to the appropriate sanction, it was for D to be awarded its indemnity costs until the hearing before DJ Campbell and for C to be deprived of his interest over that period (92-95).
The final issue was in regards to the application for relief for late service of the claim documents. It was accepted that the default was significant and serious and there was no good reason for it (96). Coulson LJ was clear that the default was serious and was only exacerbated by the unhappy history (99), but given that liability was admitted and the medical reports (which were the core of C’s claim) had been served on 17 August 2018 the effect of the delayed service was ameliorated (100). Relief should therefore be granted.
Interestingly (and perhaps because he was conscious that the court’s approach differed from the increasingly uncompromising approach that DJs are generally taking towards incompetent solicitors in PI proceedings) Coulson LJ specifically noted that he was differing from two judges who were experienced in this type of litigation, but said he was “satisfied that that is primarily due to the different arguments and more extensive authorities which were deployed by leading counsel on this appeal.” (102)