The Court of Appeal in Alpha Rocks Solicitors v Benjamin Oluwadare Alade [2015] EWCA Civ 685 dealt with the issue of when it was appropriate to strike out a claim on the grounds that the claimant has abused the process of the court.

It arose in the context of a claim by a firm of solicitors, the claimant, to recover their costs and expenses from their client, the defendant, in circumstances in which the client alleges that the bills were fraudulently exaggerated or mis-stated. First, let us consider the legal principles on striking out a claim on the grounds of the claimant’s alleged abusive or fraudulent conduct.

The legal principles

Part 3.4(2) of the Civil Procedure Rules provides that ‘[t]he court may strike out a statement of case if it appears to the court… (b) that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings’. CPR part 44.11 (previously part 44.14) makes specific provision in relation to costs assessment proceedings, providing that where ‘it appears to the court that the conduct of a party… before or during the proceedings or in the assessment proceedings was unreasonable or improper’, the court may ‘disallow all or part of the costs which are being assessed’.

In Masood v Zahoor (Practice Note) [2009] EWCA Civ 650, Mummery, Dyson and Jacob LJJ held (relying on Arrow Nominees Inc v Blackledge [2000] BCLC 167) that ‘where a claimant [was] guilty of misconduct in relation to proceedings which is so serious that it would be an affront to the court to permit him to continue to prosecute the claim, then the claim may be struck out for that reason’.

The question of whether the claim should be struck out depends on the particular circumstances of the case. The court also held that it would be a very rare case where, at the end of the trial, it would be appropriate to strike the case out rather than dismiss it in a judgment on the merits.

At paragraph 73, the court pointed out that one of the objects to be achieved by a strike-out was to ‘stop the proceedings and prevent the further waste of precious resources on proceedings which the claimant has forfeited the right to have determined’ (original emphasis).

In Summers v Fairclough Homes [2012] 1 WLR 2004, the Supreme Court approved Masood, and refused to strike out, after a trial on quantum, a massively overstated personal injury claim, when the defendant discovered that the claimant had been playing football, working and leading a normal life, despite claiming to be grossly disabled, on crutches and unable to work.

In paragraph 33 Lord Clarke, giving the judgment of the Supreme Court, said that they had concluded that as a matter of principle, cases should only be struck out on these grounds after a trial in very exceptional circumstances. The court did not think that the conclusions to be reached would be different whether under CPR part 3.4(2) or under the inherent jurisdiction of the court.

In paragraph 49, Lord Clarke said: ‘The draconian step of striking a claim out is always a last resort, a fortiori where to do so would deprive the claimant of a substantive right to which the court had held that he was entitled after a fair trial. It is very difficult indeed to think of circumstances in which such a conclusion would be proportionate. Such circumstances might, however, include a case where there had been a massive attempt to deceive the court but the award of damages would be very small.’

In conclusion, Lord Clarke noted at paragraph 62 that his judgment did not affect the correct approach in a case where an application is made to strike out a statement of case in whole or part at an early stage. Since, one of the objects then is to stop proceedings and prevent a further waste of precious resources on proceedings which the claimant has forfeited the right to have determined.

He said at paragraph 65 that the strike-out power should only be exercised where it was just and proportionate to do so, which would only be in very exceptional circumstances.

In Fari v Homes for Haringey, 9 October 2012, Judge Mitchell struck out a county court personal injury claim at an early stage where the claimant had manifestly exaggerated her injuries, pointing to the waste of taxpayers’ money. In giving permission for contempt proceedings to be brought against the errant claimant in Fari [2013] EWHC 757 (QB), Holroyde J held that there was a strong public interest in contempt proceedings being brought in such circumstances (see Moses LJ in South Wales Fire and Rescue Service v Smith [2011] EWHC 1749 (Admin) at paragraphs 2-7).

Finally, in Katherine Morgan v Spirit Group Ltd (t/a Squares), 5 April 2012, DJ Sparrow, sitting in Norwich County Court, struck out a bill of costs totalling some £113,000 because an ATE premium of £4,260 had been falsely claimed in it, and not removed until the ‘last gasp’ when queried by the client and the court. The district judge held that the signature on the bill was impugned and the whole bill was tainted.

He relied on the need to meet the overriding objective, to marshal the court’s resources and to allocate only an appropriate share to each case. It all arose because of the ‘claimant’s solicitor failing to deal with a very simple point’.

Alpha Rocks Solicitors

The two bills related to separate pieces of litigation in respect of which the solicitors had acted for the client. The judge struck out the solicitors’ claims for the entirety of the two bills, though he left in place two other claims for smaller amounts of fees. He acknowledged that the step he was taking was draconian, but held that the abuses which he had identified both involved a serious misuse of the court’s procedure, rendered further proceedings thoroughly unsatisfactory, and created a serious risk that a fair trial of the claims would be impossible.

The solicitors appealed on five grounds. First, they submitted that the application to strike out was itself an abuse of process. Second, they argued that the judge ought not to have conducted a mini-trial. Third, in relation to the first bill, the judge was wrong to find that the solicitors had not prepared the trial bundles for which they charged, and the order was anyway disproportionate.

Fourth, the second bill should not have been struck out when the judge could not conclude that it was exaggerated, and when he had misunderstood ‘paid counsel’ as meaning counsel had been paid rather than ‘not pro bono counsel’. Finally, the solicitors appealed the costs and other orders made by the judge on a number of grounds.

Vos LJ emphasised the point that there were a range of available remedies when a situation arises in which a party to litigation thinks that his opponent has exaggerated his claim, whether fraudulently or otherwise. Establishing fraud without a trial is always difficult. And it is open to a defendant to seek summary judgment on the claim under CPR part 24.2(a)(i), without seeking a strike-out for abuse of process.

As Masood and Summers supra also demonstrate, striking out is available in such cases at an early stage in the proceedings. But it is only available where a claimant is guilty of misconduct in relation to those proceedings which is so serious that it would be an affront to the court to permit him to continue to prosecute the claim; and where the claim should be struck out in order to prevent the further waste of precious resources on proceedings which the claimant has forfeited the right to have determined.

The other available remedies for such a default follow the proceedings once they have run their course, but are nonetheless important. They include costs and interest penalties and proceedings for contempt of court or criminal prosecution.

Vos LJ made clear that in his judgment: ‘… the court should exercise caution in the early stages of a case in striking out the entirety of a claim on the grounds that a part has been improperly or even fraudulently exaggerated. That is because of the draconian effect of so doing and the risk that, at a trial, events may appear less clear cut than they do at an interlocutory stage.

‘The court is not easily affronted, and in my judgment the emphasis should be on the availability of fair trial of the issues between the parties. As CPR part 3.4(2)(b) itself says, “[t]he court may strike out a statement of case if… the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings’ (emphasis added)”.’

The Court of Appeal held that the judge had been wrong in striking out the claim. The judge had conducted an inappropriate mini-fraud trial without hearing any witnesses. He decided that a solicitor was lying and that other witnesses were untruthful without their being cross-examined.

Vos LJ held ‘…that was a most unsatisfactory state of affairs. Of course, it can very occasionally be appropriate to conclude that there has been fraud without oral evidence being heard, but in this case the judge relied on forensic deduction in a case where oral evidence at least might have put a different complexion on the allegations made’.

Vos LJ was of the view that the judge was not justified in saying that the abuses created a serious risk that a fair trial would not be possible or that it would be unfair to subject the client to the time and cost involved in a detailed assessment.

There was no reason why there could not (and cannot) be a determination on the evidence of the disputes that the judge considered in relation to the invoices and a perfectly normal detailed assessment of the other parts of them. Allowing the appeal, Vos LJ concluded that the judge should not have decided these issues of fraud without disclosure and cross-examination.

Alpha Rock Solicitors demonstrates the threshold to be met for an application for strike-out to be successful is high and will be approached with caution by the courts. As Lord Clarke made clear in Summers, striking out a claim is draconian and is always a last resort.

The threshold to be met within the context of alleged fraud is even greater, and the court must ensure that it has heard oral evidence before passing judgment on a strike-out application.

Masood Ahmed, University of Leicester