High Court strikes out claim for abuse of process and dismisses parallel disclosure application under Bankers’ Book Evidence Act 1879

The High Court has granted an application by a bank to strike out a misrepresentation claim by a property investment SPV, which repeated a similar claim that had been struck out by the court in previous proceedings due to a failure to comply with an unless order. The court also dismissed a parallel disclosure application by the SPV under CPR Rule 31 and the Bankers’ Book Evidence Act 1879 (the BBEA): 889 Trading Limited v Clydesdale Bank Plc & Ors [2021] EWHC 850 (Ch).

This decision is a reassuring one for financial institutions faced with claims which have been struck out in previous proceedings for failure to comply with a court order or with disclosure applications under the BBEA. The decision highlights the court’s scope to: (a) strike out such claims on the basis that there are no reasonable grounds for bringing such claims and if they are an abuse of the court’s process; and (b) dismiss disclosure applications where the documents requested do not properly fall within the definition of “Bankers books” or where an application for early extended disclosure is made in circumstances which are not exceptional.

In the present case, the court was satisfied that the claim form and particulars of claim ought to be struck out pursuant to CPR Rule 3.4(2) on the basis that the particulars of claim disclosed no reasonable grounds for bringing a claim against the bank’s former/current employees. The court also found that it was a clear abuse for the claimant to commence the present proceedings and that it would be manifestly unfair to the bank to subject it to a further claim. In addition, the court highlighted that on the basis of Meng v HSBC Bank Plc [2021] EWHC 332 (QB) (see our banking litigation blog post for further details on the background to this case and the High Court’s decision) the documentation sought by the claimant as part of its disclosure application fell outside the scope of s.7 of the BBEA as it did not properly fall within the definition of “Bankers books”. Also, an application for early extended disclosure will only be ordered if there are exceptional circumstances.

We consider the decision in more detail below.

Background

The claimant property investment SPV purchased a property in 2007 with funding from the first defendant bank (the Bank). Prior to the property purchase, the Bank sought and obtained a number of valuation reports (the Reports). The Bank relied on one of the Reports in making its lending decision. In 2017, the claimant failed to pay interest which had accrued and was due to the Bank. A formal demand for repayment was then made by the Bank, which was not met. The Bank subsequently appointed LPA Receivers over the property. In 2018, the claimant brought a claim against the Bank and the LPA Receivers in the court (the First Action). The claimant’s case was that the Bank had deliberately and dishonestly sought to give the impression that the property was worth more than it knew to be the case in order to induce the claimant to take out the loan with the Bank and to proceed with the purchase of the property. The claimant alleged that an employee of the Bank had made several misrepresentations relating to the Reports. Shortly after the issue of the First Action, the claimant also applied to the court for an injunction to restrain the proposed sale of the property; the court dismissed the application. The court then subsequently struck out the First Action on the basis that the claimant had failed to comply with an unless order to file a Directions Questionnaire; judgment was entered in favour of the Bank and the LPA Receivers.

The present decision is in connection with a second claim brought by the claimant against the Bank and former/current Bank employees. The allegations made largely overlapped with those made against the Bank and the LPA Receivers in the First Action.

The Bank applied to the court to strike out the claim form and particulars of claim on the basis that: (i) there were no reasonable grounds for bringing the claim; and (ii) they were an abuse of the court’s process or otherwise likely to obstruct the just disposal of the proceedings (the Strike Out Application). The Bank argued that the substance of the claim against the Bank as advanced in the present proceedings arose out of the same complaint made by the claimant since the appointments of the LPA Receivers over the property and repeated the claims from the First Action in relation to the alleged misrepresentations. The Bank also argued that to the extent that any claims did not overlap with those from the First Action they were pleaded in insufficient detail or did not correspond to any recognisable causes of action.

The claimant also applied to the court seeking the disclosure of certain documents (such as those concerning the alleged misrepresentations, in particular the contents of a memorandum and file note from 2007) pursuant to CPR Rule 31 and s.7 of the BBEA (the Disclosure Application).

Decision

The High Court found in favour of the Bank, granting the Bank’s Strike Out Application and refusing the claimant’s Disclosure Application for the reasons explained below.

The Strike Out Application

Principles relating to no reasonable grounds and abuse of process

The court noted that the principles to be applied in respect of strike out under CPR Rule 3.4(2)(a) were well established and included examples of cases falling within the description of where a statement of case failed to disclose reasonable grounds for bringing the claim.

As to CPR Rule 3.4.(2)(b) and the circumstances in which the court might strike out a statement of case on the basis that it is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings, the court highlighted the following key principles:

• As per Tinkler v Ferguson [2021] EWCA Civ 18, the power to strike out for abuse of process is a flexible power unconfined by narrow rules. It exists to uphold the private interest in the finality of litigation and the public interest in the proper administration of justice and can be deployed for either or both purposes. The power must be used with care with a view to achieving substantial justice in a case where the court considers that its processes are being misused.
• As per Harbour Castle Ltd v David Wilson Homes Ltd [2019] EWCA Civ 505, if a deliberate decision was taken not to comply with the unless order, that is liable to make the second action an abuse of process, at least if it can be said that the party in question ought to have used the opportunity provided by the first action to resolve its dispute with the other party.
• It is necessary to consider with some care the circumstances in which the decision was taken not to comply with the unless order, as against the fairness or otherwise of subjecting the other party to the second action in those circumstances, the extent to which the second action might place a disproportionate burden on the court’s resources, and general considerations as to whether allowing the claimant to have a second bite at the cherry might be considered to bring the administration of justice into disrepute.

Application of no reasonable grounds and abuse of process principles

The court held that it was satisfied that the claim form and particulars of claim ought to be struck out pursuant to CPR Rule 3.4(2). The court agreed with the Bank that the particulars of claim disclosed no reasonable grounds for bringing a claim against the Bank’s former/current employees. The court commented that the allegations had been made without stating the facts necessary to formulate a complete cause of action; the Bank was entitled to know the case it had to meet.

The court also held that it was a clear abuse for the claimant to commence the present proceedings and that it would be manifestly unfair to the Bank to subject it to a further claim. In the court’s view, by pursuing the present proceedings, the claimant was essentially seeking to bring before the court the issues and the subject matter of previous proceedings which had been struck out in consequence of a failure to comply with an unless order. Although the claim was now more widely expressed in terms of conspiracy and the involvement of others, it was still essentially the same core complaint. The court also noted that the claimant had taken a deliberate decision not to pursue the opportunity provided by the First Action to seek appropriate remedies in relation to the matters now complained of in the present proceedings, and to adopt a different course. Also, the court said that the particulars of claim failed to set out sufficient facts to indicate what the claim was about, was incoherent, made no sense, and did not disclose any legally recognisable claim against the Bank.

Accordingly, the court struck out the claimant’s claim form and particulars of claim.

The Disclosure Application

Interpretation of s.7 BBEA and CPR Rule 31

The court noted some key principles relating to s.7 of the BBEA and CPR Rule 31:

• s.7 of the BBEA can only be invoked on the application of a “a party to legal proceedings”.
• The BBEA was of very narrow application, and did not extend to the categories of documents sought by the claimant. It is limited to “Bankers’ books”, which is defined by s.9 as “ledgers, tables, cash books, account books, and all other books used in the ordinary business of the bank” (as per Meng v HSBC Bank Plc).
• Disclosure in the Business and Property Courts now falls within the Disclosure Pilot provided for by CPR Practice Direction 51U; the Disclosure Application in the present case was therefore to be regarded as one for early extended disclosure.

Application of interpretation of s.7 BBEA and CPR Rule 31

The court held that the basis for the Disclosure Application had not been made out and that it ought therefore to be dismissed. The court commented that on the basis of Meng v HSBC Bank Plc the documentation sought by the claimant fell outside the scope of s.7 of the BBEA as it did not properly fall within the definition of “Bankers books”. The court also said that so far as an application for early extended disclosure was concerned, the authorities are clear to the effect that disclosure in a general sense will only be ordered ahead of the close of pleadings in exceptional circumstances; the present circumstances could not properly be described as exceptional particularly bearing in mind that the claimant was already on notice of the essential contents of the documents of which they were seeking disclosure.

Accordingly, the court dismissed the Disclosure Application.

Note: In July 2021, the claimant applied to the Court of Appeal for permission to appeal.

In November 2021, the Court of Appeal refused the claimant's application for permission to appeal.