Page 1

ICLR: Chancery Division/2001/Securum Finance Ltd v Ashton and another - [2001] Ch 291

[2001] Ch 291

Court of Appeal

Securum Finance Ltd v Ashton and another

2000 Jan 11; June 21

Chadwick LJ and Rattee J

Practice - Pleadings - Striking out - Abuse of process - Earlier proceedings struck out for delay - Alternative
cause of action with unexpired limitation period - Whether second action to be struck out as abuse of process
- CPR rr 1.1, 3.41

In 1989 a bank commenced proceedings against a debtor for the repayment of a loan, and against the two
guarantors of the loan, a husband and wife who had granted the bank a legal charge over their property. In
1997 those proceedings were struck out for delay. In 1998 the plaintiff, as the bank's assignee, brought a
second action against the defendant guarantors, claiming to enforce the bank's rights to payment under the
legal charge and to enforce its security by orders for possession and sale of the mortgaged property. The
defendants contended that the second action involved relitigating issues raised in the first, and applied to
strike it out on grounds of delay and abuse of process. The judge declined to strike it out, considering himself
bound by previous authority to the effect that, in the absence of intentional and contumelious default, a
litigant's action should not be struck out for delay or abuse of process where the relevant limitation period
remained unexpired.

On the defendants' appeal

Held, (1) that it was no longer open to a litigant whose action was struck out for delay to rely on the principle
that a second action commenced within the limitation period would not be struck out save in exceptional
circumstances; that in actively managing litigation, and in deciding whether to strike out a claim under CPR r
3.4, the court had to consider the overriding objective in rule 1.1(1) of doing justice and decide whether the
claimant's wish to pursue a second case against the same opponent outweighed the need to allot the court's
limited resources to other cases; and that in failing to give any weight to that objective the judge erred in his
approach to the exercise of his discretion (post, pp 308B-D, 309D-H).

(2) Dismissing the appeal, that the claim to payment involved relitigating an issue already raised in the earlier
proceedings and as such was an abuse of process; but that the claims to enforce the security under the legal
charge, which were not (and did not need to be) raised in the earlier proceedings, could not be so
 Page 2

categorised; that, if the issue whether there was a debt secured by the legal charge would have to be
litigated in any event, the need to consider the allocation of the court's resources had little weight; and that, in
the circumstances, to strike out the claim for payment as a mark of the court's disapproval of the delay in the
first action would be a wrong exercise of discretion (post, pp 315D-316F, 317C).

Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426, CA considered.

Birkett v James [1978] AC 297, HL(E) distinguished.

Decision of Mr Ian Hunter QC sitting as a deputy judge of the Chancery Division affirmed on different
grounds.

1 CPR r 1.1: "(1) These Rules are a new procedural code with the overriding objective of enabling the court to deal with
cases justly. (2) Dealing with a case justly includes, so far as practicable  (e) allotting to it an appropriate share of the court's
resources, while taking into account the need to allot resources to other cases."

R 3.4: "(2) The court may strike out a statement of case if it appears to the court - (a) that the statement of case discloses no
reasonable grounds for bringing or defending the claim; (b) that the statement of case is an abuse of the court's process "

[2001] Ch 291 Page 292

The following cases are referred to in the judgment of Chadwick LJ:

Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426; [1998] 2 All ER 181, CA

Barclays Bank plc v Maling (unreported) 23 April 1997; Court of Appeal (Civil Divison) Transcript No 849 of
1997, CA

Barclays Bank plc v Miller [1990] 1 WLR 343; [1990] 1 All ER 1040, CA

Barrow v Bankside Members Agency Ltd [1996] 1 WLR 257; [1996] 1 All ER 981, CA

Birkett v James [1978] AC 297; [1977] 3 WLR 38; [1977] 2 All ER 801, CA and HL(E)

Choraria v Sethia The Times, 29 January 1998; Court of Appeal (Civil Divison) Transcript No 7 of 1998, CA

Co-operative Retail Services Ltd v Guardian Assurance plc (unreported) 28 July 1999; Court of Appeal (Civil
Divison) Transcript No 1391 of 1999, CA

Department of Transport v Chris Smaller (Transport) Ltd [1989] AC 1197; [1989] 2 WLR 578; [1989] 1 All ER
 Page 3

897, HL(E)

Grovit v Doctor[1997] 1 WLR 640; [1997] 2 All ER 417, HL(E)

Henderson v Henderson (1843) 3 Hare 100

Khan v Golechha International Ltd [1980] 1 WLR 1482; [1980] 2 All ER 259, CA

Lace Co-ordinates Ltd v NEM Insurance Co Ltd (unreported) 19 November 1998; Court of Appeal (Civil
Divison) Transcript No 1717 of 1998, CA

Miles v McGregor (unreported) 23 January 1998; Court of Appeal (Civil Divison) Transcript No 51 of 1998,
CA

National Westminster Bank plc v Kitch [1996] 1 WLR 1316; [1996] 4 All ER 495, CA

SCF Finance Co Ltd v Masri (No 3) [1987] QB 1028; [1987] 2 WLR 81; [1987] 1 All ER 194, CA

Shikari v Malik The Times, 20 May 1999; Court of Appeal (Civil Divison) Transcript No 922 of 1999, CA

Staffordshire County Council v Barber[1996] ICR 379; [1996] 2 All ER 748, CA

UCB Corporate Services Ltd (formerly UCB Bank plc) v Halifax (SW) Ltd The Times, 23 December 1999;
Court of Appeal (Civil Division) Transcript No 2076 of 1999, CA

Westminster City Council v Clifford Culpin & Partners (unreported) 18 June 1987; Court of Appeal (Civil
Division) Transcript No 592 of 1987, CA

The following additional cases were cited in argument:

Axa Insurance Co Ltd v Swire Fraser Ltd The Times, 19 January 2000; Court of Appeal (Civil Division)
Transcript No 2200 of 2000, CA

Biguzzi v Rank Leisure plc[1999] 1 WLR 1926; [1999] 4 All ER 934, CA

Bradford & Bingley Building Society v Seddon [1999] 1 WLR 1482; [1999] 4 All ER 217, CA

Cheah Theam Swee v Equiticorp Finance Group Ltd [1992] 1 AC 472; [1992] 2 WLR 108; [1991] 4 All ER
989, PC
 Page 4

Culbert v Stephen G Westwell & Co Ltd [1993] PIQR P54, CA

Gardner v Southwark London Borough Council (No 2) [1996] 1 WLR 561, CA

James Lazenby & Co v McNicholas Construction Co Ltd [1995] 1 WLR 615; [1995] 3 All ER 820

Janov v Morris[1981] 1 WLR 1389; [1981] 3 All ER 780, CA

Lockyer v Ferryman (1877) 2 AppCas 519, HL(Sc)

Modica v Shell UK Ltd (unreported) 13 July 1999; Court of Appeal (Civil Division) Transcript No 1182 of
1999, CA

R v Director of Public Prosecutions, Ex p Kebilene[2000] 2 AC 326; [1999] 3 WLR 972; [1999] 4 All ER 801,
HL(E)

R v Khan (Sultan) [1997] AC 558; [1996] 3 WLR 162; [1996] 3 All ER 289, HL(E)
[2001] Ch 291 Page 293

Ramsarran-Ramphal v Tom Kharran & Co (unreported) 15 February 1996; Court of Appeal (Civil Divison)
Transcript No 481 of 1996, CA

UCB Bank plc v Chandler (unreported) 16 April 1999; Court of Appeal (Civil Division) Transcript No 656 of
1999, CA

APPEAL from Mr Ian Hunter QC sitting as a deputy judge of the Chancery Division

By writ and statement of claim dated 29 September 1998, and amended on 10 June 1999, the
plaintiff, Securum Finance Ltd, claimed against the defendants, Peter John Ashton and Pauline
Hilda Ashton, inter alia, (1) payment of all money due to the plaintiff under the legal charge between
Arbuthnot Latham Bank Ltd (whose interest had been assigned to the plaintiff) and the defendants
dated 7 March 1989; (2) interest; (3) a declaration that, as at 1 April 1998, the amount due to the
plaintiff under such legal charge amounted to £1,550,798.58; (4) in default of agreement as to the
amount due to the plaintiff, all necessary accounts and inquiries; (5) foreclosure or sale; (6) the
appointment of a receiver of the property, known as "St Just", 1, Powell Road, Buckhurst Hill,
Essex (Land Registry Title No EX249219); (7) delivery by the defendants to the plaintiff of vacant
possession of that property.

By summons dated 10 March 1999 the defendants applied for interlocutory relief including an order
that the plaintiff's claim be struck out under RSC Ord 18, r 19 or the court's inherent jurisdiction, on
the grounds that it constituted an abuse of process in that it sought to relitigate the same issues as
were or could have been litigated in previous proceedings between the plaintiff and the defendants
in action number 1989 A No 3474, or that it disclosed no reasonable cause of action and was
frivolous and vexatious. They also sought a summary determination of issues under RSC Ord 14A
 Page 5

and summary judgment on their counterclaim for a declaration that they were entitled to have their
property discharged from the legal charge. On 19 July 1999 Mr Ian Hunter QC, sitting as a deputy
judge of the Chancery Division, refused the defendants' application.

By notice of appeal dated 13 August 1999 the defendants appealed on the grounds, inter alia, that
(1) the judge erred in law in holding that the plaintiff's claim was not an abuse of process; (2) the
judge erred in concluding that (i) the claim was properly characterised as a claim under a legal
charge for which a 12-year limitation period was prescribed, (ii) although the plaintiff's previous
action on the guarantee was dismissed for want of prosecution, that did not mean the current
proceedings under the legal charge were an abuse of process, (iii) that was the consequence of the
reasoning of the House of Lords in Birkett v James [1978] AC 297 and (iv) the general rule
requiring finality of litigation was of no application because the first action was dismissed for want of
prosecution rather than after a determination of the merits; (3) the judge also erred in finding that
the legal charge created a self-standing obligation and that it was only "to some extent true" that
the plaintiff would have to establish that a debt was owed by the principal debtor, Trafalgar
Holdings Ltd, and that the defendants' guarantee for that debt was enforceable; (4) the judge
should have held that it was oppressive to invoke the court's jurisdiction a second time to prove an
issue which should have been litigated to a conclusion in a
[2001] Ch 291 Page 294

previous action, at a time when the defendants would be prejudiced on that issue.

The facts are stated in the judgment of Chadwick LJ.

James Guthrie QC and Peter Knox for the defendants. The second action was an abuse of the process of
the court because it involved relitigating allegations which the plaintiff had been debarred from seeking to
prove in the first action. Since the coming into force of the Civil Procedure Rules 1998, the principles in
Birkett v James [1978] AC 297 regarding striking out no longer apply: see Biguzzi v Rank Leisure plc [1999]
1 WLR 1926, 1931-1932, 1934 and Axa Insurance Co Ltd v Swire Fraser Ltd The Times, 19 January 2000;
Court of Appeal (Civil Division) Transcript No 2200 of 1999. Under the new rules, the court has power to
strike out the action if it appears to be an abuse of process: see CPR r 3.4(2). In exercising that power the
court is bound to give effect to the overriding objective of dealing with cases justly which includes ensuring
they are dealt with expeditiously and fairly: see CPR rr 1.1 and 1.2. Had the judge applied those rules, he
would or should have struck out the second action as an abuse of process.

The doctrine of abuse of process should be applied in a flexible manner: see Bradford & Bingley Building
Society v Seddon [1999] 1 WLR 1428, 1492-1493. The underlying policy reasons for striking out a second
action as an abuse of process when an earlier action in respect of the same subject matter has been
dismissed are (1) to maintain effective discipline over litigants and to ensure that misconduct is visited with
appropriate sanctions (see Janov v Morris [1981] 1 WLR 1389, 1395); (2) to ensure that no undue harm is
caused to other litigants wishing to have their cases heard (see Arbuthnot Latham Bank Ltd v Trafalgar
Holdings Ltd [1998] 1 WLR 1426, 1436); (3) to prevent oppression to the individual defendant by re-litigation,
and the correspondent need to ensure finality in litigation (see Lockyer v Ferryman (1877) 2 AppCas 519,
530). Each of these policy reasons applies to the present case.
 Page 6

Even before the introduction of the Civil Procedure Rules 1998, the courts showed an increasing readiness
to enable a second action to be struck out by characterising the plaintiff's conduct in the first action as an
abuse of process. A progressive expansion of the scope of the first limb of Birkett v James [1978] AC 297,
318 (contumelious default/abuse of process) or the development of an independent abuse of process
doctrine, making it more likely that courts will not only strike out the first action even where the limitation
period has yet to expire but also strike out any second action based on the same subject matter, can be
identified from Culbert v Stephen G Westwell & Co Ltd. [1993] PIQR P54; Ramsarran-Ramphal v Tom
Kharran & Co (unreported) 15 February 1996; Court of Appeal (Civil Divison) Transcript No 481 of 1996; the
Arbuthnot Latham case [1998] 1 WLR 1426, 1436-1437; Choraria v Sethia The Times, 29 January 1998;
Court of Appeal (Civil Divison) Transcript No 7 of 1998 and Lace Co-ordinates Ltd v NEM Insurance Co Ltd
(unreported) 19 November 1998; Court of Appeal (Civil Division) Transcript No 1717 of 1998. Thus, even if
the Birkett v James principles were to be applied according to their current, more flexible interpretation, they
would still require the striking out of the present action.
[2001] Ch 291 Page 295

The underlying premise of Birkett v James is that the courts will not generally dismiss actions within their
limitation period, primarily because any delay within the limitation period cannot be characterised as
inordinate; secondarily because, so long as the limitation period remains unexpired, a second action may still
be brought which would not be susceptible to striking out for abuse of process: see James Lazenby & Co v
McNicholas Construction Co Ltd [1995] 1 WLR 615, 625. The principle has no bearing in the present case,
where the court is considering the fate of the second action after the first action has been struck out on the
ground of inordinate and inexcusable delay causing prejudice to the defendants. The judge was wrong to see
Birkett v James as a bar to any application to strike out the second action as an abuse. Even if it has such
effect, the courts should now make that inroad into the Birkett v James principles contemplated by Lord
Woolf in Grovit v Doctor [1997] 1 WLR 640, 643-644 and in the Arbuthnot Latham case [1998] 1 WLR 1426,
1433. [Reference was also made to Department of Transport v Chris Smaller (Transport) Ltd [1989] AC
1197, 1202.]

A further reason for revisiting the Birkett v James principles is the defendants' right "in the determination of
[their] civil rights and obligations  to a fair hearing within a reasonable time" under article 6(1) of the
European Convention for the Protection of Human Rights and Fundamental Freedoms (1953) (Cmd 8969).
The court must have regard to the Convention, as incorporated by the Human Rights Act 1998, even though
it is not yet part of domestic law: see R v Khan (Sultan) [1997] AC 558; R v Director of Public Prosecutions,
Ex p Kebilene [2000] 2 AC 326; [1999] 3 WLR 175, 187; [1999] 3 WLR 972, 982; Lester and Pannick,
Human Rights Law and Practice (1999), pp 136, 148 and Starmer, European Human Rights Law (1999), pp
333, 379.

As to the merits of the second action, a mortgagee is entitled to pursue his remedies consecutively; he can
first bring a claim on the covenant for repayment and subsequently bring a separate claim for possession
and sale or foreclosure: see Cousins, The Law of Mortgages (1989), pp 199-200 and Cheah Theam Swee v
Equiticorp Finance Group Ltd [1992] 1 AC 472, 476. Also, if the plaintiff had properly conducted the first
action and proved its money claim and such claim had not been satisfied by the defendants, the plaintiff
could have brought further proceedings under its legal charge to enforce its other remedies. What is
objectionable in the present case is that the plaintiff is using the legal charge to prove what he was stopped
from proving in the first action because it was struck out. A mortgagee has no right to relitigate in such
circumstances, ie, to use consecutive actions repeatedly to try to prove the same underlying allegations
going to the prior question of liability. Moreover, where there are two relevant instruments (the contract of
guarantee and the mortgage containing the covenant for repayment) the principle in Henderson v Henderson
(1843) 3 Hare 100 requires claims under both instruments to be brought in the same action. On that basis,
the plaintiff's claim under the covenant in the legal charge should be struck out as an abuse.

By parity of reasoning, the plaintiff's defence to the defendant's counterclaim for discharge of the legal
charge also fails.
 Page 7

[2001] Ch 291 Page 296

Anthony Mann QC and Anthony de Garr Robinson for the plaintiff. There is nothing in the Civil Procedure
Rules 1998 which makes an action that was not an abuse of process immediately before they came into
effect an abuse of process afterwards. Biguzzi v Rank Leisure plc [1999] 1 WLR 1926 deals with the court's
reaction to a default under the old regime and what the attitude of the new regime should be to it: it does not
retrospectively make a default what was not previously a default. The matters relied on by the defendants as
rendering the present action an abuse are not ones which depend on the new Rules and would, moreover,
have made any second action an abuse where the first was struck out on the basis of inordinate delay; yet
Birkett v James [1978] AC 297 is completely inconsistent with that proposition. [Reference was also made to
Gardner v Southwark London Borough Council (No 2) [1996] 1 WLR 561 and Modica v Shell UK Ltd
(unreported) 13 July 1999; Court of Appeal (Civil Division) Transcript No 1182 of 1999.] The cases relied
upon as indicating a recent development of the Birkett v James principles were actually recognising a class
of cases which were neither pure want of prosecution or delay cases nor contumelious default cases, but
formed a third class categorised as abuses of process. However, as Arbuthnot Latham Bank Ltd v Trafalgar
Holdings Ltd [1998] 1 WLR 1426 recognised, it did not follow that a second action should automatically be
treated as an abuse: see also Barclays Bank plc v Maling (unreported) 23 April 1997; Court of Appeal (Civil
Divison) Transcript No 849 of 1997.

Since the first action was struck out for inordinate delay, there is nothing in the authorities or in principle
which makes the second action an abuse of process. It is now too late to contend that the first action could or
should have been struck out as an abuse of process. In any event, disobedience to one rule, namely, the
setting down provision, is not by itself an abuse: see Modica v Shell UK Ltd (unreported) 13 July 1999; Court
of Appeal (Civil Division) Transcript No 1182 of 1999, as contrasted with Choraria v Sethia The Times, 29
January 1998; Court of Appeal (Civil Division) Transcript No 7 of 1998 (where an element of mens rea was
required as well as a sequence of disobedience).

The process of making inroads into the Birkett v James principles contemplated by the defendants actually
involves overturning it altogether. That was not contemplated in Grovit v Doctor [1997] 1 WLR 640 or the
Arbuthnot Latham case. Rather, they contemplated adding a further string to the court's bow, namely striking
out for abuse of process. The basic principle under Birkett v James, that inordinate delay in the first action
does not by itself justify striking out the second, still holds good.

On the question of a mortgagee's consecutive remedies, while it is true to say that the plaintiff was stopped
from proving its claim in the first action, there is nothing to make it improper to pursue it in a second action
other than the fact that it is a second bite at the cherry. In any event, the plaintiff is using the charge to do
what it is entitled to do on any footing: to enforce its separate remedies on the covenant and, more
importantly, its right to possession. Unless the original money claim was dismissed on its merits, so that no
money is now owing, there is no reason why the charge should not be relied on to enforce whatever financial
entitlement the plaintiff has under it.
[2001] Ch 291 Page 297

As to the Henderson v Henderson point, there is no reported case in which it has applied where the earlier
proceedings have been other than a final hearing. Here there has been no such thing. This point is no
answer to the plaintiff's proprietary claims, and there is no good reason why the covenant should have been
separated out and relied upon in advance of the charge being sued upon. The defendants' separate liabilities
under the guarantee and the charge can be separately sued upon: see Cheah Theam Swee v Equiticorp
Finance Group Ltd [1992] 1 AC 472 and UCB Bank plc v Chandler (unreported) 16 April 1999; Court of
Appeal (Civil Division) Transcript No 656 of 1999. The Henderson v Henderson rule operates where claims
should be brought together, not merely where they could be brought together.

The counterclaim is a counterpart of the claim: if the claim survives there can be no judgment on the
 Page 8

counterclaim.

Guthrie QC in reply. It has been expressly conceded by the plaintiff in its skeleton argument that if the claim
is struck out, then the counterclaim for redemption must succeed; and that therefore it is not necessary to
address separate argument on the counterclaim.

21 June. The following judgments were handed down.

1 This is an appeal in proceedings brought by Securum Finance Ltd against Mr Peter Ashton and his wife,
Mrs Pauline Ashton, in relation to moneys advanced more than 10 years ago by Arbuthnot Latham Bank Ltd
to Trafalgar Holdings Ltd, a company incorporated in the Turks and Caicos Islands. The appeal is against so
much of an order made on 10 June 1999 by Mr Ian Hunter QC, sitting as a deputy judge of the High Court in
the Chancery Division, as dismissed an application by Mr and Mrs Ashton that the proceedings be struck on
the grounds that they are an abuse of the process of the court. The present proceedings can fairly be
regarded as the sequel to the decision of this court (Lord Woolf MR, Waller and Robert Walker LJJ) on 16
December 1997 in Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426.

The claims in the present action

2 On 28 January 1987 Mr and Mrs Ashton signed a guarantee of the obligations of Trafalgar Holdings Ltd
("Trafalgar") to Arbuthnot Latham Bank Ltd For convenience (save where the context requires a distinction to
be made) I will refer to Arbuthnot Latham Bank Ltd and its assignees as "the bank". In August 1989 the bank
commenced proceedings against them to enforce their obligations under that guarantee. It was those
proceedings which were struck out by this court in December 1997. The present proceedings were
commenced in September 1998. These proceedings are brought to enforce the rights of the bank under a
legal charge dated 7 March 1989 given by Mr and Mrs Ashton to secure their obligations under the
guarantee. The property chargeda dwelling house known as "St Just" at Buckhurst Hill in Essexwas and
is the Ashtons' home. The plaintiff, Securum Finance Ltd, is the successor in title to the rights of the bank
under the guarantee and the legal charge. In the present proceedings the plaintiff
[2001] Ch 291 Page 298

seeks payment under the covenant in the legal charge; and, further, seeks to enforce the security by orders
for possession and sale of the mortgaged property.

3 The legal charge is dated 7 March 1989. It is made between Mr and Mrs Ashton (together described as
"the mortgagor") and Arbuthnot Latham Bank Ltd Clause 1 contains both an all moneys covenant and the
charge to secure performance of that covenant. It is in these terms:

"The mortgagor covenants to discharge on demand the mortgagor's obligations together with
interest to the date of discharge and expenses and as a continuing security for such discharge
and as beneficial owner charges the property to the bank (to the full extent of the mortgagor's
interest in the property or its proceeds of sale) by way of legal mortgage of all legal interests
and otherwise by way of specific equitable charge."
 Page 9

In that context "the property" means the property known as "St Just", Buckhurst Hill; "expenses" means all
expenses (on a full indemnity basis) incurred by the bank or any receiver at any time in connection with the
property or the mortgagor's obligations or in enforcing any power under the mortgage (with interest thereon
from the date on which they are incurred); and "the mortgagor's obligations" means:

"All the mortgagor's liabilities to the bank of any kind (whether present or future actual or
contingent and whether incurred alone or jointly with another) including banking charges and
commission."

4 Securum Finance Ltd claims as successor in title to Arbuthnot Latham Bank Ltd under (i) an assignment
dated 2 May 1991 and made between the bank and Nordbanken London Branch, and (ii) an assignment
dated 21 December 1992 and made between Nordbanken London Branch and Securum Finance Ltd.

5 It is common ground that, in the context of the mortgagor's obligations in the legal charge, the only relevant
liabilities (if any) that Mr and Mrs Ashton have, or have had, to the bank are their liabilities as guarantors
under the guarantee dated 28 January 1987. Clause 1 of the guarantee is in these terms, so far as material:

"In consideration of the bank at the request of the guarantor granting or continuing to make
available banking facilities or other accommodation for so long as it may think fit to [the
customer], the guarantor hereby guarantees on demand to pay to the bank all moneys and to
discharge all obligations and liabilities whether actual or contingent now or at any time
hereafter due owing or incurred to the bank by the customer  in any manner whatsoever "

In that context "the guarantor" means Mr Ashton and Mrs Ashton, and "the customer" means Trafalgar.

6 The bank made demand on Mr and Mrs Ashton under the guarantee, in the sum of £737,928.40, by letters
dated 31 July 1989. It made a further demand under the guarantee, in the sum of £1,527,205.23, by letters
dated 15 January 1998. The difference between the two sums represents accrued interest. The letters dated
15 January 1998 included a demand under clause 1 of the charge; but to meet any argument that a separate
demand
[2001] Ch 291 Page 299

under the charge was required after a demand had been made under the guarantee, a separate demand
under the legal charge was made by letters dated 16 January 1998.

7 In my view the bank is plainly correct to assert, as it does, that its cause of action in the present
proceedings is distinct from the cause of action which it was pursuing in the earlier proceedings. The
elements which comprised the cause of action in the earlier proceedings may be summarised as (i) the debt
owed by Trafalgar to the bank, (ii) the agreement to guarantee that debt, contained in clause 1 of the
guarantee, and (iii) the demand made under the guarantee by letter dated 31 July 1989. The elements which
comprise the cause of action in the present proceedings may be summarised as (i) the debt owed by
Trafalgar to the bank, (ii) the agreement to guarantee that debt, contained in clause 1 of the guarantee, (iii)
the demand made under the guarantee by letter dated 31 July 1989, alternatively by letter dated 15 January
1998, (iv) the covenant, contained in clause 1 of the legal charge, to discharge the obligations under the
guarantee, and (v) the demand made under the covenant by letter dated 15 January 1998, alternatively by
letter dated 16 January 1998. But it is important to appreciate that, although it is true to say that the cause of
action in the present proceedings is not the same as that upon which the earlier proceedings were based,
there are two common elements(i) the debt owed by Trafalgar to the bank and (ii) the agreement to
guarantee that debt, contained in clause 1 of the guarantee. In order to succeed in the earlier proceedings
the bank had to establish those two elements; the same is true in the present proceedings.
 Page 10

8 Each of those elements is in issue in the present proceedings. That was the position, also, in the earlier
proceedings. The defendants by their defence in the first proceedings, served on 21 December 1989: (1)
denied that Trafalgar owed any sum at all to the bank; (2) denied in any event that the guarantee was
enforceable at all against them by virtue of various contractual warranties; and, also, in the case of the
second defendant, by virtue of undue influence exercised over her by the bank.

The defendants' counterclaim

9 By counterclaim in the present proceedings, as originally served, Mr and Mrs Ashton sought redemption of
the legal charge. By amendment to their counterclaim, they seek a declaration that they are entitled to have
their property discharged from the legal charge; and an order that the legal charge be delivered up for
cancellation. The basis upon which that claim to relief is founded is that there is no mortgagor's obligation
capable of being the subject of the covenant in clause 1 of the legal charge and so no obligation capable of
being secured by the charge over the property. To put the point another way, if either (i) there was no debt
owed by Trafalgar to the bank or (ii) the guarantee was unenforceable, there is nothing for which the legal
charge can stand security and the Ashtons, as owners of the property, are entitled to have it discharged.

The Limitation Act 1980

10 The present action was commenced on 29 September 1998, some three years or more after the expiry of
the six-year limitation period applicable to a claim based on a simple contract debt under the guarantee.
[2001] Ch 291 Page 300

A claim to payment under the guarantee in the present action would be met by an insuperable defence of
limitation. But a claim to payment under the covenant in the legal charge is made in an action upon a
specialty to which the 12-year limitation period, prescribed by section 8(1) of the Limitation Act 1980, applies.
Further, it is a claim brought in an action to recover money secured by a mortgage or charge, to which, also,
a 12-year period of limitation applies: see section 20(1) of the 1980 Act. It is now common groundat least
for the purposes of this appealthat a claim to payment under the covenant in the legal charge is not barred
by limitation.

11 Further, the claims in the present action are not limited to a claim for payment. They include a claim, as
mortgagee, for possession of the property charged; for the appointment of a receiver of that property; and for
orders for foreclosure or sale. Those, also, are claims to which the 12-year limitation period applies: see
sections 15 and 20 of the 1980 Act.

The relief claimed on the application to strike out

12 Mr and Mrs Ashton, having obtained an order striking out the earlier proceedings, applied (as it was to be
anticipated that they would) for an order striking out the present proceedings. They did so on the grounds
that it was an abuse of the process of the court for the bank to seek to pursue, in these proceedings, what
they see (understandably) as, in essence, the same claim as that which the court has already struck out in
the earlier proceedings.

13 The application to strike out was made by summons dated 10 March 1999. The substantive relief sought
by that summons was set out under five heads. (1) An order that the claim be struck out on the grounds that
it was an abuse of process; in that it sought to relitigate the same issues as were litigated, or could have
 Page 11

been litigated, between the bank and the defendant in the earlier proceedings. (2) An order that the claim be
struck out on the grounds that it disclosed no reasonable cause of action; in that (a) the bank's cause of
action was founded on a simple contract and, accordingly, was barred by section 5 of the Limitation Act 1980
or (b) that on a proper construction of the legal charge there were no liabilities secured by it, because the
only liability which could be the subject of the covenant in clause 1 was the liability under the guarantee
which was, itself, statute barred. (3) An order that so much of the claim as was in respect of interest accruing
before 29 September 1992 be struck out on the grounds that it disclosed no reasonable cause of action; in
that a claim for interest accruing more than six years before the commencement of the action was barred by
section 20(5) of the Limitation Act 1980. (4) Determination under what was then RSC Ord 14A of the two
issues raised under head (2). (5) Summary judgment on the counterclaim; which, as it then stood, was a
claim for redemption of the legal charge.

14 The judge, in a thorough and careful judgment, held (i) that the bank's cause of action was not founded on
a simple contract, and so was not barred by section 5 of the Limitation Act 1980; and (ii) that on a proper
construction of the legal charge the liabilities, if they existed under the guarantee, were liabilities secured by
the legal charge. He determined those issues under CPR r 24.2, and made declarations accordingly. It
followed that he refused relief under head (2) of the summons. He refused permission
[2001] Ch 291 Page 301

to appeal against that part of his order. As to head (3), the bank conceded that the claim to interest accrued
before 29 September 1992 could not be pursued; and has amended its claim accordingly. That left heads (1)
and (5). The judge decided those matters against the applicants; but he gave leave to appeal against those
parts of his decision.

Issue estoppel

15 I have pointed out that two of the issues which, on the face of the pleadings, would arise at a trial of the
present actionthat is to say, (i) whether there was a debt owed by Trafalgar to the bank and (ii) whether the
guarantee was enforceablewere issues in the earlier action. The judge held, correctly in my view, that no
question of res judicata or estoppel arose in relation to those issues. The reason was that there had been no
adjudication upon those issues. Whether it is an abuse of process to seek to litigate, in subsequent
proceedings, issues which have been raised (but not adjudicated upon) in earlier proceedings which have
themselves been struck out (whether on grounds of delay or on other grounds) is a question which I shall
have to address later in this judgment; but that is a different question from the question whether a party
should be allowed to raise, in subsequent proceedings, issues which have already been determined or "laid
to rest" (whether by adjudication, or by concession, or as the result of a decision to withdraw) in earlier
proceedings. The judge was right to hold that the Ashtons could gain no support from cases such as Khan v
Golechha International Ltd [1980] 1 WLR 1482; SCF Finance Co Ltd v Masri (No 3) [1987] QB 1028 and
Staffordshire County Council v Barber [1996] ICR 379.

Henderson v Henderson

16 It was argued before the judge that "the issues raised in the second action based on the covenant for
repayment and the property rights of the mortgagee could and should have been raised in the first action";
and that, accordingly, the bank was precluded by the principle in Henderson v Henderson (1843) 3 Hare 100
from raising them in the present proceedings. The judge rejected that contention. In my view he was right to
do. For my part, I find it difficult to see how the principle in Henderson v Henderson, as explained by Sir
Thomas Bingham MR in Barrow v Bankside Members Agency Ltd [1996] 1 WLR 257, 260A-C, has any
application to issues arising from a claim on the covenant for repayment. The question whether a liability
under the guarantee which was statute barred could be a mortgagor's obligation for the purposes of the
covenant in the legal charge could not have arisen in the earlier action. At the time when that action was
 Page 12

commenced the liability under the guarantee was not statute barred. Nor could the question whether the
relevant period of limitation for the purposes of an action on the covenant was six years (rather than 12
years) have arisen in the earlier action. And it is, to my mind, bizarre to suggest that, in the earlier
proceedings, it would have been appropriate to rely both on the cause of action founded on the guarantee
alone and on a (theoretically distinct but, in the circumstances as they then were, indistinguishable) cause of
action founded on the covenant in the legal charge. For the reasons explained by Schiemann LJ in National
Westminster Bank plc v Kitch [1996] 1 WLR 1316,
[2001] Ch 291 Page 302

there are good reasons for choosing not to sue on the covenant in a mortgage when it is unnecessary to do
so.

17 Nor, as it seems to me, can it be argued that a secured creditor who chooses, in the first place, to sue for
payment alone, is thereafter precluded from seeking to enforce his security in a separate action on the
grounds that that was a claim that could have been advanced in the first action. As the judge put it, in his
written judgment:

"Indeed, it does not seem to me that it is in the interests either of the bank or of the bank's
customers that the bank should be obliged to rely on all of its rights under the mortgage when
proceedings are first issued if it would prefer to limit itself to a claim under the guarantee.
Having decided to confine itself in the first action to a claim under the guarantee, that seems to
me to be a perfectly proper course of action for the bank to take and I do not regard it as an
abuse of the process of the court for the bank to rely subsequently on its rights under the
mortgage. No one could sensibly suppose that by suing on the guarantee the bank is to be
taken to be waiving its right to rely, if need be, on the security which it enjoys."

I agree.

Some other abuse of process

18 The real question under head (1) of the summons of 10 March 1999, as the judge appreciated, is whether
it is an abuse of process to seek to litigate, in subsequent proceedings, issues which have been raised (but
not adjudicated upon) in earlier proceedings which have themselves been struck out. The question arises
because, in order to succeed on its claim for payment under the covenant in the legal charge, the bank must
establish the two points which I have already identifiednamely: (i) whether there was a debt owed by
Trafalgar to the bank and (ii) whether the guarantee was enforceablewhich were in issue in the earlier
proceedings but which were not adjudicated upon in those proceedings because those proceedings were
struck out.

Birkett v James

19 The judge held that, in the circumstances of the present case, the reasoning of the House of Lords in
Birkett v James [1978] AC 297 required that that question receive a negative answer. He reminded himself of
the well known passage in the speech of Lord Diplock, at p 318:

"The power [to strike out for want of prosecution] should be exercised only where the court is
satisfied either (1) that the default has been intentional and contumelious, eg, disobedience to
a peremptory order of the court or conduct amounting to an abuse of the process of the court;
or (2) (a) that there has been inordinate and inexcusable delay on the part of the plaintiff or his
lawyers, and (b) that such delay will give rise to a substantial risk that it is not possible to have
 Page 13

a fair trial of the issues in the action or is such as is likely to cause or to have caused serious
prejudice to the defendants either as between themselves and the plaintiff or between each
other or between them and a third party."

[2001] Ch 291 Page 303

20 The judge continued:

"[Lord Diplock] then went on to consider whether an action ought to be dismissed for want of
prosecution before the expiration of the limitation period and he observed that crucial to that
question is whether the plaintiff whose action has been so dismissed may issue a fresh writ for
the same cause of action. He then answered that question by concluding that, exceptional
cases apart, where all that a claimant has done is to let the previous action go to sleep the
court would have no power to prevent him starting a fresh action within the limitation period and
proceeding with it with all proper diligence, notwithstanding that his previous action had been
dismissed for want of prosecution. Lord Diplock acknowledged that it was an attractive
argument that if the court has power to dismiss an action already started because it considers
that the time which the claimant has allowed to elapse since his cause of action first accrued
has resulted in a substantial risk that justice may not be done to the defendant at trial, the court
by parity of reasoning should also have the power to prevent a fresh action being started. But
he declined to accede to the contention, despite its admitted attractiveness, because to do so
would be to assume that the court has the power to treat as amounting to inordinate delay in
proceeding with the action, a period shorter than that which the legislature has prescribed in
the Limitation Act that a claimant should have as a matter of right in order to commence
proceedings."

21 The reason why the question whether a plaintiff, whose action has been dismissed for want of
prosecution, can commence within the limitation period, and thereafter pursue, fresh proceedings founded on
the same cause of action is crucial to the question whether an action ought to be dismissed for want of
prosecution before the relevant limitation period has expired was explained by Lord Diplock in Birkett v
James, at p 320:

"Crucial to the question whether an action ought to be dismissed for want of prosecution before
the expiry of the limitation period is the answer to a question that lies beyond it, viz, whether a
plaintiff whose action has been so dismissed may issue a fresh writ for the same cause of
action. If he does so within the limitation period, the effect of dismissing the previous action can
only be to prolong the time which must elapse before the trial can take place beyond the date
when it could have been held if the previous action had remained on foot. Upon issuing his new
writ the plaintiff would have the benefit of additional time for repeating such procedural steps as
he had already completed before the action was dismissed. This can only aggravate; it can
never mitigate the prejudice to the defendant from delay."

22 It was the fact that, as it appeared to him in 1978, the dismissal of the first action for want of prosecution
(in a case which fell under head (2) of his classificationconduct not amounting to an abuse of process)
would lead to additional delay and aggravation of prejudice (because the plaintiff could commence and
pursue a fresh action), that led Lord Diplock to observe, at p 322:

"For my part, for reasons that I have already stated, I am of opinion that the fact that the
limitation period has not yet expired must always be

[2001] Ch 291 Page 304

a matter of great weight in determining whether to exercise the discretion to dismiss an action
 Page 14

for want of prosecution where no question of contumelious default on the part of the plaintiff is
involved; and in cases where it is likely that if the action were dismissed the plaintiff would avail
himself of his legal right to issue a fresh writ the non-expiry of the limitation period is generally a
conclusive reason for not dismissing the action that is already pending."

23 It is important to keep in mind why Lord Diplock rejected the contention that a court which had dismissed
an action under head (2) of his classification, at p 320"because it considers that the time which the plaintiff
has allowed to elapse since his cause of action first accrued has resulted in a substantial risk that justice
may not be done to the defendant at the trial"should have power to dismiss a fresh action. The reason is
found in the double condition that is imposed under head (2): (a) inordinate and inexcusable delay and (b) a
substantial risk that it will be impossible to have a fair trial of the issues or likelihood of serious prejudice.
Where an action had been dismissed under head (2), it could be assumed that the court which dismissed it
had been satisfied that both conditions had been met. But, on an application to strike out a fresh action
commenced within the limitation period, it was necessary to re-examine the position. The question whether
there had been inexcusable and inordinate delay had to be determined in the context of the fresh action.
Delay which had taken place before the commencement of the fresh action could not be regarded as
inordinate delay, because it was permitted by the statutesee the observations of Lord Diplock in Birkett v
James, at p 320E, and at p 322:

"time elapsed before the issue of a writ within the limitation period cannot of itself constitute
inordinate delay however much the defendant may already have been prejudiced by the
consequent lack of early notice of the claim against him, the fading recollections of his potential
witnesses, their death or their untraceability. To justify dismissal of an action for want of
prosecution the delay relied upon must relate to time which the plaintiff allows to lapse
unnecessarily after the writ has been issued."

There are observations to the same effect in the speech of Lord Salmon, at pp 328-329: "the second action
could not be dismissed as an abuse of the process of the court whatever inexcusable delay there may have
been in the conduct of the first action." And in the speech of Lord Edmund-Davies, at p 334:

"a plaintiff is free to issue within the limitation period a further writ claiming the same relief and
based on the same grounds as an earlier writ dismissed for want of prosecution, and it is
irrelevant to the competency of the second action that by the time it comes on the defendant
may well be even more prejudiced than he would have been had the first action been permitted
to proceed to trial."

24 If delay which had taken place (in the conduct of the first action) before the issue of the writ in the second
action could not be regarded as inordinate in the context of an application to strike out the second action
(because it was permitted by the statute), then the application could not
[2001] Ch 291 Page 305

succeed under head (2). First, because sub-condition (a) would not be satisfied; and, secondly, because if
sub-condition (a) were not satisfied then sub-condition (b) could not be satisfied. However substantial the risk
to a fair trial, or however serious the prejudice to the defendant, that risk or that prejudice could not be said to
be the result of inordinate delay in the prosecution of the second action.

25 If the approach set out in those passages continues to be applicable, notwithstanding the introduction of
the Civil Procedure Rules 1998, the judge was plainly correct to reach the conclusion which he did.
 Page 15

The Civil Procedure Rules 1998

26 The principles laid down in Birkett v James were described by Kerr LJ in Westminster City Council v
Clifford Culpin & Partners (unreported) 18 June 1987; Court of Appeal (Civil Division) Transcript No 592 of
1987, in a passage set out by Lord Griffiths in Department of Transport v Chris Smaller (Transport) Ltd
[1989] AC 1197, 1204-1205, as "unsatisfactory and inadequate". The House of Lords was invited, in the
Chris Smaller case, to reconsider those principles. But the invitation was declined. Lord Griffiths, with whose
speech the other members of the House agreed, expressly endorsed the proposition that, at p 1207:

"the plaintiff cannot be penalised for any delay that occurs between the accrual of the cause of
action and the issue of the writ provided it is issued within the limitation period."

In relation to cases where the limitation period had expired he said, at p 1207:

"To extend the principle [to cases in which it was not shown that there was a substantial risk
that a fair trial was impossible, nor that the defendant had suffered serious prejudice] purely to
punish the plaintiff in the illusory hope of transforming the habits of other plaintiff solicitors
would, in my view, be an unjustified way of attacking a very intractable problem. I believe that a
far more radical approach is required to tackle the problems of delay in the litigation process
than driving an individual plaintiff away from the courts when his culpable delay has caused no
injustice to his opponent. I, for my part, recommend a radical overhaul of the whole civil
procedural process and the introduction of court controlled case management techniques
designed to ensure that once a litigant has entered the litigation process his case proceeds in
accordance with a time table as prescribed by Rules of Court or as modified by a judge: see
the Civil Justice Review, Report of the Review Body on Civil Justice (1988) (Cmnd 394)."

27 The criticism of the Birkett v James principles was considered again by the House of Lords in Grovit v
Doctor [1997] 1 WLR 640, 643B where Lord Woolf, with whom the other members of the House agreed,
referred to the fact that the requirement laid down by the second limb under head (2) prevented the court
taking into account the adverse effect which delay can have on the reputation and efficiency of the civil
justice system as a whole. He referred to the passage in the speech of Lord Griffiths in the Chris Smaller
case which I have just set out. He went on, at p 644:
[2001] Ch 291 Page 306

"The period which has elapsed since Lord Griffiths's speech has not seen any improvement in the problems
caused by delay in the conduct of civil proceedings. In the county court a response to the corrosive effect of
delay has been to introduce the automatic strike-out (County Court Rules, Ord 17, r 11(9)). However this has
proved to be a crude remedy the effects of which have not been wholly beneficial. It has funded an industry
of satellite litigation. Furthermore, there is now on the horizon the introduction of the sort of process of reform
to the rules of procedure which Lord Griffiths thought was required. In this situation it is at least open to
question whether it is not preferable to await the outcome of the implementation of the new rules before
making a substantial inroad on the principles endorsed by Lord Diplock in Birkett v James [1978] AC 297.
They should by case management prevent the delay happening. If delays do happen they could provide the
court with wider powers to mitigate the consequences."

28 The decision in Grovit v Doctor was handed down by the House of Lords in April 1997. Some nine months
later this court had to consider the appeal in Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1
WLR 1426. The court reminded itself, at p 1431G-H, of the principles in Birkett v James [1978] AC 297 to
which I have already referred. It pointed out [1998] 1 WLR 1426, 1432C-D, that the reason why the question
whether the limitation period had expired was of such significance was that, in the absence of some conduct
 Page 16

which meant that a second action could be stayed, it would not benefit the defendant to have the first action
struck out since this would only result in further proceedings which would inevitably cause more expense and
delay. It observed, at p 1432G-H, that the fact that the limitation period had not expired was of less
significance in a case where the proceedings which were being struck out constituted an abuse of process.
"In such circumstances, the plaintiff may well find that if he brings fresh proceedings after the original
proceedings are struck out they are stayed because of his conduct." In a section of the judgment headed
"The future" the court said, at p 1436:

"In his speech in the Chris Smaller case [1989] AC 1197, Lord Griffiths identified the
advantages which could accrue from a civil procedural process which was subject to 'court
controlled case management techniques'. This process is now being introduced. The new
unified rules are intended to come into force in April 1999. However, many aspects of the
process can be introduced while the existing Supreme Court and County Court Rules are in
force. Most of the powers which the court requires for the purposes of case management are
already contained in the existing rules.

"The gradual change to a managed system which is taking place does impose additional
burdens upon the courts, involving the need for training and the introduction of the necessary
technological infrastructure. It is therefore in the interests of litigants as a whole, that the court's
time is not unnecessarily absorbed in dealing with the satellite litigation which non-compliance
with the timetables laid down in the rules creates. The substantial argument which was
advanced before Sir Ronald Waterhouse and this court in relation to the bank case is just

[2001] Ch 291 Page 307

one instance of a phenomenon which is regularly taking up the time of the courts. In Birkett v
James [1978] AC 297 the consequence to other litigants and to the courts of inordinate delay
was not a consideration which was in issue. From now on it is going to be a consideration of
increasing significance. Litigants and their legal advisers, must therefore recognise that any
delay which occurs from now on will be assessed not only from the point of view of the
prejudice caused to the particular litigants whose case it is, but also in relation to the effect it
can have on other litigants who are wishing to have their cases heard and the prejudice which
is caused to the due administration of civil justice. The existing rules do contain time limits
which are designed to achieve the disposal of litigation within a reasonable time scale. Those
rules should be observed.

"It is already recognised by Grovit v Doctor [1997] 1 WLR 640 that to continue litigation with no
intention to bring it to a conclusion can amount to an abuse of process. We think that the
change in culture which is already taking place will enable courts to recognise for the future,
more readily than heretofore, that a wholesale disregard of the rules is an abuse of process as
suggested by Parker LJ in Culbert v Stephen G Westwell & Co Ltd [1993] PIQR P54.

"While an abuse of process can be within the first category identified in Birkett v James [1978]
AC 297 it is also a separate ground for striking out or staying an action (see Grovit v Doctor at
pp 642-643) which does not depend on the need to show prejudice to the defendant or that a
fair trial is no longer possible. The more ready recognition that wholesale failure, as such, to
comply with the rules justifies an action being struck out, as long as it is just to do so, will avoid
much time and expense being incurred in investigating questions of prejudice, and allow the
striking out of actions whether or not the limitation period has expired."

29 The new rulesto which anticipatory reference was made in Grovit v Doctor and in the Arbuthnot Latham
caseare the Civil Procedure Rules 1998 (SI 1998 No 3132 (L 17)), made under section 84(1) of the
 Page 17

Supreme Court Act 1981. They came into force on 26 April 1999. They were applicable to the application to
strike out the present proceedingswhich was heard after that dateby virtue of the Practice Direction (PD
51) made under CPR Part 51. In particular, paragraph 12 of PD 51 required that CPR Part 1 (the overriding
objective) applied to all existing proceedings from 26 April 1999 onwards; and paragraph 15(3) incorporated
the general presumption that, where an application had been issued before 26 April 1999 for a hearing date
after 26 April 1999 (as in the present case), the application would be decided in accordance with the Civil
Procedure Rules.

30 The power to strike out a statement of case is contained in CPR r 3.4. In particular, rule 3.4(2)(b)
empowers the court to strike out a statement of case (which includes part of a statement of case: see rule
3.4(1)) if it appears to the court that the statement of case is an abuse of the court's process; but that does
not limit any other power of the court to strike out: see rule 3.4(5). In exercising that power the court must
seek to give effect to the overriding objective set out in CPR r 1.1: see rule 1.2(a). The overriding objective of
the procedural code embodied in the new rules is to enable the court "to deal with cases justly": see rule
1.1(1). Dealing with a case justly includes
[2001] Ch 291 Page 308

"allotting to it an appropriate share of the court's resources, while taking into account the need to allot
resources to other cases:" see rule 1.1(2)(e).

31 In the Arbuthnot Latham case [1998] 1 WLR 1426, 1436 this court pointed out, in a passage which I have
already set out, that:

"In Birkett v James [1978] AC 297 the consequence to other litigants and to the courts of
inordinate delay was not a consideration which was in issue. From now on it is going to be a
consideration of increasing significance."

The effect on other litigants of delay in the proceedings in which that delay has occurred is, now, a factor to
which the court must have regard when considering whether to strike out those proceedings. But, equally,
the fact that earlier proceedings have been struck out on the grounds of delay is a factor to which the court
must have regard when considering whether to strike out fresh proceedings brought to enforce the same
claim. The reason, as it seems to me, is that, when considering whether to allow the fresh proceedings to
continue, the court must address the question whether that is an appropriate use of the court's resources
having regard (i) to the fact that the claimant has already had a share of those resources in the first action
and (ii) that his claim to a further share must be balanced against the demands of other litigants.

32 The House of Lords recognised, in Birkett v James [1978] AC 297, 318F that the power to strike out a first
action could be exercised where the plaintiff's conduct amounted to an abuse of process; and, further, at pp
320-321, recognised that the court would have power, in an appropriate case, to strike out a second action
(founded on the same claim) notwithstanding that it was commenced within the limitation period "on the
ground that, taken as a whole, the plaintiff's conduct amounts to an abuse of the process of the court". But
the House did not accept that the necessary ingredient of abuse would be present where "all that the plaintiff
had done has been to let the previous action go to sleep". In the Arbuthnot Latham case [1998] 1 WLR 1426,
1436, this court spoke of "the change in culture which is already taking place will enable courts to recognise
for the future, more readily than heretofore, that a wholesale disregard of the rules is an abuse of process";
and of the "more ready recognition that wholesale failure, as such, to comply with the rules justifies an action
being struck out, so long as it is just to do so". Following the Arbuthnot Latham case there have been
numerous observations in this court which are to the same effect: see Nourse and Thorpe LJJ in Choraria v
Sethia The Times, 29 January 1998; Court of Appeal (Civil Divison) Transcript No 7 of 1998; Auld LJ, with
whom Robert Walker LJ agreed, in Miles v McGregor (unreported) 23 January 1998; Court of Appeal (Civil
Divison) Transcript No 51 of 1998; Hirst and Peter Gibson LJJ in Lace Co-ordinates Ltd v NEM Insurance Co
 Page 18

Ltd (unreported) 19 November 1998; Court of Appeal (Civil Divison) Transcript No 1717 of 1998; Henry LJ,
with whom Pill LJ agreed, in Shikari v Malik The Times, 20 May 1999; Court of Appeal (Civil Divison)
Transcript No 922 of 1999; May LJ, with whom Waller LJ agreed, in Co-operative Retail Services Ltd v
Guardian Assurance plc (unreported) 28 July 1999; Court of Appeal (Civil Divison) Transcript No 1391 of
1999 and Ward LJ and Lord Lloyd of Berwick in UCB Corporate Services Ltd
[2001] Ch 291 Page 309

(formerly UCB Bank plc) v Halifax (SW) Ltd The Times, 23 December 1999; Court of Appeal (Civil Division)
Transcript No 2076 of 1999.

33 The judge was alive to the need to revisit the principles in Birkett v James [1978] AC 297. In his judgment
he said:

"The fact that the legislature has determined that a claimant is entitled to a particular period of
time within which to commence proceedings does not seem to me necessarily to mean that if
he chooses to commence an action well within that period and then conducts the action in such
a dilatory fashion that the claim is ultimately struck out for want of prosecution he should be
able to conduct himself in that way safe in the knowledge that, provided he issues fresh
proceedings within the limitation period, those proceedings cannot be struck out as an abuse of
process. Court time is precious and there is an important public interest in its proper use."

But the judge did not think it right to pursue those thoughts, having regard to the way in which the application
had been argued before him. Understandably, perhaps, he took the view that the task of revisiting Birkett v
James in the light of the developments in this area of the law since Grovit v Doctor [1997] 1 WLR 640 was
best left to an appellate court.

34 For my part, I think that the time has come for this court to hold that the "change of culture" which has
taken place in the last three yearsand, in particular, the advent of the Civil Procedure Ruleshas led to a
position in which it is no longer open to a litigant whose action has been struck out on the grounds of
inordinate and inexcusable delay to rely on the principle that a second action commenced within the
limitation period will not be struck out save in exceptional cases. The position, now, is that the court must
address the application to strike out the second action with the overriding objective of the Civil Procedure
Rules in mindand must consider whether the claimant's wish to have "a second bite at the cherry"
outweighs the need to allot its own limited resources to other cases. The courts should now follow the
guidance given by this court in the Arbuthnot Latham case [1998] 1 WLR 1426, 1436-1437:

"The question whether a fresh action can be commenced will then be a matter for the discretion
of the court when considering any application to strike out that action, and any excuse given for
the misconduct of the previous action: see Janov v Morris [1981] 1 WLR 1389. The position is
the same as it is under the first limb of Birkett v James. In exercising its discretion as to whether
to strike out the second action, that court should start with the assumption that if a party has
had one action struck out for abuse of process some special reason has to be identified to
justify a second action being allowed to proceed."

35 It follows from the preceding paragraphs of this judgment that I am satisfied that the judge adopted the
wrong approach to the question whether the claim in the present action (or any part of it) should be struck
out on the grounds of abuse. Although he recognised (correctly) the important public interest in the use of
court time, he failed to give any weight to that interest in reaching the conclusion which he did. In those
circumstances it is for this court to exercise its own discretion.
[2001] Ch 291 Page 310
 Page 19

The course of events in the first action

36 In deciding how that discretion should be exercised it is necessary to examine the events which led to the
striking out of the first action; at least in so far as they appear from the judgments delivered by Sir Ronald
Waterhouse on the application to the High Court and by this court on appeal from his decision.

37 The following statement of the course of events is set out in the judgment of this court in the Arbuthnot
Latham case [1998] 1 WLR 1426, 1429-1430:

"By letter dated 8 June 1989, the bank demanded from Trafalgar payment of money then due
amounting to over £720,000 plus interest. When that sum was not paid, on 31 July 1989, the
bank demanded from the Ashtons the somewhat larger sum which by that time was allegedly
due. Nothing was paid and on 23 August 1989 the bank issued a writ endorsed with a
statement of claim against Trafalgar and the Ashtons. Trafalgar did not serve a defence but the
Ashtons did so. In the defence they contended that (i) no debt was due from Trafalgar, (ii) the
guarantee was subject to collateral warranties which made it unenforceable in the
circumstances, and (iii) in the case of Mrs Ashton the guarantee was obtained by undue
influence. Trafalgar took no further part in the proceedings but in relation to the Ashtons
pleadings closed on 29 May 1990 and discovery was completed on 6 June 1991. On 7 June
1991, an order was made substituting Nordbanken London Branch as the plaintiff. Thereafter
no step was taken until Securum Finance Ltd wrote to the Ashtons on 20 March 1996. This was
followed by the Ashtons on 3 May 1996 issuing a summons to strike out the claim against them
on the grounds of delay. Sir Ronald Waterhouse dismissed the summons to strike out, gave the
plaintiffs leave to join Securum Finance Ltd as the third plaintiffs, gave the plaintiffs leave to
issue a summons before the master seeking leave to amend the statement of claim and
refused the Ashtons leave to appeal. On 9 October 1996 Master Trench gave the plaintiffs
leave to amend their statement of claim so as to include a claim based on the covenant in the
mortgage."

38 The explanation for what Sir Ronald Waterhouse was to conclude was inordinate and inexcusable delay
is described in the judgment of this court, at p 1430:

"In their evidence, the plaintiffs explained the delay by stating that the debt was assigned to the
company now known as Securum UK Ltd on 21 December 1992. After that assignment, that
company became 'in essence an asset recovery and debt collection company'. It had inherited
a large portfolio of bad debts some of which ran into seven figures. It was therefore decided
that the plaintiffs would deal with only those loans within their portfolio which required urgent
action and, as in this case they had security, it was not regarded as an urgent situation and so
it was not initially actively pursued. In addition Mr and Mrs Ashton were not only defending but
also counterclaiming against the plaintiffs and they appeared not anxious to pursue their
counterclaim."

[2001] Ch 291 Page 311

39 Leave to appeal in the first action was granted by this court (Potter LJ) on 12 January 1997. The appeal
was heard at the end of November and the judgment of the court was handed down on 16 December 1997.
Before examining that judgment, and the judgment of Sir Ronald Waterhouse which it reversed, it is pertinent
to have in mind the basis upon which claims were made against Mr and Mrs Ashton in the first action. That
appears from the statement of claim endorsed on the writ, a copy of which was made available to us during
the course of the hearing.
 Page 20

40 Paragraph 2 of the statement of claim in the first action sets out the terms of clause 1 in the guarantee of
28 January 1987. Paragraph 3 contains the assertion that, as at 23 January 1987, the amount owing to the
bank by Trafalgar was £705,000. Paragraph 4 sets out the terms of a letter dated 21 May 1987 under which,
it is said, the parties agreed that the bank would allow Trafalgar to make use of certain US dollar deposits as
margin cover for foreign exchange and futures trading for a period of five years; and contains the allegation
that it was in consideration of that arrangement that Mr and Mrs Ashton agreed that the guarantee of 28
January 1987 should be supported by an undated legal charge executed by them over their joint property at
Buckhurst Hill. Paragraph 6 refers to a demand made on 8 June 1989 by the bank on Trafalgar; and
paragraph 7 refers to letters of demand, for payment within 14 days of the sum of £737,928.40 then said to
be due from Trafalgar, dated 31 July 1989 and served on Mr and Mrs Ashton. It is clear that, although
reference is made to the legal charge (in paragraph 4(iv) of the statement of claim), the claims are claims
under the guarantee alone.

41 Sir Ronald Waterhouse approached the application before him with the principles identified by Lord
Diplock in Birkett v James [1978] AC 297 well in mind. At the hearing before him each party sought to rely on
Lord Diplock's observation that, in a case not involving contumelious default, the expiry (or non-expiry) of the
relevant period of limitation was likely to be determinative of an application to strike out. The primary
submission for the Ashtons was that the six-year limitation period had expired. Counsel for the bank sought
to meet that submission with an argument that the applicable period was 12 years. As Sir Ronald
Waterhouse put it:

"[Counsel] has sought to persuade me that essentially the action is on the covenant contained
in the mortgage deed, being a covenant by way of specialty for which the limitation period is 12
years by virtue of the provisions of section 8(1) of the Act of 1980  [Counsel] argues that,
having regard to the express reference in the statement of claim to the legal charge, this is
essentially a claim based on a promise made in a deed, and that the basic submission on
behalf of the second and third defendants that it is a simple contract debt is misconceived."

42 Sir Ronald Waterhouse rejected that contention. But he then had to deal with the converse argument,
advanced by counsel for Mr and Mrs Ashton, that the limitation period applicable would continue to be six
years even if an amendment to plead reliance on the covenant in the mortgage were allowedor a new
action based on that covenant were commenced. He explained the argument in his judgment:
[2001] Ch 291 Page 312

"The nature of the argument may be briefly summarised in this way: the second and third defendants submit
that, although there was a covenant in general terms in the mortgage deed whereby the second and third
defendants undertook to meet all liabilities, the reality of the matter is that the plaintiff's claim is founded upon
a debt arising from a simple contract. It is suggested, therefore, that, however the plaintiff chooses to present
its claim, whether on the present basis or on an amended basis, or indeed in a new action, the same
limitation period of six years will apply because the plaintiff cannot rely on the promise contained in the legal
charge as giving rise to a debt under a specialty."

43 Sir Ronald Waterhouse rejected that contention, also. That led him to the conclusion, which he described
as "fundamental to the question that I have to decide", that:

"if the second and third defendants were to succeed in their present application, it would be
open to the plaintiff to issue a writ forthwith claiming the amount now claimed in the
proceedings before me as a debt due under the promise contained in the legal charge. The
plaintiff would also be entitled to enforce the mortgage, to obtain an order for sale of the second
and third defendants' home and, in accounting in those proceedings, to allot all the amounts
claimed, including interest, to itself before paying any balance over to the second and third
defendants. Equally, it would be open to the plaintiff, if the application by the second and third
 Page 21

defendants failed, to make immediate application to amend the statement of claim to include an
alternative basis for repayment of the amount set out in the writ and statement of claim, namely
the promise contained in the legal charge, the plaintiff's alternative claim therefore being a
claim under specialty."

It was on the basis of that conclusion that he went on to hold that there was no purpose in striking out the
existing action; Mr and Mrs Ashton would gain no advantage from that course because the plaintiff would
immediately commence a new action to enforce its security which would be within the relevant limitation
period; whatever prejudice the Ashtons might have suffered from the delay in prosecuting the first action
would not be significantly allayed or mitigated, but would remain largely as before.

44 I have set out those passages from the judgment of Sir Ronald Waterhouse in the first action because
they are part of the background against which the judgment of this court in that action must be read and
understood. As a further preliminary to an examination of that judgment, it is relevant to note that, by the time
that appeal came before this court, the plaintiff had obtained leave to amend its statement of claim so as to
include a claim based on the covenant in the mortgage: see [1998] 1 WLR 1426, 1430B.

The judgment of this court in the first action

45 It was common ground in this court that the plaintiff's original claim on the guarantee was a claim to which
the six-year limitation period applied; and that the plaintiff's amended claim, based on the covenant in the
mortgage, was a claim to which the 12-year limitation period applied: see
[2001] Ch 291 Page 313

[1998] 1 WLR 1426, 1430B-C. There had been no appeal against the decision of Sir Ronald Waterhouse on
those points.

46 The court reminded itself, at pp 1432-1433, that delay alone does not amount to abuse of process: see
Barclays Bank plc v Maling (unreported) 23 April 1997; Court of Appeal (Civil Divison) Transcript No 849 of
1997. It reminded itself, also, at p 1432D-E, that the reasoning which had led the House of Lords, in Birkett v
James [1978] AC 297, to the conclusion that the fact that the limitation period had not expired would (save in
exceptional circumstances) be determinative against striking out in a case in which there was no allegation of
contumelious conduct, was inapplicableor, at least, of much less weightwhere there was a serious
question whether the cause of action to be asserted in any new action would be statute barred if new
proceedings were commenced, since "In such circumstances the interests of justice might be best served by
dismissing the action and leaving the party whose action has been struck out to bring fresh proceedings if he
chooses to do so", and made reference to another decision of this court, Barclays Bank plc v Miller [1990] 1
WLR 343. Further, the fact that the limitation period had not expired was of less (if any) significance in a case
where the proceedings were being struck out on the basis of abuse of process.

47 In applying the authorities to the facts before them in the first action, the court said [1998] 1 WLR 1426,
1433-1434:

"The previous authority which is closest to the bank case is the decision of this court in
Barclays Bank plc v Miller [1990] 1 WLR 343. Sir Ronald Waterhouse distinguished Miller's
case because if fresh proceedings were commenced, he took the view that the bank would
succeed. There was not the same uncertainty as to the outcome of the fresh proceedings as
there was said to be in Barclays Bank plc v Miller. Was the judge right in adopting this
approach? We do not think so, for reasons advanced by Mr Strachan on behalf of Mr and Mrs
 Page 22

Ashton."

The court set out those reasons at pp 1434-1435. It is, I think, sufficient to summarise them. (1) There was
no dispute that, in relation to the only cause of action pleaded by the bank, any fresh proceedings would be
statute barred. When considering whether or not to apply to strike out a claim on the basis of delay, the
defendant is entitled to assume that, normally, the court will determine that question on the basis of the
cause of action which has been pleaded. (2) In seeking to enforce their rights in a mortgage action (by sale
or foreclosure) the bank would be taking a wholly different course from that which it had chosen to take thus
far and it was inappropriate to take into account possibilities of this sort in determining what should be the
outcome of the very different action which the bank had relied on so far. (3) If the existing action were
dismissed, Mr and Mrs Ashton would have a number of defences to an action based on the covenant
contained in the mortgage: (a) that the statute barred claim under the guarantee would not be a "liability"
within the covenant in the mortgage; (b) that it would not be open to the bank to rely on a cause of action in
the second action which it chose not to advance in the first action"a plaintiff should bring forward at the
outset his whole case"; (c) that the bank would not be able to recover in the second action any interest in
relation to which six years had expired from
[2001] Ch 291 Page 314

the date upon which it became due prior to the commencement of the action: see section 20(5) of the
Limitation Act 1980; and (d) that the Ashtons would be entitled to their costs of the first action which the bank
would have to pay before it could bring a second action. These were defences which could not be dismissed
out of hand; and the court should not, in deciding whether to strike out the first action be required to explore
issues which needed careful examination.

48 Those reasons attracted this court in the first action; and led it to the view that Sir Ronald Waterhouse
had been wrong to dismiss the application to strike out on the basis that the Ashtons could obtain no benefit
from the order which they sought. In the events which have happened, the point under section 20(5) of the
Limitation Act 1980 has been conceded by the bank; and the Ashtons' costs of the first action have been
paid. The defences identified under (a) and (b) of head (3) have been determined against the Ashtons by the
judge in the present action.

49 It is, perhaps, easier to see why this court held that Sir Ronald Waterhouse had been wrong to dismiss
the application to strike out the first action for the reason that he gave than it is to see why (if he were wrong
on the "no benefit" point) it was an application which should succeed. Sir Ronald Waterhouse had
approached the application on the basis that it was for the defendants to establish the two elements under
head (2) of Lord Diplock's formulationthat is to say (a) inordinate and inexcusable delay and (b) a
substantial risk to a fair trial or serious prejudice. The first of those elements was not really in issueas Sir
Ronald Waterhouse pointed out in his judgment. He summarised the defendants' arguments on element (b).
But he reached no conclusion on the question whether the risks to a fair trial that the defendants had
identified were substantial, or on the question whether the prejudice which they alleged was serious. The
reason why he did not find it necessary to do so was that he was persuaded, even if element (b) were
otherwise satisfied, that striking out would serve no purpose. The defendants had suffered no prejudice by
the delay because the bank was still within the 12-year period applicable to its claims under the legal charge.
The real prejudice was caused by the existence of the legal chargewhich fettered their ability to fund other
business ventures or to move housenot by the bank's delay in prosecuting the action.

50 Nevertheless, this court took the view that element (b) had been established before the judge. The court
said [1998] 1 WLR 1426, 1430:

"Mr and Mrs Ashton's defence turned substantially on oral evidence and the judge records that
it is conceded by the plaintiff that the passage of time may have affected their recollection of
 Page 23

events and this would impinge upon their oral evidence. But he drew attention to the fact that
many important matters were recorded in correspondence and it is part of the Ashtons' case
that the proceedings against them should have been deferred until 1994 because of an
undertaking they have been given. It was however, on the basis that a fresh action could be
brought by the plaintiffs based on the mortgage which could not be statute barred that the
judge dismissed the defendants' application. By inference it appears that the judge would have
come to a different decision, because of the anxiety to which the Ashtons had been subjected
and their dimming recollection, if a fresh action could not have been brought."

[2001] Ch 291 Page 315

51 In my view it is correct to say, as counsel for the bank has contended before us, that this court took the
view that the application in the first action should be allowed on the ground that it fell within head (2) of Lord
Diplock's formulation in Birkett v James; and not on the basis that the bank's conduct should be treated (in
the context of the application before them) as an abuse of process. Nevertheless, it is clear enough that the
court did regard the practice of issuing proceedings which there was no immediate intention to
pursuewhich had occurred in the present caseas unacceptable. The court said, at p 1437:

"It has been the unofficial practice of banks and others who are faced with a multitude of
debtors from whom they are seeking to recover moneys to initiate a great many actions and
then select which of those proceedings to pursue at any particular time. This practice should
cease in so far as it is taking place without the consent of the court or other parties. If there is
good reason for doing so the court can make the appropriate directions. Whereas hitherto it
may have been arguable that for a party on its own initiative to, in effect, 'warehouse'
proceedings until it is convenient to pursue them does not constitute an abuse of process,
when hereafter this happens this will no longer be the practice. It leads to stale proceedings
which bring the litigation process into disrespect."

Should the present action be struck out?

52 In my view, for the reasons which I have sought to give, it is open to this court to strike out the claim for
payment made in the present action. That is a claim which, in substance, is indistinguishable from the claim
for payment made in the first action. If that claim stood alone it could be said with force that to seek to pursue
it in a second action when it could and should have been pursued, properly and in compliance with the rules
of court, in the first action is an abuse of process. It is an abuse because it is a misuse of the court's limited
resources. Resources which could be used for the resolution of disputes between other parties will (if the
second action proceeds) have to be used to allow the bank "a second bite at the cherry". That is an
unnecessary and wasteful use of those resources. The bank ought to have made proper use of the
opportunity provided by the first action to resolve its dispute in relation to the claim for payment.

53 But the claim for payment does not stand alone. It is conjoined with claims to enforce the security under
the legal charge. It is important to keep in mind that, by striking out the claim for payment, the court does not
extinguish the underlying debt. Nor, of course, is the underlying debt extinguished by the expiry of a limitation
period. The debt (if it exists) remains secured on the mortgaged property. I can see no basis on which the
claims to enforce the security under the legal charge can be struck out on the grounds of abuse of process.
Those claims were not made in the first action; and, for the reasons which I have already given, there was no
reason why they should have been.

54 The bank does not need to establish its claim for payment in order to obtain an order for possession. It is
entitled to possession by virtue of its legal estate; subject to the court's powers under section 36 of the
Administration of Justice Act 1970in a case to which that section applies.
 Page 24

[2001] Ch 291 Page 316

The defence to the claim for possessionand to the claims for the appointment of a receiver, for sale and
foreclosureis that the mortgage ought to be discharged on the basis that there is no debt. That, also, is the
basis of the Ashtons' counterclaim. The effect, as it seems to me, is that the issue whether or not there is a
debt secured by the legal charge will have to be resolved whether or not the claim for payment under the
covenant is struck out. That issue will have to be fought on the claim for possession; it will have to be fought
on the counterclaim if Mr and Mrs Ashton are to achieve their objective of freeing their property from the
fetter of the mortgage. That, of course, is an objective which they could have pursued at any time by
pursuing their counterclaim, either in the first action or in the present action. If they are prejudiced by delay,
the delay in pursuing the counterclaim to obtain the discharge of the mortgage is delay for which they must
bear responsibility.

55 If the issue whether or not there is a debt secured by the legal charge will have to be resolved in litigation
in any event, then the need to have regard to the appropriate allocation of resources as between the litigation
between these parties and litigation between other parties has little weight. Whether or not the claim for
payment is struck out makes little or no difference to the resources which will be needed in relation to the
litigation between these parties.

56 I have considered whether the claim for payment should be struck out, nevertheless, in order to mark the
court's disapproval of the delay that occurred in the prosecution of the first action. There would, or might, be
some benefit to the Ashtons in that course, in that the bank would not then obtain a money judgment on
which to found a petition for bankruptcy. It would be unable to recover more than the value of its security. But
I am satisfied that to strike out the claim for payment on that basis would be a wrong exercise of discretion in
the present case. It would, I think, be seen as a further punishment inflicted on the bank for a course of
conduct which, although the subject of disapproval by this court in the first action, was not then stigmatised
as an abuse; in circumstances in which it was said by this court that the new approach would not be applied
retrospectively to delays which had already occurred.

Article 6(1) of the European Convention on Human Rights

57 It was submitted that to refuse to strike out these proceedings would be to infringe the Ashtons' rights
under article 6(1) of the European Convention for the Protection of Human Rights and Fundamental
Freedoms (1953) (Cmd 8969)soon to become of direct application as part of domestic law under the
Human Rights Act 1998. Article 6(1) confers a right, in the determination of civil rights and obligations, to a
fair hearing within a reasonable time. In my view, the article provides the defendants with no assistance in
the present case. I have explained that there has been no impediment in the way of a trial, at any time since
the commencement of the first action, of the Ashtons' claim to have the legal charge discharged. The reason
why that claim has not been tried is because the Ashtons have chosen not to pursue it. They have chosen,
no doubt for reasons which have seemed sound, to leave that claim until after the question whether or not
the bank's claim for payment should be struck out has been determined. But, as
[2001] Ch 291 Page 317

I have pointed out, striking out of the payment claim would not have the effect of extinguishing the debt.
There was, as it seems to me, never any realistic possibility that, even if the Ashtons were successful in
having the payment claim struck out, they would not have to pursue their own claim for the discharge of the
legal charge to trial. The court has placed no impediment in their way in that respect. The reason why the
payment claim in the present proceedings should not be struck out is that the question whether there is a
debt secured by the legal charge will have to be decided in any event. I am not persuaded that that course
involves any infringement of the Ashtons' rights under article 6(1). Indeed, as it seems to me, they would
have more solid grounds for complaint if the court had declined to allow their own claim to proceed, leaving
the question whether or not their home is encumbered by the legal charge unresolved.
 Page 25

Conclusion

58 For those reasons I would dismiss this appeal.

59 I agree.

Appeal dismissed with costs subject to detailed assessment.

Permission to appeal refused.

8 February 2001. The Appeal Committee of the House of Lords (Lord Bingham of Cornhill, Lord Clyde and
Lord Scott of Foscote) dismissed a petition by the defendants for leave to appeal.

Solicitors: Coldham Shield & Mace, Walthamstow; Sheridans.

Reported by PAUL MAGRATH ESQ, Barrister