JL Homes Ltd v Mortgage Express and others
David Halpern QC, sitting as a deputy High Court judge
Neutral Citation Number: [2014] EWHC 190 (Ch)
IN THE IITGH COURT OF JUSTICE CHANCERY DIVISION
Case No: HC13E02476
The Rolls Building
7 Rolls Buildings, Fetter Lane
, London, EC4A INL Date: 5 February 2014
Before
:
Mr D HALPERN QC (sitting as a judge of the Chancery Division) Between:
J
L HOMES LIMITED
-and-
(1)
MORTGAGE EXPRESS
(2) PAUL DIAKIW and DAVID HEAP (Acting as LPA Receivers)
Claimant
Defendants
Mr
Roger Bartlett (instructed by Mr O’Dusanya) for the Claimant
Mr Francis Moraes
(instructed by Walker Morris LLP) for the First Defendant
Mr Jonathan Lewis
(instructed by RPC LLP) for the Second Defendant
Hearing dates: 24 January 2014
Approved Judgment
I direct that pursuant to
CPR PD 39A para 6.1 no official shorthand note shall be taken of this
Judgment and that copies of this version as handed down may be treated
as authentic.
Mr
D HALPERN QC (sitting as a judge of the Chancery Division)
Mr D Halpern QC
:
1. On 10 December 2013 I granted summary judgment to Mortgage Express (“ME”) and Messrs Diakiw and Heap (“the Receivers”) as defendants to a claim by JL Homes Ltd (“JL”). I held that, if I was wrong to grant summary judgment, I would dismiss the claim as disclosing no reasonable cause of action and as an abuse of process. I concluded by declaring that JL
‘s claim was totally without merit. I refer to that judgment which sets out the background facts and my reasons for reaching that conclusion. I am now required by CPR Rule 3.4(6) to consider whether it is appropriate to make a civil restraint order against JL. ME and the Receivers each seek an extended civil restraint order (“ECRO”). I must also deal with the question of costs, which remain outstanding from my previous judgment.
The jurisdiction to make an ECRO
2.
The jurisdiction to make an ECRO now derives from paragraph 3.1 of Practice Direction 3C to the Civil Procedure Rules, which says that an ECRO may be made:
”where a party has persistently issued claims or made applications which are totally without merit”.
3.
The word “persistently” is not defmed but it is common ground between the parties that it requires a minimum of 3 claims or applications (including the present one). This may be inferred from paragraph 2.1 of the Practice Direction, which states that a limited CRO may be made where the party has made 2 or more applications which are totally without merit; an ECRO is more Draconian than a limited CRO and hence “persistent” must envisage a larger number than 2. If the total number is no higher than the minimum number of 3, that is a factor which affects the discretion though not the jurisdiction.
4.
In R (Kumar) v. Secretary of State for Constitutional Affairs [2007] 1 WLR
536 the Court of Appeal gave guidance on the Practice
Direction. At
paragraph [67] Brooke LJ said:
“It is of course correct that paragraph
1 of Practice Direction C imposes an obligation on courts to ensure that their orders record that a statement of case or application was totally without merit, but the absence of this mantra on the face of an order does not oblige a later court, when convinced that a statement of case or application must have been treated as being totally without merit, to correct the earlier order under the slip rule or to send it back to the original court for correction under that rule. This would be to elevate form over substance in a very undesirable way.“
Aooroved Judgment
This was applied by Mr Bartley-Jones QC in Courtman v
. Ludlam [2009] EWHC 2067 (Ch) at [11] and by Roth J in Pius v. Fearnley [2013] EWHC
2217 (Ch) at [14].
5.
If the judge in the previous claim or application did not declare that it was totally without merit, there are 3 possibilities which need to be considered:
i) The first is that he did conclude that it was totally without merit but omitted to give the declaration.
In such a case, the absence of the mantra is not conclusive, as Brooke LJ explained. However, the court should be slow to infer that this was the judge’s conclusion, unless it is clear from all the circumstances.
ii) The second is that he concluded that it was not totally without merit, even though he had dismissed it. It would be difficult to imagine a case in which a later court would wish to take a different view, except where the judge’s conclusion was due to a culpable failure by the litigant to put the relevant facts before the court (by analogy with the rule that a judgment may be set aside for fraud).
iii) The third is that he did not reach a concluded view on the merits, e.g
. because he dismissed the application on a procedural ground. There is nothing in the Practice Direction which prevents the later court from reaching its own view of the merits. Paragraph 3 refers to claims or applications that are totally without merit, not to ones which the previous court held to be totally without merit. Mr Bartlett, who appeared on this, but not the previous, occasion and who argued the case for JL with skill and moderation, sensibly accepted that Brooke LJ did not have this situation in mind when he referred to the need to investigate the views of the previous judge. However, Mr Bartlett cautioned that the later court should be slow to reach a conclusion as to the merits of the earlier application if it does not know all the relevant facts and circumstances of the previous application. I agree, but would add that there may be cases in which it is clear (e.g. because the application in question was in the same terms as another one that has been held to be totally without merit). Mr Bartlett also agreed that Brooke LJ’s dictum does not apply in a case where the previous application remains extant and has not yet been determined. If it is clear that it was totally without merit, then it is open to another judge to reach that conclusion.
Has the threshold been satisfied?
The application of9 January 2013
6.
JL was the legal owner of 6 properties which it mortgaged to ME. I am told that ME appointed the Receivers as receivers of all the properties. The Receivers brought proceedings for possession of 5 of the properties (i.e. all except 17 Beck Street), of which 1 was in fact repossessed. This left 5 properties mortgaged to ME which JL wished to recover. On 9 January 2013
JL
issued an application in the Portsmouth County Court seeking (inter alia) a declaration that the appointment of the Receivers was unlawful and an injunction to stop all actions of the Respondents in exercising their alleged rights under the mortgage. On 11 January 2013 District Judge (“DJ”) Wilson dismissed the application and declared it to be totally without merit. I decided in paragraphs [25] and [26] of my earlier judgment that this was a fmal decision on the merits.
7
. Mr Bartlett now seeks to persuade me either (i) that the DJ’s declaration arguably related solely to his conclusion as to the balance of convenience, or (ii) that JL might have understood the declaration in this more limited sense and hence was not on notice that the court had regarded his entire claim as abusive. Mr Bartlett’s first way of putting the matter goes to jurisdiction and is not open to him, given that I decided the contrary on the last occasion. In any event, even if the total lack of merit related solely to the balance of convenience, it would still count towards the “3 strikes”, albeit that, as a matter of discretion, it might carry less weight if the DJ’s declaration had been limited to the balance of convenience. However, as I have said, that is not how I read the declaration. The DJ said unequivocally that he regarded the application as being totally without merit, and there is no reason to think that
he meant anything different from what he said.
The application of 11 March 2013
8.
The next application was made on 11 March 2013, when JL sought to intervene in further proceedings brought by the Receiver relating to 1 of the properties. On 22 April2013 DJ Ackroyd made an “unless” order requiring a copy of the application together with all documents and statements in support (including a further statement if so advised) to be served on the Receivers by 7
May 2013, failing which it would be struck out.
Mr Moraes (for ME) and Mr
Lewis (for the Receivers) argued that the application
of 11 March 2013 was totally without merit and that this is apparent from this order.
They said this for 2 reasons.
9. The first reason is that it is necessary to look at the context, which was that this was an attempt to relitigate the same point that
had been dismissed on 11
January 2013. However, there is nothing in the papers to indicate that DJ
Ackroyd was aware of the earlier order made by DJ Wilson in different proceedings. The likelihood is that the DJ was not aware, since it is not mentioned in ll…’s application notice. Nevertheless, even if the DJ was not aware of this underlying fact, I do agree that it is relevant to the question whether the application of 11 March was totally without merit. As I
said in my earlier judgment, this was an attempt to relitigate the point that had been declared on 11 January to be totally without merit and was even less meritorious for being the second attempt. As regards the issue of discretion, if a litigant ought to have the benefit of receiving notice that the judge regards it as unmeritorious, he has only himself to blame if he fails to tell the judge about the earlier application and its dismissal.
APProved Judgment
10
. The second reason is that the DJ made an order striking out the claim unless it was served by 7 May and that it was not so served. Mr Bartlett says that the failure to comply with an “unless” order does not necessarily establish a total lack of merit. I agree with this as a general proposition, but on the facts of this case I am satisfied that the application was totally without merit. The only evidence in support of the application was that contained in the application, and this discloses a case which was just as lacking in merit as the January application, as I held in my earlier judgment.
The awlication of 1 July 2013
11
. The next application was made by JL on 1 July 2013 for a stay of the orders for possession in relation to the 3 remaining properties. (By that stage DJ Ackroyd had struck out the application of 1I March for non-compliance with the order or 22 April.) Having made this application on 1 July, it appears that JL then sought to have it adjourned on 5 July. (In my earlier judgment I wrongly said that the hearing was on 11 July; in fact it was on 5 July but the order was dated 11 July.) DJ Ackroyd refused JL’s request for an adjournment but nevertheless granted a stay of the Receivers’ application to enforce the orders for possession pending the determination of the High Court proceedings (being the proceedings in which I have given summary judgment).
12. Mr Moraes argued that the application to adjourn on
5 July was itself totally without merit. In my judgment the mere fact that it was dismissed does not prove that it was totally without merit. There is nothing to indicate why it was dismissed.
13. Mr Lewis argued that the underlying application of 1 Ju1y 2013 was entirely without merit, because it was an attempt to relitigate the issues which had been found to be totally without merit on 11 January and which I subsequently found to be totally without merit.
14. Mr Bartlett said in answer that, if an application was in substance a single application made on 2 grounds, 1 good and 1 bad, then the fact that
1 of the grounds might be totally without merit did not mean that the application as a whole was totally without merit. He submitted that the application made on 1
July was in substance successful, in that the DJ did stay the proceedings pending the outcome of the High Court proceedings. However, that does not meet
Mr Lewis’s point, which relates to the lack of merit in the substance of the underlying application. Mr Bartlett accepted that an extant application could count towards the “3 strikes”, but cautioned that it should only do so in a clear case. In my view this is a clear case; the application made on I July was totally without merit, for the reasons given in my judgment on the summary judgment application.
15. Mr Bartlett valiantly sought to argue that parts of JL’s proceedings on which I
gave summary judgment were not totally without merit. Not only is that an
attempt to relitigate an issue which
I have previously decided, but I am satisfied that there is no substance in the arguments now advanced.
16. Accordingly I conclude that JL has made 4 claims or applications which are totally without merit, including the proceedings which I determined last month.
Discretion
17.
Mr Bartlett submitted, and I agree, that an ECRO has a wide reach. It is a Draconian order, which should not be made unless the court is satisfied that there are sufficient reasons for interfering with the liberty of the litigant to sue whoever it wishes, without having to satisfy a judge that it is a proper claim.
18. I agree with
Mr Bartlett that the most important factor in the exercise of the discretion is the threat of further abusive claims or applications. He submitted as follows:
i) There is a difference between a claim or application which is totally without merit because it is based on fanciful allegations of fact and one which is based on hopeless propositions of law. The litigant is more likely to be responsible for the former than for the latter.
If he has instructed counsel, he might reasonably assume that counsel considers the arguments of law to be reasonably arguable.
ii)
If the judge on a previous occasion makes it clear that the claim or application is wholly without merit, then the litigant will have received proper notice. But if nothing was said, the litigant might remain in blissful ignorance. Mr Bartlett accepted (as noted above) that a claim could satisfy the jurisdictional test even if it was not determined on the merits or remained extant, but he submitted that the absence of an indication from the judge was relevant to the exercise of discretion.
iii)
In this case, having failed on 11 January 2013, JL sought to argue the point in March but then sought to have all the various proceedings by the Receiver consolidated so that JL’s intervention could be determined on a single occasion. It issued proceedings in the High Court and sought to have other proceedings stayed. It has failed in the High Court, but this was the first time that any judge gave a fully reasoned judgment explaining why the application was totally without merit.
19.
I agree that there is a potential distinction between cases which are totally without merit on the facts and those which are totally without merit on the law. There may be cases in which the litigant cannot be blamed for running a case which his lawyers presumably thought was arguable. However, I am not satisfied that this helps JL for 3 reasons.
i) The first is that Mr Bartlett is now instructed by
Mr O’Dusanya, who I am told is an in-house lawyer at JL. I do not know whether JL had an in-house lawyer in 2013. I made it clear to Mr Bartlett that I would
Aporoved Judgment
regard that as relevant information if I
was being asked to infer that JL could not be blamed for failing to understand the case being advanced on its behalf, but I was not told.
ii) Secondly, Mr Bartlett expressly told me
that JL does not waive privilege in any legal advice given by its previous counsel. That is JL’s right, and the absence of waiver is not to be held against it. Nevertheless, this is a case in which JL is seeking to rely on the fact that its former counsel was involved in an application as a reason for saying that JL did not realise that the application was totally without merit. If JL could establish this fact without waiving privilege, all well and good. But in this case I do not see how JL can establish it without waiving privilege. If it is not willing to do so, then I cannot attach much weight to the argument.
iii) The third reason for rejecting Mr Bartlett’s submission is that there is nothing on the face of the applications dated 11 March and 1 July to suggest that they were drafted by solicitors or counsel, and in
any event JL appeared on 5 July by its own representative.
20. As regards Mr Bartlett’s second point, I agree that the risk of further abusive proceedings might in some cases be lower, if the litigant was unaware that his previous claims or applications had been abusive, and that he might be unaware if the judge did not tell him so expressly or did not make it clear in his judgment. But I attach little weight to that on the facts of this case:
i) I would expect DJ Ackroyd to have declared on 22 April that the application of 11 March was totally without merit,
had JL told him that it had previously made an application in substantially the same terms which had been dismissed as being totally without merit. I accept that DJ Ackroyd did not say this on 5 July, but by that stage he had become aware of the current proceedings and presumably thought it right not to pre-empt the High Court’s ruling. This is the most likely explanation as to why he took the unusual course of expressly dismissing JL’s application for an adjournment but then granting a stay.
ii) The facts, as set out in this and the previous judgment, reveal
a litigant who was clearly the driving force behind the decision to use any tactic to frustrate the Receivers’ legitimate actions.
21. As regards his third point,
I bear in mind Roth J’s acknowledgment (Pius at
[16]) that:
“Persistency is not a simple matter of numbers but an approach on the part of the litigant that is deemed obsessive in the sense that he will not accept the decisions of the court.”
As
I have said, I accept the submissions of Mr Moraes and Mr Lewis that JL was intent on taking every possible step, by intervening in proceedings in which it was not a party, to frustrate the Receivers’ proper discharge of their
Aporoved Judgment
functions. JL’s conduct in the past suggests a high probability that it
will continue with these tactics in the future, unless restrained.
22.
ME has obviously incurred costs in having to deal with JL’s tactics. I have no specific evidence as to the level of costs, but I accept that it must have incurred costs. In addition it is common ground that JL is in arrears with its mortgage instalments. Mr Moraes refers to the application dated 11 March, in which JL confirmed that the tenants of the mortgaged properties were not in arrears with their rent. He submits, and I accept, that this indicates that JL was continuing to receive rent, even though it was not paying mortgage interest. This is further evidence that JL is behaving in a cavalier fashion towards ME. Whilst that does not of itself justify making an ECRO, it is a factor relevant to the exercise of the court’s discretion, once it is satisfied that the threshold has been reached.
23.
Mr Bartlett cautioned that an ECRO would be of uncertain ambit and might apply, if for example, the Receivers sell the properties and JL seeks to argue that the sale is at an undervalue. I agree that an ECRO would apply in that situation and for good reason. I am satisfied that it is very likely that JL would seek either to abort the sale or to challenge the price after the event, whether or not there are good grounds for doing so. If there are good grounds, then the Designated Judge may give leave.
24.
It only remains for me to deal with the costs of the application, including the costs of this further hearing. ME and the Receivers were entirely successful and should obviously have their costs. In my judgment the bringing of proceedings which are dismissed on a summary basis as being wholly without merit, and which result in an ECRO, is plainly appropriate for indemnity costs. I propose to make a summary assessment of costs on the indemnity basis when I formally hand do this judgment.
Neutral Citation Number: [2014] EWHC 190 (Ch)
IN THE IITGH COURT OF JUSTICE CHANCERY DIVISION
Case No: HC13E02476
The Rolls Building
7 Rolls Buildings, Fetter Lane, London, EC4A INL Date: 5 February 2014
Before :
Mr D HALPERN QC (sitting as a judge of the Chancery Division) Between:
J L HOMES LIMITED
-and-
(1) MORTGAGE EXPRESS
(2) PAUL DIAKIW and DAVID HEAP (Acting as LPA Receivers)
Claimant
Defendants
Mr Roger Bartlett (instructed by Mr O’Dusanya) for the Claimant
Mr Francis Moraes (instructed by Walker Morris LLP) for the First Defendant
Mr Jonathan Lewis (instructed by RPC LLP) for the Second Defendant
Hearing dates: 24 January 2014
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this
Judgment and that copies of this version as handed down may be treated as authentic.
Mr D HALPERN QC (sitting as a judge of the Chancery Division)
Mr D Halpern QC :
1. On 10 December 2013 I granted summary judgment to Mortgage Express (“ME”) and Messrs Diakiw and Heap (“the Receivers”) as defendants to a claim by JL Homes Ltd (“JL”). I held that, if I was wrong to grant summary judgment, I would dismiss the claim as disclosing no reasonable cause of action and as an abuse of process. I concluded by declaring that JL’s claim was totally without merit. I refer to that judgment which sets out the background facts and my reasons for reaching that conclusion. I am now required by CPR Rule 3.4(6) to consider whether it is appropriate to make a civil restraint order against JL. ME and the Receivers each seek an extended civil restraint order (“ECRO”). I must also deal with the question of costs, which remain outstanding from my previous judgment.
The jurisdiction to make an ECRO
2. The jurisdiction to make an ECRO now derives from paragraph 3.1 of Practice Direction 3C to the Civil Procedure Rules, which says that an ECRO may be made:
”where a party has persistently issued claims or made applications which are totally without merit”.
3. The word “persistently” is not defmed but it is common ground between the parties that it requires a minimum of 3 claims or applications (including the present one). This may be inferred from paragraph 2.1 of the Practice Direction, which states that a limited CRO may be made where the party has made 2 or more applications which are totally without merit; an ECRO is more Draconian than a limited CRO and hence “persistent” must envisage a larger number than 2. If the total number is no higher than the minimum number of 3, that is a factor which affects the discretion though not the jurisdiction.
4. In R (Kumar) v. Secretary of State for Constitutional Affairs [2007] 1 WLR
536 the Court of Appeal gave guidance on the Practice Direction. At
paragraph [67] Brooke LJ said:
“It is of course correct that paragraph 1 of Practice Direction C imposes an obligation on courts to ensure that their orders record that a statement of case or application was totally without merit, but the absence of this mantra on the face of an order does not oblige a later court, when convinced that a statement of case or application must have been treated as being totally without merit, to correct the earlier order under the slip rule or to send it back to the original court for correction under that rule. This would be to elevate form over substance in a very undesirable way.”
Aooroved Judgment
This was applied by Mr Bartley-Jones QC in Courtman v. Ludlam [2009] EWHC 2067 (Ch) at [11] and by Roth J in Pius v. Fearnley [2013] EWHC
2217 (Ch) at [14].
5. If the judge in the previous claim or application did not declare that it was totally without merit, there are 3 possibilities which need to be considered:
i) The first is that he did conclude that it was totally without merit but omitted to give the declaration. In such a case, the absence of the mantra is not conclusive, as Brooke LJ explained. However, the court should be slow to infer that this was the judge’s conclusion, unless it is clear from all the circumstances.
ii) The second is that he concluded that it was not totally without merit, even though he had dismissed it. It would be difficult to imagine a case in which a later court would wish to take a different view, except where the judge’s conclusion was due to a culpable failure by the litigant to put the relevant facts before the court (by analogy with the rule that a judgment may be set aside for fraud).
iii) The third is that he did not reach a concluded view on the merits, e.g. because he dismissed the application on a procedural ground. There is nothing in the Practice Direction which prevents the later court from reaching its own view of the merits. Paragraph 3 refers to claims or applications that are totally without merit, not to ones which the previous court held to be totally without merit. Mr Bartlett, who appeared on this, but not the previous, occasion and who argued the case for JL with skill and moderation, sensibly accepted that Brooke LJ did not have this situation in mind when he referred to the need to investigate the views of the previous judge. However, Mr Bartlett cautioned that the later court should be slow to reach a conclusion as to the merits of the earlier application if it does not know all the relevant facts and circumstances of the previous application. I agree, but would add that there may be cases in which it is clear (e.g. because the application in question was in the same terms as another one that has been held to be totally without merit). Mr Bartlett also agreed that Brooke LJ’s dictum does not apply in a case where the previous application remains extant and has not yet been determined. If it is clear that it was totally without merit, then it is open to another judge to reach that conclusion.
Has the threshold been satisfied?
The application of9 January 2013
6. JL was the legal owner of 6 properties which it mortgaged to ME. I am told that ME appointed the Receivers as receivers of all the properties. The Receivers brought proceedings for possession of 5 of the properties (i.e. all except 17 Beck Street), of which 1 was in fact repossessed. This left 5 properties mortgaged to ME which JL wished to recover. On 9 January 2013
JL issued an application in the Portsmouth County Court seeking (inter alia) a declaration that the appointment of the Receivers was unlawful and an injunction to stop all actions of the Respondents in exercising their alleged rights under the mortgage. On 11 January 2013 District Judge (“DJ”) Wilson dismissed the application and declared it to be totally without merit. I decided in paragraphs [25] and [26] of my earlier judgment that this was a fmal decision on the merits.
7. Mr Bartlett now seeks to persuade me either (i) that the DJ’s declaration arguably related solely to his conclusion as to the balance of convenience, or (ii) that JL might have understood the declaration in this more limited sense and hence was not on notice that the court had regarded his entire claim as abusive. Mr Bartlett’s first way of putting the matter goes to jurisdiction and is not open to him, given that I decided the contrary on the last occasion. In any event, even if the total lack of merit related solely to the balance of convenience, it would still count towards the “3 strikes”, albeit that, as a matter of discretion, it might carry less weight if the DJ’s declaration had been limited to the balance of convenience. However, as I have said, that is not how I read the declaration. The DJ said unequivocally that he regarded the application as being totally without merit, and there is no reason to think that
he meant anything different from what he said.
The application of 11 March 2013
8. The next application was made on 11 March 2013, when JL sought to intervene in further proceedings brought by the Receiver relating to 1 of the properties. On 22 April2013 DJ Ackroyd made an “unless” order requiring a copy of the application together with all documents and statements in support (including a further statement if so advised) to be served on the Receivers by 7
May 2013, failing which it would be struck out. Mr Moraes (for ME) and Mr
Lewis (for the Receivers) argued that the application of 11 March 2013 was totally without merit and that this is apparent from this order. They said this for 2 reasons.
9. The first reason is that it is necessary to look at the context, which was that this was an attempt to relitigate the same point that had been dismissed on 11
January 2013. However, there is nothing in the papers to indicate that DJ
Ackroyd was aware of the earlier order made by DJ Wilson in different proceedings. The likelihood is that the DJ was not aware, since it is not mentioned in ll…’s application notice. Nevertheless, even if the DJ was not aware of this underlying fact, I do agree that it is relevant to the question whether the application of 11 March was totally without merit. As I said in my earlier judgment, this was an attempt to relitigate the point that had been declared on 11 January to be totally without merit and was even less meritorious for being the second attempt. As regards the issue of discretion, if a litigant ought to have the benefit of receiving notice that the judge regards it as unmeritorious, he has only himself to blame if he fails to tell the judge about the earlier application and its dismissal.
APProved Judgment
10. The second reason is that the DJ made an order striking out the claim unless it was served by 7 May and that it was not so served. Mr Bartlett says that the failure to comply with an “unless” order does not necessarily establish a total lack of merit. I agree with this as a general proposition, but on the facts of this case I am satisfied that the application was totally without merit. The only evidence in support of the application was that contained in the application, and this discloses a case which was just as lacking in merit as the January application, as I held in my earlier judgment.
The awlication of 1 July 2013
11. The next application was made by JL on 1 July 2013 for a stay of the orders for possession in relation to the 3 remaining properties. (By that stage DJ Ackroyd had struck out the application of 1I March for non-compliance with the order or 22 April.) Having made this application on 1 July, it appears that JL then sought to have it adjourned on 5 July. (In my earlier judgment I wrongly said that the hearing was on 11 July; in fact it was on 5 July but the order was dated 11 July.) DJ Ackroyd refused JL’s request for an adjournment but nevertheless granted a stay of the Receivers’ application to enforce the orders for possession pending the determination of the High Court proceedings (being the proceedings in which I have given summary judgment).
12. Mr Moraes argued that the application to adjourn on 5 July was itself totally without merit. In my judgment the mere fact that it was dismissed does not prove that it was totally without merit. There is nothing to indicate why it was dismissed.
13. Mr Lewis argued that the underlying application of 1 Ju1y 2013 was entirely without merit, because it was an attempt to relitigate the issues which had been found to be totally without merit on 11 January and which I subsequently found to be totally without merit.
14. Mr Bartlett said in answer that, if an application was in substance a single application made on 2 grounds, 1 good and 1 bad, then the fact that 1 of the grounds might be totally without merit did not mean that the application as a whole was totally without merit. He submitted that the application made on 1
July was in substance successful, in that the DJ did stay the proceedings pending the outcome of the High Court proceedings. However, that does not meet Mr Lewis’s point, which relates to the lack of merit in the substance of the underlying application. Mr Bartlett accepted that an extant application could count towards the “3 strikes”, but cautioned that it should only do so in a clear case. In my view this is a clear case; the application made on I July was totally without merit, for the reasons given in my judgment on the summary judgment application.
15. Mr Bartlett valiantly sought to argue that parts of JL’s proceedings on which I
gave summary judgment were not totally without merit. Not only is that an
attempt to relitigate an issue which I have previously decided, but I am satisfied that there is no substance in the arguments now advanced.
16. Accordingly I conclude that JL has made 4 claims or applications which are totally without merit, including the proceedings which I determined last month.
Discretion
17. Mr Bartlett submitted, and I agree, that an ECRO has a wide reach. It is a Draconian order, which should not be made unless the court is satisfied that there are sufficient reasons for interfering with the liberty of the litigant to sue whoever it wishes, without having to satisfy a judge that it is a proper claim.
18. I agree with Mr Bartlett that the most important factor in the exercise of the discretion is the threat of further abusive claims or applications. He submitted as follows:
i) There is a difference between a claim or application which is totally without merit because it is based on fanciful allegations of fact and one which is based on hopeless propositions of law. The litigant is more likely to be responsible for the former than for the latter. If he has instructed counsel, he might reasonably assume that counsel considers the arguments of law to be reasonably arguable.
ii) If the judge on a previous occasion makes it clear that the claim or application is wholly without merit, then the litigant will have received proper notice. But if nothing was said, the litigant might remain in blissful ignorance. Mr Bartlett accepted (as noted above) that a claim could satisfy the jurisdictional test even if it was not determined on the merits or remained extant, but he submitted that the absence of an indication from the judge was relevant to the exercise of discretion.
iii) In this case, having failed on 11 January 2013, JL sought to argue the point in March but then sought to have all the various proceedings by the Receiver consolidated so that JL’s intervention could be determined on a single occasion. It issued proceedings in the High Court and sought to have other proceedings stayed. It has failed in the High Court, but this was the first time that any judge gave a fully reasoned judgment explaining why the application was totally without merit.
19. I agree that there is a potential distinction between cases which are totally without merit on the facts and those which are totally without merit on the law. There may be cases in which the litigant cannot be blamed for running a case which his lawyers presumably thought was arguable. However, I am not satisfied that this helps JL for 3 reasons.
i) The first is that Mr Bartlett is now instructed by Mr O’Dusanya, who I am told is an in-house lawyer at JL. I do not know whether JL had an in-house lawyer in 2013. I made it clear to Mr Bartlett that I would
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regard that as relevant information if I was being asked to infer that JL could not be blamed for failing to understand the case being advanced on its behalf, but I was not told.
ii) Secondly, Mr Bartlett expressly told me that JL does not waive privilege in any legal advice given by its previous counsel. That is JL’s right, and the absence of waiver is not to be held against it. Nevertheless, this is a case in which JL is seeking to rely on the fact that its former counsel was involved in an application as a reason for saying that JL did not realise that the application was totally without merit. If JL could establish this fact without waiving privilege, all well and good. But in this case I do not see how JL can establish it without waiving privilege. If it is not willing to do so, then I cannot attach much weight to the argument.
iii) The third reason for rejecting Mr Bartlett’s submission is that there is nothing on the face of the applications dated 11 March and 1 July to suggest that they were drafted by solicitors or counsel, and in any event JL appeared on 5 July by its own representative.
20. As regards Mr Bartlett’s second point, I agree that the risk of further abusive proceedings might in some cases be lower, if the litigant was unaware that his previous claims or applications had been abusive, and that he might be unaware if the judge did not tell him so expressly or did not make it clear in his judgment. But I attach little weight to that on the facts of this case:
i) I would expect DJ Ackroyd to have declared on 22 April that the application of 11 March was totally without merit, had JL told him that it had previously made an application in substantially the same terms which had been dismissed as being totally without merit. I accept that DJ Ackroyd did not say this on 5 July, but by that stage he had become aware of the current proceedings and presumably thought it right not to pre-empt the High Court’s ruling. This is the most likely explanation as to why he took the unusual course of expressly dismissing JL’s application for an adjournment but then granting a stay.
ii) The facts, as set out in this and the previous judgment, reveal a litigant who was clearly the driving force behind the decision to use any tactic to frustrate the Receivers’ legitimate actions.
21. As regards his third point, I bear in mind Roth J’s acknowledgment (Pius at
[16]) that:
“Persistency is not a simple matter of numbers but an approach on the part of the litigant that is deemed obsessive in the sense that he will not accept the decisions of the court.”
As I have said, I accept the submissions of Mr Moraes and Mr Lewis that JL was intent on taking every possible step, by intervening in proceedings in which it was not a party, to frustrate the Receivers’ proper discharge of their
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functions. JL’s conduct in the past suggests a high probability that it will continue with these tactics in the future, unless restrained.
22. ME has obviously incurred costs in having to deal with JL’s tactics. I have no specific evidence as to the level of costs, but I accept that it must have incurred costs. In addition it is common ground that JL is in arrears with its mortgage instalments. Mr Moraes refers to the application dated 11 March, in which JL confirmed that the tenants of the mortgaged properties were not in arrears with their rent. He submits, and I accept, that this indicates that JL was continuing to receive rent, even though it was not paying mortgage interest. This is further evidence that JL is behaving in a cavalier fashion towards ME. Whilst that does not of itself justify making an ECRO, it is a factor relevant to the exercise of the court’s discretion, once it is satisfied that the threshold has been reached.
23. Mr Bartlett cautioned that an ECRO would be of uncertain ambit and might apply, if for example, the Receivers sell the properties and JL seeks to argue that the sale is at an undervalue. I agree that an ECRO would apply in that situation and for good reason. I am satisfied that it is very likely that JL would seek either to abort the sale or to challenge the price after the event, whether or not there are good grounds for doing so. If there are good grounds, then the Designated Judge may give leave.
24. It only remains for me to deal with the costs of the application, including the costs of this further hearing. ME and the Receivers were entirely successful and should obviously have their costs. In my judgment the bringing of proceedings which are dismissed on a summary basis as being wholly without merit, and which result in an ECRO, is plainly appropriate for indemnity costs. I propose to make a summary assessment of costs on the indemnity basis when I formally hand do this judgment.
