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Failure to restore company to the register: appeal judgment supports strike out of deafness claim in light of claimant's defaults

Cowley v LW Carlisle Company Limited
Stoke-on-Trent County Court
14th November 2018

Patrick McBrien of DWF's disease team has succeeded in applying for this occupational deafness claim to be struck out and then more recently in resisting the claimant's appeal against the district judge's strike out order. The judgment is important in demonstrating that claimants can still come unstuck if they fail to properly consider the effect of a former employer becoming dissolved and the additional procedural aspects arising from that. Simon Hughes, Counsel from Civitas Law, successfully represented the defendant at the appeal.

Background and decision at first instance

The defendant's insurers applied to strike out a purported claim on the basis that the claimant had not taken the fundamental step of restoring the defendant company to the register before starting the litigation. The application asserted that as a result of this failure the proceedings were a nullity and therefore the court should make a declaration under CPR 11 that it had no jurisdiction to hear the claim or in the alternative that the court should strike the claim out pursuant to CPR 3.4(2)(c).

The claimant resisted the application and his solicitors served a witness statement relying on the Court of Appeal's judgment in Peaktone Ltd v Joddrell (2012) that proceedings served on a company which had been dissolved were retrospectively validated on the company later being restored to the register. Significantly as things would transpire, the claimant did not though explain in the statement what steps had been taken to restore the defendant to the register nor was any evidence given within that witness statement as to the reasons why the defendant had not been restored. The witness statement did not explain either what further period of time the claimant would need to put his house in order.

During the actual hearing of the application before District Judge Etherington the claimant made an application for a stay of proceedings so that the defendant could be restored to the register and relied on the fact that once restored the proceedings would be retrospectively validated (in accordance with Peaktone) and pointed to the prejudice that would be caused to the claimant if his claim was struck out.

However the judge noted that the claim was low value as it was limited to £5,000; there were three further defendants who would be caused delay by a stay and that there was no evidence before him explaining why LW Carlisle had not been restored previously. Most pertinently, the judge was concerned that despite the application to strike out having been made a period of months prior to the hearing there was still no evidence from the claimant’s solicitors that restoration proceedings had been started. The judge, in robust terms, went onto strike the claim out under CPR 3.4(2)(c). Importantly he did not make a declaration as to whether the court accepted or declined jurisdiction.

Basis of appeal

The claimant appealed the decision on three grounds.

Firstly, the claimant argued that that the defendant had not complied with the requirements of filing an acknowledgment of service as required by CPR 11(2) and therefore the claimant averred that, had the district judge done so, he was wrong to decline jurisdiction. The defendant had in fact filed an acknowledgment of service contesting jurisdiction but the claimant argued that it had not been filed in time. In reality, jurisdiction was contested as soon DWF were instructed and the delay was a result of the claimant serving proceedings on the defendant's last known address, as opposed to on insurers or solicitors.

Secondly, the claimant argued that the failure of the defendant’s alternative application under CPR 11 meant that the court was not entitled to go onto consider an application under CPR 3.4.

Finally, even were the appeal to fail on the first two grounds, the exercise of DJ Etherington’s discretion was plainly wrong when one considered the effect of Peaktone and the prejudice caused to the claimant.

In response, the defendant maintained that the district judge had not declined jurisdiction under CPR 11 but rather struck the case out under his inherent case management powers as set out at CPR 3.1(2)(m). The fact that he explicitly or implicitly accepted jurisdiction in no way prevented him from striking the claim out as he was under an ongoing duty to continue to case manage the proceedings.

Furthermore, bearing in mind that the judge was faced with a without notice application, unsupported by proper evidence, seeking an open ended stay in a low value claim where there were other defendants, the exercise of his discretion, on the facts, was well within the broad boundaries afforded him.

Findings on Appeal

HHJ Rawlings identified key issues relevant to the appeal which included:

  1. Whether the DJ did strike out the claim under CPR 11.
  2. If he did, was he right to do so?
  3. Should he exercise his discretion to strike the claim out so as to allow a jurisdictional challenge by the back door, i.e. did the application under CPR 11 prohibit a challenge under CPR 3.4(2)(c)?
  4. If the application under CPR 11 did not exclude an application under CPR 3.4(2)(c) should he interfere with the exercise of the district judge’s discretion to strike the claim out?

As to issue 1, and having reviewed the transcript of the proceedings, HHJ Rawlings said that it was clear that DJ Etherington had not struck the claim out on the basis that the court lacked jurisdiction to hear the claim. Significantly, he noted that the appropriate order were the court to decline jurisdiction would be for a declaration to this effect. The fact that no declaration was made by the district judge was highly probative. In light of the fact that the case was not dealt with under CPR 11, HHJ Rawlings did not find it necessary to go on to consider Issue 2.

Though again technical in nature, perhaps the most significant part of HHJ Rawlings' judgment relates to the interplay between CPR 11 and CPR 3.4, as described at Issue 3. HHJ Rawlings said that simply because an application was made in the alternative for the court to decline jurisdiction which had been either explicitly or implicitly rejected by the court, did not prevent the court from going onto case manage the case under its inherent powers. In effect the court’s powers of case management were in no way hamstrung because of a failure of an application that the defendant had made. He noted the broad and largely unfettered discretion afforded to the court under CPR 3.1(2)(m) and in light of this HHJ Rawlings believed that DJ Etherington was not only entitled to consider his powers of case management but indeed obligated to do so pursuant to the overriding objective.

Finally, turning to consider issue 4 HHJ Rawlings stated that he could see no basis for interfering with the exercise of the court’s discretion below.

The appeal was therefore dismissed with an order for costs in favour of the defendant.

Comment

Firstly, it is significant that HHJ Rawlings found that, in these particular circumstances, the court has power to strike the claim out under its general case management powers and independently of jurisdiction arguments.

HHJ Rawlings said that while DJ Etherington had expressed himself in robust terms it was clear that he had considered all relevant factors including proportionality, the absence of evidence, delay and the effect a stay would have on the other defendants. The court took the view that prejudice caused to the claimant by the loss of his claim was not sufficient to outweigh these factors.

HHJ Rawlings believed that it was key to his decision and indeed “remarkable” that the claimant had called no evidence to show he had started the restoration proceedings between the issuing of the application to strike out and the hearing before DJ Etherington. In those circumstances HHJ Rawlings was unwilling to interfere with the discretion exercised by DJ Etherington.

The court's reasoning here shows that while the decision to grant a stay is discretionary, there is an onus upon claimants when seeking an indulgence of the court to be allowed to delay proceedings to produce good evidence to demonstrate that it is in advancement of the overriding objective to do so and not simply rely on the inherent prejudice of a claimant losing his claim. It may well be that many claimants will find this a difficult hurdle.

While the Court of Appeal's judgment in Peaktone has given claimants the opportunity of putting right certain technical failures around failing to restore dissolved companies before proceedings are started, this latest case demonstrates that there is a limit to shortcomings that will be tolerated by the courts. Insurers should be alive to the fact that the courts' willingness to give claimants a second chance is not without limitations.

Contact

For further information please contact Patrick McBrien on 0161 603 5236 or at patrick.mcbrien@dwf.law

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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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