Abuse Of Process: When You’re The Author of Your Own Change in Circumstances
The courts have long been encouraging litigants to negotiate a settlement, to mediate or go to alternative dispute resolution (ADR) to avoid an expensive and time-consuming court case. Where the parties unreasonably refuse to do so, they can be penalised in costs – something businesses will want to avoid.
But what about the situation where a claimant pursues proceedings in a way that amounts to an abuse of process - even if nothing unlawful was done? The Court of Appeal has given important clarification JSC v Berenger1 which potential commercial litigants are advised to note. Essentially, the parties’ conduct in proceedings may be permissible, or it could amount to an abuse of process.
The relevant conduct
The case involved millions of pounds’ worth of assets, a worldwide freezing order and a receivership order. The commercial defendant (Berenger, a foundation incorporated in Liechtenstein) accepted the instructions of a beneficiary of the foundation to exclude him formally as a named beneficiary, with the intention that Berenger could then argue he no longer had an interest in the assets in question. Berenger than applied to court for a receivership order to be discharged on the basis of a material change in circumstances or, in the alternative, that the order should never had been granted. The Commercial Court dismissed the application, holding that the argument based on change in circumstances had been brought about by Berenger itself; and was an abuse of process in order to throw obstacles in the way of enforcement. The appeal court dismissed Berenger’s argument on appeal that the application should not be treated as an abuse of process where no unlawful thing had been done nor any misuse of process.
Phillips LJ said: “There could not be a clearer example of a wrongful and abusive process, one which the Judge was right to refuse to entertain.”
Proceedings can, he said, be struck down as an abuse of process where there has been no unlawful conduct, no breach of procedural rules, no collateral attack on a previous decision or dishonesty or other reprehensible conduct.
The judge was correct in saying that it can amount to an abuse of process for a party to attempt to reopen an interlocutory order on the basis of a material change of circumstances wholly within that party's control.
What does this mean?
Great care needs to be exercised when taking or pursuing proceedings, for instance, if the party wants to avoid paying a debt. There may frequently be permissible grounds for reopening an interlocutory application in principle.
But an applicant must take this ruling as a warning that if it is made on the basis of a material change of circumstances when the party itself brought about the change, or on other grounds of the party’s own making, it could amount to an abuse or process.
Even in the absence of illegal or even underhand conduct, a party is not immune to its conduct amounting to an abuse of process. Take specialist advise where necessary.
1JSC VTB Bank (a company incorporated in Russia) v Skurikhin and others [2020] EWCA Civ 1337
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