Adams & Individuals Listed In Schedule 1 To the Amended Claim Form v Ford & Ors Listed In Schedule 2 To the Amended Claim Form & Ors

On 1 April 2010 a claim form was issued in the names of 273 claimants, whose names and addresses were listed in schedule 1 to the claim form. There were 19 defendants, whose names and addresses were listed in schedule 2. Brief details of the claim were given in schedule 3. In summary, the claimants were members of the public who had subscribed to three technology-based investment schemes collectively referred to as the Keydata-Innovator Schemes. The essence of the claim was that they were fraudulent schemes in their creation and in the way that the money obtained from the claimants was disbursed.

The solicitors who issued the claim form were Addleshaw Goddard LLP. The claim form contained a statement of truth signed by Michael Green, a partner in the firm, in the following terms:

On 30 July 2010 the claim form was amended, prior to its service, so as to reduce the number of claimants in schedule 1 to 170 and the number of defendants in schedule 2 to 13. It was served shortly afterwards.

The defendants included two solicitors who were former partners in the firm of Collyer Bristow and the firm itself (as vicariously liable for the conduct of its partners). Notice of intention to serve the proceedings was given by Addleshaw Goddard to solicitors acting for Collyer Bristow in a letter dated 28 July 2010. The letter stated:

On receipt of the amended claim form, the defendants took steps to examine the original claim form. The claimants’ solicitors were asked in correspondence to explain the reduction in the number of claimants from 273 to 170. In particular, they were asked to confirm whether the claimants whose names had been deleted had ever given instructions to the firm to issue the proceedings in their names; and also to confirm that all the claimants whose names continued to appear in the amended claim form had given instructions to issue proceedings on their behalf before the claim form had been issued.

On 23 November 2010 Addleshaw Goddard sent to the defendants a proposed re-amended schedule 1 to the claim form. The letter explained that the reason for the amendment was that 12 of the named claimants wished to discontinue their claims against all the defendants. The letter also stated that the solicitors did not have “subscription information” for 3 identified claimants, and that this information would be provided once the position was known. The inference was that the solicitors had instructions from those clients but were still waiting for certain information.

The disclosure that 12 of the claimants named in the amended claim form no longer wished to pursue those claims led to further questions from the defendants’ solicitors. The claimants’ solicitors declined to be drawn into disclosing details of the communications between the firm and individuals who had been named in the original claim form, but stated that the firm had instructions authorising it to act on behalf of all of the claimants named in the amended claim form except the 12 who wished to discontinue. This, the firm suggested, was all that it was relevant for the defendants to know.

The defendants were dissatisfied and applied to strike out the amended claim form pursuant to CPR 3.4(2)(b) and/or (c) and/or the inherent jurisdiction of the court on the ground that the claim form was issued on 1 April 2010 without the authority of all of the individuals identified as claimants. (The applicants were the two former partners and the firm of Collyer Bristow, but I will refer to them as the defendants. No formal application has been made by other defendants, but the court was told on the appeal that one of them, Mr Ford, has reserved his position.) By the time of the hearing the defendants had adduced uncontradicted evidence that 7 of the original claimants had been approached by Addleshaw Goddard but had given the firm no instructions to act on their behalf.

The application was heard by David Steel J on 20 July 2011 and dismissed. On the evidence before him, he drew these conclusions (or they are implicit in his judgment):

It necessarily follows, as David Steel J said in his judgment, that Mr Green’s statement of truth was not true. Mr Green must also have known, when he signed the statement, that he was not then instructed by all the claimants and that he was not able to affirm that they all believed the contents of the claim form to be true.

The judge rejected the argument that in the circumstances he was required to treat the claim by those claimants who were left as a nullity and he also rejected the argument that he should strike out their claim on grounds of abuse of process.

As to the first point, the judge followed the decision of the Court of Appeal in Presentaciones Musicales SA v Secunda [1994] Ch 271. In that case solicitors issued proceedings within the limitation period in the name of a Panamanian company in the mistaken belief that they had authority to act on its behalf. The defendants carried out a search of the Panamanian companies registry, discovered that the company had been dissolved under Panamanian law and applied to strike out the action as an abuse of process. The liquidators of the company thereupon purported to ratify the acts of the solicitors, but in the meantime the limitation period had expired. The Court of Appeal held that the issue of the writ without the authority of the nominal plaintiff was not a nullity and that the liquidators could adopt it, notwithstanding the expiration of the limitation period. Dillon LJ said in his judgment (with which Nolan LJ agreed) that it was well recognised law that where a solicitor starts proceedings in the name of a plaintiff without authority, the plaintiff may ratify the act of the solicitor and adopt the proceedings.

The defendants sought to distinguish that case because the rules now require a claim form to incorporate a statement of truth. David Steel J was not persuaded that this was a sufficient ground for departing from the principle in Presentaciones Musicales. He observed that CPR 22.2 provides that if a party fails to verify his statement of case by a statement of truth, the statement of case shall remain effective unless struck out. If a claim remained legally effective without a statement of truth, it would be illogical to hold that it was devoid of effect because it was verified by a statement which was untrue.

As to the second point, the judge considered that there had not been a sufficient abuse of process to justify a strike out. He said:

The defendants appeal against his decision with leave of Rix LJ.

CPR 3.4(2) provides:

A statement of case includes a claim form: CPR 2.3(1).

CPR 7.2(1) provides that proceedings are started when the court issues a claim form “at the request of the claimant”.

CPR 16.2(1) provides that a claim form must contain, among other things, a concise statement of the nature of the claim and such other matters as may be set out in a practice direction.

CPR 22.1(1) requires a statement of case to be verified by a statement of truth. CPR 22.2 provides:

PD 22 contains further provisions about the form of the statement of truth, who may sign it and the consequences of a failure to verify a statement of case. It provides:

CPR 32.14 states:

CPR 19.1 provides that any number of claimants or defendants may be joined as parties to a claim. A party may be removed without an order of the court before the claim form is served: CPR 19.4(1). Thereafter the court’s permission is required, but the court may order any person to cease to be a party if it is not desirable for that person to be a party to the proceedings: CPR 19.2(3). CPR 3.4(1) provides that the power of the court under that rule to strike out a statement of case includes reference to part of a statement of case. In a case of multiple claimants, the court therefore has power to strike out the claims of some but not all.

For convenience, I will refer to the continuing claimants either as “original instructors”, meaning those who instructed Addleshaw Goddard to act for them before the date on which the original claim form was issued, or “later instructors”, meaning those who instructed the firm after that date. The issues on the appeal can be summarised as follows:

The second issue gives rise to two sub-issues which relate directly to the later instructors but, according to the defendants’ argument, impact also on the original instructors:

On behalf of the defendants it was argued by Justin Fenwick QC (who did not appear below) that no distinction should be drawn between the original instructors and later instructors, because the claimants’ solicitors have declined invitations to provide the information which would enable the two groups to be separated. They must therefore sink or swim together. I do not accept that the conclusion follows from the premise. Although the court does not presently know the identity of the original claimants, that would not be an insuperable problem if justice requires that their identities should be known. Since Mr Green’s statement of truth in the claim form was untrue in relation to some of the claimants, it is open to the court to require him to put the record straight and to identify which claimants authorised him to act on their behalf before the claim form was issued. One of the witness statements served by the defendants in support of their strike out applications suggested that the court should take that course. Whether it is necessary to do so, in order to deal justly with the strike out application, will depend on whether the court considers that in principle the issues should yield different answers in relation to the original and the later instructors.

Logically this is the first issue, although Mr Fenwick made it plain that his argument was directed principally to the issue of abuse of process rather than whether the claim form was to be regarded in law as a nullity.

Mr Fenwick accepted that there would have been no ground for attacking the validity of the claim form if it (and Mr Green’s statement of truth) had been confined to the original instructors. His argument was that the lack of authority to issue it on behalf of the later instructors, combined with the falsity of the statement of truth in relation to them, rendered the document ineffective in law. The ineffectiveness extended to the original instructors, because if the document had no effect in law, it could not constitute an effective claim by the original instructors, albeit that it would have been an effective claim if the claimants had been limited to the original instructors.

Mr Fenwick recognised that in order to succeed in this part of his argument he would have to persuade the court not to follow the decision in Presentaciones Musicales. He submitted that a different approach was justified under the Civil Procedure Rules, under which a statement of truth has a vital part to play in order to validate a statement of case.

Mr Fenwick submitted that although a person on whose behalf an act was purportedly done, but without his authority, can subsequently ratify that act, a statement which was false in fact cannot retrospectively be made to have been true. That is correct. Ratification involves the adoption of the act or transaction done in his name as his own act or transaction. It may therefore take away the effect of an earlier untrue statement by bringing about the same state of affairs as if the statement had been true but it does not alter the fact that the statement was untrue when made. The question is what consequences follow in the present case. Mr Fenwick submitted that the consequence of Mr Green’s statement having been false is that the claim form should be regarded as having no legal effect.

Long before the introduction of the Civil Procedure Rules, it was established that a solicitor who issues proceedings thereby warrants that he has authority to do so: Yonge v Toynbee [1910] 1 KB 215, A M B Generali Holding AG v SEB Trigg Liv Holding [2005] EWCA Civ 1237, [2006] 1 Lloyd’s Rep 318. On that basis a solicitor who acts in litigation without authority to act on behalf of the supposed client is responsible for the costs thereby incurred by the other party.

The legal consequence of proceedings being issued without authority is also well established. The proceedings are defective and liable to be struck out on that account, but they are not devoid of legal effect until they are struck out. Moreover, the court is not bound to strike them out if at the time of the strike out application the client on whose behalf the action was commenced wishes it to continue and to accept responsibility for it. These principles were recognised in Presentaciones Musicales. Dillon LJ said at page 280:

The principle recognised in Presentaciones Musicales remains binding on this court, unless the rules demonstrate an intention that a claim form without a statement of truth conforming with the rules is to be treated as legally ineffective. The rules contain no foundation for that proposition. On the contrary, they provide that a claim form served without a statement of truth remains effective, and therefore it cannot be said that a conforming statement of truth is vital to the existence of a valid claim form. The rules also provide various sanctions for failure to comply with their requirements in relation to claim forms and statements of truth.

If it were the case that falsity of a statement of truth has the additional effect, unspecified in the rules, of making the claim form or particulars of claim of no legal effect, as Black LJ pointed in the course of the argument, it would open the door to undesirable pre-trial strike out applications wherever one party saw the possibility of showing that some assertion of fact in a pleading verified by a statement of truth was not true. Moreover, if that were so, it is hard to see why the same principle should not apply to any other document which requires to be verified by a statement of truth, so enabling pre-emptive strike out applications in relation to defences, witness statements and so on.

There was some discussion in the course of the argument about whether the provision in CPR 7.2(1) that proceedings are started when the court issues a claim form “at the request of the claimant” should be construed as having the effect of making the claim form ineffective in relation to the later instructors because it could not properly be said to have been issued at their request. However, if the principle in Presentaciones Musicales is applied, by the date of David Steel J’s judgment the claim form fell to be regarded as having been issued at their request. I cannot believe that it was the intention of the Rules Committee that CPR 7.2(1) should have the effect of reversing Presentaciones Musicales, not least because of the potential for injustice which would follow. The example was given in argument of a prospective claimant with a valid claim whose solicitors were in discussion with the prospective defendants. Suppose that the claimant and his solicitors were waiting for the defendant’s final offer before deciding whether to bring proceedings, but the offer – made just before the expiry of the limitation period – unfortunately coincided with the claimant suffering a serious injury, which it made it impossible for him to give such instructions before the limitation deadline. In such a case, if CPR 7.2(1) required the solicitor to have the client’s authority for the proceedings validly to be commenced, the injustice would be obvious.

If, contrary to what I have said, the claim form should be treated as lacking any effect in law in relation to the later instructors, I can see no rational or just ground for holding that it was not effective on behalf of the claimants who had authorised its issue.

Mr Fenwick submitted that the claimants should not be allowed to obtain a benefit from speculative and mendacious conduct on the part of their solicitor, and that if he had acted with propriety their names would not have been included in the claim form. It was submitted that the solicitor was thereby guilty of contempt of court and that the claimants should not be permitted to reap the benefit. These are serious charges.

The first and to my mind most difficult question is whether the court should hold that if Addleshaw Goddard had acted with propriety the names of the claimants on the original claim form would have been limited to those who had given authority to the firm to issue the proceedings in their name.

It is unquestionably a sound general proposition that it is a misuse of the process of the court for a law firm to issue proceedings in the name of a person who has not given it authority to do so. There are public interest considerations. It is not in the public interest that a law firm should use the justice system to initiate litigation in a way which amounts to meddling in matters which are not its proper professional concern.

However, there may be circumstances where the issue of proceedings would not be abusive in that sense, even though the firm lacked formal authority to issue them. Suppose that a firm received instructions on behalf of a corporate body or association whose governing instrument required certain procedures to be followed before the issue of legal proceedings. Suppose further that a limitation deadline was looming, that there was insufficient time for those procedures to be completed, but the chairman of the body instructed the firm to issue proceedings, confident in the belief that it was in the claimant’s interest to do so and that the necessary procedures would be completed before it was time for the proceedings to be served. I do not believe that it would be an abuse of the process of the court for the firm to issue proceedings in such circumstances.

Those facts are a long way from the present case. The illustration serves only to show that that it would not be right to lay down a categorical rule that the issue of proceedings without valid authority from the claimant must necessarily amount to an abuse of the process of the court.

Mr Fenwick suggested that there is an important distinction between the type of example just given, where the solicitors had instructions from someone who properly represented the proposed claimant and reasonably expected to receive proper formal instructions to proceed with the litigation, and a case where those factors are absent. I agree with him that those are very important considerations, and that in their absence the court may be very likely to conclude that the issue of unauthorised proceedings would be an abuse of process. But it would not be right for this court to lay down a hard rule to that effect. Determining whether there has been an abuse of process requires sensitivity to the facts of the particular case.

By way of an illustration, Graham Chapman on behalf of the claimants referred to the decision of the Employment Appeal Tribunal (Keith J) in Nottinghamshire Healthcare NHS Trust v Prison Officers’ Association [2003] ICR 1192. Shortly before the expiry of a statutory time limit, solicitors instructed by a trade union brought an originating application under the Employment Rights Act 1996 in the names of the union and 717 of its members, claiming that the members had been unfairly dismissed by the hospital trust which employed them. Prior to the issue of proceedings, the union had sent originating application forms to all its members for them to complete and had received back 102 completed forms. The hospital trust applied to strike out the originating application. The employment tribunal found that the application had been issued without the authority of the other 615 members of the union, rejecting the argument that the union had implied authority to give instructions for its issue on their behalf. Nevertheless the tribunal refused the application to strike out the proceedings on grounds of abuse of process. By the date of the decision by the tribunal 336 members of the union had ratified the issue of proceedings on their behalf; 111 members had indicated that they did not wish to proceed; and the remaining 168 members had yet to respond to the union’s solicitors’ enquires. The tribunal decided that the 111 members who did not wish to proceed should be treated as having withdrawn and it extended time for the 168 members to inform the tribunal of their decision, in default of which their claims would be struck out. On appeal the Employment Appeal Tribunal held that it was open to the tribunal to find that the way in which the union’s solicitors had behaved did not amount to an abuse of process. In reaching that conclusion, it took into account the practical problems which the union had encountered in obtaining the instructions of all the members.

Mr Fenwick pointed to a number of features which distinguished that case from the present, including the different statutory regime under which the proceedings were brought and the fact that in that case there was a pre-existing relationship between the union and its members, such that the union felt a legitimate sense of duty to seek to protect their interests. The case nevertheless illustrates the need to look closely at the relevant facts in their context when considering a question of abuse of process.

This is not a straightforward case and there are points to be made on both sides. On the evidence before the court, some of the claimants were strangers to Addleshaw Goddard in that there had been no communication between them except that the firm had written to them but received no reply. The firm had no instructions to act for them, let alone to commence proceedings in their name, and had no means of knowing whether they would wish to join in the proceedings which other subscribers intended to commence.

On the other hand, it would not be fair to stigmatise Addleshaw Goddard as officious speculative intermeddlers in a matter in which they had no proper professional interest. As Mr Green explained in correspondence and in his witness statement, the subscribers were a large number of private individuals, spread over of a wide geographical area, who had little or no contact with one another. Subscribers had been advised by one of the defendants, who was heavily involved in the schemes, at extraordinary general meetings of the Keydata Partnerships to adopt a “wait and see” approach. They had for some time held off from seeking independent advice about possible legal redress, but eventually a group of subscribers instructed Addleshaw Goddard to investigate and advise them. The firm reached the view that they had been victims of fraud and had valid claims against a variety of defendants for a variety of causes of action. However, the litigation costs would be heavy and the only practical way in which subscribers would be able to meet them, and bear the risk of adverse costs, would be by forming a litigation group. This was a time consuming and complicated process. The letter dated 28 July 2010 stated that it had been a considerable undertaking to coordinate instructions of more than 250 clients since the end of 2009, and that it took months to hear back from the subscribers who were interested in pursuing their individual losses on a collective basis. It would not be surprising if by 1 April 2010, when the limitation period was possibly about to expire, the position of many subscribers remained unknown. It was obviously important for those who wished to proceed that the group should be as large as possible in order to share the costs. In those circumstances the solicitors took the decision to include in the claim form all who were potential members of the group, with the intention of later removing any who did not wish to be members of the group.

On the particular facts of this case, I do not consider that conduct in itself to have constituted an abuse of the process of the court. It may have been an imperative course if any of the subscribers were to have a realistic prospect of their claims being adjudicated.

The final question is whether the amended claim form should be struck out against all claimants or against the later instructors because of the form of the statement of truth made by Mr Green. Whatever pressure he may have been under, it is a seriously troubling fact that he made a statement of truth in a form which was false.

In fairness to Mr Green it is important to take into account that before the amended claim form with the statement of truth was served, he had written the letter dated 28 July 2010, which did set out in considerable detail the steps which his firm had been taking over the preceding months. Indeed it is that letter which provided much of the ammunition on which the strike out application was based. As the defendants have rightly submitted, it is obvious from that letter that not all the claimants named in the original claim form had given Addleshaw Goddard instructions to proceed at the time of its issue, although the fact was never formally admitted. A fair reading of the correspondence is that he did not seek to hide that fact in general terms, but he was not willing to identify which claimants had given instructions to the firm to proceed and when. He regarded that as confidential to each client. While he was not obliged in law to disclose the precise date on which he received any instructions, he was obliged to comply with the rules, which required a statement of truth in proper form.

Taking together the letter which preceded the service of the amended claim form, the statement of truth on the claim form itself and the subsequent correspondence, a fair conclusion is that Mr Green did not attempt to deceive the defendants into thinking that all the claimants had authorised the issue of proceedings prior to 1 April 2010, when the claim form was first issued, but the way in which he dealt with the point was ambiguous and there was a failure of candour in not providing the information which the rules required. This was a serious shortcoming and is not to be condoned.

However, without in any way condoning it, I can see nothing wrong in David Steel J’s conclusion that it would be disproportionate and contrary to justice for the amended claim form to be struck out. It was a conclusion properly open to him.

Mr Fenwick argued that it was necessary for the court to strike out the proceedings as the only effective way of ensuring proper compliance with the rules. He acknowledged that the result in relation to the original subscribers would be to deprive them of the possibility of pursuing their claims, although they had been brought in proper time, but he submitted that they would have a remedy against the solicitors responsible for putting them in that situation.

I do not believe that the draconian step of striking out the action is necessary in order to secure proper compliance with the rules in future cases. Moreover, even if I had taken a different view in relation to the later instructors, I would see no just ground for barring the original instructors from proceeding with their claims.

At the time when the claim form was issued, Mr Green owed a duty to his clients, i.e. the original instructors, as well as to the court to comply with the rules by making a statement of truth on their behalf, having taken steps to comply with 22 PD 3.8. He had no authority to make any statement on behalf of any of the other named claimants, because he had no instructions to represent them.

Accordingly the statement of truth in the claim form should have been expressly made only on behalf of those named claimants who were his clients and had authorised him to make the statement of truth on their behalf.

When it came to service of the claim form, Mr Green should have made a further statement of truth complying with 22 PD 2.3. That statement would have been made on behalf of such of the named claimants as had given him instructions to proceed since the date of issue of the original claim form.

It would thus have been apparent to the defendants on whom the claim form was served, and to the court, which claimants had authorised the firm to issue, or pursue, the proceedings on their behalf at the time of the issue of the proceedings and at the time of service.

It would have been sensible, although not mandatory under the rules, to have explained the position more fully in a letter at the time of service. Mr Green did this in general terms, but in a way which sought to avoid disclosing who his firm had been, and was, acting for at the relevant times. He seems to have been under the misapprehension that this information was private to him and his clients. It was no such thing. The defendants were entitled to know who had authorised the issue of the claim form and who had authorised its service.

If there remained a pool of named claimants who had not authorised service of the proceedings, but who subsequently gave instructions to the firm to proceed on their behalf, the proper course would have been to serve a further statement of truth in relation to them, so as to complete the provision of properly authorised statements of truth.

Although the claimants’ solicitors were in breach of the rules in not proceeding as they should have done, I do not consider it necessary for the court to know which of the claimants were original instructors and which were later instructors for the purpose of deciding whether the claims should be struck out, because I would uphold David Steel J’s decision not to strike out the claims of either group.

Since preparing this judgment I have read the judgment of Arden LJ and agree with her comments about the wider context, in particular about allowing access to justice in multi-party litigation without encouragement of officious intermeddling and the need for proper transparency.

I agree with both judgments.

I also agree with the judgment of Toulson LJ. The present case presents at an abstract level a dilemma for procedural law. Should it allow a person to start proceedings on behalf of another which he or she considers could be in that person's best interests and which that person might, if he or she knew about the possibility, wish to start for himself or herself in order to avoid the risk that they become statute-barred? He or she would be a sort of Good Samaritan, finding a person disabled from acting on his or her own behalf and aware that a right to sue may be lost if no action is taken.

Or should the court take the view that this is a wholly impermissible and undesirable development? The solicitor could be seen as an interfering busybody who should leave events to take their course. As a matter of policy the court could take the view that even to allow this act in limited circumstances would encourage litigation and boost the compensation culture.

The answer we have given in our judgments is that there are cases where it will be acceptable to start proceedings without authority provided that it is openly done. We have rejected the idea that the policy of the law is always to prevent this happening. Such an absolute position is rejected in an analogous situation in relation to at least one other form of collective litigation: it is, for instance, possible to start a shareholder’s derivative action without the permission of the court needed for its pursuit where urgent relief is required: see CPR 19.9(4).

In my judgment, we need also to be generally aware of the effects of changes in the nature of litigation funding, involving, for instance, third parties and insurance. These changes mean that claimants are more likely to have to aggregate their claims and to bring them together in a single action. There is also today more multi-party litigation, with more vehicles for such litigation, than in the past. Procedural rules must reflect changing needs in litigation just as the common law must be kept up to date by judges so as to reflect the changing needs of society. The decision of this court in the present case is part of that process.

However, the course taken in this case is not a course which I encourage. Transparency is, in my judgment, important as a form of policing the system without the need for judicial intervention. I for my part consider that it would have been preferable for the judge to have ordered the respondents to provide a list of those who gave authority for the statements of truth and the issue of proceedings only after their issue, if that had been sought. I see no reason why that should not generally be done or why it should not have happened in this case. However, I do not consider that this information is needed to decide this appeal, or that a condition should be imposed for the provision of this information, as the point was not raised by the appellants and we have not heard argument on it from the respondents. The appellants also have not suggested that the information would disclose any material new fact.

A person who issues proceedings without authority will, if challenged, have to explain why it was justifiable to act as he or she did. He or she may also run the risk of doing more harm than good: his or her action may result in a liability in costs to the other party. Those are matters which that person will have to take into account. Furthermore, this case concerns the issue of proceedings by a solicitor. It may well be more difficult for a person who is not a solicitor to show justification.

However, the justification should be judged in the light of the circumstances prevailing at the time of the issue of the proceedings. As Cardozo CJ said in the context of the tortious liability of rescuers, the reason exacted is “not the reason of the morrow”, but “reason fitted and proportioned to the time and the event”: Wagner v International Railway Co 133 N.E. 437, 438.