High Court: Tactical warehousing
The High Court has struck out a counterclaim brought by a law firm that “deliberately maintained a discreet silence” until the claim against it was “done and dusted”.
Master Davison said the “inference of tactical warehousing” was not rebutted because the firm paid security for costs into court and applied to re-amend the counterclaim six years ago.
The firm and the solicitor who runs it were “in serious breach of the overriding objective”, Master Davison concluded.
In 2017, Western Avenue Properties Ltd and Kalpesh Patel obtained an interim injunction to restrain Sadhana Soni, who had been their in-house lawyer for 11 months before setting up her own firm, Denning Sotomayor, from acting for a particular client because of the confidentiality obligations she owed them.
Ms Soni and the firm counterclaimed for non-payment of fees. Western Avenue successfully applied for £40,000 in security for costs for this, which was paid into court in August 2018.
Then “nothing at all happened for very nearly five years” until June 2023, said Master Davison, when the defendants applied to strike out the claim based on failure to progress, which was agreed shortly before a hearing last December.
The injunction was discharged and the claimants agreed to pay the defendants’ costs.
The order was silent as to the counterclaim and the claimants applied to strike it out.
The judge said there was “no real or satisfactory explanation for the delay”; counsel for the defendants argued that the parties had treated the claim and counterclaim as on hold or paused.
“I think a much more likely explanation is that the claimants for their part had obtained what they needed by way of the interim injunction and the defendants for their part could not prosecute or pursue the counterclaim without the risk of provoking the claimants into action on the claim and therefore, consciously or by default, decided to let sleeping dogs lie.
“To put that slightly differently it seems to me that the defendants had only a conditional intent to pursue the counterclaim, namely that it would be pursued if, and only if, the claim was revived.”
The delay was “of such a scale as compels the inference” that the defendants were “warehousing the counterclaim” – in other words they had “no real intention” of pursuing it.
“I also agree that the defendants have been guilty of tactical manoeuvring in that they consciously did not bring forward their application for directions in the counterclaim until the claim was struck out.”
While the claimants too could have cross-applied at an earlier stage to strike out the counterclaim, “that does not change or detract from the fact that the defendants in my view, and on the evidence I have before me, deliberately maintained a discreet silence on the counterclaim until the claim against them was done and dusted”.
The delay amounted to an abuse of process. He noted that, having applied to re-amend six years ago, the defendants “ignored a perfectly reasonable request for further information” made soon after and “never until now pursued” the application.
The defendants were “in serious breach of the overriding objective”, Master Davison concluded.
“The delay here is inordinate and inexcusable and (though not strictly relevant to the application) the claimants would be prejudiced by it. Prejudice is to be inferred from the scale of the delay and the nature of the counterclaim.”
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