The English Court of Appeal has provided a useful review of the law relating to an application to strike out a claim on the basis that it constitutes an abuse of process. In Outotec (USA) Inc. & Another v MW High Tech Projects UK Limited [2024] EWCA Civ 844, the proceedings subject to the strike out application had been brought following previous and concurrent litigation between the parties.

The judgment answers the question: will breach of the Aldi guidelines be sufficient for strike out, or must some element of vexation, oppression or harassment be shown? The judgment also serves as a warning to parties that they must follow the Court of Appeal’s procedures carefully in order to safeguard the right to make all the arguments they want to raise at the appeal hearing.

Background

These proceedings originate in delays to the construction of a new "waste to energy" power plant in Hull. The power plant company brought a claim against the contractor for damages in respect of the delays and the consequences of termination of the main construction contract. The contractor in turn brought a contribution claim against a sub-contractor. The sub-contractor defended the contribution claim and counterclaimed for monies outstanding under the subcontract. In two separate judgments, the High Court largely found against the contractor in respect of these claims (the Main Action).

After the first judgment in the Main Action was handed down, the contractor commenced the current proceedings against the sub-contractor and its parent company (which had previously provided a guarantee to the contractor on behalf of the sub-contractor). In these new proceedings, the contractor alleged that it was induced to enter into the sub-contract with the sub-contractor as a result of fraudulent or alternatively negligent misrepresentation (the Misrepresentation Claim).

The sub-contractor and its parent sought to strike out the Misrepresentation Claim as an abuse of process. However, while the High Court found that the contractor could and should have raised the misrepresentation allegations in the Main Action, it found that the subsequent Misrepresentation Claim should not be struck out as it nonetheless did not constitute an abuse of process.

There were two other sets of such construction contracts between the parties in relation to plants in Surrey and Levenseat. Those contracts are also subject to ongoing disputes. The dispute between the contractor and the sub-contractor in respect of the Surrey sub-contract is listed for a trial in February 2026, while the Levenseat dispute is the subject of ongoing arbitral proceedings.

Abuse of process

The sub-contractor and its parent appealed, asking the Court of Appeal to find that the judge was wrong to refuse to strike out the claims as an abuse of process. But the Court of Appeal dismissed this appeal.

In upholding the first instance judgment, the Court of Appeal helpfully set out the following summary of the principles of law applicable to an application to strike out for abuse of process.

1. While the approach in the 19^th century case of Henderson v Henderson had been that, absent special circumstances, a second claim could not be brought if it could have been brought in earlier proceedings, that is now considered too dogmatic an approach.
    
2. Instead, what is required is “a broad merits-based judgment which takes account of the public and private interests involved and all the facts of the case, focussing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before” (Johnson v Gore Wood [2002] 2 AC 1). 
   
   One such circumstance the court considered to be “highly relevant” was the ongoing High Court proceedings in relation to the Surrey sub-contract (given the Levenseat proceedings were in arbitration, the court did not take into account their existence). The key consequence of the Surrey proceedings was that, irrespective of the outcome of the Main Action, a trial into alleged misrepresentations of the sub-contractor was “always” going to be heard at a later date. The Court of Appeal concluded that that factor “points firmly away from the existence of vexation/oppression/harassment, and confirms the conclusion that, in the round, the new claims do not constitute an abuse of process.”
    
3. The burden rests on the defendant to establish that it is an abuse of process for them to be subjected to the second action (Johnson v Gore Wood; Michael Wilson & Partners v Sinclair [2017] EWCA Civ 3). It will be rare for a court to shut out a genuine claim unless it involves unjust harassment or oppression.
    
4. Where a party involved in ongoing litigation becomes aware that it may have related claims which are not currently pleaded, it is required to adhere to the “Aldi guidelines”. The “Aldi guidelines” stem from a Court of Appeal ruling in Aldi Stores Ltd v WSP Group plc [2008] 1 WRL 748 which held that if a party wishes to reserve the right to bring further proceedings on closely related issues, it must raise this with the court so that the court can decide how it wishes to proceed. 
   
   The Court of Appeal in Aldi said that in complex commercial multi-party litigation, the question must be referred to the court and there can be no excuse for not doing so, this being important in the public interest as well as that of the parties. A party which breaches these Aldi guidelines runs a “high risk” that the court will find their subsequent action to be an abuse of process (Stuart v Goldberg Linde (a firm) & Others [2008] EWCA Civ 2). Adherence to the Aldi guidelines will always be a relevant factor when the court considers an application to strike out (Gladman Commercial Properties v Fisher Hargreaves Proctor & Others [2013] EWCA Civ 1466). 
   
   The Aldi guidelines do not require a party, at least initially, to plead out in detail the new claims. Rather a party is required to raise, with the court and with the other parties, the possibility of such (as yet unformulated) claims arising. Here, it appears that the contractor did not notify the court or sub-contractors of the allegations in the Misrepresentation Claim as part of “a commercial decision”, albeit no evidence was provided to justify that commercial decision.
    
5. The failure to notify the court of the Misrepresentation Claim earlier constituted a breach of the Aldi guidelines.  The Court of Appeal made clear that this breach was “only one facet of the necessary merits-based evaluation … in other words, it does not automatically follow that a breach of the Aldi guidelines will make the second action abusive. A breach may be a strong pointer towards such a result but it does not obviate the need for the applicant [here, the sub-contractor] to demonstrate vexation, oppression or harassment.”
    
6. In deciding whether a claim is an abuse of process, the court will engage in a balancing exercise which is “very similar" to the approach the court takes to exercising its discretion, albeit the decision itself is not a matter of discretion (Aldi; Stuart v Goldberg Linde). 
    
7. That exercise must consider the causative effect of the failure to follow the Aldi guidelines (Otkritie Capital International Limited v Threadneedle Asset Management [2017] EWCA Civ 274), in addition to whether there has been a misuse of the court’s process, oppression or harassment (Dexter v Vlieland-Boddy [2003] EWCA Civ 14). For example, the court will evaluate hypothetical consequences and possible case management outcomes (Barrow v. Bankside Agency Ltd. [1996] 1 W.L.R. 257, Otkritie).
    
8. The exercise will also consider the public interest, as set out in Johnson v Gore Wood and Aldi. That is unchanging from case to case (for example, the efficient use of court resources and finality), while matters such as the private interests of the parties are fact specific and will vary from case to case. Therefore, the exercise may involve an analysis of all the circumstances of the case, including the consequences of striking out or not.
    
9. On any appeal, the appellate court will be reluctant to interfere in the evaluation carried out by the judge at first instance. The appellate court will only step in where the first instance court has taken into “account a matter they should not have done, failed to take into account something [they] should have done, erred in principle, or reached a conclusion that was so perverse as to be “plainly wrong”" (Aldi; Stuart v Goldberg Linde).  The Court was clear that no such errors had been made by the first instance judge in this case.

Analysis of any potential vexation, oppression or harassment

Applying the above principles, the Court gave detailed consideration to what it deemed to be the “major factor” – whether the Misrepresentation Claim would cause the sub-contractor any vexation, oppression or harassment. In finding that the sub-contractor would not suffer from such issues, and that the claim was therefore not abusive, the Court made, amongst others, the following findings.

• The absence of overlapping claims: The Misrepresentation Claim was a new and “genuine” claim which did not overlap with the matters that arose in the Main Action, nor involve any “obvious vexation, oppression or harassment”. Having a second trial in relation to the Hull plant “would not have any significant detrimental effect on the efficient use of the court’s resources” given that the time and resources saved in the Main Action “will now be incurred in” the Misrepresentation Claim. The “net effect on the public interest is therefore neutral … Thus, in accordance with the principle noted [at point 3] above, the court will not lightly strike out such untested claims, regardless of the breach of the Aldi guidelines.”
   
• Parent company guarantee: There was some disagreement between the panel as to whether any strike out order should be limited to the claim as against the sub-contractor or whether it should include the parent company guarantor (which had not been a party to the Main Action). A majority of the panel emphasised the fact that the parent company guarantor was a different legal entity to the sub-contractor and, in addition, faced a claim of a different nature (being a claim against a guarantor, not a principle party). However, Lord Justice Stuart-Smith disagreed on the basis that, while the parent company guarantor and sub-contractor were separate legal personalities that is not the end of the matter when considering the “broad merits-based approach” required for a strike out application, which he thought allowed the court to look beyond the strict legal question. In Lord Justice Stuart-Smith’s view, it was relevant that the individuals shouldering the burden of the Misrepresentation Claim (for example, which natural persons would have to give witness evidence) would be the same irrespective of whether the action was brought against the sub-contractor or the parent company. He therefore concluded that “it is too dogmatic to insist on the niceties of separate legal personality”.
   
• Hypothetical case management considerations: While the Court delivered a unanimous verdict, there was limited disagreement in respect of whether the appellate court should overturn the first instance finding about the likelihood of the Misrepresentation Claim, had it been raised earlier, being tried at the same time as the Main Action. Lord Justice Coulson concluded that, in those hypothetical circumstances, there were a number of case management possibilities open but that a single trial of the Main Action and Misrepresentation Claim would have been regarded as impractical. In contrast to the first instance decision, he concluded therefore that the Misrepresentation Claim aspect might “have been hived off and dealt with after the first trial, in not a dissimilar way to the way in which they are in fact going to be dealt with now.” Applying the observation in Aldi, he stated that “there was a real public interest in discouraging the complication of existing proceedings by the introduction of other claims”. However, Lord Justice Arnold considered that the appellate court should not overturn the first instance conclusion in respect of that finding in the absence of a Respondent’s Notice challenging the point (in relation to which, see our postscript below).

Conclusion

The absence of vexation, oppression or harassment faced by the sub-contractor was key to the Court concluding that the Misrepresentation Claim should not be struck out. While the Court accepted “that a breach of the Aldi guidelines” was “a serious matter, and one which weighs heavily in the balance against [the contractor]”, it found that “on a consideration of all the circumstances, the [Misrepresentation Claim] should survive by a small – but still meaningful – margin.”

The Court’s reluctance to deploy the strike out remedy in this case is in line with another recent Court of Appeal decision which stated that strike out is a draconian remedy and needs to be used proportionately (Orji v Nagra [2023] EWCA Civ 1289 at [58]). In these decisions, the Court has been clear that while abuse of process is a serious matter, they must be cautious not to stifle legitimate claims. 

Parties seeking a strike out due to an opponent’s alleged abuse of process need to ensure their application: (i) meets the legal principles outlined above; and (ii) is supported by compelling and detailed evidence in order to convince the court that, in particular, they are facing vexation, oppression or harassment from their opponent.

Postscript: the importance of the Appeal and Respondent’s Notices

This judgment also contained a critical reminder on the importance of keeping to procedure in the Court of Appeal. 

The Appeal Notice and Respondent’s Notice are documents filed with the court in which the parties set out the grounds on which the decision of the first instance court should be upheld and/or overturned. Here, the respondent did not file a Respondent’s Notice. Consequently, the appellate court considered that the respondent could not challenge any specific findings made by the first instance court.

Similarly, the appellant sought to use its written and oral submissions to attack the first instance judge’s conclusions that there was little overlap between the Main Action and the Misrepresentation Claim. However, given those complaints had not been foreshadowed in the Appeal Notice (or the skeleton argument which was filed with it), the Court found that it was not open to the Appellate to raise such issues.

The judgment is therefore a useful reminder to appellants and respondents of the importance of frontloading their thinking. A failure to raise their concerns at the notice stage in the correct form will likely preclude a party from ventilating its complaints at the appeal hearing.