IN THE SUPREME COURT OF JUDICATURE QBCOF 95/0560/D

Royal Courts of Justice

Strand

London WC2

Thursday, 9th May 1996

B e f o r e :

LORD JUSTICE NOURSE

LORD JUSTICE MILLETT

and

MR. JUSTICE TUCKER

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IN THE MATTER OF SECTION 42 OF THE SUPREME COURT ACT 1981

HER MAJESTY'S ATTORNEY GENERAL

Applicant (Respondent)

-v-

BERNARD ALFRED GOUGH

Respondent (Appellant)

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THE APPELLANT RESPONDENT MR. GOUGH appeared in person.

MR. ROBERT JAY (instructed by the Treasury Solicitor) appeared on behalf of the Respondent Applicant.

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J U D G M E N T

(As Approved by the Court)

Crown Copyright

Thursday, 9th May 1996

LORD JUSTICE NOURSE: Mr. Bernard Alfred Gough appeals against a civil proceedings order made against him on 20th March 1995 by a divisional court of the Queen's Bench Division pursuant to section 42 of the Supreme Court Act 1981. By that order Mr. Gough was, shortly stated, prohibited from instituting or continuing any civil proceedings, either in his own name or in the name of the company hereafter mentioned, in any court without the leave of the High Court and from making any application in any such proceedings other than an application for such leave. The order was made on an application brought by Her Majesty's Attorney General on the ground that Mr. Gough had habitually and persistently and without any reasonable grounds instituted vexatious civil proceedings in the High Court and had made vexatious applications in civil proceedings instituted by him.

The principal events leading up to the making of the application were as follows. Mr. Gough is an inventor. In 1965 he invented an automatic storage and transportation system named Asemaster, which has since proved very successful. He obtained a patent for it. He set up a limited company called B.A. Gough Equipment Limited ("the company") in order to develop the system. Mr. Gough was, and is, a director of the company and its majority shareholder. We are told that there are three other directors. The company entered into an agreement with a firm then called Constructors Limited, by which it agreed to grant Constructors a licence for the exploitation of the invention for the duration of the patent in return for royalty payments. Mr. Gough has claimed in the past that sales of the system have exceeded £50 billion, and I believe that today he claims that that figure might well be double. He claims that he has never received any royalty payments from Constructors.

Mr. Gough had obtained finance from Lloyds Bank ("the bank") to enable him to develop the invention, and the bank took a charge over the company's rights in the invention as security. The company then ran into financial difficulties and defaulted on the loan repayments. The bank appointed a receiver. In due course a petition was presented for the winding up of the company, a compulsory order being made against it in 1969. The bank, through the receiver, decided to sell the patents in order to discharge the loan. Mr. Gough was a member of the company's committee of inspection. He objected to the sale, and that meant that the receiver had to take out a summons in the Companies Court in order to obtain the court's approval to it. Mr. Gough alleged that there was a conspiracy to deprive him of his patent rights on the ground that they had been assigned to a company in which the bank had a large shareholding. He also contended that the receiver had no power under the charge to dispose of the patents and that it had been signed by him under duress by the bank. Notwithstanding those objections, the sale was approved by Mr. Justice Megarry.

Mr. Gough then appealed to this court. On 5th June 1972 the court dismissed the appeal, holding that Mr. Gough had failed to establish that there was any conspiracy or dishonesty behind it. In October 1972 Mr. Gough made two further applications to this court. They were dismissed. Afterwards he unsuccessfully petitioned the House of Lords for leave to appeal. Meanwhile, the patents had been sold.

Because Mr. Gough has made much of a point I shall come to in due course, it is important that I should read the material passage in the judgment which Lord Justice Russell delivered when the appeal was dismissed. After stating that Mr. Gough had wholly failed to establish that Mr. Justice Megarry was in error in approving the proposed transaction and that the appeal must be dismissed, Lord Justice Russell continued:

I will return to that matter in due course.

In August 1973 Mr. Gough issued two writs in the High Court. In the first action he claimed damages for conspiracy, negligence and fraud against the receiver, the bank's solicitors and three others. He also sought an injunction restraining the defendants from conspiring against him. In the second action the defendants were a number of individuals and companies, against whom he claimed damages for conspiracy, negligence, fraud, injurious falsehood, trespass, coercion and assault and battery. The defendants in both actions applied to strike out the claims against them. The statement of claim and the writ in the first action were struck out on 18th December 1973 and in the second on 7th March 1974. Mr. Gough did not appeal against those orders and nothing of any significance seems to have happened for something over 15 years.

On 28th August 1989 Mr. Gough served a notice of intention to proceed with the first of the two actions that he had instituted in 1973. Meanwhile, on 27th March 1980, the company had been struck off the register and dissolved. However, on an application made by Mr. Gough, its name was restored to the register on 7th June 1991. That enabled the company to carry on or commence litigation.

On 24th August 1992 the company issued a writ in a new action against the bank and others claiming damages for negligence, breach of contract, breach of trust and for procuring a breach of contract between it and Constructors, which had by then changed its name to A.W. Chapman Limited ("Chapman"). The statement of claim in that action reiterated the assertion previously made that the receiver had had no power to dispose of the patents. The defendants applied to strike out the writ and the statement of claim by summonses dated 4th and 6th January 1993. In that action solicitors and counsel were acting for the company.

On 12th January 1993, six days after the second application to strike out the first action, Mr. Gough issued another writ, this time in his own name, against the bank and others. In that action he claimed damages for fraud, negligence, conspiracy and breach of duty. He also claimed damages for infringement of copyright in his invention. The defendants applied to strike out that action by a summons issued on 30th April 1993.

Reverting to the first of the new actions, the defendants submitted that the claim was barred by limitation. They also submitted that they had been prejudiced by delay in bringing the proceedings and that laches should accordingly operate to defeat the claim. They further submitted that the action was an abuse of process, on the ground that the company was attempting to repeat the same allegations that had been made in 1973 and previously. Similar grounds of application for striking out were made in the second of the new actions.

The two applications to strike out came before His Honour Judge Zucker, sitting as a judge of the Queen's Bench Division. On 4th May 1993 the judge struck out the first action on the ground that the claim was brought outside the relevant limitation period. He observed that no evidence of fraud occurring after 1972 had been shown. He also accepted the defendants' submission that the claim was barred by laches. He went on to observe that the action was an attempt to undermine the previous decisions of Mr. Justice Megarry and this court; and he held that, as this court had rejected all suggestions of conspiracy in 1972, the action was an attempt to relitigate issues which had already been determined. He then turned to consider the application in the second action and, having held that the same factual issues were raised there, he struck out that action also.

On 1st June 1993 the company issued a summons to set aside Judge Zucker's order in relation to the first action on the ground that it was obtained by fraud. That summons was dismissed by Mr. Patrick Bennett QC, sitting as a judge of the Queen's Bench Division, on 5th July 1993. Mr. Gough issued a similar summons in relation to the second action on 14th July 1993, which was dismissed by Mr. Justice Sachs on 29th July of that year. He then issued a summons to set aside Judge Zucker's order on the ground of irregularity, but that application was dismissed by Sir Peter Pain, sitting as a judge of the Queen's Bench Division, on 1st December 1993. He issued another summons to set aside Judge Zucker's order in relation to the second action on 4th October 1993, but that was dismissed on 30th November 1993 by the district judge with costs on the indemnity basis.

The next thing that happened was that on 15th September 1993 the company issued an ex parte originating application which sought to enforce the order of this court made on 5th June 1972 by directing Chapman to pay royalties to the company under the licensing agreement. In an affidavit in support of that application it was stated that Judge Zucker had directed him to enforce the order made on 5th June 1972 during a hearing in April 1993. We have seen that affidavit today, which I think was sworn by another member of the company, and I do not accept that Judge Zucker would have given a direction of that kind. He may well have said that if Mr. Gough wished to achieve a certain result then that was the course he would have to take. In any event, the solicitors acting for the bank and the receiver issued a summons to strike out the ex parte originating application on the ground that it was vexatious. On 25th January 1994 it was in fact struck out by Mr. Registrar Buckley, against whose order Mr. Gough issued a notice of appeal on 9th February 1994. He claimed that it had been obtained by irregularity; that it was granted contrary to the Rules of Court; and that it was a fraud against the company. He subsequently issued a notice of motion dated 4th March 1994 seeking an order setting aside Mr. Registrar Buckley's order. That motion was dismissed on 29th March 1994 by Mr. Justice Warner, who held that in 1972 this court had requested an undertaking from the defendants only in relation to the execution of documents. He said that no other undertakings had been requested at that time.

Mr. Gough has referred us today to affidavits sworn by himself and Angela Kirby, who appeared with him as a McKenzie friend at the hearing before Mr. Justice Warner. Each of them says that he or she understood the judge to direct Mr. Gough to make an application for the respondents to be committed for contempt for breach of the undertakings in the order of 5th June 1972. Again I am quite satisfied that the judge would not have gone further than to say that, if Mr. Gough wished to achieve a certain result, that is what he would have to do.

The next thing that happened was that Mr. Gough issued a further application in the same proceedings on 16th April 1994, which was dismissed by Mr. Registrar Buckley on 16th June of that year. He immediately issued a further notice of motion seeking an order that the bank's directors be committed for contempt of court for breach of the undertakings given to this court in 1972. That motion was dismissed by Mr. Justice Blackburne on 4th July 1994, but Mr. Gough issued another notice of motion on 12th July again seeking payment of royalties.

On 29th July 1994 the company commenced another action against Chapman to enforce a judgment debt of £16.3m alleged to have been owing under the order of 5th June 1972, being a claim for payment of royalties for the period between 3rd February 1967 and 30th June 1972. Chapman issued a summons to strike out the claim on 18th August 1994, and the company issued a summons for judgment on the following day. On 10th November 1994 Mr. Gough's summons for summary judgment was dismissed and the writ was struck out by the district judge. A notice of appeal was issued against that order on 14th November 1994, but the appeal was dismissed on 24th January 1995.

Those are the principal events leading up to the making of the application under section 42. It was issued on 10th January 1995, shortly before the last event to which I have referred. The application came before the Divisional Court on 20th March 1995. The leading judgment, with which Mr. Justice Buxton agreed, was delivered by Lord Justice Leggatt. Having reviewed the material events at length, Lord Justice Leggatt said:

He then referred to two passages in the judgment of Lord Parker CJ, delivering the judgment of the Divisional Court in Re Adams (unreported, 20th May 1966), and said that he would accede to the application and make a civil proceedings order against Mr. Gough accordingly.

In his notice of appeal to this court Mr. Gough has relied on ten grounds. He also swore a seven-page affidavit on 9th June 1995 with a number of exhibits in support of his appeal. He has lodged a seven-page skeleton argument, and today he has put in another short affidavit exhibiting a number of further documents. We are grateful to Mr. Gough for his very correct presentation of the documentation on the appeal and the care he has obviously devoted to that task.

The question which this court has to answer on an appeal against a civil proceedings order made under section 42 of the 1981 Act was stated by this court in the case of Attorney General v. Jones [1990] 1 WLR 859 to be this: was the Divisional Court justified in making the order against the appellant?

Perhaps inevitably, in view of the long history of the matter and his close and anxious involvement with it, Mr. Gough's submissions have mainly been directed towards reopening the merits of the underlying litigation. But they are not now the subject of the inquiry. However difficult it may be for Mr. Gough to accept the fact, his rights in the litigation have been exhausted. It is because he persisted in relitigating the matters in dispute after they had been fully adjudicated upon that the order under appeal was made against him. The question we have to answer, as I have stated it, depends, in turn, on whether the Divisional Court were entitled to hold that Mr. Gough had habitually and persistently and without any reasonable grounds instituted vexatious civil proceedings and made vexatious applications in civil proceedings instituted by him.

At the beginning of his submissions this morning Mr. Gough, quite rightly, emphasised that the real question was whether he had had any reasonable grounds to relitigate the matters which he did. I have listened very carefully to everything he has said. He has said what he wanted to say clearly and concisely. But at the end of the day he has failed to satisfy me that the Divisional Court were not entitled to hold as they did. In my view, in the light of the events I have recounted, Mr. Gough did institute and pursue the proceedings in question without any reasonable grounds. So far as the substance of the Divisional Court's decision is concerned, I am in no doubt that the appeal must fail.

Mr. Gough has, however, raised a number of further points, mainly in his notice of appeal but also in the course of argument today, which go to other matters. For example, in his grounds of appeal he has said that the application and subsequent order exceed the powers conferred by section 42; that the application is an act of misfeasance in that the Attorney General has a personal and political interest in obtaining an order against him; and that the mode and hearing of the application conflicted with substantive constitutional law in that it had removed his, Mr. Gough's, civil and statutory rights by the single uncorroborated statement of an official and without a jury. I have to say that all those grounds are completely misconceived. A number of others like them are raised in the notice of appeal and are equally misconceived. I should make it clear that Mr. Gough has not dwelt on those grounds in argument, prudently I think. Nevertheless I wish emphatically to reject them.

Mr. Gough has also complained about the hearing before the Divisional Court. He only received notice that the hearing was going to take place on Monday, 20th March on the Thursday beforehand. He immediately swore and put in an affidavit, but that was directed to his application for an adjournment and not to the merits of the substantive application. He says he did not have any opportunity to put in an affidavit in answer to the application itself. He has told us that the Divisional Court told him that he was sufficiently acquainted with the matter to be able to make his submissions without putting in an affidavit. However, it is clear that the evidence he would have put in would have been to the same effect as that which is now before this court; in other words, the evidence contained in the affidavits and exhibits to which I have referred. Since that evidence is not sufficient to displace the order made by the Divisional Court, I cannot think that Mr. Gough suffered any injustice by not having more time to prepare his case at that stage.

Mr. Gough has also said that the Divisional Court did not take into account the fact that, on at least one occasion and perhaps on more than one, he was in fact successful in obtaining relief from the court. He relied particularly on the order he obtained for staying the liquidation of the company. Again, while I take due account of that point, it is insufficient to outweigh the great balance on the other side of the scales.

I wish now to deal with the point about the undertakings required by this court on 5th June 1972. It is perfectly clear from the judgment of Lord Justice Russell, as Mr. Justice Warner observed, that the court was simply requiring undertakings to have the documents executed in the amended form. Mr. Gough's case is that one of them never was executed and that the other two were forgeries. He maintains that if that were so it would follow, as was claimed in the last of the recent actions, namely that against Chapman (1994 G 4025), that the company was entitled to judgment for some £16.3m. For my part I am quite unable to see how that can follow. The undertakings offered, accepted and embodied in the order were, I repeat, simply to execute the documents in a form which correctly represented the agreement that had been arrived at. I do not see how Mr. Gough can claim, on the basis of those undertakings, that the company was entitled to judgment as claimed.

Finally, I wish to refer to the form of the order made by the Divisional Court. I stated the effect of it at the beginning of this judgment. It was in the form sought in the notice of motion. In fact, in order to get into that form, it had to be amended under the slip rule. It is clear from Lord Justice Leggatt's judgment and an exchange which took place between him and Mr. Gough thereafter that the court intended to make the order in the form sought in the notice of motion. So it was properly amended under the slip rule. It is also clear that it could properly be made in that form and that there is no question of its being altered by this court if, as I would hold, it is to stand. It may, however, turn out that a question or questions will arise as to how far the order has effect in restraining proceedings instituted or continued by the company as distinct from Mr. Gough himself. I simply wish to record that point. I express no view on it at all.

In my judgment, for the reasons I have given, the order should stand and the appeal should be dismissed accordingly.

LORD JUSTICE MILLETT: I entirely agree.

Mr. Gough labours under a severe sense of grievance and undoubtedly believes that he has had reasonable grounds for bringing proceedings. I have therefore endeavoured, during his long address, to try to understand whether he really does have a genuine complaint which deserves to be investigated. I have come to the conclusion that he does not. He will not accept this, I appreciate, but I should explain briefly why it is so.

It seem to me that at the heart of his case is Mr. Gough's statement that he is trying, inter alia, to enforce a Court of Appeal order for the payment of £16.3m of royalties to the company. But there is no such order. The order to which Mr. Gough refers is an order of the Court of Appeal dated 5th June 1972. We have seen that order. The only order which the court made was an order dismissing the appeal by Mr. Gough and affirming the order of Mr. Justice Megarry below which approved a sale by the receiver of certain patents.

In the course of the hearing the court accepted an undertaking by counsel for the receiver, appearing for this purpose on behalf of the other parties, including the purchaser, that the sale documents should be amended in order to exclude from the sale all royalties which accrued before the date of completion. It was plainly the intention of the parties that pre-completion royalties should be excluded from the sale, but some of the documents had been badly drawn and did not expressly exclude them. The receiver appears to have complied with the undertaking; the sale documents were amended and executed by him. Mr. Gough asserts that the execution of the amended documentation by one of the other parties (not the purchaser) was a forgery. I do not accept that that is substantiated by the evidence, but it does not matter. The royalties which accrued to the company prior to the completion of the sale plainly were not intended to pass to the purchaser, and did not pass to it. They were excluded from the sale. The result is that they continued to belong to the company and continued to be subject to the bank's floating charge. They continued, therefore, to be subject to the power of the receiver to get them in. He made no attempt to recover them, presumably because they were disputed and he did not consider it commercially expedient to have the dispute resolved.

Be that as it may, 20 years have now passed, and it is quite plain that the receiver could not now attempt to recover the pre-completion royalties because his claim would long since be statute-barred. As for the company, it plainly cannot now attempt to recover them: first, because it has no title - the title is in the bank as a result of the floating charge; and, secondly, because the company's claim too is statute-barred. It is true that for much of the period the company did not exist; it had been struck off the register and dissolved. But when the company was restored to the register and therefore to life, the court expressly directed that its order should have effect retrospectively, and that the company should be treated as having continued in existence throughout the 20-year period. The result is that the Limitation Acts continued to apply and time continued to run against the company.

Mr. Gough's answer is that is the Limitation Acts do not apply to an action to enforce a judgment. That is correct. If the Court of Appeal had ordered a party to pay £16.3m to the company, the company could enforce it even today. But, as I have pointed out, the court made no such order. The rights of the receiver or the company to recover the royalties in question do not arise under the order. They existed before the order. They continued to exist after the order, despite the sale, because they were excluded from it. They were unaffected by the proceedings, the order or the assignment. The right to recover them is long since statute-barred. Of course, so far as the royalties after the completion of the sale are concerned, the company has no title to recover them whatever; title to them passed to the purchaser under a sale approved by the court. Mr. Gough's attempts to recover them are merely an attempt to relitigate issues decided against him in 1972.

I therefore agree with my Lord that the proceedings were brought without reasonable grounds and that the Divisional Court was right in making the order which it did.

MR. JUSTICE TUCKER: I also agree that the appeal should be dismissed.

I would only wish to say that I entirely reject the extravagant allegations made against certain persons in the papers, though not, I was glad to hear, referred to in argument. I regard those allegations as being groundless. It would have been better if they had never been made.