ANOTHER HIGH COURT DECISION: RELIEF FROM SANCTIONS REFUSED: CLARKE –V- BARCLAYS BANK CONSIDERED
The Clarke –v- Barclays Bank  EWHC decision is interesting for a number of reasons. Among other things it provides object lessons in the dangers of failing to make prompt applications and assuming cases will settle. It also highlights the dangers of being anything other than frank with the court and your opponents; it can lead to dire consequences.
BARCLAY THE FACTS
The case involved an action against a bank for allegedly selling a mortgaged property at a gross undervalue. It was listed for trial on the 10th May 2013 with a five day time estimate with the trial window starting on the 10th March 2014.
THE CLAIMANT’S EXPERT EVIDENCE
The 10th May 2013 is a significant date in that, 7 days prior to that, the Claimant’s expert valuer informed his solicitors that he was withdrawing from the case because he was retiring. Upon retirement he was not able to obtain any professional indemnity cover and as a retired member of the RICSI was no longer authorised to practice or accept fees for providing advice.
THE CLAIMANT’S RESPONSE
One crucial element of this case is that the Claimant’s solicitors kept this information to themselves until November 2013. The parties proceeded on the basis that the original expert would be instructed. It was not until the 27th November, after a new expert had been instructed by the Claimant, that the other parties were informed.
In a witness statement the Claimant’s solicitor admitted, quite candidly, that he had not notified the other parties of the position until he found another expert.
THE APPLICATION TO RELY ON THE NEW EXPERT
The new expert report was disclosed on the 20th December 2013 and an application made on the 20th January 2014 to rely on the new evidence. This application was granted by the Deputy Master. The Defendants appealed with permission from the Deputy Master.
CONSIDERATION OF THE MITCHELL DECISION AND THE DECISION IN AEI –v- ALSTOM
There is an interesting discussion of the Mitchell criteria and the case of AEI –v- Alstom which had been reported the previous day.
“The applicable rules of court and guiding principles
18. The rules and practice directions material for present purposes are CPR 1.1 (The Overriding Objective), 3.1(2)(a) (power to extend time for compliance even after it has expired), 3.9 (relief from sanctions), 35.4 (court permission needed for expert evidence), and Practice Direction 23A para. 2.7. The latter PD provides:
“Every application should be made as soon as it becomes apparent that it is necessary or desirable to make it.”
19. There have been cited to me a number of recent cases. They all turn on their facts. Some are true cases of relief from sanctions, i.e. cases where the order or direction which has not been complied with expressly provides for a sanction. Some are cases which are in substance if not in form cases of relief from sanctions, such as applications for the retrospective extension of time, i.e. where a party is late in serving a document which it relies upon. The present case, in my judgment, is analogous to such an application, but it has the added feature of whether the Claimant acted wrongly in failing to disclose the withdrawal of Mr. Dall.
20. The guidance given in the Mitchell case,  EWCA Civ 1537, is obviously very important in the present context. I will not overburden this Judgment with extensive citations from it. I can best express the guidance I derive from the Mitchell case in the present context by respectfully adopting what Mr Justice Andrew Smith said in his very recent decision in AEI v. Alstom  EWHC 430 (Comm). That was a case where a claimant had served its particulars of claim “realistically” 20 days late under the rules (without there being any sanction in the rules expressly provided for such breach). The learned Judge said:
“46 … … … Alstom’s real argument is the importance of enforcing the requirements of the CPR.
47. One reason that dealing with a case in accordance with the overriding objective includes enforcing compliance with rules, practice directions and orders is to enable the courts‘ resources to be shared fairly between litigants, and to prevent a defaulting party from using them excessively. As I have said, AEI’s non-compliance with the CPR did not have a significant impact on resources. However, there is a more general reason that the Court of Appeal has emphasised: it is considered that “once it is well understood that the courts will adopt a firm line on enforcement, litigation will be conducted in a more disciplined way and there should be fewer applications under CPR 3.9. In other words, once the new culture is accepted, there should be less satellite litigation, not more”: Mitchell (loc cit) at para 48, and see para 60. I must balance this against my conclusion that as between the parties it is a disproportionate response and unjust to refuse an extension and strike out the claim form…”
21. I think I should make it clear, however, that my agreement with the above passage in his Judgment should not be taken as agreement with what follows it. I would respectfully doubt whether the learned Judge then went on, in the following section of his Judgment, to apply correctly what the Court of Appeal had said about the result in his earlier Raayan al Iraq decision,  EWHC 2969 Comm. In Mitchell the Court of Appeal significantly did not say that his earlier case had been wrongly decided, only that it disapproved of his reasoning. In its later decision in Thevaraiah v. Riordan  EWCA Civ 14, in my judgment it is clear that Richards LJ was not saying that Raayan al Iraq had been wrongly decided: all he was doing, consciously obiter and without argument, was echoing the Mitchell judgment, i.e. it was the reasoning alone that the Court of Appeal disapproved. So, whilst I agree with the passage from his Judgment cited above, that is not to be taken as agreement with what follows. In my judgment, there is no reason to doubt that Raayan al Iraq was rightly decided on its facts. It was a case where it would bring the law into disrepute with right-thinking users if the courts were to enforce procedural discipline by striking out the claim. My understanding of Mitchell is that the court should strive to be a tough but wise, not an officious or pointlessly strict, disciplinarian.”
APPLYING “MITCHELL” PRINCIPLES TO THE CURRENT CASE
The judge stated that the Claimant’s delay in disclosing the original expert’s withdrawal as being pivotal in the case.
- The Chancery Guide, at para 8.12, states that where a witness statement has been served and a decision has been made not to call that witness, prompt notice must be given of this fact.
- There was no excuse for withholding the information about the expert’s withdrawal.
The judge was clear on this point.
“The Claimant’s counsel submits that whether or not to disclose the information about Mr Dall was one of those tricky areas of professional judgment where professionals can reasonably differ and the rules are unclear. I disagree emphatically. In my judgment, it was wholly improper for the information about Mr Dall’s withdrawal to be withheld beyond a reasonable period to allow the Claimant to decide whether he could persuade Mr Dall to change his mind or that some other arrangement could be made which would mean that the Claimant could still rely on Mr Dall. Once the Claimant had decided that he had to find a new expert to replace Mr Dall, which in the absence of evidence to the contrary I infer to be very soon after 3 May 2013, and most probably even before the listing appointment on 10 May 2013, then it is clear in my judgment that the Claimant should have disclosed the problem he faced to the court and the other side. For all the court knows, given the claim of the Claimant to privilege in respect of correspondence with prospective experts which has not been disclosed, some potential experts may have had to refuse instructions in the case because they were not available for a trial in the trial window. There is little doubt that the Court would have been sympathetic to the Claimant if it had applied to the court promptly for directions, because Mr Dall’s withdrawal was outside his control. The inference is irresistible on the evidence before me, particularly the correspondence I have referred to after service of the expert reports in August 2013: the Claimant withheld the information from the court in order to see if he could settle the case in a proposed mediation on favourable terms before he disclosed his difficulty to the other parties and thereby undermined his negotiating position. That strategy failed when the mediation was delayed beyond the end of November. A mediation conducted in, say, October 2013 would have been a mediation conducted on a premise which the Claimant knew to be false unless of course he disclosed his problem with Mr Dall.”
PREJUDICE TO THE DEFENDANTS
There was significant prejudice to the Defendant as a result of the late disclosure of the information that the original surveyor was not available.
- The Defendants’ experts had responded to the Claimant’s report.
- The Claimant had the advantage of seeing the Defendants’ reports and the forensic advantage of preparing his new report in the light of it.
- The Defendants had to respond to against to a wholly new expert report.
- The trial will have to be adjourned; it would wholly unfair to allow the trial to proceed.
“25. In this connection, the words of Waller LJ (said in the context of late amendments) are in my judgment directly applicable in this case:
“In the modern era it is more readily recognised that in truth, the payment of the costs of an adjournment may well not adequately compensate someone who is desirous of being rid of a piece of litigation which has been hanging over his head for some time and may not adequately compensate him for being totally (and we are afraid there are no better words for it) ‘mucked about’ at the last moment. Furthermore, the courts are now much more conscious that in assessing the justice of a particular case, the disruption caused to other litigants by last minute adjournments and last minute applications have also to be brought into the scales.”
26. Taking all the above factors together, the Claimant’s conduct amounted in my judgment to a serious abuse of the process of the court.”
OVERTURNING THE ORIGINAL DECISION OF THE MASTER
The judge overturned the original decision of the Master.
“The Deputy Master’s judgment
28. In my judgment, the Deputy Master failed to appreciate that the Claimant’s conduct amounted to a serious abuse of the court’s process. In particular, as paragraphs 11 and 31 of his judgment show, he regarded the Claimant’s desire to settle first without disclosing the problem with Mr Dall as an exculpatory factor whereas it was in my judgment clearly an inculpatory factor. He further failed to find, as he should have done, that the Bank and the Surveyor would suffer serious prejudice as a result if the new expert evidence were allowed in. He made a fundamental error of principle and an error of law.
29. For good measure, in my judgment the Deputy Master also failed to apply the important guidance given by the Court of Appeal in the Mitchell case. It was the Claimant’s clear duty, in my judgment, under Practice Direction 23A para. 2.7 to apply to the court for further directions in respect of expert evidence very soon after 3 May 2013. He did not need to wait until he had a new expert’s report. The court would have managed the time within which the Claimant had to identify and instruct a new expert. It would have been sympathetic to the Claimant. As it is, if Mr Yates 2nd report is allowed in, the trial would have had to be vacated, to the detriment of other court users who would have liked such a trial window. It is an important factor that the Court should enforce procedural discipline in order to raise standards of timekeeping in the courts, which the Deputy Master did not do.”
HOW THE CASE WAS DISPOSED OF: NOT STRUCK OUT BUT PROBLEMS WITH EXPERT EVIDENCE AT TRIAL
The Claimant was refused permission to rely upon the evidence of a new expert. However the action was not struck out. The Claimant was given permission to rely upon the original report at trial, without the expert present, with the trial judge giving it as much weight as appropriate.
THE ESSENTIAL PART OF THE JUDGMENT: THE CLAIMANT GAMBLED AND LOST
The key to the decision is at paragraph 30.
“The starting point in my judgment is the clear and serious abuse of the court’s process by the Claimant, coupled with the prejudice to the Bank and the Surveyor which I have already referred to. On the other side of the balance is the serious prejudice to the Claimant if he is denied permission to rely on his new expert. In my judgment, the balance of justice as between the parties comes down firmly in favour of refusing the Claimant’s application for permission to rely upon the new expert. He has only himself to blame for his predicament – he gambled that he could settle the case on a basis which he knew to be false, he has lost the gamble and he must make do with the only conceivable theoretical justification for the non-disclosure (which I derive from his Counsel’s submission I set out in paragraph 11 above), namely that he was always going to fall back on the Dall report but without Mr Dall. That is where I see the justice of this case. I would decide the case on that basis but if necessary I would add that it is reinforced in my judgment by the Mitchell guidance”
IS THIS A “MITCHELL” CASE OR A DIFFERENT CATEGORY ALTOGETHER?
Although Mitchell is mentioned this is not really a “Mitchell” type case. There is a significant difference between a litigant who accidentally, or negligently, breaches an order and a part who decides to “gamble” and not disclose significant matters. Looking at the case:
1. If the Claimant had disclosed the difficulty when directions were made in 2013 then there was every possibility that the Court would have exercised its discretion to allow a new expert.
2. If the Claimant’s expert had recently disclosed the matter, or become ill or died, then this would probably have attracted the sympathy of the court.
3. The Court appeared to object to what it perceived as the cunning attempt to hide a crucial fact from the other parties (and the court).
One would think that deliberate acts of concealment should, rightly, be treated wholly differently to oversights, mistakes or “well-intentioned incompetence”. A party that deliberately conceals mattersthat should be disclosed cannot even begin to reach the “good reason” test.
- This case highlights the very real danger of holding back crucial facts.
- The judge did not regard non- disclosure as a “tricky area of professional judgment”.
- The lawyer’s duty was clear: inform the court at once and take immediate steps to deal with it.
It would not be surprising if a separate line of jurisprudence develops in relation to deliberate (as opposed to hapless) decisions to breach the rules of court. Whilst Mitchell is being construed in a way that will bring the courts into disrepute, deliberate decisions to breach orders are a wholly different matter.