RELIEF FROM SANCTIONS CONSIDERED IN THE HIGH COURT AGAIN: MCTEAR CONSIDERED IN DETAIL

The case of McTear -v- Englehard [2014] EWHC 722 (Ch) was looked at briefly in  an earlier post in relation to the number of cases cited to the Court.  Here we look at the substantive decision in relation to applications for relief from sanctions. (The case is not reported on Bailli at the date of writing but is available on Lawtel).

NB THIS DECISION WAS OVERTURNED ON APPEAL SEE THE POST ON THE COURT OF APPEAL DECISION  HERE 

THE FACTS

The essential issue in McTear was that the defendant had served its witness statement 55 minutes late. There were 700 pages of documents exhibited to the statement, some of which had not been disclosed previously.  The defendant subsequently served a supplemental list of documents.  The defendant then made an application to extend time for service of the witness statement by one hour and for permission to serve a supplemental list of documents.

THE TIME TAKEN: TWO DAYS OF TRIAL 

These applications were heard at trial. Taking up the first two days of the four days allocated for trial.

THE RELEVANT CRITERIA: EXTENSION OF TIME OR RELIEF FROM SANCTIONS?

“64. There was discussion before me as to whether the Defendants’ applications are
applications for relief from sanctions, or are properly to be characterised, either wholly
or in part, in some other way. I consider that retrospective applications for extensions of
time either are or are to be treated as applications for relief from sanctions: see the
judgment of Andrew Smith J in Associated Electrical, in particular at [18], and the
authorities there cited. Even if that is wrong, I do not consider that it makes any
difference on the facts of this particular case. The conclusions I have reached are
justified by the overriding objective, a proper exercise of discretion under each material
provision of the CPR, striking the balance of prejudice and justice as between the
parties, and not endorsing conduct such as has occurred in this case, whether it is
properly regarded as showing disregard for rules and orders or the tactics of ambush.”

LATE SERVICE OF THE WITNESS STATEMENT: TIME OF SERVICE IS NOT THE ONLY RELEVANT FACTOR

The judge rejected the submission that all he should take into account was the 55 minutes that the witness statements were served late.

“70. Mr Lopian’s submissions on this application focused on the first of the above grounds.
He submitted that all that I could take into account when deciding whether or not to
give permission for the Defendants to call witnesses to give oral evidence in
circumstances where the statements of those witnesses had been served 50 minutes late
was that delay of 50 minutes. He referred me to the Chartwell, Lakatamia and Summit
Navigation cases as instances where judges had given short shrift to attempts by
opposing parties to invoke delays of comparable brevity, and where longer delays had
been excused, among other things having regard to the balance of prejudice produced
by granting relief on the one hand and refusing it on the other.

71. If all that had happened was that the Defendants had been 50 minutes late in serving
witness statements to which no other objection could be taken I would have little
hesitation in accepting Mr Lopian’s submission that the failure to serve by 4pm on 21
February was trivial. Indeed, by their email sent at 15.56 on 21 February the Claimants
made clear that, if appropriate witness statements were to be served late, they would not
oppose an application for permission to call the witnesses to give oral evidence at trial.
The Defendants chose to spurn that offer.

72. However, that is not all that has happened. Further, I reject the submission that the court
is constrained to considering the period of delay alone and nothing else when deciding
whether to grant permission pursuant to CPR 32.10. There is nothing in the wording of
CPR 32.10, the notes to CPR 32.10, or any authority to which I was referred by Mr
Lopian to suggest that such a constrained interpretation should be adopted, and the
tenor of both Mitchell and Durrant are strongly against it. I also consider that such an
approach would be contrary to both the letter and the spirit of the overriding objective,
and fly in the face of reason and common sense, as the facts of the present case
conveniently illustrate”

LATE DISCLOSURE: NO RELIEF FROM SANCTIONS

The judge rejected the Defendant’s application to give late disclosure. The delay was not trivial and no good reason had been given for the failure to disclose earlier.  Further he rejected an argument that the witness was allowed to rely on those documents (disclosed late) which were referred to in the defendant’s witness statement (served late).

“80. As I believe is almost self-evident, the subject matter of this application is not trivial,
and nor has any good reason been made out for the Defendants’ default in providing
disclosure and as to why an extension of time should be granted, as sought, to 27
February (or even to 25 February). Moreover, all the considerations that I have sought
to extract from Durrant apply in this case.

81. As alternative fall-back positions, Mr Lopian suggested that even if I was to decide that
the Defendants could not rely on the new documents, either (a) Michael Engelhard is
entitled to give the evidence contained in his witness statement, including referring to
the excluded documents, although the documents themselves would have to be taken
out of the exhibit to his statement, or (b) if that is wrong, Michael Engelhard is entitled
to give the evidence contained in his witness statement, subject to the paragraphs that
refer to the excluded documents being ignored or removed. No version of his witness
statement complying with the latter suggestion was available.

82. I am not prepared to countenance either of these suggestions. The first seems to me to
lack any principled foundation. The second is not unreasonable at first sight. However,
this was effectively the way forward proposed by the Claimants’ solicitors in their
email sent at 15.56 on 21 February, and summarily rejected by the Defendants’
solicitors saying “You will be served with what our clients consider appropriate to serve
you with, and you will then have to decide what if anything is right to do about it”.
Having tried to impose the documents on the Claimants as they did, having responded
in this fashion, and having then made applications which occupied the first 2 days of
what should have been the trial hearing, I consider it would be contrary to the
overriding objective, let alone the new approach heralded by Mitchell, to permit the
Defendants to subject the Claimants and the court to any such exercise during the trial.”

REJECTION OF AN ATTEMPT TO PUT EXPERT EVIDENCE INTO THE CASE BY WAY OF WITNESS STATEMENT

The judge had an additional ground for rejecting one witness. This was not a witness of fact but an attempt to introduce expert evidence.

“Mr Needham’s evidence

84. Mr Needham is a chartered accountant, who has acted for Michael Engelhard, EHL and
EFL since January 2007. Mr Needham had been asked by Mr Engelhard to “assist him
in reviewing and explaining the financial and accounting information that had been
disclosed to him in respect of [BWL] and the financial and accounting information in
his possession in respect of [EHL] for the years up to and including the financial year
ended 31 March 2006”. Mr Needham had no involvement in the events which give rise
to the present claim.

85. Mr Lopian accepted that Mr Needham is not a witness of fact. He also accepted that
part of Mr Needham’s evidence, relating to the new factual issue concerning the sum of
£145,428 which forms part of the subject of the Defendants’ third application, is expert
evidence.

86. From this rather unpromising start, Mr Lopian nevertheless contended that the
remainder of Mr Needham’s evidence was not that of an expert witness. I reject that
submission. In addition to the points made above, Mr Needham explains that he
prepared the two Schedules that are appended to the Amended Defence. Those
Schedules bear all the hallmarks of expert evidence. Purely by way of example, the
explanatory notes to the first of them include the following: “My actions have been to
sort by account code [and] select the transactions relating to Account D176 “Inter-
company holdings”, delete a number of superfluous columns, and add a cumulative
column or running total … Analysis of these transactions show the first item to be ….”

87. I hold that the Defendants should not be permitted adduce Mr Needham’s witness
statement on the further ground that it contains expert evidence for which no permission
has been sought. Mr Needham might have difficulty in discharging his overriding duty
to the court in any event, given that he is not independent, but is instead the accountant
for the persons identified above.

88. In reaching this conclusion, I have taken into account the contents of paragraphs 33-01
to 33-25 in Phipson on Evidence, to which I was helpfully referred by both sides.”

REFUSAL TO GIVE PERMISSION TO AMEND DEFENCE

The judge also refused permission to amend the Defence.

THE APPROPRIATE SANCTION: DEFENCE NOT STRUCK OUT

Despite refusing the Defendant permission to rely upon witness evidence and the supplementary documents the judge did not grant the Claimant’s application to strike out the defence.

“However, I do not consider that it follows that the Amended Defence should be struck
out. Although the Defendants’ failure to carry out proper searches pre-dates 22 April
2013, their remaining defaults are much more recent, and it seems to me to be a
disproportionate response to all their defaults to strike out a pleaded case that was
placed on the record before any of the recent failures to comply with court orders and
the CPR occurred. The Defendants may be hindered in their ability to make good their
case by the orders that I have made on their applications, which, on my rulings, are the
product of their conduct of this litigation. However, I am not persuaded that it is right to
go further and deny them the opportunity to defend the claim altogether”

THE NET RESULT: CLAIMANT STILL HAD TO PROVE CASE AT TRIAL

Clearly the defendant was (or is) going to be at a considerable disadvantage at trial. In essence the defendant’s case may be confined to putting the claimant to proof.  However this is wholly in line with the Court of Appeal decision in Durrant, where the  Court of Appeal held that the defendant could not rely upon witness evidence.  There the Court held that the defence should not be struck out, and the claimant still had to prove his case at trial.