AMENDED PLEADING FILED LATE: RELIEF FROM SANCTIONS REFUSED: THE NEED TO PLEAD THE CASE PROPERLY
In Cockell -v- Holton (No 2)  EWHC 1117 (TCC) the defendant made a mistake in typing an e mail address so that an amended Defence and Counterclaim was served late. The application for relief from sanctions was refused. The judgment contains some interesting observations in relation to both compliance and pleading.
The case involved a “highly charged” building dispute with what the judge described as a “high degree of of animosity between the parties. There no unwillingness on either side to take any point that can be taken to the detriment of the other.”
At a hearing in December 2014 the Defendant was ordered to re-plead the Counterclaim in relation to both liability and damages “with the particularity upon which the Defendant wishes to rely at trial.”
The pleading was not amended and a peremptory order was made. The amended pleading was then served within the timetable (just) but due to a typing error was not e-mailed to court correctly. The pleading was served at court late. The defendant made an application for relief from sanctions.
“Those who leave necessary steps until just before the deadline must take the risk of a last minute slip up”.
- The evidence in support was, initially, two different witness statements which purported to be the same.
- The evidence in support failed to explain the delays and inadequate pleadings satisfactorily.
- The defendant was not granted relief from sanctions so as to enable it to pursue a counterclaim.
- The defendant was allowed to use some (but not all) of the pleaded allegations as a defence to the claim. (However it could not counterclaim in relation to any alleged defects).
THE ISSUES AT THE HEARING
The claimant argued that the defendant’s breach was one of a long line of breaches. The issue was not only the lodging of the pleading late but the failure to comply with the order to particularise the case properly.
The judge observed that if the late filing was the only issue “one would not have expected an application for relief from sanctions to be opposed.”
THE WITNESS EVIDENCE IN SUPPORT
As is so often the case when things go wrong, things kept going wrong. There were major problems with the defendant’s application and the evidence in support.
The witness statement served by the Defendant’s solicitor
- During the course of reading the papers prior to the hearing I became concerned also about the nature of the evidence that had been served in support of the application. The Claimant had already made the point in his skeleton argument that the Defendant’s application notice failed to attach the draft order that it was seeking. Since the relevant box on the application form contained the words “See attached draft order”, this was a fairly fundamental defect.
- The papers that had been sent to the court in advance of the hearing included two small ring binders bearing the name and logo of the Defendant’s solicitors. One contained a copy of Mr. Barnes’s witness statement, which had been stamped by the court, and which had attached to it the Amended Defence and Counterclaim and the schedules to it. These ran to 78 pages.
- The other of the two ring binders was described as the application bundle for the hearing. That contained a copy of Mr. Barnes’s witness statement and, again, the Amended Defence and Counterclaim together with the schedules to it. This time these ran to 71 pages. It had already been pointed out by the Claimant that one version of the Amended Defence and Counterclaim did not bear a signed statement of truth. In the two files in my possession, this was the one attached to the witness statement that had been filed with the court. The version of the Amended Defence and Counterclaim that was in the application bundle did contain a signed statement of truth.
- I then noticed that the two witness statements of Mr. Barnes, one of which purported to be a copy of the other, were not in fact the same. There were three differences. First, the signatures at the foot of each witness statement, although probably by the same person, were not identical. Second, paragraph 4 of each statement differed in the number of pages that were said to constitute the exhibit. One referred to pages 3-80, the other referred to pages 3-81. Third, in one version the number of pages (3-74) did not even correspond to the page numbers given in the witness statement. However, in each case the last page of the exhibit was the same: clearly something had gone wrong.
- But what really concerned me was that Mr. Barnes appeared to have produced two different versions of his witness statement whilst apparently representing them to be the same. When I raised this with Mr. Bourne early on in the hearing he told me that he understood that the version of the witness statement in the application bundle was a copy of the witness statement that had been filed with the court. I then pointed out to him the differences that I have mentioned. He was clearly surprised by this and told me, and I have no reason to doubt it, that he was wholly unaware of them.
- At this point I decided that the only appropriate course was to adjourn the application. This was for three reasons. First, I considered that the court should have an explanation from Mr. Barnes as to the reason for the differences in the two versions of his witness statement. It seemed to me that it was at least a possibility that the second version of the witness statement had been prepared to disguise the fact that the Amended Defence and Counterclaim that had been filed with the court did not have a signed statement of truth. However, I was not prepared to draw any conclusion to this effect without giving Mr. Barnes a proper opportunity to explain what had happened. I therefore directed that he was to make an affidavit setting out the position.
- Second, since I was considering refusing relief from sanctions on the ground that the Amended Defence and Counterclaim, as served, did not comply with the requirements of Akenhead J’s order and since it was apparent that Mr. Bourne was not in a position to deal with this point, I considered that he should be given a proper opportunity to do so.
- The third reason was that Mr. Barnes’s witness statement was very vague about the reasons for the very long delay in producing the Amended Defence and Counterclaim between Akenhead J’s order on 12 December 2014 and its service on 20 March 2015. A difficulty mentioned in the witness statement was that of obtaining instructions from the insurers to pursue a subrogated claim on their behalf. Mr. Barnes said that the Defendant had “… pressed insurers to provide details on numerous occasions”. However, the witness statement did not say when those details were received. In a witness statement dated 31 March 2015 Mr. Holton said simply that:
“Instructions were received by my solicitors from insurers to enable them to produce that pleading on Wednesday, 18 March 2015”.
That was confirmed at the hearing. Since that was only two days before the final date for service, that in itself required explanation.
- In the circumstances, I felt that I should give the Defendant, or rather his insurers, a proper opportunity to provide an explanation. This was, perhaps, rather overgenerous given that they had already had such an opportunity when making the application. However, the value of the Counterclaim is very substantial and I was not prepared to strike it out without being confident that I had all the relevant information.
- On 10 April 2015 Mr. Barnes swore and filed his affidavit. Witness statements were served by Mr. Richard Thornton, the senior partner of the Defendant’s solicitors, and by Mr. Holton. The former was to confirm and support the contents of the affidavit by Mr. Barnes. The latter dealt with the question of the reason for the delay in the provision of instructions in relation to the amended Counterclaim. I propose to deal first with the affidavit by Mr. Barnes, then with the Amended Defence and Counterclaim and finally with the reasons for the delay.
The affidavit sworn by Mr. Barnes
- In an affidavit running to over 50 paragraphs Mr. Barnes gave a detailed and, I thought, candid account of the events leading up to the filing and service of the Amended Defence and Counterclaim. In short, there had been a catalogue of minor clerical mistakes. Having prepared and signed a witness statement, Mr. Barnes realised, just before it was due to be sent out, that it contained errors. He therefore prepared a second version of the witness statement, intending to dispose of the first version. To cut a long story short, the second version of the witness statement was the one that was sent to the court but the first version, a copy of which had remained on the file, was in error sent to the Claimant’s solicitors and also found its way into the application bundle prepared for use at the hearing.
- Mr. Barnes has stated, and I accept, that he had no intention to mislead the court and, indeed, that he was not aware that there were two versions of his witness statement in circulation until I raised that fact at the hearing. He has, very properly, taken full responsibility for the mistakes that occurred and I am happy to be able to say that there is no ground for impugning his integrity as a result of what happened. However, Mr. Barnes’s affidavit shows only too clearly how things can go wrong when everything is left until (or has to be done at) the last minute.
THE INADEQUATE NATURE OF THE PLEADING
The judge examined the revised pleading in detail and held that it was inadequate.
Does the Amended Counterclaim (as served) comply with the order?
- I would not have thought that it was necessary to cite authority for the proposition that the closer to trial an amendment is made, the clearer and better particularised it must be. But if authority is needed, it can be found in the judgment of Hamblen J in Brown & Others v Inovatorone plc EWHC 3221 (Comm), where he said, at paragraph 14, that one of the factors to be considered was:
“… whether the text of the amendment is satisfactory in terms of clarity and particularity.”
- I have already mentioned the order made by Akenhead J on 12 December 2014. It contained the following paragraphs:
“7. The Defendant is to re-plead the liability and quantum of his Counterclaim with the particularity to be relied upon at trial by 4 pm on 21st January 2015.
11. The scope and timing of expert evidence will be addressed following provision of full particulars of the Counterclaim as set out above and will be the subject of application to the Court if not agreed.”
- The wording used by Akenhead J at paragraph 7 is not in standard form. That, or a similar form of wording, is used only when the intention is that the pleading that is served should achieve the necessary degree of particularity the first time round. Further, if a party, in breach of an order such as this, delays service of the proposed pleading until a date that is significantly later than the date fixed by the original order, it is all the more important that the new pleading is clear and properly particularised.
- It must have been self-evident to the Defendant that the Claimant would not be in a position to instruct experts, or even to choose appropriate experts, until the amended Counterclaim had been served. As I have already said, since the work complained of has been stripped out, it is all the more important that the pleading should set out the case in clear and detailed terms.
- The analysis that I have carried out in the previous section of this judgment amply confirms my initial impression that this re-pleaded Counterclaim lacks clarity, is in places incoherent and generally falls far short of the degree of particularisation required at trial.
THE TWIST: A NEW AMENDED COUNTERCLAIM
At the adjourned hearing the defendant produced a further amended counterclaim.
The submissions made at the adjourned hearing
- As I have already mentioned, on the day before the adjourned hearing the Defendant produced a new draft of the proposed counterclaim. It will be apparent from the observations that I have made in the context of the re-pleaded Counterclaim as originally served, that this new draft is altogether a clearer and better particularised document. Although I consider that there is a need in places for clarification by way of further information, most of it provides sufficient detail for the Claimant to know the case that he has to meet.
- At the adjourned hearing of the application Mr. Bourne felt bound to accept, as in my view he had to, in the light of the contents of the new draft, that the counterclaim as served did not in some respects “… condescend to the particularity required at trial”.
- Mr. Bourne emphasised, as he had done before, that the failure to file the re-pleaded Counterclaim with the court had no impact on the Claimant. He submitted that the Claimant’s submissions to the effect that there was insufficient time in which to respond to the new pleading in time for a trial in July were misconceived, because he would have been in exactly the same position if the re-pleaded Counterclaim had been filed and served by the deadline. However, this submission overlooks two points. First, the order of 12 December 2014 contemplated service of this document in January 2015, not March 2015. Second, the order contemplated that what would be served would be a pleading that was clear and properly particularised. That never happened.
- In the course of the hearing I canvassed the possibility that I might refuse to grant relief from sanctions to the extent of striking out the counterclaim, but that I would consider permitting the Defendant to rely on the allegations in the new draft as a defence to the Claimant’s claim that he had been underpaid. I gave the parties a short time in which to consider this.
- Mr. Bourne was not in a position to consent to such an approach, but he made it clear that if that was what I was minded to do he could not usefully add to the submissions that he had already made.
Mr. William Webb, who appeared for the Claimant (as before), opposed this course. Whilst he conceded that he could see why such an approach might be fair in principle, he submitted that it would still impose an intolerable burden on the Claimant to prepare his case in time for a trial in July. He had already made the point in his skeleton argument, which I consider to be a good one, that whilst the Claimant had to start virtually from scratch in order to respond to this claim, the Defendant knew exactly what his claim was because it had already been assembled and considered by his experts over a substantial period.
THE DENTON APPROACH
The fundamental issue was not the late filing but the defendant’s failure to give full particularity.
“The appropriate approach
- In Denton v TH White Barnes Limited  EWCA 906, the Court of Appeal said, at , that the approach of the court when considering an application for relief from sanctions should involve three stages:
“The first stage is to identify and assess the seriousness and significance of the ‘failure to comply with any rule, practice direction or court order’ which engages rule 3.9(1). If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to consider why the default occurred. The third stage is to evaluate ‘all the circumstances of the case, so as to enable [the court] to deal justly with the application including [factors (a) and (b)]’. We shall consider each of these stages in turn identifying how they should be applied in practice. We recognise that hard-pressed first instance judges need a clear exposition of how the provisions of rule 3.9(1) should be given effect. We hope that what follows will avoid the need in future to resort to the earlier authorities.”
The seriousness and significance of the breach
- In the light of my analysis of the proposed Counterclaim I consider that the proposed amendments fall far short of the degree of particularisation and clarity that was necessary in order to comply with Akenhead J’s order of 12 December 2014. In those circumstances, even if the amended Counterclaim had been filed in time, the Defendant would still not have complied with the order. It is therefore not correct to say, as Mr. Bourne submitted in his skeleton argument, that an amended Defence and Counterclaim that complied with the order of 12 December 2014 was served on the Claimant in time.
- But even if this was simply an application to amend the Counterclaim, with a trial three to four months away I would have needed strong persuasion to allow it. This is because I consider that there is simply insufficient time for the Claimant to take the necessary steps by way of response and then prepare himself for a trial in July of the issues raised by the Counterclaim: for example, he would have to make a detailed Request for Information, receive a coherent response (which in itself, given the history, cannot be taken for granted) and have that response considered by his experts. All this would have to happen before the opposing experts could meet in order to discuss the issues and then prepare reports. To achieve all that, without putting unfair pressure on the Claimant’s team, would be very difficult. Indeed, the time would not have been generous if the order made on 12 December 2014 had been complied with. But the trial having been fixed for 15 July, there is an enormous difference between serving a new pleading on 21 January and serving it on 20 March.
- I should add, for the sake of completeness, that I consider that Mr. Webb’s submission that the Defendant needed permission to amend in order to allow him to rely on the re-pleaded counterclaim is correct. The court very rarely gives permission to amend a statement of case in terms that it has not seen. In my view, the order made by Akenhead J on 12 December 2014 required the Defendant to produce a draft re-pleaded counterclaim by 21 January 2015. That draft, assuming that it was filed and served in time, would still have to be approved by the court. Of course, Akenhead J would have anticipated that, if the re-pleaded Counterclaim complied with the order in terms of the degree of particularity, permission to amend would probably follow almost automatically because there would be no good reason to object. It follows, therefore, that even if the re-pleaded Counterclaim had been filed and served time, it would still have been open to the Claimant to oppose an application to amend the Defence and Counterclaim in those terms.
- I therefore conclude that this was not just a technical breach as a result of a failure to file the document with the court in time, but a serious and substantial breach of the terms of Akenhead J’s order. It cannot be dismissed as anything approaching trivial or de minimis. Further, I consider that the events of March 2015 cannot be considered in isolation: as Mr. Webb pointed out, the Defendant had been in breach of Akenhead J’s order for some two months. I consider that this is an example of a case where the persistent failure to serve the re-pleaded Counterclaim after 21 January 2015 is a factor that can be taken into account at the first stage: see Denton, paragraph 27. However, in this case it probably does not matter very much whether it is considered at the first stage or at the third stage.
- Since I have concluded that in this case the breach was both serious and significant, I must move to the second stage.
The reason why the default occurred
- The order that I made at the hearing on 1 April 2015 was that the Defendant should serve a witness statement
“… addressing (i) when instructions were received from the Defendant’s insurers in respect of the counterclaim and why they were not received earlier; and (ii) if, as appears to be the case, no responses were sent to the Claimant’s letters in January and February 2015 seeking information about the re-pleading of the counterclaim, why this was the case.”
- Whilst I am conscious of the fact that the terms of this order might have presented the Defendant with some difficulty in relation to the need to protect his and his insurers’ legal professional privilege, it did not seem to me that this would be an insuperable obstacle to providing an explanation in at least general terms for what had happened. In any event, this was something that he should have done the first time round in support of the original application for relief from sanctions.
- Following this direction Mr. Holton made a fourth witness statement, dated 10 April 2015, in which he gave a rather sparse outline of the relevant events. For example, he said that the insurers confirmed their instructions to pursue the counterclaim following the Case Management Conference on 10 October 2014. He says, understandably, that he does not know why instructions were not given earlier.
- What Mr. Holton described as “the final instalment” of the instructions, being the information used to compile the Amended Counterclaim, was not finally produced to his solicitors until 18 March 2015. It was provided by the loss adjusters. He then explained that there were several reasons why it took until 18 March 2015 for this information to be provided. These were as follows.
i) The advice that was given to himself and underwriters. However, he says that neither he nor the insurers are prepared to waive privilege in this advice.ii) There appears to have been a breakdown in communications between the insurers and the loss adjusters: each seemed to think that the other was responsible for providing the relevant information to Mr. Holton’s solicitors. This misunderstanding was not resolved until 12 March 2015.
iii) For the past two years the Claimant has spent a lot of time “harassing Mr. Kendall”, the forensic accountant retained by Mr. Holton. He then says that he believes that this behaviour by the Claimant “… may have inhibited witnesses and the production of information”.
iv) It was a “commercial decision influenced by advice and instructions received and given which is privileged”.
v) The unless order which imposed the deadline of 20 March 2015 for service of the Amended Counterclaim.
- In relation to the failure to respond to the letters from the Claimant’s solicitors in January and February 2015, Mr. Holton confirms that there were no such responses and that this was because his solicitors “did not have any instructions to reply”.
- I have to say that I find this explanation for the failure to provide the relevant information until 18 March 2015, if indeed it can be called an explanation, wholly unsatisfactory. No less so because it makes no mention whatever of the assertion made by Mr. Barnes in his witness statement that Mr. Holton had pressed the insurers on numerous occasions to provide the details necessary to re-plead the Counterclaim. At best, it seems that there was a communication failure between the insurers and the loss adjusters about who was to provide the relevant information to the Defendant’s solicitors. No attempt at all has been made to explain whether or not the Defendant’s solicitors, who were presumably instructed by the insurers in relation to the counterclaim, took any steps to inform the insurers of the order made on 12 December 2014, of the letter from the Claimant’s solicitors dated 4 February 2015 in which they said that if they did not receive the re-pleaded Counterclaim by 6 February 2015 they would make an application for an unless order or, indeed, when they were told of the unless order itself.
- I fail to see the relevance of the alleged harassing of Mr. Kendall by the Claimant. Whilst I can see that this might have deterred Mr. Kendall from providing information, no reason is given as to why this should have prevented either the insurers or the loss adjusters from providing the Defendant’s solicitors with the necessary information in good time. In any event, it is not said that any of the information that was provided for the purpose of settling the Amended Counterclaim came from Mr. Kendall.
- In short, the explanation provided by Mr. Holton appears to suggest that, first, the failure to provide the Defendant’s solicitors with the information necessary to re-plead the counterclaim was a misunderstanding between the insurers and the loss adjusters as to the responsibility for providing that information. Second, that neither the Defendant nor his solicitors took any steps to chase up that information or to tell the insurers that they did not have it.
- There is also a faint suggestion that the delay in providing the information was in some way the result of a deliberate decision taken for tactical reasons (“… it was a commercial decision influenced by advice and instructions received and given” – paragraph 13 of Mr. Holton’s witness statement). But even if this were the case, it hardly helps the Defendant. On the contrary, it suggests a cynical disregard for the orders of the court.
- But, whichever way one looks at it, things were clearly left to the very last minute. By an e-mail dated 20 March 2015, timed at 11:53, from Mr. Bourne to his instructing solicitor, Mr. Bourne provided his draft of the Amended Defence and Counterclaim, together with the schedules. He noted that these were “slightly later than promised”.
- If Mr. Bourne was not provided with the relevant information until 18 March 2015, then I doubt very much whether he can be criticised for the want of particularity or clarity in the re-pleaded Counterclaim. It looks as if he had only a little over 24 hours in which to produce the new pleading and that much of it had to be cut and pasted from some document with which he had been provided.
- In my judgment, no good, coherent or even faintly plausible reason has been advanced to justify the astonishing delay in the receipt by the Defendant’s solicitors of the information that was required to re-plead the Counterclaim. The order for its production by 21 January 2015 was made on 12 December 2014 and the unless order for its production was applied for on 17 February 2015, yet no relevant information was provided to the Defendant’s solicitors until two days before the final deadline.
- Furthermore, it is reasonably evident that the information that was provided then fell short of what was required to provide a re-pleaded Counterclaim of sufficient particularity and clarity. Whether the responsibility for that failure rests with the insurers themselves, the loss adjusters or the Defendant’s solicitors, or a combination of all three, is neither here nor there. The ultimate responsibility for the conduct of the counterclaim rested with the Defendant’s insurers.
The third stage
- In the circumstances, the question posed at the third stage of the Denton inquiry really answers itself. There is in my view no excuse whatever for the failure to serve a properly pleaded Counterclaim in time. For the reasons that I have already given when considering the text of the re-pleaded Counterclaim, I consider that the Claimant would be irretrievably prejudiced if he were to be required to meet that claim in time for a trial on 13 July 2015.
- In fact, I would go further. This was a case where, for whatever reason, the provision of the necessary information for the re-pleading of the Counterclaim was left until the eleventh hour. Those who leave necessary steps until just before the deadline must take the risk of a last minute slip up. As the Claimant submitted, the unfortunate mistake that led to the Amended Defence and Counterclaim not being filed with the court in time was simply the final straw following a period of two months in which the Defendant had been in persistent breach of the order of 12 December 2014.
- CPR 3.9 (1), as interpreted by the majority of the Court of Appeal in Denton, requires the court to have regard in particular to the two factors there mentioned, namely the need: (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders.
- So far as a factor (a) is concerned, I have already indicated that to permit the Defendant to advance his counterclaim on the basis of the version served on 20 March 2015 would disrupt the efficient conduct of the litigation. The trial would almost certainly have to be adjourned, with all the cost and inconvenience that such adjournments entail.
- So far as factor (b) is concerned, this is a paradigm case in which to enforce compliance with court orders. The Defendant’s insurers have been more than just cavalier: the evidence, such as it is, demonstrates a complete absence of any regard for the orders of the court.
- Standing back for a moment, the Claimant has had a claim against him for £1.6 million hanging over his head for a year. Solely as a result of the conduct of the Defendant and/or his insurers, no proper details of that claim were advanced either at the time it was made or during the subsequent year. The details when finally produced, on 20 March 2015, were manifestly defective, as I have already demonstrated. So defective and so late in fact that there would have to be an adjournment of the trial if the Claimant were to be given a proper opportunity to deal with them. That is not fair.
- I accept, of course, that to deprive the Defendant’s insurers of such a substantial claim is no small thing. But that was the probable consequence of doing so little so late, as they should have known. They have brought the prejudice on their own heads.
- However, I am concerned at the prospect that the Defendant might have to meet the Claimant’s claim for underpayment without being able to deploy a legitimate defence, namely the defects in the work. It has been settled law since the decision in Mondel v Steel (1841) 8 M&W 858, that an employer under a building contract who is sued for the balance of the price can defend himself by asserting that the work was defective and not worth the sum claimed. This is not some form of set-off or counterclaim, it is a simple defence. To deprive the Defendant of the ability to do that would be to impose on him or his insurers an additional source of prejudice over and above that caused by the striking out of the counterclaim. I do not see how the issue of the Claimant’s claim for additional payment can be fairly determined without permitting the Defendant to deploy his allegations of defective work as a defence. There is in principle no additional prejudice to the Claimant in permitting this: such a defence existed in the form of the counterclaim. For the reasons that I give below, I consider that it is at least very possible that this can be done without an adjournment of the trial, although I consider that justice requires that this option should remain open if the Claimant finds himself in difficulty.
- Any evaluation of all the circumstances, therefore, points to refusal of relief: the Claimant has not contributed in any way to the breach. On the contrary, his solicitors did their best to prevent it. The prejudice to the Defendant and/or his insurers can be limited by permitting the Defendant to deploy his allegations of defective work as a defence to the Claimant’s claim for underpayment.
The appropriate course
- The Claimant’s claim for underpayment is for about £240,000. That is the balance of the amount which he contends he is entitled to be paid for his work, and it includes about £40,000 that the Claimant paid pursuant to the January 2012 agreement. As I have indicated, in the ordinary course of events it would be open to the Defendant to deploy his allegations in respect of the defects in the Claimant’s work by way of abatement of the Claimant’s claim. But a defendant can only deploy such a defence to the extent necessary to defeat the claim: he cannot recover any excess. To do that he must also make a counterclaim.
- It follows that if the counterclaim in respect of the defects is struck out that would not prevent the Defendant from applying to amend his Defence to allege that the Claimant’s work was not worth the amount claimed owing to the presence of the defects. Indeed, I have already concluded that it would be unfair to allow the Claimant to pursue his claim for the balance of the value of his work without giving the Defendant the right to deploy that defence.
- It may be said that to permit to this would just be to allow the counterclaim in by the back door having just shown it out of the front door. I do not think that this would be correct. The counterclaim in relation to the defects, excluding the electrical works (which is a new claim) is for almost £800,000, so it is more than three times the amount of the Claimant’s claim. It may well not be necessary at trial to explore the precise extent of every defect or the precise cost of repairing it. For example, the claim for the remedial works to the roof, including scaffolding etc, is worth about £400,000. If the court were to form the view that it is for the most part a good claim, even if there is some doubt the precise quantum of it, it may be in a position to conclude that on any view it is sufficient to defeat the Claimant’s claim without having to get to grips with the minutiae.
- So in order to address a defence of this kind, it may not be necessary for the Claimant to investigate every nut and bolt of the claim. If it appears at a reasonably early stage that the Defendant’s allegations in relation to the defects are substantially justified, the Claimant’s claim will fail. It does not matter whether the true cost of putting right the defects is £350,000 or £750,000, either way it would be more than sufficient to defeat the claim by the Claimant.
- The matter only becomes problematical if it appears that the claim for defects is very substantially overstated and is, in truth, likely to be worth only a fraction of the amount asserted. In this event, it might well become necessary to investigate the minutiae of the claim because every pound by which it falls below the amount of the Claimant’s claim is a pound that the Claimant can potentially recover.
- All one can say at this stage is that, whilst not unknown, it is fairly unusual for an extensive claim for defects prepared and formulated by experts to have no, or only little, substance. If that should prove to be the case here, then, as I have already said, the Claimant’s experts will probably be able to form a view at a fairly early stage as to whether or not there is any real prospect of reducing the amount claimed in respect of the defects to an amount that is below the sum claimed by the Claimant. If they conclude that there is not, then further pursuit of the Claimant’s claim would be pointless.
- If, on the other hand, the Claimant’s experts form the view that the claim in respect of the defects has been grossly exaggerated, and that it needs to be investigated in detail because there is a real prospect that it may be worth substantially less than the sum claimed by the Claimant, then the Claimant’s advisers will have to take a view as to whether or not this is an investigation that can be carried out within the present timetable so that it can be determined at the trial commencing on 13 July 2015. I have already indicated that, if the Defendant is permitted to deploy the defects claim as a defence to the claim by the Claimant, the Claimant would have the right to apply to have his claim determined separately to the issues in relation to the alleged overpayment if it appears that it would not be possible to have a fair determination of these issues at the trial in July.
- In the light of these considerations, I have concluded that the fairest course would be to permit the Defendant to deploy his new draft counterclaim as a defence to the Claimant’s claim in respect of the alleged underpayment. However, for the reasons that I have already given I do not consider that the Defendant should be granted relief from sanctions so as to permit him to pursue a counterclaim, either in the form that was served on 20 March 2015 or in the form of the new draft.
- In these circumstances, I refuse relief to the extent that the following paragraphs of the re-pleaded Counterclaim as served on 20 March 2015 are to be struck out:
i) Paragraphs 93 and 94.ii) The first 10 words of paragraph 95.
iii) Paragraph 96.
- The Defendant may have permission to amend his Defence to plead, by way of abatement of the sum claimed by the Claimant, the material in the new draft of the Counterclaim (as attached to the Defendant’s skeleton argument for the hearing on 21 April 2015). If the Claimant considers that a further information in relation to the new draft is necessary, he is to formulate a request by 28 April 2015 and the Defendant is to provide the information requested, save to the extent that proper objection is made to the validity of any particular request, within 14 days of receipt of the request.
- However, this permission does not extend to the particulars given in relation to either the electrical work or the work to the interior. The former allegations were introduced for the first time in the re-pleaded Counterclaim and the latter allegations appeared for the first time in the new draft. I consider that it is too late for either of these allegations to be included, particularly since the Claimant has not instructed an electrical expert.
- The issues for the trial in July 2015 raised by the Defence and Counterclaim will therefore be confined to:
i) whether or not the Claimant overcharged the Defendant, together with the circumstances in which the “January Agreement”, the “February Agreement” and the March Deed came to be made and/or signed; andii) whether or not the Claimant is entitled to recover any further sum in respect of the work carried out having regard, amongst other things, to whether or not the work was defective in any of the respects alleged by the Defendant.
- Accordingly, the Defendant’s application for relief from sanctions fails. Whilst I have allowed the Defendant to rely on the allegations relating to the defects in the work as a defence to the Claimant’s claim for underpayment, that is not a course that was canvassed by the Defendant prior to the hearing of the application. It was a course that occurred to the court after having seen the new draft of the Counterclaim.
- At the conclusion of the hearing I gave further directions in relation to the service of witness statements and expert evidence, but I will hear counsel if there are any other questions concerning the directions leading up to the trial on 13 July 2015. I will hear counsel also on any questions relating to costs or the form of relief that cannot be agreed.”