RELIEF FROM SANCTIONS : A CLASSIC CASE FOR RELIEF TO BE GRANTED: NOTICE TO PROVE SERVED LATE

March 19, 2018 · by · in Disclosure, Relief from sanctions

In Tuke v JD Classics Ltd [2018] EWHC 531 (QB) Mr Justice Julian Knowles granted a claimant relief from sanctions when a “Notice to Prove” was served late.  It is a reminder, amongst other things, of the need to serve a “Notice to Prove” at the appropriate time. In default your opponent’s documents are assumed to be authentic.

“It would in my judgment be artificial and not in accordance with the overriding requirement to deal with cases justly and at proportionate cost to allow this case to go forward on the basis of a deemed acceptance of genuineness of the invoices when the factual reality is different and has been known at all times by both sides to be different and the matter has been squarely put in issue in the proceedings and has been dealt with in evidence by Mr Hood on behalf of the Defendant”

THE CASE

The claimant brought an action claiming an account and and delivery up of all documents relating to the defendant’s sale of classic cars on his behalf. His case was that the defendant had not properly accounted for the sums the cars were sold for. The defendant made an application for summary judgment, that was not successful.  One of the issues the judge had to consider was the claimant’s service of a Notice to Prove. The claimant’s case was that some of the documents produced by the defendant were not authentic.

THE JUDGMENT

(3) The Claimant’s application for a declaration that the Notice to Prove dated 6 February 2018 was validly served in time, alternatively for an extension of time to serve its Notice to Prove and relief from sanctions
    1. The background to this application is as follows. As part of its case the Defendant relies upon certain invoices which it sent or says it sent to Mr Tuke. His case is that he never received a number of these. In its Amended Defence the Defendant also relies upon a number of invoices said to have been furnished to third parties. The procedural history (which is uncontroversial and which I have taken from Mr Tuke’s Skeleton Argument for the Notice to Prove application) is as follows.
    2. This claim was issued with Particulars of Claim attached and served on 5 September 2016. The (undated) Defence was duly filed and the Reply filed in October 2016. The pleadings were last amended (by consent) in November 2017, when Mr Tuke re-amended his Particulars of Claim to advance a claim for an account; this is denied by the Defendant.
    3. The matter was listed for a costs and case management conference on 18 May 2017 but in the event the parties were able to agree directions and costs budgets. A consent order recording that agreement was approved by Master Eastman on 17 May 2017.
    4. The parties subsequently agreed an extension of time for the giving of standard disclosure to 13 July 2017, and standard disclosure was given in accordance with that agreement on that date.
    5. The Claimant was not satisfied by the Defendant’s disclosure and on 1 August 2017 he applied for specific disclosure of five categories of documents. Two categories were:
a. Un-redacted copies of some invoices said to have been sent to third parties in respect of the cars.
b. The electronic copies of certain invoices said to have been sent to Mr Tuke. Mr Tuke says and relies upon the fact that he did not receive those invoices at the time (as set out in entry 85 on Schedule 3 of the Claimant’s Schedules of Facts Relied Upon).
    1. The specific disclosure application was supported by a witness statement from Mr Tuke’s solicitor, Michael Gerrard Grenfell. Paragraph 5 of that witness statement stated that Mr Tuke had ‘[c]onsiderable doubts … as to the genuineness of the information on these invoices’.
    2. Witness statements were exchanged on 24 August 2017. The Claimant served statements from himself, Sam Thomas, and Richard Hudson-Evans. The Defendant served a statement from Mr Hood. Paragraphs 82 to 86 of Mr Hood’s statement dealt with what he said was the Defendant’s invoicing procedure.
    3. On 27 October 2017, the Defendant served a second witness statement from Mr Hood in response to the specific disclosure application. Paragraphs 5 to 8 stated that no electronic copies of invoices were kept, because the electronic template was overwritten by Mr Hood’s personal assistant every day a new invoice was issued. Mr Hood also said, at paras 9 to 11 of that second statement, that the Defendant retained no day books, notes or other records (electronic or otherwise) of its transactions, other than as set out in the invoices.
    4. The specific disclosure application came before Master Thornett on 6 November 2017. The application for disclosure of the electronic copies of the invoices was not pursued, but the application in respect of unredacted invoices said to have been sent to third parties was pursued. Mr Tuke’s Skeleton Argument served on that occasion said that the Claimant wanted to ‘…test whether the documents furnished to date and upon which the Defendant places reliance provide a true and accurate of what the Defendant says happened’. In the event, that part of the application was adjourned by the Master.
    5. The adjourned application came before Walker J on 30 January 2018. He dismissed the remaining part of the Specific Disclosure Application and struck out all of the factual witness statements served in the action (with the exception of Mr Hood’s second and third witness statements dated respectively 27 October 2017 and 13 November 2017). He then ordered that the parties produce the schedules of facts and matters relied upon that I have referred to earlier, and that further witness statements directed at the matters disputed in those schedules be served by 20 February 2018.
    6. The Notice to Prove, dated 6 February 2018, was served on 7 February 2018. It required the Defendant to prove certain invoices, namely (a) those invoices said to have been issued to Mr Tuke but not received by him at the time, and (b) those invoices purportedly issued to third parties, but which have been disclosed only in redacted form.
    7. The Defendant’s solicitors responded to that Notice to Prove on 7 February 2018, claiming that it was served out of time as it should have been served by 24 August 2017, which was the date by which witness statements had to be served.
    8. On the application before me, Mr Brannigan’s primary position is that the Notice to Prove was served in time. CPR r 32.19 provides that:
“(1) A party shall be deemed to admit the authenticity of a document disclosed to him under Part 31 (disclosure and inspection of documents) unless he serves notice that he wishes the document to be proved at trial.
(2) A notice to prove a document must be served –

(a) by the latest date for serving witness statements; or

(b) within 7 days of disclosure of the document, whichever is later”

    1. Mr Brannigan points to the deadline for the service of a Notice to Prove as being the ‘latest date’ for serving witness statements. Walker J on 1 February 2018 in para 3 of his order struck out certain witness statements and in para 7 ordered that any further witness statements be served by 4pm on 20 February 2018. Hence, says Mr Brannigan the Notice to Prove was in time. He says that where more than one round of factual witness statements is contemplated, then the ‘latest date for serving witness statements‘ coincides with the date for serving the final round of those witness statements. He says that that is the natural and ordinary meaning of CPR 32.19(2)(a).
    2. Alternatively, if the Notice to Prove was not in time, then Mr Brannigan seeks an extension of time pursuant to CPR r 3.1(2)(a), and relief from sanctions pursuant to CPR r 3.9, pursuant to the three-stage approach set out in Denton v TH White Limited [2014] 1 WLR 795. The three-stage approach requires the court to consider first the seriousness and significance of the failure to give the required notice. Next, the reason for the failure must be considered. Finally, the court must consider all the circumstances of the case, giving particular weight (in accordance with the guidance given in Denton) to the need for litigation to be conducted efficiently and at proportionate cost and to enforce compliance with rules, practice directions and orders. Mr Brannigan relies on the decision of Richard Salter QC sitting as a Deputy High Court Judge in McGann v Bisping [2017] EWHC 2951 (Comm), para 21, where an extension of time and relief from sanctions was granted in relation to a Notice to Prove. I am not especially assisted by that case, whose facts were different. Whether to grant an extension of time and relief from sanctions requires a fact-specific analysis.
    3. First, Mr Brannigan says that the non-compliance was not serious or significant. He says that the Defendant has known since at the latest 1 August 2017 that the authenticity of these invoices were in issue because of Mr Grenfell’s witness statement made in support of the specific disclosure application said that it was the Claimant’s position that there were ‘[c]onsiderable doubts…as to the genuineness of the information on these invoices…’. He also said that Mr Hood’s first and second witness statements dated 24 August 2017 and 27 October 2017 have addressed the Claimant’s doubts about the genuineness of the invoices, so it will not be not prejudiced. So Mr Brannigan says that the point taken against him is a technical one and the Defendant has known for months that the authenticity of the invoices has been in issue, and has adduced evidence as to the alleged procedure by which the invoices were created. On the second Denton point, the reason for the default, Mr Brannigan frankly accepted that it occurred through an oversight on the part of Mr Tuke’s legal team. On the third point, he submitted that the honesty of Mr Hood’s account is in issue in these proceedings and he places substantial weight upon the invoices (see, eg, paragraph 3 of the Defence, and the Defendant’s Schedules), and it is therefore right that their authenticity should be tested.
    4. On behalf of the Defendant, Mr Pymont submits that the Notice to Prove was out of time because the deadline for service was 24 August 2017, and that that is relevant date for the purposes of CPR r 32.19(2)(a). He says this is not a case where more than one round of factual witness evidence was contemplated. The new witness statements ordered by Walker J were not a further round of statements but new ones, to replace the ones excluded. Second, he argues that if a litigant has admitted (or has been deemed to admit) something, that will remain the case unless and until the admission has been withdrawn. Mr Tuke has not said that he has withdrawn the admission he made by his failure to serve a notice to prove last August, and the rules do not allow him to do so in any case. Hence, there having been no Notice to Prove served by 24 August 2017, Mr Tuke must be taken to have admitted the genuineness of the invoices.
    5. Further or alternatively, Mr Pymont submits that I should not grant an extension of time and relief from sanctions. He submits that the default by the Claimant is serious and significant and that the rules are there for a reason and should be enforced. He submits that what Mr Grenfell said in his witness statement did not put in issue sufficiently clearly the authenticity of the invoices and that the Defendant was entitled to believe and did believe that the Claimant was not challenging the authenticity of the Invoices right up until the Notice to Prove was served. As to the second Denton point, in its Skeleton Argument the Defendant said no reason had been given for the failure to serve, but it now has the benefit of Mr Brannigan’s admission at the hearing that it occurred through the fault and oversight of Mr Tuke’s legal team. On the third Denton point the Defendant accepts that the invoices are important and says that it precisely why a notice should have been served in time, and that it would be unfair at this late stage to allow their authenticity to be challenged.
    6. I agree with Mr Pymont that the Notice to Admit was not served in time in accordance with CPR r 32.19, and I reject Mr Brannigan’s submission that the decision of Walker J in January 2018 to strike out the bulk of the existing witness statements and to set a fresh deadline for the service of replacement statements had the effect of setting aside the deemed acceptance by the Claimant of the invoices’ authenticity which occurred once the date of 24 August 2017 passed. Given that the statements, and in particular Mr Tuke’s statement, were struck out because they were ‘scandalous’ (as Mr Pymont put it), it would be an odd result if Mr Tuke were thereby to be granted the benefit of further time to serve his Notice to Prove. In effect, he would be benefitting from his own wrong (or rather, that of his lawyers).
    7. However, in my judgment it is appropriate and in the interests of justice to extend time for service of the Notice to Prove under CPR r 3.1(2)(a) and to grant the Claimant relief from sanctions under CPR r 3.9.
    8. I must first consider the seriousness and significance of the Claimant’s failure to give the required notice. In my judgment, it was neither serious nor significant, on the facts of this case. The Defendant was not misled in any way by the Claimant’s failure. I accept that the Defendant has known since at least August 2017 that the Claimant was doubting the authenticity of these documents. The invoices were specifically referred to in the Defence at para 3, and the Claimant’s Reply at para 4 made no admissions about the Schedule of cars attached to the Defence, which in turn referred to the invoices. The Defendant cannot properly have genuinely believed that there had been a considered change of position by the Claimant on this issue, which is why no doubt Mr Hood dealt with the matter in his witness statement, as I have explained.
    9. I must then consider why the default occurred. As I have said, it occurred through the oversight of Mr Tuke’s legal team. Mr Brannigan candidly accepted there was no real excuse for the failure.
    10. Thirdly, I have to consider all the circumstances of the case, giving particular weight (in accordance with the guidance given in Denton) to the need for litigation to be conducted efficiently and at proportionate cost and to enforce compliance with rules, practice directions and orders, in the language of CPR r 3.9. As to this, there is of course a requirement on litigants and their lawyers to comply with the CPR, and I give this very serious weight. ‘Rules are rules’, as Mr Pymont put it. But this is not a case of a deliberate and intentional flouting of a rule designed to deliberately wrong foot an opponent. This was an honest oversight by those advising Mr Tuke, and no doubt the point has been taken on board for the future. It would in my judgment be artificial and not in accordance with the overriding requirement to deal with cases justly and at proportionate cost to allow this case to go forward on the basis of a deemed acceptance of genuineness of the invoices when the factual reality is different and has been known at all times by both sides to be different and the matter has been squarely put in issue in the proceedings and has been dealt with in evidence by Mr Hood on behalf of the Defendant.
    11. Taking these matters together, in my judgment it is in the interests of justice to extend time for the service of the Notice to Prove and to grant relief from sanctions.”
Conclusion
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