PROVING THINGS 161: DOCUMENTS BEING DELIBERATELY DESTROYED AND EXPERTS WHO WERE OF VERY LIMITED ASSISTANCE
The judgment in Bajaj Healthcare Ltd v Fine Organics Ltd  EWHC 2316 (Ch) is in what could appear to be a fairly dry dispute about the supply of goods. As the judge observed this was not a simple sale of goods case. The judge found that one party had deliberately destroyed documents. The experts called on behalf of both parties gave evidence that was deeply flawed.
The claimant sought recovery for unpaid invoices following the delivery of chemicals to the defendant. The defendant counterclaimed on tbe basis that the chemical substance supplied to it was contaminated.
NOT A SIMPLE SALE OF GOODS CASE
Mr Michael Green QC (sitting as a Deputy Judge of the Chancery Division) summarised the issues.
On one level this is a straightforward claim in respect of goods sold and delivered. The parties are agreed that the AHA that was supplied met the written specifications of FOL and it was delivered and used for the purpose that FOL intended to use it, albeit not as efficiently as FOL would have liked.
On another perhaps more disturbing and unsatisfactory level however this is about deception, in particular, whether the manufacture of the AHA took place where BHL had led FOL to believe it did and whether there has been a cover-up of the true reasons for the presence of the Green Contaminant. BHL has destroyed nearly all the relevant documents concerning the manufacture of the AHA which is of course highly unfortunate and suspicious.
There has been a curious lack of frankness between the parties some of which can be explained as protecting commercial interests, but also in respect of what might otherwise appear to be straightforward matters such as the use to which the AHA was to be put by FOL and the location of its manufacture by BHL. There was an intermediary who was heavily involved in matters relevant to this case but who was not called as a witness, a Dr Uday Gokhale. I will explain the involvement of Dr Gokhale in due course but it is one of the strange features of this case that both parties are claiming that Dr Gokhale was acting for the other at the material time and that his knowledge should be attributed to that other party.
In the circumstances I cannot regard this as a simple sale of goods case. Neither party nor their experts have been able to identify what the Green Contaminant is or how it got into the 2014 consignment of AHA. I will have to try to work out what is likely to have happened on the balance of probabilities by reference to the surrounding circumstances, the available contemporaneous documentation and the credibility of the witnesses, in particular, Mr Anil Jain of BHL.
DESTRUCTION OF DOCUMENTS
One important issue in the case was the deliberate destruction of documents by the claimant, and the total failure to keep any kind of copy.
(i) The destruction of relevant documents
On 6 November 2018, in response to a specific disclosure application by FOL, Mr Jain made his first witness statement. In that witness statement, Mr Jain effectively stated that all relevant documents, in particular the batch manufacturing records, in relation to the production of AHA between 2011 to 2014 had been destroyed as part of BHL’s routine practice in such respect. This was even said to have happened after it was clear that there was a dispute in relation to the 2014 batches of AHA and even after these proceedings had commenced. This extraordinary state of affairs was inevitably explored with Mr Jain in cross-examination.
“a. raw material specifications
b. batch manufacturing records or batch sheets, which are prepared by our Quality Assurance Department. These record the date and time of the commencement and completion of the production of a specific batch of a product, and the quantity produced; the in-put materials used; general instructions on the operation for the production of the material in question; equipment details and packing materials issuance details; the blending procedure; packing details; details of sampling by our Quality Control Department; labelling details; the checks carried out to ensure that past packaging materials are not utilised for the current batch and that surplus current packaging materials are destroyed; and a specimen label;
c. materials requisition slips;
d. checklists for the review of batch or lot manufacturing;
e. equipment cleaning records;
f. finished or final product specifications;
g. intimation slips for the sampling of finished goods;
i. batch or lot release checklists;
j. packing lists and delivery notes;
k. analytical work reports and certificates of analysis;
m. bills of lading.”
These would clearly be highly relevant documents for the purpose of working out how a consignment of AHA could have become contaminated, whether through the raw materials used, the manufacturing process adopted or the storage or transportation of the product. According to Mr Jain, every single such document in relation to all its AHA production for FOL, including the last 2014 consignment in issue in these proceedings, has been destroyed and/or is said to be unavailable from BHL.
“The Claimant’s general (but not invariable) practice is to preserve documents relating to a specific product for a period of one year after the expiry of that product’s shelf-life – in the case of AHA, 2 years. Thus documents would therefore generally be preserved for a total of three years. At the end of a period during which managers might preserve documents relating to batches of product produced by Bajaj, those documents would be destroyed.”
According to this timetable, the documents relating to 2011 AHA would routinely be destroyed in 2014 and the critical 2014 documents would potentially be destroyed in 2017.
On 12 June 2014, Dr Gokhale forwarded to Mr Jain an email he had received that day from Mr Dunn of FOL in which he had said that there was a problem with their “hydrogenations” and “something is poisoning the catalyst“. Mr Dunn said that it could be a sulphur impurity in the AHA and if it was then BHL would not be paid. Dr Gokhale’s email to Mr Jain said:
“Now, that they have production problem, wherein there [sic] catalysts is getting poisoned.
As you are fully aware that S is coming from the facility where this is manufactured.
FOL has asked me to visit A’leshwar and do the detailed study – this is problem for me as well as for Bajaj.
The other reason, nitrile source, where I had told you that it will be a problem – we saved 1.5 USD but now stand to loose [sic] more…
The more worry is that if Evonik efuses [sic] to accept the final product from FOL and investigations lead to Bajaj – manufacturing site as well as procurement of r.m. – then there is problem.”
Quite apart from the significance of this email as providing some clues as to how the manufacturing of the AHA in 2014 may have gone wrong, for present purposes it shows that by June 2014 BHL was fully aware that a serious problem had arisen with the 2014 consignment of AHA and that FOL may well be refusing to pay for the AHA as a result. Nevertheless, Mr Jain gave no instructions to preserve documents that may be needed to resolve this potential dispute. In fact, according to the routine destruction policy (if that was truly in play), the documents relating to the 2011 manufacture of AHA would have been destroyed shortly after receipt of this email.
These proceedings were commenced in December 2016. At that time, at least the highly relevant documents relating to the 2014 consignment should have been in existence, as Mr Jain admitted in cross-examination. However, Mr Jain says that they have since been destroyed. Mr Jain said that, despite knowing of their crucial importance to the case, he “overlooked” informing the Quality Assurance department not to destroy any such documents.
“18. In respect of the documents mentioned in these requests, I have made enquiries within the Claimant organisation and confirm that:
(i) The documents mentioned at paragraph 7 above existed, having come into existence during the course of the manufacture of the AHA or at the conclusion of the manufacturing process for each batch manufactured;
(ii) The documents had been prepared in hard copy;
(iii) For the AHA manufactured in 2011, 2012 and 2013, the documents have been destroyed and are believed to have been destroyed just after three years from the date of manufacture. For documents up to March 2014 cannot be found.
(iv) The claimant’s employees who authorised the destruction were the managers within its Quality Control Department and the Quality Assurance Department; and
(v) The documents in question were destroyed for the reasons set out at paragraphs [sic] 12 above.
20.2 As to (ii): the documents mentioned at paragraph 7 above existed, and were held in hard copy. The analytical raw data for the sampling of the AHA finished product for 2011, 2012 and 2013, and until March 2014 is not available. The documents for 2011, 2012 and 2013 are believed to have been destroyed just after three years from the date of manufacture, and those up to March 2014 cannot be found. The claimant’s employees who authorised the destruction were the managers within its Quality Control Department and the Quality Assurance Department. The documents were destroyed as set out at paragraphs [sic] 12 above.”
24. Neither the Defendant’s recommendation nor the Claimant’s own list of suppliers from the relevant time can now be found, and are thought to have been deleted where held in soft copy, or misplaced where held in hard copy. It is possible also that they were destroyed where held in hard copy.
28. The tracking of raw materials in the course of the manufacturing process of the AHA was carried out by Nigam. I have made enquiries with Nigam, and have been informed that no documents from the preparation of AHA have still been preserved by Nigam.
43. Most communications with Nigam took place orally, and in person or over the telephone. Personnel from the Claimant supervised processes carried out by Nigam. Some email correspondence, which existed in soft copy, is now no longer available.”
As can be seen, Mr Jain appears to accept little or no responsibility for this extraordinary state of affairs. He was wholly unapologetic in both his written and oral evidence and laid the blame on BHL’s Quality Assurance department for having carried out its routine destruction policy. Where he said in his first witness statement that the 2014 documents could not be found, he confirmed in his oral evidence that he had since discovered that those documents had also been destroyed. He appeared quite blasé about all of this during cross-examination and totally unconcerned about the consequences of having allowed this to happen, if that is all that he did.
I am afraid that I do not accept that these documents were destroyed pursuant to a routine destruction policy and I find that Mr Jain’s evidence in such respects is both incredible and concerning. I consider it most likely that he specifically directed that all documents relating to the 2014 manufacture of AHA be destroyed because they contained incriminating evidence. I conclude this for the following reasons:
(1) BHL’s Site Master File, to which Mr Jain was taken, included the following in the “Documentation” section: “All the documents related to all departments are recorded both electronically and on paper also at QA“. Therefore, it appeared as though there would be electronic as well as hard copy records of everything. However, Mr Jain’s evidence was that at the time they “did not have a server” and “we were not recording all documents electronically“. In other words, they were in breach of their own policy document that had been provided to FOL. He also said that the only electronic documents were blank template forms that were printed off and then completed in hard copy. This struck me as highly implausible.
(2) It appears that the only electronic documents that have been disclosed are emails between BHL and FOL, which could not be successfully destroyed by BHL as they would be available from FOL. There was apparently email traffic between BHL and Nigam, as referred to in paragraph 43 of Mr Jain’s first witness statement, but somehow these have been deleted. There is now no evidence whatsoever in relation to the arrangements that existed between BHL and Nigam Pharmachem in relation to the manufacture of AHA, including whether BHL had subcontracted the manufacture to Nigam Pharmachem (in its original Reply, BHL had said this, but then amended the Reply to assert that it was partly manufactured at Nigam’s facility but not subcontracted). The true position therefore cannot be determined.
(3) Dr Christie found a document when he visited BHL in May 2013 that had been issued by the Finnish Medicines Agency following an inspection of BHL’s facilities in April 2013. It is a Statement of Non-Compliance with Good Manufacturing Practice under two EC Directives. The document identified certain critical and major deficiencies: the critical one being “falsification of documentation and deliberately hiding the use of an unapproved critical starting material.” The Report went on to say that “The deliberate hiding of traceability data for the critical starting material could be regarded as criminal activity that puts patient health at risk.” Mr Jain said in cross-examination that he accepted those findings but he blamed it, again, on a person in the Quality Assurance department who he said had done this to hide his mistakes. This clearly shows the capacity for BHL to be engaged in falsifying records.
(4) In November 2014, as part of FOL’s investigations as to what went wrong with the 2014 AHA consignment, Dr Christie and Dr Parkinson visited the Vadodara facility to audit it and discuss with Mr Jain how the 2014 manufacture was carried out. It is FOL’s case that Mr Jain confirmed that the manufacture took place at Vadodara and Mr Jain showed them the production records for that 2014 manufacture. Those productions records, according to Dr Parkinson who made manuscript notes of what he found but did not take copies of the records, identified vessels at Vadodara in which the manufacture was said to have taken place. BHL’s case now is that part of the manufacture of all the commercial quantities of AHA took place at the Nigam facility, not at Vadodara. That would mean that the records shown to Dr Christie and Dr Parkinson were false records. Neither those, nor the real production records (if such existed) are before the Court.
The Finnish Medicines Agency Statement shows a propensity on the part of BHL to falsify documents. Mr Jain accepted that he did not tell Dr Christie and Dr Parkinson that manufacture did not take place at Vadodara which was the only site they audited. It is likely that, if he was intent on concealing the actual site of manufacture, he would falsify the records in order to maintain that pretence. The 12 June 2014 email shows that Mr Jain was well aware that the use of an unauthorised and unaudited facility where the AHA could have been contaminated could lead to BHL not being paid.
But the main reason why I reject Mr Jain’s evidence in relation to the documents is because it is simply not credible that every single document, whether in hard copy form or electronic, was destroyed because of a routine policy that was allowed to continue even after the dispute arose. As soon as there was a question mark over the 2014 AHA and there was a risk of BHL not being paid, a reasonable and honest response by BHL would have been to want to investigate for itself what had happened. Such an investigation would require examination of the production records, at the very least. It would be obvious that such documents should not be destroyed. If that was not done, it could only have been because BHL and Mr Jain knew exactly what those records stated and they would have exposed the fact that, as indicated in the 12 June 2014 email, manufacture was not taking place at Vadodara and also, possibly, that they had used cheap and low quality raw materials that might have caused the contamination. In other words, there was every incentive to conceal those facts from FOL.
Mr Nersessian on behalf of BHL pointed to the existence of some contemporaneous records that had been disclosed by BHL. These included some Certificates of Analysis and Analytical Work Reports prepared by the Quality Control department. In response, Mr Cameron on behalf of FOL said that the non-destruction of these documents shows that there was actually selective destruction of unhelpful documents. The documents that have survived merely show the testing of the AHA that had been manufactured and confirm BHL’s case that the AHA complied with the specification. The documents that would show how and where the AHA was manufactured have all been destroyed.
I was unimpressed with the casual way that Mr Jain treated this part of his evidence. In my view he knew the seriousness of what he had done but tried to pretend that it was a mere oversight not to have instructed the Quality Assurance department to preserve all documents related to the AHA. I find that he was not telling the truth about how these documents came to be destroyed and that this impacts on the overall credibility and reliability of his evidence.
THE EXPERT EVIDENCE CALLED BY THE PARTIES WAS ALSO DISCOUNTED
The judge found fault the expert evidence was of very limited assistance.
“The Expert shall report on (i) whether the [AHA] supplied by the Claimant to the Defendant contained any impurity or contaminant; (ii) if so, what the impurity or contaminant was: and (iii) what the effect of any such impurity or contaminant would be on the hydrogenation process carried out by the Defendant.”
There were then a series of more detailed questions to be answered by the experts. The experts were required to serve their reports and then to meet to try and narrow the issues between them.
BHL instructed Mr Paul Forsythe of Alemare Solutions Limited as its expert. FOL instructed Mr Peter Claes as its expert. The experts served their reports and corresponded with each other. However, no joint statement of the points of agreement and disagreement was finalised and I have not seen any such document. BHL has blamed Mr Claes for not returning a draft prepared by Mr Forsythe but I am not concerned with the reasons for the failure to comply with the Order. Unhelpfully, there was simply no joint statement before the Court.
At the start of the trial, Mr Cameron on behalf of FOL sought to adduce a further report prepared by Mr Claes which I was told contained the results of further tests that Mr Claes had carried out. Mr Cameron said that Mr Claes might refer to these further tests in the course of his oral evidence and so it would make sense if the Court had this available in written form. Mr Nersessian objected to this report being adduced, particularly because, as he submitted, Mr Claes had not responded adequately to the joint statement draft. In the event, I did not allow the new report to be admitted to evidence and I have not read it.
Mr Forsythe is, as he said in his evidence, a materials scientist. He is not a chemist and he conducted no experiments himself in order to answer the questions he was supposed to be answering. Instead he based his report purely on the testing that had been done by the parties and other third parties. I am not convinced that Mr Forsythe had the requisite expertise to opine on the matters that had been directed. His work and experience lies more in the regulation of chemical processes. His personal history section of his report states as follows (underlining added):
“I am the director of Alemare Solutions Ltd, a Lincolnshire-based manufacturing and chemical regulation consultancy. I have a Master of Arts degree in Materials Science from Cambridge University and a Post-Graduate Certificate in REACH Regulation management from Hull University. I am also a committee member of the Chemical and Industrial Consultants Association and a member of the Chemical Hazards Communication Society. Before leaving full-time employment in 2005, I worked for more than thirty years within the chemicals and composite moulding industries, improving products and processes. I specialised in using Statistics to optimise formulations and processes so that they were robust and insensitive to conditions that were impossible or expensive to control. My responsibilities included trouble-shooting manufacturing processes for my employer, the Scott Bader, its customers and licensees. I am therefore very familiar with the issues that arise when an established product is made using different equipment and raw materials. For the final five years of my employment, I managed the company’s materials testing laboratory, advising the development departments, and steering products through regulatory approval processes.”
Mr Claes, by contrast, does have relevant expertise and did carry out his own testing. His particular expertise is in catalysts and chemical synthesis, which is directly relevant to this case as it concerns the effectiveness of the catalyst used in the hydrogenation process to convert the AHA into the finished product Octopamine. Even so, Mr Claes has not been able to identify what the contaminating substance is.
The problem with Mr Claes’ evidence is of a different nature. He declared on the second page of his report that: “I know of no conflict of interest of any kind, other than any which I have disclosed in my report. I do not consider that any interest which I have disclosed affects my suitability as an expert witness on any issues on which I have given evidence.” Mr Claes did not disclose that he has worked as a consultant to FOL for a number of years and in particular in relation to its use and sourcing of catalysts. Furthermore, it appears from an email dated 27 June 2014, around the time that the problems with the AHA arose, that Mr Claes was involved in some way. While Mr Claes insisted in his evidence that he was not consulted about the AHA in question in these proceedings, his serious lack of candour in not disclosing his connection to FOL in his report is troubling.
Furthermore, Mr Claes said that in preparing his report, he “utilised the services of a number of independent laboratories, to provide analytical support.” What he did not say is that he actually used FOL’s facilities to carry out his experiments. This was therefore a highly misleading statement intended to give the impression that he had compiled his report independently of FOL. Mr Claes accepted in his oral evidence that this was not a “helpful statement” in his report and that he should have mentioned his connections with FOL. Mr Nersessian submitted that this is proof of actual bias in Mr Claes’ evidence. It is certainly unsatisfactory and concerning that Mr Claes did not disclose his longstanding connection to FOL and it does, to my mind, undermine his independence. I propose to treat what he says with extreme caution. In the event, it may not be significant, as I do not believe that the expert evidence greatly assists in the resolution of the actual issues in this case.
The defendant was liable to pay some of the claimant’s invoices. However the defendant’s counterclaim was largely successful.
I have found that Mr Jain deliberately destroyed the production records relevant to all the AHA manufactured by BHL. Furthermore, he falsified such records in order to try to satisfy Dr Christie and Dr Parkinson when they visited in November 2014 that production had taken place at Vadodara. Such actions are fairly clear indications both that Mr Jain knew that BHL had done something wrong in relation to the manufacture of the AHA in 2014 and also that he was determined to cover that up.
(1) The use of substandard raw materials;
(2) The specified process was not followed;
(3) The audited site was not used; or
(4) It was an unexplained by-product of the manufacturing process.
Mr Forsythe, BHL’s expert, agreed with Mr Cameron during cross-examination that (4) was not what happened and that it had to be one or more of possibilities (1), (2) or (3). In relation to (4), my conclusion on the expert evidence was that the dimer, which is the only element that could be considered a by-product of the process, was a small part of the extraneous material and that it was not the cause of the problems with the hydrogenation.
In relation to (1), (2) and (3), it is impossible for me to determine which one or more of these caused the damaging Green Contaminant to be present. That is because there are no records in existence that show precisely what raw materials were used or the process that was followed. There is an indication from the 12 June 2014 email from Dr Gokhale to Mr Jain (referred to in paragraph  above) that Mr Jain knew that substandard raw materials had been used in breach of contract and that the use of the Nigam facility was unauthorised. The destruction of the production records was, in all likelihood, to conceal all these three possibilities.
Mr Nersessian maintained his general submission that the only appropriate measure of quality is whether the AHA satisfied the prescribed tests in the Amended Specification and everyone, including the experts, agreed that the 2014 AHA did pass those tests. It was therefore within the contractual tolerances that FOL had required and BHL could not be expected to test for an unknown quality – efficient conversion to Octopamine – or bear the risk of FOL not prescribing appropriate tests. He also submitted that even if BHL was contractually bound to manufacture at Vadodara, there was no evidence that manufacture at Nigam caused any loss to FOL.
The trouble with these submissions is that they overlook the reality of what happened and in particular the consequences of Mr Jain’s actions and untruthful evidence. It could very well have been because Nigam was dirty, that extraneous matter found its way into the AHA. Dr Christie was unimpressed with the Nigam site when he visited in 2015. If there was no problem with it, I do not understand why Mr Jain would fabricate records and maintain the pretence to FOL that Vadodara was being used.
I have found against BHL as to the terms of the contract, in particular as to the measure of quality not being limited to the Amended Specification. I agree with Mr Cameron’s submission that compliance with the Amended Specification cannot be “an excuse for dropping any rubbish into the AHA“. FOL could not sensibly include a test designed to establish if the Green Contaminant was there as it could not anticipate that that sort of material could be present in the AHA if all three elements of the contract were followed (ie raw materials, process and site). It is akin to the meat pie analogy in that compliance with the specification does not prove that the product is of satisfactory quality and uncontaminated by an unknown substance.
The previous supplies of AHA had a maximum of 0.22% of extraneous matter and they all hydrogenated efficiently and in accordance with FOL’s expectations. The 2014 AHA had far more extraneous matter within it and this fundamentally changed the quality of the AHA so that it did not hydrogenate efficiently or at all and certainly did not perform in a similar way to the previous supplies.
(1) The 2014 AHA was not of a “similar quality” and/or did not have a “similar impurity profile” to the previous supplies of AHA in 2012 and 2013 in breach of the express terms of the contract;
(2) The 2014 AHA was not of “satisfactory quality” in breach of the implied term in section 14(2) of the SGA;
(3) The 2014 AHA was not fit for its purpose of converting efficiently into Octopamine in breach of the implied term in section 14(3) of the SGA;
(4) The 2014 AHA was not manufactured at Vadodara in breach of the express term of the contract.