APPLICATION FOR RELIEF FROM SANCTIONS: THE IMPORTANCE OF PROMPT APPLICATIONS

In Pepe’s Piri Piri Ltd & Anor v Muhammad Ali Junaid Food Trends Ltd (Now Dissolved) & Ors[2019] EWHC 2769 (QB) Matthew Gullick (sitting as a High Court judge) granted the claimants relief from sanctions in relation to late service of witness statements and expert reports. It is a case that emphasises the importance of making prompt applications for relief from sanctions.   The applications for relief were successful, however

“…  a factor in the balance against relief was the serious delay of two months in making the application for permission to rely on the witness statements after those statements had been prepared and served on the Defendants. There was no good reason for that delay. There is no reason in principle why egregious and unexplained delay on the part of a litigant in making an application might not at the third stage of the Denton analysis outweigh the first two factors which are otherwise in favour, even strongly in favour, of the grant of relief.”

THE CASE

The claimants were successful in bringing an action in relation to procuring breaches of contracts in relation to chicken franchises.  Many of the losses claimed were held not to be recoverable, or not established on the evidence.   In this later judgment the judge considered the consequences of an application for relief from sanctions that the claimants had made shortly before trial.

THE JUDGMENT IN RELATION TO RELIEF FROM SANCTIONS

The judge set out his reasons for granting for relief from sanctions in allowing new witness and expert evidence to be served shortly before the trial.

Background

1. I shall not rehearse the content of the Main Judgment. However, that judgment does not set out my reasons for allowing the Claimants’ application of 5 March 2019, which were given in an ex tempore judgment on 13 March 2019, the second day of the trial, but which have not been transcribed for the purposes of this application. I shall therefore summarise the position in respect of that application.

2. On 5 March 2019, one week before the commencement of the trial, the Claimants issued an application for permission to rely on a supplemental expert report from Mr Blake and four further witness statements. By order of Master Kay QC made on 4 January 2018, following a hearing at which all parties were represented by counsel, the parties had been ordered to exchange witness statements of the witnesses of fact by 23 August 2018. The order provided in terms identical to CPR 32.10 that oral evidence at trial would not be permitted where witness statements had not been served in accordance with the order. The Master’s order further provided for the claimants to serve the report of an expert in the field of accountancy and business valuation by 12 October 2018. It gave the defendants permission, if so advised, to file their own expert report by 7 December 2018 and then for the experts to meet and to prepare a joint statement for the court. There was no provision in the Master’s order for any further witness evidence or any supplemental expert evidence to be filed by any party.

3. Witness statements were exchanged in accordance with Master Kay QC’s order and expert reports were served by both sides by the dates specified. Mr Cohen, the Defendant’s expert, made points in his report which were entirely new to the litigation and which, if they were to be made by the Defendants, required a response from the Claimants. In particular, Mr Cohen raised the issues of whether the Claimants had failed to mitigate their claimed losses and, in broad terms, considering the position of several of the Claimants’ other franchisees, whether the Claimants’ business model was a viable one.

4. On 4 January 2019, the Claimants’ solicitors served on the Defendants four further witness statements. Two were from existing witnesses, Mr Munir Hussain and Mr Clive Sawyer. Two were from new witnesses, Mr Ian Wilson and Mr Lee Hussain, both of whose witness statements were very brief; in due course they were not cross-examined on their evidence (see paragraph 86 of the Main Judgment). In addition to the witness statements, the Claimants served an addendum report from their expert, Mr Blake, dated 9 January 2019, which addressed some of the content of Mr Cohen’s report. Most significantly however it contained a revision of Mr Blake’s view of the extent of the Claimants’ losses, to which I made reference at paragraphs 92 and 241 of the Main Judgment. In response, the Defendants served their own supplemental expert report from Mr Cohen, dated 15 February 2019, addressing both Mr Blake’s supplemental report and aspects of the Claimants’ further witness evidence. No application was made in January 2019 by the Claimants for permission to rely, in response to the Defendant’s expert’s report, on the four further witness statements or on the supplemental report of Mr Blake. Nor was any such application made either prior to or at the pre-trial review before Dove J on 22 February 2019. Nor did the Defendants make an application to rely on the supplemental report of Mr Cohen.

5. On 8 February 2019, Mr Razi on behalf of the Third to Ninth Defendants wrote to the Claimants’ solicitors stating that all four of the new witness statements should be withdrawn because they had not been served in accordance with the order of Master Kay QC. Mr Junaid wrote letters in materially identical terms on 14 February and 20 February. He stated in the second letter, “You cannot simple [sic] send statements to other side and to the court and expect them to be accepted out of time.” Despite this, no application was made either before or at the pre-trial review on 22 February.

6. The Claimants’ application to rely on the further witness and expert evidence was issued on the afternoon of 5 March 2019 and served on the Defendants by email after hours that day. It was not suggested by the Claimants, when the application was argued before me, that they did not need the permission of the court to rely on the further material. The application was supported by a witness statement from the Claimants’ solicitor, Miss Matthews, in which she explained why the new evidence had been filed. Miss Matthews did not, however, give any explanation for the Claimants’ delay in applying to the Court for permission to rely on those statements and that further report.

7. I considered that notwithstanding the fact that the Defendants did not positively object to the further evidence when it was served on them, the onus was at all times on the Claimants to secure the Defendants’ agreement to the evidence being admitted and, in any event, to apply to the court for permission. Although they said nothing initially, the Defendants had objected to the Claimants’ further material by 8 February 2019. As Lord Dyson MR emphasised in R (on the application of Idira) v Secretary of State for the Home Department [2015] EWCA Civ 1187, [2016] 1 WLR 1694 (“Idira“) at [80], it is the court and not the parties – still less, one side – that is in control of the management of litigation. I considered that it ought to have been obvious to the Claimants and those advising them that permission to rely on the further evidence would be required, and that the application of 5 March 2019 was an extremely late recognition of that. The application was not made promptly.

8. In my view, the approach of the Court of Appeal set out in Denton v TH White Limited [2014] EWCA Civ 906, [2014] 1 WLR 3926 was applicable. Denton itself was a case in which the defaulting party had served further witness statements very shortly before the trial, see at [46-57]. However, a fact-sensitive assessment is required in each particular case. I considered that the Claimants’ breach, i.e. not having served the new witness statements in compliance with the case management order, was not serious or significant. This was because the statements were essentially, although not entirely, responsive in nature. They responded in large part to points raised by the Defendant’s expert in his report, served well after the deadline for the witness evidence, which were not previously the subject of controversy between the parties. I did not consider that the Claimants should be criticised for not having anticipated these points in their own witness or expert evidence. It was also not suggested that, if the statements were to be admitted, the trial would need to be adjourned. There was in my view a good reason for the breach, because the Claimants were responding to issues raised, after the date for the filing of witness statements, by the Defendants’ expert. In Denton it is at least implicit in the Court of Appeal’s analysis of the particular issue in that case at [54] that it would have viewed the service of further evidence soon after the expert’s report raising the issue (rather than as actually occurred, after a delay of 16 months) in a very different light in relation to one or both of the first stages of the process.

9. At the third stage of the analysis, I considered that the factors considered at the first two stages weighed in favour of relief being granted. However, a factor in the balance against relief was the serious delay of two months in making the application for permission to rely on the witness statements after those statements had been prepared and served on the Defendants. There was no good reason for that delay. There is no reason in principle why egregious and unexplained delay on the part of a litigant in making an application might not at the third stage of the Denton analysis outweigh the first two factors which are otherwise in favour, even strongly in favour, of the grant of relief. This is a point made at paragraph 3.9.6 of Civil Procedure (“the White Book”) which cites for that proposition British Gas Trading Ltd v Oak Cash and Carry [2016] EWCA Civ 153, [2016] 1 WLR 4530 in which relief was refused because the delay in making an application, which would have been granted had it been made timeously, caused the trial date to be lost. However, delay in and of itself is only one factor and all the circumstances must be considered at the third stage.

10. I considered that in all the circumstances it would have been unjust not to permit the Claimants to rely on this evidence, notwithstanding the unexplained delay in making the application. The statements dealt, for the most part, with issues raised for the first time by the Defendant’s expert’s report. Mr Munir Hussain and Mr Sawyer would be giving evidence in any event and would have been likely to raise many of the matters contained in their supplemental witness statements when cross-examined. The statements of Mr Lee Hussain and Mr Wilson were brief and dealt with specific points. Nor was there a high degree of prejudice to the Defendants in the evidence being admitted, given that they had been in receipt of it for two months and that they had served a supplemental report from Mr Cohen which took the new evidence into account.

11. With regard to the further expert evidence, slightly different considerations applied; but those considerations appeared to me to be in favour of permitting the evidence to be adduced. Mr Blake had changed his opinion and so was required to inform the instructing party and also to amend his report – see paragraphs 64-66 of the Practice Direction to CPR 35. His revision of the assessment of the Claimants’ losses was, in any event, in the Defendants’ favour. Given that the Claimants’ further witness statements would be in evidence, it would have been artificial and unjust to exclude from the trial the expert analysis and opinion in respect of such evidence, which had been provided by both parties’ experts. Although the Defendants had not issued an application to rely on Mr Cohen’s supplemental report, it would have been unfair to refuse them permission to rely on it in these circumstances, particularly given that it was one of the factors reducing the prejudice to the Defendants arising from the Claimants’ further witness statements.

12. I therefore gave permission to rely on the four further witness statements (in the case of the Claimants) and on the supplemental reports of the experts (in the case of both sides).

THE COSTS OF THE APPLICATION FOR RELIEF FROM SANCTIONS

1. 1. For the Claimants, Mr Strelitz now submits that the application of 5 March 2019 was opposed by the Defendants when they ought to have consented to it. The application was successful, despite the Defendants’ objections. The application was to adduce evidence by way of response to the points raised by the Defendants’ expert. Therefore, he submits, the Claimants’ costs of the application should be paid by the Defendants.

   2. I do not accept Mr Strelitz’s submission that the costs of the application should be paid by the Defendants in any event because they should have consented to it. In my judgment, the Defendants’ opposition to this application – made barely a week before the trial and with no explanation for the Claimants’ delay being given in Miss Matthews’ evidence – was far from unreasonable. In Idira, Lord Dyson MR said at [80], in the context of a delay in filing a respondent’s notice in the Court of Appeal:

“At para 43 in Denton, this court said that parties should not “adopt an unco-operative attitude in unreasonably refusing to agree extensions of time and in unreasonably opposing applications for relief from sanctions”. It added: “it is unacceptable for a party to try to take advantage of a minor inadvertent error….”. I would emphasise the words “unreasonably” and “minor inadvertent”. A party is not required to agree to an extension of time in every case where the extension will not disrupt the time-table for the appeal or will not cause him to suffer prejudice. If the position were otherwise, the court would lose control of the management of the litigation.”

Indeed in that case, although relief from sanctions was granted, the respondent to the appeal (the applicant for relief) was ordered to pay the costs of the application on the indemnity basis because of what the court viewed as an excessive delay in filing the respondent’s notice without a sufficient excuse – see at [74] and [84]. The Court of Appeal made that order even though the appellant (the respondent to the application for relief) had unsuccessfully opposed the application (see at [72] and [76]).

1. 1. In my judgment, the present case is not one where the balance falls in favour of either side being awarded the costs of the application. Whilst, as in Idira, the Claimants’ delay in making the application to rely on the new evidence was substantial and was not adequately explained (factors which, as in Idira, might result in an award of costs against a successful applicant for relief from sanctions), the new evidence had been served on the Defendants two months before the trial. Further, the new evidence was, in significant part, responsive to points raised by the Defendants’ expert and so the need for such evidence to be adduced in the first place resulted from the conduct of the Defendants rather than the conduct of the Claimants. In all the circumstances, in my judgment the appropriate order in respect of the application of 5 March 2019 is that the costs should be in the case.