11th HOUR APPLICATION TO INTRODUCE NEW WITNESS EVIDENCE (AND A NEW CASE) REFUSED

In Crumpler & Anor (Liquidators Of Peak Hotels And Resorts Ltd v Candey Limited [2019] EWHC 3558 (Ch) HHJ Davis-White QC (sitting as a High Court judge) refused a party relief from sanctions where witness statements were served late.  The introduction of the evidence was, the judge held, an attempt to introduce an entirely different case.  There was no good reason for the late introduction of evidence and it would have had a major adverse impact on the management of the case.

“It seems clear to me that the breach in this case is clearly serious and significant given (among other things) (a) the late stage at which the evidence is sought to be adduced given the time by which the evidence was required to be served and the history of orders in this case and (b) its effect, which is to seek to change a fundamental basis of Candey’s case, upon which basis the parties and witnesses had been proceeding, at what can be described as the 11th hour”

THE CASE

The respondent had provided legal services to the claimant. The Court of Appeal had earlier held that the agreement between the parties was not on a fixed fee basis. The Court was determining what sums were payable for the services provided.

THE DEFENDANT’S LATE WITNESS EVIDENCE

The respondent (Candey) had served evidence late.   That evidence, the 10th statement of Mr Candey,  went to the issue of whether work had been done that had not been recorded.

THE JUDGE’S CONSIDERATION OF WHETHER THE LATE EVIDENCE SHOULD BE ALLOWED

The judge held that the order for the service of witness evidence was subject to a sanction. Applying the Denton principles relief from sanctions should not be granted.
Time cost charging: (3) the scope of the evidence
  1. I turn to the issue of whether or not Candey should be permitted to rely on the evidence contained in Mr Candey’s 10th witness statement and Mr Dunn’s 2nd witness statement. (I should also note that Mr Candey’s 9th witness statement was served late, but not very late, and the Liquidators did not object to it going into evidence.)
  2. The significance of the new evidence in the two witness statements in question is that until shortly before it was served, Candey’s position had always been that the work that it had undertaken had been recorded in the contemporaneous timesheets that had been provided to the Liquidators as long ago as 9 May 2016.  The case had proceeded on that basis.  I need not cite the relevant passages in the evidence but I am satisfied that this was a key basis upon which both parties proceeded.  Indeed, this was made clear in the expert reports in express terms (and in the first joint memorandum of the experts).  In the applicants’ evidence, it was also referred to in (among other places) Mr Crumpler’s 2nd affidavit (26 September 2016); Mr Crumpler’s 3rd affidavit (14 February 2017); Ms Bower’s 2nd affidavit (22 September 2017) and Mr Crumpler’s 4th affidavit (22 September 2017).     Mr Candey also expressly asserted that the Timesheets were accurate (see e.g. his 5th witness statement dated 8 November 2017).
  3. In his second report dated 9 September 2019, Mr Thomas picked up a  comment of Mr Hurst in his, Mr Hurst’s, second report dated 5 August 2019 in which Mr Hurst said:
“..It should also be borne in mind that, not infrequently, when a detailed schedule of costs is prepared, the total claimed is more than the figure first estimated.”
Mr Thomas expressed himself as to be unclear as to the meaning of this remark.  He pointed out that where there was a recording of total time costs (as here), it would be very unlikely that a detailed assessment would produce a higher figure as that would require the solicitors to identify additional time spent but somehow not recorded on the time recording system.  So far as he was aware, Candey was not suggesting that such further unrecorded time had been spent.
  1.  In the second Joint Memorandum of the Experts dated 7 October 2019, Mr Hurst answered this point by reference to “thinking time” which he said would have been involved but “might not always be recorded in..time sheets”.   He suggested that this should be taken into account in the valuation exercise referring to the skill, labour, specialist knowledge and responsibility involved on the part of the solicitor and thus, as I understand it, suggesting that this was a factor in setting the appropriate hourly rate for those involved.
  2. Notwithstanding how I have understood Mr Hurst’s comments recorded in the Joint Memorandum, Stephenson Harwood, solicitors for the Liquidators, followed up the issue by letter dated 8 October 2019.  They re-iterated that Candey’s case had always been that all times had been recorded in the Timesheets.  They asked that, if Candey’s position had changed, full particulars of the new position be provided, the Liquidators’ reserving their position and in terms saying they did not accept a new case could be run at this late stage.
  3. On the same day, 8 October 2019, but possibly in response to questions about the bundles rather than in response to the letter I have referred to, Candey LLP (acting for Candey and through Mr Ashkhan Candey) wrote that the Timesheets should not be in the bundle  and asserting that “in circumstances where our client’s believed that they were acing on a fixed fee they would unsurprisingly not have diligently captured all of their time”.
Under cover of an email dated 14 October the two witness statements that I have referred to provided by Candey LLP were sent to Stephenson Harwood in the context of “…thinking time and the time narratives provided”.  However, those witness statements go well beyond saying that the times entries left out are simply “thinking time”. 
  1. Thus, as a result of the 10th witness statement of Mr Candey (and the 2nd witness statement of Mr Dunn each) made on 14 October, 11 days before the reading day on this application, it was for the first time made clear that the position of Candey had changed.   Mr Candey’s evidence is that as Candey’s case had been that a time cost basis of valuation was inappropriate and that the Fixed Fee was the appropriate valuation, he had not focussed on checking the time records other than defending criticisms of them.  Having carried out an “initial review” which is “very much just an initial assessment” he had identified that (on his analysis) Mr Dunn’s time could not have been properly recorded but is in fact massively unrecorded, and that time spent in the BVI in December 2015 is massively unrecorded.  Further, doing a “spot check” of his emails and phone records for 21 and 22 October 2015 there is, he says, no record of any times having been recorded for what are, on any view, a substantial amount of emails and phone calls.  He does not suggest what the actual quantum of unrecorded time is on any of these matters or indeed generally over the period covered by the Timesheets. He concludes that he is “not confident” that the time was properly captured by the Timesheets.  He says the only way that the matter can now be dealt with is for him to instruct a costs draftsman to analyse the position and produce a bill of costs “in the usual way”.   Mr Dunn largely supports Mr Candey’s evidence in terms of confirming his concerns as to the absence of full time recording from specific examples. Largely if not entirely the examples mirror those identified by Mr Candey. In effect, the evidence seeks an adjournment of any quantum determination to the extent that the valuation should be conducted on the basis of time spent (which I have decided that it should be).
  2. There are three further relevant factors. First, and as regards the contemporaneous evidence of charging, Candey in fact provided invoices to PHRL (pro forma as I understand it given there was in fact in place the fixed fee) on a time cost basis dated 31 January 2016, which invoices covered the period in which the FFA operated (some invoices overlapped a period before the FFA too).  These were, to the relevant extent, later replaced by invoicing by reference to the FFA and the fixed fee.  It was not suggested that the January 2016 invoices were provisional or inaccurate because full times had not been recorded.
  3. Secondly, at least since the Court of Appeal judgment Candey has been arguing for a hypothetical CFA as one of the possible basis of charging (and before that was relying on it as a comparator to demonstrate that the Fixed Fee represented the value of the service provided).  A CFA itself depends upon a time cost basis of charging coupled with an uplift to the same.
  4. Thirdly, there is the question of the procedural orders in this case.  By my order of 17 July 2017, having determined that I had inadequate evidence to determine the Valuation Issue, I directed that Candey was to file any further evidence of fact by 4 August 2017 and the Liquidators were to serve theirs by 8 September 2017.  Expert evidence was to be filed by 4 September (Candey) and 8 September 2017 (the Liquidators).
  5. HH Judge Raeside QC heard the issue in December 2017 and his order is dated 5 December 2017.
  6. The 2nd Court of Appeal judgment, allowing the appeal against the determination of HH Judge Raeside is dated 27 March 2019.  At the relevant hearing Ms Toube submitted that there should be no further evidence.  However, the Court of Appeal determined that there should be a case management conference before a High Court Judge for the purpose of determining what evidence might be relied on or adduced.
  7. The case management conference was conducted by Mr Edwin Johnson QC (sitting as a High Court Judge).  By his order dated 23 May 2019, Candey was given until 4pm on 21 June 2019 to file any supplemental evidence of fact on which it wished to rely.  The Liquidators were given until 4pm on 12 July 2019 for the same purpose.  Candey was additionally given permission to rely on further supplemental evidence from Mr Hurst which was to be served and filed by 4pm on 12 August 2019.  The Liquidators’ extra expert evidence was to be filed and served by 4pm on 9 September 2019. A meeting of experts was to take place by 23 September and a joint memorandum was to be prepared by 4pm on 30 September 2019.  All of the supplemental evidence was to be limited to
such supplemental evidence as is required to take account of the decision of the Court of Appeal…as to the correct approach to the Valuation Issue…”
  1. It was also directed that there was to be no live witness testimony from factual witnesses at the Remitted hearing “unless the court grants permission”.  There was liberty to cross-examine the experts.
  2. The direction regarding no live witness testimony from factual witnesses was, in my view, an example of the court exercising its powers under CPR r32.1(1)(c) and r32.5(1).  I consider that the hearing before me was a resumed “trial” and the default rule, without a court order, would be that evidence would be given orally (CPR r32.2, 32.5).  
  3. The question is whether the sanction under CPR r32.10 applies, either directly or by analogy.  CPR 32.10, as is well known, provides a sanction that in the event a witness statement is not served by the time prescribed by court order then that witness may not be called to give oral evidence unless the court gives permission.   In my view it is implicit in the Order of Mr Edwin Johnson that the direction that oral evidence would not be given applied to the existing evidence and the further evidence served in accordance with his order If the evidence was not so served then a further court order was required, extending time for service of witness evidence and, in effect directing afresh that oral evidence was not required (and incidentally disapplying the sanction that would otherwise apply under CPR r32.10).   I consider that this is therefore  a case where there is a direct sanction.  There is a further point supporting this view.  Evidence regarding the actual time spent by Candey was not a new issue arising from the 2nd Court of Appeal judgment.  Both experts had said they had inadequate evidence to opine on the time spent issue and the issue was therefore live before the 2nd Court of Appeal judgment, not least because the Liquidators always said that the Valuation Issue was to be determined by reference to time costs.  The new evidence sought to be adduced is therefore not within the limits of the case management order and it would now be necessary to seek to adduce the same and the relevant order that would need extending is not that of Mr Johnson but my earlier order.
  4. However, as I understand matters, Candey does not really resist the proposition that whether or not the sanction under CPR r32.10 strictly applies or not, I should approach the question of the admission of Mr Candey’s 10th Witness Statement (and Mr Dunn’s 2nd Witness Statement) on the basis that Candey needs or should be treated as needing, relief from sanctions in accordance with the Denton principles.
  5. As regards the application of the relief from sanctions analysis even where there may be said to be no direct sanction, and in particular as regards retrospective extensions of time, I was referred to Global Energy Horizons Corporation v Gray [2019] EWHC 1132(Ch), itself relying upon  R (on the application of Hysaj) v Secretary of State for the Home Department [2015] 1 WLR 2472 and Ellison v University College Hospitals of Morecombe Bay [2015] EWHC 477 (QB).  As regards the Hysaj case I also draw attention to Salford Estates (no 2) Ltd v Altomart Limited [2015] 1 WLR 1825  and R (on the application of Fayad) v Secretary of State for the Home Department [2018] EWCA Civ 54.  In my judgment, even if the sanction under CPR r32.10 does not apply, the so-called “Denton principles” clearly apply by analogy in this situation.
  6. By way of broad summary only the principles derived from the Denton case  (Denton v T H White Limited [2014] EWCA Civ 906[2014] 1 WLR 3926) which apply where the court is considering an application for relief from sanctions involves the following three stage test (which I take from the Fayad case):
(1)          The court must identify and assess the seriousness and significance of the failure to comply with any rule, practice direction or court order engaging CPR rule 3.9(1). If the breach was not serious or significant, it is likely that relief will be granted by the court, and it is unlikely that it will be necessary to investigate stages (2) and (3) in any depth.
(2)          The court must identify and consider the reasons why the default occurred.
(3)          To enable the application to be dealt with justly, the court must evaluate all the circumstances of the case, including the need to enforce compliance with rules etc and the need for litigation to be conducted efficiently and at proportionate costs.
  1. It seems clear to me that the breach in this case is clearly serious and significant given (among other things) (a) the late stage at which the evidence is sought to be adduced given the time by which the evidence was required to be served and the history of orders in this case and (b) its effect, which is to seek to change a fundamental basis of Candey’s case, upon which basis the parties and witnesses had been proceeding, at what can be described as the 11th hour.
  2. So far as explanation is concerned, it seems to me that there is no good explanation for the late appearance of this evidence.   From the very start, the Liquidator’s case has been that the Valuation Issue is to be determined on a time cost basis and that the relevant times are those set out in the Timesheets.  The only issues were whether the hourly rates claimed were too high, some time entries were not properly claimed because they were incurred at a time when the Liquidators had de-instructed Candey and whether the narrative details of the actual times were adequate.  While Candey was arguing for a different basis of valuation, the Liquidators’ case has not changed and Candey always faced the possibility that its case on an alternative basis of valuation to time costs would not succeed.   Further, after the 2nd Court of Appeal judgment it must have been obvious that a time cost basis of charging was at the least a very real candidate for the basis of valuation which the court would adopt.  Even on Candey’s own case, a time cost basis of valuation was in part required under the CFA analysis.  Further, no directions or agreement were sought that the entire issue of quantification on a time costs basis (if that was the court’s decision) should be put off to a different procedure or further hearing and that further evidence would be required in that respect as regards the actual time spent by Candey in the provision of relevant legal services.
  3. Looking at all the circumstances, my judgment is that relief should not be granted.  It is even now wholly unclear the extent of time and costs of that time which would be brought into issue.   At this stage the main suggestion is that there should be an adjournment to enable a costs draftsman to prepare a full bill of costs.  This is likely to cause significant delay and cost.  A whole new line of enquiry on both sides would be necessary.  Candey has already had three opportunities to put evidence before the Court (in the lead up to the hearing before me, in the lead up to the hearing before HHJ Raeside and in accordance with the order of Mr Johnson).  The case has been on foot for a not inconsiderable period of time.   As I have already held, there is no reason as a matter of principle to adjourn this hearing to carry out a more detailed assessment process.  However, even if I am wrong on the last point, and this matter were to be adjourned to a further “quantum” hearing of some sort, I do not consider that it would be just to the Liquidators to permit the re-opening of a primary factual matter upon which a time costs basis of valuation would be carried out.
  4. I also reject the submission of Mr Saoul that if I proceed to determine all issues on the Valuation Issue now, without a further hearing, I should take into account the new evidence he relies upon.  That is primarily because the Liquidators have not had adequate time to deal with it.  Further, it is unclear what is its effect.  This is because it does not spell out the time entries (both as to length of time and the rate in question) has been left out of the Timesheets in respect of the individual “spot check” matters it has identified.  Further, there is a failure to identify the overall effect if the exercise of identifying the “missing time entries” from the Timesheets is carried out (which is another reason why the Liquidators cannot have been expected to deal with this evidence by evidence of their own).