RELIEF FROM SANCTIONS GRANTED FOLLOWING LATE SERVICE OF WITNESS STATEMENTS: SUCCESSFUL APPEAL TO THE HIGH COURT

High Court decisions in relation to relief of sanctions seem to be coming in pairs.  Yesterday we looked at Depp II v News Group Newspapers Ltd & Anor [2020] EWHC 1237 (QB) today we are looking at the claimant’s successful appeal in Razaq v Zafar [2020] EWHC 1236 (QB).  Mrs Justice Yip allowed an appeal against a refusal to grant relief from sanctions in relation to late service of witness statements and a list of documents.  The case highlights the need for the court to consider the entire Denton criteria when hearing an application for relief from sanctions.

 

THE CASE

The claimant brings a claim alleging that he has paid the defendant £60,000 for a business which has not been transferred to him. The defendant’s case is that the money was repaid.  Directions were made which included the service of witness statements on the 2nd October 2019 and further statements on the 23rd October 2019. The matter was then to be listed for the pre-trial review.

THE CLAIMANT’S DELAY

Mrs Justice Yip set out the nature of the claimant’s delay.

  1. The Claimant did not comply with the directions in relation to his list of documents and witness statements. On or around 22 October 2019, the Claimant’s solicitor, Mr Ansari, appears to have realised that the directions had not been complied with. By way of explanation for the default, he relies upon the fact that his firm was investigated by the Solicitors Regulation Authority in the period from July to October 2019. This resulted in the Claimant’s file being taken by the SRA for auditing on 18 September 2019. Having got the file back on 16 October 2019, he attempted to contact the Claimant but found that he was abroad and accordingly made the application on 24 October 2019. He sought to extend the time for disclosure and initial witness statements to 29 October 2019 and for the supplementary statements to 8 November 2019 (although as I understand it the Claimant does not require provision for supplementary statements).
  2. The Claimant filed and served his List of Documents and three of the statements upon which he seeks to rely on 29 October 2019. A statement from a fourth witness was served unsigned on that date but served in a signed format the following day. The List of Documents was therefore provided about six weeks late and the witness statements three-and-a-half weeks late and six or seven days after the date that had been provided for service of statements in response to the Defendant’s statements.

THE HEARING BEFORE THE CIRCUIT JUDGE THE ASSERTION THAT THE WRONG APPLICATION HAD BEEN MADE

There were some surprising aspects about the way the case was presented before the District Judge.  This was a retrospective application to extend time.   The claimant did not, initially, appear to accept that CPR 3.9 applied.
    1. The Defendant contends that the ‘wrong’ application had been made in that the written application was not expressed to be an application for relief from sanctions pursuant to CPR 3.9. However, nothing turns on this. The judge was plainly right to treat the application before him as an application for relief from the automatic sanction under CPR 32.10, which provides:

“If a witness statement or a witness summary for use at trial is not served in respect of an intended witness within the time specified by the court, then the witness may not be called to give oral evidence unless the court gives permission.”

    1. This point appears to have taken Counsel for the Claimant somewhat by surprise at the hearing below. She initially sought to argue that CPR 3.9 did not apply. However, having accepted, as she was bound to, that the Claimant did require relief from sanctions and that the application was to be considered by reference to CPR 3.9 and the approach set out in Denton v TH White Ltd [2014] EWCA Civ 906, Ms Wills then made some brief submissions about pragmatism. She contended that the delay was excusable and relied upon the fact that the default had not prejudiced a trial date.
    2. Mr Harmel’s submissions for the Defendant were also brief and, as he now readily accepts, not framed according to the correct test as laid down in Denton. He wrongly submitted that unless the claimant could establish a good reason for the breach there was no need to even consider the third stage of Denton, that is evaluating all the circumstances of the case. However, it is fair to say that the judge was not misled and did have the correct framework in mind.
    3. The hearing before the judge was brief. I understand that he was required to take the application at short notice as another judge was indisposed and that he interposed it during a trial. Having considered the transcript of the hearing, regrettably I do not consider that the judge was greatly assisted by the submissions made on either side. I well understand the pressure on the judge and counsel and have no doubt that everyone was seeking to assist as best they could and to be efficient. Unfortunately, though I do not believe the judge got the succinct, well-focussed and legally accurate submissions that I think he was entitled to expect. In particular, the result of the misunderstandings on both sides was that neither party addressed the judge in any detail as to the exercise of his discretion under the third stage in Denton nor did they conduct any real analysis of all the circumstances of the case as required by CPR 3.9.
    4. The judge gave a brief judgment. Having set out the correct legal framework within which the Claimant’s application was to be considered, he addressed the three stages in Denton. He concluded that the breach was serious, gave consideration to the explanation for the default and then turned to the third stage, which he dealt with briefly, as follows:
“… it is submitted by Miss Wills that there should be no difficulty with the timetable and no prejudice to the defendant. I therefore have to balance those circumstances against the other circumstances in the case, including the need for litigation to be conducted efficiently and to enforce compliance with the rules, practice directions and orders. If I allow this application, there will be further delay whilst the claimant complies with orders that should have been complied with several months ago. In my judgement, in view of the poor excuses proffered by the claimant solicitors for their failures, in view of the many breaches by the claimant’s side, and in view of the wholly unexplained and unremedied failure to give disclosure, the balance falls heavily in favour of the defendant. Litigants and their solicitors must realise that they cannot ignore the directions of the court and expect the courts to indulge them when they seek relief from sanctions. Such a practice delays the litigation in question and clogs up the lists with applications for relief, thus inconveniencing other court users. I dismissed this application for relief from sanctions.”

THE CLAIMANT’S SUCCESSFUL APPEAL: THE CORRECT APPROACH TO THE THIRD STAGE

Mrs Justice Yip carried out a detailed analysis of the “third stage” of the Denton test. She concluded that there were error’s in the judge’s approach and that relief from sanctions should be granted.

    1. As the judge correctly reminded himself, CPR 3.9 requires the court to have regard to all the circumstances including the need –

a) for litigation to be conducted efficiently and at a proportionate cost; and

b) to enforce compliance with rules, practice directions and orders.

    1. The correct approach to the third stage is to be found in Denton at paragraphs 31 – 38. The court must consider all the circumstances of the case “so as to deal justly with the application.” The two factors specifically set out in rule 3.9 are to be given particular (although not paramount) importance. Factor (a) makes it clear that the court must consider the effect of the breach in every case. Factor (b) stresses that the court must always bear in mind the need for compliance with rules, practice directions and orders and that the old lax culture of non-compliance is no longer tolerated (see Denton at [34]). In considering all the circumstances, including the two important factors mentioned in the rule, the court must take account of the assessment of seriousness and significance of the breach (as assessed at the first stage) and of any explanation (considered at the second stage).
    2. I have already said that I consider that the lack of any real analysis of the seriousness of the breach impacted on the exercise of the judge’s discretion. I also accept that the Claimant has identified material errors of fact in the judge’s reasoning.
    3. First, the judge said that if he allowed the application, there would be further delay whilst the claimant complied with orders that should have been complied with months ago. That was not right. In fact, the Claimant had served his list of documents and all his witness statements six weeks before the hearing. No procedural steps remained outstanding and there was no reason to think there would be any further delay. Indeed, the Claimant was not seeking any direction that required future compliance.
    4. I note that in the course of the hearing, the judge identified that the wording of the statements of truth attached to Claimant’s witness statements did not strictly comply with the wording set out in the relevant Practice Direction, The statement of truth on the Claimant’s statement referred to the Particulars of Claim rather than his witness statement. Further, Ms Wills had suggested that an interpreter might be required at trial, yet none of the witness statements contained an endorsement that the contents had been read to the witness in their own language. Mr Harmel invited me to infer that this was the basis on which the judge found that orders had still not been complied with and that if relief was granted, there would be further delay.
    5. I am unable to accede to that submission. The transcript makes it clear that the judge acknowledged that the point about the statements of truth was probably a matter of form rather than substance and he appeared to put it aside and indicated to Ms Wills that she need not address that point further. Mr Harmel accepted before me that no real objection could be taken to the statements of truth attached to two of the witness statements. The error in the Claimant’s statement of truth could be cured simply by correcting the words “Particulars of Claim” to “witness statement” and having him re-sign it. Further, there was no evidence that the other witness did not understand the contents of his written statement when he signed it, even if he might require an interpreter to assist him at trial. The minimal amendment to the Claimant’s statement would not have necessitated any delay or materially increased costs. I conclude that the judge was wrong to say that granting relief would result in further delay. In fact, the case was trial ready, and directions could have been given for trial at the pre-trial review on 10 December 2019.
    6. The judge appeared to refer to the list of documents as something of an afterthought, saying:

“I omitted to mention earlier at the first and second stages there has been a failure to serve a list of documents or a disclosure statement as required by the order, and no separate explanation appears in the witness statement of Mr Ansari as to why that was the case.”

He then relied on “the wholly unexplained and unremedied failure to give disclosure” as a factor to put in the balance against granting relief.
    1. In fact, the failure to serve a list of documents was not ‘unremedied’ at the time of the hearing. Disclosure by list had been given on 29 October 2019. Further, it was not right to say that there was no explanation for the failure to serve the list of documents in time. At paragraph 4(b) of his statement, Mr Ansari said that the fee earner had “oversighted” (I think he meant “overlooked”) that direction as the firm was then engaged with the SRA investigation. It may be said that this was not a good explanation, but the default was not wholly unexplained. Further, the significance of that breach was limited as the only material document in the Claimant’s possession was the handwritten agreement, which had been disclosed at the outset with the injunction application.
    2. Further, it is difficult to see how there could be said to have been “many breaches by the Claimant’s side.” The Claimant had breached two directions – those relating to the list of documents and to witness statements. There was no prior history of non-compliance. Although the judge referred to the directions “mercifully” allowing the Claimant a “second bite of the cherry” in that he had permission to serve witness statements in response to the Defendant’s by 23 October 2019, the fact that there were two potential dates for service of statements cannot be considered to have given rise to two separate breaches. The second date allowed for the Claimant to serve additional statements “if so advised”. It did not compel him to do so. I do not believe the judge was treating the wording of the statements of truth as one of the “many breaches” to put in the balance given that he had acknowledged during Ms Wills’ submissions that it was probably not important.
    3. Having considered the short judgement, I am driven to the conclusion that the judge erred in the exercise of his discretion because he:
i) misdirected himself on the assessment of seriousness at the first stage;
ii) made material errors of fact in the factors he put into the balance against granting relief;
iii) did not stand back and look at the consequences of the breach or consider the impact of the sanction.
    1. Analysis of the seriousness of the breach at the first stage did properly lead to the conclusion that it was serious or significant, albeit not for the reason given by the judge. A delay of three-and-a-half weeks in serving witness statements was significant in the context of the timetable, particularly where the effect was to reverse the order of sequential exchange directed by the court. The effect was that the Claimant had the Defendant’s statements before serving his, and the Defendant’s opportunity to respond to his evidence was removed.
    2. On the other hand, the pleadings, including the detailed Reply to the Defence which the Claimant had served, clearly identified the parties’ respective factual cases. Further, within the injunction proceedings, the Claimant filed and served a witness statement in August 2018. While not intended to be his evidence at trial and the directions plainly envisaged him serving further evidence, this statement was sufficient to establish a prima facie case. Arguably, the Claimant could rely on this evidence even without seeking relief from sanctions. The Defendant did not suggest that he had been prejudiced by the reversal of the order of service of the evidence. The directions envisaged that the Claimant would have the opportunity to serve further witness statements after the Defendant served his and that exchange of witness evidence would be complete by 23 October 2019. In fact, that stage was completed a week later. The late service did not impact upon the timetable in any other way. There was no threat to the trial date. By the time of the pre-trial review, the case was ready for trial. The breach did not in fact disrupt this litigation or cause an increase in costs, beyond the need for an application to be made (which could have been dealt with by an appropriate costs order). The application for relief could be dealt with at the pre-trial review and listing for trial could have occurred in the same way as had been envisaged. Therefore, the breach did not have any significant impact on other court business.
    3. I conclude that the breach was not insignificant, but it was certainly not at the upper end of the scale of seriousness. That assessment is to be carried through into the balancing required at the third stage.
    4. I have already indicated that I think the judge was right in his consideration of the explanation for the breach. It was fair to describe the excuses put forward by the Claimant’s solicitor as ‘poor’. It cannot be said that there was a good reason for the default, albeit it was not wholly unexplained.
    5. I turn then to the third stage. Looking at factor (a) in CPR 3.9, it was relevant that the breach did not affect the efficient conduct of this or other litigation and did not significantly increase costs. It did not imperil any trial date or otherwise impact on the timetable. Contrary to what the judge appeared to think, all necessary steps had been completed by the pre-trial review so that the case was trial ready. Granting relief at that hearing would not have resulted in any further delay nor would it have required the court to make additional time for the case so impacting on other court users.
    6. Factor (b) did remain an important point to weigh in the balance against granting relief. There was no good reason for the delay. The Claimant’s solicitors appear to have failed to prioritise compliance with the court’s directions. The judge was right to say that litigants and their solicitors cannot ignore directions and then expect the court to indulge them.
    7. However, it could not be said that there was a history of non-compliance. The failure to serve a list of documents on time was really part of the same problem, in that the Claimant’s solicitors had not made proper arrangements to ensure they complied with the directions order made on 10 July 2019. Up to that point, they had conducted the litigation appropriately. Once they realised that they had overlooked directions, they took steps to remedy the position and made the application reasonably promptly. All this was done well in advance of the pre-trial review.
    8. I consider also the impact of not granting relief. As I have already said, arguably the Claimant could rely on his witness statement which had been filed and served in August 2018. However, as Mr Harmel put it in submissions, he would have been “significantly hamstrung” in the conduct of his case. If not allowed even to rely on his August 2018 statement, he could not proceed at all. The fundamental issue in the case is which of the parties is being dishonest. Either this is a fraudulent claim or the Defendant has sought to defraud the Claimant of £60,000. The Claimant seeks to call witnesses who are said to have directly witnessed the relevant events. Without their evidence, the Court will not have a full picture. The Claimant may still be able to have a trial, but he will be at a very significant disadvantage. In my view, this claim ought to be tried with the benefit of all the available evidence so that the Court can reach a fair decision, particularly as a finding of dishonesty on one side or the other is likely to be made. Of course, this is not a decisive factor but it is a factor to be weighed in the balance along with all the other circumstances.
    9. Standing back and weighing all the circumstances, I consider that the judge was wrong to refuse to grant relief. It was true that there was no good reason for the breach and that the need to enforce compliance with court orders was an important factor to put in the balance against granting relief. However, the judge was wrong to say that there had been many breaches on the Claimant’s side, that the failure to give disclosure was wholly unexplained and unremedied or that there would be further delay while the Claimant complied with orders that should have been complied with several months ago. In fact, the breaches had been remedied well before the pre-trial review. Disclourse was complete and all witness statements had been exchanged. The case was ready to be listed for trial. The Defendant had not been prejudiced and the breach had not disrupted the course of this or other litigation. Refusing to grant relief would significantly harm the Claimant’s case, if not prevent him from proceeding with his claim altogether. I conclude that relief from sanctions should be granted and the Claimant should be permitted to give evidence and to call the three witnesses whose statements were served at the end of October 2019.
Disposal
  1. I therefore allow the Claimant’s appeal. I will extend the time for the Claimant to give disclosure to 29 October 2019. I grant relief from sanctions and extend the time for service of the Claimant’s witness statements to 30 October 2019 so that he be permitted to give evidence and to call Mohammed Nabeel, Khalid Parwiz and Choudry Imran Hussain.
  2. Mr Harmel accepted that the Defendant’s strike out application would fall away if the appeal was successful.