WITNESS EVIDENCE AND COUNTER-SCHEDULE STRUCK OUT AS INADMISSIBLE: THE PRINCIPLES APPLIED

In Rahman v Rahman & Ors [2020] EWHC 2392 (Ch) Master Clark struck out part of the defendants’ witness evidence and counter-schedule.  The judgment provides a useful summary of when the court will strike out evidence and statements of case.

“… substantial parts of the evidence are inadmissible as being collateral challenges to the judge’s findings of fact, as to which D1 is issue estopped; they are therefore to be struck out as an abuse of process.”

THE CASE

The claimant brought an action for breach of contract in failing to allot him shares in a business. There had been a five day trial on the issue of liability where the claimant had been successful.  The judge ordered that there be an assessment of damages in lieu of specific performance.  Directions had been given for the assessment of damages. The defendants put in witness evidence in relation to the assessment which, the claimant argued, attempt to undermine the findings of the judge at the trial on liability. The claimant applied to strike out those parts of the witness evidence and parts of the counter-schedule.  The claimant’s application was successful.

THE RELEVANT LAW

The Master first considered the relevant law.

Striking out statements of case – the legal principles
    1. CPR 3.4(2) provides, so far as relevant:
“The court may strike out a statement of case if it appears to the court –
(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;
(b) that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings;”
    1. As to striking out for no reasonable grounds, as noted in the White Book (para 3.4.7), there is a considerable overlap between the court’s powers under CPR Part 24 and r.3.4; and the court has a discretion to treat an application made under CPR 3.4 (2)(a) as if it were an application under Part 24. In this case, there is no practical distinction in the test to be applied.
    2. The principles applicable to summary judgment are well established. They were summarised by Lewison J, as he then was, in Easyair Ltd v Opal Telecom Limited [2009] EWHC 339 (Ch), in a formulation approved in a number of subsequent cases at appellate level, including AC Ward & Sons v Catlin (Five) Limited [2009] EWCA Civ 1098 and Mellor v Partridge [2013] EWCA Civ 477. The burden of proof is on the claimant.
    3. Of particular relevance to this claim is the principle derived from ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725, namely, if the application gives rise to a short point of law and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it.
    4. This is confirmed by CPR PD3A, which provides:
“1.6 A defence may fall within rule 3.4(2)(a) where:
(2) the facts it sets out, while coherent, would not even if true amount in law to a defence to the claim.
1.7 A party may believe that he can show without a trial that an opponent’s case has no real prospect of success on the facts, or that the case is bound to succeed or fail, as the case may be, because of a point of law (including the construction of a document). In such a case the party concerned may make an application under rule 3.4 or Part 24 (or both) as he thinks appropriate.
    1. On the other hand, the court should not strike out a statement of case in an area of developing jurisprudence: see the cases referred to at para 3.4.2. of the 2020 White Book.
Striking out witness statements – the legal principles
    1. Two principles are in play here.
    2. The first principle is that if and to the extent that a statement of case is struck out, then the evidence relevant to the struck out allegations will no longer be admissible, and (unless otherwise relevant to remaining parts of the statement of case) must be struck out. This is uncontroversial.
    3. The second principle concerns the interplay of admissibility and case management. The court’s power to control evidence is contained in CPR 32.1:
“(1) The court may control the evidence by giving directions as to –

(a) the issues on which it requires evidence;

(b) the nature of the evidence which it requires to decide those issues; and

(c) the way in which the evidence is to be placed before the court.

(2) The court may use its power under this rule to exclude evidence that would otherwise be admissible.”
    1. The jurisdiction to exclude evidence must be exercised in accordance with the overriding objective of dealing with cases justly: see O’Brien v. Chief Constable of South Wales Police [2005] 2 AC 534 at [54].
    2. More detailed guidance as to the way in which the court should exercise its discretion is found in BGC Brokers v Tradition UK [2019] EWHC 3588 (QB) at paras 49-51:
“49. Where an issue arises as to the admissibility of particular evidence, a two-stage test is to be applied. First, is the evidence potentially probative of one or more issues in the litigation? If so, it is legally admissible, but the court will then go on to consider, secondly, whether there are good grounds for why it should decline to admit that evidence in the exercise of its case management powers; see JP Morgan Chase Bank & Others v Springwell Navigation Corporation [2005] EWCA Civ 1602 at paragraph 67, applying the principles laid down by Lord Bingham in O’Brien v Chief Constable of South Wales Police [2005] 2 AC 254 , HL.
50. At the second stage, Lord Bingham suggested that three matters might affect the way in which a judge should exercise their discretion in this regard; see as summarised by the Court of Appeal in JP Morgan v Springwell:

“(i) That the new evidence will distort the trial and distract the attention of the decision-maker by focusing attention on issues that are collateral to the issues to be decided.

(ii) That it will be necessary to weigh the potential probative value of the evidence against its potential for causing unfair prejudice.

(iii) That consideration must be given to the burden which its admission would lay on the resisting party.”

51. In relation to the third of these considerations, Lord Bingham specifically identified:
‘The burden in time, cost and personnel resources …of giving disclosure, the lengthening of the trial, with the increased cost and stress inevitably involved, the potential prejudice to witnesses called upon to recall matters long closed or thought to be closed, the loss of documentation, the fading of recollections …In deciding whether evidence in a given case should be admitted, the judge’s overriding purpose will be to promote the ends of justice, but the judge must also bear in mind that justice requires not only that the right answer be given but also that it be achieved by a trial process that is fair to all parties.'”

EXERCISING THE POWER IN THIS PARTICULAR CASE

The Master struck out parts of the counter-schedule and parts of the defendants’ witness evidence.

    1. I have concluded that:
(1) D1’s case as to the November date for valuation of the shares and as the date when C’s entitlement to distributions should be treated as ending is unsustainable as a matter of law;
(2) Accordingly, paras 6(d) and 20(c) are to be struck out as having no reasonable prospect of success;
(3) Insofar as the disputed evidence is sought to be adduced to support that case, it is inadmissible;
(4) In any event, evidence as to C’s role in the business of the College, and C’s alleged responsibility for the breakdown in the parties’ relationship are irrelevant to that case;
(5) That evidence is arguably relevant to the issue as to whether C’s share should be valued with a minority discount; but the factual matters relied upon by D1 have never been articulated in the List of Issues or in the Counterschedule;
(6) As set out above, substantial parts of the evidence are inadmissible as being collateral challenges to the judge’s findings of fact, as to which D1 is issue estopped; they are therefore to be struck out as an abuse of process.
    1. The majority of the disputed evidence is as to C’s role in in the business of the College, and C’s alleged responsibility for the breakdown in the parties’ relationship. Even if I am wrong as to its admissibility as a matter of law, and its relevance, and whether D1 is issue estopped from adducing it, it is at best marginally relevant to the November date issue.
    2. Although the disputed evidence is capable of being relevant to the minority discount issue, D1’s intention to rely on C’s conduct has been raised at the latest possible stage, namely in counsel’s skeleton argument. No particulars of the conduct relied upon have ever been pleaded. The consequence is that C has had no notice of the factual matters relied upon; and could not reasonably have been expected to adduce evidence as to these in the witness statements which have been served by him.
    3. On this basis, I would exercise my discretion to exclude the disputed evidence on the following grounds:
    4. The disputed evidence is lengthy and contentious. It has already been the subject of the lengthy ET proceedings and, in part, the liability trial. Some of it is entirely irrelevant on any basis e.g. Mr Dulloo’s evidence that C reneged on an agreement to pay him £10,000, as to C’s business relationship with Mr Khandaker, and that C copied D1 and D2’s documents. D1 submitted that the fact that the evidence is lengthy and contentious is not sufficient to justify striking it out. I agree, but these factors are capable of affecting the trial estimate (and in this case, the trial date).
    5. For the reasons set out above, in my judgment, the disputed evidence would distort the trial and distract the attention of the court, by focussing on issues which are essentially collateral to the issues to be decided.
    6. At best, the potential probative value of the evidence is marginal to the November date issues. There is no need for evidence that the parties’ relationship broke down. There is no need for evidence that C was willing to consider negotiating with D1 to resolve the dispute. The allegations of misconduct against C are capable of being unfairly prejudicial.
    7. Although the evidence as to C’s conduct is capable of being relevant to the minority discount issue, C has not had proper notice of it, and it would be unfair to permit D1 to rely upon it, given the consequences below of permitting that reliance. It is not therefore necessary to consider whether to accept the concession offered by C, set out at para 82 above.
    8. The consequences of allowing the evidence to remain in would be that C would have to adduce further statements addressing the matters raised. Disclosure would need to be revisited. These burdens fall squarely within the passage from JP Morgan v Springwell cited in BGC Brokers (see para 52 above):
(a) C would face a substantially increased burden in time, costs, and his own resources;
(b) the trial would be doubled from 5 days to 10 days (about the same length as the ET proceedings), with the associated increased costs and stress;
(c) the matters with which the evidence deals occurred between 17 and 6 years ago (and in the case of the allegations as to C’s role and conduct, between 17 and 10 years ago), so that there is high risk of faded recollections.
    1. In addition, with the trial due to commence on 19 October, there is a real risk that the additional steps required as a result of its admission could not be achieved in the remaining available time before trial.
    2. As to the increase in trial length, as at today’s date, the court could not accommodate the longer trial, so the trial would either go part heard (inherently undesirable) or need to be vacated and relisted. In this long-running and highly acrimonious dispute, I consider it to be of paramount importance to maintain the trial date, and resolve the remaining issues between the parties.
Conclusions
  1. For the reasons set out above therefore, I accede to C’s application and will hear counsel as to the form of the order.