RESPONDENT SIX MONTHS LATE IN SERVING WITNESS STATEMENT: RELIEF FROM SANCTIONS GRANTED

February 6, 2023 · by · in Applications, Relief from sanctions, Sanctions, Witness statements

In  Davidson & Ors v Looney (Re Kieran Looney & Co Ltd) [2023] EWHC 197 (Ch) Deputy ICC Judge Kyriakides granted a respondent relief from sanctions when a witness statement was served six months late.

THE CASE

The applicant liquidators sought an order that the defendant, a former director of the company, pay a sum – claimed at £2,169,604.91 to the company.  The respondent resisted the application, his case being that he was owed money by the company.

THE BREACH OF THE ORDER IN RELATION TO WITNESS STATEMENTS

The court ordered that witness evidence be served, however the respondent’s evidence was served many months late. The respondent applied for relief from sanctions.

THE JUDGMENT ON RELIEF FROM SANCTIONS

 

Mr Looney’s application to rely on his witness statement dated 28 June 2022

    1. On 26 July 2021 ICC Judge Prentis made a case management order. Paragraph 4 of that order provided that the parties were to file and serve any further evidence of fact by 4 pm on 26 November 2021. This deadline was extended by agreement between the parties to 4 pm on 3 December 2021.

    1. The Applicants served their evidence within the period provided for, but no witness statement was filed and served by Mr Looney. On 30 June 2022 Mr Looney issued an application seeking relief from sanctions and an extension of time for filing and serving his witness statement. That application was opposed by the Applicants. Save for that part of Mr Looney’s witness statement in which it was claimed that the Company owned the intellectual property rights in the Materials Program, for the reasons set out below, I gave relief from sanctions and extended time so that Mr Looney was able to rely upon his witness statement.

    1. CPR 32.10 (which applies by reason of rule 12.1 of the Insolvency (England and Wales) Rules 2016) states:

“If a witness statement…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. Relief from sanctions was, therefore, required if Mr Looney was to be permitted to give oral evidence. This is to be decided by applying a three stage test (Denton v TH White [2014] EWCA Civ 906). The first stage is to assess whether the breach is serious or significant. The second stage is to consider whether there was a good reason for the breach. The third stage is to consider what the just result is, having regard to all the circumstances of the case and giving particular weight to the two particular factors referred to in CPR 3.9(1) (a) and 3.9(1)(b).

    1. Applying the first stage, the service of Mr Looney’s witness statement was almost seven months after the expiry of the relevant deadline. This, in my judgment, was a serious failure. Applying the second stage, the reason given by Mr Looney for that failure was that he did not realise that he had “to set out the information for the court to consider in a witness statement.“ Whilst I accept that Mr Looney may genuinely have not understood that a witness statement was required if he was to give oral evidence, the authorities make it clear that the court will not apply a lower standard of compliance with rules and orders for litigants in person and that it is reasonable to expect a litigant in person to familiarise himself with the rules (Barton v Wright Hassall [2018] 1 WLR 1119 at [18]). In the premises, I do not consider that the reason given by Mr Looney for his default was a good reason.

    1. However, this is not an end of the matter. I now need to consider what the just result is, having regard to all of the circumstances.

    1. Mr Davies argued that the just result would be to refuse the application for the following reasons:

    1. 1. the Applicants would suffer significant prejudice if relief was granted. In particular, the witness statement sought to raise issues that had not been raised before and had not been pleaded. Mr Davies gave two examples of this:

35.1.1. the first related to the alleged justification for allocating expenses incurred in relation to the Trafigura Litigation to Mr Looney’s DLA. In paragraph 20 of his Points of Defence, Mr Looney sought to justify this allocation by claiming that the Trafigura Litigation was for the benefit of the Company as income from the Trafigura Agreement had been allocated to the Company and it was Mr Looney’s intention to allocate any damages awarded in the proceedings to the Company. However, in his witness statement Mr Looney sought to justify the allocation on the basis that: (i) the Company owned the intellectual property rights to the Materials Program that had been licensed to Trafigura under the Trafigura Agreement; (ii) Trafigura had copied that program; and (iii) as the Company owed the intellectual property rights to the program, any damages paid to Mr Looney in the Trafigura Litigation would have to be paid by him to the Company;

35.1.2. the second related to the purchase of a motor yacht in the names of Mr and Mrs Looney. It is the Liquidators’ case that the yacht belonged to Mr and Mrs Looney because it was in their names and, therefore, that the sum paid for it could not credited to Mr Looney’s DLA. In his witness statement, Mr Looney seeks to explain his belief that the yacht was in their personal names because of Spanish legal requirements, an explanation that had not previously been proffered by him;

    1. 2. having regard to CPR 3.9(1)(a) and 3.9(1)(b), the effect of producing a witness statement so late is that the parties have been prevented from litigating efficiently and at proportionate cost. It was only in the witness statement that Mr Looney sought to explain certain matters, for example, the DLA. Had he produced these explanations at an earlier stage, then the parties could have sought to narrow the issues and re-assess their position regarding settlement;

    1. 3. preparation for trial is an intensive process and service of a witness statement shortly before trial is disruptive, risking other deadlines being missed and driving up costs.

    1. Whilst the points made by Mr Davies are all good and valid points, I decided that, save for those parts of Mr Looney’s witness statement in which he claimed that the intellectual property rights in the Materials Program belonged to the Company, the just result was to grant relief from sanctions and a time extension. Much of Mr Looney’s witness statement would not have come as a surprise to the Applicants. There were only two new matters, which had been highlighted to me. The first was the alleged ownership by the Company of the intellectual property rights in the Materials Program. It seemed to me that it was too late in the day to raise this issue (which could not, in any event, be properly determined without an adjournment of the trial) and that the Applicants would be prejudiced if I allowed it in. In any event, it was not part of Mr Looney’s pleaded case and no application had been made to amend that case. The second matter was the yacht. So far as it was sought to explain why the yacht was in the names of Mr and Mrs Looney, in my judgment, no prejudice was suffered by the Applicants since a belief regarding what the Spanish registration laws might have been without any proper supporting evidence had no evidential value and, as shown below, I have not taken it into account in my judgment.

    1. Whilst the court takes seriously failures to comply with its orders, the failure in this case was not a deliberate choice on the part of Mr Looney; as he explains, it was not until recently, when he received advice, that he realised that he should have produced a witness statement. Whilst this is not a good reason for the purposes of stage 2, it is in my judgment a factor that I can take into account in deciding what the just result is.

    1. In my judgment, once the evidence relating to the intellectual property rights is excluded, the position is that the prejudice that will be caused to Mr Looney if he is not permitted to rely on his witness statement and give oral evidence, outweighs that to the Applicants. Neither party contends that the trial should be adjourned if the witness statement is admitted and, as has proved to be the case, the admission of Mr Looney’s witness statement and his giving oral evidence, has assisted me in relation to my judgment. Finally, I would add that, having had regard to the evidence and what had taken place prior to this trial, I doubt that the production of Mr Looney’s witness statement at an earlier stage would have enabled the parties to reduce the issues between them or to reach a settlement.

  1. For all these reasons, in my judgment, the just result was, and is, to grant relief for sanctions and extend time for filing and service of Mr Looney’s witness statement, excluding the section relating to the Company’s alleged ownership of the intellectual property rights in the Materials Program.

THE RESULT

The witness evidence did not prove to be of great assistance to the respondent who was found to owe the company £1,583,502.

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