DEFENDANT FAILS TO GIVE FULL DISCLOSURE: PEREMPTORY ORDER MADE AND BREACHED: APPLICATION FOR RELIEF FROM SANCTIONS FAILED: APPEAL UNSUCCESSFUL

In Winchester Park Ltd v 1 Palace Gate Freehold Ltd [2024] EWHC 661 (Ch) Mr Justice Adam Johnson dismissed a defendant’s appeal on the issue of relief from sanctions. He held that the judge below was entitled to refuse to grant relief, the defendant being in breach of several court orders and a peremptory order.

“The question therefore to address is whether the “decision exceeds the generous ambit within which reasonable disagreement is possible”. In my opinion, it does not. Others may have responded differently, but I find it impossible to say that the Judge’s decision to refuse relief from sanction was plainly wrong and effectively perverse.”

THE CASE

The claimant was a limited company seeking enfranchisement of the flats of residential premises.  A key issue in the case was whether a particular flat had been used for office purposes as opposed to residential purposes. The defendant was to give disclosure on this issue.  The defendant’s first list was incomplete as was the second list.  The claimant obtained an order for specific disclosure.  That order was made as a peremptory order, with the defence being automatically struck out if there was non-compliance.

“the Defence be automatically struck out 5 minutes after non-compliance and the Claimant shall be at liberty to apply for a declaration that the participating tenants have a right to collective enfranchisement and the Defendant shall pay to the Claimant the costs of the actions, such costs to be the subject of detailed assessment if not agreed“.

THE DEFENDANT’S FAILURE TO COMPLY

The claimant argued that the list filed following the peremptory order was incomplete and sought a declaration.

THE DEFENDANT’S APPLICATION FOR RELIEF FROM SANCTIONS

1. 1. On the following day, 15 November, Winchester Park issued its own application seeking relief from sanction. This was supported by a Witness Statement from its solicitor, Ms Thompson, who acknowledged that there had been a breach of HH Judge Dight’s Order, but only of a limited kind: this was that, when the documents in the Third List were copied and provided to the Claimant, a number (18) were inadvertently missed in the copying process – with the consequence that they were listed but copies were not provided. This was rectified as soon as the problem was identified. Otherwise, however, Winchester Park took the position that the Order of HHJ Dight had been complied with. Ms Thompson said that was because:

“The Defendant maintains that it has conducted a reasonable search of the documents that it holds and has provided all the documents from that reasonable search and those that are within its control that it has asked third parties to search for.”

Further Documents are Disclosed

1. That was not the end of it, however. The hearing before HHJ Parfitt was on 1 December 2022. As noted, that was very shortly before the trial, which was scheduled for 7 December 2022. The Judgment of HHJ Parfitt records that, two days or so before the hearing, Winchester Park disclosed 40 or so further documents (see at [44]). Certain of these documents were to become a major focus at the hearing.

RELIEF FROM SANCTIONS REFUSED BELOW

1. 1. HHJ Parfitt held (Denton Stage 1) that there had been a serious failure to comply with HHJ Dight’s Order in relation to disclosure going beyond Winchester Park’s failure to provide copies of the 18 documents missed out in its copying process. More particularly, HHJ Parfitt held that (1) the available evidence suggested that obviously relevant documentation had not been disclosed in the Third List dated 27 October (see at [84]), and relatedly (2) no clear explanation had been given as to what searches Winchester Park had in fact been carried out (ibid.), and so the Court could have no confidence that disclosure had been properly carried out. At [80], the Judge raised a particular concern as regards electronic disclosure. He said:

“I am not satisfied that the Defendant has carried out a proper search of its electronic records. It seems to me if it had carried out a proper search of its electronic records then it would have said so in its various lists of documents, but none of them has said that an electronic search has been carried out.”

1. 1. In forming his assessment on point (1) (i.e., his conclusion that apparently relevant documents had been missed from the Third List), the Judge relied on the following points in particular:

i) First, an email exchange between Mr Mahpud and Mr Maunder Taylor, the appointed manager of 1 Palace Gate (see above at [7]), dating from September 2018. This exchange had been revealed among the 40 or so additional documents produced by Winchester Park shortly before the hearing. They show Mr Mahpud and Mr Mauder Taylor engaged in correspondence about arranging buildings insurance. Having been sent a buildings insurance schedule on 12 September 2018, Mr Mahpud responded on 13 September to say, “Please note unit 6 is a commercial unit only and any reference to residential should be removed“. Mr Maunder Taylor replied to say that an inspection had noted “a bed and bathroom facilities within unit 6“, and so insurers had been notified that it was “office space with provision for some residential accommodation.” Mr Mahpud’s response made the point that the earlier assessment of the Kensington Planning Office had been that Unit 6 was “purely commercial and can’t be considered as residential.” Mr Maunder Taylor said, “We’ve told insurers that it’s offics space with a bed, shower and kitchenette facilities.” The Judge’s conclusion as to this exchange was that, “[i]t is impossible to see other than that it is something that should have fallen within the disclosure obligation” (see at [52].

ii) Second, the Judge relied on the email exchange I have already referenced above, in April 2020, between Mr Pavlovski, one of the sub-tenants of Unit or Flat 6, and solicitors acting for Number 1, CJJ Law (see above at [13] and [27]). This seems to have been uncovered as a result of the Claimant’s inquiries. In his email Mr Pavlovski complains about having been misled into thinking that Flat 6 was available for residential use, when in fact use was restricted to commercial use and this had resulted in the neighbours complaining and a request for return of the deposit paid by Mr Pavlovski and Ms Lauc. In a reply dated 17 April 2020, however, CJJ Law disputed any allegation that Mr Pavlovski and Ms Lauc having been misled, and resisted return of the deposit. The Judge observed that these emails had not appeared in the Third List, and moreover Mr Pavlovski’s email referred to two other documents – a letter and an earlier email from CJJ Law – and neither had they been disclosed. The Judge also noted that yet further communications which had been disclosed, and which dealt with the topic of the sub-tenant’s deposit, appeared to signal the existence of others which had not been (see at [62]).

iii) Third, a further set of email exchanges in the period before 28 October – the date for compliance with HHJ Dight’s Order – which showed Winchester Park in contact with solicitors acting for Mr Maunder Taylor, to ask for copies of communications exchanged with Mr Maunder Taylor, which prompted his solicitors to ask, “Why can’t Number One Group or its solicitor produce the correspondence in question?” There was later correspondence about Winchester Park paying the costs associated with Mr Maunder Taylor’s solicitors conducting a search, but this was only after the 28 October deadline for production of the Third List had already passed. On this point, the Judge thought it inadequate that apparently all Winchester Park had done was to contact a third party and make inquiries, because “what they were obliged to do … [was] actually to search their own records, and in particular their electronic records and find the documents that they have in their possession“.

1. 1. The Judge considered that these failures to comply with the Order of HHJ Dight were serious (see at [82]). That was mainly because of the crucial importance of the disclosure exercise in the context of the Claimant’s claim, given the imbalance between the parties in terms of their access to potentially relevant documents: the nature of the central issue meant it was Winchester Park and Number 1 who would have the key documents, since they were parties to the December 2014 Lease, and who had been involved in arranging the controversial sub-tenancy to Ms Luac and Mr Pavlovski in 2018. The Judge thought that comprehensive disclosure of documents concerning these arrangements was critical to a fair trial of the issues. In the circumstances, however, and given that obviously relevant documents had been missed and no explanation had been given of what had been done or of how that had come about, the Judge held that the Court could have no confidence that the disclosure process had been properly carried out and that was a serious matter.

Denton Stage 2

1. 1. As I read it, the Judge’s reasoning at Denton Stage 2 (the reasons for the default) was that no good reason had been given. That followed from his conclusions at Stage 1, since the lack of any proper explanation as to what disclosure searches had been carried out meant it was not possible to say why some apparently important documents had been missed (see at [84]). The lack of any explanation at all meant that there was no evidence of any good reason for the default.

Denton Stage 3

1. 1. The Judge then went on to consider “all the circumstances of the case” (Denton Stage 3 – and see also CPR, rule 3.9, which the Judge quoted at [85]). On this question, the Judge’s assessment was:

i) Winchester Park’s defaults had led to serious inefficiency and had resulted in a process which was “the antithesis of efficient and proportionate litigation” (see at [86]). This had caused the Claimant to have to incur additional and substantial costs ([87]).

ii) Winchester Park had been given a last chance to get its house in order by means of HHJ Dight’s Order, but had failed to do so, thus jeopardising the trial date which was just days away ([88]).

iii) The Defendants had had every opportunity over a period of many months to comply with their disclosure obligations, but had failed to do so ([89]-[92]). The First List was hopelessly inadequate, and even now, there were obvious deficiencies (see at [92]). The upshot was that the situation “wholly undermines the confidence that the Court can have that this would be a fair trial” (ibid.)

iv) In summary: the integrity of the trial process was undermined; the result of Winchester Park’s default was an inefficient and disproportionately expensive process; and all this had come about because of a failure to comply with Orders of the Court (see at [93]).

v) As against that, Winchester Park made a number of arguments, but the Judge found none of them persuasive. As to those arguments –

a) It was said that refusing relief from sanctions would give the Claimant a “big windfall”, but the Judge did not consider that persuasive because it was often the case when there was an unless Order and in any event here, the sanction was not disproportionate since “[t]he subject matter of this sanction and this unless order was of vital importance to the integrity of the process and the fairness of the intended trial, so I do not think there is any mileage in the big windfall point” (see at [95]).

b) It was said that the Court could effectively mitigate the effects of Winchester Park’s defaults by (for example) extending the time for trial, allowing cross-examination in relation to any missing documents, and drawing adverse findings. However, HHJ Parfitt did not think it “fair to the Claimant to leave the Claimant with that as its protection in relation to the very real risk of injustice that has been demonstrated on the material before me all flowing from the Defendant’s approach to disclosure” (see at [96]).

c) It was said that the Claimant could be compensated in costs, but HHJ Parfitt did not consider that costs would adequately answer the problems created by the Defendant’s own conduct (see at [97]).

1. 1. The Judge’s overall conclusion is then set out at [98] of his Judgment. He refused relief from sanction and granted the declaration sought. He said:

“For all those reasons I will not grant relief from sanction. The Defendant’s Defence is struck out. In accordance with the order of HHJ Dight, the Claimant has applied, and I will grant a declaration that the participating tenants have a right to collective enfranchisement, and the Defendant shall pay to the Claimant the costs of the action. Such costs to be subject to a detailed assessment if not agreed.”

THE UNSUCCESSFUL APPEAL

The defendant’s appeal was dismmised.

1. 1. Leaving aside for the moment the question of the proposed new evidence (see [39] above), and the question of the Judge’s decision to grant the declaration sought by the Claimants (see [40] above), I start by emphasising that permission to appeal was given only on Ground 3, not on Grounds 1 and 2 (noted above at [36]). Thus, the Appeal is in effect a challenge to an exercise of discretion by HHJ Parfitt, the precise context being the exercise of discretion in a matter of case management (see, for example, Chartwell Estate Agents Limited v. Fergies Properties SA & Anor [2014] EWCA Civ 506, [2014] Costs LR 588). There being no appeal on Grounds 1 and 2, moreover, the exercise of discretion must be examined on the basis that the Judge was correct to find that Winchester Park has still not disclosed all relevant documents it had in its control as at the date of the hearing before him, albeit that the matter was just days away from trial.

 

1. 1. It is of course very well settled that an appeal Court will be very slow to interfere with an exercise of discretion, particularly in the context of case management by the Court below. What is needed is to show that the Judge misdirected himself on the law, or took into account irrelevant factors, or overlooked relevant factors, or that his decision was so extreme that it fell outside the generous ambit within which reasonable disagreement is possible, such that it can fairly be described as perverse (see, for example, The Commissioners of Police of the Metropolis v. Abdulle & Ors [2015] EWCA Civ 1260 at [25], and Piglowska v. Piglowski [1999] 1 WLR 1372B-C, per Lord Hoffmann).

 

1. 1. Here, there is no question that the Judge misdirected himself on the law. He set out in terms at [85] of his Judgment the text of CPR, rule 3.9, as follows:

 

“On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it do deal justly with the application, including the need –

(a) for litigation to be conducted efficiently and at proportionate costs, and

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

1. 1. In Mr Berkley’s Skeleton Argument, he suggested that the Judge had overlooked certain matters of importance, viz. the fact that Winchester Park’s disclosure failings were not the result of deliberate suppression or destruction of documents, or of any determined resistance to disclosure, nor even of a totally cavalier approach to disclosure, but were really the result of a combination of poor management by the solicitor retained by the Appellant and a lack of any clear understanding of what steps had to be taken to conduct a reasonable search. Mr Berkley emphasised the lack of any agreed or directed search methodology and the role of the solicitor, and in effect suggested that the failings of the solicitor should not be visited upon the client. Mr Berkley further said that the Judge had failed to consider his broader powers and the likelihood that a fair trial might still be possible if other procedural responses were deployed (e.g., delaying the trial date in order to allow further searches to be undertaken, and/or inviting adverse inferences to be drawn given the absence of certain documents, and/or the making of appropriate orders for costs).

 

1. 1. The short answer to these points, it seems to me, is that the Judge is bound to have had them in mind, insofar as they are justified and were relevant to the exercise of his discretion. They may not have been spelled out or referenced in terms in his Judgment, but they did not need to be because they are obvious points which the Judge must have been aware of. The Judgement, although very comprehensive, was delivered extempore, and allowance must be made for that, and the Judgment construed accordingly and in a common-sense way (see further below at [65]).

 

1. 1. Turning back to the points made by Mr Berkley KC:

 

i) It is true that HHJ Parfitt made no finding that there had been deliberate concealment or a determined resistance to disclosure by Winchester Park, but not having done so he did not need to say expressly that he was then going on to exercise his discretion on the basis that neither deliberate concealment nor determined resistance had been shown.

ii) As to the Judge failing to have regard to the disclosure failings not being the result of a cavalier approach, I am not sure I agree with the premise of Mr Berkley KC’s criticism, because it seems to me the Judge’s overall findings are consistent with a somewhat cavalier approach to disclosure by Winchester Park. In my opinion however that was not an unfair or unwarranted finding given the procedural background I have explained and which the Judge also set out in some detail.

iii) As to the role of Winchester Park’s solicitors, the Judge obviously knew that Winchester Park were represented by solicitors, and would have had well in mind the role played by solicitors generally in the conduct and management of disclosure. I do not think it correct to consider that the Judge simply disregarded such matters.

iv) As to the idea that there were no agreed or directed parameters for disclosure, that seems to me rather to miss the point of the Judge’s main criticism, which is that the process for standard disclosure required Winchester Park itself to describe what searches it had undertaken, in particular for electronic documents; but having had three opportunities to do so, it had singularly failed to say what it had done, save for the somewhat perfunctory description set out in the Witness Statement of Mr Mahpud served in response to HHJ Dight’s Order (see above at [25(i)]). That was still the position as at the date of the hearing before HHJ Parfitt, because the Third List still contained the formal deficiencies present in the First and Second Lists (see above at [16], [17] and [25(ii)]), and Winchester Park’s position remained that it had complied with its duty to conduct a reasonable search, but without having explained why it maintained that was the case, and in circumstances where the further documents produced before the hearing and obtained by the Claimants suggested strongly it had not (see above at [31]).

v) As to the question of the Judge’s powers and other procedural responses open to him, plainly he did not overlook such points because in his Judgment at [96]-[97] he referred expressly to extending the time for trial, allowing cross-examination on disclosure, drawing adverse inferences, and the making of appropriate costs orders.

1. 1. In short, I do not see this as a case in which relevant matters were overlooked, or irrelevant matters were taken into account. Consequently, I think Mr Cohen was correct in his submissions to say that Winchester Park’s challenge was really in the nature of a challenge to the Judge’s overall evaluation – i.e., a submission that he had made a decision which was so extreme that no reasonable decision-maker could have made it. I think this is made plain by the terms of Ground 3, taken at face value: the gist of it is really the suggestion that the Judge’s approach was entirely disproportionate and he could and should have chosen to do something else. This is really no more than a challenge to the exercise of balancing the available options which the Judge plainly carried out, and what is really being said is that the option he chose was one that no reasonable decision-maker could have settled on.

 

1. 1. A challenge on this basis is necessarily difficult. It is not enough to show that someone else could, or even very likely would, have made a different decision. It must be shown that no reasonable person could have made the decision which was in fact made. The principle is illustrated by the Piglowska v. Piglowski decision I have referred to above, in which Lord Hoffmann cited the following statement of Asquith LJ in Bellenden (formerly Satterthwaite) v. Satterthwaite [1948] 1 All ER 343, at 345, which had earlier been expressly approved by Lord Fraser of Tullybelton in G v. G (Minors: Court of Appeal) [1985] 1 WLR 647, 651-652:

 

“It is of course not enough for the wife to establish that is court might, or would, have made a different order. We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to intervene.”

1. 1. The present context is of course different, but the principle is equally applicable. The question therefore to address is whether the “decision exceeds the generous ambit within which reasonable disagreement is possible”. In my opinion, it does not. Others may have responded differently, but I find it impossible to say that the Judge’s decision to refuse relief from sanction was plainly wrong and effectively perverse.

 

1. 1. The truth of it is that the Judge was presented with an unusual and, I think, rather extreme set of facts. The Claimant’s case turned on a single issue – the use of Flat or Unit 6 in September 2020. There was some ambiguity as regards the issue, because although the permitted use of Flat or Unit 6 seems to have been limited to commercial use by Winchester Park’s Lease with Number 1, other evidence such as the sub-tenancy with Ms Luac and Mr Pavlovski, and CJJ Law’s attitude to their attempts to recover their deposit (see above at [31(ii)]), suggested differently. Trial of that issue was only days away. It had been well recognised for many months that disposal of the issue required the production of documents which only Winchester Park was in a position to provide. By the time of the hearing before HHJ Parfitt, Winchester Park had had three opportunities to provide disclosure by way of List, and to provide details of its searches by properly completing its Disclosure Statement, and had failed to do so. The inadequacies in disclosure, as the Judge held, were apparent from (1) the fact that further, and highly material, exchanges with Mr Maunder Taylor had been produced after delivery of the Third List; (2) the fact that highly material exchanges between CJJ Law and Mr Pavlovski again did not appear in the Third List; and (3) the fact that Winchester Park’s own exchanges with Mr Maunder Taylor’s solicitors indicated that they were relying on him to provide copies of relevant documents, which suggested they had not satisfactorily and thoroughly completed their own searches. The combination of (a) material documents having emerged which had not been disclosed, together with (b) Winchester Park’s failure to describe adequately what it had done to search for documents, meant the Judge simply had no confidence that the disclosure exercise had been carried out properly and could be trusted to have produced everything (or at least the majority of things) likely to be relevant to the imminent trial. The problem was a serious one, because on one view of it the newly produced documents not included in the Third List were supportive of the Claimant’s case, and it was likely that there were more relevant but undisclosed documents in existence. All that had consequences for the fairness of the imminent trial process, which was only a few days away.

 

1. 1. In such circumstances, it seems to me that the Judge was perfectly well entitled to come to the decision he did. In the circumstances as they stood before him, I do not consider that his response was so disproportionate or unfair that it can be described as plainly wrong or unprincipled. I would emphasise three points:

 

i) The nature of the relevant sanction – i.e. the striking out of Winchester Park’s Defence and it being at liberty to apply for the declaration it sought on an undefended basis – had already been considered during the hearing before HHJ Dight, and in fact as I have noted, the form of Order he made was effectively agreed between the parties. So I do not think it was open to Winchester Park to submit to the Judge that the form of sanction was per se unfair.

ii) It might have had a point to make about proportionality had its defaults not been serious, but as I have noted, the Judge found that the defaults were serious, and in my opinion he was justified in doing so. In fact, I think he was justified in particular in stating expressly that the relationship between the defaults in question and the sanction was proportional, because the Court’s disclosure Orders had been made precisely in order to ensure that Winchester Park’s defence was advanced fairly by means of the Claimant having access to all relevant documents touching on the single disputed issue, and that not having been achieved, it was a proportionate response to debar Winchester Park from defending itself, which is what the Order of HHJ Dight contemplated.

iii) As to the idea that the Judge wrongly overlooked other possible responses, as I have explained, he did consider them (see above at [46(v)]), but did not regard them (either al1 or in some combination) as adequate. Again I consider he was fully entitled to do so, because his view was that the possible need for them only arose at all as a result of Winchester Park’s own repeated failure to do what it had been ordered to do which the Judge regarded as serious (see his Judgment at [96]-[97]). It seems to me that in doing so, the Judge was correctly placing particular weight on the two factors specifically referenced in CPR, rule 3.9, namely (a) the need for litigation to be conducted efficiently and at proportionate cost, and (b) the need to enforce compliance with rules, practice directions and orders. I think the Judge was effectively saying that other available responses would have increased cost and led to further delay, and would have attached insufficient weight to fact that Winchester Park’s predicament only arose because of its own defaults, both historic and ongoing. Others might have taken a different view of such matters, but it seems to me that is irrelevant, because I think HHJ Parfitt was entitled to take the view he did.