England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ORDER OF HIS HONOUR JUDGE CAULFIELD

		Royal Courts of Justice Strand London WC2
		12th May 1997

LORD JUSTICE BROOKE: This is an appeal by the Plaintiffs, a Dutch company, from an order of His Honour Judge Caulfield in Manchester County Court on 7th April 1995 on the first day of the trial of an action refusing leave to adduce the evidence of their Managing Director, Mr Campman, at the trial which began before the judge that day and, consequently, dismissing the action because the Plaintiffs were unable to adduce evidence to prove their case. This is yet another appeal arising from the provisions of Ord.17,r.11. I will use the terminology adopted in the leading case of Bannister v SGB plc (unreported, 25th April 1997), and refer to the pages in the transcript of that judgment quite briefly.

This was an action arising out of the sale and delivery of rugs and carpets to a company that went into administrative receivership. The Defendants are the receivers. When they resisted the Plaintiffs' claim asserting title to the goods under a Romalpa clause, the Plaintiffs issued a writ on 7th April 1993. They had agreed that the Defendants might sell the goods at a price no less than would have been receivable from the company in money or money's worth on condition that the net proceeds of any such sales should be kept separately pending the resolution of the Plaintiffs' claim. In the circumstances the Plaintiffs claimed delivery up of such of their goods as yet unsold and appropriate declarations, accounts and other financial relief.

The action was ordered to be transferred to Manchester County Court. On its arrival there the proper officer of that court issued a notice inviting the parties to note that automatic directions applied (Ord.17,r.11) unless directions had previously been given by the High Court.

Unhappily, the way in which the proceedings were conducted by the parties' solicitors left a lot to be desired. When dismissing an application for security for costs on 17th May 1994 District Judge Jones said:

"The tenor of the correspondence between the parties' solicitors has degenerated from pettiness to outright antipathy with each solicitor using every procedural device in the hope of battering the opposition into submission."

He found on that occasion that the plaintiff company's balance sheet revealed assets of £4m. and that they had been in business for almost 100 years, exporting their carpets worldwide, and there was not a scrap of evidence to demonstrate that they were incapable of paying any award for costs that the court might make. Needless to say, this court deplores litigation conducted in this way.

As far as the exchange of witness statements was concerned, on 2nd February 1994 the Plaintiffs' solicitors said that they were ready to serve their statement once the Defendants' solicitors indicated their readiness to exchange their own witness statement. They received no reply. On 27th January 1995, after sending the Defendants' solicitors the bundles of documents they proposed for the trial, the Plaintiffs' solicitors suggested exchanging witness statements on 30th January. They received no reply. On 5th April, two days before the trial was due to start, still having received no reply, they once again asked for an immediate exchange of witness statements. On the same day the Defendants' solicitors wrote making comments for the very first time on the proposed trial bundles, notwithstanding the fact that the trial was due to start within 48 hours, and adding -

"We note that you have not served us with your witness statements. Please do so by return facsimile. We do not propose to call any witnesses at the trial."

On the following morning the Plaintiffs' solicitors wrote:

"As regards exchange of witness statements, this was requested in our letter dated 25/01/95. We received no response until your facsimile yesterday afternoon notifying us that in fact you did not intend to call any witnesses. We should mention that it was intended to call our client's current Export Manager Mr Evert Kroon to give evidence and to that end we had prepared a proof of evidence which he had approved and dated 24/01/94. However given that our client's claims have been vigorously defended it was thought far better that the presentation of our client's case and the evidence in support ought [to] be dealt with by our client's Managing Director Clemens Campman. On that basis we have lately prepared a proof of Mr Campman which is currently in his possession and which should be approved by him in the course of today. As soon as it is we shall serve a facsimile copy upon you. This should be at or about 3 p.m. today."

That fax was sent and received at 2.39 p.m. on 6th April and the Defendants' solicitors replied:

"We presume that you intend to call Mr Campman to give evidence. As you have failed to comply with the County Court automatic directions, however, we expressly reserve the right to challenge the ability of the Plaintiff to call Mr Campman and to refer to this letter on the question of costs if appropriate particularly given certain comments made by Mr Campman which it is difficult to accept are matters of evidence."

They then went on to say that as the parties' solicitors appeared to be unable to agree one of the bundles they would prepare their own. Thus an indication of how impossibly difficult it is to prepare sensibly for trial, so that the trial judge can read the papers beforehand, if a party's solicitors leave the matter of commenting on bundles prepared for trial until two days before the hearing.

The Defendants' solicitors duly instructed counsel to object to the admission of Mr Campman's evidence, Mr Campman presumably having travelled from the Netherlands to Manchester to give evidence.

The judge upheld that objection. It is clear that he believed that automatic directions applied in full force to the action and he refused to admit the witness statement so long after the timetable for the exchange had expired. After reciting the history of the matter the judge said:

"But none of this is a good or sufficient reason. Timetables under automatic directions are there to be adhered to, and I can find no basis for exercising my discretion to give the plaintiff the leave which it seeks. The plaintiff's case is, in ordinary language, `Sorry we haven't done it but the defendant hasn't suffered any prejudice.'

I consider that highly relevant factors in relation to whether or not I should exercise my discretion are, first, the period of delay since any witness statement should have been served, and, secondly, whether any good or sufficient reason has been given to explain, or to seek to explain, that delay.

Here, the delay, is gross, being some 17 months, and no good or sufficient reason has been given. I also find that the plaintiff's failure to serve the witness statement timeously or at least before the parties tried to compromise the claim has prejudiced the defendants. They did not know precisely what the plaintiff's case was, particularly given that Mr Campman's statement goes beyond the answers to the interrogatories which he has previously given."

The judge did not take into account the fact that the Plaintiffs' solicitors had been attempting to arrange exchange of witness statements for 15 months before the trial of the action and were thwarted in their attempts because the Defendants' solicitors simply did not reply to letters or give any indication whatsoever that they did not intend themselves to rely on evidence at the trial. There is no indication in the judgment that the judge was willing to consider alternative ways of handling the matter, whether by limiting the Plaintiffs' evidence to the evidence which had already been given which was, quite clearly, already on the face of the material before the court, or to grant an adjournment in view of the way the matter had suddenly erupted at the last minute, as a result of the Defendants' solicitors failure to answer letters, in order to enable the Plaintiffs, on such appropriate directions as to costs as the judge thought appropriate, to adduce their case at the trial. It was a singularly unhappy feature of the discussion after the judge ended his judgment that counsel for the Defendants then applied for an order that the Plaintiffs' solicitors should show cause why they themselves should not pay the Defendants' costs on the limp grounds that the Plaintiff company was resident in Holland which might involve difficulties of recovery.

Nobody suggested to the judge that automatic directions did not apply to this action although, as a matter of strict law, they did not, in the sense of being automatic. The claim included a claim for delivery of goods. In Bannister (p.7-8) this court confirmed that this means that automatic directions do not apply to such an action, being an excepted action under Ord.17,r.11 (1) (e), and that they cannot be subsequently applied to the action in their full sense. The Defendants argued, however, that they could be treated as applying through the application of a doctrine comparable to estoppel by convention. This was because both sides knew that the goods had all been sold and that this was simply a money claim, and both sides treated automatic directions as applying to the timetable of the action. Both sides made interlocutory applications to the county court on the express assumption that automatic directions applied. In Bannister (pp.22-23) this court considered the circumstances in which something resembling automatic directions could apply notwithstanding that an action was excepted from the rule. After deploring the shorthand which was very frequently used in county courts, the court said:

"There remains the question whether such orders have any effect at all. On balance we consider that with one exception they do, since they can (just) be read and understood as shorthand for applying the relevant directions (as opposed to the sanctions) that are to be found in Order 17 Rule 11, particularly those in sub-rule (3). However we are bound to say that in our view this form of shorthand is highly undesirable. If the rule does not apply to the action, it is only confusing to say that it does ..... In the future, Court orders must spell out plainly and precisely what the parties are to do and when they are to do it and this form of shorthand must not be employed. In such cases we emphasise that the principles governing the orders that can be made and the sanctions for failure to comply with them are not those in Order 17 Rule 11 but are governed by the general law (eg Costellow, Hytec)."

The judge, of course, did not have the benefit of our judgment in Bannister, nor did he have the benefit of the judgment of this court in Mortgage Corporation Limited v Sandoes (unreported, 26th November 1996) (see The Times, 27th December 1996).

The relevant rule, as if taken from automatic directions, which set out the timetable, was Ord.17,r.11 (3) (b) (iii):

"(b) except with the leave of the court or where all parties agree -

....

(iii) any party who intends to place reliance at the trial on any other oral evidence shall, within 10 weeks, serve on the other parties written statements of all such oral evidence which he intends to adduce."

The fact that such an exchange had not taken place was to a considerable extent due to the Defendants' solicitors failure to reply to letters. The judge had to decide on the day of the trial when there had been no "unless" order or any other order to similar effect, what would be the just course to take.

I should make it clear that this was a case in which the court had not given manual directions, which was the situation with which this court was concerned in its judgment in Bannister. A note had been issued, wrongly, by the county court when the case was transferred that automatic directions should take effect. This was not, therefore, a situation governed by Ord.17,r.11 (2). There were no manual directions in that sense.

One of the problems which the Plaintiffs faced as a result of the Defendants' solicitors' failure to reply about witnesses was that they were in great difficulty in filing a note under Ord.17,r.11 (8) giving an estimate of the length of trial and the number of witnesses to be called, since the Defendants' solicitors were not disposed to exchange evidence, not giving any indication whether or not they intended to call evidence. If the judge had had the advantage of the judgment of this court in Mortgage Corporation Limited v Sandoes he would have applied the principles set out in the judgment of Millett LJ (pp.38-39). They start:

"1 Time requirements laid down by the Rules and directions given by the Court are not merely targets to be attempted; they are rules to be observed,"

The judge clearly paid attention to that. They continue:

"2 At the same time the overriding principle is that justice must be done.

.....

6 Where time limits have not been complied with, the parties should co-operate in reaching an agreement as to new time limits which will not involve the date of trial being postponed.

.....

8 The court will not look with favour on a party who seeks only to take tactical advantage from the failure of another party to comply with time limits."

For my part, if the judge had had the benefit of the guidance given by this court in both Bannister and Mortgage Corporation Limited v Sandoes he would not have made an order which had the effect of shutting out the Plaintiffs from giving any evidence in support of their case and dismissing the action. He would, in my judgment, have considered three possible options. First, to limit the Plaintiffs' evidence to the evidence which was already clear on the face of the documents and possibly to the evidence in the witness statement which the Plaintiffs had been ready to exchange 15 months previously. Alternatively, he would have adjourned the matter on such directions as to costs as he thought appropriate. Alternatively, he should have left the matter to proceed, allowed any objection on hearsay grounds to matters set out in Mr Campman's evidence, allowed Mr Campman to give the evidence he wished to give subject to ruling out any hearsay evidence and formed his own view as to the justice of the matter having heard Mr Campman give evidence, bearing in mind that the Defendants had not had more than 2 days' notice of what Mr Campman was going to say. In my judgment, the judge was clearly wrong to refuse to allow the Plaintiffs to give evidence at all and to dismiss the action.

I must make it clear that this is an exceptional case.

This court will only interfere if a judge is clearly wrong. There are many instances where a judge, in today's climate, may make orders of this kind which may have the effect, following previous "unless" orders, of preventing a party giving the evidence at trial that they wish to give, which this court will uphold. It is only in the rarest case that this court will interfere in a decision, on a matter of this kind, made by a judge in the exercise of his discretion. In my judgment this is one of those exceptional cases and, given that the matter will have to go back for a trial, we do not have to decide, when deciding how to exercise our discretion, to do anything other than quash the judge's order.

We would wish to hear from Mr Ashton whether his solicitors are willing to give us an undertaking to apply forthwith for a new date for trial, giving the court a reliable time estimate of the length of time it will take and the number of witnesses to be called.

For these reasons, I for my part would allow this appeal.

LORD JUSTICE WALLER: I agree.

Order: Appeal allowed with the costs.