England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BIRMINGHAM DISTRICT REGISTRY
THE MERCANTILE LIST
(Her Honour Judge Alton)

		Royal Courts of Justice Thursday, 19th July 2001

1. LORD JUSTICE LATHAM: This is an appeal from a decision of Her Honour Judge Alton given on 18th June 2001 in the Mercantile Court in Birmingham, when she lifted a stay on a claim brought by the respondent against the appellant. The claim had been stayed under the Practice Direction to Part 51 of the Civil Procedure Rules in April 2000, as it had not been brought before a judge within the time limits set out in those transitional provisions.
2. The respondent and the appellant are father and son. The respondent is now some 78 years of age. Until 1980 he ran a business selling wood shavings to poultry farmers. It was a successful business. He was able to sell it. Not surprisingly, he was made subject to a restrictive covenant for two years. Having sold the business his son commenced in the same trade. The respondent's case is that his son set up the business as a front, in effect for both the son and the respondent. When the covenant came to an end in 1982 the respondent then, according to him, joined his son, and thereafter worked in the business in various capacities, providing know-how, help with health and safety matters and financial support. The consequence, in his view, was that he and his son were engaged in a 50/50 partnership.
3. In 1991 the appellant decided to form a company to run the business, and it was accordingly incorporated. The respondent's case is that he understood that the company would essentially be carrying on the same business as the partnership on the same basis, namely that he would retain a 50 per cent share. It was not until November 1994, on his account, that he appreciated that that was not the understanding of his son. There was an argument which resulted in this dispute, which was commenced by a statement of claim served on 12th April 1995. That is within a short time of the breakdown of the relations between father and son.
4. In the proceedings he claims various forms of relief, essentially to obtain what he considers to be his rightful entitlement, namely 50 per cent of the value of the company.
5. The proceedings themselves progressed without undue delay until, in January 1998, the last pleading was served, which was the respondent's reply. Thereafter, there was discovery and other procedural matters which were dealt with without any need for any further orders of the court. In September 1998 there was a meeting between the parties in order to seek a settlement. That unfortunately did not result in any compromise; and in December 1998 the respondent's solicitors wrote to the appellant's solicitors indicating that they would be asking for a date for trial in the New Year. No such application was made, and the next procedural event was that the operation of the Practice Direction, to which I have referred, resulted in the proceedings being stayed in April 2000. The respondent then applied to lift that stay on 22nd May 2001.
6. When the matter came before Her Honour Judge Alton, she properly treated the application to lift the stay as an application for relief from sanctions. Accordingly, she applied the provisions of CPR Part 3.9 to the dispute, and the evidence upon which the respondent relied in support of that application was a statement by her solicitor, Stephen Beverley. The explanation which was given by him in his statement was that the delay had been caused partly by reason of difficulties in obtaining funding and partly because of the ill-health of the respondent. He explained in paragraph 7 of the statement that a number of applications had been made between the summer of 1998 and the autumn of 1999 for legal aid and legal aid was finally refused in September 1999. In October 1999 the respondent had a knee replacement operation and had been immobilised. In March 2000 he had gone to hospital for two weeks and required a month convalescing after a further operation and was unable to give full instructions. It was not until the end of 2000 that the respondent was able to make satisfactory financial arrangements. It was then that he was able to give instructions which enabled a further and finalized witness statement to be prepared on his behalf for the purposes of the trial. There was no explanation as to why the application to lift the stay was delayed until May 2001. That was the background against which the judge made her decision.
7. It is accepted on behalf of the appellant by Mr. Ashe, who has, if I may say so, put his argument both forcefully and lucidly, that the judge approached the matter perfectly properly as a matter of law in directing herself that the provisions with which she was concerned were Part 1 of the Civil Procedure Rules (that is the overriding objective), and Part 3.9 which, as I have already indicated, she directed herself was the relevant Part. Mr. Ashe also accepts that the judge impeccably directed herself in relation to all the subparagraphs of 3.9 until she came to deal with paragraphs (h) and (i). It is not surprising that he accepts that because, having dealt with paragraphs (a) to (g), the judge said this:

"Pausing before I come to those two, which I think are the key to this case, I should say that had those considerations not been there and had I stopped here, then I would have had little doubt but to say that the stay should not be lifted in any circumstances, because there had been a total failure to comply with the Rules, an inadequate explanation, and delay, as I said, even in seeking relief against the penalties."

8. She went on then to consider the provisions of Part 3.9 (h) and (i). Those provide 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 including -

(h) the effect which the failure to comply had on each party; and

(i) the effect which the granting of relief would have on each party."

9. In considering those two paragraphs, which she did compendiously, she considered that the central issue was whether or not it was possible for there to be a fair trial. She noted that the critical dates which would have to be considered by the court of trial were in 1980, 1982 and 1991. She referred to the fact that in general terms much of what happened was not in dispute in relation to what was done, but clearly there would be significant difficulties in anybody being able to recollect what was said. She considered that the court would get little help from contemporaneous documentation and accepted that the court would have to depend entirely on its assessment of the credibility of the parties. She referred to the fact that the respondent himself had accepted in earlier affidavits that he no longer had a perfect memory and that there was clearly the risk that the evidence that would be given to the court would be affected, not simply of course by the passage of time but the perspective from which the evidence was being given. She further accepted that the case would not be an easy case to try and that it may be difficult to sort the wheat from the chaff. However, she reminded herself that this problem would have been an inevitable problem, even had the matter proceeded to trial at the time at which trial would have been appropriate, which she considered would have been in 1998. Having so reminded herself, she came to the conclusion that, although the case was finely balanced and it was difficult for her, without the benefit of the crystal ball having heard all the evidence, to see precisely the extent to which the delay would affect the fairness of the trial, nonetheless, it was "still possible just for there to be a fair trial provided that the matter could be dealt with promptly." Accordingly, she lifted the stay but she indicated that she considered that it would be appropriate for the matter to be tried on the basis that, if the respondent were to have any relief, then he should not obtain any benefit that might otherwise have accrued from the delay of three years, from 1998, stating that, if there were to be any valuation of the company, then that should be at 1998 values and the court should consider with care whatever order would be appropriate in relation to interest to take account of the delay of three years since 1998.
10. Mr. Ashe submits that the judge was wrong in the conclusion to which she came. He is correct to put the question to the court in that way because that is indeed the test which this court has to apply under CPR Part 52.11(3). His task is not an easy one. This is an area of discretion. It is appropriate to cite a passage in the judgment of Brooke LJ in Tanfern Limited v Cameron-MacDonald [2000] 1 WLR 1311 in this context. Having explained the general approach under the Civil Procedure Rules, his Lordship continued:

"This marks a significant change in practice, in relation to what used to be called 'interlocutory appeals' from district judges or masters. Under the old practice, the appeal to a judge was a rehearing in the fullest sense of the word, and the judge exercised his/her discretion afresh, while giving appropriate weight to the way the lower court had exercised its discretion in the matter. Under the new practice, the decision of the lower court will attract much greater significance. The appeal court's duty is now limited to a review of that decision, and it may only interfere in the quite limited circumstances set out in CPR r.52.11(3)."

11. The question therefore is whether or not it can properly be said that the decision of Her honour Judge Alton is one which falls outside the broad discretion which the rules give to judges in exercising their case management jurisdiction.
12. Mr. Ashe has concentrated (I accept that that is indeed the only area upon which he could concentrate) on the judge's apparent acceptance of all the difficulties which the trial judge would be faced with, bearing in mind the fact that the events about which evidence would be given had occurred so long ago. He submits that, at the end of the day, the only sensible conclusion which the judge could have come to, having acknowledged all the difficulties, was that it was not possible to have a fair trial. He has referred us to a decision of this court in Purefuture Limited v Simmons & Simmons, in which judgment was given on 25th May 2000 and of which we have a transcript. That was a case in which the claimant's claim depended critically on the content of two telephone conversations, as to which there was little if any contemporaneous documentation and which took place 12 years before the matter was considered by this court. In upholding the judge's decision to strike out the case, there having been significant breaches of the rules, Clarke LJ made it clear that the important issue was that the claim would be based upon a determination of what had happened in those conversations which were, as I have already indicated, some 12 years earlier. Clarke LJ concluded that the judge was correct in deciding that in those circumstances a fair trial was not possible. I agreed and indicated that it was a classic example of a case where the delay was such that a judge would be faced with an impossible task of trying to determine the truth of what happened without the support of documents, some 12 years after the events. Mr. Ashe submits that the present case has sufficient similarity to that to mean that the judge must clearly have gone wrong in principle in coming to the conclusion that she did. I disagree. It may be that others might have taken a different view; but the decision of Her Honour Judge Alton was one which cannot be faulted for failing to take into consideration all the material which was relevant to the decision. She expressly acknowledged all the difficulties that the delay over the years was likely to cause to the court. But it seems to me that she was essentially saying that she considered that this was not a case which fell into the category of those where the critical question was going to be the nature of words used in a particular conversation some years before. It was going to depend upon an overall assessment of the evidence of the protagonists, put against the background of facts, which were unlikely in themselves to be in dispute, and that in that respect it was unlikely that the court was going to be in a significantly different position this year from the position it would have been in in 1998. She clearly considered that this was the type of dispute which cried out for resolution and that there was insufficient in the points made on behalf of the appellant that a fair trial was not possible to justify the conclusion that the matter should be struck out or, at least to be more exact, the stay maintained.
13. I take the view that this experienced judge, who is likely in any event to have to deal with the problems herself at trial, was in the best position to determine the extent to which she considered a fair trial was or was not possible. I do not take the view that this was therefore a case in which it could properly be said that her decision was wrong. I would dismiss this appeal.
14. LORD JUSTICE LONGMORE: I agree. This is an appeal from the exercise of the judge's discretion. Different judges on these facts might not necessarily have come to the same conclusion as that to which this judge came but, in my view, her decision was fully within the ambit within which reasonable disagreement is possible. I find it impossible to say that the exercise of her discretion was wrong.
15. I would only add this. One of Mr. Ashe's arguments was that the judge thought that the only way that there could be a fair trial in this case would be if she were able to ensure that the claimant did not benefit from any enhancement in the value of the business between about 1st January 1999 and the date when the trial will take place. He relied for this purpose on the discussion that is recorded after her judgment at page 18 of the transcript which we have. In my view, that is not a fair reading of the judge's judgment. She was satisfied that the case could be tried fairly but merely wished to eliminate any possible unfairness of an additional kind that might arise to the defendant as a result of the delay for which the claimant was responsible. I agree that this appeal should be dismissed.
16. LORD JUSTICE POTTER: I agree. As already indicated by Latham LJ, the judge, who considered the matter in detail and with considerable care, was of the view that, taking into account the considerations set out in subparagraphs (a) to (g) of rule 3.9(1), the indications were firmly against the lifting of the stay. However, she was persuaded that, having regard to the provisions of subparagraphs (h) and (i), and no doubt having regard to the overriding objectives, it was nonetheless just to lift the stay. I agree. In considering the effect which the failure to comply had had upon each party, she was right to approach the matter upon the basis of considering how far the position had worsened since 1998, the date when the trial should have taken place, and in that respect she formed the view that any prejudice was minimal. She also accepted, generally and overall, that:

"It is undoubted that there is a very real risk that over the years there has been a dimming or confusion of memory. It is undoubted that the court may well have difficulty in sorting the truthful or accurate wheat from the inaccurate or dishonest chaff."

17. Nonetheless, and having found the case to be finely balanced, she decided that it was still possible for there to be a fair trial. Again, I consider that she was right. This is not a case where the details of conversations are likely to be in issue, so much as the question whether (a) they took place at all, and (b) whether or not the general thrust of them was to give the claimant reassurances about the nature of his relationship with his son so far as the partnership was concerned, and more particularly the nature of his interest in the company after incorporation had taken place. Early in her judgment the judge made clear the necessity to have regard to the overriding objective, namely that of dealing with the case justly between the parties. So far as the parties were concerned, I have no doubt that she bore in mind, by way of background to her judgment, that this was a family dispute of a kind which was archetypally one appropriate for resolution by the court in the absence of agreement, rather than being left to fester during the father's declining years in a situation where, if he was correct in his assertions, he had invested considerable money in the business now being carried on by the son and the son has enjoyed considerable benefit at his father's expense. All decisions fall to be considered on their merits and the principles applied evenly, but in a case of this kind it is important to have particular regard to the various considerations which are outlined in subparagraphs (2), (3) and (9) of paragraph 1. It is plain to me that the judge gave careful attention in considering those matters. As Latham LJ has made clear, these are matters peculiarly for the discretion of the judge in the light of the considerations laid out in the rules.
18. This court is most reluctant to interfere with the exercise of such discretion, unless the judge can be shown to have been plainly wrong. That has not been demonstrated in this case. I agree that the appeal should be dismissed.
Order: Appeal dismissed with costs assessed summarily in the sum of £4,700 including VAT; costs to be paid within 14 days. (Order not part of the judgment of the court)