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 THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(Mr Justice Toulson)

		Royal Courts of Justice Strand London WC2 Tuesday 27th March, 2001

1. LORD JUSTICE TUCKEY: This is an appeal (with Potter LJ's permission) from the judgment of Toulson J given on 14th July 2000 in which he struck out the claimant's claim under CPR 3.4 for failure to comply with the rules. The failure is admitted. The question on this appeal is whether strike out was just or proportionate.
2. The claimant is a one-ship Panamanian company whose only asset is its claim against the defendant underwriters for the loss of its fishing vessel, Guadalete. The defendants subscribed to 30 per cent of a Lloyd's hull policy on this vessel, which insured against losses caused by perils of the sea, latent defect and negligence of the crew. The remaining 70 per cent of the risk was insured in the Italian market. The insured value of the vessel was US$3,050,000.
3. The vessel sank at sea off the coast of Mexico on 3rd August 1992 and has not been recovered. The crew, however, were all rescued. Within days of the casualty a naval architect, apparently instructed by the Italian underwriters, and someone from the London Salvage Association, apparently instructed by the London market, went to Mexico where they interviewed Mr Robayna (the man behind the claimant company), the port captain and the crew. They also obtained a copy of the report of a Board of Inquiry set up by the Mexican authorities to whom the crew also made statements and some of the vessel's class records.
4. The claim under the policy was initially discussed between brokers. When it was not paid the claimant apparently instructed lawyers in Italy (although there is little detail about this), where the position is that the Italian underwriters have denied liability for the claim but extended time for proceedings to be taken until the outcome of these proceedings is known.
5. The claimant instructed English solicitors in July 1997. After some initial correspondence from which it became clear that proceedings would have to be taken, a writ was issued on 31st July 1998, two days before the limitation period expired. The points of claim which followed allege that the vessel sank after the sudden and unexpected collapse of a large pipe which formed part of the seawater circulating line of the refrigerating system of the vessel. This, it is said, caused flooding of the steering room, the shaft tunnel and then the engine room which the crew were unable to contain. The collapse of the pipe is alleged to have been caused by perils of the sea (an earlier storm or unascertained perils) or latent defect. Alternatively, it is alleged that the crew were negligent for failing to contain the flooding.
6. The defence puts all the primary facts in issue. It alleges that the casualty was caused by ordinary wear and tear, failure of the claimant or its managers to exercise due diligence and/or by the vessel's unseaworthiness.
7. The defendants' solicitors extended time for a reply until 29th January 1999, but no reply was served. Nor was any answer given to the defendants' request for further and better particulars dated 11th November 1998. That request included a request asking the claimant to identify the defect and why it was said to be latent.
8. No further step was taken in the action until 18th April 2000, when the claimant's solicitors applied for a case management conference to avoid the claim being automatically struck out a week later under CPR 51.19.
9. The claimant says that this delay stems from a request for security for costs of £70,000 made by the defendants' solicitors on 21st December 1998. In a statement explaining the delay, Mr Mitchell, the claimant's solicitor, refers to this letter which said that following the loss of the vessel the claimant had no assets except for the claim under the policy and continues as follows:

"This was, of course, true as the Claimants had lost their only profit earning chattel. ...For the reasons explained in the next section of this statement, the claimant and Mr Robayna in particular, had considerable difficulty in raising this sum in the light of the fact that the Claimants had no income."

10. Then in the next section he says:

"The cause of the delay ... was lack of funds.

Since early January 1999, the Claimants, and Mr Robayna in particular, have been attempting to arrange funds to provide security for costs. ...

It took Mr Robayna about fifteen months to arrange the finance. Although this may sound like a long period of time, the Court should not forget that Mr Robayna is an individual and not a trading corporation. Mr Robayna, very simply, was unable to fund the security for costs and was also in difficulty in funding the Claimants' costs of the litigation. ...

I am advised by Mr Robayna that he has now personally funded the security for costs which have been on the table since 13 April 2000. I believe that he is also in a position to fund the Claimants' costs of this litigation up to and including a trial."

11. The defendants' solicitors were told on 13th April that the security they had asked for could be provided in the form of a guarantee by a first class European bank. The application to strike out followed.
12. In his judgment, after reviewing the history which I have summarised and the decisions of this court in Biguzzi v Rank Leisure Plc [1999] 1 WLR 1926, Axa Insurance Co Ltd v Swire Fraser Ltd (9th December 1999) and Walsh v Misseldine (29th February 2000) the judge said:

"In summary, the courts have recognised in all these cases that it is incumbent under the present regime for claimants to get on with cases. They have recognised that the courts have a more flexible ability to deal with the situation than in the past if a claimant fails to do so. If a claimant fails to get on with a case for no good reason, it may well be just to strike out the case even though no specific additional prejudice has been caused. It may be just to do so for a number of reasons. The courts should not be clogged with stale cases and parties should know that. It may not be possible to determine whether a fair trial will be possible, because that may itself involve an element of guesswork. But if the court is in doubt whether a fair trial would be possible, that is a powerful reason for exercising the discretion to strike out the claim where there has been delay by the claimant for no good reason."

13. Having found (as is now conceded) that the claimant had been in breach of the rules for more than a year, the judge identified the factors which he considered important in deciding what order to make. These were that the case was very stale; there was no satisfactory explanation for the delay, because the assertion of impecuniosity lacked detail; and, most importantly, there was:

"... a real risk that there may not be now a truly fair trial of this action."

14. The question of whether a fair trial was possible was obviously crucial to the judge's decision. Mr Hill, for the claimant, submits that the judge misdirected himself in the passage I have quoted, because he appears to be saying that the claim should be struck out if the court is unable to say ("in doubt") whether a fair trial is possible or not.
15. However, if one reads the judgment as a whole, it is clear that the judge did not misdirect himself. Later in the judgment he asked himself the question to what extent is it now likely that there can be a fair trial of the action. He answered it in the way I have already referred to. That was the correct approach.
16. But the main point on the appeal is whether the judge was right to conclude that there was a real risk that a fair trial was no longer possible, since it is Mr Hill's submission that this conclusion was wrong.
17. Obviously the outcome of the case would depend upon evidence of primary fact as to the sinking of a vessel and its condition and maintenance before that time and upon expert evidence interpreting and commenting on those primary facts.
18. So the first question is whether the quality of the evidence of primary fact has deteriorated as a result of the lapse of time? The judge did not accept Mr Hill's submission that there was no real problem because all the relevant witnesses had given statements soon after the event. The judge accepted that there were a good number of relevant factual matters which the statements did not deal with and observed that these statements had been taken at a time when the claim had not been formulated as it now is.
19. Mr Hill criticises what the judge said about this. He has taken us through the statements made to the Board of Inquiry and to the Italian underwriting expert. It is clear that only the evidence of the chief engineer and the oiler, who alerted him to what was happening, shed any light on the cause of the loss. They describe a massive ingress of water into the steering room and the shaft tunnel, and thence into the engine room, but give no real clue as to why this happened, although the engineer does mention the possibility that the line, to which I have referred, had fractured. There is also a shortage of information in the statements about the vessel's previous condition and maintenance. At the time these statements were taken no allegation had been made about the cause of the loss, let alone that it had been caused by an insured peril. When such allegations were made in 1993 the expert said, in effect, that these allegations were inconsistent with the witness statements and would need to be, as he put it, "further and deeply investigated".
20. So I think there were important factual matters not dealt with in the statements and the judge was right to attach importance to the fact that if these factual witnesses were available to give evidence at trial they would have very little reliable memory of what had happened which went beyond what they had said in their statements. This might be, as the judge accepted, to the claimant's disadvantage; but, as he also pointed out, it could be to underwriters' disadvantage also, since in the nature of this type of claim they could only make their case through cross-examination.
21. So on the main point I reject Mr Hill's criticism of the judge's conclusion which I think was justified.
22. Mr Hill succeeded in persuading Potter LJ to grant permission on the basis that the essential arguments and issues in the case would be between the experts based on what can be deduced from the statements. I am afraid I do not accept this analysis. All the primary facts are in issue. They are not confined, as Mr Hill submits, to where the water which entered the vessel came from. But even if one accepts that all the engineer and the oiler will say is that they saw water there is still the critical question as to whether, if there was any defect in this line, it was latent or patent. In his statement the engineer says nothing about his or those under his command's inspection of this line. Such evidence would of course be crucial to whether if there was a defect, it should have been detected in the ordinary course of maintenance.
23. In reaching these conclusions, I have only considered the claimant's case based upon latent defect, since before this court Mr Hill has offered to abandon his alternative cases based upon perils of the sea and crew negligence. But if those allegations remained in issue at trial, further factual issues would arise which are not dealt with in the statements.
24. Mr Hill's other points do not I think take matters much further forward. He submits that the judge's criticism of the explanation for the delay was unjustified; the claimant's impecuniosity was obvious and credible; and if the judge wanted further information about the steps which had been taken to raise money, he should have given the claimant the opportunity to provide it.
25. I think there is some force in these points. But the fact remains that the claimant ought to have anticipated an application for security and if there was difficulty raising the money this provided a basis for resisting the application which could have been tested in court or at least raised in correspondence. Instead, after saying they hoped to respond to the request for security shortly, the claimant's solicitors said nothing for 15 months.
26. Finally, Mr Hill says that the judge does not specifically consider whether strike out was a proportionate response. He submits that as the Civil Procedure Rules allow a more flexible response to breach of the rules, the tight procedural timetable which the claimant was prepared to follow to ensure that the trial took place quickly would have been a proportionate response and/or the claimant could have been deprived of interest.
27. Obviously the judge could have made such orders within the exercise of his discretion. But he did not do so and in the absence of misdirection I am quite unable to say that his decision was obviously wrong. He had well in mind that his powers were flexible because he says so in the passage I have quoted. He must also have had in mind that the claimant's claim was substantial and that there were proceedings which might follow in Italy if the claim here was struck out.
28. As to the latter, I cannot see any hardship from the claimant's point of view because instead of losing his claim altogether, as is usually the case on strike out, it has at least the prospect of being able to pursue 70 per cent of its claim for the loss of the vessel in the Italian proceedings. But more importantly, it cannot be fair to the defendants in these proceedings for proceedings against them to be continued simply because the claimant has a claim against others in Italy.
29. At the end of the day, this was, as the judge said, a stale claim which had been started at the very end of the limitation period. There had been a breach of the rules which had resulted in further delay for over a year. As Lord Woolf said in Biguzzi at page 1934:

"... judges have to be trusted to exercise the wide discretions which they have fairly and justly in all the circumstances, while recognising their responsibility to litigants in general not to allow the same defaults to occur in the future as have occurred in the past. When judges seek to do that, it is important that this court should not interfere unless judges can be shown to have exercised their powers in some way which contravenes the relevant principles."

30. I do not think the judge exercised his powers in this case in a way which contravened the relevant principles, and so I do not think we should interfere with his decision.
31. For those reasons, I would dismiss this appeal.
32. LORD JUSTICE KAY: I agree.
ORDER: Appeal dismissed with costs, here and below; permission to appeal to the House of Lords refused. (Order does not form part of approved judgment)