England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
CIVIL DIVISION
ON APPEAL FROM THE TECHNOLOGY AND CONSTRUCTION COURT
(His Honour Judge Seymour QC)

		The Royal Courts of Justice The Strand London Thursday 2 May 2002

 


Thursday 2 May 2002

1. LORD JUSTICE KAY: The claimant, R C Residuals Ltd, appeals against the decision of His Honour Judge Seymour QC sitting in the Technology and Construction Court on 26 April 2002. At an earlier hearing on 8 February 2002 the judge had made an order that the claimant was to serve its expert reports by 4.00 pm on 12 April 2002 and failing such service it would be debarred from calling that expert. The claimant failed by a matter of minutes to serve the reports from experts upon which it wished to rely and was obliged therefore to seek relief from the sanction.
2. The claimant's claim is a substantial one for damage to its plastic products which were stored on the first floor of the first defendant's warehouse and which were damaged by an oil spillage. Liability has been admitted. There is, however, a very significant difference as to the value of the claim. The claimant puts it at £800,000 while the defendants only admit a little over £51,000.
3. By an order made on 13 July 2001 the court gave permission for the parties each to call an expert on chemical issues and an expert accountant. The trial was fixed for March 2002. All parties were in breach of the order of 13 July 2001 and as a result the trial date had to be vacated. It was in these circumstances that Judge Seymour came to make the order of 8 February and the trial was refixed for 7 May. There can be no doubt that the purpose of the judge in making the unless order was to make sure that the trial would proceed on 7 May and that there would be no further delay. His order also set out a timetable in each case, coupled with further orders which would debar the calling of evidence unless other stages in relation to the preparation and service of evidence were complied with.
4. In a statement made by James Watthey of the claimant's solicitors and filed in support of the application for relief from sanction, the circumstances in which service of the reports was late were related. Both the accountancy expert and the chemical expert instructed on behalf of the claimant had not completed their reports by 12 April 2002 and each was still working on the report that day. The report from the chemical expert arrived in time for service to be effected before the deadline but the accountancy report, which was being prepared in Epsom, was still not available by 2.00 pm. The accountant made arrangements that a motorcycle courier would take the report from Epsom at 2.30 with an anticipated arrival time at the solicitor's office of 3.30 pm. When it failed to materialise by that time, the solicitor rang the accountant and asked her to prepare at once an unbound copy so that it could be faxed through to the claimant's solicitors, who would in turn serve it by fax upon the defendants' solicitors. Mr Watthey then contacted the solicitors acting for the defendants and explained the problems, and indicated that as a result the reports might be a few minutes late. He then dispatched the chemical expert's report by motorcycle courier and awaited receipt of the fax from the accountant.
5. The accountancy report was long and did not arrive in its entirety until 3.58 pm. It was immediately faxed to the defendants' solicitors but the faxing process was not completed until 4.10 pm. In the meantime, the courier conveying the other report had been delayed and so that report did not arrive until 4.20 pm. Thus service of each report was after the deadline, in the one case by 10 minutes and in the other by 20 minutes.
6. The defendants' solicitors indicated, quite properly, that if the claimant wished to rely on the reports they would have to apply to the court but, without prejudice to their position in respect of this application, agreed that the experts should proceed to hold discussions and produce joint statements, as had been provided for in the order. There was no suggestion from them that the late arrival had in fact caused any prejudice to their position. It was agreed that the application for relief from sanction should be heard at the pre-trial review which was to take place on 26 April. As had been agreed, the experts arranged to meet on 22 April and their joint statement was produced and agreed on 26 April. There is therefore no suggestion that the trial date will be affected by the late service of the reports.
7. The matter came before Judge Seymour on 26 April at the pre-trial review and the application for relief was duly made. There is no transcript of the judgment given by Judge Seymour on that occasion but we have an agreed note of the proceedings which has been drawn from the notes taken by the parties at the proceedings. It has not been shown to the judge. That is acknowledged to be an error, but we have the advantage of his having considered himself the application for permission to appeal and having set out in detail his reasons for refusing that application, including setting out his reasons for his original decision. That account very much matches that with which we have been provided by the parties and we are satisfied, therefore, that we are in a position to know what it is that the judge was saying at the time.
8. In his judgment the judge made reference to Mr Watthey's statement. Counsel had apologised for the delay and thereafter the judge went on and said:

"This Order provided the expert witnesses with a period of nine weeks in which to produce their reports which was not a very demanding timetable. It was not complied with. The only evidence in Mr Watthey's statement was that the accountancy evidence was 10 minutes late and the chemist's expert evidence was 20 minutes late and that, since the delay was only a few minutes, it does not matter. This betrays a serious misunderstanding of the importance of Unless Orders handed down by the court.

No explanation had been offered at paragraph 4 of Mr Watthey's statement as to why both the accountancy and chemical experts were still working on 12 April 2002. The only conclusion is that the Claimant, or their advisers, left the preparation to the last minute. This was a mistake, and mistakes have consequences. That is life and life is tough."

9. Having given his ruling, he was then asked to grant permission to appeal and declined do so. He gave, as we have indicated, written reasons to this court as to why it was that he had declined to grant permission. Having set out the circumstances in which he had refused the application, he then added this:

"Given the history of this action, and in particular the vacation of the earlier trial date by reason of the failure of the parties to comply with earlier directions given by the court, it did not seem to me appropriate to accede to the application for relief. The Claimant had had ample opportunity to comply with the order in relation to service of experts' reports had it wished. It had chosen to leave everything to the last minute in the hope and expectation that precise compliance with the order of the court would not be insisted upon. I did not consider that it would be right to encourage the Claimant or other litigants to take that view of unless orders of the court.

I do not consider that an appeal against my decision would have a real prospect of success."

10. The appellant renewed its application for permission to appeal to this court. I granted permission on the papers earlier this week and directed that the matter be heard urgently to preserve the trial date.
11. Mr Hollander QC, on behalf of the respondents, argues, first, that the judge failed to have proper regard to the provisions of CPR 3.9(1). 3.9(1) provides:

"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 -

(a) the interests of the administration of justice;

(b) whether the application for relief has been made promptly:

(c) whether the failure to comply was intentional;

(d) whether there is a good explanation for the failure;

(e) the extent to which the party in default has complied with other rules, practice directions and court orders and any relevant pre-action protocol;

(f) whether the failure to comply was caused by the party or his legal representative;

(g) whether the trial date or the likely date can still be met if relief is granted;

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

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

12. Mr Hollander has brought to the court's attention observations made by Lord Justice Brooke in Bansal v Cheema (unreported, 2 March 2000) in which Lord Justice Brooke said:

"It is essential for courts, exercising their discretion on an occasion like this, to consider each matter listed under CPR 3.9(1) systematically in the same way as it is now well known that courts go systematically through the matters listed when an application is made for the exercise of the court's discretion under s 33 of the Limitation Act 1980."

13. It is perhaps pertinent to observe that that decision and other decisions on the same matter have not found their way into the law reports. It seems to me unfortunate that cases are coming before the courts regularly now which deal with these issues where the parties are still not aware of the approach taken by the Court of Appeal. Most recently the Court of Appeal considered the application of CPR 3.9(1) in the case of Woodhouse v Consignia [2002] EWCA Civ 275, again a judgment given by Lord Justice Brooke. The court considered the passage to which reference has been made in the earlier case of Bansal v Cheema and gave considerable guidance as to the approach to be adopted in relation to matters of this kind when the rule needs to be considered. It is to be hoped that those responsible for reporting cases in this court deem that to be a case of significance worthy of being reported, because it is likely to be of considerable assistance to those who are involved in litigation and have to consider matters of this kind.
14. Mr Hollander contends that the judge did not adopt a systematic approach to the exercise that he was obliged to consider on the application under rule 3.8, and failed to go through the various considerations set out in 3.9(1). He submits that if he had done so he would, when he came to do the balancing exercise which it is clear is a necessary part of considering applications of this kind, inevitably have attached weight to a number of matters which do not feature in his reasons for his decision. He submits in those circumstances that the exercise of the judge's discretion was flawed and that the court ought therefore to re-exercise the discretion.
15. His principal submissions are that in this case the effect of this very short delay was that there were going to be no adverse consequences for the trial process. The matters that still needed to be done in relation to the case could all be done, and there was no suggestion from anybody concerned with the case that the trial date could not be met. He therefore submits that consideration (g) in 3.9(1) had to be taken into account and was in the context of this case an important consideration. It was important because the very reason for making the unless order in the first place was to secure that objective and, if the failure was not going to affect the objective of the judge in making the order, that was clearly an important consideration in deciding whether or not to grant relief from the sanction.
16. He contends further that there are other considerations that ought to be weighed in the same sort of way. First, that the actual late service had no effect on the process of preparation by the defendants. If the relief was granted, the only consequence, so far as they were concerned, was that they would lose the windfall that otherwise would be available to them of not having to meet any expert evidence in this important case. But there were no consequences of the kind that are frequently encountered, where preparation of the hearing of the matter would be affected by the late service of the reports. He submits in those circumstances, and bearing in mind that this was not, and has never been suggested to be, an intentional failure (a consideration under (c) of 3.9(1)) that the proper result of the balancing exercise in this case would be that it would be simply disproportionate for the claimant, in effect, to have its claim restricted from the very large claim that it makes down to the much lower figure that otherwise would be the limit of its claim if it does not have available to it the necessary expert evidence to prove its case.
17. Mr Hollander further contends that in the circumstances the judge's order breached Article 6 of the European Convention on Human Rights. He contends that a trial of the issue of quantum in which the appellant was precluded from calling expert evidence on the critical issues in the case would not be a fair trial of the claimant's claim. He acknowledges that the court has to balance other interests in considering the effect of Article 6, and contended that the refusal to grant relief is such a disproportionate sanction, having regard to the extent of the default and the consequences thereof, that the court should not apply it and to do so breaches the claimant's rights.
18. On behalf of the defendants, Mr Cory-Wright reminds the court that CPR 3.9 requires the court to consider "all the circumstances", including those specifically identified in the paragraph. He again points to the approach of this court in Woodhouse v Consignia. He submits that the judge did in fact make reference to all the matters in this case. He took into account, as he must necessarily have done, the written and oral submissions made by counsel appearing on behalf of the claimant at the application. He viewed the fact that the unless order had not been complied with and that there had been substantial default in the past as being of particular importance, outweighing the other considerations. Mr Cory-Wright submits that therefore, this being a matter of discretion, the judge was entitled to come to the conclusion to which he did and that this court should not interfere with the exercise of that discretion.
19. As to Article 6, he submits that it really adds nothing to the application of the principles of the CPR in these circumstances. He contends that the right to equality of arms cannot operate so as to assist, let alone entitle, a party who has failed to comply with an unless order to relief from the sanction provided. He rightly points out that to conclude otherwise would have consequences for the effectiveness of the CPR.
20. Considering, first, whether the judge did or did not properly weigh the factors that he was required to weigh, I have regard to the terms of his judgment. In that, there is no acknowledgment that he was obliged to take into account all those matters listed under CPR 3.9(1). He did take into account the two matters to which he made reference, firstly that there had been a failure to comply with the order and, secondly, that that was not the first occasion when there had been default by the same party not complying with orders in the case. He had regard, I am satisfied, to what were properly to be considered the interests of the administration of justice, namely that if it become known that the court would readily grant relief from unless orders, they would be unlikely to serve the purposes sought to be achieved by the rules so far as the administration of justice is concerned. It was a factor he was entitled to take into account. However, I can find no indication that he then thought it appropriate, having identified those factors that pointed in one direction, to go on and do the balancing exercise by going through the list contained in 3.9(1) and seeing whether there were factors that pointed in the other direction.
21. For those reasons I am satisfied that the exercise that the judge performed was a flawed one and that the exercise by him of his discretion cannot be allowed to stand. It follows from that that it falls to this court then to re-exercise discretion and to do the balancing act which I am satisfied the judge did not do. When one comes to deal with that, there is no question at all that the judge was right to attach importance to ensuring that cases where unless orders were made they did have the effect of causing the parties and their solicitors to realise the importance of complying precisely with the orders made. That was a factor which undoubtedly had to be considered. It was equally of importance, and rightly to be taken into account and to weigh heavily on the one side, that there had been the earlier history which had led to a previous trial date being vacated, with all the consequences that there are as a result of that for other parties who may be deprived of the chance of having their case heard.
22. However, I am satisfied that, on the other side, the judge had to go on and weigh against those factors the very important fact that this default was not going to cause a failure to achieve the objective that he had sought in securing the trial date when he made the unless order. This was a case, I am satisfied, where there was no intentional default. The statement filed before the judge on behalf of the claimant's solicitors was, I am satisfied, inadequate in that, as the judge rightly observed, although it pointed out the explanation for what had gone wrong on the day when service should have been made, it did not in any way deal with the circumstances that put the claimant's solicitors in the position where those events could happen. There remains, despite the efforts of the courts, a feeling that when an order is made that something should be done by a particular day, that is interpreted as an order that it should be done on that day. The sooner parties are disillusioned from thinking that is so, the better, and one can well see why the judge was anxious to disillusion all those involved with the process from that thought. The obligation on the parties is to comply with the order as soon as possible, but no later than the deadline provided by the order. In that way the administration of justice will best be effected.
23. The evidence before the judge did little to help him to understand whether there had been a real attempt on the part of the claimant's solicitors to comply with the order. Mr Hollander reminds the court that the unless order that was made was one part of a complex order that required a number of steps to be taken. He submits that the judge, even on the evidence before him, was perhaps a little unfair to say that the witnesses had nine weeks to comply with that order by making sure that their statements were available for service, because there were a number of steps which, it is quite apparent from the face of the order, still needed to be taken before the reports could be completed by the experts. In those circumstances he submits that, even on what the judge had available to him, it was hard to say that the solicitors had simply waited until the last minute and done nothing.
24. Before us, Mr Hollander sought permission to rely upon a further statement made by a partner in the claimant's solicitors, Mr Atkins, in which he set out in much more detail exactly how the situation had arisen. He made it clear in that statement that the experts had been instructed at an early stage but that there were a number of reasons why it was that they could only produce the report at the last minute. On behalf of the respondents, Mr Cory-Wright did not object to that statement being considered by the court, and since the court now has to exercise discretion afresh, it can take that matter into account.
25. I have no doubt at all that when one looks at the totality of the picture, one can see that the solicitors were genuinely trying to comply with the order. They believed until a very late stage of the day that they were going to succeed in complying with the order. Therefore, as they saw it at that stage, there was no need to seek any sort of extension and it was only at the very last minute that they realised that circumstances were going to mean that there would be a failure.
26. In those circumstances, when one comes to balance the consequences of the making of the order against all the other matters in this case, it seems to me that the balance tilts very firmly in favour of allowing the experts to give evidence on behalf of the claimant. If they do not, the claimant will be deprived of the chance of pursuing a very substantial part of its claim. It has tried to comply with the order. The failure was not a substantial one. It had no consequences for the defendants and it had no effect upon the matter proceeding to trial on the date that was indicated.
27. For those reasons I would exercise discretion in favour of granting the relief from the sanction that is sought and I would accordingly allow the appeal.
28. SIR SWINTON THOMAS: I agree. This court cannot stress too strongly the importance of strict compliance with court orders, particularly unless orders. If relief is granted lightly an entirely wrong message goes out to litigants and their advisers. Further, as my Lord, Lord Justice Brooke, pointed out in the course of argument, judges of first instance are entitled to complain if, having made orders envisaged by the rules and which they are encouraged to make by this court, this court then lightly sets them aside. However, for all the reasons given by Lord Justice Kay, I am satisfied that on the facts of this particular case the learned judge did exercise his discretion wrongly and that a proper exercise of discretion leads to the inevitable conclusion that relief from the sanction should be granted to the claimant.
29. Accordingly I also agree that an appeal should be allowed.
30. LORD JUSTICE BROOKE: I agree. I too do not wish the decision of this court on this appeal to be understood as sending out any message that the court does not take very seriously the consequences of non-compliance with an unless order, particularly if that non-compliance occurs very close to the projected trial date. If in truth the position was that the claimant's professional advisers were not making very real efforts to comply with the requirements of the unless order, as the judge believed, then it would be understandable why relief should be refused and an appeal might not have been successful.
31. If the judge had been alert to the need to consider all the matters contained in CPR 3.9 (as I have stressed in two unreported judgments of this court, and more recently in the case to which Lord Justice Kay has referred); and if he had enquired of counsel why it was that matters had been left so late, he would no doubt have received the information which is now contained in Mr Atkins' witness statement, which is before this court. This statement explains some of the problems faced by the experts who were instructed. For instance, the defendants delayed nearly six weeks in sending to the claimant's advisers diesel of the same specification as that involved in the spill on which the claimant's expert wished to carry out tests. Further delays were caused by the fact that, as a consequence of the judge's order in February, the claimant's accountancy expert did not receive details of the way that the defendants were putting their case on the amount of damage until mid-March, and then problems arose because the critical annual audited accounts of the claimant company did not become available from their auditors until just before Easter.
32. Although it would no doubt have been better if this information had been placed formally before Judge Seymour in a witness statement, I do not consider that in the absence of such inquiry he ought to have reached the conclusion which he expressed in these terms:

"The Claimant has had ample opportunity to comply with the order in relation to service of experts' reports had it wished. It had chosen to leave everything to the last minute in the hope and expectation that precise compliance with the order of the court would not be insisted upon. I do not consider that it would be right to encourage the Claimant or other litigants to take that view of unless orders of the court."

33. For the reasons given by Lord Justice Kay, with which I agree, this appeal should be allowed.
34. There is one other matter I should mention. The accountants' report was ready in Epsom at 2.30 pm. It could easily have been e-mailed in about a minute from their firm to the claimant's solicitors in central London, and from there to the defendants' solicitors in Lime Street, to arrive 90 minutes before the guillotine set under the unless order was due to fall. Instead, when the claimant's solicitors decided at 3.45 pm not to wait any longer for the courier from London, time was taken up in the very slow process of faxing the document from Epsom to Holborn Viaduct, printing it out and then faxing it from Holborn Viaduct to Lime Street, a process which seems to have taken 25 minutes to complete, ten minutes of which were beyond the time set by the judge in his order in February.
35. The defendants' solicitors would have been entitled strictly to refuse to accept formal service of this report by e-mail. CPR 6.2(1)(e) provides that a document may be served by fax or other means of electronic communication in accordance with the relevant practice direction; and the practice direction to CPR Part 6 provides at paragraph 3.3 that service by other electronic means than facsimile may take place only if three conditions are fulfilled. One of those conditions is that the legal representative who is to be served has previously expressly indicated in writing to the party serving the document his willingness to accept service by this means and has provided his e-mail address or other electronic identification.
36. The defendants' solicitors set out in their notepaper in uncompromising terms the words, "We do not accept service by e-mail". On the other hand, if the claimant's solicitors had offered to send the accountant's report by e-mail to the defendants' solicitors on the afternoon of Friday 8 April at 2.30 pm and the defendants' solicitors had parrotted the words set out on their notepaper, no doubt the court would have had little sympathy with them if they had stood on their rights and said they were entitled to require the claimant's solicitors to produce the document to them by some other means, even if that other means took the better part of two hours to complete.
37. I mention these matters because electronic communication is now becoming more and more common. The defendants' solicitors are entitled as a matter of general policy to adopt the stance they took, but when one is dealing with emergencies such as occurred that afternoon, if firms of solicitors do take this stance completely rigidly, they may have difficulty in resisting applications for relief from the other side.
ORDER: Appeal allowed. No order on the costs of the appeal. (Order not part of approved judgment)