England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM WREXHAM COUNTY COURT
(HIS HONOUR JUDGE PERRY)

		Royal Courts of Justice Strand, London, WC2A 2LL
		6 March 2014

1. LORD JUSTICE UNDERHILL: This is an appeal against the decision of His Honour Judge Perry in the Wrexham County Court on 7 March 2013 giving judgment for the claimant against both defendants in the sum of £30,000 together with interest and costs. The judgment was given after a trial at which the defendants were not present or represented, and the essential issue is whether the judge was right to proceed in their absence. In those circumstances I need not say much about the underlying claim. In bare outline the claimant says that in 2007 he agreed with the first defendant to become a partner, with a 35 per cent share, in a restaurant business in Porthmadog and that he paid the first defendant £30,000 as his share of the capital, but that he has never received any account or share of the profits. I will come back to the question of what relief he seeks.
2. The appellants, to whom I will continue to refer to as the defendants, are represented before us by Mr Rory Clarke and the respondent, the claimant, is represented by Mr Islam Khan. Neither counsel appeared below. The solicitors have also changed.
3. I should briefly summarise the procedural history. There are various obscurities, but the broad picture is adequately clear.
4. The claim was issued in the Manchester County Court some time in mid 2011. The only defendant at that stage was the first defendant. The brief details of claim on the face of the claim form read as follows:

"The claimant claims the sum of £30,000 in respect of monies paid further to an attempted partnership between the claimant and the defendant which the defendant subsequently reneged on and has refused to return the monies back to the claimant."

The short particulars of claim on the back of the form add a little more detail and end as follows:

"The defendant, following the receipts of the money neither completed a partnership agreement nor provided any accounts, profits or information to the claimant and despite many requests for the returns of the monies has failed to return the monies to the claimant and the claimant therefore seeks damages of £30,000, interest, costs."

5. The defendant lodged a defence on 5 August 2011. It is not entirely easy to interpret, but he appears to accept that the business was owned by a partnership and that the claimant contributed an unspecified amount; but he says that his own share was 75 per cent and that the other 25 per cent was contributed jointly by the claimant and a Mr Islam. He appears to say that the partnership was continuing and that he has, by agreement, accounted to Mr Islam on the claimant's behalf.
6. The case was transferred to the Caernarfon County Court and the claimant, in circumstances that are obscure, produced a fully pleaded particulars of claim - strictly, amended particulars of claim, although they are not so entitled. It appears to be common ground that these replaced the short particulars of claim on the claim form. The nature of the relief sought is different from that claimed originally. The prayer reads:

"The claimant therefore claims: 1. Damages for unpaid profits between November 2007 and the present. 2. Dissolution of the partnership. 3. Proportionate sales proceeds from the sale of the business."

That claim necessarily accepts that the partnership is continuing, though the first defendant has failed to account, and that it ought now to be dissolved.

7. There were case management hearings on it, seems, 30 March, 16 May and 10 August 2012, although we do not have copies of the orders. At the last of those hearings the claimant obtained leave to join the second defendant on the basis that the restaurant business had, without his knowledge, been vested in it. Amended particulars of claim were served on 14 August, which sought an order for 35 per cent of the shares in the second defendant to be transferred to the claimant. The prayer for relief was amended so as to read as follows:

"The claimant therefore claims: 1. Damages for unpaid profits between November 2007 and the present. 2. Declaration of partnership of 35 per cent for the claimant. 3. Transfer of 35 per cent of the shares of the second defendant to the claimant."

It will be observed that the claim for dissolution and the sale proceeds of the business have been dispensed with.

8. The second defendant lodged a defence in substantially identical terms to the first defendant's defence, notwithstanding that the nature of the claim to which it was pleading was significantly different.
9. Also on 10 August 2012, the District Judge made an order for a two-day hearing on 7 and 8 March 2013 and for exchange of witness statements on 25 October 2012.
10. The defendants failed to comply with the order for exchange of witness statements and an unless order was made on 12 November. The defendants also failed to comply with that order: although witness statements from the first defendant and Mr Islam were lodged, that occurred about three quarters of an hour after the deadline. Accordingly on 24 January 2013 an order was made, the material terms of which are:

"1. Judgment for the claimant against the first and second defendant for an amount to be decided by the court. 2. The claim remains listed on 7 March 2013 with the time estimate for the hearing being reduced to one day."

11. It is clear, though the language may not be entirely apt, that the effect of the order of 24 January 2013 was that the court would on 7 March determine the issue of what remedy the claimant was entitled to on the basis that the amended particulars of claim could not be disputed. The listing of one day recognised that that would not necessarily be a straightforward exercise. The claims for a declaration and for the transfer of the shares in the second defendant might not be difficult but the claim for unpaid profits, in practice an account, could give rise to real issues.
12. The defendants applied for relief from the effect of the order of 24 January and that application was listed to be heard on the day of the substantive hearing.
13. That brings us to the hearing on 7 March. It is material to note that that was a Thursday. The case seems now to have transferred again, to Wrexham. The claimant was represented by Mrs Victoria Roberts of counsel and the defendants by Mr Lloyd Maynard of counsel. Neither the first defendant nor anyone from their solicitors attended the hearing -- I will come back to why in due course. We have a transcript of the entire hearing. We also have what is described as an attendance note produced subsequently by Mr Maynard.
14. Mrs Roberts had produced a skeleton argument which she showed Mr Maynard before the hearing, and which was produced to the judge, in which she addressed the two questions which were, or were potentially, before the court - (1) the application for relief and (2) the issue of remedy. Nothing was said in the skeleton about the issue of what I will as a shorthand call "liability". It is a reasonable inference that Mrs Roberts did not expect that to be addressed at that hearing if the application for relief was successful.
15. Under the heading of "remedy", Mrs Roberts' skeleton argument sought permission to reamend the particulars of claim -- strictly perhaps it should have been "re-reamend" -- in order to reinstate as the claimant's primary claim the claim for the £30,000 by way of a claim in restitution which had appeared in the original short particulars of claim but which had been dropped in the two intervening versions. She said -- somewhat boldly, it might be thought -- that the amendment was sought "for the avoidance of doubt", but it was entirely clear that such an amendment would be necessary, since no restitutionary claim was advanced in the current pleadings. (I am bound to say that it seems to me very questionable whether such an application could have been entertained if the order of 24 January had stood. You cannot get judgment effectively on one basis and then at the remedy hearing seek to substitute an entirely different cause of action. In the event, however, that is not the course that matters took). I should say we do not have any draft of the proposed pleading and it is not entirely clear that one was produced. The substance of what was proposed is, however, clear from the skeleton argument.
16. Mr Maynard for his part told Mrs Roberts in advance of the hearing that if the application for relief was successful he would be asking for the remedy issue to be adjourned.
17. The judge proposed, plainly rightly, that the application for relief be heard first. He observed that if it succeeded "we would not be going much further today". He then proceeded to hear submissions. In the course of Mrs Roberts' submissions he observed, apparently departing from his original reaction, that if relief were granted it would be open to him to go on and hear the trial on liability that day: his observation was directed to the issue of what prejudice might be caused if relief were granted. Mrs Roberts agreed, though she mentioned what Mr Maynard had told her about his intention to seek an adjournment. It had also by then transpired that the first defendant was not present, and the judge acknowledged that that could be a problem.
18. At about 1.30 the judge announced his decision, giving a short judgment, to grant the defendants the relief against the effect of the order of 24 January. He then asked whether the parties were ready to proceed -- that is, with the issue of liability. Mr Maynard confirmed that his clients -- in practice he must have meant the first defendant -- were not present. He said that he had tried to contact his solicitor but without success. He said that he was seeking an adjournment, and he made it clear that if the application was unsuccessful he would have to withdraw. He did not spell out why he would have to withdraw, but in the attendance note he says that he was obliged to do so because he had insufficient instructions to defend the claim in the absence of his clients. That is unsurprising: it must be recalled that the hearing had only been fixed to decide remedy and he would not have been instructed, save possibly incidentally, on liability issues.
19. Mr Maynard proceeded to make the application for an adjournment. He relied primarily on the fact that although there was an order for a trial bundle to be served by the claimant's solicitors a week before the hearing -- that is, by the previous Thursday -- it had not in fact been sent by post until the Friday and that it had not, as far as he knew, reached his solicitors; certainly it had not reached him. The claimant's solicitor had attempted to repair the error by sending him a copy of the bundle by email, but he had only received that on the Tuesday afternoon and it was even then seriously incomplete.
20. Mr Maynard did not, in support of the adjournment application, rely as such on the absence of his client from the hearing. The judge did, however, in the course of his submissions ask him why they were not present, apparently on the basis that if they had been present they could have helped him with any queries as a result of the late supply of the bundles. Mr Maynard said that he did not know where they were. We now in fact know, as a result of emails produced by the defendants, that he had advised his instructing solicitors on the Monday that the first defendant need not be present at the hearing. Late on the Wednesday evening -- that is, the day before the trial -- he had sent an email to his solicitors, the effect of which appears to be that the attendance of the first defendant was required after all. It is not known whether or when that message got through to the solicitors or indeed the first defendant. That sequence of events was not communicated to the judge. I am bound to say that I think it should have been, but it would not be fair to be too critical of Mr Maynard without having heard from him.
21. In any event the judge refused the defendants' application. He said that although there had been a breach of the order for delivery of the trial bundle by the claimant's solicitors the defendants' solicitors also bore some responsibility to see that it had been served in time, and that in any event its late service should not have caused Mr Maynard insuperable prejudice. He made the point that all of the documents in the bundle should have been documents that had been disclosed before and whose contents therefore should have been familiar to his solicitors if not to himself. He was concerned about the prejudice to the claimant if the trial were adjourned. He observed that what mattered was that the defendants should have had an opportunity to be heard, but that they had now had that opportunity.
22. Following the refusal of the application Mr Maynard withdrew. The judge, as he had previously indicated that he would, proceeded to hear the trial of the issue of liability. He began by raising with Mrs Roberts her proposed amendment. He suggested that it was really unnecessary because the nature of the claim had been clear all along. That was, as I have already noted, not so: although there had originally been what in substance was a claim for restitution of the £30,000, that claim had been abandoned in two successive versions of the pleading. Mrs Roberts said that she thought that the amendment ought to be made. The judge acceded to that application. I should note the reasons that he gave, which were as follows:

"I will allow the amendment on the basis that even though it is done in the absence now of the defendants and any representations from them it cannot be said in any sense to prejudice them because it simply now reflects what the claim form always reflected, what the earlier particulars of claim reflected and what was always sought. My understand something that the alternative claim for a 35 per cent share of the partnership profits was always a fall back and so I grant the amendment on that basis."

I am bound to say that that way of putting it does not give the priority which ought to have been given to the nature of the case as pleaded.

23. The claimant was then asked to, and did, confirm the contents of his witness statement on oath. He was not asked any supplementary questions. Mrs Roberts said that that proved her case and the judge gave a short confirmatory judgment. He did refer to the witness statements of the first defendant and Mr Islam but he said that he could not prefer their account to that of the claimant, bearing in mind "that they have not attended this trial to confirm the truth of their statements on oath nor have they given the court the opportunity of hearing them cross-examined". On that basis he proceeded to give judgment against both defendants for £30,000 together with interest and costs.
24. The defendants' appeal is expressed in the notice of appeal as being against (1) the judge's decision to allow the particulars of claim to be reamended and (2) his refusal to grant an adjournment. But in substance it must be against the judgment itself, on the basis that those two particular decisions render it unfair for the judge to have proceeded to judgment in the way that he did.
25. Mr Clarke has developed a number of particular criticisms of, separately, the decision to allow the reamendment and the decision to refuse the adjournment; but they to a considerable extent inter-relate. The overarching submission is that it was unfair of the judge to refuse an adjournment in the circumstances as they obtained following his decision to relieve the defendants from the consequences of the order of 24 January 2013.
26. In my judgment that submission is well-founded. It seems to me that the fundamental point to which the judge did not attach proper weight is that the hearing was listed as a hearing for the trial only of the issue of remedy. The parties were entitled to proceed and prepare on that basis and had in fact done so. It is true that if the application for relief succeeded the issue of liability would revive; but it was entirely reasonable for the parties, and more particularly for the defendants, to assume that in that eventuality a fresh hearing would have to be fixed. It was not only that the hearing was only listed for remedy, but a one-day listing -- in practice a half-day after the application had been disposed of -- would patently have been inadequate: the original listing had been for two days. It was clear that at the start of the hearing that was the expectation not only of both parties but of the judge; see his remark which I have quoted above. To go back on that expectation would, subject to one point which I will consider shortly, patently prejudice both parties, and more particularly -- given that it is they who we are concerned with here -- the defendants, who would have to argue issues for which they were not prepared, and in a highly compressed timescale.
27. That main point is reinforced by two particular considerations.
28. First, the judge knew that the claimant wished to proceed on a different basis of law from that which had been pleaded -- that is, with a restitutionary claim for £30,000. Even if it was fair to expect the defendants to deal with liability on the pleaded basis, it is another matter to expect them to deal with an issue which in principle would require different primary facts to be proved and possibly different disclosure. I do not put this point entirely at the forefront, first because it is not clear on the material before us just how different the evidence in relation to the restitutionary claim and the evidence in relation to the claim as pleaded really was, and secondly because it seems from Mr Maynard's email to his solicitors on the evening before the hearing to which I have already referred that he anticipated -- although it is not entirely clear how -- that the claim might now be being advanced as a claim for the return of the £30,000. Nevertheless, the change in the nature of the pleaded case plainly reinforces the unfairness of what had occurred.
29. Mr Clarke also points out that the evidence adduced by the claimant via the witness statement on which the judge relied in giving judgment does not in fact clearly prove a case of total failure of consideration. It was not directed to that issue, and indeed the final sentence of the witness statement reads:

"I now require my 35 per cent of the share of the business from the defendants, together with the profits from November 2007."

It is hard to see how that evidence could justify the relief which the judge in fact gave.

30. Mr Clarke also points out, and I agree, that the only defendant to any restitutionary claim, absent proof of some special facts, would be the first defendant. The second defendant -- that is the company -- was not on the face of it the recipient of the £30,000.
31. The second reinforcing point that I would make is that I am bound to say that I think the judge made too little of the prejudice to Mr Maynard of receiving the bundle only one working day before the trial and in incomplete form. To say that the documents which it should have consisted of would all have been disclosed documents and therefore would have been familiar to his solicitors, if not to him, seems to me, with respect, a little unreal: the trial bundle is the fundamental working tool for the advocate conducting and preparing for a trial. Further, the obligation to supply it was squarely on the claimant's solicitors.
32. It might be said -- and this is the point to which I said earlier that I would have to come back -- that all of those points are more theoretical than real because the first defendant was not in fact present: whatever defence the defendants might have been able to advance on the issue of liability, or indeed on the issue of remedy, could not have got off the ground without his oral evidence, and so the prejudice of being bounced with a liability trial was simply not operative on the facts as they were. It may be that this factor at some level weighed with the judge, although he does not say so, in terms in his decision to proceed. But Mr Khan himself did not place any weight on this point in his submissions to us and I think he was right not to do so. Mr Maynard's initial advice that the first defendant was not needed at what was expected, at most, to be a remedy hearing, and might not even be that if the application for relief was successful, seems with hindsight a little surprising, although it may well be explicable on the basis of the limited information that Mr Maynard had at that time -- he had not, it is clear, received the trial bundle or full instructions. But it is inconceivable that he would have given the same advice if he had known that the judge would or might be deciding the issue of liability.
33. Mr Khan's submissions in support of the judgment were in essence that the decision whether to grant an adjournment was a case management decision within the discretion of the trial judge which on ordinary principles should not lightly be interfered with on appeal. He also referred to the overriding objective and pointed out the waste of costs and of public resources involved in an unnecessary adjournment. But that submission fails to engage with the particular reasons why an adjournment was in the present case necessary in the interests of fairness.
34. For those reasons I believe that the judgment must be set aside and that the case must go back to the County Court for trial. So also, since the decision was taken after the refusal of the adjournment and the consequent withdrawal of Mr Maynard, must the decision to grant permission to reamend. For myself, I can see nothing objectionable in the re-amendment and it may be that if a further application is made in good time it will not be opposed, subject to any necessary ancillary orders. But it cannot be upheld as an order made in the particular circumstances in which it was made.
35. LORD JUSTICE FLOYD: I agree.
36. LORD JUSTICE RICHARDS: I also agree.