England and Wales High Court (Chancery Division) Decisions

Arrow Nominees Inc v. Blackledge [1999] EWHC Ch 198 (2nd November, 1999)

(1) ARROW NOMINEES INC
(2) LORRAINE BLACKLEDGE

(1) GRAHAM BLACKLEDGE
(2) MARGARET BLACKLEDGE
(3) GR & MM BLACKLEDGE

1. This judgment concerns an application to strike out a petition for relief under section 459 of the Companies Act 1985 which is one of three related proceedings pending before this Court the other matters being a cross-petition under section 459 and an action seeking relief for passing off. The substantive hearing of the three matters is due to commence on Tuesday 9^th November and I am the Judge of trial. The hearing of the application to strike out extended over three days concluding on the 25^th October. There are joint petitioners in the petitions sought to be struck out, Arrow Nominees Inc, who hold 24% of the shares in the company in question, Bodycare (Health & Beauty) Ltd on behalf of Nigel Tobias, and Lorraine Blackledge who holds in her personal capacity a further 24% of the issued shares in that company. At the conclusion of the hearing on the 25^th October, I indicated that I was not minded to strike out Lorraine Blackledge as a petitioner but that I would consider over night whether I should strike out Arrow Nominees Inc. In the result on the morning of Tuesday 26^th October I indicated that I was not minded to strike out Arrow Nominees Inc. as a petitioner either. I gave my decisions on the application as soon as possible after the conclusion of the argument before me because of the imminence of the substantive hearing. However because of the unusual facts surrounding the application which raise considerations not dealt with in any reported case to which my attention was drawn in the course of argument I reserved the giving of my reasons. The following therefore are the reasons underlying my decision to decline the relief sought by the respondents to the petition to strike it out or alternatively to enter summary judgment for them on that petition pursuant to their application notice dated the 3^rd September 1999.
2. So that this judgment is complete in itself it is necessary to set out the background to the dispute from which the three sets of proceedings to be tried arise. In the judgment of Mr Justice Rimer given on 27^th August dealing with another interim application in these proceedings he succinctly and sufficiently sets out the background facts. I therefore take my description of those facts from his judgment with some minor alterations.
3. The company at the centre of attention is called Bodycare (Health & Beauty) Ltd ("Bodycare"). It is owned as to 52% by GR & MM Blackledge PLC ("PLC") and as to 24% by Lorraine Blackledge ("Lorraine") and as to 24% by Arrow Nominees Inc ("Arrow") which is a British Virgin Islands company. Arrow is a nominee for a trust in which Nigel Tobias ("Nigel") has an interest, and can for all practicable purposes be regarded as representing his interests. PLC is owned 100% by Graham Blackledge ("Graham") and Margaret Blackledge ("Margaret"). It has four directors: Graham, Margaret, Fidelma Walmsley and Roy McFarlane. Bodycare also has four directors: Graham, Margaret, Nigel and Lorraine. May I make clear that my use of the parties' forenames is adopted for the sake of brevity and I do not thereby intend any disrespect
4. The factual background is complicated and is in material respects in fundamental dispute. The contest is effectively between camps represented by Graham and Margaret on the one hand and by Nigel and Lorraine on the other. In the first of the section 459 petitions Nigel and Lorraine seek to acquire PLC's shares in Bodycare. It is this petition which is sought to be struck out. In the second of those two petitions, which is effectively a cross-petition, PLC seeks to acquire Nigel's and Lorraine's shares in Bodycare. The action (for passing off) is one by PLC against Bodycare.
5. The two companies are engaged in the sale of toiletries. They are, and have been, both very successful. PLC has a long and established wholesale and retail business. It owned and operated stores under the name "Graham's" and in the early 1990s it opened a small number of stores under the name "Bodycare" in the North West of England through which it sold a range of its own brand products under the Bodycare name.
6. The origins of the present litigation derive from the decision by PLC in about 1994 to expand its retail base. It was decided that this should be done through Bodycare, which was then a dormant company which Graham had formed. Nigel and Lorraine were to be involved with this and were to organise the programme of retail site acquisition. PLC was to supply the shops. At least for the first three years PLC was also to supply financial support to Bodycare.
7. Bodycare started trading in 1994. Its operations have since been conducted by Nigel and Lorraine, who have acted as its joint managing directors and have conducted its day to day business. Graham and Margaret, although directors of Bodycare, have played no active part as such. In about 1997 there was a proposal or an attempt to achieve a flotation of the entire group. The attempt failed after which the relationship between Graham and Margaret on the one hand and Nigel and Lorraine on the other appears to have steadily deteriorated. There has developed between them a fundamental dispute as to the basis on which Bodycare was established and as to what Nigel's and Lorraine's expectations in respect of Bodycare were. Nigel and Lorraine claim that they are, as its managing directors, free to make decisions as to its affairs without reference to Graham and Margaret, whom they say have a conflict of interest as directors of both PLC and Bodycare. Graham and Margaret for their part accept that the day to day operation of Bodycare's business has been, and is, under Nigel's and Lorraine's control, but they claim that PLC has always been entitled to a high degree of control over the sales and supply side of Bodycare's business. There is, in particular, dispute as to the terms on which PLC ought to be supplying Bodycare, the particular issue being as to the profit margin which Bodycare should be able to enjoy.
8. It is unnecessary for present purposes to describe the issues between the parties in closer detail. The outcome has been a section 459 petition by Nigel and Lorraine in which one of the complaints has been that PLC has sought to prevent Bodycare from continuing to expand by opening new stores and has sought to reduce its profit margin unfairly or contrary to the parties' alleged agreement. The complaint is that PLC has effectively attempted to acquire all Bodycare's trading and goodwill and to prevent Bodycare from acquiring the benefit of the Bodycare trading name and style. PLC's cross-petition is based upon what is alleged to be Nigel's and Lorraine's unauthorised conduct in seeking unilaterally to cause Bodycare to abandon its established manner of doing business and to seek to cut it loose from PLC' its parent company. The action which is in the nature of a passing off action, has resulted from threats by Nigel and Lorraine to obtain supplies for the Bodycare stores from third parties and to obtain stores unauthorised by PLC.
9. Both the applications before Mr Justice Rimer and the present application derive from the revelation of some disgraceful conduct by Nigel prior to the disclosure of documents which has been given in these proceedings. Disclosure took place earlier this summer. The documents disclosed by Nigel and Lorraine included six letters purportedly written by Nigel about which PLC's solicitors, Eversheds, became suspicious, the suspicions being in part provoked by the appearance on the documents of a telephone code which was not in use at the date which the letters purported to bear. Eversheds raised their concern with Linder Myers who were then acting as solicitors for Nigel and Lorraine, and the outcome was that on the 4^th August 1999 that firm admitted that the letters in question were (as they put it ) "not authentic". Put more bluntly, it is now openly admitted by Nigel that he had forged these letters, the plain inference being that he did so for the purpose of attempting to improve his and Lorraine's case at trial. I make plain that there is no suggestion that Linder Myers were aware of the fact of the forgeries until Eversheds voiced their suspicions and they have since ceased to act for Nigel and Lorraine. Before me it was accepted that there was no evidence implicating Lorraine in Nigel's dishonesty. As the evidence before me shows he did what he did without reference to her and that he sought to deceive her about his activities as much as he sought to deceive everyone else. As a result, she unwittingly associated herself with the list of documents containing the forgeries.
10. Nigel has explained his conduct in an affidavit of the 18^th August, amongst other documents. He there expresses profuse apologies and regrets for his conduct, he says that he does not understand why he did it. I have no doubt that he does greatly regret his actions. But it remains the case that they involved conduct of the most profound dishonesty, involving what was obviously a careful and deliberate strategy on his part to perpetrate a fraud on the court and on all the parties concerned in this litigation, including Lorraine with whom he lives. His fraud involved extracting from the files of some valuers certain original letters he had written to them in 1993 and 1994, retyping them with false and dishonest amendments and then inserting the forged letters in the files in place of the originals. He manufactured afresh two purported letters to a firm of accountants and placed them as pretended originals in the accountants' file. He also added entries to his diaries for the years 1995 to 1997 which diaries were in due course with the forged letters disclosed on discovery with other documents in the case.
11. It is necessary to examine in some detail the evidence describing the giving of disclosure by Nigel and Lorraine whom I will together call the petitioners with the associated acts of forgery by Nigel.
12. The most recent description by Nigel of his forgeries is contained in paragraph 115 to 123 of his witness statement dated the 14^th September of this year. He describes how in late April or early May he borrowed the files of Lambert Smith Hampton ("LSH"). Surveyors employed by Bodycare under his management and the files of Gruber Levinson Franks ("GLF") Bodycare's accountants. He describes how he retyped with additions four letters on the LSH file on Bodycare notepaper to LSH, signed by him, dated the 29^th September and 2^nd December 1993 and 16^th February and 30^th May 1994. He also describes how he brought into existence two fresh letters on Bodycare paper, signed by him, to GLF dated the 3^rd and 18^th May 1994. He substituted the newly created letters to LSH for the true letters on the LSH file bearing those dates which he destroyed. He then returned the file to LSH. He procured the forged letters to GLF to be placed on GLF's file by a Mr Cobb of that firm. At paragraph 118 Nigel describes how at about the same time he made additions to his 1995,1996 & 1997 diaries, recording, as he said, events from his memory a description of which did not appear in the un-altered diaries.
13. Standard discovery was given by Nigel and Lorraine by lists on the 2^nd July. The files of LSH and GLF and the altered diaries from 1995,1996 and 1997 were produced to the respondents as a result of that discovery.
14. Messrs Eversheds the respondents solicitors on becoming suspicious about the forged letters wrote to Messrs Linder Myers the petitioners solicitors on the 28^th July asking for the production of the original file of GLF "from which the letters from Mr Tobias to Mr Cobb dated the 3^rd and 18^th May 1994 were taken, which will include the originals of those letters." The letter also drew attention to the fact that two pages in Nigel's 1997 diary for the 19^th and 20^th February had been torn out as had half the page for the 23^rd May. On the 29^th July Linder Myers responded that they were obtaining GLF's file that day and would inform Eversheds when they had it and that their client, Nigel, did not have the torn out pages from the 1997 diary and did not know where they were. Notwithstanding the assurances as to the production of the GLF file contained in this letter it appears that it was not immediately produced it being later said that it was unavailable.
15. On the 3^rd August Eversheds wrote to Linder Myers repeating their suspicions as to the two letters on the GLF file and expressing suspicions about four letters on the LSH file two of which they had examined at the premises of LSH and were proposing to be subjected to forensic examination.
16. It seems that Nigel went to the offices of Linder Myers early on the morning of the 4^th August. In a fax timed at 4:51 that afternoon Linder Myers wrote to Eversheds :-
17. "We have discussed with Nigel Tobias your letter of the 3rd August 1999 and he has confirmed during today's meeting that those letters to which you have referred, on the file of papers of Lambert Smith Hampton which contain a telephone prefix of 0161 are not authentic. Furthermore the two letters dated the 3^rd and 18^th may 1994 on the file of papers of Gruber Levinson Franks are similarly not authentic.
18. We have advised Mr Tobias that these letters must be withdrawn from the list of documents and a new list of documents filed. Furthermore that we can no longer act for him and we will file after tomorrows hearing a notice of him acting in person."
19. On the 5^th August applications in the proceedings dealing with disclosure came on for hearing before his Hon Judge Howarth he ordered the petitioners to file revised lists of documents verified by affidavit and made orders directing Nigel to search his home and offices for his diaries for 1993 and 1994 which he had said were missing and for the missing pages in the 1997 diary and also for any undisclosed tape recordings of conversations between Nigel, Lorraine and any parties concerned in the case. On the 6^th August Eversheds wrote to Linder Myers in respect of whom notices of change had not by that date been filed. Their letter concludes:-
20. "Lastly, and for the avoidance of doubt, please ensure that Mr Tobias in disclosure affidavits deals with whether the diary entries in each of the diaries disclosed are authentic and made in the diaries on the dates on which they appear in the diaries."
21. On the 18^th August Nigel swore an affidavit in response to Judge Howarth's order. In it he deposes that there was only one relevant tape recording which he failed to disclose and that one of the tapes had been edited by him to exclude certain distressing personal material which was said to be irrelevant. He also states that he was "certain that the tearings from the diaries from my 1997 diary dated 19^th and 20^th February and 23^rd May 1997 were entirely innocent and innocuous. They were probably for the purpose of taking a piece of paper with me with directions on it or such like. The tearings were nothing to do whatsoever with these proceedings." He reiterates that the 1993 and 1994 diaries have been mislaid. At paragraphs 4(1) to (3) he describes the forgeries of the letters to LSH and GLF and then at paragraph (4) says:-
22. "(4) I have given disclosure of my 1995, 1996 and 1997 diaries. At the same time that I added to/created the letters referred to above I added to these diaries by locating some of the dates of my meetings with Graham Blackledge and adding in from memory notes of what took place. Regrettably I cannot now distinguish between my genuine contemporaneous notes and the ones that I have added in. The majority of the notes were written at the time of the meetings as were manuscript notes on two pieces of paper stapled into the diary on the 18^th November 1997 and 27^th November 1997 the latter having since come away but been kept together with the diary. This represents the sum total of the evidence I have created."
23. At paragraph (5) having tendered an apology for his behaviour he adds "I did not at any time tell Lorraine Blackledge what I had done until the day that Eversheds wrote to Linder Myers, I think on the 3^rd August 1999, regarding the authenticity of certain documents."
24. There then follows Nigel's witness statement of the 14^th September to which I have already referred. At paragraph 119 of that statement he says "I have not tampered with any other documentation relating to this or any other matter in my entire life." At paragraph 121 he describes telling Lorraine about the forgeries and the effect of that disclosure upon her. At paragraph 122 he describes informing his younger brother Joel about the forgeries on the 4^th August who appears, as a result, later that day, to have consulted a forensic scientist. It is Nigel's and Joel's case that the purpose of that consultation was to see whether it was possible to tell which of the diary entries had been forged and which were true. On the same day Lorraine signed a witness statement containing 261 paragraphs dealing mainly with the merits of the issue between the petitioners and respondents. At paragraphs 257 to 260 she describes how Nigel first told her about the forgeries on the 3^rd August and the events immediately following on his doing so.
25. Meanwhile on the 3rd September this application had been issued and on the 14^th October Nigel signed a further witness statement in answer to the respondents evidence supporting their application to strike out. Paragraphs 7 onwards of that statement reads:-
26. "7 On the evening of the 3^rd August 1999 I informed Lorraine of what I had done with the LSH and GLF letters and my diaries. Between 6 and 7am on the 4^th August 1999 I went to Bernard Seymour's office at Linder Myers and informed him of the same. I am not prepared to waive privilege as to the context of my conversation with Mr Seymour unless or until I am advised that this is necessary. However Linder Myers decided that they could no longer act for me. Overall the events of that day remain very much of a haze although I do recall being asked to sign two or three draft letters which Linder Myers wanted to sent to Eversheds. I signed these without really reading them.
27. Mr Gold [of Eversheds whose witness statement is the primary evidence in support of this application] considers that my inability to identify the changes I made to my diaries is surprising. However when I made the changes I did not take notes. The changes that I undertook added entries on a few occasions when there were none in relation to events which I new had taken place but which I had made no note of in my diary. I did not keep a separate note of these entries and I am simply not able to tell which ones are which. In percentage terms the changes are less than 5% of my diaries. At least 95% of my diary entries are genuine and contemporaneous.
28. At paragraph 20 of his witness statement Mr Gold points out inadequacies in my explanations concerning the forgeries. I do not recall seeing Eversheds letter to Linder Myers of the 9^th August 1999 and I had not appreciated the question posed by Mr Gold had remained unanswered by Linder Myers who were not acting for me. I do confirm however that save for what has already been acknowledged by me, no other documents have been tampered with, forged or removed from files and/or are otherwise not authentic. My 1993/1994 diaries are lost and were lost well before this litigation commenced. I have not created any further evidence. As far as I am aware nobody else on my behalf has created evidence."
29. On the same day Lorraine signed a witness statement which contains the following paragraphs:-
30. "3 I signed the disclosure statement at Linder Myers' office on the 2^nd July 1999. It was very much a last minute thing and I was not referred to the documents at that time. I had no knowledge at that time of any forged documents. If it is suggested by Mr Gold that I in any way condone what has transpired with the documents then his suggestion is rejected. I know that to have forged documents is completely out of Nigel's character and my supporting Nigel through this difficult period is only natural in the circumstances. It has however been misunderstood.
31. I recall seeing a Gruber Levinson Franks ("GLF") letters although I cannot specifically remember whether I saw these at Linder Myers' offices or whether Mr Seymour sent the letters to us. The documentation in this case is voluminous and I recall no conversation between Nigel and Mr Seymour concerning the GLF letters. I do not believe I saw the Lambert Smith Hampton ("LSH") letters before learning of their altered status after 3^rd August 1999."
32. In the course of the hearing before me I was informed that as a result of permission obtained from this Court, disclosure of the forgeries has been made to the police and that Nigel has been charged with offences as a result.
33. In his judgment in Allen v Alfred MacAlpine and Sons Ltd 1968 2QB at p259 Lord Justice Diplock contemplated that the Court might strike out a claimant's case where his breach of the rules "has been intentional and contumelious...". In his speech in the House of Lords in Birkett v James 1978 AC at p 318 he said :-
34. "The power [to strike out] should be exercised only where the Court is satisfied either (1) that the default has been intentional and contumelious e.g. disobedience to a peremptory order of the Court or conduct amounting to an abuse of the process of the Court... or that there has been an inordinate and inexcusable delay... ."
35. The first question at issue on this application was whether it is a proper exercise of the Courts power to strike out proceedings before it on the grounds of breach of the rules or generally abuse of its process where the Court could be satisfied that the abuse had as far as possible been remedied and there was no significant risk that a fair trial of the issues between the parties could not thereafter take place. In short whether the word "contumelious" when used by Lord Diplock meant "deliberate and continuing" or simply "deliberate".
36. In Logicrose Ltd v Southend United Football Club Ltd, unreported save in the Times of the 5th March 1988 where judgment was given on the 5^th February 1988 Mr Justice Millet, as he then was, considering an application to strike out a plaintiff's action in the middle of the substantive hearing on the ground that Mr Harriss the responsible director of the plaintiffs had "deliberately suppressed [a crucial document] and, for a time, successfully concealed its existence from the Court." Mr Justice Millet is recorded as saying this in his judgment:-
37. "That is a very serious allegation indeed if true it would deserve the serious consequences for which the defendants ask, but it must be clearly proved. Despite Mr Nugee's submissions to the contrary on behalf of the plaintiffs, I am satisfied that it does not have to be proved in accordance with the criminal standard of proof. Deliberate disobedience of a peremptory order for discovery is no doubt a contempt and, if proved in accordance with the criminal standard of proof, may, in theory at least, be visited with a fine or imprisonment. But to debar the offender from all further part in the proceedings and to give judgment against him accordingly is not an appropriate response by the Court to contempt.
38. It may, however, be an appropriate response to a failure to comply with the rules relating to discovery, even in the absence of a specific order of the Court, and so in the absence of any contempt, not because that conduct is deserving of punishment but because the failure has rendered it impossible to conduct a fair trial and would make any judgement in favour of the offender unsafe.
39. In my view a litigant is not to be deprived of his right to proper trial as a penalty for his contempt or his defiance of the Court, but only if his conduct has amounted to an abuse of the process of the Court which would render any further proceedings unsatisfactory and prevent the Court from doing justice. Before the Court takes that serious step it needs to satisfied that there is a real risk of this happening."
40. The Judge then rehearsed the history of disclosure in the case and at a point in that description said:-
41. "At that stage on the evidence of Mr Jenner, it was clearly an application [to strike out] which was justified. It was a reasonable response to the evidence which had just been heard. There was at least prima facie evidence that Mr Harriss had asked specifically for and been given the flimsy – a crucial document about which he had already been cross-examined – and that he had deliberately suppressed it."
42. However after the application to strike out was made the relevant document was produced. Mr Harriss and Mr Jenner, who had both had possession of the document were extensively cross-examined in front of the Judge. In the result the Judge came to the conclusion that he was not justified on the evidence before him in finding that Mr Harriss was guilty of deliberately suppressing the document. He said this on the penultimate page of the transcript of the judgment with which I have been provided:
43. "Since I propose to allow the action to continue, I shall say only that it is quite impossible for me to be satisfied on the evidence before me at this stage that Mr Harriss deliberately attempted to suppress the flimsy. For that reason alone I dismiss the application. ...
44. But I ought to add this. I would, in any event, have refused to accede to this application once the missing document had been produced. The object of order 24 rule 16 is not to punish the offender for his conduct but to secure the fair trial of the action in accordance with the due process of the Court (see Husband's of Marchwood Ltd v Drummond Walker Developments Ltd 1975 1 WLR603). The deliberate and successful suppression of a material document is a serious abuse of the process of the Court and may well merit the exclusion of the offender from all other participation in the trial. The reason is that it makes the fair trial of the action impossible to achieve and any judgment in favour of the offender unsafe. But if the threat of such exclusion produces the missing document, then the object of order 24 rule 16 is achieved. In my judgment an action ought to be dismissed or the defence struck out (as the case my be) only in the most exceptional circumstances once the missing document has been produced and then only if despite its production, there remains a real risk that justice cannot be done.
45. This might well be the case, for example, if it was no longer possible to remedy the consequences of the document's suppression despite its production, perhaps because a material witness who could have dealt with the document had died in the meantime, or where, despite the production of the document, there was reason to believe that other documents had been destroyed or remain concealed. But I do not think that it would be right to drive a litigant from the judgment seat without a determination of the issues as a punishment for his conduct, however deplorable, unless there was a real risk that that conduct would render the further conduct of proceedings unsatisfactory. The Court must always guard itself against the temptation of allowing its indignation to lead to a miscarriage of justice. In my judgment there is no risk of injustice if I allow the trial to continue."
46. In re Jokai Tea Holdings Ltd in which judgment was given in January 1989 in the Court of Appeal and which is reported as a note in 1992 1WLR at p1196 the Court of Appeal was considering a case where an "unless order" for the service of particulars of defence was a not obeyed but application was made to amend the defence involving the abandonment of the paragraphs of which particulars had been ordered. The Court of Appeal in allowing the case to proceed gave leave to amend the defence. Lord Justice Parker in his judgment at page 1206 says this:-
47. "... it appears to me that there must be degrees of appropriate consequences even where the conduct of someone who has failed to comply with a penal order can properly described as contumacious or contumelious or in deliberate disregard of the order, just as there are degrees of appropriate punishments for a contempt of Court by breach of an undertaking or injunction. Albeit deliberate, one deliberate breach may in the circumstances warrant no more than a fine, whilst another may in the circumstances warrant imprisonment. In each case all the circumstances must be taken into account including the nature of the relief which is sought by the party in default. It is one thing for a plaintiff who has been struck out for want of prosecution to issue a writ claiming precisely the same relief the next day. It is quite another for a defendant to raise an arguable defence not previously before the Court and thus in no way associated with the penal order. It is plain on the authorities that albeit with caution, a defendant whose defence has been struck out for failure to comply with a penal order can in appropriate circumstances, be permitted to continue the very same defence of which particulars were ordered. It is in my view clear that, albeit there must still be caution, the position of a defendant who seeks only to rely on a defence which was not subject to the penal order particulars and to raise an arguable defence not previously raised is stronger. To shut out a new arguable defence would require more heinous conduct than would be required to justify a refusal to reinstate the very defence of which particulars had been ordered. In essence, the question in each case must be whether the punishment fits the crime."
48. The decision of Mr Justice Millet in Logicrose was not cited to the Court of Appeal in this case. It is not clear what sort of "more heinous" conduct was contemplated by Lord Justice Parker as being sufficient to justify the striking out of an otherwise arguable case and if, he would have contemplated such striking out in circumstances where the Court could be satisfied that there was no serious risk that there could not be a fair trial.
49. In Landauer Ltd v Comins & Co (a firm) in which judgment was given on the 14^th May 1991and is only briefly reported in The Times, but of which I was provided with a full transcript of the judgments, the Court of Appeal was considering a case where the first instance Judge had struck out a claim under the provisions of order 24 rule 16(1) in circumstances where a number of relevant documents did not appear on the plaintiffs list of documents and were found to have been destroyed, the destruction having taken place after the commencement of proceedings, and in respect of some of the documents, after the plaintiffs list of documents had been filed.
50. The decision of Mr Justice Millet in the Logicrose case was cited and referred to in the judgment of Lord Justice Lloyd which was the lead judgement of the Court.
51. In the course of giving judgment Lord Justice Lloyd drew attention to the fact that "this is the first occasion on which a claim has been stuck out for breach of a discovery obligation".
52. In the result the Court of Appeal upheld the judges order striking out the claim on the basis that he was "fully entitled to find that there was a serious risk that essential documents may have been destroyed in this case, as a result of which a fair trial of the action is no longer possible... ." In doing so Lord Justice Lloyd said in discussing a submission made to him:-
53. "It may be that the submission means no more than this, that where documents have been deliberately suppressed, it may be relatively easy to draw the inference that they are highly material and that in the absence of those documents justice cannot be done. If that is all that was meant, then I would agree."
54. However Lord Justice Lloyd then continued:-
55. "There was however some discussion in argument before us as to what would have been the position if the documents had been destroyed in knowing disregard of the plaintiff's obligation as to discovery. I find some difficulty in seeing how, if the sole question is whether a fair trial can still be held the conduct of the plaintiffs in destroying the documents, whether it was merely inadvertent or whether it was in knowing disregard of their obligation as to discovery and therefore more blameworthy, can be fitted into the equation. But the question does not arise in the present case. It will need careful consideration when it does arise.
56. In Logicrose Millet J said that it was no part of the function of the Court in exercising its discretion under order 24 rule 16 to punish the party in default. In all ordinary cases that must be so. But I can imagine cases of contumacious conduct such as the deliberate suppression of a document, which might justify the striking out on the analogy of striking out for want of prosecution under order 25 rule 1(4) even if a fair trial was still possible. I use the word "contumacious" with the encouragement of my Lord Sir John Magaw since it expresses the required meaning more accurately than "contumelious" the word more commonly used and originally, I believe, used by Diplock LJ in this connection."
57. That is a reference back to the judgment of Sir John Magaw in The Jokai Tea case to which I have already referred where he said at page 1206 of the report:-
58. "The conduct of the defendants, having regard to the circumstances, could not be described as "contumelious". With all respect, it seems to me that the word "contumacious" would be more apt than "contumelious" in the passage in Lord Diplock's discussion of the effect of the failure to comply with a peremptory order in Allen v Sir Alfred MacAlpine... . "Contumacy" means "perverse and obstinate resistance of authority". Surely it is that characteristic not "insolent reproach or abuse" which is a frequent hallmark of a litigants failure to comply with a peremptory order?".
59. It is clear that these final passages in the judgment of Lord Justice Lloyd in the Landauer case are obiter. In any event if the word "contumacious" is the proper word to justify striking out a case notwithstanding that a fair trial was still possible then, on the meaning given to that word by Sir John Magaw it would seem that the breach must be shown to be a continuing breach as well as deliberate.
60. In London Borough of Lambeth v Blandford in which judgment was given on the 20^th May 1997 the Employment Appeal Tribunal chaired by Mr Justice Lindsey was considering an order striking out Lambeth's case for failure to comply with orders for directions made by the Tribunal. On the question of the circumstances in which a striking out would be justified under rule 4 of the Tribunal rules the Logicrose case was cited. In giving the judgment of the Appeal tribunal Mr Justice Lindsey said, having reviewed that case, :-
61. "We, for our part, would doubt whether Virdee [another decision of the Appeal Tribunal] is not a little too favourable to someone in Lambeth's position because it is plainly the case, on authority, that if there is deliberate and wilful contumacious disobedience of an order of the Court then the person so responsible for such behaviour can find his or her case struck out, notwithstanding that a fair trial might still be possible. But where conduct of that high degree of blameworthiness is not proven, then the test suggested by the EAT in Virdee, we would say, is correct, namely that the Court has to consider whether any judgment ultimately obtained could not be considered to be fair between the parties. Here, there was and is no evidence that the substantive hearing in this case would necessarily, in the events that had occurred by the 2^nd December 1996, have been unfair, or would be unfair, by reason of Lambeth's delays and failures in relation to their non-compliance with the order."
62. Finally in re Swaptronics Ltd unreported, in which judgment was given on the 24^th July 1998 Mr Justice Laddie was considering an order for directions in a section 459 petition between a husband and a wife where "unless orders" had been made that unless the petitioning wife serve her expert evidence and exchange her witness statements by set dates she be debarred from adducing expert evidence and/or from adducing evidence of the facts. The petitioner having failed to provide the evidence by those dates the Court was dealing with an application to strike out the petition for want of prosecution or as an abuse of process. It was accepted by the parties that the application was not properly to be treated as an application to strike out for want of prosecution rather it was to be treated as an application to strike the petition out because there was no real prospect of its succeeding having regard to the failure by the petitioner to comply with these orders and so not being in a position to adduce expert or factual evidence.
63. The Judge having dismissed a number of arguments reached the question "must the petition be struck out in there has been breach of a Court order by the petitioner?" his judgment continues:-
64. "It seems to me that there is another, and more fundamental, reason why this application should fail. I do not accept the second part of the respondents argument, namely that a consequence of being in breach of a Court order is that the petitioner must be shut out from pursuing her petition".
65. The Judge then considered the rule illustrated by the judgments of the majority of the Court of Appeal in Hadkinson v Hadkinson 1952 P p285:-
66. "That anyone who disobeys an order of the Court (and I am not now considering disobedience of orders relating merely to matters of procedure) is in contempt and may be punished by committal or attachment or otherwise. The second is that no application to the Court by such a person will be entertained until he has purged himself of his contempt. It is the second of these consequences which is of immediate relevance to this appeal. The rule in its general form cannot be open to question." per Romer LJ.
67. Romer LJ went on to confirm that this general or ordinary rule applied unless the person in contempt brought himself within one of the exceptions to it. It is noticeable that the prohibition was imposed without regard to the strength or weakness of the contemnors claim or defence. The issue which determined whether he would be refused a voice in the litigation was the flagrancy of his breach of the Courts order. It follows that a plaintiff with a strong claim or a defendant with a good defence could be prevented from pursuing his rights or defending his actions as a punishment for being in contempt. This might well concentrate the contemnors mind but in some cases it would amount to a punishment far in excess of any fine or other financial penalty which the Court would normally impose for breach of its orders. More than that, it means that the Court would be prepared to contemplate a miscarriage of justice for the purpose of punishing those who breach its orders. This is an un-appealing way in which to exercise the Court's power over litigants and the proceedings before it. Two wrongs do not make a right. For reasons set out below it appears to me that Romer LJ 's views, and the passage taken out context from Jokai, do not represent the modern attitude in this area."
68. Mr Justice Laddie then refers to the judgment of Denning LJ in The Hadkinson case where he says:-
69. "The earlier cases seem to me to point the way to the modern rule. It is a strong thing for a Court to refuse to hear a party to a cause and it is only to be justified by grave considerations to the public policy. It is a step which a Court will only take when the contempt itself impedes the course of justice and there is no other effective means of securing his compliance... I am of opinion that the fact that a party to a cause has disobeyed an order of the Court is not of itself a bar to his being heard, but if his disobedience is such that, so long as it continues, it impedes the course of justice in the cause, by making it more difficult for the Court to ascertain the truth or to enforce the orders which it may make, then the Court may in its discretion refuse to hear him until the impediment is removed or good reason is shown why it should not be removed."
70. Then later in his judgment Mr Justice Laddie says:-
71. "I can see no need for additional powers [over and above punishment by fine imprisonment etc] to prohibit a party who is obdurately in contempt by reason of his contempt from enforcing his civil rights or from defending himself against civil claims made against him. A person guilty of the most disgraceful persistent crimes is not prevented by reason of those activities form enforcing or defending civil litigation. That is so even if he is continuing to threaten to commit a criminal act. If a persistent and serious criminal is allowed to litigate, why should a person in contempt of Court be prevented from doing so? I cannot see why it is necessary to treat him as a pariah because he has offended a Court. It is all too easy for a Court to be impressed by its own status. Sir Robert Megarry's miscellany at Law records that in 1631 a litigant who threw a brickbat at a Judge, but missed, had his right hand chopped off and nailed to the gibbet on which he was thereafter hanged in the presence of the Court. I am not sure what would have happened to him had his aim been better. In any event, we have come a long way since then. The Courts need powers of punishment with which to enforce their orders. The ones they have at present are adequate. They do not need a power which deprives a litigant of his right to litigate. Indeed it seems to me that were the Courts to refuse to allow those in contempt access to the Court simply on the grounds that they are in contempt they could well be acting in breach of the provisions of Article 6.1 of the European Convention on Human Rights which entitles everyone to the determination of his civil rights by means of a fair and public hearing before an independent impartial tribunal. The "everyone" in that article is not subject to an exception in respect of people who are guilty of serious offences or contempt of Court... Where an action or inaction by a party seriously interferes with the fair conduct of a trial as well as being in contempt of an order of the Court it is the former consideration not the latter which justifies the Court in taking the steps either of staying the proceedings or, where appropriate, striking out the parties claim or defence. The way that this would work in practise may be illustrated by reference to the example of discovery. If a litigant destroys relevant documentation, thereby frustrating his obligation to give discovery, the Court may strike out his claim or defence as the case may be "if there is a real or substantial or serious risk that a fair trial is no longer possible" see Landauer v Comins. The corollary is that if the destruction of discovery documents does not represent a threat to the trial the claim or defence will not be struck out. If the destruction of the documents occurs in circumstances which make it a contempt of Court it is almost inevitable that the contempt cannot be purged. In such a case if the contempt does not threaten the fairness of the trial then it should proceed even though the litigant no doubt will be penalised for his actions."
72. In the light of this authority I conclude that it is not a proper exercise of the Courts power under the rules or its inherent power to strike out a claimants case where the claimant has been found to be in contumacious breach of the rules or an order of the Court or even is guilty of conduct amounting to a fraud on the Court and so a gross contempt, if it can be shown that notwithstanding the claimants conduct there is no substantial risk that a fair trial of his claim cannot follow. In my judgment the applicable rule is to be found in the judgment of Mr Justice Millet in The Logicrose case. It does not seem to me that the decision of the Court of Appeal in the Jokai Tea case and Landauer case bind me to take a contrary view. I agree with the conclusion of Mr Justice Laddie in The Swaptronics case that to conclude that a contemnor should have his case struck out by reason of his contempt notwithstanding that the Court takes the view that a fair trial can follow is likely to be a breach of Article 6.1 of the European Convention on Human Rights as being a breach of the contemnors right to a "the determination of his civil rights and obligations" at "a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law." Plainly to strike out a contemnors case where the Court takes the view that the acts constituting a contempt lead to a real risk that a fair trial cannot happen would not constitute a breach of the article.
73. I therefore turn to the question of whether I can be satisfied on the evidence before me at this stage that there is a significant risk that a fair trial cannot now take place. The submissions to me that I ought to find that such a risk is present which were forcefully made by Mr Freedman on behalf of the respondents may be summarised in this way:-
74. Whereas the GLF letters involved the insertion of wholly new forged letters into the GLF file the forgery of the LSH letters involved the destruction of the original and we now only have Nigel's word, that of an admitted fraud, as to the form that his alterations took.
75. It is hardly likely that Nigel would have run the risks involved in destroying the LSH letters and substituting forged letters in place unless the original letters contained matter which is significantly damaging to the case he seeks to present in the proceedings. The Court is therefore entitled to infer that the destroyed letters contained material significantly damaging to Nigel's case. The respondents cannot now have that material with which to cross-examine Nigel. They will simply be faced with Nigel's assertion that the originals were similar to the forged substitute letters without the passages which he admits he added to them.
76. The same considerations apply to the admitted forgery of entries in Nigel's diaries for the years 1995,1996 and 1997.
77. The only forgeries which Nigel has admitted are those in respect of documents which the respondents solicitors pointed out to him and his advisers as being suspicious. It follows that the Court cannot be sure and there must be a significant risk that there are further documents which have been disclosed by the petitioners which Nigel has forged but which have not been discovered.
78. These are formidable points but I have come to the conclusion that on the evidence as it stands before me I cannot be satisfied that there is a significant risk that a fair trial of the petitions and the actions is not possible. The forged letters to LSH were addressed to Mr Royle of that firm. Mr Royle has filed a brief witness statement which does not deal with the matter of the forged letters to him. I am told that Mr Royle is to be asked to file a further witness statement dealing with this subject and I am assured that he will be called at the trial. I am also told that investigation will be made of LSH correspondence records to see whether in fact any response was made by Mr Royle to any of the four original and now destroyed letters from Nigel of which he subsequently produced forged replacements. There are no such responses from LSH in the documents in evidence before me. It seems unlikely that four letters written by Nigel to LSH or Mr Royle should have received no reply of any kind. From those replies and, in particular any reply to the letter of 30^th May 1994, which was substantially altered by Nigel, may indicate what those letters originally dealt with.
79. I do not think that it is quite fair to contend on the evidence as it stands that Nigel confessed to having altered his diaries only when it became apparent that the respondent solicitors had persuasive evidence that the diary entries had been added to by him. In any event I am told that it may well be possible with the assistance of forensic scientists to demonstrate which of the entries in the diaries are original and which modern.
80. As with most cases the documents in the case will be of importance in establishing the facts and intentions of the parties to this litigation, in particular, whether the petitioners or the respondents account of what the agreement or understanding between the parties was pursuant to which Nigel and Lorraine took shares in Bodycare and devoted their time and energies to promoting that companies welfare is correct. As a result of his actions Nigel and Lorraine will be under the disadvantage that to the extent that the documents assist their case there will always be a question mark over their reliability whereas there will be no similar justification for such consideration in respect of documents which may support the case of the respondents.
81. I do not take the view that the respondents have shown any other examples of intentional breaches of the disclosure obligation by the petitioners in particular they have not been able to point to a suspicion that another particular document or class of document has been suppressed. It may be that cross-examination directed to the disclosure of documents surrounding the "Braehead" transaction will reveal an intention by Nigel to suppress relevant documents embarrassing to his case in particular the "peak projects proposal" of the 12^th January of this year. As matters stand I cannot be satisfied that Nigel intended to suppress that document which has been produced albeit late.
82. I must emphasise, however, that I have dealt with this application on the evidence before me at the moment. That is not the end of the matter. If in the course of the trial further evidence emerges that there have been breaches of the disclosure obligations by the petitioners and, in particular, that other documents have been suppressed or fraudulently altered, the application to strike out can then be renewed and is highly likely to be successful because it will lead the Court to take the view that contrary to Nigel's denials he has not made a clean breast of his fraudulent activities. It is plain that cross-examination at the trial directed to the insufficiency of disclosure will be permitted notwithstanding the general rule that a party cannot seek to go behind, at an interlocutory stage a parties oath confirming disclosure. Such cross-examination could have been sought in the present application because there is an exception to that rule so that cross-examination will be permitted where a party has admitted breaches of the disclosure rules. See per Lord Justice Stewart Smith in Fayed v Lonrho CA unreported where judgment was given on the 14^th June 1993.
83. The position of LORRAINE
84. There could only have been an argument for the striking out of Lorraine as a petitioner in the event that I had come to the conclusion that Nigel should be struck out as a petitioner on the basis that there was a serious risk that a fair trial of the petition could not take place as a result of his fraudulent actions. I have not come to such a conclusion.
85. These are the reasons which led me to announce to the parties at the end of the argument on this application that I would not accede to the relief sought by the respondents to Nigel and Lorraine's petition set out in their application notice of the 3^rd September. On that occasion I also announced that I would consider the appropriate steps for the Court to take to mark Nigel's admitted contempt of this Court after I have given judgment in the proceedings.