England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LEEDS DISTRICT REGISTRY
MERCANTILE COURT

		30 October 2006

1. Introduction

1. This is an application by the Claimants and Part 20 Defendants to set aside an order of Judge Langan QC on 7^th June 2006 when the claims of the Claimants and Part 20 Defendants were dismissed and their defences to the First Defendant's Part 20 claims were struck out. As a result judgment was entered against the Claimants on the First Defendant's Part 20 claims (with a direction for damages to be assessed); and the costs of Puccino's Limited ("Puccino's") were ordered to be paid by the Claimants.
2. It will be necessary to consider the history of the proceedings in some detail later in this judgment. For present purposes it is sufficient to note that the Judgment was entered as a result of what was said to be the repeated failure by the Claimants and Part 20 Defendants to comply with their disclosure obligations; culminating in their failure to comply with an Unless Order that had been made by Judge Langan QC after a contested hearing on 5^th May 2006.
3. The Claimants and Part 20 Defendants do not accept that they were in breach of the Unless Order. If they were in breach they contend that the breaches were technical only and/or were breaches by Janak Patel (the First Part 20 Defendant) only. They contend that they should be granted relief from sanctions.
4. Puccino's contend that it is plain that the Claimants and Part 20 Defendants are in breach of the Unless Order; that breaches are serious and by no means technical. Indeed the breaches are so serious that is now impossible for them to comply with their disclosure obligations. It is a case where there have been repeated and serious breaches of orders of the Court and it is not appropriate for there to be an order for relief against sanctions.

2. Representation

5. The Claimants and Part 20 Defendants were represented by James Barker instructed by Miss Liz Egarr of Runhams. Puccino's were represented by Robert Anderson instructed by Miss Fiona Gillett of Baker & McKenzie LLP. Both Counsel produced extremely full and clear skeleton arguments. I am most grateful to them.
6. The argument before me lasted for a day. Most of the morning was taken up by a careful analysis by Mr Barker of the history of litigation. After the luncheon adjournment and before completing his submissions Mr Barker informed me that his instructions and those of Miss Egarr had been withdrawn. He therefore applied for the application to be adjourned. The application was opposed and refused. I shall not repeat my reasons. Mr Barker then informed me that his instructions had been renewed for the purpose of continuing the application but no further.

3. The Litigation

7. Neither Counsel thought it necessary to take me to the pleadings in relation to the numerous issues in dispute. However paragraphs 2 to 4 of Mr Barker's skeleton argument contain a summary that I am content to adopt for the purpose of this judgment.

2. The proceedings involve a number of commercial agreements made between the parties in the period from September 2003 to March 2004. The First Defendant ("Puccino's") ran a coffee bar and restaurant and franchise business in the U.K. The Second Defendant ("SZEW") runs a similar business on the Continent and in 2004 it acquired a majority shareholding in Puccino's. The Claimants are all either members of, or corporate vehicles of, the Patel family. A number of franchise agreements were made between Puccino's and SZEW as franchisors on the one hand, and the 1^st to 4^th and 6^th Claimants as franchisees on the other. Separate agreements were made in

relation to the letting and refurbishment of various premises from which the franchise businesses were to be carried on.

3. The Claimants claim that Puccino's and SZEW have breached their contractual obligations: in particular the Claimants say that there has been a wrongful failure to refurbish the various premises from which the businesses were to be carried on, as a consequence of which large losses have been suffered. Puccino's and SZEW deny the claims against them and Puccino's brings a counterclaim in which it claims to have suffered large losses by reason of the Claimants' alleged breaches of the various agreements. Puccino's also brings claims against the Part 20 Defendants: one of the allegations in the Part 20 claims is that the First and Second Part 20 Defendants, Janak Patal and Bizmaker Ltd, have breached fiduciary duties which they owed to Puccino's (they having been appointed as Puccino's' agents) by preferring the interests of the Claimants in dealings which they had with the Claimants on Puccino's' behalf. The Part 20 Defendants deny Puccino's' claims and they (except for Janak Patel) have in their turn made Part 20 claims against Puccino's.

4. The numerous claims and counterclaims are too detailed to be easily summarised. For present purposes it suffices to say that the proceedings raise a large number of substantive and complex issues between the parties: the Claimants and Part 20 Defendants stand a real prospect of success, and large amounts of money are at stake. It has previously been estimated that the trial of these issues would take 15 days. The voluminous pleadings are in bundle A1.

8. During the course of the hearing I was told that SZEW have not been properly served with the proceedings and are thus not parties. Certainly they have taken no part in the proceedings. Secondly I was told that the amounts involved in the claim are substantial. According to Mr Barker the claim is valued at between £5 million and £7 million and the Part 20 Claim at between £1 and £2 million.
9. It is important to note from this summary that there are hotly contested allegations of breach of fiduciary duty against Janak Patel. Janak Patel has alleged that the transactions between him (on behalf of Puccino's) and the Claimants were conducted at arms length and that documents in his possession were kept separate from those in the possession of the Claimants. As I have said Puccino's do not accept this. They recognised however that disclosure would be very important in establishing their claim. They also took the view that the precise provenance of documents that were disclosed would be of importance as it would shed light on how far documents were in fact kept separate.

4. History of the Proceedings

4.1. The Pleadings

10. The proceedings were issued on 4^th February 2005. The Particulars of Claim was served in April 2005 and amended in July 2005. The Defence and Part 20 Claim was initially served in July 2005 and amended on 18^th August 2005. On 20^th September 2005 there was a Reply to the Defence. On 26^th September 2005 there was a Reply to the Defence to the Part 20 Claim.
11. It is to be noted that there are 11 different parties comprising the Claimants and Part 20 Defendants.
12. In July 2005 there were contested proceedings for security for costs. In the event both sides were ordered to provide some £75,000 security for costs to the other. The Claimants were ordered to pay £15,000 of the costs of the application. These were paid, though not on time.
13. There were a number of minor breaches of court orders by the Claimants. Thus orders for costs were paid slightly late and one order for costs in the sum of £175 was paid very late. None of these breaches are of any real significance in this application.

4.2. The Order dated 22^nd November 2005.

14. On 22^nd November 2005 there was a CMC before myself on an Interim Application Day. The orders were largely consensual and included orders that:

1) The Part 20 Defendants should reply to the First Defendant's Part 18 request for further information by 4 pm on Monday 12^th December 2005.

2) All parties should provide "full disclosure of documents (to include all 4 categories referred to in the Peruvian Guano case) by way of lists by 4 pm on 17^th February 2006".

15. The order for disclosure is central to this application. It is to be noted that both sides recognised the importance of disclosure in that the order was for the old fashioned Peruvian Guano type disclosure.
16. It is also to be noted that as part of the order the trial was fixed for 15 days commencing on 13^th November 2006.
17. The further information was not provided by 12^th December 2005 and on 19^th January 2006 Judge Kaye QC made an unless order requiring that it should be provided by 4 pm on 26^th January 2006. On 26^th January 2006 responses to the request for further information were served. A number of documents were served as part of the response.

4.3. Disclosure on 17^th February 2006

18. On 17^th February 2006 Runhams purported to serve a single list of documents on behalf of all 11 parties it represented. There is a dispute as to what was served on that day. It is common ground that the list as served was verified by Miss Egarr and not by the parties themselves. Furthermore it purported, on its face to be a list of documents "relevant to the issues involved". It thus purported to be only standard disclosure.
19. The list was initially sent by fax to Baker & McKenzie. It is plain that what was faxed comprised a document of only 22 pages. The Schedule to the faxed list comprised only some 484 documents.¹
20. It is now plain that in addition to the Schedule of 484 documents ("the Original Schedule") there is in existence an Additional Schedule comprising some 5 pages and a further 80 documents. There is a dispute as to whether the Additional Schedule was served on 17^th February 2006.
21. It is clear that the Additional Schedule was not included with the list that was sent by fax. The fax has been retained by Baker & McKenzie and comprises only 22 pages. Miss Gillett says that the first time that she saw the Additional Schedule was as an exhibit to the witness statement of Miss Egarr served on 21^st August 2006.
22. Miss Egarr believes that the Additional Schedule was served on 17^th February 2006. In her witness statement she identifies the documents as being documents examined to prepare the Further Information that had been requested. She says that the Additional Schedule was prepared for this purpose and kept at the front of the files of those documents. She says that the Schedules in front of the files was copied and exhibited to the List of Documents.
23. Miss Egarr was not cross-examined and thus I am bound to accept that Miss Egarr now believes that the Additional Schedule was served on 17^th February 2006. I am, however, not satisfied that it was. There are a number of reasons for this:

1. There is no direct evidence that it was so served. Miss Egarr was not present when the list was sent or faxed. There is no witness statement from the person who sent it or faxed it.

2. There is no documentary evidence that it was served. Runhams do not keep records of what documents are sent or faxed. There is no reference to any of the documents in the Additional Schedule in any of the correspondence that followed the service of the list.

3. It plainly was not served with the fax that was sent on 17^th February 2006.

4. It was not included in any of the 33 lists sent on 18^th May 2006.

5. Baker & McKenzie have no record of having received it.

6. In paragraph 13 of Miss Egarr's witness statement she says that she recalls asking her secretary whether all of the documents had been sent to Baker & McKenzie. She says that she received that confirmation. She also says the copy of the list that remained in the office had the Additional Schedule attached. To my mind this is inconclusive. In particular Miss Egarr did not herself check that the Additional Schedule had been sent to Baker & McKenzie and she did not ask for specific confirmation from her secretary that the Additional Schedule had been served. The conversation referred to plainly occurred significantly after 17^th February 2006. It related to the sending of documents and not to the documents that were included in the list.

4.4. The hearings before Judge Langan QC

24. On 21^st February 2006 Miss Gillett wrote to Runhams asking them to clarify on what authority a single list of documents had been served on behalf of 11 parties and invited them to confirm that full disclosure had taken place. The letter referred to the fact that only 484 documents had been listed. Despite a chaser sent on 28^th February 2006, Runhams did not reply.
25. In the result on 11^th April 2006 Miss Gillett issued an application for an unless order. Relevant documents were duly served on Runhams including a detailed witness statement from Miss Gillett. There was no response from Runhams prior to the telephone hearing before Judge Langan QC on 27^th April 2006.
26. There is no transcript of the hearing before Judge Langan QC. However there is a contemporaneous file note. It is apparent from this note that Miss Gillett stated that the further information supplied was inadequate and should be remedied. In addition Miss Egarr asserted that the parties had agreed a moratorium whilst negotiations continued. Judge Langan QC adjourned the application to be heard by video conference to determine whether there was in fact a moratorium. Miss Egarr did not put in a witness statement to justify her allegation that there was a moratorium. Puccino's produced a witness statement from David Fraser, the partner conducting the settlement negotiations on behalf of Puccino's.
27. The adjourned application was heard on 5^th May 2006. Miss Egarr did not pursue the allegation that there was a moratorium and the application proceeded. There is no transcript of the judgment of Judge Langan QC but there is a contemporaneous note. Amongst other things he said:

1. that there was considerable delay by the Applicants in addressing the deficiencies in the Part 18 Replies.

2. that the Applicants had failed to comply with the order for full disclosure made on 22^nd December 2005.

3. In his view the delay in this case was "of unusual length" in complying with the orders of the Court and the CPR. In his view an "unless order" was appropriate to put an end to the Applicants' "procedural dance".

4. He gave a timetable for compliance with the orders:

1) Deficiencies in the Further Information were to be corrected by 17^th May 2006. [The deficiencies were substantial and included within the order]

2) Full disclosure (in accordance with the 22 November 2005 order) was to be provided by each of the Applicants (by separate list) by 17^th May 2006.

3) Copies of all documents referred to in the list served on 17/2/06 to be supplied by 12^th May 2006.

28. The sanction for breach of the unless orders was that the Defences and Part 20 Claims be struck out without further order.
29. He ordered the Applicants to pay the costs of the application assessed at £3,214.40

4.5. Compliance with the Order of Judge Langan QC

The supply of documents

30. On 12^th May 2006 Runhams sent by courier the documents in the disclosure list. It is, I think, common ground that this did not include the documents in the Additional Schedule. There is certainly no mention of them in the letter sent by Miss Egarr enclosing the documents.

The Further Information

31. On 17^th May 2006 the Applicants finally made good the deficiencies in the Further Information. The Response is a 15 page document containing substantial further information.

The Further lists

32. On 17^th May 2006 Miss Egarr served 11 separate lists of documents on behalf of her 11 clients. (In fact they were served in 3 different ways so that 33 separate lists were in fact served).
33. The lists were in identical form and each of the Schedules contained the same 484 documents that had been contained in the Schedule served on 17 February 2006. It is to be noted:

1. it is common ground that none of the Additional Schedule documents were contained in any of the lists. Miss Egarr accepts that this was an omission. In her witness statement she apologises and makes the point that the final preparation of the documents (presumably she means "the lists") was not carried out by her usual secretary .

2. it is impossible from these lists to ascertain which of the 484 documents were in the possession of which of the Applicants.

The witness statements

34. No doubt appreciating that there might be some criticism of the approach that had been adopted witness statements were prepared (all dated 16^th May 2006) from Sean McInernay, Minaxi Parmar, Nishaan Patel (2), and Janak Patel. Those witness statements are important and substantially to the same effect. I shall not set them out in detail. I shall take by way of example the statement of Nishaan Patel on behalf of the First, Second, Third, Fourth and Sixth Claimants.
35. He says that originally the documents were kept separate at Unit 7 Northwest Business Park Leeds. In paragraph 10 he says this:

When as a consequence of [Puccino's'] conduct proceedings were issued and, indeed after Puccino's brought in my father Mr Janak Patel and his Company … it was agreed that in order to progress the litigation that all the Claimants/Part 20 Defendants would have access to each other's documents and therefore all documentation relating to the Claimants/Part 20 Defendants have been held within Unit 7, Northwest Business Park, Leeds.

36. He verifies that – in effect – that he has made full disclosure.
37. The other witness statements are to the same effect. Thus it can be seen that:

1. Prior to the litigation all documents are alleged to have been kept separate – no doubt to support the case that there was no conflict of interest between Mr Janak Patel in his capacity as agent for Puccino's and the rest of the Patel family.

2. At a time when the litigation was on-going and all the Part 20 Defendants had been joined all of the parties documents were combined so that it is now impossible or impractical to see the provenance of any of the documents and to test the assertions that they were in fact kept separate.

4.6. Miss Gillett's reaction.

38. On 18^th May 2006 Miss Egarr sent a letter to Baker & McKenzie which is alleged did not arrive. Nothing turns on this letter and I say no more about it.
39. Miss Gillett's reaction to the disclosure is not hard to imagine. On 25^th May 2006 she wrote a long detailed 6 page letter setting out the alleged deficiencies with the disclosure. She makes a number of points:

1. As the list is identical to the 17 February 2006 list it follows that no additional documents have been identified since that date.

2. It is inappropriate to serve 11 identical lists. It negates the purpose of serving separate lists which was to enable Puccino's to see which documents were in the possession of which party at the respective time. The explanation is disingenuous.

3. There has been a failure to provide full disclosure (despite the statements in the witness statements). She gives a non exhaustive list of documents not disclosed:

1) Franchise agreements etc

2) Exhibits to 2 witness statements that had been voluntarily served – some of these documents are documents which Puccino's did not have and had no knowledge of.

3) Documents attached to the Replies to Further Information dated 26 January 2006 and 17 May 2006

4) A number of miscellaneous documents that Puccino's have strong reason to believe that the Applicants have failed to disclose. 7 such documents are listed. Miss Gillett makes the point that these documents are not in Puccino's' possession.

4. Miss Gillett makes the point that the Applicants appear to be cherry picking what documents they choose to disclose. She makes the point that it is eminently likely that other documents exist that will never see the light of day.

5. She makes the point that Runhams' approach is unacceptable and is prejudicing a fair trial taking place.

40. There is an issue whether Runhams replied to that letter. Runhams contend that they sent a reply by DX on 26^th May 2006. There is no independent record of the documents that Runhams sent by DX and Baker & McKenzie have no record of receiving the reply. Accordingly on 30^th May 2006 Baker & McKenzie submitted an application to the Court for the claims to be dismissed and for judgment to be entered on the Part 20 claims for damages to be assessed. The application was supported only by a certificate signed by Miss Gillett that the Applicants had failed to comply with the Unless Order.
41. A copy of the application was sent to Runhams. It provoked no response from Runhams.
42. The matter was considered by Judge Langan QC as boxwork on 7^th June 2006. He acceded to the application and made the orders as requested. The order was sealed on 12^th June 2006. On 13^th June 2006 a copy of the order was faxed by Baker & McKenzie to Runhams. There was no response.

4.7. The application to set aside the judgment

43. On 29^th June 2006 Baker & McKenzie wrote to Runhams proposing directions for the assessment of damages on the Part 20 Claims. The proposed directions were to the effect that the trial date of 13^th November 2006 be kept for the purpose of the assessment of damages for 5 days. There was no response to the proposed timetable.
44. On 6^th July 2006 Baker & McKenzie applied to the Court for directions in accordance to the proposed timetable so as to achieve an assessment of damages on 13^th November 2006.
45. On 13^th July 2006 Runhams wrote to Baker & McKenzie stating that they were intending to make an application to set judgment aside and for further directions.
46. Puccino's' application for directions was listed for a telephone hearing on 15^th August 2006. No application to set aside the judgment was sent to the Court until at the earliest 11^th August 2006. The document that was received was defective in that it was unsigned, had no statement of truth and was unsupported by evidence.

The hearing on 15^th August 2006.

47. At the hearing Puccino's was represented by Counsel; the Applicants by Miss Egarr. Despite the defects in the application it was accepted that the application could proceed. A tight time table was proposed in order to bring the matter before the Court for a contested hearing on 14^th September 2006. I made it clear that the dates in the timetable were important and that there should be no slippage.
48. In the event there was slippage in respect of every date that the Applicants were to comply with:

1. an amended (but unissued) application notice was served at 5 pm rather than 4 pm on 15^th August 2006.

2. Miss Egarr's evidence in support was not served till 16.42 on 18^th August 2006 and was more than a day late. More importantly the exhibits were not received till 21^st August 2006.

3. The evidence in Reply and exhibits were not served till late on 13^th September 2006.

49. Despite this the application proceeded on 14^th September 2006. Mr Anderson did not object to the late service of the evidence though he drew it to my attention as symptomatic of the wholesale disobedience by Runhams to the orders of the Court.

Mr Patel's witness statement

50. Part of the evidence in Reply comprised a witness statement from Janak Patel. The witness statement confirms that Janak Patel was in breach of his disclosure obligation in relation to a file of papers relating to a share sale agreement between himself and Mr Black a former director of Puccino's.
51. Janak Patel accepts that these documents are relevant and should have been disclosed. He says that they were in the possession of a different firm of solicitors and thus not pooled. He also says that he was advised that the arrangement was a private arrangement and not relevant. He now accepts that that advice was not correct. He apologises to the Court.

5. Failure to Comply

52. Both Counsel agree that the first question is to determine the extent of any breach of the Unless Order. In so far as there is a breach the court must then consider whether to grant relief from sanctions.

5.1. Disclosure

53. Mr Anderson referred me to CPR 31.10(2) as to the obligation on each party to make a list of documents. He also referred me to the note at 31.10.6 of the White Book as to the obligations in respect of disclosure.

31.10.6 Obligations of solicitors in respect of disclosure and of production by their clients

It is necessary for solicitors to take positive steps to ensure that their clients appreciate at an early stage of the litigation, promptly after the claim form is issued, not only the duty of disclosure and to produce for inspection which will arise if disclosure is agreed or ordered by the Court and of the extent of such duty but also the importance of not destroying documents which might possibly have to be disclosed (per Megarry J. in Rockwell Machine Tool Co. Ltd v. E.P. Barrus (Concessionaires) Ltd [1968] 2 All E.R. 98 (Note)). Moreover it is not enough simply to give instructions that documents be preserved. Steps should be taken to ensure that documents are preserved (Infabrics Ltd v. Jaytex Ltd [1985] F.S.R. 75 where, because a defendant had not preserved documents affecting the quantum of damage, the maxim omnia praesummuntur contra spoliatorem was applied against him).

It cannot be too clearly understood that solicitors owe a duty to the court, as officers of the court, carefully to go through the documents disclosed by their client to make sure, as far as possible, that no relevant documents have been omitted from their clients' [list]", per Salmon J. (as he then was) in Woods v. Martins Bank Ltd [1959] 1 Q.B. 55 at 60.

5.2. Breach

The pooling of the documents

54. Mr Anderson submitted that the pooling of the documents so as to make it impossible to know from which party they came was a serious breach of the disclosure obligation. He reminded me of the importance of disclosure in this case. He pointed out that the 22 November 2005 Order recognised that importance by requiring "full" as opposed to "standard" disclosure. He submitted that the pooling of the documents had made it impossible for there to be proper disclosure in this case. What had happened had made a mockery of the order of Judge Langan QC. He drew to my attention that the pooling had taken place well after proceedings had begun; after the Part 20 Defendants had been joined.
55. Mr Barker did not accept that the pooling of the documents amounted to a breach. In any event it happened before the order of Judge Langan QC.
56. It is true of course that Judge Langan QC did not know of the pooling. Miss Egarr chose to file no evidence and did not tell him. Thus the fact that the pooling took place before his order seems to me to be of little significance. Judge Langan QC's order gave the Applicants a last chance to comply with their disclosure obligations. If they had put it out of their power to comply it was inevitable that they would be in breach of his order.
57. I prefer the submissions of Mr Anderson on the point. In my view the decision by the Applicants to pool their documents after the proceedings had commenced in such a way as to make it impossible for them to make meaningful separate lists of documents was a substantial and serious breach of their disclosure obligations.

Janak Patel

58. It is plain that Janak Patel was in breach of his disclosure obligations in relation to the share sale agreement. Mr Anderson makes the point that it is apparent from paragraph 4 of his witness statement that he did not receive proper advice from Miss Egarr.

The Additional Schedule

59. On any view the documents in the Additional Schedule were not listed in any of the lists served on 17^th May 2006. For reasons I have given I am not satisfied they were mentioned in the list served on 17^th February 2006.
60. This was a breach of all of the Applicants' disclosure obligations. Mr Barker submits that this is technical because all of the documents had been disclosed with the Further Information. As I understood his submission Mr Anderson accepted that some of the documents were attached to the Further Information but did not accept that they all were. He said it was not possible to identify all of the documents in the short time since the 21^st August 2006 when the exhibits to Miss Egarr's witness statement were received.
61. It is plain that the failure to list these documents is a breach. In my view it is not merely technical.

Other matters referred to in Miss Gillett's letter of 25/5/06

62. I do not intend to go through each and every document referred to in that letter. Mr Barker submitted that in so far as the documents were not included in a list the breach was technical in that Puccino's already had copies.
63. Plainly the failure to list many of these documents is a breach of the obligation. In so far as Puccino's had copies of the documents it reduces the seriousness of the breach but it is a breach nonetheless.
64. It is plain that some of the documents (those referred to paragraph 34.3 of Miss Gillett's witness statement) are not in Puccino's' possession. Some appear to be contained in the documents disclosed by Janak Patel in respect to the share agreement. In her latest witness statement Miss Egarr says that the Applicants do not have the ventilation report but this has not been specifically verified by any of the Applicants. Miss Egarr does not deal with many of the other documents such as the structural report in respect of Wakefield Crown Court.
65. Miss Gillett submits that the overall effect is that she has no confidence in the Applicants' disclosure. They have verified full disclosure when it is plain that the witness statements are untrue. They have pooled documents so that it is impossible to determine the provenance of any documents. It is plain from the lists that documents have not been disclosed and she is concerned that the Applicants are cherry picking and that there are documents damaging to the Applicants case that will not see the light of day.

6. Relief from sanctions

66. Both parties recognised that the question of granting relief was governed by CPR 3.9 that provides:

Rule 3.9 Relief from sanctions

(1) 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, court orders and any relevant preaction protocol GL;

(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 on each party; and

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

(2) An application for relief must be supported by evidence.

67. Both parties referred me to CIBC Mellon Trust Company v. Stolzenberg [2004] EWCA Civ 827 June 30, 2004, CA, unrep., where Arden L.J. analysed carefully the various circumstances listed in r. 3.9(1) and reviewed the authorities, particularly those dealing with non-compliance with "unless" orders. A significant feature of the case is that it involved an application under r.3.9 to set aside a judgment (not merely a procedural order) entered in default of compliance with an order of the court. In the context of r.3.9, a finding of intentional failure to comply with a rule is a highly significant and may or may not be decisive, depending on the circumstances of the case (Bournemouth & Boscombe Athletic Football Club Ltd v. Lloyds TSB Bank Plc, [2003] EWCA Civ 1755 December 10, 2003, CA).

6.1. (a) the interests of the administration of justice;

68. Mr Barker draws my attention to the overriding objective and the need to deal with cases justly. He makes the point that there is no reason why it is not possible to have a fair trial. He makes the point that the pooling of the documents is unconnected with the Unless Order. He submits that the breaches are technical save in respect of Janak Patel. He describes the breach as a failure to list the documents that are known to Puccino's. He points out that this is a substantial claim and that the Applicants should not lightly be denied their day in court.
69. Mr Anderson submits that it is not now possible to have a fair trial. If the Judgment was to be set aside, Puccino's would face a trial in which the Applicants' disclosure will be inadequate. There has also plainly been a "cherry picking" of documents; as appears, quite clearly, from the documents exhibited to the statements of Mr Black and McInerney: as set out in Paragraph 34.1 of Miss Gillett's statement.
70. I have dealt with many of Mr Barker's submissions above and shall not repeat my views. The fact that the breach took place before Judge Langan QC's order is not to my mind material. I do not regard the breaches as technical. I agree with Mr Anderson that disclosure was particularly important in this litigation and that the pooling of the documents by the Applicants has severely jeopardised the prospects of a fair trial. I also accept the submission that Puccino's are justified in their view that they cannot be confident that there are documents which will not see the light of day.

6.2. (b) whether the application for relief has been made promptly;

71. It is plain that the application for relief was not made promptly. Miss Egarr was notified of the judgment on 13^th June 2006 and made no application for relief until 11^th August 2006. She was plainly aware of the judgment on 13^th July 2006 yet waited until 11^th August 2006 (only 4 days before the hearing for directions instigated by Baker & McKenzie) to apply defectively for relief.

6.3. (c) whether the failure to comply was intentional;

72. Mr Barker submits that the failure was not intentional. He draws to my intention the attempts by Runhams to comply with the order. He reminds me of the 15 page document putting right the defects to the Request for Further Information. He makes the point that the failure to include the Additional Schedule documents was an oversight. He makes the point that the failure to disclose the share sale documents was based on wrong advice. He reminds me that the breaches were minor. He makes the point that Janak Patel was not cross examined and thus I ought to accept the explanation in the witness statement.
73. Mr Anderson submits that the failure was intentional. He makes the point that it was a deliberate decision by the Applicants to pool their documents after the proceedings had commenced. Even if the Applicants were unaware of the duty to preserve the documents the decision to pool was intentional. Similarly the decision not to disclose the share sale agreement documents was a deliberate decision based on wrong advice.
74. I have dealt with many of the points of Mr Barker above. Arden LJ dealt with this issue at paragraphs 163 et seq of her judgment. It is to be noted that the question that she asked was whether there was a conscious decision not to abide by orders of the court. I am satisfied that the decision to pool documents was not deliberate or intentional in that sense. It was, however, a deliberate decision by the Applicants which has had the effect of making it impossible for proper disclosure to take place.

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

75. I have set out the explanations for the failure in so far as they appear in the documents. It is to my mind plain that the explanations are not "good"

6.5. (e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant preaction protocol GL;

76. In his skeleton argument Mr Anderson puts the position thus:

14. There has been a wholesale (perhaps, unprecedented) failure by the Applicants to comply with the CPR and Court Orders. The extent of the failure is, quite literally, staggering. In addition to the indisputable failings in respect of disclosure, numerous other instances are set out in some detail at Paragraphs 81 to 86; 91 and 92 (in respect of Costs Orders) and 93 (failure to answer correspondence) of Miss Gillett's statement [B1/pp.26-30]. A similar pattern of behaviour was demonstrated in the Applicants' opposition to Puccino's application for security for costs.

15. The failures often appear to have been deliberate; there can be no other explanation (nor has one been proffered in any evidence in reply). This has disrupted the proceedings and caused inordinate additional expense. There is no reason whatsoever to suppose that, if the Judgment was set aside, this pattern of behaviour would cease. This is a crucial factor on this application.

77. In submissions Mr Barker did not seek to pretend that there had not been defaults by the Applicants throughout the history of the case. He submitted that the defaults were not serious in the context of the Unless Order. He made the point that all costs orders have now been paid (though he accepted that payment was not always on time. He submitted that this was not a factor of any great weight.
78. Whilst I would not go quite as far as Mr Anderson I substantially agree with his submissions. It is plain that this heavy commercial litigation has been conducted by Runhams in a wholly unprofessional manner. The failure to answer correspondence, to make prompt applications and the disobedience of court orders has seriously affected the conduct of this litigation.
79. The fact that the Applicants now intend to seek different representation may mean that these defaults would be cured in the future. It would depend on the efficiency of the new advisors.

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

80. It is difficult to allocate blame as between the Applicants and Runhams though it seems likely that a substantial portion of the blame must lie at Runhams' door.

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

81. The trial date of 13^th November 2006 has been lost. Although the trial date for the assessment of damages has been kept it must be severely at risk. Apart from all other factors if the Applicants seek separate advice it is likely that they will want time to appraise themselves of the situation.
82. Although the hearing was on 14^th September 2006 it was necessary to reserve judgment with the result that directions for the assessment will not be given until October 2006. That leaves a very short time for the preparation of an assessment of damages where the amount claimed is in excess of £1 million.

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

83. The consequences of the failure to comply are serious to the Applicants. They will lose the right to claim damages put at between £5 million and £7 million. They will be forced to pay damages on the Part 20 Claim put at over £1 million. If and in so far as there are insufficient assets they may face insolvency. They may be able to recover some of these losses from Runhams in a professional negligence claim. Such claims are not easy to prosecute and are in any event in the nature of a claim for a loss of a chance.
84. As against that Mr Anderson makes the point that this is a case where the court cannot be certain that there will be a fair trial and thus they are significantly prejudiced if the judgment is set aside.
85. For reasons I have given whilst, of course, I accept that this is a serious matter I agree with the submission that there may not be a fair trial if the Judgment is set aside.

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

86. I have dealt with this above. If the judgment is set aside the Applicants will (unless they fall down at a later hurdle) have their day in Court. However if that happens Puccino's will have to fight the case without knowing the provenance of the documents in the list and in the knowledge that there may be further documents that they have not seen.

7. Conclusion

87. Once I have taken into account all the factors set out in the rule I am required to have regard to all the circumstances of the case. This involves a consideration of the overriding objective and the need to dispose of cases justly.
88. When I take all the factors into account I have come to the clear conclusion that the Judgment should not be set aside and the application should be dismissed. The factors that have weighed most heavily with me are (though not in any particular order):

1. the fact that the unless orders were made after a contested hearing. Judge Langan QC clearly contemplated that separate lists would be different. He did not contemplate that 11 identical lists would be produced. He should have been told of the pooling.

2. the substantial disregard of orders of the court and failure to deal with correspondence

3. the fact that proper disclosure cannot now take place.

4. the importance of disclosure in this case and the consequent fact that there is a real risk there cannot be a fair trial

5. the real doubt I have that there are documents that remain to be disclosed.

6. the failure to act promptly and the loss of the trial date.

¹ Puccinos' list had contained 1456 documents.

JOHN BEHRENS Tuesday 21 November 2006