England and Wales High Court (Technology and Construction Court) Decisions

1. Applications have been made by the second claimant, Mr Basten, and by the defendant, Racal. Mr Basten applies to re-re-amend the statement of claim. Racal opposes that application and itself applies to strike out the statement of claim in its previously amended form. I annex to this judgment the proposed re-re-amended statement of claim as I shall have to refer to it extensively during the course of this judgment.

2. In order to understand the background to these applications, it is first necessary to outline the history to this action, much of which can of course already be found in the reports of judgments already given (by His Honour Judge Havery QC (1994) 42 Con LR 120; by the Court of Appeal [1996] 3 All ER 748; and by the House of Lords [1997] 1 WLR 721; [1996] 3 All ER 748). I shall in part draw on the agreed statement of facts presented to the House of Lords on the hearing of Racal's appeal. The first claimant, Circuit, was a company run by Mr Basten who formed it in October 1983. Prior to its liquidation it provided computer aided design ("CAD") services to electronics manufacturers. It produced designs of printed circuit boards using computers to assist in the design work. Racal is a company which supplied computer hardware and software, including CAD hardware and software, for the design of printed circuit boards. In the summer of 1985, following discussions between Mr Basten, representing Circuit, and Racal, Circuit bought from Racal an Apollo DN660 computer and a "Visula" system, which was a CAD system devised by Racal. Circuit was one of Racal's first customers to acquire the system. Circuit experienced problems in operating the system (System 1) and took them up with Racal, but, according to Circuit, the equipment and software supplied by Racal remained defective. In 1986 Racal offered to supply Circuit with System 2 together with a further DN660. Circuit arranged for Black Arrow Finance Limited to provide the money to buy both hardware and software from Racal. Circuit entered into software licensing and maintenance agreements with Racal. I shall refer to some of these agreements more fully later. However Circuit's problems were not solved by the new equipment and (System 2 even though in 1987 the DN660 was replaced by a DN3000, and agreements with Black Arrow were varied accordingly.

3. Circuit ceased trading during 1988. The company went into creditors' voluntary liquidation and a liquidator was appointed on 22 March 1988. It was insolvent with estimated claims against it of about £350,000. The writ in this action was issued on 22 March 1988. Circuit was then the sole plaintiff. Its statement of claim set out causes of action in contract, negligence or negligent misrepresentation. Later by amendment, following joinder of Mr Basten as a plaintiff, other causes of action in negligence and intimidation were asserted. Racal served a defence denying the defects, breaches of contract, negligence and misrepresentations, and counterclaimed about £108,000 due under various agreements. When ultimately a schedule and particulars of damage were served (in July 1994) Circuit's claim was estimated to be about £2.2m (to 30 June 1994) and continuing at a yearly figure of £216,000, as well as loss of goodwill claimed at £1m and loss of enhanced profits and interest. In 1992 Black Arrow obtained a judgment against Mr Basten for £277,216 as he had guaranteed Circuit's obligations.

4. In September 1988, Circuit was ordered to provide £10,000 by way of security for costs. Ultimately security was provided in March 1990. The action was in the meantime stayed. During this period Mr Basten sought help in meeting legal costs to enable the action to proceed. The claimants' present solicitors came on the scene and, amongst other things, achieved, on 12 April 1990, an assignment of Circuit's causes of action in favour of Mr Basten. The assignment provided that the company, in consideration of a payment of £1 and the right to 40% of the net proceeds of prosecution of certain causes of action, assigned:

5. In June 1990 Mr Basten obtained legal aid. In July 1991 Racal applied for leave to amend his defence to include an attack on the validity of the assignment and sought an order that that issue should be tried as a preliminary issue. By consent leave to amend was given and Racal's application was dismissed. In November 1993 the action was transferred to this court. On 15 April 1994 I decided that there should be a trial of certain preliminary issues arising under paragraphs 21A and 21B of the re-amended defence and counterclaim (i.e. whether the assignment was valid as being contrary to certain clauses prohibiting assignment contained in various agreements or on the grounds of improper purpose, respectively). The preliminary issues were tried by His Honour Judge Havery QC in the autumn of 1994. He found in favour of Racal in respect of the issue raised by paragraph 21B of the defence and he also struck out certain parts of the statement of claim. In March 1996 the Court of Appeal reversed the decision of Judge Havery under paragraph 21B and dismissed the appeal against the decision under paragraph 21A, namely that the assignment was ineffective to transmit to Mr Basten's causes of action purportedly assigned contrary to non-assignment clauses in the lease/rental agreement. However the Court of Appeal allowed the appeal against part of Judge Havery's order which struck out part of the re-amended statement of claim. In consequence, in addition to causes of action which did not fall foul of valid non-assignment clauses, Mr Basten had a claim under an assignment dated 7 January 1993 from Black Arrow and a claim based upon alleged duty of care owed to him as someone known to have guaranteed certain liabilities of the company. The House of Lords dismissed Racal's appeal from the decision of the Court of Appeal in respect of the plea in paragraph 21B of Racal's defence.

6. The upshot is that, when the action returned here, the following claims were made against Racal:

23. In the latest version of proposed re-re-amended statement of claim (which was not proffered until 8 June 1999) the claims in the action have also been summarized in tabular form in paragraph 1A.

7. In November 1998 a summons was issued for leave to serve certain particulars of the statement of claim which had been served voluntarily in October 1996; or in the alternative to have leave to amend the existing particulars by the inclusion of those voluntary particulars; in the alternative to have leave to re-amend the statement of claim by the addition of those voluntary particulars viz. as particulars under paragraph 74. In my decision on that application I said, amongst other things:

8. I decided that I would neither allow nor refuse the application since, although the particulars were, at least in part, crucial to the claimant's case, Racal had raised a number of objections that had not been anticipated in the proposed pleadings and which, in my judgment, had to be overcome before leave to amend could be granted. I rejected the submission that leave to amend should be granted, even on conditional terms, because in my view there was a real danger that the action would be repeating the course it had taken so far with a proliferation of pleadings, one superseding the other. I came to the conclusion that, as there was nothing fundamentally wrong with the proposed amendment but there was a lot wanting in the statement of claim, the right course was to require the Plaintiff to provide the necessary procedural framework i.e. to put their house in order. I said:

9. I therefore ordered that application should be

33. The latter was a reference to what had been said, in particular in the Court of Appeal, about the difficulties facing the plaintiffs and about the manner in which they presented their case. I therefore expected the plaintiffs to re-examine the pleadings and to recast them radically. I also ordered that the trial of the action should commence in January 2000 with estimated length of 6 weeks. The hearing fixed for 16 April 1999 was vacated by consent.

10. Subsequently Racal applied for and obtained from me an order increasing the security for costs required of Circuit by £45,000. Circuit is unable to find that sum of money so its claim has been stayed. Accordingly, as the preface to the proposed pleading records, the action is now concerned only with those claims which Mr Basten can pursue himself. For this additional reason one might have expected the statement of claim to have been more substantially rewritten. In addition on the application for security Mr Roger Henderson QC mentioned that the pleading then proposed still created difficulties. I suggested that a letter should be sent by junior counsel to explain them so that counsel for the plaintiffs could take them into account. The letter was apparently sent (as was a letter from Racal's solicitor) but the present proposal is not far removed from the pleading attached to the application notice.

11. Since January 1999, the Civil Procedure Rules have come into effect. Paragraph 11 of the Practice Direction to Rule 51 provides that, where any step is to be taken in existing proceedings it is to be taken under the CPR. Paragraph 14 provides:

36. Paragraph 15(2) states:

38. I have not directed to the contrary so the CPR affect these applications. That means that, amongst other things, I must give effect to the overriding objective set out in Rule 1.1 both when deciding whether or not to allow either of the applications and in the interpretation of the rules governing those applications. "Dealing with the case justly" includes:

49. The sums of money in this case are large and it is clearly important to both parties, especially to the reputation of Racal. So far as the financial position of the parties is concerned the fact that Mr Basten is legally aided means that he is in the same position as a litigant with adequate resources for litigation of this kind and is entitled to expect that the court will not order or authorise steps that are not proportionate in terms of costs. Saving expense is an important consideration, and, where the claimant is legally aided, is probably of cardinal importance to the defendant. A claimant such as Mr Basten is however in no worse (and no better) a position than another litigant. I naturally also heed Rule 1.4 although it covers virtually all matters which this court regularly took into account prior to 26 April 1999.

12. As a result of Circuit's inability to continue to maintain its claims in these proceedings, Mr Basten has had to consider how he can pursue a claim in respect of those of Circuit's claims which cannot be validly assigned to him and in respect of Black Arrow's claims (on the basis that there is a valid non-assignment provision, which is the subject of the second substantive point) so that he can pursue them against Racal, i.e. the "type 4" claims (as set out in the table to paragraph 1A of the proposed re-re-amended statement of claim) which are claims arising out of breaches or alleged breaches of contract of supply between Black Arrow and Racal. In addition to the paragraphs of the statement of claim set out in paragraph 1A concerning the "type 4" claims, paragraphs 70B-70D and 75B - 75E are relevant as some of the claims described as "type 2" are also covered. The manner in which Mr Basten seeks to achieve this objective is the subject of substantive points on his application to amend. All were raised on the previous application to amend.

1. "Don King v. Warren"

13. Mr Basten's case is that, where any contract with Racal could not be assigned, then the effect of the decision of the Court of Appeal in Don King Productions Inc v. Warren, 21 December 1998, unreported, was that Circuit held its rights as trustee for the putative assignee, namely Mr Basten, and did assign those rights to Mr Basten who was then entitled to enforce them against Racal, i.e. as set out in paragraph 75F(c):

14. Mr Alastair Wilson QC submitted that Don King v Warren was no more than a continuation of an application of the principle In re Turcan (1888) 40 Ch D 5. In Don King the question before the court was, essentially, the meaning of a provision in a partnership agreement between the plaintiff and Mr Warren and other parties. Schedule 2 of the agreement provided that the initial capital contribution of the partners (i.e. the plaintiff and the other party) should be deemed to be satisfied by:

52. This was a reference to "the full burden of all existing promotional, management agreements with boxers together with all and any associates' sponsorship, closed circuit, television and radio contracts absolutely." However the benefit of many such contracts could not be assigned so as to vest them in the partners. Lightman J recorded that the parties had agreed that some effect might be given in equity to an intention to vest them in the partners jointly, but there was a difference as to what the effect could be. Mr Warren contended that the effect would be limited to creating a trust of the receipts in the hands of the would be assignor. The plaintiff submitted that a trust of the contract and the right under it could be and had been created. Lightman J decided:

54. An appeal was dismissed. The judgment of the court was given by Morritt LJ. He said at paragraph 26:

57. At paragraphs 29 - 30 Morritt LJ accepted the proposition that a partner who was a party to a management agreement of the kind before the court but which could not be assigned, held the benefit of that agreement in trust for the partnership:

15. As may be seen from paragraph 70D of the proposed pleading, a deed and notice of appointment of 22 March 1999 has been executed by Circuit's liquidator whereby Circuit "hereby confirms and declares that it holds such causes of action and the fruits thereof and flowing therefrom on trust for Mr Basten that he may apply the same in accordance with the assignment." The assignment is that of April 1990. A similar declaration of trust has been made by Black Arrow on 15 April 1999.

16. Mr Henderson submitted that the route of the supposed trust was a device to get round the fact that the causes of action were not assignable. He referred to Lord Browne-Wilkinson's speech in Linden Gardens Ltd v. Lenesta Sludge Ltd [1994] 1AC 85 at page 106B:

and at page 107B:

17. Mr Henderson submitted that Don King v. Warren was not an authority for the proposition that a person can, by breach of a valid non-assignment clause in the contract, put the third party, such as Mr Basten, in a better position than a would be assignor who nonetheless respected the rights and terms of the contract. The decision in Don King said nothing about the rights of the beneficiaries of the trust as against the other parties to the agreements which could not be assigned e.g. the boxers and staff - their rights would be unchanged as between themselves and their manager or promoter.

Decision

18. As a preliminary applicable to all the substantive points, in approaching an application which seeks to introduce by way of an amendment a new case in law to which exception is taken, it is now necessary to consider the applications in the context of Rule 1 of the CPR. Rule 1.4(2) restates that active case management includes:

65. Where, as here, there can be identified either a point of pure law or a point of law which arises on facts which cannot change, then it would not be right simply to allow the amendment and then to have a further hearing at which the point of law is decided, if the point can be decided upon the application to amend, as envisaged by paragraphs (c) and (i) (and thus (j)). This is perhaps no more than a continuation or extension of the previous practice whereby amendments were not allowed if the case sought to be introduced was liable to be struck out. Not only has there been preliminary argument on the previous application but that argument has been continued on these applications and I am sure that there is now no more that can be said. It would be a waste of expense, time and resources to defer a decision. Accordingly, in my judgment, I ought now to consider all the substantive points of law raised by Mr Basten or by Racal to see whether they are valid and, if valid, then to decide whether the amendment should be allowed in the form put forward or what other course is to be taken.

19 First, I consider that Mr Henderson is right in his submission that no distinction is here to be made between the assignment of the performance of the contract and the assignment of the fruits of that performance: see Linden Gardens at page 106B. Secondly, that a non-assignment clause means what it says and is to be implemented in accordance with the intentions of the parties. In commercial contracts of this kind, this means that the party with the benefit of the clause is not to have to deal with any party other than the other party to the contract or otherwise in a way that would in effect mean that the contract was marketable or transferable in the sense that another person could take the benefits of it vis-a-vis the original contracting party. In my view this is clear from Linden Gardens - see for example Lord Browne-Wilkinson at page 108:

67. There may be an assignment of the benefit of a contract, but it is not to affect the other contracting party. It operates only as between the putative assignor and assignee. The assignment is valid in law as between those two parties but it is ineffective as regards the party who contracted with the assignor. If it is not contrary to public policy to have non-assignment clauses, then it must be equally consistent with public policy to protect the rights of the party for the benefit of the contract. On the other hand in Linden Gardens Lord Browne-Wilkinson accepted that a non-assignment clause did not "preclude A from agreeing, as between himself and C, that will he account to C for what A receives from B: Re Turcan" (see page 104E-H).

20. Accordingly either the 1990 assignment or the 1999 declaration of trust may in law have the effect of creating Circuit a trustee of its rights against Racal or of whatever it may receive from Racal as damages for breach of Racal's contract or contracts with Circuit. (The 1999 declaration of trust appears to recognise that the 1990 assignment was ineffective to transfer any contractual rights in Mr Basten which were the subject of a non-assignment clause in the contract.) However it does not follow that Mr Basten can step into the shoes of Circuit so as to pursue a claim in these proceedings in his name against Racal in respect of breaches of contracts where there exists a valid non-assignment clause. In my judgment Circuit is the only person who can pursue its claims against Racal in respect of causes of action which it may hold on trust for Mr Basten. In re Turcan and Don King v. Warren make clear that the trust is of the rights or of the receipts that may be obtained. These cases only show, as Morritt LJ said in the latter "that the court will protect the interests of those contractually entitled to have the benefit of an inalienable asset before the fruits of the asset have been realised". They do not establish that a person so entitled can deal with the party with the benefit of a contract that was not assignable. Morritt LJ went on to say:

69. In my judgment Mr Henderson was right in his submission that to permit Mr Basten effectively to engage with Racal would be to excuse the breach of contract in assigning the contracts and to deprive Racal of its contactual rights for which it had so carefully stipulated for good commercial reasons.

21. It is therefore for Circuit (or Black Arrow) to pursue a claim for breach of contract in is own name against Racal. If it obtains a judgment the amounts recovered are held on account but for this to happen there must be a judgment in the name of Circuit or Black Arrow. Since a judgment creates a new contract of record which is not subject to a non-assignment provision, the judgment creditor could then assign it, although that would not be necessary here. Mr Basten will (and will only) get the benefit of the trust when a judgment exists and when Racal satisfy it. The amendments proposed to plead a trust in favour of Mr Basten of rights under non-assignable contracts will therefore not be allowed. They are also irrelevant. Since Circuit is admittedly unable to pursue its claims, it would also be an abuse of the process of the court to allow such a case to maintained.

22. In addition in the case of Black Arrow's rights, the present pleading is incomplete since it lacks any claim by Black Arrow against Racal for damages for breach of any contract. For reasons which will become apparent a claim of this kind may be made on behalf of Black Arrow. The present amendment to join Black Arrow will not therefore be permitted. However, subject to Mr Basten showing how he intends to overcome limitation, Black Arrow might be joined in the action so that any causes of action which it may have may be pursued against Racal. Its contracts with Circuit apparently permit some one to take over the conduct and control of such claims. If a judgment is obtained in its favour then it will hold the damages on trust.

2. Black Arrow

23. The next question is whether the original contract between Black Arrow and Racal was subject to a non-assignment clause. If so, then no claim could be maintained by Mr Basten in respect of breaches of it since the assignment of 1993 would not entitle him to pursue Racal for whatever Black Arrow might have recovered from Racal. This point arose in January on the original application since it affected the amount of damages claimed by way of amendment. On that occasion I gave Circuit and Mr Basten not only further time to enable them to see whether there were additional facts upon which they might wish to rely but also the chance to plead clearly how the contract between Black Arrow and Racal was made so that a decision could be taken as to whether or not such a claim should be allowed or whether it should be struck out on the grounds that it was bound to fail. The case has now been pleaded in paragraph 2A, 47A, 47B, 65, 65A, 75 and 75A-75F. No other facts are known. Discovery has taken place. In the circumstances I decline to defer a decision in case something turns up. The point of law can and should now be decided. The facts are simple.

24. On 15 May 1986, Racal submitted a quotation to Circuit for a DN660 computer plus software, including the Visula System 2 package (and accessories). The total came to £145,000 exclusive of VAT. On its face, the quotation was "subject to Racal-Redac's United Kingdom Terms and Conditions of Sale, printed on quotation." and comprised two sections: the pricing details and the Standard United Kingdom Terms and Conditions of Sale. There were also three notes on the face of the quotation, one of which read:

71. Paragraph B(ii) of section 1 (the pricing details) stated:

75. The "Buyer" shall mean the other contracting party.

76. The "Products" shall include all the goods and services to be supplied by the Seller.

.......

.....

25. Mr Basten evidently passed the quotation to Black Arrow for on 20 June 1986 it wrote to Circuit to inform it that Black Arrow was

113. Black Arrow then wrote to Racal on 25 June 1986:

116. Racal issued an invoice dated 27 June 1986 to Black Arrow recording all the hardware and software described in its quotation which was referred to on the invoice as "Customer Purchase Order Number". The invoice also provided for delivery to Circuit. The equipment was delivered to Circuit. Black Arrow paid Racal £145,000.

2. Decision

26. On the face of it there would appear to be little doubt that a contract was made between Black Arrow and Racal for the supply and delivery of the hardware and software at a price of £145,000. The contract was made by an offer, namely Black Arrow's letter of 25 June 1986, in which Black Arrow offered to buy the hardware and software on the terms contained in Racal's Quotation No. 1287/A/RW of 15 May 1986, and an acceptance, namely by Racal submitting the invoice requested by Black Arrow in its letter of 25 June 1986, which signified Racal's agreement to contract with Black Arrow rather than with Circuit to which the quotation had originally been sent. A contract made in this way therefore incorporated Racal's Standard Terms including Clause 15 which precluded assignment. The Products as defined in clause 1 include both hardware and software and both are subject to all the terms and conditions. The fact that clause 9 refers only to hardware does not in my judgment mean that clause 10 does not also apply to software. Clause 10(g) for example extends to the Products. The only warranty is that given in relation to hardware.

27. Racal's Standard Terms and Conditions, like many others, are not free from blemishes. For example, although the "Buyer" is defined as "the other contracting party", there are references also to "the Customer". However, it seems to be that "the Customer" is to be read as "the Buyer" for the purposes of a contract made on Racal's Standard Terms. I can see no reason to differentiate between the two. In any event although Circuit was originally envisaged to be the Buyer/Customer, by the time of Black Arrow's letter of 25 June 1986 it was clear that Black Arrow put itself forward as the potential Buyer and was accepted as such by Racal.

28. I do not consider that the reference in Note 3 at the foot of the quotation form means that the quotation is not to be regarded as an offer. First, such note is not appropriate to convey such an important condition or restriction. Secondly, "acceptance" of the order in the context of the quotation, means only the time at which the Buyer's order is received by Racal. At that stage Racal has also to get the Software Licence Agreement for otherwise it would not regard itself as bound by the contract.

29. Racal's apparent wish to have a Software Licence Agreement signed by the Buyer creates slightly more difficulties. However, I accept Mr Henderson's submission that such a provision is included for the benefit of Racal who could decide to waive it or not to require it to be performed before delivery of the products (hardware or software). A Software Licence Agreement was ultimately signed by Circuit so it existed and Racal had the benefit of it. In addition, clause 2 incorporates the terms of the Software Licence Agreement as part of the terms of the contract applicable to software. The terms are clearly Racal's standard terms and are therefore ascertainable. The fact that they did not accompany the quotation is therefore irrelevant.

30. I have already set out the passages from the speech of Lord Browne-Wilkinson in Linden Gardens which show clearly that there is to be no distinction between an assignment of the performance of the contract and an assignment of the fruits of the contract. Clause 15 bears the meaning for which Racal contends. First, it equates the contract to a contract for personal services which, by its nature, is normally non-assignable. Secondly, it reinforces that intention by expressly stating the contract is non-assignable. I see no reason in principle why such a condition should not apply to a contract with a finance house. Black Arrow could (and did) make arrangements whereby Circuit could step into its shoes and so be able to pursue against Racal such rights as Black Arrow might have for any breach of the contract committed by Racal.

31. That is sufficient to deal with the main arguments advanced against Racal. Clause 5(b) is met because Racal's invoice specifies otherwise; Clause 5(c) is met because there is an agreement otherwise made in the same way. Clause 11 is perfectly capable of applying where the finance house is the Buyer. Thus none of the reasons advanced by Mr Basten persuade me that I was wrong in my preliminary view that a contract was concluded with Black Arrow which incorporated Racal's Standard Terms and Conditions. The contract (and any variation of it) was therefore subject to Clause 15 and was not assignable by Black Arrow other than in breach of the contract. The proposed pleading is maintaining otherwise is impermissible.

3. Darlington v. Wiltshier

32. There was some argument as to whether or not Circuit could bring itself within the principles of Darlington Borough Council v. Wiltshier Northern Ltd [1995] 1 WLR 68 so that Black Arrow could recover losses suffered by Circuit as part of any damages recoverable from Racal. There is indeed more than a passing similarity between the structure of the facts of that case and the arrangements made in this case. Wiltshier contracted with Morgan Grenfell to provide a leisure centre which was to be operated by Darlington Borough Council who owned the site. Morgan Grenfell was a finance house and had no other interest in the project, but as Dillon LJ said at page 75B:

118. So too was the contract with Black Arrow made for the benefit of Circuit to the knowledge of Racal. In Darlington v. Wiltshier it was common ground that the Council as assignee of Morgan Grenfell could not recover any damages from Wiltshier beyond those which Morgan Grenfell could have recovered from Wiltshier if there had been no assignment (see page 72H where Dillon LJ so stated, relying upon Dawson v. Great Northern and City Railway Co [1905] 1 KB 260 at pages 272 and 273). Nevertheless the Court of Appeal held that the Council was able to recover losses which it alone would have incurred and which would not have been incurred by Morgan Grenfell. There were two reasons. First, the Court of Appeal considered that the facts of the case fell within the principle set out in Linden Gardens Trust Ltd v. Lenesta Sludge Disposal Ltd [1994] AC 85 and, secondly, by majority, that the effect of the assignments made Morgan Grenfell constructive trustees of the benefit of any rights under or for breach of the building contract.

33. Whether Circuit can bring itself within the same principles will depend upon the facts. At present, it seems probable that it would be able to do so. There is certainly no reason not to permit an amendment of the statement of claim or to strike out any part of it in its unamended form, on the grounds that Black Arrow would in law be quite unable to recover losses incurred by Circuit. However Circuit have yet to show how it will overcome clause 10(f) which limits the damages to no more than the purchase price.

119. Racal's Application

34. In addition to opposing the application for the re-re-amendment of the statement of claim, Racal applied to strike out the existing pleading for a number of reasons. I shall try to record most of them but for convenience I will combine some of the points made by Mr Henderson in his submissions which attacked both the proposed pleading and the existing pleading.

35. In essence he submitted that the proposed pleading contained a number of deficiencies which ought by now to have been put right and that it was embarrassing in its present form since it did not enable the defendant to know precisely the case being advanced against it. Mr Henderson submitted that a statement of claim should be a coherent and chronological whole setting out, in a manner which would enable it to be easily understood by those for whom it was intended, the facts giving rise to each cause of action (duty, breach and the resulting damages) with, in the prayer at the end, a clear summary of the effect of the preceding paragraphs. This was not found either in the existing pleading or in the proposed pleading. Circuit's inability to advance its own claims (see the preface) and the switch to Mr Basten's claims (albeit incorporating Circuit's claims) ought to have lead to a clear re-presentation of the claims being advanced by Mr Basten. Instead, all that one got was the table of cross references in paragraph 1A which served only to highlight the disorder of the pleading. To understand the case now being advanced it was necessary to reconstruct the facts for each cause of action in a proper order so that effectively the defendant and the Court would each have to replead the case by tracing the paragraphs identified in paragraph 1A, on the assumption that it was complete - an assumption which turned out to be incorrect. The table did not help since it did not do anything to correct a major structural deficiency in the statement of claim which placed the chronology after the agreements and effectively the causes of action.

36. Mr Henderson gave as an example the cause of action entitled "Intimidation in respect of the Black Arrow Agreement". He submitted that, if one were to trace the references in the relevant part of the table, then if one turned to paragraph 52 that was in itself was incomplete without its preceding paragraphs, and so too paragraph 65 required paragraphs 46A and 47C to be read. On arrival at paragraph 47C, the reader was told to go on to paragraph 43A and then 52A. Reverting to the table paragraph 58 led one, once again, to paragraph 47C and next went to paragraph 65, which had a different date and a requirement again to take on board paragraphs 47A and 47C. The losses alleged to arise were apparently to be found in paragraph 47C, but that merely referred the reader back to paragraph 43A and 52A and referred only to sums paid for a consideration which had wholly failed. If that were the case, it did not appear in the prayer. Therefore there was no claim for the recovery of any liquidated sums.

37. On a more general basis, the chronology was not even chronological. The losses alleged were set out all over the pleading, neither separately for each cause of action or brought together as a whole. Paragraph 14 referred partly to a schedule and partly to special damage to follow in the chronology. Lastly, paragraph 75F(c) on page 26 referred the reader to three different places to find the damages claimed - the statement of claim itself; the amended schedule of loss (which might not be that referred to in paragraph 14) and also the Scott Schedule. The terminology was not consistent. Mr Henderson suggested that the more sensible course would have been to have made a fresh start and to have used the names of those involved, e.g. Mr Basten, Racal, Circuit and Black Arrow. Paragraph 1E required the reader to pencil in the names to understand it.

38. Mr Henderson also raised the following specific points.

Decision

39. In my judgment, Mr Basten's present and proposed pleadings provide textbook examples of the justification of the reform introduced by the Civil Procedure Rules whereby the court can now take a grip of an action and require a party to it to present its case in a form which will satisfy the overriding objective and which will enable it to be understood clearly and to be managed properly, i.e. it will identify the claims clearly and precisely and, in so doing, it will lead to the definition of the issues in a way that will be just and fair to both parties. There is no reason to suppose that the underlying case against Racal is unmeritorious. Racal has fairly and properly admitted that there were some deficiencies but has equally fairly and clearly maintained that their cause were not matters for which it was as a matter of fact or law liable. It does not however wish to go to the expense of preparing for a trial of an action by a party who is legally aided unless and until it is clear that a tenable case in fact (eg on causation and quantum) and in law (ie a precise and thought through legal basis) is pleaded against it. It believes that if this is done then the Legal Aid authorities will be better placed to be advised as to the prospects of Mr Basten succeeding.

40. Whilst it is not for the court to assist a party for an ulterior purpose (such as enabling Racal more effectively to campaign for the withdrawal of legal aid) its duty to deal with a case justly now includes the need to ensure that it is presented justly and in a cost-effective and efficient manner. In the past the court has not been able to direct a party as to how it should present its case in anything but an outline manner. The customary approach has been seen in a number of cases of which GAB Robins Holdings Ltd v Specialist Computer Centres Ltd (1998) 15 Con. LJ 43, is typical. In that case Lord Woolf MR re-affirmed that "it is for the parties and not for the court to determine how the case should be framed, even in a judge-managed list such as those in specialist courts", but he then said, "I would add, in the first instance". I trust that I do not read too much into the last words if I infer from them that, under the old rules, and now certainly under the new rules there will be a limit to the extent to which a party will be allowed not to frame its case in a manner which will enable the other party and the court to know clearly what that case is. The CPR introduce, by way of reforms, powers of management which enable a court to take greater control of the proceedings. Some are quite extensive, but even in relation to evidence and proof, they do not confer on the court the powers which are to be found in other jurisdictions - commonly called "inquisitorial" or "investigative" - by which the court itself decides the areas of enquiry and what facts it wishes to establish and, in some cases, by whom the facts are to be established. In my view, the CPR, in emphasising the need for clarity and precision in the parties' statement of case and elsewhere in the rules, do not signal a major departure from the general principle that it is primarily for each party to decide what its case is and how best it is to be presented to the other party or parties and to the court. The party most affected may seek clarification or further information, as may the court, acting on its own initiative. However, if a party does not heed the need to reconsider its case, then, in my judgment, the court has now not only the power but also the duty, under Rule 1, to intervene - not to take the case out of a party's hands and to require a party to put forward a case which is not its preferred case - but to direct a party as to how its case is to be presented to the court, in other words, in a form which will enable the case to be properly managed in the interests of all.

41. In my judgment, the defendant has satisfied me completely that the time has come when the court could and should intervene to direct Mr Basten, and those advising him, to start again so that both the defendant and the court know clearly what Mr Basten's case is. I gave a clear warning in January that I expected a revised statement of claim which would "make it very clear indeed how that claim is maintainable in anticipation of the points which Mr Henderson has so clearly set out". That has not been done. What has been done is the antithesis of what should have been done. If anything the pleading is less clear. The present statement of claim and the proposed statement of claim remain essentially back to front: the facts i.e. the chronology, are in the wrong place. Had not Mr wilson said that the chronology culminated about paragraph 69 it was a matter of speculation where it came to an end. The pleading meanders towards its conclusion but peters out in a swampy delta with no certain foothold, eg in the form of specific prayers. The tables in the beginning of the new pleading are, in places, incomplete and, in any event, are not a proper way of presenting a case. They serve only to show the lack of organisation and clarity. I have set out only one of Mr Henderson's illustrations of how in following the references in the tables one has to go backwards and forwards to try to see what is being alleged. Each of the cases on collateral contract and misrepresentation is, quite frankly, a shambles, as is much else of the pleading. It is not acceptable to have to divine what statement led to what act of reliance and which delivery or installation perfected the contract. I do not accept Mr Wilson's suggestion that, in some way, the written agreements are comprehended by paragraph 5 of the existing statement of claim. On any ordinary and fair reading of the case, the claim was originally, and still is, presented primarily as one which is intended to bypass the written agreements, presumably on the basis that they could not be used as the main plank of the case against Racal. As the case has developed that may no longer be Mr Basten's basic position. Mr Basten must now, in my view, decide which are his principal planks and which are presented as alternatives to the principal planks. He may well succeed on a subsidiary case even if he fails on a primary case.

42. It is not possible to know whether a particular written agreement is said to have been broken and, if so, what caused the breach and what were the losses flowing from that breach. I cannot tell what constitutes breach of each individual Software Licence Agreement. I do not know what is relied as breach of a maintenance agreement. Mr Wilson said that it was a failure but that may be due to breach of a primary contract. Breach of a maintenance agreement generally means a failure to tackle a notified fault so the fault, the notice, the failure, and the resulting loss or damage should be clearly shown. These cannot be found. Furthermore if Mr Basten were to be the inheritor of the rights of Black Arrow, then Black Arrow's case must be presented as a case against Racal. At present, viewed solely in presentational terms, there is no clear plea which shows what sum of money Black Arrow might or might have been entitled to recover from Racal, the rights to which have been either assigned to or held otherwise for the benefit of Mr Basten.

43. What ought to have been done, as Mr Henderson submitted, was to serve a substituted statement of claim. Permission to do so is readily granted in this court when it is clear that the existing pleading is no longer capable of being used intelligibly. Mr Henderson was also right in saying that the text of a substituted statement of claim in a case of this kind would naturally and logically not use titles such as claimant or plaintiff (and would in any event make all necessary changes consequent on the CPR) and instead use the names of those involved so that the pleading was more comprehensible.

44. In my judgment permission to make the re-re-amendments should therefore not be granted, for the substantive reasons which I have already set out, and for the procedural reasons to which I have just referred. I also consider that the existing pleading can no longer be tolerated, and that unless a satisfactory substituted statement of case can be produced, it must be struck out. Mr Basten has had since January to correct the deficiencies in the pleading and has failed to do so. He has had more than adequate opportunity to do so. In arriving at this decision I bear in mind the expense that has already been incurred in producing the original and revised versions of the re-re-amended statement of case and the fact that this order will require further expenditure. However against those factors I take account of the need that the case should be presented fairly to the defendant and the fact that all this expenditure could and should have been avoided had what I said in January been heeded. Ample time was then given but the opportunity has been wasted.

45. I consider that the defendant has a solid prima facie case for maintaining that, some at least, of the causes of action are statute barred. However, in the present state of the pleadings, it is not possible to be certain as to which of the causes of action are or are not statute barred, since there has been no attempt to connect the facts set out in the Scott Schedule, for example, to the causes of action. Accordingly, I intend to adjourn and defer a decision on this part of the defendant's application until a new statement of case has been prepared. This must also show how it is intended to defeat any limitation defence available to Racal in respect of a claim by Black Arrow. Until this is done it would be futile to grant unconditional permission to join Black Arrow.

46. The orders which I propose to make also include directions leading to the trial, but these directions are dependent on compliance with the time table. They are in my view otherwise feasible. I regret that it is necessary to set out objectives for the new pleading since they are elementary. Precisely how the objectives are attained is a matter for the judgment of Mr Basten and his advisers. The dates have been fixed on the basis that it is not expected that either Mr Basten or Racal will need to deal with any case or allegation that has not already been made in some form or another. The parties must conform to the requirements of the CPR. This means that not only must the defendant observe Rule 16.5 but Mr Basten must present his case in such a form that the defendant is able to comply with that duty. It will be apparent that, in giving Mr Basten a further opportunity to serve a substituted statement of case, this must be regarded as his last chance or virtually his last chance for otherwise his claims are liable to be struck out. The orders do not deal with the Scott Schedule as I expect that its status will depend on the extent to which its items are utilised in the Mr Basten's new case. A PTR will be held in early December 1999. In this way the trial date may be maintained. A rolling timetable has been provided to avoid Mr Basten having to make an application for a little more time for the new pleading. However the trial date will be in peril if the new statement of case cannot served by 30 July, in which Mr Basten will need to apply for more time in order to avoid the consequences. The costs reserved from the January hearing will be paid by the claimants in any event, since I am quite satisfied that the costs of that occasion and of the applications and of the hearing on 11 June 1999 are entirely the fault of one or other of the claimants. Accordingly, the defendant is also entitled to its costs of the hearing of 11 June 1999. As there is no challenge to the figures these costs will be summarily assessed in the figure of £24,597.80 to include the costs of today, subject to the usual provisos, as they are to be paid by Mr Basten who stands to gain most from this action and for whose benefit the application to amend has been made.

47. Mr Wilson sought legal aid taxation for Mr Basten's costs of attending by counsel on the application for security for costs on which occasion there was uncertainty as to whether anybody (leading counsel, junior counsel or solicitor) had been instructed to appear. Mr Wilson says now that the Legal Aid Fund was approached before that hearing and was persuaded to fund the attendance of counsel who were accordingly instructed on behalf of both claimants. Whilst I do not accept that Mr Basten needed to be represented to ensure that no order was made against Circuit since a stay against Circuit would not extinguish any rights that it had assigned to Mr Basten or which it held on trust for him I can see that Mr Basten had some interest in the outcome, even if no one was aware of being instructed to safeguard it. In the circumstances that interest would have been sufficiently protected by the attendance of junior counsel on a watching brief basis without the attendance of any solicitor and there will therefore only be legal aid taxation to that extent. Since Mr Shipley would have had to have been present in any event, I think that a proportion, not exceeding one-quarter, of that part of his fee referable to actual attendance, thus excluding any preparatory work, would be sufficient.

48. The orders and directions that I have in mind are:

135. 2. The substituted statement of case shall meet the following objectives:

CHRONOLOGY

17. In the same brochure -

197. The Plaintiffs rely upon:2

(x) Clause 19 of the Terms provided for acceptance tests to be undertaken by the Buyer. 3

Particulars 3

76. Further or in the alternative, by reason of their dealings with the Plaintiffs during and prior to the matters complained of herein, the Defendants were aware that the First Plaintiff company was owned substantially by the Second Plaintiff, and accordingly that any harm occasioned to the First Plaintiff, and in particular any harm leading to the destruction of the business of the First Plaintiff would cause damage to the Second Plaintiff. At all material times, 98 percent or more of the equity in the First Plaintiff company was owned by the Second Plaintiff (the remainder being owned by his wife). By reason of the premises, the Defendants owed to the Second Plaintiff as well as to the First Plaintiff those duties of care pleaded in paragraph 9A. The First Plaintiff relies upon the matters pleaded herein as constituting breaches of such duty causing damage to the First Plaintiff by destroying and preventing the increase in the value of his shareholding.2, 3

AND the Plaintiffs Claim Second Plaintiff claims as against the First Defendants3 DAMAGES together with statutory interest at the rate of 15% per cent per annum or such other rate in excess thereof3 as may from time to time represent the 'real' rate of interest on money borrowed in the open market, from the date of accrual or from such other date as may be just until Judgement or earlier payment.

ROY LEMON

GRAHAM SHIPLEY1

GRAHAM SHIPLEY2

204. Served this 13th day of May 1988 by ROWBERRY MORRIS & Co for and on behalf of the Plaintiffs.

205. Re-Served this 24th day of April 1990 by HUMPHREYS & Co of 14 King Street, Bristol BS1 4EF (Ref: B/687/1), Solicitors for the Plaintiffs.1

206. Re-Re-Served this 19th day of November 1993 by HUMPHREYS & Co of 14 King Street, Bristol BS1 4EF (Ref: B/687/1), Solicitors for the Plaintiffs.2