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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		29th June 2012

 


Mr Justice Akenhead:

1. The Defendant seeks to strike out the First Claimant's Particulars of Claim and seek summary judgement against the First Claimant on the basis that they disclose no reasonable grounds for bringing the claim or otherwise as amounting to an abuse of the Court's process.

The Factual Background

2. These facts are primarily culled from the pleadings, amplified in part by two witness statements of Mr Dale and two reports prepared by a Mr Sickles. The findings in this judgement are not intended to bind any final trial judge.
3. By a Claim Form (issued in the Queen's Bench Division General list) and Particulars of Claim, the First Claimant, Whessoe Oil and Gas Ltd, ("WOGL") and the Second Claimant Cleveland Bridge UK Ltd ("Cleveland") have brought claims against the Defendant in respect of alleged breach of contract and statutory duties imposed on the Defendant under the Companies Act 2006. The claims are for damages and equitable remedies.
4. WOGL and Cleveland are members of the Al Rushaid Group of companies, said to be a leading Saudi owned group of companies operating in the oil and gas industries, construction, engineering, manufacturing, trading, real estate and technology sectors. Each claimant company is a specialist within that sector: WOGL specialises in designing and building low temperature and cryogenic storage and handling facilities for the hydrocarbon and petrochemical industries; Cleveland specialises in structural steel fabrication and construction, particularly for bridges and large commercial and industrial buildings.
5. The claims concern breaches of contract and duty by the Defendant arising out of an Engineering Procurement and Construction Contract between WOGL and its joint venture partner, Volker Stevin, with Dragon LNG Limited to design, execute and complete the construction of facilities for a liquefied natural gas import terminal at Milford Haven in Wales for a fixed price of approximately £184.7 million ("the Dragon LNG Project"). It is the Claimants' case that Mr William Dale the Defendant, as Managing Director, managed all the key areas of the operation, including project management, engineering, construction, project engineering, legal affairs and subcontracting. As such, it is said that Mr Dale had complete autonomy in all areas of project management including sub-contracting. His breaches are said to have arisen out of his management of those areas, for which he is accountable to the Claimant companies. The Claimants assert that the Dragon LNG Project was a commercial disaster for WOGL that would have resulted in insolvency if it were not for the provision of additional funds from its Saudi shareholders.
6. The total value of the claim which is the subject of the application to strike out/summary judgment is said to be £50.6 million. The Claimants also claim for equitable compensation or an account of profits made by the Defendant as a result of breach of his director's duties. The Claimants suggest that they are not required to elect between the remedies of damages and an account of profits until liability has been established.
7. Mr Dale was employed by WOGL as its Managing Director since 2004 although in January 2009 his employment was transferred under TUPE arrangements to another Al Rushaid group company, Project Services International Ltd ("PSI"). It is common ground that his employment was terminated in 2010. He issued proceedings in the Queen's Bench Division in March 2011 against PSI for damages for wrongful dismissal, outstanding salary, payment of bonus and other claims. That led to the service of a Defence and Counterclaim in July 2011 amended in October 2011 in which issue is taken in relation to termination or dismissal and almost verbatim the Counterclaim is the same as the Particulars of Claim in the current proceedings. It is perhaps surprising that PSI felt able itself to advance any counterclaim in those terms.
8. The Particulars of Claim plead materially two duties pursuant to the Companies Act 2006 in breach of which is later pleaded:

"12.1 A duty to act in the way that [Mr Dale] considered, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole (pursuant to section 172 (1), having regard to the matter is set forth in section 172 (1) (a) - (f)…

12.3 A duty (pursuant to section 174) to exercise reasonable care, skill and diligence that would be exercised by a reasonably diligent person…

12.3.1 the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by [Mr Dale] in relation to the company, and

12.3.2 the general knowledge, skill and experience that [Mr Dale] has or had at the material time."

9. Paragraphs 16 to 22 of the Particulars of Claim are entitled "Breaches of contract and duty in relation to the Dragon LNG Project". Paragraph 18 explains that the "total costs to Dragon…of the Dragon LNG Project should have been approximately £184.7 million, in relation to which WOGL was budgeted to make a profit of £19.3 million. In fact the total cost was £364.9 million. WOGL had to contribute £36.7 million to the cost overrun. As a consequence instead of making a profit of £19.3 million it made a loss of £31.3 million (as at December 2008), and negative variance of £50.6 million). Paragraph 19 asserts that the:

"principal cause of the cost overrun was the subcontracting cost of the Dragon LNG Project. The subcontracting was done by WOGL (under the control of the Defendant) and Volker Stevin. Further from about September 2007, the Defendant formed a steering committee with his counterpart at Volker Stevin (Rene Postulart) in a belated attempt to control the future costs of subcontracting on the Dragon LNG Project."

10. Paragraph 21 pleads the breaches of the terms pleaded at paragraphs 12.1 and 12.3 (set out above):

"20.1 The Defendant failed to arrange the organisational structure of WOGL and/or the joint venture so that it provided an adequate system of checks and balances and so that there was a system of adequate control over subcontractors and subcontracting expenditure;

20.2 The Defendant failed to ensure that appropriate contracts were in place with the various subcontractors, having regard to the fixed price EPC contract that WOGL had entered into for the Dragon LNG Project. As at 19 October 2007, approximately 70% of the subcontracts were 'reimbursable' contracts, meaning that the contracts effectively allowed subcontractors to charge for all labour, materials, equipment and transportation on an unlimited basis;

20.3 The Defendant failed to adequately control or supervise the subcontractors and the work that they undertook on the Dragon LNG Project (or to procure the control or supervision of the same);

20.4 The Defendant failed to adequately supervise or control expenditure on subcontractors (or to procure the control or supervision of the same). For example, the subcontracts for the mechanical works and fabrication of the inner tank and external pipework were on reimbursable contracts under which labour costs were charged on an unlimited hourly basis. The Defendant failed to implement and operate a proper system of checks to ensure that timesheets submitted for work to be charged actually reflected hours that had been worked by subcontract labour (or to procure the implementation or operation of the same);

20.5 The Defendant failed to take any or any appropriate remedial measures to try to bring the Dragon LNG Project under control. For example, even after difficulties were apparent, nearly 2.5 years into the project, the Defendant continued to hire subcontractors on reimbursable contracts."

11. In Paragraph 21, WOGL pleaded in the alternative breaches of express terms pleaded in Paragraphs 10 and 11 of the pleading which were specific terms of the service agreement into which Mr Dale had entered with WOGL. They do not add very much, if anything. Paragraphs 22 to 29 relate discretely to various other alleged breaches which WOGL or Cleveland pursue against Mr Dale which he does not seek to strike out.
12. Paragraph 29 is entitled "Loss and damage":

"By reason of matters aforesaid, WOGL and/or Cleveland have suffered loss and damage. The best particulars that they can provide prior to disclosure and/or the provision of any further information herein are as follows:

29.1 WOGL has suffered loss and damage of £50.6 million as a result of the cost overrun on the Dragon LNG Project…"

13. Paragraph 30 is entitled "Other relief":

"Further or alternatively Cleveland and/or WOGL are entitled to an account or equitable compensation in relation to the losses that they have suffered as a result[sic] of the Defendant's breaches."

14. The Defence (served on 6 September 2011) which was a more detailed document running to some 20 pages set out up a number of the material facts upon which Mr Dale relied. For instance he alleged in Paragraph 7 that he did not have complete autonomy and did not manage directly all the key areas of the operation of the Dragon LNG Projects in that he appointed staff and delegated substantial areas of the management of the project to others. He avers in Paragraphs 8 and 9 to the fact that there were other very substantial oil or gas related projects in and around Milford Haven which in effect made it more difficult and costly to retain subcontractors and the like and highlighted a number of factors which he says caused the cost overruns such as extreme weather, poor labour productivity, changes in client requirements and extra costs involved in accelerating works. He positively pleads in several places (Paragraphs 10 to 15) that the claim is embarrassing in its lack of particularity, impossible to plead to or otherwise inadequately particularised.
15. The parties by their solicitors attended before Master Eyre on 13 September 2011. He made this order amongst others:

"3. The Claimants must by no later than 31 October 2011 and the Defendant must by no later than 30 November 2011 serve the report of the a witness of opinion with expertise in the field of managing a construction project such as the Dragon LNG Project."

History does not relate specifically why he made this order but there are only two possible reasons, the first being that he considered of his own motion that the Particulars of Claim were on their own inadequately particularised. The second is that he may have felt that the Claimants could only legitimately pursue Mr Dale if they had such an expert report. The learned Master has since retired and the Claimants have changed solicitors (twice) and instructed new counsel since September 2011. As a matter of inference, I consider that it is most likely that he had the first reason in mind because the second reason would not justify ordering Mr Dale to serve an expert report at this stage and because (for reasons which follow) it is clear that there are substantial inadequacies in the Particulars of Claim.

16. In the result, the Claimants did not comply with this order but had to seek an extension of time which Master Eyre granted on 14 November 2011. Time was extended until 16 December 2011. This was on the basis that Mr Iain Wishart, a well known quantity surveyor expert, would be providing the report.
17. As late as 11 December 2011, the Claimants instructed an American engineer called Mr Sickles to report which he did on 16 December 2011. Given that he had only had a few days to look at matters, it is hardly surprising that this report (effectively of 5 pages) is vestigial. Remarks include:

"4…Based on the documents reviewed to date [the pleadings, Master Eyre's orders and a few other documents] and the analysis performed it is my opinion the Claimants' claims are supported pending results of the ongoing review of the large amount of related data. Additionally, it is my opinion the Defendant could have prevented substantial losses experienced by the Claimants

It should be understood this professional expert report is based on a preliminary review of the vast amount of documentation provided (Reference 1). The analysis of the documentation is ongoing. An ongoing review of provided and additional documentation is needed to form a complete expert opinion…

4.3 …A complete evaluation of the original cost estimate which includes references to all management reports and adjustments to established estimates is ongoing.

4.4 …a. Preliminary research supports the claim that the primary cost overrun is attributed to contract and subcontract labor. An itemised project cost overrun summary is being developed to identify all sources of overrun and what prudent courses of action would be expected based upon the specific causes of overruns. The following items would be required to create a fully itemised project cost overrun summary: all contracts, subcontracts change orders, final accounting including all support papers leading up to the agreements, internal cost reports, claims made and received, still unsettled claims made and received, still unsettled change orders made and received, information regarding any and all contingent liabilities, all communications between clients, contractors and subcontractors, and all invoices provided by subcontractors to clients…

4.5 As to the particulars of Claim Paragraph 20…

a. … Paragraph 20.1: I support the claim that there was not an adequate system of project financial control based on facts that the project was overrun. My review to date suggests that primary overruns are attributed to subcontractors and subcontracting expenditures. However, an ongoing review is being performed to determine the itemised breakdown of cost overruns. An organisational structure was in place…however, my investigation to date has revealed no adequate system of checks (measurements) and balances (verifications). The continuance of my investigation will determine if the balances were reasonably utilised…,

b…Paragraph 20.2: in my expert opinion, fixed-price contracts are inherently high risk projects with respect to schedule, cost, and deliverables…A document discovered during this preliminary review (Reference 5) shows that no risk analysis was performed contrary to [WOGL's] pre-proposal Project Risk and Opportunity Procedure…

c….Paragraph 20.3: … preliminary information review shows Key Performance Indicators were tracked and reported…A preliminary review shows no labor performance related corrective actions were imposed by the Defendant in response to poor performance reports nor is there evidence found to suggest labor efficiencies were challenged for improvement, as would have been prudent. All contracts…are being reviewed…

e…Paragraph 20.4:… Review of any and all documents required by [Claimants'] policies is ongoing with intent to determine if policies were enforced.

f…Paragraph 20.5, Preliminary review shows no remedial recommendations were made by the steering committee, which was formed by the Defendant. Further analysis is being conducted to determine what if any recommendations of the steering committee were adopted and what if any effect was produced as a result of the recommendations.

5. SUMMARY OF CONCLUSIONS

5.1 It is my expert opinion that Defendant was in a position to impact the overall financial success of the Dragon LNG Ltd Project…

5.2 My work to date suggests that the Defendant has violated Claimants' company policy by not having the required pre-proposal risk assessments before signing the Dragon LNG Ltd EPC contract.

5.3 My preliminary review support primary cost overrun is attributed to contract and subcontract labour. Defendant was in a position to prevent these cost overruns. My continued analysis will develop a fully itemised cost overrun summary.

5.4 Based on my review to date the Defendant did not exercise prudent contract authority on behalf of the Claimants…My detailed analysis of contracts…is ongoing.

5.5 My work to date indicates that claimants [sic] claims are justified. However, my work is ongoing, and more reports will be provided.

18. That was responded to (as ordered) by Mr Dale on whose behalf there was served a preliminary expert report of Richard Swan on 27 January 2012. It is fair to say that this provided a much greater and informed analysis of the issues raised by the Claimants' expert. He said:

"7.2 Mr Sickles' opinion is that the Claimant's claims are supported, pending results of ongoing review. It is my view that Mr Sickles is not yet in a position to be able to give opinion which supports the Claimants' allegations, yet he purports to do so. His opinion would seem to be premature and wholly unsupported by any reliable evidence. (Para 5.3)

7.3 Mr Sickles has not provided any opinion to support the case on causation or quantum at all. (Para 5.4)

7.4 Mr Sickles states at a number of points in his report that he is not able to find evidence that certain things were done by the Defendant. I consider his opinion to be inconclusive and wholly unsupported by any reliable evidence. (Para 5.5)

7.5 I do not believe that it is possible to conclude anything to support the Claimant's claim in relation to the cause of cost overrun based on the documents provided. (Para 5.7)"

19. Also on 27 January 2010 and whilst the case was still in the General List of Queen's Bench Division, Mr Dale issued an application to strike out the Particulars of Claim and for summary judgement. He attached his own (first) witness statement in which he provides some more detailed background on the facts explaining that he is suffering severe prejudice by having the claim hanging over him. He complains that the case against him is "so poorly particularised" that he does not "know the nature of the very serious allegations that are made against" him. He says that the Claim has blighted his career. He reviews Mr Sickles report, it would be fair to say, critically. He supports his pleaded case that the cost overruns were attributable to a large number of causes. He explains that the steering committee was formed after control of the project had been ceded to Volker Stevin (WOGL's Joint Venture partner) in 2008 and that it was supported by experts from many different disciplines. He explains that the assertion about no full risk assessment is simply wrong and that a full risk assessment was carried out at the outset and interim risk assessments were carried out.

"44. Mr Sickles seizes upon his Reference 5, alleging that this document was "discovered" during a "preliminary review" and that this document shows that "no risk analysis was performed contrary to WOGL's pre-proposal Project Risk and Opportunity Procedure (Sickles' Reference 6). Mr Sickles has got the wrong end of the stick and is completely missing the point. As stated above, WOGL carried out a risk analysis at the outset. This was then updated regularly.

45. Mr Sickles appears to have been provided with Reference 5 out of context. To put it in context, Reference 5 was prepared as part of the negotiations with the client for the completion agreement. As part of that process, a company called Eurolog carried out a risk analysis for the client. When it came to the negotiations, the joint venture asked the client for a copy of the Eurolog risk analysis but the client failed to provide a copy. Following a series of discussions with the client at various levels, the joint venture board made a presentation to the client's board. As part of that presentation, I prepared a series of slides, including slide 7 ("History how we got here"). The reference on slide 7 to "No risk analysis" is therefore a reference to the client's failure to provide a copy of the Eurolog risk analysis and not a reference to a failure by the joint venture to follow its own procedures and carry out its own risk assessment."

This is and remains unchallenged. He criticises Mr Sickles' report for its constant fall back on the ongoing reviews. None of his evidence is challenged.

20. Thereafter in about April 2012 the case was transferred to the TCC and the originally fixed hearing date in early May 2012 was re-fixed for 25 June 2012.
21. No witness statement as such has been filed by WOGL. However a second report from Mr Sickles dated 29 May 2012 has been lodged. This runs effectively to 16 pages together with some 21 attachments. By this stage the Claimants had changed solicitors for the third time. The new solicitors had sent Mr Sickles a letter of instruction on 30 April 2012 which asked him to report on the scope of duties owed by a construction manager, which had been breached by Mr Dale and the evidence supporting his opinion and they losses or types of loss resulting from these breaches. In this later report, Mr Sickles defends himself against the criticisms made of his first report by saying that both reports were "preliminary only and it would be unrealistic to expect me to consider the more than one half million documents in this case under the current time constraints". He has spoken to a Mr McNaughton, a WOGL employee.
22. He suggests that Mr Dale "had full project autonomy". He makes a distinction between responsibility for "the cause and effect issues which affected cost escalation", accepting that Mr Dale was not directly responsible for this, and "accountability" saying that as Managing Director he was "ultimately accountable" (see Paragraphs 4.2 k and l, for instance). He goes on to say that, whilst the joint venture remained on a fixed-price contract arrangement with its employer, Mr Dale renegotiated sub-contracts to make them reimbursable on a cost plus basis; he suggests that Mr Dale "relinquished some financial control and exposed the Claimants to financial risk" (Paragraph 4.4 a). He suggests that most of the cited costs overruns "could have been avoided had the Defendant provided a better initial cost estimate and had made earlier corrections to increase subcontractor productivity" and that the joint venture "should not have allowed the client to make design changes affecting cost and schedule after the contract had been awarded without appropriate compensation…" (see Paragraph 4.4 c).
23. He looks again in Paragraph 4.5, briefly, at the five sub-paragraphs of Paragraph 20 of the Particulars of Claim. In the few lines devoted to each complaint, much of what he says is vague and woolly:

a...Paragraph 20.1: In my opinion, the Defendant was aware of subcontractor low performance as he admittedly worked to build a system of checks and balances to help control spending. Regarding sub-contract labor expenses, once he realised his attempts to manage through automation and crosschecks was failing, I believe the Defendant should have aggressively controlled the situation with direct management intervention. In my opinion, the Defendant owed a duty to the Claimant to regularly visit the job site and subcontractor offices to facilitate improved worker efficiency. I have found no evidence such a regiment [sic] existed.

b…Paragraph 20.2:…Thus, the risk assessment and risk register failed to provide the needed insights to mitigate issues later shown to be detrimental. These assessments were the responsibility of the JV Board and by extension the responsibility of the Defendant. This illustrates a failure to properly plan.

c….good leadership and vigilant project management should ensure all expenses are "limited" and proportioned appropriately relative to fulfilling the project requirements. It is not uncommon for costs to be higher than expected, but it lacks due diligence to allow them to escalate out of control (as appears to be the case for the Dragon LNG project).

d…Paragraph 20.3: …I would have expected the Defendant to have required sub contract suppliers to maintain updated program plans along with cost and schedule estimates throughout the duration of their efforts. Any variances would have required subcontractor reporting of causes and corrective action plans. This would apply to fixed-price or reimbursable contracts. In my opinion, the Defendant failed this duty to protect the claimants best interests.

e. Likewise, the Defendant owed the duty to closely and frequently communicate project overruns (and reasons for overruns) with the investor…I have not seen a history of this type of correspondence between the Defendant and the investor. Without evidence, I cannot show such correspondence regiment [sic] did occur. Furthermore, I believe the Defendant should have aggressively controlled the situation with direct management intervention"…

f…Paragraph 20.4: Review shows Claimants had policy drafted…for subcontract control and subcontractor data review. My review to date of these policies has been limited. As such, I am not currently in the position to offer an opinion on this element of the claim.

g…Paragraph 20.5: There is evidence that supports that the Defendant did take remedial measures to try to bring the Dragon LNG Project under control. [Various examples are given]

The above items all show reasonable care. However, it should be noted that review of the Board Meeting Minutes evidenced extreme concern yet responsiveness seemed to be less than prudent [various examples are given]…In all cases, my opinion is that the Defendant's responses were less than adequate and too late…"

24. There is nothing in Mr Sickles' second report about losses or how they were caused.
25. Mr Dale submitted a second witness statement dated 14 June 2012 which does not take the matter very much further other than making some general criticisms of Mr Sickles' second report and emphasising that the "unjustified and unwarranted claim against me continues to damage my employment prospects."

The Arguments and the Law

26. Mr Dale has applied to strike out the claim form and Particulars of Claim pursuant to CPR r. 3.4(2)(a) and/or (b) and/or for summary judgment under CPR Part 24. The draft order sought makes it clear that the Application is brought only in respect of WOGL's claim and not in respect of Cleveland's separate claim.
27. The relevant provisions of the CPR are:

3.4 (2) The court may strike out a statement of case if it appears to the court –

(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;

(b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings…

24.2 The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if –

(a) it considers that –

(i) that claimant has no real prospect of succeeding on the claim or issue; or

(ii) that defendant has no real prospect of successfully defending the claim or issue; and

(b) there is no other compelling reason why the case or issue should be disposed of at a trial."

During the course of argument Mr Bowdery QC indicated that his client was no longer pursuing the summary judgement application.

28. As is apparent from note 3.4.1. of the White Book Service 2012 (Vol 1, p. 71) the jurisdiction under grounds (a) and (b) covers claims which are unreasonably vague, incoherent, vexatious, scurrilous or obviously ill-founded and other cases which do not amount to a legally recognisable claim or defence. A statement of case is not suitable for striking out if it raises a serious live issue of fact which can only be properly determined by hearing oral evidence (see Bridgeman v McAlpine-Brown January 19, 2000 unrep. CA). An application to strike out should not be granted unless the court is certain that the claim is bound to fail (Hughes v Colin Richards & Co [2004] PNLR 35). For the purpose of the summary judgment application (and as reflected in White Book, note 24.2.3, Vol. 1, p. 678), it is sufficient for WOGL to show some "prospect", i.e. some chance of success. It is not necessary for WOGL to show that the case will probably succeed at trial. On a summary judgment application, the court will not engage on a mini-trial. An application for summary judgment is not appropriate to resolve a complex question of law and fact, the determination of which necessitates a trial of the issues have regard to all of the evidence (Apvodedo NV v Collins [2008] EWHC 775 (Ch)). Where such issues arise, the claimant is entitled to have the dispute determined at trial.
29. Mr Bowdery QC relies upon the decision of Coulson J in Pantelli Associates Limited v Corporate City Developments Number Two Limited [2011] PNLR 12. He contended that the principles recognised by the learned Judge in Pantelli in the case of a tortious professional negligence claim pursued in the TCC should also be applied by analogy and consequently upon the orders of Master Eyre in respect of both breach of an employment contract and breach of directors' statutory duties claims. This was challenged by Mr Brown for WOGL.
30. The Pantelli case involved a claim by quantity surveyors seeking fees whose claim was met by a Defence and Counterclaim which raised allegations of professional negligence and a counterclaim for £300,000; that counterclaim was pleaded in very bland terms that: "The Defendant has incurred additional and/or wasted costs of approximately £300,000. These include the costs of engaging additional consultants including structural engineers, CMP consultants and transport consultants". The Defendant was ordered by way of an unless order to provide proper particulars of the negligence causation and loss by way of a proposed amendment. Mr Justice Coulson decided that proper particulars had not been provided. He said:

"11. CPR 16.4(1)(a) requires that a particulars of claim must include "a concise statement of the facts on which the claimant relies". Thus, where the particulars of claim contain an allegation of breach of contract and/or negligence, it must be pleaded in such a way as to allow the defendant to know the case that it has to meet. The pleading needs to set out clearly what it is that the defendant failed to do that it should have done, and/or what the defendant did that it should not have done, what would have happened but for those acts or omissions, and the loss that eventuated. Those are 'the facts' relied on in support of the allegation, and are required in order that proper witness statements (and if necessary an expert's report) can be obtained by both sides which address the specific allegations made.

12. It is plain that, on any view, the amendments contained in paragraph 16 of the Amended Defence and Counterclaim do not begin to meet the test in r.16.4(1)(a). It is impossible for anyone to work out from those generalised and generic allegations what particular matters were being alleged against Pantelli. It would be impossible for a solicitor to take a witness statement from those involved in providing the services in question that could hope to meet these points, because no details have been provided for a prospective witness to accept or dispute. Accordingly, paragraph 16 is not a proper pleading of a case of professional negligence.

13. Similarly, paragraph 36 is not a proper pleading of causation and loss. It is impossible to work out from that terse summary what facts CCD rely on in support of their contention that a particular breach or breaches has given rise to a particular head of loss. There is no answer to the question: but for the negligence, what would have happened and why? The damages claimed are wholly unparticularised. Again, therefore, paragraph 36 does not comply with r.16.4(1)(a)."

31. He then went on to deal with a further ground upon which he would have struck out the claim which was to do with the absence of any supporting expert evidence:

"16. There is a second, separate reason why I am in no doubt that those parts of this Amended Defence and Counterclaim that purport to be allegations of professional negligence should be struck out. That is because, even though the work that is now the subject of these purported allegations was carried out three years ago, there is no expert evidence of any kind to suggest that that work was carried out inadequately, or was in some way below the standard to be expected of an ordinarily competent quantity surveyor. Not only is it simply not good enough to turn a positive contractual obligation into an allegation of professional negligence by adding the words "failing to" to the obligation, but it is also wholly inappropriate to do so in circumstances where there is no expert input to allow CCD to make such an allegation in the first place.

17. Save in cases of solicitors' negligence where the Court of Appeal has said that it is unnecessary (see Brown v Gould & Swayne [1996] 1 PNLR 130) and the sort of exceptional case summarised at paragraph 6-009 – 6-011 of Jackson & Powell, Sixth Edition, which does not arise here, it is standard practice that, where an allegation of professional negligence is to be pleaded, that allegation must be supported (in writing) by a relevant professional with the necessary expertise. That is a matter of common sense: how can it be asserted that act x was something that an ordinary professional would and should not have done, if no professional in the same field had expressed such a view? CPR Part 35 would be unworkable if an allegation of professional negligence did not have, at its root, a statement of expert opinion to that effect…

19. In the present case, although this is a claim that has been in existence for some years, CCD have chosen not to avail themselves of any expert input to support their allegations of negligence. There is no explanation for that failure. It is wrong in law and practice to make such unsupported allegations in this way, and I regret that they were ever made. In the light of the terms of the agreed unless order, they must be struck out."

32. It is clear that Mr Justice Coulson was referring here to the need for expert evidence to support a case for professional negligence. In this context, the TCC considered these observations in the context of various other authorities in ACD (Landscape Architects) Limited v Overall [2012] EWHC 100 (TCC) and the Court commented at Paragraph 17:

"a) They are not expressed to and do not lay down an immutable rule of practice that in those circumstances no pleading can be put forward which pleads professional negligence unless and until the party pleading has secured supporting expert evidence. One only has to consider the practical example of a Claim for fees which is issued and served and, in accordance with the CPR, a Defence has to be served within 28 days, failing which judgement in default can be entered; it would be contrary to principles requiring a fair trial that the Defendant would in effect be barred from presenting a Defence and Counterclaim which raised legitimate defences including some based on allegations of professional negligence against the Claimant.

(b) There is under the CPR the requirement that pleadings should be supported by a Statement of Truth (CPR Part 22 generally). CPR PD 22 Paragraph 2.1 requires the statement of truth verifying a statement of case (including a Defence) to say:

"I believe that the facts stated in this [document being verified] are true".

One can envisage circumstances in which a defendant or claimant may legitimately or at least not dishonestly believe that the facts stated in his or her pleading are true, even where they involve allegations of professional negligence against the other party and where no expert evidence has yet been retained. Obviously, there must be sufficient for the maker of the statement to make it.

(c) As Mr Justice Coulson says above, there are obviously some cases of professional negligence in which expert evidence is not required.

(d) Where there are explanations as to why the party pleading professional negligence has not or has not yet acquired expert corroboration for its allegations of professional negligence, the Court can look at those reasons in making up its mind as to what is an appropriate course. Thus, it may be legitimate for the Court to bear in mind that it is disproportionate, costs-wise, for expert evidence to be secured at a very early stage in the case, particularly where the amounts in issue may be small or where there is a sensible prospect of mediation or other amicable resolution. This, in my judgement, gives effect to the overriding objective.

(e) Matters may however be different in circumstances in which a party relying on professional negligence allegations makes it clear that it does not need expert evidence, gives a clear impression that it has no intention of securing expert evidence or, as in the Pantelli case that party without good reason has proceeded for a long time during the litigation without securing such evidence. The other party in those circumstances can then take steps, in an extreme case by way of a striking out application or by other more cost effective means, to bring this to the attention of the Court. It is open to the Court to strike out allegations of professional negligence which in its judgement would have to be supported by expert evidence to stand any realistic prospect of success in circumstances in which the party making such allegations makes it clear that it has no intention of obtaining such evidence. Another fairer course open to the Court, having established that the party making the allegations would need such evidence, would be to give that party a reasonable opportunity to obtain such evidence. Obviously, that may depend upon the stage at which the point arises and, for instance, that may be inappropriate at a very late stage in the proceedings or even during the trial."

Discussion

33. It was argued by Mr Bowdery QC, albeit ultimately not very strenuously, that the case should be struck out because the information in the Sickles' reports was insufficient to support a case of negligence or breach of duty against his client. In my judgement, it is not strictly or absolutely necessary for WOGL's case on a negligence or breach of duty to be supported by an expert's opinion on whether there was such negligence or breach. My reasons are as follows:

(a) WOGL's claim is not based on the tort of negligence, but for breach of contract and/or statutory duty. A managing director is not as such a professional (such as a doctor, lawyer, architect or other equivalent to whom the courts apply the Bolam test): see Asher v London Film Productions [1944] KB 133 at 139. The obligations upon the Defendant as employee and director are not necessarily coterminous with those which arise upon the assumption of professional responsibility by an independent contractor (namely the exercise of a reasonable degree of care and skill). As such, it is not the case (as in Pantelli) that CPR Part 16.4(1) (a) requires the provision of an appropriate expert report as a necessary preliminary.

(b) The differences between the requirements of a negligence claim and the present claim for breach of contract/duty are tolerably clear. The allegation of breach of Clause 2 of the service agreement is that the matters particularised in Paragraph 20 of the Particulars of Claim constituted a breach of the "powers and duties commensurate with a Managing Director." The scope of this is a matter of contract and company law and not necessarily established by a body of professional opinion.

(c) The duties owed pursuant to Clause 5A are also distinct from an obligation to carry out duties with reasonable care and skill. The clause includes the following discrete obligations on Mr Dale to devote time, attention and skill to his duties, to faithfully, efficiently, competently and diligently perform such duties and exercise such powers as may from time to time be assigned to or vested in him, to obey all reasonable and lawful directions given by or under authority of the Board and to use best endeavours to protect, promote and extend the interests of the Claimants.

(d) The duties implied by law are also arguably distinct from the obligation of reasonable care and skill and extend to arguable obligations on Mr Dale faithfully and loyally to serve WOGL and to conduct himself in a manner consistently with the relationship of confidence and trust between employer and employee.

(e) Simply because a significant part of the complaints involve assertions that Mr Dale failed to exercise reasonable care and skill does not convert the Claim into a case of professional negligence.

(f) I do not say that expert evidence will not be required on any aspect of the case. For instance, it may well be extremely helpful to the Court to have expert evidence about appropriate management tools in a project such as this and it may well be close to essential for the Court to have expert evidence on quantum. The Court may be informed by expert evidence as to what may be expected of competent construction managers in the context of a project such as this.

(g) I do say however that the Claim can not be struck out simply because it is not supported (at all or well) by expert evidence about breach of possible professional standards.

34. The complication (if it can be so called) in this case is that Master Eyre clearly required the Claimants to provide an expert report and, as indicated above, the Master's approach was primarily dictated in all probability by his concerns as to the thinness of the Particulars of Claim. His order however does not amount to a declaration that, unless adequate expert evidence was deployed, the Particulars of Claim would be struck out. His order however does serve as the clearest warning to the Claimants that they needed to amplify and explain their case, not only as to liability but also as to causation and quantum.
35. Turning to the Particulars of Claim, I have absolutely no doubt that in a case such as this the pleading is extremely thin and lacking in essential particulars. Put another way, and perhaps to illustrate the ramifications of the point, if the Claimants adduced no evidence on any material facts other than those currently pleaded, the claim would fail and be dismissed. The most obvious example is the totally inadequate pleadings of causation and loss. To plead a £50 million claim for damages simply by saying that by reason "of the matters aforesaid", loss of £50.6 million has been suffered, is simply not acceptable. There are no material facts pleaded linking the loss to the breaches and the reader or Mr Dale and his advisers in this case have, simply, no idea what the Claimants' case actually is on the point and it would be immensely difficult for them to prepare for trial on the point.
36. So far as quantification is concerned, it is simply not credible for the Claimants to plead that the vestigial case pleaded is the best they can do prior to disclosure or the provision of further information. There is no doubt, as Mr Sickles himself confirms, that the very large bulk of the relevant documents (which doubtless do explain how and why the losses alleged were incurred) are available to the Claimants and indeed to him (even if over the last six months or more he has not been able to do the analysis which he himself called for in his first report). Mr Sickles' remark in his first report was that "an itemised project cost overruns summary is being developed to identify all sources of overrun and what prudent courses of action would be expected based upon the specific causes of overruns". That clearly has not been developed yet that is at least a credible exercise which might well assist the pleading.
37. The allegations of breach in Paragraph 20 are also vestigial. It is particularly concerning that one of the duties alleged to have been breached is the duty on the part of Mr Dale to act in good faith; the complaint of breach is in effect that he acted in bad faith. There is not a hint or suggestion in Paragraphs 20.1 to 20.5 of bad faith or a lack of good faith, albeit that they are some very general complaints of possible incompetence. All the other complaints are very and self evidently general. A good example is Paragraph 20.5, the alleged failure on his part to take any appropriate remedial measures, with one very vague example given. There is an almost embarrassing lack of particularity. He is entitled to know what remedial measures should have been taken, when and in relation to which sub-contractors. An even better example is Paragraph 20.3, the alleged failure adequately to control or supervise sub-contractors; that tells the reader and Mr Dale nothing as to what he should have done, when and in relation to which sub-contractors.
38. This embarrassing lack of particularisation is not helped by Mr Sickles' two reports which are self-evidently preliminary and largely un-researched. Again, if that represented the evidence to be presented at trial, it might well be thought that the Claimants' prospects of success were precarious.
39. The only question therefore for the Court is whether or not the case as pleaded is so unreasonably vague, incoherent or embarrassing that it should be struck out now. I consider that there is, albeit vestigially a cause of action pleaded in Paragraphs 20 and 29. The pleading is not exactly "incoherent", because one can understand what the words and mean, albeit that it is difficult to understand in the context of a project such as the one described in the pleadings. Projects like this can run seriously over budget; the reasons may be many and various. They may arise because there is such a skills shortage in the area that prices or rates are higher than in other areas where there is no such shortage. They may occur as a matter of bad luck, if there are strikes or bad weather which delay the works. They may occur through bad management on the part of any number of people. They may occur because substantial changes to the works are called for. The reasons for the cost overruns however must be capable of determination and attribution to appropriate factors which may or may not be within the control or responsibility of Mr Dale. Certainly, it can be said with some force that the pleading is embarrassing because it does not begin to set an appropriate agenda for trial and it does not begin to enable Mr Dale to prepare for trial let alone know in reality what the case is against him.
40. There is however one issue raised by Mr Brown for WOGL in relation to Paragraph 30 which is in my judgement wrong. He says that it is not necessary for his clients to spell out what their case on loss is because they are "entitled to an account or equitable compensation". However, they have not set out on any coherent basis what material facts give rise to any entitlement to an account or equitable compensation. They are not saying for instance that Mr Dale has squirreled away money belonging to WOGL or that he has come in to funds which are WOGL's. They have however pleaded a claim for damages for breach of contract and of duty but the obvious compensation for that (if any) is damages. A party pleading a case which is unable to articulate its case on loss can not avoid the need to do so by blandly claiming an account or equitable compensation, even if some of the breaches are breaches of the Companies Act duties.
41. The Court is left with two choices: should the Particulars of Claim be struck out forthwith or should the Claimants be given the chance to provide proper particulars and plead the material facts relied upon by them? On balance, but only just, I consider that the latter option should be deployed by the Court. This is more because Master Eyre did not expressly articulate in his order why he was ordering the Claimants to provide an expert report and because the Defendant could have articulated somewhat earlier that further information had to be pleaded. Although it can be inferred why he made the order, the Master did not spell out the consequences of the production of an inadequate report such as each of Mr Sickles' reports. On balance therefore it would be unfair on the Claimants to strike out their major claim without giving them a final opportunity adequately to particularise their claim. It is right to make a final order for the provision of such particulars for two reasons, the first being that the Particulars of Claim are in key respects set out above embarrassingly un-particularised and secondly that it must have been obvious from the time of Master Eyre's unusual pre-disclosure order that this was the case. That order was made nine months ago. It is clear that the Claimants have advanced this (at least superficially) serious claim to over £50 million without having analysed in any detail if at all how such a claim can be maintained or pursued. Mr Sickles himself makes it clear that a substantial amount of work has been required for many months (but not obviously pursued with any alacrity) and that it should be possible to identify the overruns, their causes and their linkage to any imprudent acts or omissions on the part of Mr Dale.
42. In reaching this decision I take into account the observations in Kim v Park [2011] EWHC 1781 (QB) of Mr Justice Tugendhat in which he said at Paragraph 40:

"However, where the court holds that there is a defect in the pleading, it is normal for the court to refrain from striking out their pleading unless the court has given the party concerned an opportunity of putting right the defect, provided that there is reason to believe that there he will be in a position to put the defect right."

43. In a discussion with Mr Brown for the Claimants, he accepted on instructions that appropriately articulated particulars could be provided in pleading form, either as further information or by way of draft amendments within four weeks of 25 June 2012. I remain to be convinced that this will be possible but it would be unfair on balance not to give the Claimants the final opportunity to do so.

Decision

44. I therefore adjourn the Defendant's striking out application on terms that the Claimants must provide full particulars of the breaches of duty relied upon, of the losses claimed and of causation of such losses, such particulars to include all material facts upon which the Claimants rely. This is by way of a final order. I have also re-fixed a hearing for 2½ hours for this application on 1 August 2012 at 10 am at which the application may be pursued if no or inadequate particulars provided, alternatively directions can be given to bring this matter on to trial.