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
		26 March 2012

 


Mr Justice Akenhead:

1. These proceedings arise in relation to what was a proposed development of two brownfield plots of land in Ashford, Kent. M3 Properties Ltd ("M3") was retained in about November 2004 by ZedHomes Ltd ("Zed") to provide consultancy services in connection with this development. It is said that this retainer was varied from time to time thereafter. These services were provided primarily in the 2005 to 2007 period
2. The claim by M3 is for the sum of £181,000, said to represent the outstanding balance of fees due in respect of such services as were provided.
3. The proceedings already have a chequered history. A letter before claim based on an invoice from M3 to Zed was sent by M3's solicitors in January 2011, based on there being a contract between it and Zed. During the exchange of correspondence, amongst other things Zed took the point that there had been a full and final settlement between it and M3 in April 2007. Following the conclusion of this correspondence, an unexplained gap occurred. On 18 October 2011, M3 issued proceedings against not only Zed but also Mr Schwartz and Bondball Ltd; both Zed and Bondball were companies owned in whole or in part by Mr Schwartz and it was said that he and Zed in effect entered into the retainer and later variations thereto as agents for Bondball, albeit that all three were said to be responsible for the unpaid fees. This was somewhat surprising because Bondball was not in existence in November 2004 at the time of the original retainer. A Request for Further Information was served by the Defendants before service of Defence and for a few weeks it was agreed between solicitors that the Defence did not have to be served until the Further Information had been provided.
4. At very short notice in the last week of January 2012, M3 issued an application for an unless order requiring the service of a Defence within a few days, notwithstanding the non-provision of the Further Information. A draft Defence having been served just before the hearing of the application, the Court ordered that the Defence be served properly by 1 February 2012 and also that the Claimant provide any draft Amended Particulars of Claim, addressing as appropriate the Request for Further Information.
5. The Defence, apart from pleading that the retainer was between Zed and M3 alone, also positively pleaded that there was a final settlement reached between the parties at a meeting on the 23 April 2007; it is asserted that an e-mail dated 24 April 2007 sent by Mr Schwartz to Mr Mannion confirmed or evidenced such agreement between the parties.
6. On 7 March 2012, M3 served notice of discontinuance of the claim against Bondball and Mr Schwartz. This, almost characteristically, was served very shortly before a court hearing on the same day at which the Court gave permission to the Claimant so to discontinue its claim, gave orders relating to permission to amend the Particulars of Claim, gave directions for the Defence and Reply to be filed and served and made orders for costs primarily at the expense of M3. There was discussion at this hearing about an as then unissued application by M3 relating to computer "Devices". This related to the fact that, apparently, Zed had not retained any of the electronic or other computer devices which would or might have kept an electronic record of the e-mail dated 24 April 2007 said to record the alleged settlement agreement. There was not time to deal with this would be application but there was some discussion about the desirability of each party serving a witness statement identifying (a) what became of the Old Devices, (b) what, if any, part thereof remained in the possession or in the custody, power or control of the Defendant and its whereabouts and (c) when, where, by whom, on whose instructions and in what manner any part of the Old Devices was disposed of or destroyed. Orders in those terms were made by consent in relation to both parties. The Court also gave directions for the service of further evidence and, ultimately today's date was fixed for the hearing.
7. The application was then issued. A further application, issued as late as 23 March 2012 (that is the Friday before the Monday hearing), by M3 seeks to vary the order made by the Court on 7 March 2012. Essentially, the Claimant now seeks an order permitting an independent expert forensically to examine Zed's servers and any backups which it may have to see if either they show the e-mail of 24 April 2007 or if they record the creation of the e-mail at some stage after that date. A letter dated 22 November 2010 supposedly sent by Mr Schwartz to a Mr Cowan of M3 attracts the same attention, referring as it does to the settlement said to have occurred; M3 says that this letter has never been seen by Mr Cowan or M3 albeit that there is another letter two days earlier from Mr Schwartz referring to "all invoices for services [having] been fully settled"; the earlier (alleged) letter refers to "an agreement" being made "as to the settlement of the account".
8. The Claimant's evidence is to the effect that there never was any settlement and that it never received the e-mail of 24 April 2007 or the letter of 22 November 2010. Its own (not wholly completed) searches to date of its own electronic equipment showed no trace either of the early e-mail or, on its electronic document management system, the receipt of the later letter. The clear inference, it argues, is that these documents have been improperly created and, if that finding is made, the credibility of the Defence is seriously undermined. Essentially, it argues that, as this alleged settlement is a key issue, it ought to be allowed to carry out an extensive electronic search of such of Zed's relevant electronic equipment as remains intact, albeit through an independent expert.
9. The proposed Order accompanying the latest application runs to some six pages and seeks an order that Zed shall permit inspection "of all or any Relevant Devices" by Zed's expert in the presence of M3's expert; an image of the entire content of the Relevant Devices is to be created, with the Defendant cooperating with all reasonable requests of the experts relating to inspection and creation of the image. A copy of the image is to be provided to both sides' solicitors with each expert being entitled to provide a copy to their sides' respective solicitors. Confidentiality is to be maintained. "Relevant Device" is to mean "any server or backup thereof which has been used by the Defendant or by the said Michael Schwartz for the creation sending and receiving or storage of e-mails and the Documents"; such documents are they e-mail and letter referred to above.
10. M3 has put forward a number of supportive facts and inferences as to why it may well be the case that the e-mail and letter are fabricated:

(a) Its own electronic searches of its own equipment show not only that these documents were not received by it but also that e-mails either side, time-wise, were recorded.

(b) Between May 2009 (when M3 sought payment of outstanding fees from Zed) and January 2011, Zed never suggested that the claim had been compromised, notwithstanding a fair bit of correspondence between the parties.

(c) There was no mention of the e-mail until the draft Defence was served towards the end of January 2012.

(d) The letter of 22 November 2010 is effectively in part repetitive of the letter of 24 November 2010, with the latter not referring to the agreement; there was no point in sending the second letter if the first one had ever been sent.

(e) Such electronic searches of Zed's or Mr Schwartz's remaining equipment as have been possible had not revealed any electronic copy.

(f) It has been said in Zed's evidence that Zed's old server and hard drives were destroyed in about December 2011, apparently for "security reasons"; this was after proceedings were started and after Zed had been told by solicitors to retain relevant documents for disclosure. Coupled with that, the hard drive to Mr Schwartz's personal computer (said to have been the computer from which the e-mail was sent) was destroyed at the end of July 2011, or possibly in 2008, with the disk being crushed and no copies being retained.

11. So far as the law is concerned, CPR Part 25.1 enables the Court to grant injunctions or orders "for the inspection of relevant property" or for the "preservation of relevant property". It is common ground that that the Court has the power to make the order sought but the order must be both necessary and proportionate. This was confirmed in the case of Patel v Unite [2012] EWHC 92 QB This approach is consistent with the overriding objective.
12. I am not prepared to make the further order sought by the Claimant. The reasons are as follows:

(a) The Claimant already has a substantial armoury of points to deploy to seek to demonstrate that the e-mail (and therefore possibly also the 22 November 2010 letter) were fabrications. If it secures proof positive from its own IT expert that the e-mail was definitely not received, that will in all probability go a long way to establishing the point. Ultimately, the credibility of Mr Schwartz and Mr Mannion will be important in the decision as to who is right but that will be considered in the light of the points deployed by the Claimant.

(b) The Defendant's evidence that the key computers, hard drives and servers were destroyed is supported by three employees of the Defendant and, although all things are possible, there could be three people involved in a conspiracy to pervert the course of justice in that particular context, which is less likely.

(c) The further exercise will add substantial costs to be borne by both sides, although initially the major cost will be on the Defendant which must already have spent a substantial management resource as well as legal costs in dealing with the current order. The Defendant estimates its further IT costs as about £20,000. In practice, and from the experience of this court, it is likely that the costs will exceed that; the cooperation required from the Defendant will also be intrusive.

(d) The proposed search will cover the period from April 2007 to January 2011 to see if there is an electronic hint that the documents were fabricated and it will involve looking amongst other things for deleted e-mails and drafts. This can only be done with difficulty, as Counsel for the Claimant accepted in argument.

(e) Mr Schwartz has said in the witness statement that or the Devices had been listed by him (including any backups); the evidence shows that the new server has been searched with no success. The key e-mail is said not to be on any of the remaining Devices.

(f) Disclosure, which will be ordered, and which will include E-disclosure will be provided within the next few weeks in any event.

(h) The Claimant's IT has not yet finally completed its own search of the Claimant's Devices. The searches to date have revealed no trace of the relevant e-mail being received by the Claimant. It is confidently expected by the Claimant that the searches when finally completed will positively show that the e-mail was not received and therefore was not sent. The more positive the findings will be, the more it will render unnecessary any further detailed and expensive search of the Defendant's remaining devices.
 


13. I remind myself again that this claim is only for £181,000 and, although I am sure that it is important to the Claimant, the amount of costs and resource time which will be further expended on a further expert search of the Defendant's Devices, which will only cross the Ts and dot the Is, at best, is likely to be disproportionate; on the available evidence, particularly of the destruction of older Devices by the Defendant, it is unlikely to produce a conclusion other than that no trace of the e-mail can be found or remains.
14. This is a case which in the Court's view is one which should be settled and the parties would be well advised, through mediation or otherwise, to sit down and talk to each other with a view to resolving the matters in issue.
15. The Claimant has sought an amendment to the terms of the order which I made in early March 2012, which in the light of my ruling above is not object to and is therefore allowed.