RELIEF FROM SANCTIONS, FRAUD AND THE CHANGING SITUATION

I must preface this post with the warning that it is not possible to cite decisions relating to  permission to appeal.  However the decision in Bawden -v- WM Morrison Supermarkets PLC [2015] EWCA Civ 957 is interesting in itself. The Court of Appeal refused permission to appeal where a Circuit Judge had granted relief from sanctions on the grounds that circumstances had changed.

“The appellant is seeking to use a series of unmeritorious procedural points to avoid having to face the music in relation to what may turn out to be a serious case of fraud or perjury. If that is the outcome, there will be very serious consequences indeed.”

“The tests in Denton provide an easy way for District Judges to proceed, but the questions still have to be answered correctly. If a District Judge goes plainly wrong, then they will be subject to review, as happened in this case on appeal.”

KEY POINTS

  • The Circuit Judge was correct to overturn a decision of a District Judge and grant relief from sanctions.
  • It was not reasonable to expect a defendant to review surveillance evidence in detail until the defendant had some notice that there was a potential fraud.

THE CASE

  • The claimant claimed damages which included a substantial sum for the hire of a cleaner.
  • The cleaner told the defendant’s solicitors that this aspect of the claim was a fraud.
  • The defendant had, earlier, been refused permission to rely on surveillance evidence. They applied for permission to rely on that evidence (since it showed no cleaner attending).
  • The District Judge refused the defendant’s application.
  • The defendant appealed to the Circuit Judge who allowed the appeal.
  • The claimant then sought permission to appeal from the Court of Appeal. That application for permission was refused
THE JUDGMENT IN THE COURT OF APPEAL
  1. This is the renewed oral application for permission to bring a second appeal against the decision of His Honour Judge Freedman, sitting in the Newcastle-upon-Tyne County Count, dated 22nd July 2014. Judge Freedman had overturned the decision of District Judge Hardy dated 5th June 2014 which the appellant, Miss June Bawden, now wishes to reinstate.
  2. The appellant suffered an accident at work when she slipped off a stool, causing her a fractured spine, on 29th June 2009. She commenced these proceedings on 13th June 2012 after the defendant, William Morrison Plc, had admitted liability.
  3. On 6th November 2012 the District Judge gave directions for the exchange of witness statements by 21st December 2012 and ordered an assessment of damages hearing. He also ordered an interim payment of £10,000, but he refused expert evidence on the application of the defendant on the basis that questions should first be put before that was necessary.
  4. On 15th and 16th January 2013 the claimant’s house was subject to surveillance at the instigation of the defendant. The defendant thereafter of course had in its possession the tapes, CDs or disks recording that surveillance.
  5. In March 2013 the claimant’s solicitors sent to the defendant’s solicitors some invoices from a Mrs Borrie in respect of cleaning the claimant’s house at the rate of, I think, £20 per week. This, it is said, gave the defendant’s solicitors a clear indication that it was intended to claim for house cleaning during that period.
  6. On 2nd July 2013 the defendant was granted permission to adduce orthopaedic expert evidence in relation to issues of causation. On 22nd October 2013 the defendant applied to the District Judge for permission to rely on the surveillance evidence that by this time had been obtained on both 15th and 16th January 2013 and 24th and 25th July 2013. The defendant also applied for the assessment hearing to be set down for trial.
  7. The matter did not come on before the District Judge until 2nd April 2014, when he refused the defendant relief from sanctions and refused to allow it to rely on the surveillance evidence.
  8. On 22nd April 2014 the claimant served an updated witness statement from herself, including reference to Mrs Borrie’s cleaning costs having been incurred, and that was confirmed two days later on 24th April 2014 in an updated schedule of loss, including a statement of truth by the claimant which the earlier statement of loss, as I understand it, had not had. The updated schedule claimed £1,430 for past cleaning costs and a total of £16,250 for future cleaning costs. On 23rd April 2014 the court set the trial date for the assessment of damages on 25th and 26th June 2014.
  9. On 29th April 2014 the defendant applied for a witness summons to secure Mrs Borrie’s attendance at court. On 19th May 2014 the defendant’s solicitor’s attendance note records a conversation with Mrs Borrie, saying that the claim for cleaning services that had been made by the claimant was “dishonest”. As a result of that conversation, on 20th May 2014 the defendant issued an application notice seeking that the trial be vacated, that there be relief from sanctions to rely on Mrs Borrie’s statement and that there should be permission to rely on the surveillance evidence as a result of a material change of circumstances. Mr Roy, counsel for the claimant, has indicated to me that the District Judge in fact only allowed the application for relief from sanctions to rely on Mrs Borrie’s statement at the hearing and that it was not included in the application notice, but in reality that probably does not make a great deal of difference to the case that is being put.
  10. On 5th June 2014 District Judge Hardy dismissed the defendant’s application. He first held that the evidence of Mrs Borrie did not amount to a change of circumstances. Two and two, he said, should have been put together when the invoices were provided in March 2013, even if they had not been provided in December 2012 when statements were due to be exchanged. When the District Judge was told that the proper test was to be found in Mitchell v News Group Newspapers [2014] 1 WLR 795, not to be found in Tibbles v SIG Plc [2012] 1 WLR 2591, where the court was asked to reverse its own order due to a change of circumstances, he gave another judgment refusing relief from sanctions. The District Judge was concerned about jeopardising the trial date.
  11. His Honour Judge Freedman heard the appeal from the District Judge on 22nd July 2014. He gave a careful reserved judgment on 12th September 2014 allowing the appeal. He reminded himself that he was dealing with a case management issue with which he should only interfere if the generous ambit of discretion had been exceeded. He reminded himself of Mitchell, which had by then been succeeded by Denton v TH White Ltd [2014] 1 WLR 3926. He agreed with the District Judge that the breach was not trivial, in the old language, and was “serious or significant” in the new language, but he held that the District Judge had been wrong not to find that there was a good excuse for the failure to comply with the order to serve statements by 21st December 2012, namely that the defendant did not know about Mrs Borrie and her evidence by then. The District Judge, he said, had been wrong to ask himself whether there was a good reason for serving the statement later than April 2013, rather than just serving the statement in breach of the order for exchange of witness statements by 6th November 2012. But even if that were the right test, he was satisfied that there was a good reason for not serving the witness statement until May 2014, after service of the updated schedule of loss on 24th April 2014.
  12. The judge then proceeded to stage 3 of the Denton test and decided that there had been no flagrant violation of the rules of procedure or a relaxed approach to litigation and that the exposure of fraud provided a good reason for time to be extended in this case so that the District Judge had been wrong to conclude that, looking at all the circumstances of the case, including factor A and factor B in the CPR rule, it would not be just to accede to the defendant’s application.
  13. Finally, he decided there was a material change of circumstances since District Judge Hardy had refused to admit the surveillance evidence and that that too should be admitted.
  14. On 9th February 2015 McCombe LJ refused permission to appeal on the papers on the grounds that the judge had simply disagreed with the District Judge’s assessment of the relevant factors as he was entitled to do.
Grounds of appeal
  1. The grounds of appeal are, first, that the judge was wrong to interfere with the District Judge’s refusal to grant relief from sanctions for filing Mrs Borrie’s statement late because the evidence could and should have been obtained earlier. The District Judge was not in error in finding no good reason for the delay and the judge should not have interfered with the District Judge’s balancing exercise.
  2. The second ground of appeal is that the judge was wrong to disturb the District Judge’s refusal to revoke the previous order refusing relief from sanctions in respect of the surveillance evidence.
  3. In addition, the appellant, through Mr Roy, submits that the case is fit for a second appeal on the ground that the judge’s approach undermines the proper and consistent implementation of the new Civil Procedure regime and would devalue the clarification offered in Denton and the Jackson reforms themselves. Moreover, it is said that this is the claimant’s first opportunity to question the judge’s decision so that there is some other compelling reason for an appeal to be heard: see the judgment of Arden LJ at paragraph 65 in Esure Insurance Ltd [2008] EWCA Civ 842.
Discussion
  1. In my judgment, the judge’s analysis of the facts of this case was clear and supportable. It is hard to see how the District Judge reached a sustainable conclusion that there was no good excuse for the delay between March 2013 and May 2014. It was not until the schedule of loss was served with a statement of truth on 24th April 2014 that the defendant can have thought it necessary to check the surveillance evidence for signs that Mrs Borrie had done the cleaning. It is to be taken into account that checking surveillance evidence for a number of days takes a good deal of time, effort and cost. Of course the defendant could have done that earlier, but to do so would have been unnecessary and speculative as “mistake” rather than “fraud” would up to that time have been likely to offer a more plausible explanation for the inconsistency. Once, however, the defendant’s solicitors received the new statement and the schedule of loss and saw that the claimant was relying on a large cleaning claim, they followed the matter up with Mrs Borrie, requiring her to attend as a witness at the approaching trial. But it was not until Mrs Borrie telephoned them to inform them that her evidence had been dishonest that they had any idea that they were being faced with an allegedly fraudulent claim.
  2. The tests in Denton provide an easy way for District Judges to proceed, but the questions still have to be answered correctly. If a District Judge goes plainly wrong, then they will be subject to review, as happened in this case on appeal. The judge was perfectly entitled, in my judgment, to interfere for the reasons he gave. It was, as McCombe LJ said, a proper exercise of the appellate function.
  3. Moreover, I entirely agree with the way the judge exercised his discretion at stage 3, taking proper account, as he was required to do, of factors A and B and all the circumstances of the case, including the good excuse he had found at stage 2 and the need to track down and deter others from pursuing fraudulent claims. The rules should not be used as a shield for legitimate attempts to expose fraudsters.
  4. The legal system operates on the basis of trust and parties to litigation cannot be expected to mistrust everyone and everything before that trust is clearly called into question. That only occurred here at the end of April 2014, which led to the contact with Mrs Borrie, and the application to adduce the statement was made shortly after the fraud had been alleged.
  5. In addition, I see no grounds for questioning the judge’s decision to reverse the District Judge on the question of the surveillance evidence. Once the statement was admitted, that became highly significant. There was indeed a material change of circumstances within the Tibbles test demanding that the surveillance be admitted.
Disposal
  1. There is therefore, in my judgment, no important point of principle or practice raised by this appeal. The law is clearly set out in Denton. The appellant is seeking to use a series of unmeritorious procedural points to avoid having to face the music in relation to what may turn out to be a serious case of fraud or perjury. If that is the outcome, there will be very serious consequences indeed. I would refuse this application for permission to appeal.

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