THE ARROYO CASE WAS A BIG & COMPLEX ACTION: THE PROBLEMS WERE SIMPLE (AND COMMON) 1: UNCHECKED SCHEDULES OF DAMAGES

The judgment of Mr Justice Stuart-Smith in Arroyo -v-Equion Energia Limited [2016] EWHC 1699 TCC is 1885 paragraphs long.  The trial lasted from the 15th October 2014 to the 5th March 2015, that is 62 court days.  The judgment actually contains a “health warning” to lawyers tempted to read it.  However it illustrates some basic, and common, themes of litigation which are worth considering.  The judgment is so long I am going to discuss the case in a series of posts.

THE CASE

The claimants were all owners of farms in Colombia. They brought actions for damages and losses allegedly caused by the laying of pipelines in Colombia.  There were 109 claimants and 73 farms. Four of the claimants were taken as lead cases.  The court had jurisdiction, however Colombian law applied.

ISSUE ONE: INACCURATE SCHEDULES OF DAMAGE

The judge considered the schedules of loss put forward
  1. The Original Schedules of Loss were produced in late 2008. This was over a year after the Letter of Claim, which was sent by a team of lawyers and experts who had the advantage of having acted for claimants with similar claims since 2004. They provided considerable detail, sufficient to suggest that they were the product of careful and competent preparation upon which at least some reliance might be placed. When the individual claims were formally pleaded, each Particulars of Claim alleged that:
“By reason of the facts and matters set out above the Claimants have suffered loss and damage and claim accordingly. In this regard, a Schedule of Loss was served on 2 September 2008. Further particulars will be provided in due course. The Claimants claim compensation pursuant to Colombian Law, quantified pursuant to English law or damages.”
  1. The Lead Claimants’ Pleadings were all supported by Statements of Truth in or about March 2010. The reference to “further particulars” being provided meant that further details would be provided of the claim formulated in the Schedules that were now being verified by the Statement of Truth; it did not mean, and would not be understood as meaning, that the current claim was fundamentally unreliable. If anything, it supported the reliability of the Schedules rather than undermining them.
  2. I have indicated what was and is the Court’s view of the purpose of the Original Schedules of Loss. That view was shared by Leigh Day: “the intention was to enable the Defendant to gain an understanding of the potential value of each claim based on best estimates at the time so that the Defendant could consider the possibility of an early resolution of the claims as set out in the Claimants’ Letter Before Action dated 22 May 2007” {C6/33/11}. The importance of the documents for the parties and Court should be apparent to anyone conducting litigation of this sort. For the parties, even in adversarial negotiations, some trust has to be placed in documents that are presented by reputable opponents seeking an early settlement. For the Court, trying to establish where the truth lies, consistency and demonstrable reliability are key features to which the Court will look when assessing a party’s case.
  3. In the event, the Original Schedules of Loss were shown to be quite unreliable and, in many respects, bore little or no relation what had happened or the evidence of the Claimants. The Claimants produced a schedule in the course of oral closing submissions which showed the percentage change (either up or down) between the Original Schedules of Loss and the Schedules that were provided in and after 2010 {C6/43.1/1}. Eight of the ten Lead Claimant Original Schedules of Loss were reduced when Revised Schedules were later produced. The divergence (on the Claimants’ approach) in 7 of the 10 cases was 25% or more (of which 5 required reductions). The most extreme case was LC54, where the Original Schedule of Loss exceeded the Revised Schedule by a factor of 22. In LC39 it exceeded the Revised Schedule by a factor of 1.5; in LC50 it was a factor of 2.3; in LC74 it was a factor of 1.3. The most extreme divergence in the other direction was LC61 where the Revised Schedule exceeded the Original Schedule by a factor of 3.8.
  4. When Snr Mesa (LC54) was asked if he had known that, by his Original Schedule of Loss, he had claimed COP 3.9 billion (roughly equivalent to £1-1.3 million) the look of astonishment on his face was real and unforgettable. His immediate reaction was that perhaps the COP 3.9 billion was “a group loss” and not his loss alone {Day7/25:3}. He was clear in his evidence that he had not known that such sums were being claimed in his name. I accept that evidence. It raises the wider question how the Original Schedules of Loss came to be prepared.
  5. Leigh Day provided an account of how the Original Schedules came to be produced by a letter dated 14 January 2015 {C6/33/11}. I accept that account. In briefest outline, information was gathered during three relatively short trips (April/May 2007, March 2008, February 2009), on each of which a number of potential Claimants were interviewed at locations away from their properties. The information included “some initial information relating to issues of productivity and quantum.” The time with each Claimant was limited to 2-3 hours, which covered liability and quantum issues and took place without the assistance of technical experts. The Schedules were prepared on the basis of that information. Although not expressly stated it is implicit (and I find) that Leigh Day did not go through the Original Schedules with any Claimant before serving them on the Defendant or before incorporating them in the pleaded case. Leigh Day’s letter says that, when incorporating them in the pleadings, it had been the intention to provide further particulars in respect of the losses alleged in the group action. As before, there is a well understood difference between providing further particulars of a pleaded claim and changing the basis of the claim substantially. Leigh Day’s letter says that the information obtained on their visits to Colombia did not change with time.
  6. In the light of the extent to which the case on quantum as set out in the Original Schedules of Loss has been shown to be inaccurate and the ready explanation for such inaccuracies which Leigh Day’s letter provides, I am unable to place any weight upon the Original Schedules of Loss as being an accurate reflection of any losses that the Claimants may have suffered or the causation of those losses, despite the fact of their having been incorporated as part of the Claimants’ pleaded case, backed by a statement of truth. It does not reflect adversely upon the Claimants themselves, since they were not involved in and were not personally responsible for the construct that was placed upon the information they provided or for the fact that the Schedules were put forward as real statements of the Claimants’ factual case and losses.
The Revised Schedules of Loss
  1. Each Lead Claimant in the trial cases gave evidence in their witness statement in the following terms (or very similar): “My schedule of losses has been read to me and I confirm that it is an accurate/precise description of my losses.” {D4/71/809} – Snr Sequeda; {D5/88/954} -Snr Manco; {D5/91/1035} Snr Buitrago; {D6/100/1199} – Snr Mesa; {D6/105/1250} – Snra Arango; {D8/125/1518} – Snr Velez. However, in oral evidence, Snr Sequeda said that he had no idea and that his lawyers had not told him what he was claiming {Day11/85:21}. Snr Mesa gave highly equivocal evidence in a way which left me quite unconvinced that he had seen or had read to him his revised schedule of losses {Day6/126:1} ff. Snra Arango had no idea how much she and her husband were claiming {Day7/119:2}. Snr Velez said that someone had read him his Revised Schedule of Loss but that he didn’t really understand it because he cannot read {Day4/37:1} ff.
  2. In the light of this evidence I am not satisfied that the statement in the witness statement is reliable and am not satisfied that any of the Trial Claimants either read (or had read to them so that they understood it) their Revised Schedules of Losses. I am driven to the conclusion that, no doubt with the best intentions, the Revised Schedules of Losses were lawyers’ documents by which they set out what they believed might be the most advantageous formulation of a claim for their clients, rather than rigorously checking with their clients whether what was being put in the schedule was supportable. That process continued even until after the hearing, when the Claimants put in further revisions which are said to reflect the evidence. That may or may not prove to be true, but I cannot rely upon the Schedules themselves to provide support to the Claimants’ cases.
Reformulation of the Claimants’ Claims
  1. In June 2012 the Claimants served new Schedules of Loss. These raised, for the first time in the proceedings, claims for the cost of reinstating their lands. The potential impact on the litigation is illustrated by the effect that the reinstatement claim would have had upon the claim of Snr Sequeda (LC39). The headline figure for the claim for reinstatement was COP 730,633,559 (c. £271,114). The aggregate total of all other quantified heads of claim was COP 130,649,270 (c.£48,478). The Defendant objected to the late introduction of the reinstatement claim and the Claimants’ application to add them was refused by the Senior Master by his order of 15 February 2013, having provided his judgment to the parties in draft on 11 January 2013.
  2. In January 2013 the Claimants informed the Defendant for the first time that they wished to add a claim for general damages for “damage to land”. On 18 October 2013 I refused permission to the Claimants to bring their proposed now claim in general damages for damage to their land adopting as the measure of loss either general damages at large or damages in accordance with the principles outlined in Wrotham Park Estate Company v Parkside Homes Ltd [1974] 2 All ER 321 and subsequent cases.
  3. The net result of the decisions to refuse the late introduction of these heads of claim means that, in a case which is essentially about alleged damage to land, the Claimants’ cases are not framed by reference to what English law would regard as one of the conventional measures of loss, namely diminution in the value of the Claimants’ land. It has therefore been neither necessary nor possible to investigate whether such a reduction has occurred or whether, viewed objectively, there is any apparent relationship between the value of the land and the claims that are made about the economic losses that the Claimants allege that they have suffered as a result of living and working on their damaged lands.

UNCHECKED SCHEDULES

It is clear from this aspect of the judgment that the judge was not impressed by schedules which were unchecked and unverified by the claimant. The schedules were “lawyer’s documents” and, as it transpired, not supported by the evidence.

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One comment

  1. Michael Loveridge · · Reply

    As a matter of interest, were these claims run under CFA’s? The costs must have been spectacular for a 62 day hearing and the ATE insurance premium must have been massive.

    And in view of the fact that the biggest claim was only for £120k how on earth would the proportionality rules apply to a case like this?.

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