FAILURE TO PROVIDE INFORMATION IN WITNESS STATEMENT LEADS TO APPLICATION BEING STRUCK OUT: HIGH COURT DECISION TODAY

Chief Master Marsh has had a busy day. This is the second decision today I am writing about. In  Wave Lending Ltd -v- Batra and SFM Legal Services Ltd [2016] EWHC 2238 (Ch) he considered whether a witness statement complied with a peremptory order and whether relief from sanctions should be granted.

KEY POINTS

  • The applicant had failed to comply with a peremptory order that he explain the reasons for a six year delay in making an application.
  • Failure to comply meant that the action was struck out without the need for a court order.
  • It was not a case where the court would grant relief from sanctions.

THE CASE

The defendant in an action (Mr Batra) had settled an action brought by the claimant in October 2009 (the terms of that settlement were private and not disclosed). He had issued an additional claim against a firm of solicitors “SFM”.  These solicitors did not attend the trial and it transpired they did not participate “because of a lack of financial resources”.

As a consequence, and on the same date that terms of settlement were agreed between the claimant and Mr Batra, the judge made an order adjourning the claim against the solicitors sine die with permission to restore the additional claim. Although information about the events in October 2009 is sparse, it appears that an election was made by Mr Batra, who had the benefit of representation by leading counsel, not to proceed with the trial of the additional claim in the absence of the Solicitors although there seems to have been no obvious impediment to adopting that course of action.”

THE APPLICATION TO RESTORE

In October 2015 Mr Batra made an application that the claim against the solicitors be restored for a hearing.  The liquidator for the solicitors firm made a cross-application to strike out the claims.

THE PROCEDURAL HISTORY OF THE APPLICATION TO RESTORE

The court made directions within the course of the application. Mr Batra did not comply.

  1. Mr Batra’s application merely applies for the claim against the solicitors to “be restored to the list for hearing”. Despite the passage of very nearly six years between the order made by Mr Justice Peter Smith and the issue of his application, no explanation whatever was given in his application about why the Part 20 claim should now be revived. The application first came on for hearing before Deputy Master Bartlett on 18th December 2015. On that occasion both Mr Batra and the liquidator were represented by counsel. Although no account of that hearing was provided, it is clear that the court proceeded on the assumption that Mr Batra wished to restore the Part 20 claim with a view to pursuing the Solicitors’ professional indemnity insurers. The material part of the order provided:
i) “The applicant must file and serve on the respondent and the respondents indemnity insurance provider, Quinn Insurance Ltd (or its successor firm), by 4pm on 8th January 2016 a witness statement setting out the history to date that has given rise to the present application. The applicant must also address and account for any delay in making the application to restore proceedings following the stay of the proceedings pursuant to an order of Mr Justice Peter Smith dated 30th October 2009 adjourning proceedings sine die.

ii) The respondent, if so advised, may file and serve on the applicant and the indemnity insurer a statement in reply by 4pm on 29thJanuary 2016.

iii) The applicant has permission, if so advised, to join the indemnity insurers as a party to the application pursuant to their stated liability under section 1 of the third party (Rights Against Insurers) Act 2010.

iv) The matter is to be relisted on a date not before the 8th February 2016 with a time estimate of one hour. The applicant must provide notice of the hearing to the indemnity insurers no less than 21 days before the hearing date.”

  1. Two points arise from that order. First, Mr Batra was required not only to provide a witness statement setting out the history of the proceedings to date but also to address and account for any delay in making the application to restore the proceedings. Secondly, the court wrongly proceeded on the basis that Third Party (Rights Against Insurers) Act 2010 was in force. In fact, the Act did not come into force until 1st August 2016 and, in any event, it has no application where the insolvency and the insured incurring a liability occurred prior to the commencement of the 2010 Act. Thus, its predecessor, the 1930 Act is applicable and if Mr Batra wishes to take advantage of it, he must first obtain a judgment against the solicitors.
  2. Mr Batra did not comply with the Deputy Master’s order and on 20th January 2016, on the Solicitors application, an order was made without a hearing, the material part of which is in the following terms:
“Unless the defendant files and serves on the third party and the third party’s indemnity insurance provider, Quinn Direct Insurance Ltd, a witness statement setting out the history of the proceedings to date that has given rise to the defendant’s application to restore proceedings, and such evidence addresses and accounts for any delay in making the application to restore proceedings following the stay ordered by Mr Justice Peter Smith ordered on 30th October 2009 within seven days of service of this order, the defendant’s Part 20 claim against the third party do stand as struck-out without further order and the defendant shall pay the third parties costs in the Part 20 claim, to be assessed on the standard basis if not agreed.”
  1. The order also required Mr Batra to pay the costs of the application which were summarily assessed in the sum of £957.20. He then applied to set aside only the costs order and on 26th February 2016 enforcement of that order was stayed until a later hearing. In any event, Mr Batra filed and served a witness statement dated 1st February 2016 in purported compliance with the unless order. The witness statement provides only a very limited explanation of the history of the proceedings giving rise to his application. More significantly, there is an issue as to whether Mr Batra has complied with the requirement of the order to address and account for the delay in making the application to restore the proceedings. That was not a point taken by the Solicitors and was first raised by the court at the hearing of the application. It is an issue to which I will return.
  2. It is right to observe that the order made by Mr Justice Peter Smith adjourned the additional the claim sine die whereas, in the usual way, the main claim was stayed under the terms of a Tomlin Order. An adjournment normally relates to a specific event and, by adjourning it, the event is put off, or postponed, to a later date. Thus, the trial of a claim can be adjourned; but it is not obvious how a claim, as such, can be adjourned. An adjournment and a stay are not generally regarded as being synonymous. It may be that the parties, by use of the word adjourned rather than stayed, had in mind a temporary or relatively short-term hiatus. But it seems to me the right approach for the purposes of Mr Batra’s application is to construe the order in a way which is most favourable to him and to treat it as amounting to, in reality, a stay of the claim, without time limit, with both Mr Batra and the Solicitors having an entitlement to apply to restore the additional claim. Mr Batra’s application is made pursuant to the liberty to apply.

THE APPLICABLE CRITERIA

The applicable criteria were not covered by authority and the Master

  1. The criteria which are applicable to his application cannot be discerned directly from any authority which has been cited to me. I propose to approach the application on the basis that:
i) The court has a broad discretion about whether or not it should permit Mr Batra to continue the Part 20 claim. Put another way, Mr Batra has no entitlement, as of right, to pursue the Part 20 claim in the light of the judge’s order.
ii) It is for Mr Batra to satisfy the court that he should be permitted to pursue the Part 20 claim.
iii) The court’s discretion should be exercised taking into account the provisions of the overriding objective.
iv) Account needs to be taken of the length of the delay, the reasons for it and the likely effect of the delay on the court’s ability to conduct a fair trial. The threshold an applicant has to reach will usually become higher as time passes.
v) It is also right to have some regard to the merits of the claim but I do not consider that on his application Mr Batra is obliged to show, as if he were facing a Part 24 application, that the additional claim has a real prospect of success and he has a real likelihood of making a significant recovery. However, a court may well be reluctant to allow a weak claim to be pursued after a lengthy delay.

DID THE WITNESS STATEMENT COMPLY WITH THE UNLESS ORDER?

The Master considered whether the unless order had been complied with.

The unless order.
  1. As the Court of Appeal explained in Marcan Shipping (London) Ltd v Kefalas [2007] EWCA Civ 463, the sanction prescribed in an unless order takes effect automatically as a result of a failure to comply with its terms. Unless the party in default has applied for a relief, or the court itself decides for some exceptional reason that it should act of its own initiative, the question whether the sanction ought to apply does not require a judicial determination (see [34[ in the judgment of Moore Bick LJ). The issue I have to consider, therefore, is whether Mr Batra complied with the unless order. That involves construing what the order required him to do and establishing whether what he has done is sufficient to amount to compliance with the order. It is not necessary for him to have done more than the minimum which the order required.
  2. It is also relevant to have regard to the fact that the Solicitors did not take the point about a failure to comply with the unless order until it was raised by the court at the hearing at which point it was adopted. Thus, there was no opportunity for Mr Batra to apply for relief save in the course of the hearing. No request was made by Mr Pettican for an adjournment.
The evidence.
  1. There are two witness statements from Mr Batra and two witness statements from Mr Mawer, the current liquidator. It is however only necessary to refer to Mr Batra’s first witness statement, made in response to the unless order, in any detail.
  2. Paragraphs 3 to 18 of Mr Batra’s first statement provide a very brief summary of the background to the proceedings, and the Part 20 claim, and the events leading up to the trial in October 2009. Although it is a very brief summary, it provides an adequate history of the proceedings.

HAD THE PEREMPTORY ORDER BEEN COMPLIED WITH?

The Master considered whether the order stating that the witness statement complied with the peremptory order.

  1. The starting point is to consider whether as a consequence of the unless order, the Part 20 claim has been struck out. The order made by the Deputy Master, which is reflected in the unless order, set out with some care the information which Mr Batra was required to provide in his witness statement. The order required him to address and account for any delay. Although Mr Batra is a litigant in person, given his level of sophistication, he could not have been in any doubt about what was required of him. Indeed, counsel represented him when the original order was made. It seems to me that an order expressed in those terms clearly contemplated that a full account would be given particularly as the period of delay which fell to be explained was approximately six years. The witness statement he has provided refers to five events in that six year period:
i) The occasion in May 2010 when Mr Batra saw a copy of the SDT report and findings.

ii) Quinn being placed in administration in March 2010.

iii) Mr Graham being disqualified as a director in October 2010.

iv) Mr Graham’s conviction in October 2013 of seven counts of tax evasion.

v) Mr Graham’s disqualification in February 2014. The reference in paragraph 28 of Mr Batra’s witness statement to Mr Graham’s disqualification in 2014 is not clear because Mr Graham was struck off as a solicitor in December 2009.

  1. Although Mr Batra says that these events were the reasons why he delayed in making the application, it is difficult to accept his evidence on this point for three reasons. First, save for the entry into administration of Quinn in March 2010, none of the events he relied upon appear to be reasons to delay pursuing the claim. Secondly, there are long gaps between the events which are not explained. For example, there is a gap of more than three years between Quinn going into administration and Mr Graham’s conviction (for unrelated offences) and his striking off. Thirdly, the disciplinary proceedings brought against Mr Batra by the FCA, his reference to the Upper Tribunal and unsuccessfully seeking permission to appeal, are plainly much more material than the events he lists. It is impossible to ignore the obvious link between the FCA’s decision in mid-2015, after the decision of the Upper Tribunal, and the issue of the application in October 2015.
  2. I am satisfied that Mr Batra’s witness statement falls a long way short of what was required by the unless order. There was significant failure on his part to account for the delay not just in what he chose to reveal but, more importantly, in what he chose to suppress. Mr Batra’s witness statement date 1st February 2016 is not only inadequate but it is also misleading. On that basis, by virtue of the failure to comply with the unless order, the Part 20 claim was struck out seven days after service of the order dated 20th January 2016 unless the court, exceptionally, takes the view that Mr Batra should be granted relief from sanctions in the absence of an application by him. In considering the possibility of granting relief, some account must be taken of the fact that the issue only arose at the hearing and Mr Batra did not have the opportunity to explain himself in a witness statement.
  3. Applying the well-known guidance derived from Mitchell v News Group Newspapers [2013] EWCA Civ 1537, as explained in Denton v TH White Ltd [2014] EWCA Civ 906, the first two stages can be dealt with simply. The breach of the order was plainly serious because the court required Mr Batra to explain the basis of his application in circumstances which required full details to be provided. There is no reason, let alone a good reason for the failure to do so. There was an almost complete failure to address the requirements of the order and, importantly, a decision was made by Mr Batra to suppress information which he must have appreciated would be relevant. The third stage of the test requires the court to evaluate all the circumstances of the case including the provisions in CPR 3.9(1) (a) and (b).
  4. Mr Batra’s application was made nearly six years after the additional claim was adjourned without any explanation being given for the adjournment. It should not have been necessary for the court to make an order requiring him to provide an explanation, let alone an unless order requiring compliance. It seems to me that the nature of Mr Batra’s application itself calls into play the criteria in CPR 3.9(1)(a) because of the inevitable difficulty of a claim being re-started after a lengthy delay. And the application has been considerably delayed because of the need for the original order made by the Deputy Master and the unless order. The wider considerations of the claim and additional claim point towards the need for finality and in this connection Mr Batra’s primary motivation in pursuing the application, namely an attempt to clear his name, after similar issues have been extensively canvassed in the Upper Tribunal, is unhelpful to him because in this type of claim the primary purpose of litigation is to provide a financial remedy.
  5. In the circumstances of this case, I can see no reason why it is unjust for the court to decline to grant relief from sanctions. It is of particular significance that one of reasons for Mr Batra having failed to comply with the unless order is that he knowingly misled the court about a material manner.”

RELATED POSTS: PEREMPTORY ORDERS

 

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