1. PHILIP JOHN GRUNDY v 2. GILLIAN GRUNDY [2001] EWCA Civ 139

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE MANCHESTER COUNTY COURT
(MRS JUSTICE STEEL)
[2001] EWCA Civ 139Venue Royal Courts of Justice, Strand, London WC2A 2LL, Thursday 1 February 2001
Between
1. PHILIP JOHN GRUNDY2. GILLIAN GRUNDYClaimants/RespondentsDR U NAQVIDefendant/Appellant
Before
Lord Justice Simon BrownLord Justice LongmoreMR STEPHEN PRITCHETT (Instructed by Messrs Krivinskas & Co, Manchester M2 5PR) appeared on behalf of the AppellantMR GUY VICKERS (Instructed by Messrs John Hardman & Co, Manchester M3 2JA) appeared on behalf of the RespondentDate 1 February 2001

LORD JUSTICE SIMON BROWN:

[1]I will ask Lord Justice Longmore to give the first judgment.

LORD JUSTICE LONGMORE: This application for leave to appeal arises in a case which is a claim for the cost of refurbishment of the Cumberland Hotel, Fleetwood. It is not a large claim, the counterclaim is for an even smaller sum and the case is redolent of dismal delays on the part of the parties.

[3]There were three substantial delays after the claimants issued their writ, as it then was, in February 1995. They were:(1) A period between 21 August 1995, when there was an order for delivery up of a contract mentioned in the defence so that signatures could be examined, and 12 September 1996 when the claimant took out an application for an unless order in relation to the defendant's documents.(2) A second period of 12 months' delay between 19 March 1997, when directions were made that experts' reports be exchanged within 42 days, and 10 March 1998 when the claimants took out a summons to reamend their statement of claim asking for the reasonable price of extras and eight days later gave a notice of intention to proceed.(3) A further delay of 14 months occurred between 31 March 1998, when there was a notice of discharge of the legal aid certificate of the plaintiffs, and 24 May 1999 when an order was made applying the new Civil Procedure Rules which had come into force to this case.[4]That is by way of history and we have not invited the parties to give their explanations for those delays. No doubt there were faults on both sides.[5]The material history begins on 1 July 1999 when, pursuant to the new rules, there was a case management conference. An order was made by District Judge Wilby, sitting at the Bolton County Court, which (materially) provided for expert's reports to be exchanged by 8 July 1999 and for factual witness statements to be exchanged by 26 August 1999. Experts' reports were exchanged pursuant to that order on 8 September 1999. It then emerged that the defendant wanted to counterclaim for defective work of a considerably larger amount than the £5,000 claimed in the original defence and counterclaim. It was now said that the defendant was entitled to a sum of about £28,000 rather than £5,000. Accordingly the experts were at cross purposes, so that the meeting between them ordered by District Judge Wilby at the case management conference, could not usefully go ahead. It was therefore for the defendant to apply for leave to amend so that the pleadings could coincide with what her experts said.[6]The defendant did nothing, save that her solicitor has said that he remembers saying at the case management conference that there would be need for leave to amend, a remark that is not remembered by the claimants' solicitors, but nothing was done. That put the claimants in a difficult position but not one which is unknown to those who are engaged in litigation. No factual witness statements were exchanged by 26 August and on 23 November 1999 the claimants threatened the defendant that they would be taking out an application for an unless order in relation to the provision of witness statements unless they were provided. There was no response to that letter or to other letters written at about the same time.[7]On 6 December 1999 the claimants' solicitors protested that they had had no replies to letters since 28 September. They said that they had applied for a debarring order if witness statements were not exchanged within 7 days. There is no copy of that application before us, but, in accordance with the rules, it was made to the district judge as a paper application. That did at last sting the defendant's solicitors into activity and on 8 December they replied to the letter of 6 December explaining their delays as being due to the trouble they had experienced in obtaining documentation from the clients. The letter continued:
"It is our client's intention to amend the defence and counterclaim in order to include the information revealed in the said report. We therefore enclose a copy of the proposed amended Defence and Counterclaim with attached consent order. If you are willing to allow our client to amend her Defence and Counterclaim please sign the enclosed consent order and return it to us. If you are not prepared to consent to the amendments please inform us by return so that we can made the appropriate application to Court."
[8]That letter was never put before the district judge despite the pending application for an unless order debarring the defendant from defending the claim if witness statements were not exchanged. In my view both parties are to be criticised for that because it is senseless for litigation to be conducted on paper in accordance with the new rules unless the district judge, who was dealing with the paper application, has the material documents before her.[9]On 15 December 1999, before obtaining any instructions from their clients, the claimants' solicitors said they did not imagine that their client would consent to the amendment and that their own application that the defence be dismissed if witness statements were not exchanged still stood. They repeated that on 22 December after they had taken instructions. But, two days before that, District Judge Wilby had considered the papers and made the order, which is at the root of this application for permission to appeal, in the following terms:
"Upon the Claimant not appearing and the Defendant not appearing EX PARTE IT IS ORDERED THAT 1. Unless the Defendant confirms that she is ready to exchange witness statements within seven days and does so she will be debarred from defending further and shall have judgment entered against her with costs to be assessed, and the costs of this application be provided for."
[10]That order was made on 20 December, the Wednesday before Christmas Eve. It was drawn up by the court office on 6 January 2000. We are told that the order does not take effect until it is drawn and, therefore, the seven day period ran from 6 January. It was in fact served by the court office on the defendant's solicitors on 10 January, by which time four of the seven days had already expired. That galvanised the defendant's solicitors into some activity. On the very same day they wrote to the court saying that they had received a copy of the order and stating, somewhat disingenuously:
"We are surprised that the Claimant applied for such an ex parte order considering that they were well aware that we have been in the process of amending the Defence and Counterclaim."
[11]I say "disingenuously" because it would have been more sensible if they had themselves informed the court that they were in the process of amending their defence and counterclaim. The letter of 10 January continued:
"We enclose a copy of the application for leave to amend. If we are successful in our application then it would be appropriate to serve witness statements in support of the proposed amended Defence and Counterclaim. We informed the Claimant's solicitors by letter on the 8 December 1999 of our intention to amend, enclosing copy of amended Defence and Counterclaim together with a consent order. The expert's report upon which our amended Defence and Counterclaim is based was served on the Claimant's solicitors in July 1999. In light of the above we would respectfully ask you to vary your order to require exchange of witness statements within seven days of the hearing of the application to amend the Defence and Counterclaim."
[12]On receipt of that letter, the court accepted that there would then have to be an oral hearing. That could not be fixed until 3 April 2000. After oral argument, District Judge Wilby refused the application to amend the defence and counterclaim and proceeded to give immediate judgment for the claimant on the basis of her order of 20 December. It is pointed out by Mr Pritchett, for the applicant, that the district judge did not consider any question of proportionality.[13]In the light of that order, the defendant appealed to Steel J sitting at Manchester. In the course of her judgment upholding the order of the district judge, she recited the history of the matter and no complaint has been made of her account of the history until a passage of her judgment where she says (page 4A):
"That unless order was totally ignored, it seems, and nothing happened until 3rd April of this year. That, in the submission of Mr Vickers, is a 'contumelious default', to use the words which applied prior to the recent changes in the law. No appeal was made against that order and there was no application to vary the order or to set it aside."
[14]With respect to the judge, that is not a completely accurate statement of the position. As I have explained, on receipt of the unless order by the defendant's solicitors on 10 January 2000, they did at last issue a formal application to amend the defence and counterclaim and informally apply by the letter of 10 January to the district judge to vary the order of 20 December 1999, in which she required exchange of witness statements within seven days so that it would read "from some day subsequent to the hearing of the application to amend".[15]Steel J then concluded, in her discretion, not to permit the proposed amendment to the defence and counterclaim because the claimants would suffer prejudice in dealing with a new case, and because a fair trial would not be possible in relation to those amended allegations since the building had now been sold to a third party and was in the process of being refurbished yet again. We have already indicated that that exercise of her discretion is unappealable and we have refused leave to appeal that decision to refuse permission to amend. We have, however, granted leave to appeal in the course of the hearing against the further order which Steel J upheld, namely that there be immediate judgment for the claimants in the light of the failure to comply with the unless order.[16]The learned judge did not consider that aspect of the matter as part of the judgment. She said:
"Accordingly, the order of District Judge Wilby will stand and the appeal is dismissed."
[17]In the course of post judgment discussion the judge made it clear why she was so doing. She said at page 6F of the transcript:
"...the application should be dismissed to amend, and it follows from that, and it follows from the fact that no proceedings were taken following the unless order in December last year, that judgment should be entered against the Appellant in this case."
[18]That is not in fact correct and that is why we gave permission to the defendant to appeal that part of the order.[19]Mr Pritchett has submitted, on behalf of the defendant, that the sanction of striking out the whole original defence and entering judgment for the claimant was disproportionate to the default on the defendant's part. He reminds the court in his skeleton argument of Biguzzi v Rank Leisure Plc [1999] 1 WLR 1926 , correctly cited by the judge for the proposition that delays and defaults will be taken seriously by the courts. He submits that it is also authority for the proposition that there are many alternatives in the court's armoury of powers which enable a case to be dealt with justly in accordance with the overriding provisions of the Civil Procedure Rules, without necessarily taking the draconian step of striking the case out. Thirdly, Mr Pritchett submits that examples of such powers are awarding costs, making orders for payment into court and making realistic orders which take into account the parties' requirements for a fair trial.[20]Fourthly, he submits that it was reasonable, despite the existence of the unless order, for witness statements not to be exchanged while an application to amend was pending. Fifthly, he submits that the duty to prosecute a counterclaim is not so serious as a duty to prosecute a claim and that against the background of the long delays at the beginning of the case, the delay in exchanging witness statements between 26 August 1999 and 10 January 2000, when the unless order was served on the defendant's solicitors, was by comparison not so very striking.[21]For the claimants, Mr Vickers relies on the history of the delays for which the defendant was responsible in this case. He points to the fact that no less than three previous unless orders had to be made against the defendant and, while that is true, it is also true to say that with that incentive the defendant did comply with those orders, all made before the unless order of 20 December, which is the subject matter of this appeal. Mr Vickers says further that, when the case management conference took place on 1 July and an order was made for exchange of experts' reports by 8 July and factual witness statements by 26 August, the defendant's solicitors must have been perfectly well aware that(a) an application for leave to amend would be necessary, and(b) in the light of that, it would be impossible to exchange witness statements by 26 August. He also submits that the material delays being the fault of the defendant, there is no reason why the unless order should not take effect in accordance with its terms.[22]For my part, I regard it as important that neither District Judge Wilby nor Steel J gave any substantial consideration to the question whether striking the original defence out and entering judgment for the claimants would be disproportionate, and whether there could not be other ways of achieving justice in this matter.[23]As for Mr Vickers' arguments, if one looks at the delays in the case as a whole, they are by no means all solely the fault of the defendant. The fact that the defendant's solicitors must have known at the time of the case management conference that there would be need for leave to amend and therefore the order for exchange of factual witness statements would be liable to be a futile order, does not necessarily mean that the defendant should then be visited by the draconian order of a striking out. The judge's approach was, with respect to her, clearly influenced by her inaccurate view that no proceedings were taken following the unless order. That is less than fair to the defendant in the light of the defendant's letter of 10 January. Therefore it does not seem to me to be correct to categorise the default of the defendant as contumelious. It is possible to go further and say that it would have been pointless to exchange witness statements while a bona fide (and it is not suggested it was not bona fide) application for leave to amend was before the court.[24]Undoubtedly, the defendant can be criticised for not drawing the attention of the court on paper to the fact that an application for leave to amend was being made. They should have taken out the application for leave to amend at, or very shortly after, the case management conference. But, those defaults are not so blatant as to justify the extreme measure of striking out the defence and entering judgment immediately for the claimant.[25]Accordingly, I would reverse that part of the learned judge's judgment by which she upheld the right of the claimant to enter judgment, but our order should be on stringent terms. The terms, if my Lord agrees, which will be incorporated into the order, are that there should be a payment of £50,000 into court within 14 days; that witness statements are to be exchanged within 7 days from today. We would remit the matter to the district judge to fix a date for trial, to order a realistic meeting between the experts and a Scott Schedule, if the district judge thinks that is the appropriate course to take, and make any consequential orders she thinks fit.

LORD JUSTICE SIMON BROWN: Mr Vickers asks, forensically, in the course of his powerful and plausible argument, if an order debarring the defendant from defending and entering judgment accordingly in default for the full sum claimed ("the supreme penalty") is not appropriate in this case, when will it be? The short answer to that question is, in a case when the relevant breach of the unless order, here the failure to exchange witness statements, is not so intimately bound up, as this breach was, with the defendant's application to amend the defence and counterclaim. Whilst that application remained outstanding, it was hardly surprising that witness statements were not being exchanged. When, as here, the application to amend failed because of the very same defaults in the defendant's conduct of proceedings as had caused the unless order to be made in the first place, it by no means follows that the supreme penalty should also be paid for a breach of that order. That would be to punish the defendant twice for the same offences. As Waller LJ observed, when initially he adjourned this application:

"To refuse amendment was one thing, but to give judgment on the whole claim was another."
[27]Refusing the amendment was, as my Lord has explained, amply justified. It would have prejudiced the claimant and made a fair trial impossible. That is why we refused permission to appeal that part of Steel J's order.[28]No such prejudice or unfairness flows, however, from allowing the defendant to pursue her original defence and counterclaim. Mr Vickers' argument amounts to this, that the defendant's application for leave to amend was so unmeritorious that it should simply be ignored entirely as a reason for having failed to exchange witness statements and thus breached the unless orders. I would reject it.[29]It follows that I agree that this appeal should be allowed to the extent indicated by my Lord. I would agree also with the terms he proposes as a basis upon which the appeal succeeds.

Order

Appeal allowed as indicated (payment into court of £50,000 within 14 days, witness statements within 7 days). No order as to costs before Steel J or this court provided order is complied with.

Cited in 1 later judgment