Hague Plant Ltd v Hague & Ors [2014] EWCA Civ 1609

[2014] EWCA Civ 1609Case No A3/2014/0970
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, CHANCERY DIVISION,
Venue THE LEEDS DISTRICT REGISTRY
His Honour Judge Behrens (sitting as a High Court Judge)
2LS30214
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Thursday 11 th December 2014
Before
LORD JUSTICE BRIGGSLORD JUSTICE CHRISTOPHER CLARKELADY JUSTICE SHARP
Between
HAGUE PLANT LIMITEDAppellantHAGUE AND ORSRespondent
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company165 Fleet Street, London EC4A 2DYTel No: 020 7404 1400, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
CHRISTOPHER PARKER QC and MAXIM CARDEW (instructed by WALKER MORRIS LLP) for AppellantGREGORY PIPE (instructed by SHULMANS LLP) for First and Third Respondents JOHN RANDALL QC and MARGARET GRIFFIN(instructed by TAYLOR & EMMET LLP) for Second RespondentHearing Hearing dates : 19-20/11/2014
JudgmentLord Justice Briggs :Introduction
[1]This is an appeal against the Order of HHJ Behrens, sitting as a judge of the Chancery Division in the Leeds District Registry, made on 5th March 2014 whereby, save for a small number of agreed items, he refused permission to the claimant (and appellant in this Court) Hague Plant Limited (“HPL”) to re-amend its Particulars of Claim in these proceedings alleging dishonest breach of fiduciary duty and dishonest assistance against the defendants (and respondents to this appeal) Martin Hague (“Martin”), Jean Angela Hague (“Jean Angela”), and their wholly owned company MHH Contracting Limited (“MHH”).[2]Notwithstanding that this is an appeal against a discretionary case management decision, it has been litigated on a truly grand scale. Skeleton arguments by both sides in excess of forty pages were deployed, and no less than nineteen lever arch files of documents (for each member of the Court) were lodged. The appeal took a full two days of hearing and more than a full day’s pre-reading for each member of the Court. It is likely that hundreds of thousands of pounds of costs have been incurred on this appeal, and even larger sums for the preparation and hearing of the application before the Judge.[3]It is not, at least initially, the function of this Court to re-examine de novo the detailed merits of an appealed case management application. That task arises in this Court only if it decides both that the first instance decision cannot stand, and decides to re-exercise the judge’s discretion afresh. This Court’s first task is to determine, on a much narrower basis, whether the case management decision under appeal can be impugned. In Walbrook Trustee (Jersey) Limited v Fattal [2008] EWCA Civ 427, at paragraph 33, Lawrence Collins LJ said this:
“These were case management decisions. I do not need to cite authority for the obvious proposition that an appellate court should not interfere with case management decisions by a judge who has applied the correct principles and who has taken into account matters which should be taken into account and left out of account matters which are irrelevant, unless the court is satisfied that the decision is so plainly wrong that it must be regarded as outside the generous ambit of the discretion entrusted to the judge.”
I would add that, in the context of the increased focus of the overriding objective upon the proportionate conduct of litigation, and the ever-increasing need to husband limited court resources so as fairly to allocate them among all litigants, there is a real need to conduct appeals about case management decisions with economy and, wherever possible, brevity. I have constructed this judgment with the same objectives in mind. It will be sufficient to explain my reasoning to the parties, even though it omits an extended description of the background, the litigation and the draft pleading under review, for all of which readers unfamiliar with this litigation will need to consult other documents, and in particular the judgment under appeal.[4]It is evident that the Judge himself paid full regard to the requirements of economy and brevity in formulating his own reserved judgment, in which he dealt with the extensive submissions and documentation with admirable focus in a mere seventeen pages. For this he was taken to task in the appellant’s Grounds of Appeal for having, in various respects, failed to give adequate reasons. In that respect he was in my view entitled to take account of this dictum of Griffiths LJ in Eagil Trust Co Limited v Pigott-Brown [1985] 3 All ER 119, at p. 122:
“I cannot stress too strongly that there is no duty on a judge, in giving his reasons, to deal with every argument presented by counsel in support of his case. It is sufficient if what he says shows the parties and, if need be, the Court of Appeal the basis upon which he has acted…”
[5]The main reason for the Judge’s refusal of permission to re-amend was that, taken as a whole, the draft pleading was:
“disproportionate in the sense that it would not lead to the litigation being conducted at proportionate cost and would lead to further extensive judicial time being expended at the expense of other litigants.”
In slightly more detail, he concluded that the draft pleading was constructed in a style which failed to comply with the primary requirement of a pleading, namely that it should include a concise statement of the facts upon which the claimant relies, so as to clarify rather than obscure the issues: see McPhilemy v Times Newspapers [1999] 3 All ER 775, at p. 793. Large parts of it consisted of detailed citation of the first defendant’s position as set out in previous litigation between the parties, in disclosure, transcripts, pleadings, witness statements and Part 18 information, and all in a document five times longer than the original Particulars of Claim, including much which, because it was merely responsive to the Re Amended Defences, could perfectly well have been included in a Reply.[6]These conclusions were, in essence, about the form and style of the draft pleading rather than its detailed content in terms of the matters alleged. The judge’s conclusion that, taken as a whole, the draft should not be permitted, on proportionality grounds, did not of itself prohibit the claimant from seeking to re-plead all or part of the underlying content in a different way, and indeed the claimant has applied for permission to re-plead parts of that content by an application which has been stayed, pending this appeal, but which is in due course to be heard by the Vice-Chancellor Norris J.[7]Nonetheless, in later parts of his judgment, the judge did address specific parts of the content, and made rulings to the effect that no form or style of pleading of those parts could be permitted, either because they were, on a summary judgment test, bound to fail, or (in one instance) because they amounted to an abusive collateral attack upon findings in a judgment resolving earlier litigation between the same parties or their privies. The appellant accepts that, unless successfully appealed, those separate parts of the judge’s conclusions would prevent those aspects of the substance from being re-pleaded, even though the judge’s conclusions about them do not appear in the Order under appeal, which merely dismisses the application to re-amend, save where items were allowed by consent. The appellant’s thirteen Grounds of Appeal therefore address both the proportionality decision about the form and style of the draft pleading, and the specific conclusions about parts of its substance. In this judgment I shall, without slavishly following the numbered order of those Grounds, nonetheless deal first with proportionality, and then with the specific matters of substance. But it is first necessary to say a little about the background. Background[8]These proceedings are the fifth stage in a lengthy and bitterly fought dispute between members of the Hague family. They are therefore generally referred to as “Hague 5”. Douglas and Jean Hague had three children, David, Dianne and Martin. They moved to Prospect Farm near Sheffield in the late 1950s primarily in order to farm. In 1975 Douglas set up HPL to take over the various non-farming businesses which each of Douglas and Jean had established in the meantime. HPL was originally owned as to twenty percent by each of Douglas, Jean, David, Diane and Martin, but in 1996 Douglas and Jean transferred most of their shares to their children.[9]HPL developed a flourishing business in excavation, site clearance and land reclamation during the early 1980s and, in 1984, obtained a tipping licence at a disused quarry near Prospect Farm, thereby establishing a tipping and landfill business.[10]MHH (then called Hague Plant Excavations Limited or “Excavations” for short) was established in mid-1985. Initially, its shares were held equally between the three children but, later in 1985, David and Dianne transferred their shares to Martin and his wife Jean Angela, and Dianne, Jean and David’s wife Rosemary resigned as directors, leaving Martin and Jean Angela as the sole owners and directors of MHH.[11]Shortly thereafter, in early 1986, Martin became aware of the opportunity to purchase a landfill site at Carlisle Street near Sheffield city centre. This, and the tipping licence obtained for its exploitation, became the foundation for MHH’s considerable business success thereafter.[12]From then until the parties fell out in 2005, Martin ran both HPL and MHH, and the two companies did a great deal of business together. For example, HPL carried out a substantial amount of tipping at MHH’s Carlisle Street site. It stationed plant there and, when MHH obtained an even more valuable waste transfer licence for the site, provided the plant and workforce for the waste recycling operation carried on there, upon the basis that the proceeds of the on-sale of valuable materials extracted from the waste during recycling would be for its account.[13]The disputes which engulfed the family from 2005 onward were between David and Dianne on one side, and Martin and Jean Angela on the other, although for the most part their parents Douglas and Jean took Martin’s and Jean Angela’s side, at least in the evidence which they gave in Hague 1.[14]Hague 1 concerned a single issue, namely whether notwithstanding the transfer of David and Dianne’s shares in MHH to Martin and Jean Angela the latter continued to hold them upon a trust of which David, Dianne and Martin were the three equal beneficiaries. The trial gave rise to sixty lever arch files of documentary evidence, forty-eight witness statements and eleven days of oral evidence. It was tried by Judge Behrens in 2009, and he formed a generally dim view of the creditability of all the family witnesses, not least because of their propensity for fraudulent deception of the tax and other authorities. He found against David and Dianne’s claims to a beneficial interest in MHH, during a process which provided him with unique expertise in handling contentious, high-value, costly and complicated litigation between members of the Hague family.[15]I need say nothing about Hague 2, 3 and 4, save to note that Hague 3, about the family’s landholdings, went to trial before being compromised part-heard. Hague 5 is of course the present claim. There is also, waiting in the wings, Hague 6, which is HPL’s response to the risk that certain claims which it wishes to introduce by amendment into Hague 5 may give rise to an arguable limitation defence, and therefore need to be pursued in a separate claim.[16]Notwithstanding that the claimant and one of the three defendants are companies, Hague 5 is as much a battle between David and Dianne on one side and Martin and Jean Angela on the other, as was Hague 1, because David and Dianne are, as HPL’s majority owners, able to procure that it brings these proceedings, and to direct its conduct of them as its directors, Martin having been removed as a director in 2005. In the barest outline, its object is to bring Martin to account for his stewardship as a director of HPL, and Jean Angela as his dishonest assistant, for having preferred the interests of MHH over those of HPL in the two companies’ mutual business dealings. As will appear, from time to time it has been alleged that Jean Angela is also liable as a de facto director of HPL.[17]In its original form, Hague 5 complained of two main aspects of the companies’ mutual dealings, namely 1) overcharging by MHH for tipping by HPL at Carlisle Street, and 2) non-payment or under-payment for HPL’s services to MHH in connection with the waste disposal business carried on Carlisle Street. The misfeasance and breach of fiduciary duty relied upon is alleged to have occurred between 1986 and 2009. The amount claimed, in the aggregate, is £18 million. The conduct of Martin and Jean Angela is alleged to have been dishonest from start to finish, either because of an intent to prefer the interests of MHH over those of HPL, or because of recklessness as to whether that consequence would ensue from their stewardship of the affairs of HPL. Having regard to the extended period of alleged misconduct relied upon, most of which falls outside the ordinary 6 year period of limitation prior to the commencement of Hague 5 in June 2011, HPL relies upon the allegations of dishonesty for the purposes of rebutting limitation defences, under Sections 21 and 32 of the Limitation Act 1980. Dishonesty is also, of course, a main plank in the dishonest assistance claim against Jean Angela.[18]By comparison with what followed, the original Particulars of Claim in Hague 5 may fairly be described as a model of focussed brevity, extending to a mere thirty-eight paragraphs plus prayer,spread over eight pages. Even after permitted amendment in September 2012, it retained its essential brevity, although by now spread over twelve pages (excluding a short appendix). There soon developed a battle royal under Part 18, which ran from May 2012 until July 2013, and which occupies no less than 180 pages of the pleadings, orders and Part 18 bundle before this Court.[19]In the meantime the defendants’ defences (the first and third defendants pleading jointly and the second defendant separately) went through three iterations until, after re-amendment in October 2013, they each extended (ignoring appendices) to twenty-six pages.[20]Permission to re-amend the defences had been opposed by HPL, but was granted by Judge Behrens (and not appealed), on the basis that they sought legitimately to introduce two specific matters which needed to be pleaded, namely an allegation that Dianne had been involved in what were said to have been overpayments by HPL to MHH, and to introduce a document (“the JA Note”), said to have been recently discovered by Martin, which was said to support the defendants’ case about what has come to be known as cross-invoicing, and the absence of any consequential detriment to HPL in what was alleged to have been merely a fraud on the Revenue.[21]It is to be noted that, quite apart from the vast expenditure of time and money by the parties on Hague 5 during the two and a half years before the hearing of HPL’s application to re-amend, the Court itself had been obliged to devote seven days for the hearing of interim procedural applications with a (probably) equivalent amount of pre-reading and judgment time, for the case management and determination of part of a family dispute which had in the aggregate already taken up tens of days of court time over a period fast approaching a decade, and all in a district registry of the Chancery Division, served by only two Chancery specialist Senior Circuit Judges, with the occasional assistance of the Vice Chancellor. This forms an essential part of the background to the judge’s conclusion that the proposed re-amendments were disproportionate, a background of which this judge had the most detailed experience and which, in my view, he was entitled to take fully into account.

The draft Re-Amended Particulars of Claim

[22]It is unnecessary for me to give a comprehensive description of the content of the re-amendments in issue. It is succinctly summarised in seven categories in paragraph 4 of the judgment below, and that summary has not been criticised during this appeal. More importantly for present purposes, the draft pleading extends to 104 paragraphs, plus the prayer, spread over 65 pages. It is, viewed as a whole, a completely new pleading in which, after only one page of text, those parts of the original Particulars of Claim which had not been crossed out appear only intermittently. Were it to be permitted, it would require the defendants completely to re-plead their Defences. Mr. John Randall QC for the second defendant (who undertook the burden of the response to this appeal for all the defendants) said that, if permitted, it would also re-open a fresh battle royal under Part 18.[23]A singular feature of the draft pleading (and unprecedented in my experience) is the extraordinary extent to which it recites or summarises what is said to be Martin’s or Jean Angela’s case about the matters in issue, as it has developed over time, by reference to submissions and evidence in Hague 1, and to pleadings, Part 18 responses and witness statements prepared for summary judgment and strike-out hearings in Hague 5. In paragraph 69 of his judgment, the judge identified no less than 47 examples of this process. But the sheer number of examples does not sufficiently describe the sense of bewilderment and confusion experienced by a reader of the pleading as a whole. So far from being a concise statement of the primary facts relied upon in support of the claim, it comes across as a rambling narrative of the supposed twists and turns of the defendants’ case about the matters in issue, serving no apparent purpose, and obscuring, rather than clarifying, the claimant’s own case.[24]I am, thus far, doing no more than describing my impression of the draft pleading upon reading it for the first time, although it largely coincides with the judge’s own impression, after hearing extensive argument: see paragraphs 66 to 73 of his judgment. I shall in due course address the submissions about this extraordinary process, to the extent necessitated by dealing with the Grounds of Appeal to which I now turn.

Mis-application of the Mitchell v News Group case (Ground 5)

[25]The judge’s conclusion that the proposed re-amended pleading was disproportionate was illuminated by his citation of a single passage from one of the judgments of Master McCloud under appeal in Mitchell v News Group Papers Limited [2014] 1WLR 795, cited at paragraph 17 of the judgment of the Court of Appeal:
“Cases are usually important to the parties but if such considerations weighed too heavily one would be unable to implement the objectives of the new rules. One would be unable to prevent some claims from taking unfair amounts of judicial resources away from other claims at the very moment when it is common knowledge that budgetary constraints may lead to fewer judges in the courts, and to reduced non-judicial resources to operate those courts. Judicial time is thinly spread, and the emphasis must, if I understand the Jackson reforms correctly, be upon allocating a fair share of time to all as far as possible and requiring strict compliance with rules and orders even if that means that justice can be done in the majority of cases but not all.”
[26]In the light of the summary of the burden thus far imposed by the Hague family dispute upon the Leeds District Registry, it is in my view entirely understandable that the judge made reference to this valuable passage.[27]Mr. Christopher Parker QC for the appellant describes this as an error of law because, he says, the Mitchell case was about non-compliance with rules, practice directions and court orders, whereas the present case is nothing of the kind. In my judgment that criticism is misplaced for two reasons. The first is that Master McCloud’s dictum, approved by the Court of Appeal, was a general description of the profound effect of the Jackson reforms, and the consequential amendment of the overriding objective, in tempering the traditional dedication of the courts in case management towards achieving perfect justice between particular parties by the need to allocate to those parties no more than a fair share of the court’s limited resources. This principle appeared in the CPR from the outset, and its application is by no means limited to cases of breach of the rules, Practice Directions or Orders. It has for example been applied by this court in connection with the need to encourage parties to engage with proposals for mediation or other forms of alternative dispute resolution: see PGF II SA v OMFS Company 1 Limited [2013] EWCA Civ 1288, at paragraph 27. It was specifically applied in the context of late amendment in Swain-Mason and ors v Mills & Reeve LLP [2011] EWCA Civ 14, at paragraph 70.[28]Secondly, the criticism is misplaced because a primary reason for the judge’s rejection of the draft pleading was that it conspicuously failed to comply with the fundamental rules of pleading, in particular the rule that particulars of claim should contain a concise statement of the facts relied upon for the purposes of clarifying the issues between the parties: see paragraph 70 of the judgment and Part 16.4(1)(a).

Late amendment

[29]Both the Grounds of Appeal (at Ground 2) and Mr. Parker’s submissions contained a sustained attack on the judge’s conclusion that the proposed re-amendments were late. He submitted that the judge’s conclusion about lateness was wrong in law, unsupported by reasoning and that it ignored the reasons put forward by HPL for both the timing and the extensive content of the draft.[30]It is convenient to start by looking a little more closely at the judge’s analysis of the issue and relevance of lateness. He began (at paragraphs 47 to 49) with citations from the Swain-Mason case, from Savings & Investment Bank Limited v Fincken [2003] EWCA Civ 1630, and from Worldwide Corporation v GPT (1998) (CA) (Unrep) and concluded, at paragraph 49:
“Thus, as Lloyd LJ recognised in paragraph 72 (in the Swain-Mason case) it is also a question of striking a balance but the court is and should be less ready to allow a very late amendment than it used to be in former times, and that a heavy onus lies on a party seeking to make a very late amendment to justify it, as regards his own position, that of other parties to the litigation, and that of other litigants in other cases before the court.”
[31]Next, at paragraphs 63 to 65, under the heading “A late application” the judge accepted that it was not a “very late” application because, as is common ground, no trial date had by then been fixed, the loss of which might have been caused by permitting the amendments. He concluded however that the application to re-amend was nonetheless late, “having regard to the time that has passed and the work that has been done”.[32]In that succinct passage the judge clearly distinguished between the “very late” amendment cases such as Swain-Mason where the risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be heavily loaded against the grant of permission, and “late” amendments in which the consequence of the large scale reformulation of the Particulars of Claim, after the completion of Defences and Part 18 exchanges, will risk undermining work already done in response to the original Particulars of Claim, and causing a duplication of cost and effort. It is evident, for example from paragraphs 60 and 61, and elsewhere in the judgment, that it was this aspect of lateness, namely the consequence that, if permitted, the amendments would cause existing work to be wasted and substantial further work and expense incurred, that weighed in the judge’s mind.[33]I consider that the judge was entitled to approach the relevance of lateness in this way. Lateness is not an absolute but a relative concept. As Mr. Randall put it, a tightly focussed, properly explained and fully particularised short amendment in August may not be too late, whereas a lengthy, ill-defined, unfocussed and unexplained amendment proffered in the previous March may be too late. It all depends upon a careful review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of its consequences in terms of work wasted and consequential work to be done. A fair reading of the judgment as a whole shows that this is how the judge took lateness into account. When dealing with specific matters sought to be introduced he never said merely that it was “too late” but rather that the manner of pleading it, or the lack of satisfactory explanation for it not having been pleaded earlier meant that it was being introduced at too late a stage: see for example paragraphs 83, 118 and 124 of the judgment.[34]Lateness, used in this way, is a factor of almost infinitely variable weight, when striking the necessary balance in determining whether or not to permit amendments. The weight to give to this consideration in any particular instance is quintessentially a matter for the case management judge, not lightly to be interfered with on appeal unless shown to have been seriously flawed either by taking into account irrelevant matters, omitting relevant matters, or perversity.[35]A central plank in Mr. Parker’s arguments on this appeal was his submission that the real reason and justification for the thoroughgoing recasting of HPL’s claim was the fundamental change of the defendants’ position as revealed by their Re-Amended Defences, such that it was unfair of the judge to permit the defendants’ equally late re-amendments but refuse the responsive re-amendments by HPL. The same submissions were used in an attempt to justify the form of the Re-Amended Particulars of Claim, a point to which I will have to return.[36]Similar submissions were made to the judge, and he dealt with them under the heading “Changes to the Defendants’ Case” at paragraphs 74 to 79 of his judgment. In the end, he did not find it necessary to rule, one way or the other, upon the submission that Martin had fundamentally changed his case. In this court, Mr. Parker submits that he should have done. I do not agree. The judge’s view was that, even if Martin had changed his case as alleged, that did not justify a response consisting of the fundamental recasting of the Particulars of Claim, still less the lengthy setting out of the full history of Martin’s supposed changes of position, starting in Hague 1 and ending his in Re-Amended Defence in Hague 5, in Re-Amended Particulars of Claim. To the extent that (as alleged by HPL) Martin had pleaded admissions, they could be relied upon at trial without being pleaded as such by HPL. Otherwise, the Re-Amended Defence could, to the extent necessary, be dealt with in an Amended Reply.[37]The analysis of the extent to which Martin had changed his case over time would have necessitated a substantial increase in length in the judgment. At its heart, the allegation of change of case related to the way in which Martin explained the precise nature of the interlocking business arrangements between HPL and MHH in relation to the waste transfer and recycling business being carried on at Carlisle Street. It is common ground that MHH owned the site and the necessary licences, and that waste was deposited there by customers of MHH who paid MHH for the privilege of doing so, at a convenient city centre site. It was common ground throughout that HPL’s plant and employees were deployed for the carrying out of the recycling, so as to separate valuable recycled materials from mere waste, and that HPL received the proceeds of the on-sale of the valuable materials, while being paid by MHH for transporting the valueless waste to landfill sites. The supposed change of position concerned the question whether HPL’s contribution to those processes was merely as a contractor with MHH whereby the proceeds of sale of the recycled materials constituted a form of payment for services, or whether HPL was conducting its own recycling business, receiving and recycling waste from MHH and on-selling the valuable materials thereby extracted, at its own risk and benefit.[38]Like the judge, I do not find it necessary to burden this judgment with a detailed analysis of the parties’ contentions on the question whether Martin’s successive statements about this inter-company relationship (in cross-examination, witness statements, pleadings and Part 18 responses) disclose a significant, still less fundamental, change of case. All I would say is that, when his various statements are read in their proper context, rather than in isolation, the changes suggested by Mr. Parker for HPL seem to me to be greatly exaggerated.[39]Mr. Parker’s answer to the judge’s conclusion that, even if responsive to change of case, the extensive recitation of Martin’s supposed changes of position should not have been incorporated at inordinate length in Re-Amended Particulars of Claim was as follows. Martin was the fiduciary steward of HPL’s complex business relationship with MHH. He had, over time, put forward a series of unsatisfactory and mutually contradictory explanations about that relationship, from which dishonesty in the conduct of the relationship itself should be inferred against him. Thus, he submitted, all those successive statements constituted particulars of dishonesty, which needed to be pleaded in full as part of HPL’s claim, rather than either in a Reply, skeleton arguments, cross-examination or submissions at trial.[40]Mr. Parker is of course right in submitting that facts upon which dishonesty is sought to be inferred must be pleaded. Furthermore, I do not rule out the possibility that a concise factual allegation that an inference of dishonesty against Martin should be drawn from the unsatisfactory and self-contradictory nature of his successive assertions about the nature of the relationship between the two companies under his stewardship could have been pleaded in a way which clarified rather than obscured the issues between the parties. Nor did the judge: see paragraphs 58 and 69 to 73 of his judgment. The vice identified by the judge, correctly in my view, was to plead an extended history of Martin’s explanations in a form which mixed up primary facts with evidence, submissions and cross-examination material without any prior explanation of the purpose for the introduction of that material, or any attempt at brevity or focus. Furthermore, by introducing the whole of it in Re-Amended Particulars of Claim it would have forced the defendants (as the judge accepted) to trawl through Martin’s prior statements, including statements in various forms in this very litigation, and plead as to as the accuracy of their summary, or as to a proper appreciation of their context in Re-Re-Amended Defences, commenting at length upon superceded versions of their Defences in this litigation. It would have been, in my view, a recipe for circularity, obscurity and confusion.[41]As Christopher Clarke LJ pointed out during argument, there are much better case management alternatives for satisfying the requirement for particularity in relation to allegations of dishonesty. A simple example would consist of points of claim focussed upon the alleged inference of dishonesty flowing from prior inconsistent statements, followed by points of defence and reply if necessary, in documents outside the Particulars of Claim, sufficiently anchored to them by the essence of the inference being concisely stated in the Particulars of Claim. Indeed, the Vice-Chancellor has already directed such a process in relation to another complex aspect of the dispute (namely cross-invoicing) ahead of a planned trial of a preliminary issue in that respect, next year. It follows that, far from disclosing error of law, serious mistake or perversity, the judge’s succinct treatment of this issue, in the passages which I have identified, was in my view correct.[42]The judge’s main reason for refusing permission to amend upon proportionality grounds was, as I have sought to explain, mainly based upon his apprehensions about the further, duplicative and otherwise unnecessary work to which they would expose the defendants, and the knock-on consequences in terms of increasing the weight, cost and duration of the trial, and of further case management ahead of it. Mr. Parker submitted that the judge was not entitled to reach that conclusion without a detailed analysis of the extra work which would be required: see Ground 4. I emphatically disagree. Not only did this judge have many years’ experience in case management and trying litigation of this kind. He had the unique advantage of having tried Hague 1 and being heavily engaged in the case-management of these proceedings, including the contested application for permission to re-amend the Defences. A judge is, in my view, perfectly entitled to apply both his general and particular experience to these questions without spelling out, in analytical detail, the reasons for his conclusions about the increased cost and burden, both to the parties and the court, threatened by a substantial proposed re-amendment. Furthermore, it strikes me as obvious that a quintupling in the length of Particulars of Claim, all of which would need to be pleaded to in Re-Re-Amended Defences, would threaten just such increases in work, length and cost, even if significant parts of the re-pleaded material could be found within Part 18 exchanges, existing Defences, or statements and transcripts in earlier proceedings.[43]It follows from what I have set out thus far that, in my view, the challenge to the judge’s conclusion that, viewed as a whole, the proposed Re-Amended Particulars of Claim should not be permitted otherwise than where consented to, entirely fails. I turn therefore to the discrete items of substance about which the judge made specific rulings.

The Alternative Relief

[44]In its original form, HPL’s claim sought specific relief for having been overcharged by MHH for tipping, underpaid by MHH for the provision of services, and in respect of payments to MHH for no apparent consideration. By paragraphs 48 to 53, and 78 to 79 of the draft Re-Amended Particulars of Claim, HPL sought to introduce for the first time a claim to an account of all MHH’s profits during the relevant period.[45]The judge specifically refused permission to make these amendments, upon the basis that they depended entirely on a re-casting of the nature and extent of Martin’s alleged fiduciary duty to HPL in paragraph 12 of the draft pleading, which he had earlier rejected (at paragraphs 81 to 83), the new claim being in his words “parasitic upon those amendments”.[46]On this appeal HPL contends that this analysis was fallacious, because the defendants consented to paragraph 12(3) of the draft, which alleges that Douglas (rather than Martin) had told David and Dianne that HPL would receive a preferential tipping rate when tipping at MHH’s site.[47]Paragraph 12(3) was indeed introduced as a re-amendment by consent. But this does not in my view undermine the judge’s reasoning for rejecting the grand new claim by HPL to the whole of MHH’s profits. First, the new claim was based not merely on paragraph 12(3), but upon the whole of paragraph 12, the rest of which the judge had rejected. Secondly, the judge was, as it seems to me, entitled to conclude that the mere allegation that Douglas had made this suggestion to David and Dianne (at a time when MHH had not even acquired Carlisle Street, and was tipping elsewhere) was a wholly insufficient basis upon which to erect such a broad new claim two and a half years into the litigation, not least because the matter had been investigated in Hague 1, and because Douglas was not acting as Martin and Jean Angela’s agent in making that suggestion, even if he had made it.

De facto director

[48]Apart from the alternative claim to which I have just referred, much the most significant part of the substance of the proposed re-amendments was to re-introduce to the proceedings an allegation, earlier abandoned, that Jean Angela was a de facto director of HPL.[49]This allegation had been made in a limited form, in paragraph 24 of the Particulars of Claim, as an alternative to the primary claim that Jean Angela dishonestly assisted Martin in his breaches of fiduciary duty, and only in relation to her having caused HPL to make payment on certain inter-company invoices raised by MHH. In paragraph 78 of her original Defence, Jean Angela admitted participating in the invoicing process in question, but said that she had done so “with the knowledge and upon the instructions of the directors and shareholders of HPL”.[50]In its amended Particulars of Claim, HPL withdrew the allegation that Jean Angela had acted as its de facto director, an allegation which has in any event never been included in the Claim Form as the basis of a cause of action against her. In a witness statement made in November 2013, Mr. Scott of HPL’s solicitors Walker Morris stated that this allegation had been withdrawn against Jean Angela “in the light of the Defence that had been put forward by her…”.[51]It was then sought to be re-introduced, in much more detail and to a greater extent (“with a vengeance” as the judge put it) in the draft Re-Amended Particulars of Claim. The reason for its re-introduction was given by Mr. Scott, in the same witness statement (at paragraph 2.16) as having been that the defendants had recently sought to place the blame for certain inaccurate aspects of inter-company invoicing on Dianne, and because the defendants had resiled from a limited admission of responsibility for that invoicing. It was said that this had “made it inevitable” that Jean Angela should be considered to have been a de facto director.[52]The re-introduced claim that Jean Angela was a de facto director of HPL appears in paragraphs 16 and 17 of the draft Re-Amended Particulars of Claims. Paragraph 16 is designed to create an estoppel against the defendants from denying that she was, at least in relation to inter-company invoicing. It begins, at paragraph 16(2), by quoting out of context the following passage in the Defences of all three defendants, namely that:
“Martin and Jean Angela had some but not sole responsibility for raising invoices from HPL to MHH and sole responsibility for raising invoices from MHH to HPL.”
At paragraph 16(3) reference was made to a statement by Mr. Pipe, counsel for the first and third defendants, at a hearing at which Jean Angela was represented, but not affected by the relief sought, to the effect that, by using the word “responsibility” the defendants were referring to Martin’s and Jean Angela’s responsibility as directors. Accordingly, it was said, and because the defendants had obtained permission to re-amend their Defences on the basis of the adoption of what Mr. Pipe had said, the defendants were estopped from denying that Jean Angela was a de facto director.

The judge had difficulty even in understanding this estoppel plea:

[53]see paragraph 94.1 of his judgment. It was in my view completely unarguable. First, the passage in the defendants’ Defences quoted above needs to be read in the context of their clear denial in the same pleadings that Jean Angela had ever been a de facto director of HPL because of her averment that she acted throughout on Martin’s instructions. Accordingly, although she was indeed a de jure director of MHH, her use of the word “responsibility” did not as a matter of pleading mean responsibility as a de facto director of HPL.[54]Secondly, the transcript of the relevant hearing shows clearly that Mr. Pipe’s reference to ‘responsibility meaning responsibility as a director’ was aimed solely at Martin’s and Jean Angela’s status as directors of MHH (then labelled ‘Excavations’), not HPL. He said in terms “they were the directors of Excavations”. By the same token, the adoption of Mr. Pipe’s observations in later evidence by the defendants’ solicitors was similarly focused upon MHH.[55]Accordingly, in my view this alleged estoppel fully justifies the epithet ‘totally without merit’, even though the judge rejected it in somewhat milder terms.[56]Paragraph 17 of the draft pleading asserted, in twelve lettered sub-paragraphs, particulars of the allegation of de facto directorship against Jean Angela. All of them, except one, relied upon matters and material available to HPL at the commencement of these proceedings. The only new material relied upon consisted of three documents bearing Jean Angela’s signature alleged to prove that she held herself out as a director of HPL. On examination, one of them may be said to have done so, but not the other two. In any event, HPL had, much earlier, another document broadly to the same effect available for that purpose.[57]Having dismissed the alleged estoppel as groundless, the judge went on to reject the more detailed attempt to re-introduce the allegation of de facto directorship on the ground that no sufficient or satisfactory explanation had been provided for its abandonment followed by re-introduction. He said (at paragraph 94.2) that there was an analogy with the making of a fresh claim after discontinuance under Part 38.7, so that it was only in exceptional circumstances that the court should allow an abandoned claim to be re-instated. He said that the accusation in the Defences of responsibility for cross invoicing on the part of Dianne could not be a satisfactory explanation for a tit-for-tat re-introduction of de facto directorship against Jean Angela. He went on to dismiss two legal explanations proffered by counsel (neither of which appear to have formed actual reasons for the re-introduction of the claim). The first was a supposed broadening of the basis upon which de facto directorship could be alleged, in a recent unreported decision of Hildyard J. The second was a perception (which turned out to be true) that the Supreme Court might overrule the Court of Appeal’s decision that Section 21(1) of the Limitation Act 1980 applied to a claim in dishonest assistance.[58]Save in one small respect, I consider that the judge’s detailed reasons for refusing to permit the re-introduction of a claim that Jean Angela was a de facto director were unimpeachable. My exception relates to his use of the phrase “exceptional circumstances” when applying Part 38.7 by analogy.[59]Mr. Parker roundly submitted that there was simply no analogy between the re-introduction in existing proceedings of an allegation previously abandoned, and the bringing of a new claim after discontinuance of a similar earlier claim based upon the same or substantially the same facts, under Part 38.7, where the court’s permission is required.[60]In my judgment there is indeed an analogy between the re-introduction of a claim previously abandoned in the same proceedings and the making of a fresh claim after discontinuance of a similar claim based on the same or substantially the same facts, as is controlled by Part 38.7. Both types of conduct, unless closely controlled by the court, tend to undermine the public interest in finality in litigation. But Part 38.7 imposes that control not in terms by the requirement to show special circumstances, but rather by the requirement that such fresh proceedings may only be brought with the Court’s permission. In that respect they equate the bringing of fresh proceedings with the re-introduction of an abandoned claim by amendment, since amendment itself requires the court’s permission. Beyond that, it seems to me that the rule leaves it to the court to decide whether to grant or refuse permission having regard, as I have said, to the public interest in finality.[61]It is true that the Notes to the current edition of the White Book use the phrase “exceptional circumstances” as characteristic of the sort of explanation likely to be required in an application for permission under Part 38.7, but it is dangerous in my view to erect that as a test imposed by the rules, not least because of its inherent uncertainty. To that limited extent the judge may have mis-described the ambit of the court’s discretion to give such permission. The real question for the judge was whether, having abandoned the de facto directorship claim in the light of Jean Angela’s Defence (in which the other defendants precisely concurred) a sufficient explanation was offered for its re-introduction to overcome the court’s natural disinclination to permit a party to re-introduce a claim which it had after careful consideration decided to abandon.[62]Against that test, it seems to me that the judge was entirely correct to regard the proffered explanations as falling well short of what was required. First, the defendants’ pointing of the finger of responsibility toward Dianne is manifestly an inadequate explanation. Tit for tat is no basis for evading the public interest in finality.[63]The explanation based upon a supposed broadening of the scope for alleging de facto directorship is, as Mr. Randall easily demonstrated, wholly underminded by the fact that, as recently as June 2014, this court (in Smithton v Naggar and ors [2014] EWCA Civ 939) confirmed that the principles for establishing de facto directorship were those set out by the Supreme Court in HMRC v Holland [2010] 1 WLR 2793, so that there had been no intervening change during the currency of this litigation.[64]As for the explanation that HPL’s limitation difficulties as against Jean Angela, pursued only in dishonest assistance, might be about to multiply if the Supreme Court were to decide that s.21 of the Limitation Act did not apply to dishonest assistance (as it later did decide), it was not suggested that this actually motivated the re-introduction of the de facto directorship claim. Furthermore it does not appear to have been decided whether the extension of S. 21 of the Limitation Act 1980 to de jure directors, applies also to de facto directors.[65]For those reasons, which coincide largely with those given by the judge, it seems to me that he was entirely correct to refuse to permit the re-introduction of the claim against Jean Angela as a de facto director. If his slight misstatement of the relevant test means that this court must re-exercise that discretion, I would do so in the same way as he did, and for reasons substantially the same as those which he gave.

The JA Note, the Jean Diaries and the Grey Books

[66]I can take these three items relatively briefly. Part of HPL’s original case, pleaded at paragraph 19(1) of the Particulars of Claim, was that Martin had procured that HPL transfer money amounting in the aggregate to £3.446 million to MHH for no consideration. The original Defence, at paragraph 56, was that transfers of money supported by invoices from MHH were admitted (although the amount was not), but that this was part of a cross-invoicing scheme whereby year-end money transfers were made to evade or postpone tax on HPL’s profits, and then re-transferred early in the following year under a process generally described in Hague 1 and Hague 5 as cross-invoicing, but at no net cost to HPL.[67]In the Re-Amended Defences, the defendants relied upon, and produced as an appendix, manuscript notes said to have been made by Jean Angela, but only recently discovered by Martin, containing calculations which it was said she had made to ensure that the cross-invoicing process balanced, i.e. at no net cost either to HPL or MHH. Those notes, “the JA Notes”, were regarded by David and Dianne, and therefore by HPL, with the utmost suspicion and submitted for forensic analysis, which we were told had proved to be inconclusive.[68]In the draft Re-Amended Particulars of Claim, at paragraph 33(7), under the general heading “The alleged cross-invoicing scheme”, and in support of a general assertion that the scheme was “a smoke-screen being used to make detection of the defendants’ appropriation of HPL’s money and resources more difficult and obfuscate analysis of figures”, HPL refers to the JA Notes, and continues:
“The defendants are put to proof that the JA Notes are contemporaneous with the transactions they purport to record and genuine in circumstances where…”
There then follow no less than seven numbered paragraphs of particulars of that non-admission over four pages, the last of which is as follows:
“(viii) Martin and Jean Angela have a propensity for relying on manufactured or deliberately misleading documents PARTICULARS (a) … (b) In Hague (No. 1) Jean produced to the Court, and Martin and Jean Angela relied upon, certain diaries, which were said to support Martin and Jean Angela’s case to the effect that undocumented cash payments were made by Jean to all members of the family including David and Dianne. In fact, the entries in these diaries were fabricated, as can be seen from the fact that: …”
There then follow yet further particulars of the new allegation that the Jean’s diaries were fabricated. The defendants submitted that this was a collateral attack on the judge’s finding, in Hague 1, that the diaries were indeed genuine, and correctly recorded cash payments to David and Dianne, despite their denials. That finding had followed evidence from Douglas, Jean, Martin, Jean Angela, David and Dianne. At paragraph 98 of his judgment

the judge concluded:

“I agree with (counsel for the defendants) that this is a direct attack on the finding in Hague 1. They could have been pleaded in the Particulars of Claim. Furthermore Douglas and Jean are now very elderly and thus the Court is likely to be in a far worse position to assess the relevant evidence than it was when Hague 1 was decided in 2009.”
Accordingly, he ruled that the authenticity of Jean’s diaries could not be challenged in these proceedings. (a) … (b) In Hague (No. 1) Jean produced to the Court, and Martin and Jean Angela relied upon, certain diaries, which were said to support Martin and Jean Angela’s case to the effect that undocumented cash payments were made by Jean to all members of the family including David and Dianne. In fact, the entries in these diaries were fabricated, as can be seen from the fact that: …”[69]In my view the judge was right to rule against a challenge to the authenticity of Jean’s diaries, partly for the reasons which he gave, but also for the following additional reason advanced by Mr. Randall before us. It would be one thing, he submitted, to attempt to rely upon the supposed fabrication of Jean’s diaries as similar fact evidence in support of a positive claim that the JA Notes were themselves fabricated. But the challenge to the authenticity of Jean’s diaries is sought to be pleaded not as similar fact evidence of an allegation of falsification made in these proceedings, but of a mere non-admission of the genuineness or dating of the JA Notes. I agree with Mr. Randall that this is wholly inappropriate. The non-admission of the authenticity of a document, where the only alternative is that it was dishonestly fabricated, is the pleading of someone ready to wound but afraid to strike. To plead, positive, the fabrication of a document found in earlier proceedings between the same parties or their privies to have been genuine, in support of a mere non-admission in later proceedings of the genuineness of a different document is, in my view, a clear abuse of process, and was rightly prohibited by the judge.[70]Finally, HPL sought to advance a further estoppel in relation to manuscript accounting records known between the parties as “the Grey Books”.[71]Under the general heading “HPL and MHH’s records”, paragraphs 23 to 27 of the draft Re-Amended Particulars of Claim seek to set up a case that the defendants are estopped by representation and/or convention from contending that documents other than the Grey Books contain a more accurate description of any of HPL’s activities, or that the value of the services performed at Carlisle Street by HPL does not appear and/or cannot be deduced from the Grey Books. This estoppel is said to derive from statements made, supposedly to that effect, by Martin while under cross-examination in Hague 1, upon which it is said that the judge relied and upon which it is said that the defendants themselves relied to their detriment in carrying out forensic work upon the Grey Books for the purposes of formulating their claim in Hague 5.[72]At paragraphs 110 to 112 of the judgment, the judge rejected this supposed estoppel, first on the basis that there could be no issue estoppel since the question whether the Grey Books were comprehensive or not was not an issue in Hague 1, and secondly because, in his view, the evidence of Martin and Jean Angela in Hague 1 was not to the effect that the Grey Books constituted a comprehensive record of HPL’s activities, but merely a record from which some of those activities could be identified.[73]Nothing submitted by Mr. Parker on this appeal has come near to persuading me that judge’s two conclusions on this point were not correct. Furthermore, I have from start to finish been unable to understand how, in the absence of an issue estoppel, any estoppel could be constructed upon the basis that David and Dianne relied upon the truth of anything said by Martin or Jean Angela in Hague 1 (whether to their detriment or otherwise), not least since HPL’s case in the present proceedings (at the instigation of David and Dianne) has from start to finish been that Martin and Jean Angela are dishonest liars, none of whose statements are worthy of any trust.

Conclusions

[74]It follows from the foregoing analysis that, in my view, this appeal should be dismissed. Although I have identified an arguable error in the judge’s summary of the test for the reintroduction of claims previously abandoned, by a perhaps over-simplistic use of the phrase “exceptional circumstances”, that error if such it was went only to a small part of the substance of the draft pleading, and did not even then lead to an incorrect result in relation to that part. It was of no consequence at all in the judge’s decision to refuse permission for the pleading as a whole, on proportionality grounds, which was a decision well within his case management discretion and, in my view, a correct exercise of that power. Further, his decisions as to those parts of the substance of the pleading, to the effect that, regardless of form, those matters cannot be advanced in these proceedings, were also correct. I would therefore dismiss this appeal.

Lord Justice Christopher Clarke :

[75]I agree. The appellant’s case is that the trading arrangements made by the respondents in respect of MHH and HPL require justification and that the respondents have given different and contradictory explanations of what they were about, each of which was unsatisfactory in itself. They have, therefore, sought to include in the amended pleading an extensive history of what the respondents are said to have said or pleaded in a variety of documents and how they have changed their position. Their aim is to get the respondents to state in an amended defence their case in relation to each matter averred and on what is said to be their change of position. They contend that this will enable(a) the respondents to know the case of dishonesty which they have to meet; and(b) the Court and the appellants to know in advance of trial what the respondents’ response is.[76]The resultant pleading, for which permission was sought, is unworkable. Particulars of Claim must include a concise statement of the facts on which the claimant relies: CPR 16.4. (1) (a). But they need not, and should not, contain the evidence by which they are to be proved or the opposing party’s pleadings or admissions. Whilst it may be appropriate in some circumstances to rely, as proof of dishonesty, on the fact that the defendant’s account of his position requires explanation and that he has given several different accounts, all unacceptable, this can and should be done in a concise way, referring to documents (but not necessarily quoting in extenso) which makes clear what is the issue. The pleading cannot be used as the first draft of an opening or a delineation of points for cross examination.[77]In the present case the form and content of the proposed amendment is wholly disproportionate. It will not assist the judge in understanding the gist of the case. The inevitable request for further and better information and the response thereto, no doubt after yet another interlocutory battle, would exacerbate the position. A re-re-amended defence would, in all probability, be inordinately long and involve setting out the respondents’ disagreement with the appellant’s summaries of the respondents’ position, arguments about the context in which things were said or what was meant by them, and the addition of qualifying or supplementary material of the same kind as is referred to in the proposed new Particulars of Claim. The resultant combination of Particulars of Claim and of Defence, with accompanying particulars, would be unmanageable.[78]Pleadings are intended to help the Court and the parties. In recent years practitioners have, on occasion, lost sight of that aim. Documents are drafted of interminable length and diffuseness and conspicuous lack of precision, which are often destined never to be referred to at the trial, absent some dispute as to whether a claim or defence is open to a party, being overtaken by the opening submissions. It is time, in this field, to get back to basics.

Lady Justice Sharp :

[79]I agree with both judgments.

Cited in 65 later judgments

and 41 more of the most senior

Showing the 50 most senior of 65.