Dhillon & Anor v Sandhu [2014] EWHC 3231 (Ch)

Case No CH/2014/0320[2014] EWHC 3231 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Rolls Building, Fetter LaneDate Thursday 24 th July 2014
London
EC4A INL
Before
HIS HONOUR JUDGE HODGE QC(Sitting as a Judge of the High Court)
Between
JASWANT SINGH DHILLONAppellantMAIDIE MOHINDER KAUR DHILLONAppellant- v -
Between
BAGGA SINGH SANDHURespondent
Tape transcription by:John Larking Verbatim Reporters,(Verbatim Reporters and Tape Transcribers)Suite 91, Temple Chambers, 3-7 Temple Avenue,London EC4Y OHPTel: 020 7404 7464
MR. RICHARD B. RITCHIE (instructed by PKP French) appeared as counsel for defendants/appellants.MR. DAVID W. MAYALL QC (instructed by Thakrar & Co) appeared as counsel for claimant/respondent.(Approved in Liverpool on 7 October 2014 without reference to any papers)
JUDGMENTThursday 24 th July 2014APPROVED JUDGMENTJUDGE HODGE QC:
[01]This is my extemporary substantive judgment on an appeal brought by Jaswant Singh Dhillon and his wife, Mrs Maidie Mohinder Kaur Dhillon (as defendants to proceedings brought against them by Mr Dhillon’s maternal uncle, Mr Sandhu), from an order of Chief Master Marsh of 7th April 2014. That order, effectively refusing relief from sanctions, was made before the decision of the Court of Appeal in the case of Denton v T H White Limited and two related appeals[2014] EWCA Civ 906.[02]One matter I may need to consider is the proper approach to be taken by an appeal court to a decision to refuse relief from sanctions which was handed down without the benefit of the guidance provided by the Court of Appeal in Denton.[03]The substantive claim between the parties is one for the dissolution and winding-up of two partnerships whose principal assets are three investment properties: two in Slough and one in Nottingham. The total net assets are in the region of £3.5 million. The claim form was issued on 17 January 2013.[04]Although the appellants filed an acknowledgment of service indicating an intention to defend the claim, they did not thereafter engage in the proceedings in any meaningful way. The respondent issued an application, which came before Deputy Master Jefferis on 13th June 2013. Although then represented by a firm of solicitors, Fishman Brand Stone (which I shall refer to as ‘FBS’), the appellants did not appear at that hearing. The Deputy Master made orders declaring that both partnerships had been dissolved on 26th July 2012; and (by paragraph 3 of his order) he directed as follows: ‘That the defendants do give the claimant and his advisers access to all the books and records of the partnerships and afford the claimant and his advisers the opportunity to take copies of all and any parts of such books and records within 14 days of this order being served on the defendants’ solicitors. For this purpose inspection shall take place at the offices of the defendants’ solicitors, and the parties’ solicitors shall liaise as to a convenient date and time within the said 14 days. If the defendants’ solicitors are not on the record, then the books and records should be produced at the claimant’s solicitors’ office.”[05]The appellants failed to comply with that order. Accordingly, on 13th August 2013, the respondent issued a further application, which was made returnable before Master Marsh on 18th September 2013. That application was disposed of by way of a consent order, agreed between the parties’ solicitors, who were Thakrar & Co for the respondent and FBS for the appellants. That order provided (so far as material) as follows: ‘Unless the defendants give disclosure of the books and records of the partnerships known as DS Property Investment and D&S Holdings by making them available for inspection and copying at the offices of FBS at a date no later than 14 days after the date of service of this order by the solicitors for the claimant on the solicitors for the defendants, then the defendants be debarred from participating in the taking of the partnership accounts ordered by Deputy Master Jefferis on 13th June 2014.” That consent order was not sealed by the court until 25th September 2013.[06]At the time of hearing before Master Marsh, in March and April of this year, there was no evidence that a sealed copy of the consent order had been served before 7th October 2013. Master Marsh therefore proceeded expressly on the footing that the time for compliance had expired on 21st October 2013. If anything, that approach may have favoured the appellants.[07]It is said by the respondent (and the Master held) that the appellants again failed to comply with this direction, although this is disputed by the appellants. In the event, the appellants only offered to make the partnership books and records available for inspection on 4th December 2013, after they had dispensed with the services of FBS and had retained new solicitors, PKP French (who continue to act for the appellants), on or about 29th October 2013. The respondent’s accountant, Mr Nayan Shah, in fact inspected the books and records of the two partnerships on 20th December 2013; and his resulting report is exhibited to his witness statement dated 3rd March 2014.[08]On 10th February 2014 the respondent issued an application seeking an extension of time for serving draft dissolution accounts (as had been ordered by paragraph 5 (1) of Deputy Master Jefferis’s order of 13 June 2013). On 24 February 2014 the respondent issued a further application seeking (amongst other relief) an interim payment from the appellants on the footing that the account ordered to be taken by Deputy Master Jefferis was bound to result in a payment to the respondent.[09]On 4th March 2014, two days before the return date of the respondent’s two applications on 6th March, the appellants issued their own application seeking a variation of the unless order made by consent on 18th September 2013 or an extension of the time for compliance. Although not expressed as such, Master Marsh proceeded on the basis that this application also included an application for relief from sanctions.[10]Initially the evidence filed by the appellants comprised a 17-page witness statement made by Mr Dhillon, dated 3rd March 2014, and an attached exhibit bundle, JSD1. The appellants’ application was adjourned part-heard on 6th March 2014; and the hearing resumed on 4th April 2014. By that time the appellants had filed a second witness statement for Mr Dhillon, dated 26th March 2014, extending to some 14 pages, together with a further exhibit bundle, JSD2.[11]On 7th April 2014 Master Marsh announced that he would make an order dismissing the appellants’ application and refusing them relief from sanctions. He also ordered the appellants to pay to the respondent £350,000 as an interim payment in respect of sums due on the taking of the account. It is from this order that this appeal is brought.[12]Master Marsh’s written judgment, setting out his reasons for his order of 7th April 2014, was only handed down at a further hearing on 9th May 2014. That judgment bears the neutral citation number, [2014] EWHC 1464 (Ch). Master Marsh refused the appellants’ application for permission to appeal. The form N460 prepared by the Master states as follows: “The defendants have no real prospect of success, either in relation to relief from sanctions or the interim payment, and there is no other compelling reason why permission should be granted in relation to the refusal of relief from sanctions.[13]In the meantime, on 24th April 2014, Master Marsh had extended the appellants’ time for appealing his order until 21 days after the handing down of his written judgment. Thus it is that although the appellant’s notice was only filed on 29th May 2014, this appeal is in fact brought in time.[14]On 12th June 2014 Birss J directed that there should be a conjoined hearing of the application for permission to appeal, with the appeal (subject to such permission) to follow.[15]The application for permission to appeal, with the appeal to follow if permission is granted, came on for hearing before me yesterday, Wednesday 23rd July 2014. The hearing has continued this morning until just before 12.00 noon, having started at 10.00am. At this hearing the appellants are represented by Mr Richard Ritchie (of counsel). The respondent is represented by Mr David Mayall (also of counsel). Both counsel had appeared in the lower court. For the reasons I gave in an extemporary preliminary judgment delivered yesterday afternoon, I refused an application by the appellants to adduce further evidence that had not been before the Master. I then turned to the application for permission to appeal and the substantive merits of the appeal. Although the grounds of appeal are 12 in number, extending to five densely-typed pages, and (notwithstanding Practice Direction 52B para 4.2(d)) they are of a somewhat discursive nature, the grounds of appeal are affectively three in number: 1. That the Chief Master erred in finding that the appellants were in breach of the order of 18th September 2013; 2. That the Chief Master erred in refusing to vary that order pursuant to CPR 3.1(7); and 3. That the Chief Master erred in refusing to grant relief from sanctions pursuant to CPR 3.9.[16]CPR 3.9 now provides as follows:
‘Relief from sanctions: (1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders.’
[17]In first opening the application and appeal before me yesterday, Mr Ritchie made it clear that the ultimate question to be decided by this court is whether justice requires the sanction of the 18th September 2013 order to be upheld, with the consequence that the defendants are debarred from taking part in the account. He submits that the documents were all available for inspection from 8th October 2014. The appellants had done all that they could do by delivering the documents to their then solicitors within time. Inspection has now taken place, and the respondent’s accountant, Mr Shah, has been able to inspect the documentation and produce his report. There is no date as yet for the trial. There is no date for the taking of the account. The respondent is said to have suffered no significant prejudice: the partnership properties have not yet been sold, so there can be no final account prepared; both partnerships are said to be fully solvent; the effect of upholding the debarring order is said to be to confer a very significant advantage on the respondent; and, by contrast, the appellants will suffer a very significant prejudice, that of being driven from the judgement seat. Mr Ritchie made the point that the respondent’s accountant had been able to take advantage of his access to the partnership books and records to prepare his accounts.[18]I remind myself that by CPR 52.11(3) an appeal court will only allow an appeal where the decision of the lower court was either wrong, or unjust because of a serious procedural or other irregularity in the proceedings in the lower court. I also remind myself that by CPR 52.3(6) permission to appeal may only be given where either the appeal court considers that the appeal would have a real prospect of success, or there is some other compelling reason why the appeal should be heard.[19]In my judgement the appellants have no real prospect of persuading the appeal court that Master Marsh was wrong, either(1) in finding that the appellants were in breach of the consent order of 18th September 2013; or(2) in refusing to vary that order or to extend time for compliance. Absent any real prospect for a successful appeal on either of these two grounds, there is no reason – still less any compelling reason – why the appellants should be allowed to pursue their appeal on either of these two grounds. Accordingly, I refuse permission to appeal on these two issues, upon which I did not find it necessary to call upon Mr Mayall to address me, having had the benefit of reading – albeit only in court at the opening of this appeal - his helpful written skeleton argument dated 17th July 2014. Mr Ritchie was right, in opening the appeal, to focus on the refusal of relief from sanctions.[20]On the first issue, that of breach of the consent order, I am entirely satisfied that Chief Master Marsh was right to find that the appellants were in breach of the order of 18th September 2013. Mr Ritchie submits that the appellants complied with this order by delivering the partnership books and records to their then solicitors, FBS, who were specifically identified in the order. He submits that the appellants had done all that they could do to comply with the order, and that they were not required to do any more. Mr Ritchie referred me to observations of Greene LJ in the case of Abalian v Innous [1936] 2 All ER 834 at 838. Greene LJ said this:
“Where the defendant, in reliance on such order, goes to the court and asks it to say that, as a result of the order, the action stands dismissed and is no longer existent, he must be able to show first of all that the language of the order is sufficiently precise, and, secondly, that the facts which the order contemplates have occurred.”
[21]I accept that the language of the unless order must be sufficiently precise to enable the addressee of the order to know what he must do in order to comply with its terms. But in my judgement, the order of 18th September 2013, to which the appellants (through their then solicitors) had expressly consented, satisfies the requirements of precision and clarity.[22]In my judgement, the appellants do not comply with the order merely by delivering the partnership books and records to their solicitors by the stated time. The order does not merely refer to delivery of the partnership books and records. It also requires the appellants to give disclosure, by making those documents available for inspection and copying by the respondent. In my judgement, that requires the appellants’ solicitors to identify a time at which the respondent (or his appointed representatives) may attend at FBS’s offices, during normal business hours, to inspect, and take copies, of the documents, no later than 14 days after service of a sealed copy of the order. The appellants are, in my judgement, responsible for their then solicitors’ failure to do this.[23]The relevant correspondence is summarised at paragraphs 12 through to 13 of the judgment of the Chief Master. It is sufficient for me to refer to four letters. The first is a letter from Thakrar & Co, the respondent’s solicitors, to FBS dated 7th October 2013. In that letter, Thakrar & Co stated that they had no alternative but to proceed on the basis that the appellants would not comply with any orders. That letter led to a telephone conversation between the parties’ solicitors on the following day, 8th October 2013. There is no note of that telephone conversation in evidence before me; but its terms are addressed in a letter that Thakrar & Co later wrote to the appellants’ new solicitors, PKP French, on 14 November 2013. That was a very long letter. At numbered paragraph 7, the writer states that on 8th October 2013 Thakrar & Co had received a telephone call from FBS, when FBS confirmed that the accounting records had been delivered to their offices by the appellants. Thakrar & Co informed FBS that, strictly without prejudice to the breaches of the two orders by the appellants, they would take the respondent’s instructions as to when the respondent and his forensic accountant would be in a position to attend the offices of FBS to inspect the accounting records.[24]The correspondence then continued with a letter from Thakrar & to FBS dated 9th October 2013. The letter was said to have been written following that telephone conversation on 8th October 2013. Reference was made to Master Marsh’s order of 18th September and its terms. It was said that the order had been served upon FBS on 19th September by fax, email and recorded delivery. (I interpose to say that that was an unsealed copy of the relevant order.) The letter continued:
“Consequently will you confirm to us by return that you agree your clients are now debarred from participating in the taking of the partnership accounts ordered by Deputy Master Jefferis on 13th June 2013 in light of the delay in providing access … within the time limit that your clients were ordered to provide. If you disagree with the above, then let us know by return as to why would you disagree; and if you do not disagree, then will you confirm this to us?”
The letter continued:
“Further, strictly without prejudice to the above, we are checking with our client as to his availability, and the availability of his accountant, to carry out the forensic examination of the accounts since, so far as our client is concerned, our client has no doubt that your clients have, without any authority, taken money from the partnership which, in our client’s opinion, is nothing less than theft; and further, your clients have defrauded the Inland Revenue, who our client believes should investigate the conduct of your client. It will be our client’s intention to submit his forensic accountant’s report to the two authorities referred to above as soon as the report is available, etc.”
[25]There was never any response to this letter from FBS. They never expressly indicated whether or not they did agree with Thakrar & Co’s understanding of the effect of Master Marsh’s order of 18 September 2013. In fact, there was no apparent response from FBS to any of Thakrar & Co’s letters.[26]The final letter to which I must turn is at page 498. Again, this is from Thakrar & Co to FBS. It is dated 14th October 2013. It refers to the earlier letter of 9th October 2013. It asserts a breach of the terms of the order of 18th September 2013; and it asserts that following that breach, the appellants were debarred from participating in the taking of the partnership account. The letter continues:
“Having said this very clearly our client is prepared to go through the exercise of inspecting the records, but this is clearly without prejudice to what is set out above. Further, we must make it very clear to you that our client is absolutely certain that the first defendant (who according to our client is a very conniving and a devious person) will not have delivered all the records to your firm. Be that as it may, what our client intends to do is to attend your offices on Friday 18th October 2013, with his forensic accountant, and go through the records and take copies of the relevant documents. The attendance would be from 10.00 am onwards. Will you confirm that subject to what is set out above this is convenient and acceptable to you?”
[27]There was no response to this letter; and, as a result, the inspection never took place, on 18th October or at all, so far as inspection at the offices of FBS is concerned. The irony is that had such inspection taken place on that date, given the apparent date of service of the sealed copy of the order of 18th September 2013, the terms of that order would have been complied with.[28]As I said, the appellants dispensed with the services of FBS on or about 29th October. The new solicitors offered to make the partnership books and records available for inspection on 4th December; and such inspection in fact took place, through the good offices of the respondent’s accountant, on 20th December 2013. Thus it is clear that the appellants, through their then solicitors on the record, FBS, failed to identify a time at which inspection and copying of the partnership books and records might take place within the time for compliance with the order of 18th September, despite being invited to do so by the respondent’s solicitors. FBS compounded that error by failing, as invited, to take issue with Thakrar & Co’s erroneous approach to the debarring provision in the court’s order. I am satisfied that there was a clear breach of the order.[29]I agree entirely with what is said at paragraph 27 of Master Marsh’s judgment:
“On a plain reading of the order the obligation placed on the defendant was not just to deliver documents to his solicitors, but for the defendant to give disclosure of the books and records ‘by making them available for inspection and copying’ at his solicitors’ offices. To comply with the order, the defendant had to take the positive step of making the documents available for inspection. In reality, that step would be performed in normal circumstances by his solicitors acting as his agents. Mr Ritchie sought to distinguish between the defendants and the solicitors then acting for them, but the distinction does not in reality exist. The steps required to make the books and records available to the claimant were either to be taken by the defendants or their solicitors. It is not open to the defendants to blame their solicitors for failing to do what was necessary. If the solicitors failed to act on his instructions the defendants were still in breach of the order.”
[30]I also agree with what is said at the end of paragraph 6 of Master Marsh’s ruling of 9th May 2014, on the application for permission to appeal:
“I consider that the wording of the order is so plain and so clear that there is no realistic basis upon which a different view could be reached.”
[31]I also agree with what Mr Mayall has said at paragraphs 4 and 5 of his written skeleton argument. The order imposed a single obligation upon the defendants to give disclosure of the books and records by making them available for inspection and copying at the offices of FBS. Simply delivering the documents to FBS, if the claimant was not permitted to go there and inspect them, could never amount to compliance with the order. The correspondence referred to in the Master’s judgment clearly shows that Thakrar & Co were making every attempt to obtain access for inspection and copying, but this was not forthcoming. I therefore refuse permission to appeal on this ground.[32]On the issue of the application under CPR 3.1(7), Master Marsh dealt with this at paragraphs 29 to 33 of his judgment. At paragraph 29 the Master said that the power was expressed widely in CPR 3.1(7), but that it was common ground that the correct approach to the power was that set out in Tibbles v SIG plc [2012] 1 WLR 2591. That case was discussed at paragraph 44 of the judgment of the Court of Appeal in Mitchell v News Group Newspapers Limited [2013] EWCA Civ 1537 reported at [2014] 1 WLR, 795. The Chief Master set out what had been said about the jurisdiction by the Master of the Rolls. At paragraph 30 the Chief Master referred to Mr Ritchie’s submission that two of the circumstances described in Tibbles were applicable in the instant case. First, he said there that had been a material change of circumstances since the order was made. Secondly, he said that there was a manifest mistake in the way the order was formulated.[33]The Chief Master addressed what was seen as a preliminary point, namely that the order had been made by consent. He referred to the discussion of Tomlinson LJ in his judgment in Pannone LLP v Aardvark Digital [2011] EWCA Civil 803. There was a discussion as to the extent to which the power to vary an order was available to the court in the case of an order made by consent. The Chief Master accepted that there was jurisdiction, albeit a limited one, to vary a consent order. The jurisdiction was said to be wider in relation to what may be described as a case management order than, for example, an order disposing of proceedings altogether. Mr Ritchie is said to have submitted that the material change of circumstances which had occurred since the order was made was that it had been complied with. The documents had been made available to the claimant, inspected, and relied upon by Mr Shah when producing the draft dissolution accounts.[34]The Master referred to Mr Ritchie’s submissions that it would be unfair for the claimant to have both the benefit of the documents and the benefit of the sanction; and that the defendants’ late compliance was said to be a change of circumstances. The Master did not agree. The type of material change of circumstances which the court had in mind in Tibbles was said to be something much more fundamental than late compliance with the order that the applicants sought to vary. It was said that there must be a change which makes a fundamental alteration to the landscape which existed at the time the order was made.[35]The jurisdiction to vary under CPR 3.1(7) had been very narrowly construed, and it was said simply to be wrong in principle that a defendant could apply retrospectively to vary an order following late compliance. The regime under the Civil Procedure Rules, as amended with effect from 1st April 2013, was said to emphasise the importance of compliance with court orders; and where a sanction was attached to an order the approach set out in Mitchell could not be circumvented by relying on late compliance as a basis for varying the order.[36]The second ground relied on by Mr Ritchie was said to have no substance at all. Reference was made to a passage in Lindley & Banks on Partnership, 19th Edition, at para 23-130. It was said to be suggested in that passage that if a partner did not comply with the obligation to produce books and records, the court, when taking the account, would merely make adverse assumptions against the defaulting partner.[37]The Master said that that might well be the case where there was a non-compliance with the obligations under the Partnership Act, and where a party chose not to apply for an order for production of partnership books; but in a case in which one partner controlled all the partnership records, the Master could see no reason why the court might not exercise its jurisdiction to make an order for the documents to be produced, and later to make an order providing a sanction in the event of non-compliance. All the more so in the case of an order to which the defaulting party had consented, as in the instant case. There was said to be no proper basis upon which the defendant could, on the one hand, consent to an order, but later say that the order was an improper one. The Master concluded that the case was not one in which the order should be varied.[38]Before this court, Mr Ritchie relied not simply on the fact of late compliance with the order but on the further facts that:(1) the respondent had asked to see the documents, notwithstanding his assertion that the debarring provision had already taken effect; and(2) that the respondent had subsequently made use of those documents in the form of his accountant’s report.[39]Mr Ritchie accepted the court’s formulation of his argument that the material change of circumstances relied on in the present case was the provision of accounting documentation in response to a request for it after a debarring order had been made, and, on this hypothesis, had taken effect. Mr Ritchie acknowledged that there would have been no material change of circumstances if the addressee of the request had provided the information, not in response to a request, but of his own volition.[40]Mr Mayall, for his part, accepted that the respondent had made use of the documents inspected by his accountant. Mr Ritchie submitted that the respondent was therefore approbating and reprobating. He was taking the benefit of the sanction whilst, at the same time, making use of the accounting documents disclosed by the appellants.[41]Mr Ritchie submitted that no-one disputed that one had to obey orders of the court; but here one was dealing with the consequences of a failure to obey. He said that the Master should have varied the order.[42]I reject Mr Ritchie’s arguments, essentially for the reasons given by the Chief Master. I accept the competing submissions of Mr Mayall at paragraphs 10 through to 17 of his written skeleton argument. There was no material change of circumstances. The defendants had been under a continuing obligation to provide the disclosure, both under the original order made by the Deputy Master, and under the Partnership Act. The sanction arose because the defendants did not comply by the date set by consent in the unless order. Those were precisely the circumstances envisaged at the time the unless order was made.[43]The fact that the defendants had belatedly, and eventually, complied with their continuing obligation, which existed at the time the unless order was made, was not a material change of circumstances. It was incorrect to say that an unless order gave the person against whom it was aimed a choice. It was not for a litigant to choose whether or not to comply with an order of the court. The defendants had to comply with the obligation to give disclosure within 14 days of service of the court order. They agreed that if they did not do so, the sanction would bite. They could not make the continuing obligation to provide disclosure go away by not complying with the time limit.[44]The respondent was not approbating and reprobating. The sanction had already bitten. All he was doing was attempting to enforce the ongoing obligation. His solicitors repeatedly made it clear that the respondent wanted to inspect the books and records, without prejudice to his contention that the defendants were already debarred from participating in the taking of the account. Such provision [of the partnerships’ books and records] was made in full knowledge that that was the position being taken by the respondent’s solicitors.[45]In any event, the Master rightly recognised that any application to vary had to be made promptly. This application was made very late indeed, and there was no proper explanation for the delay. The closest the appellants came to providing an explanation for the delay was that relied upon in support of the application for relief from sanctions; namely that Mr Dhillon had not made any application because he had assumed that any accountant instructed by Mr Sandhu would produce an objective set of accounts. That is said to be tantamount to saying that he deliberately did not make any application to vary the order, or for relief from sanctions, because he thought he had got away with it, and he would not suffer any penalty as a result of his disobedience to the court order.[46]The accountant had produced his report in accordance with his duty to the court, and in compliance with the terms of the Deputy Master’s order. As the Chief Master recorded in his judgment, there had been no significant challenges to his methodology, but only to some of the assumptions he had made, and to his conclusions.[47]I accept the reasoning and the conclusions on this issue of the Master. In my judgement they cannot be faulted. The considerations identified by Mr Ritchie may support, and they may be highly relevant to, an application for relief from sanctions; but in my judgement they do not support a variation of the order or any extension of the time for compliance. For those reasons, I refuse permission to appeal on this issue.[48]On the application for relief from sanctions, the landscape has, to some extent, changed as a result of the Court of Appeal’s recent decision in Denton. The Master proceeded on the basis set out at paragraph 36 of his judgment. He considered the defendants’ application for relief from sanctions on the premise that the appellants had failed to comply with the order dated 18th September until 20th December 2013, and that the time for compliance had expired, at the latest, on 21st October 2013. Although the defendants were entitled to take advantage of the strict terms of the order, under which time did not start to run until service of the order, their knowledge of the terms of the order, even before it was made, is a factor which the Master said he was entitled to take into account on the application for relief.[49]The Master started by observing that on any view the defendants’ application had not been made promptly. No reason, let alone a good reason, had been given for the lateness of the application, or for the failure to include a request for relief. The Master was in no doubt that the sanction was one which had been properly imposed; and, in any event, that the defendants had consented to it. Furthermore, it was not suggested that the breach was a trivial one. It followed, so the Master said, that the onus was on the defendants to show why the order was not complied with, and they must satisfy him that there was a good reason for the breach. The Master recorded that Mr Ritchie, candidly and realistically, accepted that it was difficult for him, based on the evidence before the Master, to show good reasons for non-compliance with the order. The explanation given in the first defendant’s witness statement of 3rd March 2013 was that he was let down by his then solicitors. He painted a picture of FBS regularly failing to respond to correspondence.[50]The Chief Master then referred to further points made by Mr Dhillon. He then recorded that Mr Dhillon said that he had delivered the books and papers to FBS on 8th October 2013. In addition, Mr Dhillon said that he had requested FBS to contact the claimant’s solicitors to give them access to the books and records, although there was said to be no evidence to support that assertion.[51]At paragraph 41, the Master identified what he described as some unsatisfactory features in the defendants’ explanation. At paragraph 42 he said he was unconvinced by the explanation provided by the defendants. He said it was very convenient simply to blame their solicitors. He said that Mr Dhillon had not given an explanation of the steps he had taken after he had become aware of the order of 18th September to ensure that the documents were made available to the respondent. It appeared to the Master that such efforts as were made had been wholly inadequate.[52]However, at paragraph 43 of his judgment, the Master said that even if the defendants’ explanation was largely true (about which he had grave reservations), it came nowhere near to excusing the defendants’ failure to ensure that either FBS, or the new solicitors, complied with the order.[53]At paragraph 44, the Master referred to Mr Ritchie’s submission that the approach adopted by the Court of Appeal in Mitchell was capable of being distinguished because in that case there was no evidence of prejudice to Mr Mitchell (perhaps rather surprisingly) whereas here it was easy to see that there would be prejudice to the defendants if they were not permitted to play a part in the taking of the account. The Master did not consider that the question of prejudice, taken alone, was sufficient to distinguish the approach to be drawn from Mitchell. The wider considerations that were formerly part of CPR 3.9(1) did not, when taken with the rule in its new form, mitigate in favour of relief being granted.[54]In summary – and here I correct errors in the numbering and lettering of the Master’s sub-paragraphs:(1) The application for relief was not made promptly, indeed it was made very late indeed.(2) There had been a singular failure on the part of the appellants to engage with these proceedings, and the clear impression that the Chief Master had of Mr Dhillon’s behaviour was that he had been knowingly obstructive.(3) There was no good explanation for the failures to comply with the order.(4) The Master was not satisfied that the failure to comply with the order was caused by the defendants’ solicitors.(5) The failure to comply with the order had caused significant delay. It had not affected a trial date as such; but it was possible to see that there was real prejudice to the claimant by the taking of the account being held up, although such prejudice might be capable of being compensated by an appropriate award of interest. The appellants’ approach was matched by their refusal to countenance the possibility of there being any interim payment to the respondent.(6) The granting of relief would put the appellants in a more satisfactory position. The refusal to grant relief would not, however, prevent the appellants from participating in the taking of the account at all. It would simply mean that they had no entitlement to rely upon evidence. They would be permitted to attend the oral hearing and make submissions concerning the respondent’s evidence.(7) The appellants’ ultimate compliance with the order by producing the files was a factor which weighed in the appellants’ favour; but in the Master’s judgment it was not sufficient to tip the balance in favour of granting relief, taking into account all the other factors. In conclusion, the Master considered that it was not appropriate to grant relief to the defendants.[55]It is clear from paragraph 58 of the Master’s judgment that he was alive to the implications of his refusal to grant relief from sanctions. At paragraph 58, he acknowledged that the extent to which the appellants would be able to challenge the respondent’s accountant’s figures would be limited. If the appellants could demonstrate that the accountant’s methodology was incorrect, the figures might change; but the attack made at the time the matter was before the Master to Mr Shah’s approach was said to be very limited. The appellants would not be able to challenge the underlying factual basis for the accountant’s conclusions. The appellants would not, for example, be entitled to call evidence to justify what were described as the rather suspicious rounded invoices from Dhillons of Berkshire, and the Master noted that Mr Dhillon’s witness statement made no real attempt to do so. The accounts produced by Mr Shah were provided pursuant to the Deputy Master’s order. There would be further accounts needed when the properties were sold; but it was said that they would only affect the amount payable on the dissolution of the partnership. That paragraph makes it clear that the Master was alive to the implications of his order.[56]At the end of yesterday’s hearing, I indicated that I was concerned that the Master, at the subparagraph which I have numbered (6) in this judgment, may have misstated the effect of the debarring order. The Master said in terms that the refusal to grant relief would not prevent the defendant from participating in the taking of the account, but would simply mean that he had no entitlement to rely upon evidence. It seems to me that that statement ran counter to the express terms in the order of 18th September (made by consent) by which, in the event of noncompliance, the defendants were “debarred from participating in the taking of the partnership accounts” ordered by the Deputy Master. It seemed to me that those words were clear. The defendants were not simply debarred from adducing any evidence on the taking of the accounts; they were debarred from participating in the taking of them.[57]Mr Ritchie indicated that if I was right, his clients were in an even worse position than that stated by the Master, and that was the reason why he had not sought to raise the point.[58]Overnight both counsel sought to produce a number of authorities on the potential meaning and effect of an order in the terms of this consent debarring order. I do not find those authorities to be of any assistance whatsoever. The relevant orders were not expressed in the terms of the instant order. They were orders debarring a party from defending litigation and/or striking out that party’s defence.[59]As Mr Ritchie pointed out, CPR 16.5(4) makes it clear that the quantum of any claim for damages is always an issue in any litigation, irrespective of the terms of the pleaded defence, subject, of course, to any admissions expressly made therein. None of the orders were in the form of an order debarring a party from taking any part in the relevant litigation.[60]Mr Mayall suggested that the Chief Master may have taken the view that it was open to the judge conducting the taking of the account to form a view as to the true meaning and effect of the debarring order. It seems to me that that is not a satisfactory approach to take in considering whether to grant relief against sanctions. It is necessary for the court entertaining that application to form a clear view as to the effect that the sanction will have. In my judgement this order is clear. It debars the appellants from taking any part in the taking of the accounts. It does not have the limited effect which the Chief Master stated in the relevant passage in his judgment of merely denying the appellants their entitlement to rely upon any evidence.[61]This morning Mr Ritchie indicated that he would wish his grounds of appeal to be treated as having been amended to assert that the Chief Master had failed properly to construe the terms of the consent order and to identify its effect upon the appellants. I agree that the grounds of appeal should be treated as having been amended in that way. Mr Mayall indicated that if there were anything in this point, as I think there is, then the proper approach is to address the matter by granting relief from the sanction of the debarring order to the very limited extent set out in the Chief Master’s judgment. In my judgement, given the way the Chief Master dealt with it at the hearing, it would be wrong to refuse permission to appeal, or to dismiss the appeal, otherwise than on the basis on which the Chief Master refused the grant of relief from sanctions, namely that the order in question did not prevent the appellants from participating in the taking of the account at all, but merely that they had no entitlement to rely upon the evidence.[62]To that extent, I give permission to appeal and allow the appeal, so that relief from sanctions is granted to the extent of enabling the appellants to participate in the taking of the account.[63]That leaves the question, however, whether I should give permission to appeal, and allow the appeal, against the refusal of wider relief, enabling the appellants to rely upon evidence on the taking of the account at all. Since it is now almost one o’clock, I think that that would probably be a convenient point to interrupt my judgment and resume it at two o’clock. I will not be finished in less time than another 20 minutes or so. I think it would be unfair on the court staff, since we have been going since ten o’clock, thus almost three hours, not to have a break now. So I will resume at two o’clock. (Short adjournment) JUDGE HODGE QC: This is a continuation of my extemporary judgment.[64]Before the short adjournment I indicated that I would give permission to appeal, and allow the appeal, to the limited extent of granting relief against sanctions so as to permit the appellants to participate in the taking of the account. That was the basis upon which the Chief Master had approached the application for relief against sanctions before him. I now have to consider whether or not I should give more extensive relief against sanctions, so as to entitle the appellants to rely upon evidence on the taking of the account.[65]Mr Ritchie, in addition to his extensive grounds of appeal, had prepared a written skeleton argument in support of his appeal dated 10th June 2014. Following the decision of the Court of Appeal in Denton, Mr Ritchie supplemented his written submissions by way of a supplementary skeleton argument dated 21st July 2014. I do not propose to burden this judgment further by reproducing what Mr Ritchie has said in those two documents. Mr Ritchie took me through the Court of Appeal decision in Denton at length. He began with the guidance at paragraph 24 of the joint judgment of the Master of the Rolls and Vos LJ. The majority - and in this respect Jackson LJ agreed - considered that the guidance given at paragraphs 40 and 41 of Mitchell remained substantially sound. But in view of the way in which that guidance had been interpreted, they proposed to restate the approach that should be applied in a little more detail:
“A judge should address an application for relief from sanctions in three stages. The first stage is to identify and assess the seriousness and significance of the ‘failure to comply with any rule, practice direction or court order’ which engages rule 3.9(1). If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to consider why the fault occurred. The third stage is to evaluate ‘all the circumstances of the case, so as to enable the court to deal justly with the application, including [factors (a) and (b)]’.”
[66]The majority considered each of those stages in turn, identifying how they should be applied in practice. They expressed the hope that what followed would avoid the need in future to resort to the earlier authorities.At paragraph 82 of their judgment the majority reiterated their hope that it would now become unnecessary to refer to earlier authorities in the future.[67]Mr Ritchie took me through the court’s detailed analysis of each of the three stages, at paragraphs 25 through to 44 of the judgment in Denton. In answer to a question from the Bench, Mr Ritchie accepted that he would have some difficulty in submitting that the non-compliance in the instant case was not serious or significant; but he emphasised that the non-compliance did not in fact impact upon any future hearing dates, or disrupt the conduct of this litigation generally. A set of accounts had been produced, and had been produced with the benefit of the books and records of the partnership produced by the appellants.[68]The reason for the non-compliance was because Thakrar & Co, in correspondence with FBS, had taken the point that the appellants were in breach of the order at a time when they were not, and were therefore debarred from defending. The main point was said to be that no trial date had been lost in the instant case. There had been some delay; but there had been no knock-on effect on the litigation in this case as such, or on other court users. The parties would incur no significant extra costs if relief were to be granted. The object of achieving compliance with court orders was not to be seen as an end in itself, but simply as a means of achieving justice.[69]Mr Ritchie submitted that the effect in the present case had been the equivalent of a strike-out of the appellants’ defence. Later in the course of his oral submissions, he took me to paragraph 62 (amongst others) of the judgment of the Court of Appeal in the earlier case of Chartwell Estate Agents Limited v Fergies Properties SA [2014] EWCA Civ 506. There, Davis LJ, giving the judgment of the Court of Appeal, had emphasised that the objective under CPR 3.9 was to achieve a just result, having regard not simply to the interests of the parties but also to the wider interests of justice. As had been said by the Master of the Rolls (in his 18th lecture), enforcing compliance was not an end in itself. In the well-known words of Bowen LJ:
“The courts do not exist for the sake of discipline.”
Such sentiments were said not to have been entirely ousted by CPR 3.9, as it was to be interpreted and applied in the light of Mitchell, and now of Denton.[70]Mr Ritchie emphasised that the courts, in considering applications under CPR 3.9, did not have, and should not have, as their sole objective, a display of what Davis LJ described as “judicial musculature”. Mr Ritchie submitted that the Chief Master failed to give adequate weight to the effect his order would have. It was in this context that he directed me to paragraph 58 of the Chief Master’s judgment, which I have previously cited. He submitted that it was difficult to see how the appellants could challenge Mr Shah’s conclusions if the appellants could not put forward their own figures. They would be unable to take any serious part in the taking of the account. They would be very seriously disadvantaged; and that would be unfair because the appellants had already produced the books and records that had enabled Mr Shah to produce his partnership account. Conversely, it was said that the respondent would suffer no prejudice if relief from sanctions were to be granted on a basis more extensive than I have already indicated, and which the Chief Master had understood to be the effect of the debarring order.[71]Mr Ritchie emphasised that Mr Dhillon’s participation in the taking of the accounts would be key. He stressed that the taking of accounts would still go ahead, but it would be without any input and evidence from Mr Dhillon. He submitted that debarring Mr Dhillon from participating in the taking of the accounts by adducing evidence would be in no-one’s interests since he was the accounting party.[72]Mr Ritchie cited extensively from the Court of Appeal’s earlier decision in the Chartwell case, referring me to paragraphs 31, 47 and 49 to 62, notwithstanding the Court of Appeal’s references in Denton to the lack of any need to refer to earlier authorities. Mr Ritchie relied on Chartwell because of what he said were the similarities between that case and the present case. He emphasised that that was a case where the Court of Appeal had upheld the grant of relief from sanctions, which had been granted by Globe J at first instance.[73]Mr Ritchie took me to the decision of the European Court of Human Rights in the case of Ashingdane v UK (1985) 7 European Rights Reports 528. He cited from paragraph 57, where the court emphasised that limitations on a party’s access to a court must not reduce that access in such a way, or to such an extent, that the very essence of the right was impaired. Furthermore, any limitation would not be compatible with Article 6.1 of the European Convention on Human Rights if it did not pursue a legitimate aim, and if there was not a reasonable relationship of proportionality between the means employed and the aims sought to be achieved. I am entirely satisfied that the mechanisms in CPR 39, as construed and explained by the Court of Appeal in Denton, are in accord with the provisions of Article 6 of the European Convention. I am satisfied that a principled application of the grant of relief from sanctions in no way impairs a litigant’s rights of access to the courts.[74]Mr Ritchie made a number of other points in the course of his oral submissions.[75]Mr Mayall had addressed the application for relief from sanctions in rather shorter terms in his written skeleton argument. He submitted that the Chief Master had faithfully applied the guidance in Mitchell and he had firmly concluded that it was not appropriate to grant relief. His approach and conclusion were said to be unimpeachable. Even had the Chief Master had the benefit of the updated guidance in Denton he would, it was said, have reached the same conclusion.[76]Mr Mayall submitted orally that the court could not be satisfied that the appellants had, as they assert, provided all of the relevant partnership accounting books and records to FBS on 8 October 2013. As to that, I accept Mr Ritchie’s competing submission that that was the basis upon which the Chief Master approached the matter; and it is not open to this court to take a different view on that issue.[77]Mr Mayall submitted that there had been no attempt by the defendants, in their evidence, skeleton arguments or submissions, to claim that the breach was trivial. Whilst that might no longer be the test at the first stage – although it had been at the time the matter was before the Master – it was clear that Chief Master Marsh was of the view that the breach was serious or significant. Mr Mayall referred me to what is said on that aspect of the matter at paragraph 26 of Denton. He adopted the definition of “serious and significant” as being a breach which “imperils future hearing dates or otherwise disrupts the conduct of the litigation”, bearing in mind, of course, that “the litigation” is not just a reference to the instant litigation, but to litigation involving other litigants before the court generally.[78]Mr Mayall accepted that because no future hearing date had been set, no such date had been imperilled; buthe emphasised that the non-observance of the consent order had clearly imperilled the conduct of the litigation. The Deputy Master had made an order back in June which had been ignored. That fact had prevented the next step in this litigation from being taken in accordance with the Deputy Master’s timetable. That timetable had as a result been severely disrupted. That had been the purpose of making the unless order, so that the parties could get on with the taking of the partnership account. The appellants did not comply with that order. The conduct of the litigation was thereby seriously disrupted. The fact that there had been no hearing date set which had been lost should be treated as a factor telling against the appellants rather than in their favour. The non-compliance had prevented any hearing date from being set. It had had a knock-on effect on the winding-up of the partnership. Mr Mayall submitted that the non-compliance was also bound to have had an effect on other court users. It had tied up the Chief Master on two or three hearing days, which had been taken up with applications for (amongst other things) relief from sanctions. That inevitably must have a knock-on effect on other court users.[79]Mr Mayall emphasised that the Master had not dealt with the first stage in any detail, but he had found:(1) That his impression was that the defendants had been knowingly obstructive.(2) That the failure to comply had caused significant delay.(3) That the failure to comply had been particularly serious. In that regard Mr Mayall referred to what was said by the Chief Master at paragraph 6 of his reasons for refusing permission to appeal on 9 May, where he said that the defendants’ failure to comply with the order was a particularly serious one, with the period from the date of the original order to final compliance being a very lengthy one indeed.(4) There was said to have been a particularly egregious failure to comply with the initial order and the unless order.[80]Mr Mayall submitted that had he been applying the Denton guidance, the Chief Master would have been bound to conclude that this breach had disrupted the course of this litigation, as well as other litigation competing for court time. It could not be suggested, at the second stage, that there was any good reason for the breach. Mr Mayall submitted that the Master had taken all of the circumstances into account in concluding that it was just to refuse the application for relief. He submitted that no reasonable judge could possibly have concluded otherwise. But quite apart from that, it was said to be clear that the Chief Master’s decision had been within the ambit of his case management discretion, so that there was no proper basis upon which the appeal court could set it aside.[81]In that context, Mr Mayall referred me to what had been said at paragraph 62 of Chartwell, where Davis LJ had indicated that he would wish to repeat the point emphasised in Mitchell that appellate courts would not lightly interfere with a case management decision. That view had, Mr Mayall said, been reiterated in Denton, both at paragraph 9 of the majority judgment and in paragraph 98 of the partly dissenting judgment of Jackson LJ. He submitted that the decision had quite clearly and obviously been one within the generous ambit of the Chief Master’s discretion.[82]Turning to all the other circumstances of the case, Mr Mayall submitted that Denton made it quite clear that they should not be given equal weight to the two factors specifically identified in sub-paragraphs (a) and (b) of the new CPR 3.9(1): the need(a) for litigation to be conducted efficiently and at proportionate cost, and(b) to enforce compliance with rules, practice directions and court orders. The court had to give particular weight to those two specifically identified factors when having regard to all the circumstances of the case.[83]One of the most striking circumstances of the present case was said to be that this was a consent order. That was a factor that had to be taken into account. Reference was made to what I had said at first instance in the case of Pannone LLP v Aardvark Digital Limited. At paragraph 48 of my first instance decision, reproduced at paragraph 23 of the judgment of Tomlinson LJ in the Court of Appeal (the neutral citation to which is [2011] EWCA Civ 803) I had said:
“The interests of the administration of justice do dictate that consent orders should be given full force and effect by the court.”
[84]Mr Mayall took me to part of paragraph 33 of the Court of Appeal’s judgment; and in his reply Mr Ritchie took me to the whole of that paragraph:
“In my view the weight to be given to the consideration that an order is agreed will vary according to the nature of the order and thus the agreement. Where the agreement is the compromise of a substantive dispute or the settlement of proceedings, that factor will have very great and perhaps ordinarily decisive weight, as it did in Weston v Dayman, which was not in any event concerned with an application to extend time. Where however the agreement is no more than a procedural accommodation in relation to case management, the weight to be accorded to the fact of the parties' agreement as to the consequences of non-compliance whilst still real and substantial will nonetheless ordinarily be correspondingly less, and rarely decisive. Everything must depend on the circumstances, and CPR 3.9(1) prescribes that on an application for relief from a sanction for a failure to comply with a court order the court will consider all the circumstances, including those enumerated in the following sub-paragraphs. Beyond noting that where an order is made by consent, that is one of the circumstances which the court will take into account, it is not I think necessary to impose any further gloss on the Rules, which are already adequately drafted so as to ensure that all proper considerations must be taken into account.”
[85]Those observations must be read, of course, in the light of the revision to CPR 3.9(1) effected in April 2013. They must also now be read subject to what is said in the Court of Appeal in Denton. In my judgment, the Chief Master correctly stated the effect of the decision in Pannone v Aardvark at paragraph 30 of his written judgment.[86]Mr Mayall submitted that the whole purpose of this consent order had been that the parties should get on with the taking of the account; and, if they did not, it was expressly acknowledged that there would be this sanction. He also emphasised that the appellants were still under a continuing obligation to produce the partnership books and records. They had just merely not done so within the time prescribed by the consent order, and must therefore bear the sanction which they had signed up to by agreeing to that order.[87]Mr Mayall reiterated that the Chief Master’s decision had been within the generous ambit of his discretion, and that it would not be right to interfere with his decision. He submitted that the Court of Appeal in Denton had not been rowing back on the numerous cases in which it had previously said that appeal courts should not interfere with robust case management decisions.[88]In his reply, Mr Ritchie emphasised that in litigation steps always tended to be sequential, so that there would always be some disruption to the conduct of litigation if a party failed to proceed with a step in accordance with the prescribed timescale. That, it seems to me, ignores the fact that here the parties have expressly agreed that a sanction would attach to non-compliance with the step required by the court.[89]Mr Ritchie submitted that the difficulties must have caused no real inconvenience to other court users. So far as that is concerned, I would accept his submission to the extent that no additional inconvenience to court users has been caused than would be the case with any other application for relief from sanctions. The mere fact that time has to be set aside for an application for relief cannot preclude such relief being granted. Mr Ritchie accepted in reply that the fact that this was a consent order was one factor to be taken into account, but it was not to be treated as decisive. He also emphasised that it was the solicitors who had agreed to the consent order who had let the appellants down. He sought to argue that the consent order had assumed that a sanction would not apply if the documents were not forthcoming. The documents had in fact been produced, and had been produced at the request and insistence of the respondent; and he had thereafter made use of them in his accountant’s report. It would be unfair in all the circumstances to refuse relief from sanctions in such circumstances, particularly where:(1) no date had been set for the taking of the account; and(2) the taking of the account would still have to take place. He concluded his submission by submitting that the Master’s order had been too harsh in all the circumstances.[90]Since I have called on Mr Mayall to respond to Mr Ritchie’s submissions, albeit only on the relief from sanctions point, I consider that I should grant permission to appeal on this aspect of the appeal because, clearly, having called on Mr Mayall, my view was that the appeal had a real prospect of success. But having done so, and heard what Mr Mayall has to say, I am satisfied that I should dismiss the appeal from the decision to refuse relief from sanctions, save to the limited extent I have already indicated of allowing the appellants to take part in the taking of the account, but not to adduce evidence thereon.[91]Having borne in mind all that Mr Ritchie has said, both in writing and orally, I agree with Mr Mayall, for the reasons he has given, that the Chief Master made a decision which was within the generous ambit of his discretion. It does not seem to me that the Chief Master either erred in principle in his approach, or left out of account some feature which he should have taken into account, or took into account some feature that he should not have considered, or that his decision was wholly wrong, because the court is of the conclusion that the Chief Master did not balance the various factors fairly in the scale. The Chief Master was bereft of the guidance provide by the Court of Appeal in the later Denton decision. But, nevertheless, it seems to me that his decision was entirely in accordance with the terms of that guidance.[92]Mr Ritchie himself accepted in oral submissions, in answer to a question from the Bench, that he would have some difficulty in saying that this was not a serious or significant breach of a court order. In my judgment he was right to do so. It clearly was, for the reasons that the Chief Master and Mr Mayall have given. The non-compliance has significantly impeded the taking of the account and delayed that process.[93]Even if the Chief Master was wrong to ignore the difficulties which the appellants claim to have faced with their former solicitors, FBS, it seems to me that the Chief Master was entirely right to say that those difficulties come nowhere near to excusing the appellants’ failure to ensure that either those solicitors, or more particularly the new solicitors retained at the end of October, complied with the order. Even after retaining new solicitors, it was not until a little over a month and a quarter later that the new solicitors offered to allow the respondent to inspect the books and records of the partnership. The appellants would be prevented from producing any further evidence on the taking of the account. But in so far as they are seeking to adduce evidence within the partnership books or accounts, then those are documents which they should have produced in accordance with the terms of Deputy Master Jefferis’s order, and then the consent order approved by Chief Master Marsh to which a sanction was attached.[94]It is now far too late for the appellants to be seeking to adduce any further evidence comprising partnership books or records. It may be that they will suffer some disadvantage evidentially in being unable to rely on other evidence, not falling within the description of partnership books or records; but if so that is a disadvantage entirely of their own making by having failed to comply with each of the two court orders.[95]This was a case management decision made by the Chief Master for which he has given full and proper reasons, and it is not for this appeal court to interfere with his decision.[96]That leaves the appeal against the making of the interim payment of £350,000. Having refused relief from sanctions, it can no longer be said that the Master wrongly failed to take into account Mr Dhillon’s evidence on the application for the interim payment. But even if that evidence were taken into account, it seems to me that there is no real prospect of successfully demonstrating that the amount awarded by the Chief Master of £350,000 was an inappropriate figure, and that no payment (or any lesser sum) was appropriate.[97]At paragraph 11 of the grounds of appeal, and paragraph 48 of his written skeleton argument, Mr Ritchie sets out various respects in which it is said the Chief Master erred in the exercise of his decision to order an interim payment. I did not find it necessary to call on Mr Mayall on this aspect of the case either. In his written submissions, Mr Mayall submitted that the decision was a matter for the Master’s discretion and that there was no prospect of a successful appeal against that exercise of discretion, for the reasons set out in paragraph 8 of the Master’s ruling of 9 May refusing permission to appeal. There, the Chief Master reminded himself that the evidence provided by the claimant (from an accountant who had who undertaken a careful and full analysis of the records finally made available) had suggested that a figure of £675,000 was required to equalise the financial position between the parties. He recorded Mr Ritchie’s submission that an order for an interim payment was wrong in principle, because the properties which formed the capital base of the partnership were yet to be sold, but would soon be sold, and therefore there was no need for an interim payment.[98]The Chief Master did not consider that such a contention had a real prospect of success, and I agree. As the Chief Master said, the purpose of an interim payment is to deal with the position in the short-term. There was no reason to believe that the properties would be sold immediately, and it might take some time for that to occur. It was right, in the Chief Master’s judgment, to order an interim payment, disregarding capital provision in the future, which would lead to a substantial payment to both partners. The Chief Master made it clear that in reviewing the figures, he had adopted a cautious view, with a discount of £325,000 from the view taken by the forensic accountant. He acknowledged that it was possible that some of the accountant’s conclusions might not be correct; but the margin he had allowed was more than adequate to take into account any differences which might arise in relation to which the defendants had a real prospect of success, particularly bearing in mind that there was said to be £60,000 which the defendants acknowledged that they had received, and that was another figure that should be brought into the mix.[99]As Mr Mayall submitted, all of the Master’s figures were based upon the accountant’s report, which the Master had found to be a careful and full analysis of the records finally made available. The resulting figure was obviously within the Master’s ambit of discretion. I accept those submissions. I can find no basis for interfering with the Master’s discretion to order an interim payment on account of £350,000. There is no real prospect of success on that aspect of the appeal; and I therefore refuse permission on it.[100]In the result, for the reasons that I have given, I refuse permission to appeal on all grounds, except on the application for relief from sanctions. On that aspect of the case, I dismiss the appeal, save to the limited extent of granting relief from sanctions to enable the appellants to take part in the taking of the account, which Chief Master Marsh had envisaged that they would do at paragraph 44(v) of his judgment (on page 21), to which I have referred in this judgment as sub-paragraph (6). I will grant relief from sanctions to the limited extent of allowing the appellants to participate in the taking of the account; but not to the extent of allowing them to rely upon evidence. That is my judgment. MR MAYALL: My Lord, on the question of the principle of costs, it is my submission that they should follow the event, although, you have granted a very limited permission to appeal. JUDGE HODGE: It was not even asked for in the grounds of appeal. MR MAYALL: They were no better off than they were, because that is what the Master said they could do in any event. JUDGE HODGE: Yes. Although I have not printed them out, two costs statements were received by me by email earlier today. Do you have those? MR MAYALL: Yes. There have been various ones floating around, because they had to be amended when it went into two days. Does your Lordship have one? JUDGE HODGE: I have not received the original one. I have received two this morning. MR RITCHIE: Two from us? JUDGE HODGE: Two from you. MR MAYALL: Can I then, as soon as possible, hand this in? There should be a total of £15,028. JUDGE HODGE: Yes. That is the one I have here. MR MAYALL: I personally have not seen an assessment from my learned friend. JUDGE HODGE: This may actually be up to date, because it does include an element for today. MR MAYALL: Yes, the one I have handed up is up to date. JUDGE HODGE: Mr Ritchie, have you had this? MR RITCHIE: I have, sir, yes. On the principle of costs I do not resist the application for costs. So far as the mathematics is concerned, I think I have three points. Firstly, I think the maths has gone wrong in there in their schedule. I do not know what they have done, but I made the total of pages 1 and 2 up to the end of site inspections £1,265.40. They have not put that total in. That is a total I think they have made a mistake in, because you would then add up the other figures, it comes by my reckoning to £12,460.40. JUDGE HODGE: How much? MR RITCHIE: With a total figure, instead of £12,523.40 I think it should be £12,460.40. There may then need to be subsequent adjustments of VAT. That is my first point. On the detail of it, I think my only point is the attendances on parties. Two hours seems rather excessive when they were not the appellants. All they had to do was receive our documents and deal with those. JUDGE HODGE: Well, they had 550 pages of additional evidence. MR RITCHIE: Yes, but not evidence that particularly concerned Mr Sandhu, which he would have had to deal with. The third point is attendance at the hearing for today. They have put 5.5 hours. I think it probably should be four hours. Subject to that, I have nothing further to say on the schedule. JUDGE HODGE: Is there anything you want to say, Mr Mayall, in response to that? MR MAYALL: My Lord, the hours on personal attendance does not seem at all excessive, when you have to explain to your client that we have had 500 pages and ask if he has any comments on them, etc. It sounds remarkably modest in the time spent on the documents, which you will see on the schedule is a total of five and a half hours, which is very good speed reading. I could not quite follow Mr Ritchie’s maths. There appears to be a difference of £63 we are talking about between his £12,460 and the £12,523. JUDGE HODGE: It looks as though only five hours has been charged in total for the hearing, both today and yesterday. Is that correct? MR MAYALL: We appear to have attendance at hearing, five hours at £126. That is right, because there are ten and-a-half hours in total, because five hours of hearing and five and a half is travel and waiting, so there should be another 250 or thereabouts. JUDGE HODGE: I think travel and waiting, unless it is two days, is excessive. Equally, the attendance at the hearing is on the low side. MR MAYALL: There would have been another three hours today. JUDGE HODGE: Yes. Having delivered my substantive judgment, I now have to deal with the question of costs. Apart from a limited measure of success, which(1) was one not sought in the grounds of appeal, and(2) did no more than restore the position as it was understood to be before the Chief Master, there can be doubt but that the respondent has been entirely successful on the hearing of this application for permission to appeal and the appeal. He was also successful in resisting the application yesterday for permission to adduce further evidence. In those circumstances, Mr Ritchie is entirely right to accept that the appellants must bear the costs of the appeal. It is appropriate, in the interests of proportionality and the overriding objective, that I should undertake a summary assessment of the costs, even though this appeal has gone into a second day. No objection could be taken to the hourly rates of the fee-earners, and none is taken. I have looked at the hours expended. Notwithstanding Mr Ritchie’s observation about the two hours’ attendance on the respondent, given the volume of fresh evidence on which the appellants sought to rely, it seems to me that that is both reasonable and proportionate. I am satisfied that the other heads of costs are also reasonable and proportionate. Indeed, the attendance at this hearing seems, in view of the fact that this has gone into a second day, to be understated. Mr Ritchie has pointed to a small discrepancy in the figures; but in my judgement that is more than compensated for by the failure to claim a full figure for the grade D fee-earner’s attendance on the second day of this appeal. In those circumstances, I propose summarily to assess the costs, although rounding them down, at a sum of £12,500 plus VAT, which I think will bring it up to £15,000 in total. Normally that would be payable in 14 days. Mr Ritchie, are you seeking any longer period? MR RITCHIE: It would be nice to have a longer period. I would ask for a month. JUDGE HODGE: Mr Mayall? MR MAYALL: I will probably settle on 21. JUDGE HODGE: I think that is right. Twenty-one days will take it to 14 August, I think. So I will order £15,000 to be paid on or before 14 August. Mr Mayall, since you have been the successful party, I will invite you to prepare an order to give effect to my decision. MR MAYALL: My Lord, yes. I will submit it to Mr Ritchie. JUDGE HODGE: Are there any other matters? MR RITCHIE: Might I seek clarification of your order? It is just what we can and cannot do on the taking of the account. You refer to paragraph 44, 45 and 46. As I understand it, what we can or cannot do is effectively encapsulated in the first part of the paragraph 58. JUDGE HODGE: I will avail myself of what it says. MR RITCHIE: If you could demonstrate the methodology is wrong, it is not showing the underlying factual basis. JUDGE HODGE: You will not be able to call evidence. MR RITCHIE: If the document had been put in saying X, and he has --- JUDGE HODGE: Yes. He can make submissions on the documents. He can (1) make submissions to say that the documents produced do not support the conclusions in the report; and (2), he can challenge inferences to be drawn from the documents. I think that must be right, Mr Mayall. MR MAYALL: I am all in favour of keeping it simple. As he said in subparagraph 5 or 6, amending it so that he is permitted to attend at the oral hearing, and to make submissions concerning the claimant’s evidence, but not to adduce evidence himself. JUDGE HODGE: Yes. I think that is what the order should provide. Just to make it clear, it seems to me the effect of that is that he cannot call evidence, but can say:
“The underlying documents do not support the conclusion Mr Shah has reached, and the inferences that he has drawn from certain documents are not justified.”
But they will have to do that without evidence. MR MAYALL: I would concede that if there is any other factual evidence, he is probably entitled to cross examine and say, “You are lying about it,” and it will be up to the Master to accept it. MR RITCHIE: One point which is simply this. One order back, I notice in the order of June 2013 by Deputy Master Jefferis, was that the claimant prepare and file dissolution accounts. Then we would have six weeks after service of those to file and serve our numbered points of objection. Obviously the six weeks has well come and gone, but as I understand it what you are saying is we could actually do that. We are entitled to put in numbered points of objection. It was some time ago, so I would have to ask for an extension of time. JUDGE HODGE: You will have to ask for an extension of time in doing that. MR RITCHIE: I am trying to establish the principle on which we could do it. JUDGE HODGE: I think it would be convenient, if you able to take part in the account, it must be possible for you – and it is clearly convenient – that you should put in a written document setting out what your case is. Your time for doing so needs to be extended; but I think you will just have to deal with that through an application, hopefully by consent, in the usual way. MR MAYALL: I anticipate that it is going to require effectively a case management conference before the Master to sort it all out. It may be sensible that we will agree that we will apply to him for a CMC as soon as possible. JUDGE HODGE: And I make it clear that, given that I have refused permission to appeal from the bulk of his order, and that I have dismissed the appeal from his decision – except to a limited extent which, if anything, was favourable to the appellants – I see absolutely no reason why Chief Master Marsh cannot continue to have conduct of the taking of this account, if he is content to do so. MR MAYALL: That is a different matter. JUDGE HODGE: Is there anything else? What I will do, before the appeal bundles go back, I have taken some documents from the bundle in case I have to approve a transcript of this extemporary judgment, so I will keep those. But other than that, the bundle of authorities can go back. Can I thank both counsel for their submissions. We anticipated that this appeal would not be concluded in a day, even before we saw the application for further evidence, and in that we were right. Can I thank you both. - - - - - -