Chartwell Estate Agents Ltd v Fergies Properties SA & Anor [2014] EWHC 438 (QB)

[2014] EWHC 438 (QB)Case No HQ13X02659IN THE HIGH COURT OF JUSTICEQUEEN’S BENCH D IV IS IO NVenue Royal Courts of JusticeDate Tuesday, 18th February 2014
Before
MR. JUSTICE GLOBE
B E T W E E N:
Between
CHARTWELL ESTATE AGENTS LTDClaimantFERGIES PROPERTIES SADefendantsHYAM LEHRERDefendant
Transcribed by BEVERLEY F. NUNNERY & COOfficial Shorthand Writers and Tape Transcribers One Quality Court, Chancery Lane, London WC2A 1HRTel: 020 7831 5627 Fax: 020 7831 7737info@beverleynunnery.com
MR. M. DE GREGORIO (instructed by SGH Martineau LLP) appeared for Claimant.MR. R. DEACON (instructed by Blake Lapthorn) appeared on behalf of the Defendants.
J U D G M E N T
[1]This is the claimant's application, dated 27th January 2014, for a variety of orders not all of which are opposed. The significant applications, which are opposed, are the claimant's application for an extension of time for the exchange of witness statements; the claimant's application for relief from sanctions for failing to serve witness statements in time, and the claimant's application for permission to amend its cost budget.[2]The claimant, Chartwell Estate Agents Ltd., are estate agents. The first defendant, Fergies Properties, were the owners of 19 Wilton Crescent in Knightsbridge. The second defendant, Hyam Lehrer, is the solicitor who at all material times has been acting for the first defendant.[3]The action relates to the claimant's claim for commission upon the sale of 19 Wilton Crescent by the first defendant to Radovan Vitek on or about 22nd April 2013 for £25million. The basis of the claim surrounds an agency agreement, completed on or about 14th May 2012, between the claimant and the first defendant, as signed by the second defendant on the first defendant's behalf. Within the agreement a commission fee of 1.5% plus VAT is referred to.[4]The agency agreement came into being at a time when 19 Wilton Crescent was about to be sold by the first defendant to Vitek for £27.5million. However, no contract for sale was concluded; Vitek withdrew from the sale and the property remained on the market until Vitek made a further offer to purchase the property in February 2013 for the reduced figure of £25million. That sum was accepted by the first defendant and the sale was effected on or about 22nd April 2013 for £25million.[5]The claimant claims commission of 1.5% plus VAT which amounts to £450,000.[6]The pleadings identify various differences of interpretation as to the events during 2012 and 2013 and the effectiveness of the agency agreement. The defendants deny that any commission is payable.[7]It is not for me to resolve those disputes at this hearing. They are trial issues. I am concerned with case management issues.[8]The procedural history of the claim is as follows: The claim form was issued on 8th May 2013 and it was served together with the particulars of claim. The defence is dated 20th May 2013. There is an undated reply which was served some time before 5th July 2013. On 5th July 2013 the defendants issued a Part 18 request for further information. On 24th July 2013 the claimant served its response to the Part 18 request.[9]On 17th October 2013 there was a case management conference before Master Leslie. It deal with various issues, including allocation, cost budgets and applying for a trial within the March to May 2014 trial window, with a time estimate of 4 days. Subsequently the case has been fixed for trial with that 4 day time estimate in the trial window commencing 29th April 2014.[10]The order of 17th October 2013 dealt retrospectively with the Part 18 request and response, giving the defendants liberty to serve their request by 12th July 2013 and directing a response by the claimant by 26th July 2013. As already stated, that had already happened.[11]Paragraph 6 of the order dealt with disclosure. Again it dealt retrospectively with what in part had already happened. It required the parties to exchange electronic document questionnaires by 6th August 2013. It added that "if the parties are unable to agree any matters regarding electronic disclosure or inspection the matter shall be referred to the court for further directions at the earliest practical date". It required each party to give standard disclosure of documents by list by 27th August 2013. It stated that the last date for service of any request to inspect or for a copy of a document was 3rd September 2013.[12]Paragraph 7 of the order stated as follows: "Each party shall serve on every other party the statements of all witnesses of fact and any notices relating to evidence on whom it intends to rely. There shall be simultaneous exchange of such statements by no later than 4p.m. on 22nd November 2013".[13]Paragraph 8 of the order dealt with requests for clarification or information based on any document disclosed or statement served no later than 21 days after disclosure or service with any such request to be dealt with within 14 days of the request.[14]No further application has been made to the court and no further court hearing has been requested or has taken place since 17th October 2013, save for this application and hearing.[15]The relevant correspondence between the parties from 1st July 2013 onwards is exhibited in a 101-page bundle attached to a witness statement produced for this application by the claimant's solicitors. It has been amplified by further correspondence and documents attached to a statement filed on behalf of the defendants. Pages 1 to 34 of the claimant's bundle relate to matters that preceded the case management conference on 17th October 2013. It is clear from those documents that behind the agreed disclosure orders within the order of 17thOctober 2013 lay a dispute in relation to disclosure which was simply not addressed within the context of that order.[16]A letter dated 15th October 2013, from the claimant's solicitors, highlighted specific disclosure issues. It contended that there had not been full disclosure by the defendants. It sought a response by 23rd October 2013 failing which the claimant's solicitors reserved the right to make an application to the court for specific discovery. The final sentence stated that until the defendants completed the disclosure exercise it would be impossible for witness statements to be drafted and finalised.[17]The defendants responded by email on 17th October 2013, before the case management conference, stating in the last two paragraphs of their response: "1. You were provided with our client's list of documents on or around 29th August 2013 and inspection on 4th September 2013. You have therefore had 6 weeks to respond but have only just provided us with your comments. 2. We fail to see how the provision of the documents you have described makes it impossible for you to finalise your witness statements. You are acting for the claimant and so we expect that you can provide statements that support your client's case without requiring documents from our client".[18]As already stated, the disclosure issue and the possible consequential witness statement issue were not addressed at the case management conference. If there was any substance to them they should have been addressed. They were not addressed. The case management conference order was made. The case should have proceeded in accordance with its terms.[19]Notwithstanding the specific terms of the order, the correspondence shows a continuing unsatisfactory issue over disclosure. Put simply, the claimant's solicitors were claiming that disclosure should be made of additional documentation which it was claimed was relevant and, without sight of the documents, witness statements could not be prepared and exchanged. In a detailed letter dated 11th November 2013, a list of twelve specific items were referred to. Mr. De Gregorio supports his submissions today by stating that the majority of those items have been supplied during the past few days or weeks.[20]The defendants' solicitors disagreed about the relevance of the additional documentation that was being requested. They disagreed about its effect upon the preparation and exchange of witness statements. The subsequent recent disclosure of documentation has been made without prejudice to arguing its relevance.[21]The claimant's solicitors continued to indicate that an application would be made to the court for specific discovery if full disclosure was not made. No such application was ever made.[22]On 20th November 2013, the defendants' solicitors emailed the claimant's solicitors with reference to 22nd November 2013 being the date when witness statements should be exchanged, asking whether they would be in a position to exchange witness statements or were going to seek an extension of time for service. An email reply was sent on 22nd November 2013. It stated that it remained the claimant's position that full disclosure had not been provided and consideration was being given to making an application for specific discovery. Until discovery was complete it was impossible for either party to finalise their witness statements. Notwithstanding the content of that email, no application was made for specific discovery and no application was made for any extension of time to serve the witness statements.[23]Neither party had completed witness statements ready for service by 22nd November 2013. The claimant's position was expressly stated in their email of 22nd November 2013. It is the substance of this application. The defendants' position from the correspondence is not as clear cut as that. There is no document which states witness statements were ready to be served. No effort was made to safeguard their position, such as filing witness statements in a sealed envelope at court. Subsequent events, and the contents of an email dated 21st January 2014, satisfy me that the defendants were not ready to exchange their own completed witness statements. That is a finding I am able to come to on the papers alone. However, in the course of submissions, Mr. Deacon has conceded that the defendants did not have their statements ready to serve by 22nd November 2013. He maintains that was solely because the claimant had said that the claimant's statements were not going to be ready. However, the simple fact is that the defendants did not have their statements ready either, nor did they seek to protect their position by so having them ready.[24]This wholly unsatisfactory state of affairs continued. The claimant's solicitors continued to send letters complaining about disclosure, warning that an application for specific discovery would be made and indicating that witness statements could not be exchanged without full disclosure being made. That continued beyond Christmas and into January 2014.[25]The defendants' solicitors wrote on 21st January 2014 stating that the defendants would have been ready to exchange witness statements on 22nd November 2013, however they were not finalised at that time because the claimant's solicitors had said that they would not be in a position to exchange witness statements by that date. The defendants' solicitors would not agree to any extension of time for the service of such statements because it was considered it was by then a matter for thecourt to consider the issue of an extension of time and it was for the court to consider whether to grant relief from sanction. It was not a matter for the consent of the parties. The defendants' solicitors' letter concluded by stating:
"We shall finalise our client's witness evidence and, subject to any order the court may make, will be in a position to exchange statements by the end of this week"
. It is that concluding paragraph which clearly indicates, on the face of the documentation, that even by 21st January 2014 the defendants' own witness statements were not complete.[26]It is against this unsatisfactory background that the application is now made principally for an extension of time to serve witness statements and to obtain relief from sanction. The procedure is set out in a number of the rules. CPR 32.10 states:
"If a witness statement or a witness summary for use at trial is not served in respect of an intended witness within the time specified by the court, then the witness may not be called to give oral evidence unless the court gives permission."
CPR 3.1(2)(a) states: 27. "Except where these Rules provide otherwise, the court may - (a). extend … the time for compliance with any rule, practice direction or court order (even if an application for extension is made after the time for compliance has expired)". CPR 3.8(1) states: 29. "Where a party has failed to comply with a rule, practice direction or court order, any sanction for failure to comply imposed by the rule, practice direction or court order has effect unless the party in default applies for and obtains relief from the sanction." CPR 3.8(3) states: 30. "Where a rule, practice direction or court order – (a). requires a party to do something within a specified time, and (b). specifies the consequences of failure to comply, 33. the time for doing the act in question may not be extended by agreement between the parties". CPR 3.9(1), as recently amended, states: 34. "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."

CPR 3.1(2)(a) states:

[27]There is clear authority that the prohibition imposed by CPR 32.10, on calling a witness whose witness statement has not been served within a specified time, amounts to a sanction in terms of CPR 3.8(1) taking effect for failure to comply with a rule or court order. Accordingly, a party applying for permission under CPR 32.10 must apply for relief from sanction as provided for by CPR 3.9.[28]The note to the White Book at 32.10.2 states: "However, where before trial a party requests the court to exercise its powers under CPR 3.1(2)(a) to extend time for serving their witness statements, it could be argued that CPR 3.9 does not apply because at that stage the sanction imposed by CPR 32.10 has not had effect within the meaning of CPR 3.8".

CPR 3.8(1) states:

[29]If that is correct, no relief from sanction is required and I would need to consider whether it is appropriate to extend time for service and exchange of the witness statements in accordance with CPR3.1(2)(a) applying the principles of the overriding objective of dealing with the case justly and at proportionate cost. The note may be correct because the time has not yet arrived when any party is seeking to call a witness and it is not until that happens that the issue of the court giving permission also arises. It may also be correct in that the sanction is that permission is needed if a witness statement is not served in time. As such, maybe that is independent of any application under CPR 3.9.

CPR 3.8(3) states:

[30]The contrary argument is that, with the time limit having expired for the exchange of the witness statement, CPR 32.10 debars the calling of any witness to give evidence at trial unless the court gives permission. The debarring runs from the time when the time for the witness statement to be served expired and unless and until permission is granted the sanction remains in force and has effect. Relief from sanction is thereby required.[31]If relief from sanction is required, consideration needs to be given to the case of Mitchell [2013] EWCA Civ. 1537, where the Master of the Rolls gave guidance as to how the new approach to seeking relief from sanction under CPR 3.9 should be applied in practice. In para.38 reference was made to the more robust approach to rule compliance and relief from sanctions inherent in the Jackson reforms. Inpara.39 the Court of Appeal endorsed that approach. In paras.40 and 41 guidance was set out. It is worthy of reminding oneself of the context of that guidance. Paragraph 40: "… It will usually be appropriate to start by considering the nature of the non-compliance with the relevant rule, practice direction or court order. If this can properly be regarded as trivial, the court will usually grant relief provided that an application is made promptly. The principle "de minimis non curat lex" (the law is not concerned with trivial things) applies here as it applies in most areas of the law. Thus, the court will usually grant relief if there has been no more than an insignificant failure to comply with an[32]Mitchell was a case concerned with a decision to refuse relief from a sanction imposed for failure to comply with the rules on cost budgeting. The Court of Appeal case of Durrant [2013] EWCA Civ. 1624, which was reported on 17th December 2013, was concerned with a decision to grant relief from a sanction for non-compliance with an order requiring service of witness statements by aspecified date. The result of the grant of relief on the trial date itself was the loss of the trial date. The appeal was allowed and the Court of Appeal substituted a decision refusing the application for relief from sanction. The Durrant case is therefore a closer parallel to this case, save that the application for relief was on the trial date itself.[33]A similar situation came before this court in the even more recent first instance decision of Turner J. in M A Lloyd & Sons Ltd v PPC International Ltd [2014] EWHC 41 QB, which was reported on 20th January 2014. Turner J. refused relief from sanction for failure to serve witness statements in accordance with a court order. The date fixed for trial in that case was 30th January 2014. The hearing before Turner J. was not on the trial date. It was 10 days beforehand. However, the failure to serve witness statements seriously impacted upon the trial date.

CPR 3.9(1), as recently amended, states:

[34]With these procedural matters firmly in mind, I return to the factual matrix of the case. The trial window, commencing 29th April 2014, remains. Notwithstanding the purported complexity within the correspondence and the pleadings of the issues in the case, it is a confined issue and there is no reason why the trial date cannot be maintained and the trial concluded within its estimated trial period. I regard that fact as an important fact in the context of the case. It differentiates this case from the facts in both of the two very recent cases of Durrant and Lloyd & Sons.[35]I regard both parties to be at fault for what has happened. Given the ongoing disclosure problems at the time of the case management conference on 17th November 2013, those issues should have been properly addressed at that time. They were not. If specific blame were to be attached, there is greater fault on the part of the claimant's solicitors because they were the ones who were dissatisfied with disclosure. They were certainly at fault by 22nd November 2013 when they failed to make an application for specific discovery in respect of what they were claiming was inadequate disclosure by the defendants and in failing to apply for an extension of time for the exchange of witness statements by 22nd November 2013. They could have made the applications. They failed to make them. No application to extend time was made until weeks after the date had passed.[36]Their non-compliance with the order of 17th October 2013 cannot be regarded as trivial in the sense explained in Mitchell. That puts a burden on them to persuade the court to grant relief. It is argued that there was good reason for the non- compliance because of the default of the defendants. The difficulty with that submission is two-fold. First, even absent the disclosure they were seeking, witness statements could have been served and an application could have been made to serve supplemental statements in the event that they were necessary upon full disclosure being given. Second, no justifiable reason has been given for a failure to seek an extension of time prior to 17th November 2013.[37]However, the default of the claimant cannot be seen in isolation. I do not find the attitude of the defendants in correspondence to have been helpful. They have eventually given disclosure. Without in any way seeking to determine the issue of relevance in relation to that disclosure, if that was the approach to be taken it could have been taken at a much earlier stage and more swiftly than it was. The requests date back months. The disclosure is recent.[38]Most important, the order of 17th October 2013 was for the exchange of witness statements, not for sequential service as it was in the case of Lloyd & Sons. There lies a significant difference between the factual scenario in that case compared with this. As already stated, I am satisfied that the defendants were not ready to serve their witness statements on 22nd November 2013. The email of 24th January 2014 establishes it. It is a fact which is properly conceded by Mr. Deacon. The default is therefore on both sides.[39]The overriding objective requires me to deal with the case justly and at proportionate cost. The trial date remains. Both parties can exchange witness statements almost immediately, certainly within 7 days. If a relief from sanction is required, a refusal to give relief on the basis of a robust application of the new CPR3.9 would effectively mean the end of the action. In my judgment, that would be too severe a consequence and would be an unjust result when considered against the background history, as described in this judgment; default occurring on both sides; the fact that the trial date can be maintained, and there are no significant additional cost implications if, as I intend should be the case, the cost budgets are not increased. In this regard, any additional expenditure on each side is a direct consequence of their own default. The proportionate cost of the whole action is therefore not affected by a relief from sanction.[40]In these circumstances, it is appropriate to give relief from sanction and an extension of time to both sides to exchange witness statements within 7 days. In giving relief, I have not ignored the note in the White Book as to whether CPR 3.9 applies at all to this application. If I am wrong that it does apply then, by the same reasoning, it is nonetheless still appropriate to extend time for service and exchange of the witness statements within the same time period.[41]The other directions sought in the application will flow from this result and an order needs to be drawn up in accordance with the earlier agreed discussions. MR. JUSTICE GLOBE: Mr. De Gregorio, you will appreciate that in the course of that judgment I have dealt with all three issues. MR. DE GREGORIO: Yes, and I believe that ---- MR. JUSTICE GLOBE: The costs should stay as they are.MR. DE GREGORIO: Cost reserved? MR. JUSTICE GLOBE: No. I am not going to increase the cost budgets and I am not making any costs in relation to today. It seems to me that the effect of my ruling, and the basis of it, is that the action proceeds because I have extended time and given relief from sanction but each side effectively has to pay its own costs. MR. DE GREGORIO: So no order as to costs. MR. JUSTICE GLOBE: No order as to costs. MR. DEACON: My Lord, can I just have one moment on the costs issue? (After a pause): My Lord, would you hear submissions on costs? MR. JUSTICE GLOBE: Yes, I think it is only fair that I do because you may not have been appreciating that that was going to be the effect of my order and therefore you must be allowed to make submissions. MR. DEACON: It is simply on the basis that on 22nd November the claimant said that they are not going to serve witness statements and they have made the application. It was not a position that we were in that we could agree to the extension. It had to come to court. The position was that witness evidence could not be called unless this application was made. So we have in those circumstances really been forced to come to court and, in effect, we have put before the court the relevant authorities and made relevant submissions. So, in those circumstances, although your Lordship has made certain findings, this is not a situation where we have had really any option but to be here and, in those circumstances, I would submit that we ought to have our costs or at least some provision made for our costs. For example, if you will not go to the extent of giving costs of today, the defendants' costs in the case. MR. JUSTICE GLOBE: It is a valiant effort, Mr. Deacon. The answer is no. MR. DEACON: Yes, my Lord. My Lord, permission to appeal in relation to the order. Of course this is essentially a case management order, I believe, but it does raise an important point of principle in relation to the application of Mitchell. Your Lordship would understand the basis on which the appeal would be pursued, essentially the submissions I have made earlier, that the breach was non-trivial and there is no excuse, and it is really a question of whether or not the surrounding circumstance that the defendant itself did not effectively lodge its own witness statements really makes any difference.MR. JUSTICE GLOBE: I appreciate the submission and your application. I am not going to grant it. MR. DEACON: So be it. MR. JUSTICE GLOBE: Mr. De Gregorio, will you be drawing up the order? MR. DE GREGORIO: I will, my Lord, yes. MR. JUSTICE GLOBE: Are you clear about all the other terms? MR. DE GREGORIO: Yes, I believe so. (After a pause): My Lord, whilst Mr. Deacon is reviewing the order, I was just going to suggest that the parties take five minutes after your Lordship has risen outside just to check that there are no further issues in relation to the order and it can be drawn up. MR. DEACON: I do not think there are any issues. The only issue would be the cost budget but I think you have said, my Lord, that is going to be refused anyway. MR. JUSTICE GLOBE: I refuse it. It goes alongside the no order as to costs. MR. DE GREGORIO: My Lord, there was a request for a direction for permission for supplementary witness statements. I am not sure whether that has been directly addressed. MR. DEACON: We do not oppose it, my Lord. MR. JUSTICE GLOBE: What do you suggest should appear in the order? MR. DE GREGORIO: The order is that any supplementary witness statements limited to further developments or documents produced after the date in para.1, which would be 7 days from now. So it would only be if further documents emerge effectively beyond ---- MR. JUSTICE GLOBE: Yes, I am content that that goes into the order if that is by agreement. MR. DEACON: Yes. I do not oppose that. MR. JUSTICE GLOBE: Thank you.

order

for example, where there has been a failure of form rather than substance; or where the party has narrowly missed the deadline imposed by the order, but has otherwise fully complied with its terms. We acknowledge that even the question of whether a default is insignificant may give rise to dispute and therefore to contested applications. But that possibility cannot be entirely excluded from any regime which does not impose rigid rules from which no departure, however minor, is permitted." Paragraph 41: 42. "If the non-compliance cannot be characterised as trivial, then the burden is on the defaulting party to persuade the court to grant relief. The court will want to consider why the default occurred. If there is a good reason for it, the court will be likely to decide that relief should be granted. For example, if the reason why a document was not filed with the court was that the party or his solicitor suffered from a debilitating illness or was involved in an accident, then, depending on the circumstances, that may constitute a good reason. Later developments in the course of the litigation process are likely to be a good reason if they show that the period for compliance originally imposed was unreasonable, although the period seemed to be reasonable at the time and could not realistically have been the subject of an appeal. But mere overlooking a deadline, whether on account of overwork or otherwise, is unlikely to be a good reason. … If departures are tolerated, then the relaxed approach to civil litigation which the Jackson reforms were intended to change will continue. We should add that applications for an extension of time made before time has expired will be looked upon more favourably than applications for relief from sanction made after the event."

Cited in 2 later judgments