Quick updates on procedural issues for those dealing with disputes - Summer 2021
Read the full articles by clicking on the drop downs below.
PART 36 BENEFITS CAN BE REFUSED WHEN LEVEL OF DAMAGES IS ATTRIBUTABLE TO LATE EVIDENCE
The Court refused a claimant's application to recover Part 36 benefits under CPR 36.17(4) as it was "unjust" because the damages awarded bettered the claimant's Part 36 offer only because the claimant had relied at trial on evidence it had served late, without good reason.
One of the benefits of a claimant's Part 36 offer is that it can (if the claimant is awarded greater damages than it was willing to accept from the defendant in its offer) be awarded Part 36 benefits. These benefits may entitle a claimant to interest on the claim, indemnity costs and a further monetary sum. The Part 36 scheme is intended to sanction or reward parties, to encourage attempts to settle claims.
In this decision the Court held, further to CPR 36.17(3), that Part 36 benefits should only be refused (where a Part 36 offer has been beaten) where it would be "unjust" for them to be awarded. Of particular interest in this decision is that the factors the Court must consider are not limited to those listed in CPR 36.17(5), but all relevant circumstances, and those may include whether evidence has been adduced late in proceedings.
It remains the case that Part 36 consequences cannot be considered by the Court in a challenge to late evidence being adduced. The Court made clear, however, that the claimant (C) could not rely on the fact no objections were made by the defendant (D) to the evidence being introduced late, so as to deprive D from arguing that it would be unjust to award the benefits now that the impact of the late evidence is better understood. This decision emphasises the need to adduce evidence as early as possible: the costs consequences of Part 36 offers are not guaranteed.
This was a personal injury claim (relating to the death of a man who had contracted mesothelioma) in which C was awarded greater damages than they had offered to accept in a Part 36 offer made between the original judgment and subsequent appeal. C sought consequential orders under CPR 36.17(4) for (a) interest on the whole sum awarded, (b) costs on an indemnity basis from the date on which the relevant period expired, (c) interest on those costs and (d) an additional amount.
The Court had to decide whether to refuse such order based on it being "unjust". The main factual circumstance the Court considered was that C had introduced evidence shortly before the trial, without good reason. The evidence proved that the deceased would have reduced his shareholding in a business (as his involvement was set to reduce). This was to C's benefit as there was no investment income for D to offset against lost earning capacity (which there might otherwise have been). This was deemed likely to have caused the damages awarded to be greater than the amount in C's earlier Part 36 offer.
KEY LEGAL POINTS
Despite this finding, Johnson J maintained that it remains a "formidable obstacle" to show that the granting of consequential orders would be unjust (pursuant to Smith v Trafford Housing Trust  EWHC 3320 (Ch)).
The Court must consider the factors listed under CPR 36.17(5) in deciding whether it would be unjust to make the order. But all relevant circumstances are not limited to the factors listed in CPR 36.17. In this case, the introduction of the late evidence affected the quantum of the claim to C's benefit. As the possibility of Part 36 benefits was only available because C relied on evidence served late without good reason, it was deemed unjust to award them. It was not necessary for the Court to establish the precise monetary difference the evidence caused as it was sufficient that C beat their Part 36 offer by a 'relatively small proportion of the overall value of the claim' : any significant increase in the value of the claim was 'likely to have made all the difference'. It was also not necessary for D to have objected to the late evidence when it was initially introduced.
Finally, it is also worth noting that it was not relevant to consider whether making the order might result in D paying more than the amount required to compensate C for the losses sustained. The rationale for this was that such potential outcome is 'inherent in a scheme… of sanctions and rewards' and is intended to encourage early dispute resolution
ALTERNATIVE SERVICE OUT OF THE JURISDICTION
The Court held that there was a 'good reason' to permit alternative service, under CPR 6.15, on two defendants out of the jurisdiction, in Indonesia and Thailand.
When considering applications for alternative service of claims in countries which are party to the 1965 Hague Service Convention or other bilateral treaties, bear in mind that the English court is less likely to exercise its discretion, than where service is to be effected in countries which are not parties to the Hague. That is because where states have agreed by treaty how service of claims is to be effected, the English court will be slow to circumvent the treaty. This decision also looks at factors that a court will consider when deciding what amounts to a 'good reason' to allow for alternative service, in respect of a claim to be served outside of the jurisdiction, and makes clear that the court must first give permission, in principle, for the claim to be served out of the jurisdiction.
- The claimants (Cs) applied for (i) permission to serve by an alternative method, by email to the defendant's (Ds) solicitors within the jurisdiction; alternatively (ii) for permission to serve outside of the jurisdiction, and (iii) in either case, to extend the time for service.
- Pursuant to an order of Moulder J (the Moulder Order), Cs were permitted to serve D2 (Lion, a company incorporated in Indonesia) and D3 (Thai Lion a company incorporated in Thailand) by an alternative method. However, permission to serve out of the jurisdiction was not included in the Moulder Order.
- Lion and Thai Lion argued that Cs should not have been permitted to serve the claim form on them by an alternative method.
- In this application, the Moulder Order was set aside on the basis that the Court lacked jurisdiction to make an order for alternative service, without first permitting the claim to be served out of the jurisdiction. Mr Justice Henshaw held that there was a 'good reason' to permit alternative service and (if necessary) extend the time for serving the Claim Form. He granted permission for C to serve out of the jurisdiction and ordered that the steps already taken under the Moulder Order constituted good service.
KEY LEGAL POINTS
- Is the country, where service is to be effected, party to the Hague Service Convention or other bilateral treaties? Mr Justice Henshaw held that where a service convention or treaty does not apply, an alternative service order cannot subvert its provisions. Instead, the Court should consider simply whether there is a 'good reason' to allow alternative service.
- What constitutes a 'good reason'? This will depend on the facts of the case. Mr Justice Henshaw held that there was a good reason in this case to permit alternative service because:
- Lion and Thai Lion were fully aware of the claims against them and had a legal team who were fully up to speed with the litigation as a whole;
- There was no dispute that Cs would be entitled to permission to serve the claims on Lion and Thai Lion out of the jurisdiction;
- There were connections in commercial terms between the claims and parties involved in the litigation as a whole; and
- It was desirable in the interests of justice for all the claims to advance together and not to be unduly delayed.
- What should be in an order for alternative service where there is added complexity of serving outside of the jurisdiction? Pursuant to CPR rule 6.37(5)(b)(i), when making an order for alternative service, the court must also grant permission to serve a claim form out of the jurisdiction.
GETTING DOCUMENTS FROM A NON PARTY OVERSEAS - GUIDANCE FROM THE HIGH COURT
BUGSBY PROPERTY LLC V LGIM COMMERCIAL LENDING LTD  EWHC 1217 (COMM)
The High Court has given guidance on drafting letters of request to foreign courts for orders for production of documents by non- parties to disputes, and on the English court's approach to deciding whether a request is permissible.
The decision in Bugsby Property LLC v LGIM Commercial Lending Ltd  EWHC 1217 (Comm) (unrep) highlights some key considerations for parties when drafting non-party disclosure applications, (whether addressed to parties in England or overseas) including the value of the applicant offering undertaking to meet costs, particularly when the disclosure being sought could be time consuming for the third party.
This dispute relates to the sale of Olympia, an exhibition centre in West London, and the breach of an exclusivity agreement between the claimant (a bidder) ("C") and the defendant (a funder) ("D").
C argues that but for the breach it would have had a chance of winning the bid for Olympia. Although D admits to breaching the agreement they argue that C suffered no loss as the successful bidder would have still won the bid without D's financing.
C successfully applied to the court for letters of request to be issued by the English court to the relevant German courts to assist in obtaining certain documents from third parties that were relevant to a critical issue between the parties. HHJ Pelling ordered the disclosure to be subject to a tiered confidentiality club arrangement, limiting the individuals who had access to different categories of disclosed documents.
KEY LEGAL POINTS
HHJ Pelling noted out of fairness to the recipient each document sought should be individually identified or, at least, identified with sufficient certainty to leave the recipient in no real doubt what they must do (Tajik Aluminium Plant v Hydro Aluminium AS  EWCA Civ 1218).
HHJ Pelling held that:
- Where general words (such as "or other documents") were used in categories of documents sought, the applicable test was whether the general words made the class of documents "unclear, non-specific or disproportionately wide" in the context of the issues in the case and the parties to whom the request was directed;
- Each category of documents C sought went to a critical issue in the litigation: whether C's rival bidders could have been successful without funding from D. The categories, viewed in the context of the addressees, the case and the issues arising, were sufficiently particularised, especially since C could not know how the non-parties would have described the documents; and
- C's undertaking to meet such costs as the German court directed it to meet offered further, valuable protection if the document categories proved more difficult to access or more extensive than first appeared.
The Judge also noted that the ultimate arbiter of what must be produced will be the German courts who receive the letter of request. This is a point worth noting if a party seeks non- party disclosure from a foreign jurisdiction: the English court doesn't have the last word on the issue.
WITNESSES GIVING EVIDENCE REMOTELY FROM A FOREIGN JURISDICTION - HIGH COURT PRACTICE NOTE STRESSES FORMAL PROCESS
The Chancellor of the High Court has issued a Practice Note confirming the process to be followed in order for a witness voluntarily to give evidence remotely from a foreign jurisdiction to a court in England & Wales. Importantly, permission is required in a foreign jurisdiction
This Practice Note shows the High Court striving to avoid the informality that remote hearings can engender and to ensure that when evidence is given from foreign jurisdictions no local foreign law or practice is contravened. It is a requirement under the Civil Procedure Rules that the party calling a witness who will give evidence to an English court while based in another jurisdiction obtains the permission of the local foreign court, if needed, in good time and informs the English Court that permission has been obtained or is not required.
The Chancellor explains in the Practice Note that gaining permission from the local court (or other relevant authority) in a foreign jurisdiction has been an issue in a number of cases in the recent past causing unnecessary delays or disruption to trials and hearings.
KEY LEGAL POINTS
In an attempt to resolve this issue the Practice Note sets out the following points:
- In any case where there is a pre-trial review a party calling a factual or expert witness remotely should have obtained any necessary permission by the date of the pre-trial review and should inform the Court as such at the pre-trial review.
- In cases where there is no pre-trial review, a party calling a factual or expert witness remotely should have obtained any necessary permission by the time of filing the pre-trial check list and should record in the pre-trial check list that the permission has been obtained.
THE IMPORTANCE OF SERVING A CLAIM FORM ON TIME
BOXWOOD LEISURE LTD V GLEESON CONSTRUCTION SERVICES LTD AND ANOTHER  EWHC 947 (TCC)
The court refused to validate service of a claim form where the claimant had mistakenly served the claim form four days late.
The decision highlights the importance of diarising procedural time limits and ensuring they are met. Working conditions during the pandemic will not be an excuse for failing to do this. Proceedings should be served with time to spare ahead of the expiry of the claim form, especially where limitation is an issue, and junior lawyers need careful supervision when working remotely, as the Law Society has pointed out recently - here.
- The solicitors for the claimant (C) sent a letter by email to the solicitors of the defendants (D), and omitted to include the claim form.
- A week or so later, C's solicitors spotted their mistake and sent the claim form by email. D's solicitors said the claim form had not been served within the extended time period.
- C applied for relief, under CPR 3.9 and CPR 3.10, for the failure to comply with an order that had already extended the time period for service of the claim form (the Order), and applied to have the Order varied. They argued that the claim form had not been served due to COVID-19 disrupting their normal working arrangements. C's application was dismissed.
KEY LEGAL POINTS
Application under CPR 3.9
C was not entitled to rely on the court's general powers under CPR 3.9 to circumvent the specific conditions set out in CPR 7.6(3), related to extending the period for service of a claim form. The court would not have extended time for service, even if it had the discretion to do so:
Applying Denton v White, CA, 2014:
- The breach of CPR 7.5 and the Order was serious and significant. The delay of service was a matter of days rather than minutes.
- The court accepted that working remotely reduced the oversight of/ability to supervise junior practitioners. However, despite it being a genuine mistake, C's solicitors were obliged to ensure the extended deadline for service was met, particularly because limitation was a live issue.
Application under CPR 3.10
- C was also not entitled to rely on CPR 3.10 to validate its failure to serve the claim form, and circumvent the conditions for extending the period for service in CPR 7.6(3).
- C could not satisfy the conditions in CPR 7.6(3), so the court did not have the power to vary the Order.
- Under CPR 3.10, an "error of procedure does not invalidate a step taken in the proceedings, unless the court so orders". Here, service of the claim form within the relevant time did not occur at all.
- D would suffer prejudice if the relief was granted because they would be deprived of a potential limitation defence.
Application of CPR 7.6(3)
- C had made no application under CPR 7.6 for an extension of time. Regardless, the conditions under CPR 7.6(3) would not have been met because C could not establish it had taken "all reasonable steps to comply with rule 7.5" to serve the claim form within the required time period – indeed, it had not taken any steps.
LEVEL PLAYING FIELD WHEN INSTRUCTING AN EXPERT EVIDENCE ENSURES THE FAIR ADMINISTRATION OF JUSTICE
DANA UK AXLE LTD V FREUDENBERG FST GMBH  EWHC 1413 (TCC) (26 MAY 2021)
A powerful reminder from the Technology and Construction Court (TCC) that severe sanctions will be imposed on litigants who breach the requirements of CPR 35 and other direction orders. In this case defendants found themselves without expert evidence to support their defence at trial.
Experts and those instructing them need to be aware of, document, and discuss the duties of an independent expert instructed to prepare a report for exchange with an opponent and to give evidence at trial. Those duties are very clear and accessible. They are set out in the Civil Justice Council Guidance for the instruction of experts in civil claims, which is incorporated into the Practice Direction to the relevant Civil Procedure Rule (CPR 35). In this case if the expert had been aware of those duties and what they meant in practice, and if the client had understood them, the offending communication between party and expert should not have taken place.
Joanna Smith J excluded the expert evidence of the Defendant (D) because breaches of a Pre Trial Review Order and the CPR had caused an uneven playing field between the two parties.
D breached the Order by failing to provide full details of all materials provided to the experts, including lists of documents and factual information provided orally. It appeared that the experts were receiving guidance from Ds which went beyond logistical assistance; this breached the Order because parties cannot be involved in the negotiating and drafting of joint statements by experts.
In light of the numerous breaches of CPR 35 and the Order, the Court agreed with the claimant’s (C's)submission that the only appropriate sanction was to refuse permission for D’s experts to give evidence.
Joanna Smith J said that cases involving experts require lawyers to have careful oversight and control when instructing the experts to establish a level playing field. If the Civil Procedure Rules (the Rules) are flouted, the level playing field abandoned and the need for transparency ignored, the fair administration of justice is put directly at risk.
C brought proceedings against D following the alleged premature failure of pinion seals manufactured by D and supplied to C. C had fitted the seals to vehicle rear axles which it had then supplied to Jaguar Land Rover for installation into vehicles. This resulted in multi-million-pound warranty claims.
Expert evidence was due to be exchanged in February 2021, but D served theirs late. C did not object to the late service of the expert evidence provided that various aspects of the experts' report were remedied, including a failure to identify documents relied on and provide sit visit details. At the pre-trial review, O'Farrell J ordered D to provide the revised reports as a PTR order. The revised reports were served, but Cs were not satisfied that they complied with the Rules; however, Cs wrote to the Court to say they would not pursue the matter further do avoid distractions. During the trial, Cs mentioned their dissatisfaction, and the Judge ordered D's solicitors to serve a witness statement explaining the contact between the expert and D's staff. This resulted in further disclosure from D of 175 documents.
C made an application on the day 7 of the trial to exclude Ds technical expert evidence. C argued that there was a breach of the PTR Order, CPR 35 and the Civil Justice Council's Guidance for the instruction of experts in civil claims.
KEY LEGAL POINTS
Joanna Smith J held that the use of experts only works when everyone plays by the same rules. The provision of expert evidence required permission from the court (it was not an absolute right) and such permission presupposed compliance in all material respects with the rules.
It was noted that D was in breach of the 'letter and the spirit' of the Order. However, Joanna Smith J stated that - even without the breach of the Order - the breach of CPR 35 and the TCC Guide would have been sufficient to justify refusing permission for Ds to reply on their expert reports.
It is the responsibility of those instructing experts to ensure all rules and orders are complied with, and to educate their clients about the proper role of experts and their duties to the court.