The team was distracted from setting up the 1CL Wicker Man this week by a number of robust decisions from all quarters. Trower J in Mohamed v Khalil  4 WLUK 266 dealt vigorously with a dishonest Defendant; the Competition and Markets Authority finally lost patience with Teletext for failing to provide refunds for Covid-induced cancellations; Roth J in Berkeley Square Holdings v Lancer Property Asset Management Limited  4 WLUK 394 allowed without prejudice statements made in the course of a mediation to be disclosed in subsequent proceedings; and Gerald J ordered Ryanair to compensate passengers whose flights had been cancelled in the 2018 pilots’ strike. The airline had attempted to argue that the strike constituted extraordinary circumstances within the meaning of the Denied Boarding Regulations, but Gerald J was having none of it. It remains to be seen whether Ryanair appeal on the basis set out in the Advocate General’s opinion in Airhelp Limited v Scandinavian Airlines System, Case C-28/20.
Defendants and Dishonesty: Mohamed v Khalil  4 WLUK 266
The introduction of QOCS and the concept of Fundamental Dishonesty mean that, in personal injury litigation anyway, the honesty of the claimant is often under close scrutiny. However, defendants, and indeed anyone signing a statement of truth, should remember that their own dishonesty and particularly any false statement supported by a statement of truth can have serious consequences.
This was demonstrated by the recent decision of Trower J in the case of Mohamed v Khalil  4 WLUK 266. The Claimant, an Egyptian businessman resident in Cairo, brought two sets of proceedings, one in 2019 and one in 2020, arising out of a property investment agreement with the Defendant. The 2019 proceedings concerned the purchase of a property in London. The Defendant was debarred from defending both sets of proceedings and ordered to pay around £1.3 million together with indemnity costs and interest. In both proceedings the Defendant had made statements supported by a statement of truth to the effect that he did not reside in the jurisdiction but in Canada. He was said to have done so in order to set aside service, avoid the court’s jurisdiction and disrupt the proper conduct of the claims. The Claimant applied for permission to bring contempt proceedings against the Defendant for knowingly making a false statement in documents verified by a statement of truth.
The judge applied the following legal principles to the application for permission:
- The court had to be satisfied that there was a strong case that the defendant made false statements knowing that they were false.
- The court also had to consider the significance of the statement in the proceedings and the use to which it had been put.
- The alleged contempt had to be of sufficient gravity for there to be a public interest in taking proceedings in relation to it and to justify the resources that have to be devoted to them.
- The court had to guard against the risk of allowing vindictive litigants to use such proceedings to harass persons against whom they had a grievance, whether justified or not, and against the danger of reducing the usefulness of contempt proceedings if they were pursued where the case was weak or the contempt, if proved, trivial.
- However, the court should not be seen to treat the making of false statements as of little significance, thereby encouraging witnesses to regard the statement of truth as a mere formality.
In the instant case, there was a strong prima facie case that the Defendant had stated that he was resident in Canada and that those statements were false. There was a possible issue that the Defendant genuinely thought his address in England was temporary and he was entitled to consider he remained resident in Canada, but there was still a strong prima facie case that the Defendant knew the statements to be false. The judge found that the Defendant had a strong motive for making the statements and that they were intended to interfere with the proper conduct of the 2019 and 2020 proceedings, even if they failed in that object. They were of sufficient gravity to justify the resources necessary to pursue them. False statements verified by statements of truth were very serious and litigants and others should be “terrified” of the consequences if they lied to the court. The case was not weak nor the contempt trivial. While the Defendant maintained that the totality of the litigation was oppressive, the court was satisfied that the contempt application was not oppressive.
Disputing jurisdiction will of course often be an attractive course for defendants as it can lead to an early resolution of a claim without having to defend the merits. However, this case demonstrates that defendants and their advisors should carefully consider whether that is an argument open to them on the evidence, and a party should certainly never be tempted to invent that evidence. More widely, it is yet another reminder of the significance of the statement of truth and the possible consequences of making a false statement.
About the Author
Ella Davis was called to the Bar in 2013. She undertakes work in the cross border field on behalf of both Claimants and Defendants. She has particular expertise in claims involving allegations of fundamental dishonesty and has a good deal of experience in conducting trials around the issues which arise from such allegations.
Dishonesty and Disclosure: Berkeley Square Holdings v Lancer Property Asset Management Limited  4 WLUK 394
The Claimants in this case were companies who owned a portfolio of London properties worth £5 billion; the Defendants were an asset management company and its directors who had managed the portfolio pursuant to an agreement reached with the Claimants in 2005. The agreement was amended to give the Defendants increased entitlement to performance bonus payments and property management fees, and in 2012 a dispute arose over the Defendants’ entitlement, which was settled after mediation. In 2018 the Claimants issued proceedings alleging that in 2017 they discovered that the Defendants had conspired with their managing agent to perpetrate a substantial fraud on the Claimants by significantly increasing the payments due to the Defendants under the agreement and passing on those payments to a consultancy company owned by the agent for services that were never provided. The Defendants countered that the Claimants had approved the increase in fees under the agreement and had known about the payments to the agent’s company since at least 2012, as the Defendants had set out the position in that regard during the mediation proceedings. The Claimants applied to strike out the defence based on the mediation statements on the basis that the statements were without prejudice communications and were therefore inadmissible. The Defendants responded that the statements fell within one or more of the exceptions to the inadmissibility rule, and they applied to amend their defence to make further arguments on that basis.
Roth J refused the Claimants’ application and granted the Defendants’ application.
He held that the Defendants’ mediation statements were admissible either under the misrepresentation/fraud exception, properly interpreted, or by reason of a small and principled extension of it to serve the interests of justice. Given that antecedent negotiations could be used by a claimant to prove a misrepresentation and thereby rescind an agreement, it was illogical to argue that they could not be used by a Defendant to disprove a misrepresentation and thereby uphold an agreement. In a rectification dispute, the without prejudice negotiations were admissible to determine the true agreement reached by the parties and whether it was properly reflected in the resulting contract. In the instant case, the mediation papers were being looked at to determine the facts of which both sides were aware, on a dispute as to whether the agreement concluded was made in ignorance by the Claimants of certain key facts. Further, there was no conflict with the fundamental principle that parties should be encouraged to speak freely in negotiations, without concern that it might be used against them in litigation, since the Defendants were seeking to adduce evidence of what was said by themselves, and not by the Claimants.
Furthermore, if it had been necessary to decide, the judge found that the Defendants’ statements would have been admissible under the exception set out in Muller v Linsley & Mortimer  11 WLUK 417. A fundamental issue in the trial of the claim would be whether the Defendants had acted dishonestly. The Claimants could not fairly advance a case based on ignorance while excluding evidence that they were told of the facts some five years earlier. Justice demanded that the defendants’ statements should be admitted, therefore.
About the Author
Called to the Bar in 1997, Sarah Prager has been listed in the legal directories as a Band 1 practitioner in travel law for many years. Together with her colleagues at 1 Chancery Lane, Matthew Chapman QC and Jack Harding, she co-writes the leading legal textbook in the area, and has been involved in most of the leading cases in the field in the last decade. She was recently named Best Lawyers’ Travel Lawyer of the Year 2020/2021 and the Lawyer Monthly Women in Law Awards 2020: Personal Injury.
We were intrigued to read the comments of Sir Colin Birss, Deputy Head of Civil Justice and a Court of Appeal judge, who has said that he expects every civil case to be started and managed online within five years, rendering it ‘impossible’ for parties not to comply with many of the Civil Procedure Rules. He anticipates that lawyers’ in-house IT systems will liaise directly with the court system, seamlessly updating it instantly on case developments. Sir Colin also believes that machine learning and natural language processing will allow the court IT system to monitor cases constantly and choose ‘an appropriate moment’ to suggest alternative dispute resolution to the parties.
“We all need to engage. Otherwise we risk a dystopian cyberpunkesque court future,” he concluded, which put paid to our nascent objections that no major government IT project has ever actually worked as intended, and that’s without the complications arising from interface between the court system and individual firms’ IT systems. The trouble, we venture to suggest, is that there is something of a gulf between the Skynet envisaged by enthusiastic proponents of automating justice, on the one hand, and the Swiss Family Robinson nature of the reality, on the other; an expectation gap partly, but not wholly, explained by lack of proper funding. Still, no one wants to see litigants running amok in the sacred halls of the Royal Courts of Justice, Mad Max style, so we at 1CL will be rolling up our sleeves and engaging like crazy with these exciting developments. We trust we can rely on your support when we roll out the 1CL Litigator L-800.