Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
MR JUSTICE WARREN
Between :
MARINE RESCUE TECHNOLOGIES LTD. (1) DAVID MARSHALL RESCUE CONCEPTS LLC (2) | Claimants |
- and - | |
MICHAEL BURCHILL (1) COMMERCIAL FINANCE (UK) LIMITED (2) SEA MARSHALL RESCUE SYSTEMS LTD (3) | Defendants |
Between | |
COMMERCIAL FINANCE (UK) LIMITED | Part 20 Claimant |
and | |
MARINE RESCUE TECHNOLOGIES | Part 20 Defendant |
Mr Richard Edwards (instructed by Mishcon de Reya) for the Claimants
Mr Michael Burchill (the 1st Defendant) appeared in person
Hearing date: 27th July 2007
Judgment
Mr Justice Warren :
Introduction and background
This is an application by the Claimants to re-instate their action against Mr Burchill and the corporate defendants. The action was – or at least may have been, a matter to which I will come – struck out as a result of an “unless” order made by me on 19 February 2007.
The action was commenced as long ago as September 2001 with additional claims being added in 2003. I have already delivered two judgments on interim applications. I refer to those judgments, without repeating their contents, for the history of the action.
The first of those interim applications in time was an application by the Defendants to strike out the proceedings (a) pursuant to the court’s inherent jurisdiction (b) under CPR 3.1(2) and (c) under CPR 3.4(2). The application was, essentially, based on the proposition that there had been such delay on the part of the Claimants in prosecuting the claim that it was no longer possible to have a fair trial; alternatively, it was said, as I understood the position, that even if a fair trial was possible, the delay was such as to allow the action to proceed would be an abuse of process, especially given that there had been a failure to comply with court orders. It was accepted by Mr Edwards who appeared on behalf of the Claimants – he could hardly have contended otherwise - that matters had not moved as fast as they might and that, so far as concerns one period of delay of 6½ months, his clients were really to blame. However, for the reasons given in my judgment, I reached the clear view that this was not, then, a case for strike-out for delay or abuse of process. That the application was made, however, was a clear indicator by Mr Burchill that he considered the Claimants should now get on with the action and that he was no longer prepared to “let sleeping dogs lie” and thus be unable to rely on any further delay on the part of the Claimants. I delivered judgment on 15 February 2006.
The second of those interim applications in time was one by the Defendants for specific disclosure. I delivered judgment on this application on 16 December 2006. Although I dismissed the application for specific disclosure as requested in the application, it did seem to me on the material before me that there were inadequacies in the standard disclosure given. In particular, it seemed possible, to put it at its lowest, that not all of the relevant documents may have been looked at in relation to the chain of title of certain intellectual property rights. Further, and surprisingly to my mind at the time and now, the List of Documents contained no entry for documents that were but are no longer under the control of the Claimants. I also noted that the only location which had been searched was the Deep Business Centre, Tower Street, Hull, business premises of the Claimants. The hearing before me had illuminated to some extent the case which Mr Burchill was running and that issues were live which had not been appreciated as live by the Claimants up to that time. I said that there might be relevant documents to be found elsewhere than at the Deep Business Centre.
I decided that the way forward was to give a further opportunity to the Claimants to address the question of standard disclosure pursuant to CPR Part 31 without needing at that stage to make any further specific order in relation to any specific classes of documents. I expressly referred to CPR 31.7 saying this:
“In particular, they must bear in mind CPR31.7, which is the duty to search and to provide in the list an indication whether they have not, in fact, searched for a category or class of document on the grounds that to do so would be unreasonable. I make that observation because in the witness statement in opposition to this application there has been reference to thousands of documents, the implication being that they are either all irrelevant or that a search of them would be disproportionate. I do think that it is incumbent on the claimants to explain whether they have been searched and are not relevant or whether they have not been searched because a search would be disproportionate.”
I went on to say that if Mr Burchill was dissatisfied with the standard disclosure resulting from this requirement that the solicitors for the Claimants reconsider the issue of standard disclosure, it would be open to him to make a further application.
In this context, it should be noted that the principal individuals concerned on the Claimants’ side are Mr and Mrs Marshall. Quite properly and sensibly, at the hearing before me, Mr Edwards did not take any point about the distinction between the companies and Mr and Mrs Marshall. In other words, it was not the Claimants’ position, as articulated by Mr Edwards, that the Defendants would need to make a third party disclosure application against Mr and Mrs Marshall. However, he had no instructions to that effect and was unable formally to concede it. Accordingly, in my judgment I said this:
“If the claimants are going to take a point about the distinction between themselves on the one hand, and Mr and Mrs Marshall, on the other hand, with the result that disclosure of documents that might be relevant is not dealt with on the footing that they are not and never have been under the control of the claimants but are under the control or have been under the control of Mr and Mrs Marshall, they should - and I direct that this be done – in the supplemental disclosure that they give, expressly explain the position, so that Mr Burchill will have the opportunity to take whatever steps he thinks appropriate to obtain disclosure from the individuals.”
No such point has been taken. In the hearing before me on the present application, Mr Edwards accepted that, in the result, documents under the power, possession and control of Mr and Mrs Marshall are to be treated as under the power possession and control of the Claimants.
I directed that standard disclosure be given by 19 January 2007. This has been described as the reinstated standard disclosure order since it merely repeated an order for standard disclosure which had been made by Patten J in 2004. No further disclosure was given by 19 January. It appears that the partner, Mr Davis, dealing with the case at the Claimants’ solicitors, Mishcon de Reya, had fallen ill before Christmas. He did not recover fully until the end of January although he did return to work in the New Year. Even though he was back at work in the new year he did not, as he accepts, give this matter the attention which it should have had; he does not blame it all on his illness for he says that “in part because of my illness, I did not pay sufficient attention to my work…” but he does not explain what other reason there was for his inattention. He had certainly not made alternative arrangements for ensuring that this piece of work was carried out in accordance with my direction.
Mr Burchill, for whom the issue of disclosure had been a bone of contention for a considerable time and not wishing to be accused of dilatoriness himself, wrote to Mr Davis on 31 January 2007 asking for dates on which he might be available for an application for the Claimants to provide standard disclosure. On 9 February, Mr Burchill issued an application for that purpose with a return date of 19 February. On 16 February, Mr Davis wrote to Mr Burchill consenting to the application in principle but asking for 14 days rather than the 7 days specified in the application. Mr Davis did not attend the hearing on 19 February, thinking, he says, that Mr Burchill would show his letter the court which would give the 14 days requested.
In fact the court, in the person of myself, did give 14 days to comply with the order which I had made in December: my new order was an “unless” order which would result, if not complied with, in the automatic strike out of the Claimants’ claim.
On 1 March 2007, Mischons wrote to Mr Burchill. Mr Burchill says that this letter was never received and that he did not see it until a copy was sent which he received on 9 March. The letter stated that “any further search of documents would, as has already been explained both in evidence and in court, be both unreasonable and disproportionate for our clients to make”. Mischons enclosed copies of the original lists and saying “…we hereby re-serve [the lists]…..”, adding in the last paragraph that as I had mentioned “…if you are dissatisfied by the disclosure, it is open to you to make a further application”.
As to the evidence just referred to, the only evidence, as I understand it, is a short passage in Mr Marshall’s evidence which is directed at Mr Burchill’s request for disclosure of correspondence between Mr Marshall and a Mr Fidlon which he, Mr Marshall, considered to be irrelevant. He saw Mr Burchill as being on a fishing expedition seeking to see “thousands or irrelevant documents” and asking the defendants “to produce ten thousand documents so that he can look through them”. There is nothing to suggest that a search for documents other than at Deep Business Centre would be unreasonable – a reasonable search does not mean that every document must be read when it is clear from the nature of a file that its contents are irrelevant.
It is clear that the letter of 1 March did not contain a disclosure statement. A statement was subsequently provided, but not until 15 March.
On 5 March, Mischons wrote again further to their letter of 1 March, suggesting a timetable for directions. On 6 March, Mr Burchill sent an email to Mr Davis stating that there had been no reply to various letters and emails and no compliance with my order dated 19 February. It is clear from that email, I think, that Mr Burchill had not received the 1 March letter nor, by then, the 5 March letter. He says that he never has received the original 1 March letter.
The next letter, dated 8 March 2005, came from Mr Burchill to the directors of the first Claimant. He indicated that enforcement of a costs order was being vigorously pursued; he invited proposals for settlement of the second Defendant’s counterclaim indicating that it would be pursued absent any settlement. He concluded by stating that he would in touch “shortly with a breakdown of costs in relation to defending the ‘struck out’ claim…”.
On 8 March, Mishcons wrote to Mr Burchill in response to his letter to the directors. They enclosed copies of their letters dated 1 and 5 March. Mr Burchill acknowledged this letter on 9 March. At some stage, Mr Burchill received the original letter dated 5 March, but it is not clear when. What came to him through the post were two envelopes, one A4 and one half that size. It is fair to infer that the larger one contained the letter dated 8 March with its enclosures. The other, smaller, envelope was not stamped. Mr Burchill had to pay the postage and a handling fee. It is fair to infer that this envelope contained the letter dated 5 March. Mr Burchill says that he has never received the letter dated 1 March and its enclosures. It is at least possible that it was never posted or, if it was posted, that it was not properly stamped.
If it was not posted or properly stamped, Mr Edwards submits that this is just the sort of mistake in relation to which relief from sanctions should be given. It is, I agree, an important factor in the exercise of the discretion to grant relief from sanctions, and I shall take account of it when going through the factors of which account must be taken under CPR 3.9.
But there is a prior point which is whether there has been a failure to comply with my “unless” order in the first place. In relation to that, Mr Edwards suggests that the order was complied with, albeit perhaps inadequately so that Mr Burchill’s correct course is to seek specific disclosure. Mr Edwards says that disclosure was given (a) in 2005 and (b) by the letter dated 1 March.
I ought at this stage to say something about the requirements of CPR 31 in relation to the separate matters of disclosure and inspection.
First, it is to be noted that a party discloses a document by stating that the document exists or has existed: CPR 31.2.
A party is entitled to inspect a disclosed document unless it is no longer in the control or the party disclosing it. If a party considers inspection would be disproportionate, he may withhold inspection but must state as much in his disclosure statement: CPR 31.3(2).
The scope of documentation which has to be given under standard disclosure is set out in CPR 31.6.
When giving standard disclosure, a party is required to make a reasonable search for documents falling within rule 31.6(b) or (c): CPR 31.7(1). The factors relevant in deciding the reasonableness of a search include the matters set out in rule 31.7(2). And where a party has not searched for a category or class of document on the grounds that to do so would be unreasonable, he must state this in his disclosure statement and identify the category or class.
The procedure for disclosure is set out in CPR 3.10. Each party must make and serve a list on the relevant practice form. The list must include a disclosure statement: see rule 31.10(6). The statement must set out the extent of the search that has been made to locate the documents.
The order which I made in December 2006 was for standard disclosure. In my judgment, it is clear that that order implicitly requires disclosure to be given in accordance with the procedure set out in CPR 31.10. It would not be compliant with that order for the Claimants to provide a list of documents other than on the practice form and without a disclosure statement. The same applies to the “unless” order which I made. Accordingly, even if the list was served on 5 March (having been posted by first class post on Thursday 1 March), my order was not complied with and, subject to one point, the action was automatically struck out.
The point just mentioned is this. The Claimants considered, according to the disclosure statement which was eventually provided (and which is acknowledged to have been provided too late to save the day for the Claimants), that the disclosure given in 2005 was in fact adequate: not a single new document was included in the list. Accordingly, Mr Edwards submits that there has been disclosure and that my order has been complied with, albeit that Mr Burchill is still able to point to inadequacies in it. For instance, he might say that a search has (still) not been carried out at Mr and Mrs Marshall’s home and that the appropriate order for Mr Burchill now to obtain is an order that such a search is carried out; if and when he seeks that order, the Claimants would be able to argue that such a search was unreasonable so that no order should be made.
I can perfectly well see that, if an “unless” order had not been made, the Claimants might well say that they had already given full disclosure and that no new list or disclosure statement was necessary. Strictly, I do not think that that would be compliance with the order to give standard disclosure but it might be thought to serve little purpose to force the Claimants to serve the same list and the same disclosure statement again. Faced with that, Mr Burchill could then make an application for a direction that the Claimants search the Marshalls’ home, in the course of which the Claimants would be able to argue that such a search is unreasonable.
Unfortunately for the Claimants, there was an “unless” order. Non-compliance with that order had an automatic consequence. In my judgment, the Claimants cannot rely on either the disclosure given in 2005 (including the disclosure statement at that time) or the service of lists by the letter dated 1 March (assuming it was sent by first class post) as compliance with the “unless” order. In my judgment, the claim was struck out automatically on 5 March. The question then is whether it should be re-instated.
In the exercise of my discretion, I must include consideration of each of the factors set out CPR 3.9. Before I do so, I think it is important to bear in mind the reason for making a further standard disclosure order in December 2006. I made the order because I had concerns about the adequacy of the disclosure which had been given as set out in my judgment of 16 December 2006 and briefly summarised above. It was made also to give the Claimants the opportunity to consider whether they should search for documents other than in the Deep Business Centre. It is clear from the new disclosure statement (and is confirmed by Mr Edwards) that no search was made of other premises and, in particular, not of the Marshalls’ home. Notwithstanding the opportunity given, notwithstanding Mr Burchill’s constant complaints and notwithstanding my own concerns, not only has no search been made but no evidence whatsoever has been given (apart from the short passage from Mr Marshall’s evidence already mentioned) about why no search has been carried out. Nor do I understand, even on instructions, why it was not carried out. It is clear from Mr Marshall’s own evidence that he frequently worked from home and that he did a substantial amount of work on his laptop (again not searched). It is clear that the Claimants kept back-up tapes of their computers and carried out a substantial amount of email correspondence. None of this has been searched and no attempt has been made to explain why such a search would be unnecessary (because only irrelevant material could be expected to be found on them) or would be unreasonable.
Turning to the facts in CPR 3.9:
The interests of the administration of justice. It is, of course, the case that the courts now expect parties to get on with their cases and that unreasonable delays are not acceptable. I have already described many of the delays in my judgment on Mr Burchill’s strike-out application. The fact that a delay is not sufficient to justify the strike out of a claimant’s case does not mean that that delay is to be ignored when, the action having been struck out, the claimant seeks to re-instate. The interests of justice require that the effect which the conduct of a case has on other litigants in other cases to be taken into account. I do not, of course, place the whole of the blame for the delay in these proceedings on the Claimants, but it would be idle to suppose that they have not been responsible for some of it.
Deliberate breach of court orders was considered under this head in Stolzenberg v CIBC Mellon Trust Co [2004] EWCA Civ 827. I will consider this aspect under paragraph c below.
I note that Mr Burchill submits that the present case has been a matter of controversy in the press and is being widely used as an example of the delays still possible: there is a risk that public confidence in the administration of justice will be shaken. I do not take any account of what has appeared in the press which seems to me to be irrelevant. The interests of justice require, of course, that there should be public confidence in the administration of justice. I do not need any persuading that serious and contumelious delays, if left without the imposition of sanction, might undermine that confidence. But this is not a case where the delays, taken in the context of the actual conduct of the case, are so long as to lead to only one result, namely to leave the matter struck out. The delay is, however, a factor which I take into account.
Whether the application for relief has been made promptly. The application clearly was made promptly.
Whether the failure was intentional. In the present case, the failure being referred to in rule 3.9(1)(b) is the failure to comply with the “unless” order. It is clear that Mr Davis knew about the “unless” order. He may have thought that the letter of 1 May was sufficient, although he now accepts that a fresh disclosure statement was required. I do not consider that his conduct was a deliberate flouting of the order. He did not, I am sure, say to himself “This order requires a fresh disclosure statement but I am not going to arrange for my clients to give one”; and the Claimants themselves obviously relied on him for advice. Nonetheless, the disclosure statement was, in my opinion, very important since it is that document which commits the Claimants to the list provided as being full disclosure in accordance with the court order. There would be serious sanctions if the statement had been made knowing it to be untrue. So, although the failure was not intentional in the sense that it was a deliberate flouting of the order, it was a failure of substance and not a merely formal failure.
Whether there is a good explanation for the failure. Mr Davis is frank about his responsibility for the failure. There is no good explanation in the sense that the Claimants were somehow prevented by unforeseen circumstances from providing disclosure. Mr Davis does not really have an explanation at all other than that the letter of 1 March was thought to be enough. Mr Edwards says that Mr Davis’ explanation is better than no explanation at all: Mr Davis takes responsibility. Mr Davis should, it is submitted, be given credit for that. I do, of course, give him credit personally for being straightforward. But it is not an excuse for non-compliance with the order. I do not have any idea why the matter was left to the very last moment especially as no additional disclosure was to be given. No doubt there are issues of privilege which would prevent him giving a full explanation, particularly in relation to what searches he advised should be carried out and when that advice was given.
The extent to which the Claimants (not the Defendants) have complied with other rules and orders. The Claimants have not breached any orders since the strike-out application; prior to that there was a period when both parties ignored directions about exchange of witness statements. I attach very little weight indeed to that.
Whether the failure was caused by the party or his legal representative. It can be seen that the failure can probably be laid at the door of Mr Davis. I say probably, because there is no evidence about what the Claimants were advised. Mr Davis’ evidence shows why the disclosure and disclosure statement came late but it does not explain why it is considered that it is properly so restricted. I have read the Note at CPR 3.9.2 at page 117 of the White Book (2007) and referred to the cases there cited. I do not attach much weight to the fact that the fault is that of Mr Davis rather than his clients. The clients knew, or ought to have known, that they had to comply with the order and of the consequences if they did not. This, it seems to me, is the sort of case where the client cannot escape the consequences of his own adviser’s shortcomings.
Whether the trial date can still be met if relief is granted. No trial date has been fixed so this factor does not arise. However, a related consideration is the effect that the failure has had on the overall trial timetable. The failure to comply with the “unless” order has resulted in a delay from 5 March to the date of this judgment. It is no answer to that delay to say that, if the Defendants had not opposed the granting of relief, the action would probably have been reinstated in March and virtually no time would have been lost. I take account of this additional delay in the exercise of my discretion.
The effect of the failure to comply on each party. Mr Burchill has given evidence about the devastating effect that this litigation has had on his health and his finances. I have no doubt that he has been under great stress and it may be that this has contributed to or even been the major cause of health problems. That, however, is a consequence of the whole litigation. I cannot begin to say the extent to which that sort of stress has been exacerbated by the delays in this action (for not all of which the Claimants are responsible). Further, this aspect has not been made worse by the failure to comply with the “unless” order save as to the extent that there has been an additional delay from 5 March to the date of this judgment and the additional worry caused to Mr Burchill by this application. There does not appear to me to be any effect on the Claimants of their own failure which needs to be taken into account.
The effect which granting the relief would have on each party. The effects seem to me to be limited to these. First, there is the obvious effect of enabling the Claimants’ claim to proceed to trial and thus enabling justice to be done on the facts as between the parties. Secondly, there is the obvious effect of depriving the Defendants of having the claim struck out. This carries in particular the advantage for him that it eliminates the constant, and he says damaging, interruption of his work in Kiev. Thirdly, the Defendants will need to bring yet further disclosure applications to require a search of the Marshalls’ home and the equipment which I have mentioned. They would be no further on in relation to disclosure than they were in December.
Apart from delay generally, which I have dealt with, and the effect of this litigation of Mr Burchill’s health, no other factors other than those which I have just dealt with have been put forward as relevant for consideration.
The purpose of the “unless” order was to ensure compliance with the disclosure obligation on the Claimants. Mr Edwards says that the order, albeit belatedly, has had that effect since there is now a list and a disclosure statement and that his clients should not be shut out simply because they were a few days late. It would be disproportionate not to reinstate the action. I would have some sympathy with that submission were I satisfied that standard disclosure had been properly given. I can see, also, that, had the list and the fresh disclosure statement been provided by the end of February, there might have been strict compliance with the “unless” order; and this might well be so even if, following an application by Mr Burchill, the Claimants were ordered to conduct a search of the Marshalls’ home, Mr Marshall’s laptop and the Claimants own servers and tape back-ups.
But whether there would have been strict compliance had the list and disclosure statement been served in time is not, to my mind, the important point. If the Claimants are to have relief from sanctions, I consider that they need to show me that the standard disclosure exercise has been properly conducted. As I have said already, the order which I made in December 2006 was designed precisely to allow the Claimants to correct any inadequacies in their disclosure. They have failed to search the Marshalls’ home and the equipment which I have mentioned. They have failed to explain, in their evidence for relief from sanctions, why searches of the home and the equipment would produce only irrelevant material or would be unreasonable. And yet, prima facie, one would expect that relevant documents might well be found at the home and on the equipment but they have not been searched to see whether this might be so. As I said in my judgment on the disclosure application:
“I do think that it is incumbent on the claimants to explain whether [the documents] have been searched and are not relevant or whether they have not been searched because a search would be disproportionate.”
No such explanation has been given.
In all of these circumstances, I decline to grant the Claimants the relief which they seek. In reaching this decision, I have taken into account all of the factors which I have listed above, but the most important factors are (a) that there has been a complete failure to search the Marshalls’ home, Mr Marshall’s laptop, the back-up tapes and the email servers and (b) there is no explanation of why to do so would be unreasonable. I can see that, in relation to back-up tapes and email servers, the required search might be disproportionate. But in relation to the home, and to a lesser extent, the laptop, I would have thought that there may very well be relevant documents and, in the absence of any evidence to show that any sort of search would be unreasonable, it does not seem right to me to grant relief. As I have said, a search does not require each and every document to be looked at. The labelling of a file may show that it would be pointless to go through it; in that case, the correct approach is not simply to refuse to conduct any search, but to identify the file and so say it has not been searched. But that has not been done. So far as I am aware, there has been simply no search at all.
I have also taken into account Mr Edwards’ submission that the second defendant’s Part 20 claim will proceed in any case, so that litigation will proceed even if the claim is not reinstated. That, however, is not relevant to the position of Mr Burchill personally or that of the third defendant. I have serious doubts as to whether the Part 20 claim will in fact proceed if the claim is not reinstated.
There is one other matter raised by Mr Burchill. It appears that the Claimants and/or Mr Marshall have available to them the records of US court proceedings which Mr Burchill says are, or may be, relevant to the devolution of the ownership of the IP rights. These have not been disclosed. It may be that the Claimants consider they are irrelevant and have declined to disclose them on that basis. The failure to disclose forms no part of my decision.
Moreover, I do not consider that I should permit the Claimants to adduce further evidence to show that these searches would all be unreasonable; nor should I give them a further opportunity to conduct further searches.
Accordingly, I dismiss the Claimants application for relief from sanctions. In the light of Mr Burchill’s commitments overseas, I propose to hand down this judgment without requiring the parties to attend. I will deal with costs on a separate occasion if the parties cannot agree.