Grammer v Webster & Ors

The applications before me seek a determination that Anthony Webster (“Mr Webster”) is debarred from taking any further part in these proceedings following his failure to comply with unless orders relating to disclosure. Mr Webster denies any failure to comply, and seeks relief from sanctions if such failure is established. The Claimant, David John Grammer (“Mr Grammer”) opposes the grant of relief against sanctions. In the alternative, he says, if relief is granted, it ought to be on terms requiring Mr Webster to pay outstanding costs orders.

Mr Grammer has sued, amongst others, Mr Webster in relation to a property known as Ivy House Farm (“the Farm”). Mr Webster is the First Defendant. His brother, Heath Webster, is the Second Defendant.

On 11 May 2009, I made an order at trial, following the abandonment by the First and Fourth Defendants of their respective defences. The Second Defendant did not defend the claim, and was debarred from doing so.

The Order amongst other things declared that the freehold of the Farm was held by Mr Webster and his brother upon trust for themselves and Mr Grammer in equal one-third shares. Mr McNall (for Mr Grammer) had to persuade me (which he did) that it was appropriate in the absence of a full trial to grant declaratory relief in the light of the Court of Appeal’s guidance in Animatrix Ltd v O'Kelly [2008] EWCA Civ 1415.

I also made an order for the trial of various other issues. This is referred to in the Order in places as “the Quantum Trial”, though this is not an apt description, as issues other than quantum remain. Elsewhere in the Order, it is described as “the Second Trial” which is a more apt description.

The matters reserved to the Second Trial were identified as follows:-

I shall refer to these 5 issues as (respectively) the dealings point, the damages point, the tenancy point, the sale point and the partition point.

On the same occasion, I also made an order for disclosure in the following terms:-

“By no later than 4pm 15June 2009 the Claimant and the First and Second Defendants shall each properly comply with their obligation to make ongoing disclosure in respect of their trusteeship and management and control of the Farm since 18 December 1996, and their dealings with it, including but not limited to specific disclosure of the following categories of documents:

1.

all documents relating to the use of the Farm or any part of it as security for an advance to them or to a company under their control of approximately £1.1 million in or about November 2002, the subsequent application of those moneys, and the profits therefrom;

2.

all documents relating to the sales, dispositions of, or other dealings with the Farm or part of it;

3.

all communications with the Environment Agency or any other statutory or regulatory bodies regarding the use and/or despoliation of the Farm or any part of it;

The Claimant and the First and Second Defendants shall make such disclosure by each filing and serving a Disclosure List in Form N265, verified by a Statement of Truth, and providing copies of all documents disclosed.”

I also gave directions for the service of further pleadings and expert evidence by single joint experts, one environmental and one a valuer. Pleadings would be closed by August 2009, the expert evidence would be complete by September 2009 and witness statements were to be exchanged by the end of that month. The Second Trial was then to be listed before a Judge for 2 days on the first available date after 1 October 2009. The 2 day estimate was the parties’.

It is on the face of it odd that the timetable should start with disclosure before pleadings, followed then by expert evidence and witness statements (in that order). There had however already been standard disclosure prior to the first trial, and the structure of the timetable regarding the Second Trial was agreed between the parties.

There has been considerable slippage in the timetable, and the volume of material that has been placed before me on interlocutory applications alone gives me considerable misgivings over the 2 day estimate. Given the number of separate issues still to be addressed, the estimate seems to me to be unrealistic.

Many but not all of the delays have been in relation to disclosure. Mr Grammer served a list on 12 June 2009, though for some reason he did not search for documents pre-dating 2007, despite the reference in the Order to 1996. I should explain that although the Order referred to the continuing disclosure obligations of the parties arising from their trusteeship and management and control of the Farm, Mr Grammer was not a trustee, though he had been involved in its management. Mr Webster’s case is that Mr Grammer was in occupation of the Farm until 2007.

Mr Webster and his brother did not initially comply with the disclosure order at all, and on 10July 2009, I made an Order debarring each of them from taking any further step in these proceedings unless they complied with my previous order as regards disclosure and inspection by no later than 24 July 2009. Mr Webster appeared in person at the hearing, as did his brother, which coincided with Mr Webster’s then solicitors ceasing to act. It appears that those solicitors (The Smith Partnership) are or were owed substantial sums by Mr Webster, and they have exercised a lien over the papers, which has not assisted the disclosure process.

Mr Webster, in purported compliance with the Unless Order, served a list of documents in time, apparently based on an earlier list prepared by or with the assistance of The Smith Partnership. His brother made no attempt to comply with his disclosure obligations and has been debarred in consequence.

Also on 10 July 2009, I appointed 2 named individuals as joint experts, requiring Mr Grammer’s solicitors to instruct them by no later than 24 July 2009. This requirement appears to have been overlooked thereafter, and was subsequently varied in November 2009. Other aspects of the timetable were put back, so that no trial could be listed before November 2009. The time for service of the further pleadings required by the May Order was not addressed afresh at this stage. The time for service of Points of Claim had by then expired without any Points of Claim being served.

Mr Grammer was dissatisfied with Mr Webster’s purported compliance with his disclosure obligations and applied back to me for amongst other relief a formal determination that Mr Webster and his brother were debarred, or (if they were not) for security for costs, praying in aid their failure to comply with previous orders for the payment of costs and other monies.

A major plank of Mr Grammer’s complaint was that there had been inadequate disclosure relating to the application of the advance of approximately £1.1 million referred to in the May Order, and the profits made therefrom. A witness statement of his solicitor, Mr Oliver Wilson, dated 14 October 2009 stated that Mr Grammer intended to apply for orders for non-party disclosure. He also stated that the £1.1 million was invested in property development believed to have yielded at least £1 million profit for the Webster brothers. Mr Grammer claims “disgorgement” (as it is now put in his Points of Claim) of the whole of the alleged profit, or his one-third share.

In his witness statement in answer in November 2009, Mr Webster (who had the assistance of new solicitors at this time) asserted that the Farm was not used as security for an advance of £1.1 million, and produced documentation relating to a 2004 advance to Webster Bros. Commercial Limited of £1.125 million secured on other land. This was not the advance referred to in the May Order, but a different advance. The May Order referred to a 2002 advance, and the evidence shows that there was, contrary to Mr Webster’s evidence, such an advance, of £1.062 million secured on the Farm, which was made by Abbey National. However, the May Order did not in terms specify Abbey National, or the precisely correct amount.

Mr Webster has subsequently explained and now pleads (if I have understood the Amended Points of Defence correctly) that the Abbey National advance was merely refinancing existing borrowings, being or including borrowing for the parties’ joint benefit, in which Mr Grammer acquiesced (though it is not said how) and has been repaid at no cost to Mr Grammer. It is possible that the reference in Mr Wilson’s statement to investment in property development may have had the effect of concentrating Mr Webster’s mind on the loan which was used for that purpose if (as he appears to be saying) the Abbey National advance was not. It is also possible that, following the repayment of the Abbey National advance, he forgot about it, or did not appreciate its significance. So far as the point may be relevant on the present applications, I cannot infer as the evidence stands and without cross-examination that Mr Webster was deliberately holding back, or being disingenuous in his witness statement. Nevertheless, disclosure in relation to the Abbey National advance should have been given.

The matter came before me on 20 November 2009, when Mr McNall drew attention to Mr Webster’s failure to deal with the material advance, either in his list or in his witness statement. I took the view that the disclosure list represented a genuine albeit insufficient attempt at compliance (as contrasted with the previous position, when there was no list at all). I also considered that it was necessary to specify precisely what advance was being referred to in the May Order, as an unless order cannot take effect unless there has been non-compliance, for which purpose the unless order needs to be clear. I accordingly made a further Order varying the material part of the May Order so as to provide that Mr Webster should also specifically disclose all documents “dealing with an advance of £1.062m from Abbey National, and the alleged discharge of existing indebtedness with any or all such moneys, including but not limited to all bank statements”. I also extended time for compliance with the Unless Order of July 2009 to 6 January 2010.

The effect of the November Order was therefore that Mr Webster was not debarred, but he remained at risk of being debarred in the event of non-compliance by 6 January 2010. The debarring order had the potential to take effect (subject to any application for relief from sanctions) without further order, as explained in Marcan Shipping (London) Ltd. v Kefalas [2007] EWCA Civ 463, in particular at [34]. It may be that the strictly correct position is that Mr Webster was debarred by the time the matter came before me in November (assuming the previous orders were sufficiently clear as to what was required to be done) but that the extension of time I then gave operated as a relief from that sanction, which remained alive in the event of continued non-compliance by 6 January 2010.

It is clear from a completion statement in relation to the Abbey National advance that the monies were disbursed to a number of accounts of or connected with Mr Webster and his brother, or in one case their mother. Documents relating to that advance were in the possession of The Smith Partnership, Mr Webster’s former solicitors, who were by November 2009 exercising a lien. The evidence shows that The Smith Partnership had a large number of documents, said to fill a room. It was not clear in November 2009 precisely what they had relating to the Abbey National advance. It appears to have been assumed (or at least hoped) that they would have all relevant documents, including bank statements. In fact, they had some relevant bank statements, but not (apparently) all relevant statements, or, if they had, they had not been revealed at the time of the hearing before me. Mr Webster’s new solicitors have now had access to The Smith Partnership documents, though the access they were afforded was initially limited. Mr Webster has not himself retained documents relevant to the Abbey National advance. To the extent, therefore, that they were not held by The Smith Partnership, he would have to obtain the documents from elsewhere. It was common ground before me that, to the extent that the Bank retained or was able now to reproduce bank statements, Mr Webster would have power, either as an account holder or as a director of any company whose accounts were relevant, to obtain copies, and his disclosure obligations would extend to obtaining such copies. However, some of the transactions go back many years, and the records may no longer be available. In that event, Mr Webster’s obligations would not extend to obtaining copies of documents which no longer exist or which cannot be recreated.

The November Order also made provision for a further hearing on 29 January 2010 at which time I would reconsider what was described as the application to debar. 29 January was a date of just over 3 weeks after the extended period of time for compliance with the Unless Order. What therefore I would be considering on 29 January was not (strictly) an application to debar, but whether the automatic sanction had taken effect, which would depend upon whether the Unless Order had been complied with by 6 January 2010.

The November Order also extended the procedural timetable (including this time for the service of pleadings) and suspended all other directions until the next hearing. Points of Claim were finally served on 4 December 2009. Points of Defence were served and then amended in January of this year, which prompted a request by Mr Grammer for further information and a Notice to Admit facts. Joint experts appear to have been appointed, though with some difficulty in agreeing the valuer’s instructions.

Mr Webster served a supplemental disclosure list on 30 December 2009, together with a covering letter from his present solicitors, The Wilkes Partnership, explaining the list and the difficulties that had been encountered in locating and obtaining relevant documents. Subsequently, they or Mr Webster have obtained additional relevant documents, which have been provided upon receipt, though after the 6 January deadline. A reasonably full, but still incomplete, picture has now emerged in relation to the Abbey National advance and its application. To the extent that it is incomplete (because some relevant bank statements are missing) the bank has been approached for copies. They will either provide copies or be unable to do so. In the former case, the disclosure will be given, albeit late. In the latter case, there will be no default unless the case is that they are available to Mr Webster from another source.

The steps that have now been taken to comply with the Unless Order are genuine. Both Mr Webster and his solicitors have (in Mr Webster’s case belatedly) done their best. Nevertheless, there is no doubt to my mind that there was continuing non-compliance on (and after) 6^th January 2010. I can make that point good by reference to one highly significant example. The completion statement relating to the Abbey National advance identified a sum of £580,957 which papers from the solicitors acting at the time (Robinsons) reveal was paid into an account numbered 41176006. At the time of the hearing before me, there had been no disclosure of any bank statements relating to this account, and the Robinsons papers revealing its existence were not obtained (and therefore not disclosed) until after 6^th January 2010. This is not an isolated example, as parts of other bank statements are also missing, and those that have been disclosed were in many cases disclosed after 6^th January 2010.

I am prepared to assume that the various missing bank statements are no longer in Mr Webster’s possession. Those that have been disclosed after 6^th January 2010 were, however in his control. Mr Webster has obtained them from a mixture of his bank, his previous solicitors or others such as his accountants. They should have been disclosed timeously. So should the Robinsons papers. The reasons they were not was because serious efforts to obtain them were deferred until late in the day. In those circumstances, the Unless Order took effect automatically and the focus of attention must therefore shift to the application for relief from sanctions.

Schedule 2 of the December list referred to papers said no longer to be in Mr Webster’s control. The covering letter explained that these were the papers of The Smith Partnership. They were of course exercising a lien. though a payment schedule had been agreed. I do not think that strictly excused Mr Webster from obtaining those documents and making disclosure of them as documents within his control. A party cannot escape the duty of disclosure by delivering papers to his solicitors and then failing to pay them. That would be too easy for the unscrupulous to exploit. Mr Webster had a right to call for those papers, but he had to pay The Smith Partnership’s charges. There was nothing inappropriate in requiring him to do this, as the charges were due, and the lien was properly asserted pending payment. If, however, the difficulties Mr Webster encountered in paying his solicitors were genuine, it might have been prayed in aid as a reason for refusing inspection. Alternatively, the impact of the lien would be a relevant factor in obtaining relief from sanctions. In the present case, The Smith Partnership gave limited access to the papers and, as I have said, steps were taken to pay their charges by instalments. They have also provided bank statements, which were produced to Mr Grammer’s solicitors after 6^th January 2010. Mr McNall, adopting a realistic approach, did not put the failure to produce The Smith Partnership papers timeously at the forefront of his submissions. He concentrated his attack on the non-disclosure of other documents not subject to a lien, such as other missing bank statements (or other copies of the bank statements held by The Smith Partnership) from another source, and the Robinsons papers, in an endeavour to demonstrate that there was a failure to comply with the Unless Order quite apart from that arising from the impact of The Smith Partnership lien. In this endeavour he succeeded. Some missing statements have now been produced late, but others had not at the date of the hearing before me been produced at all, including some statements exactly contemporaneous with the Abbey National advance.

Mr Richmond for Mr Webster argued before me that as at 6^th January 2010, Mr Webster had made a reasonable search for documents and that it would be wrong of me to find him guilty of default just because the searches were initially unsuccessful. I do not accept this submission. The efforts belatedly undertaken to obtain missing documents should have been undertaken much earlier. Mr Webster appears to have assumed that The Smith Partnership had everything that was relevant, but they did not. No real explanation of why they did not have the missing bank statements has been given. More importantly, the order for disclosure was not an ordinary order for standard disclosure, but ordered specific disclosure in wide terms, and highlighted specifically (unambiguously in its amended form) the Abbey National advance. It is not surprising that all the material documents may not have been readily available. That merely underscored the need, in the particular circumstances of this case, to conduct considered searches from a variety of sources, of the kind that have now been undertaken.

There are other documents or classes of documents about which complaint is made of non-disclosure. They include trading accounts and other financial information, which it is said should have been disclosed timeously (as they are potentially relevant to the derivation of profit from the Farm as a tax advantage may have been obtained, or trust monies may have been invested in vehicles, producing profit) but which were supplied late. That is said to represent a further default, though this has now (at least to some extent) been remedied. However, whilst I see the relevance of the points now made, it is not clear that the range of accounts and other financial information now sought by Mr Grammer fell within the disclosure order I made. I am not satisfied that there has been any default in this respect. I also understand that steps are now being taken to obtain the financial information requested by Mr Grammer, and it remains open to Mr Grammer to seek a further order for specific disclosure if he can justify it. This is in my judgment the appropriate course. It is not appropriate to complain of breach of an Unless Order for disclosure in respect of documents which are not clearly and unambiguously within it. Moreover, part of what Mr Grammer seeks are working papers of Mr Webster’s accountants, which would not be in Mr Webster’s control, though it seems likely that the accountants will produce them voluntarily to Mr Webster’s solicitors. It is desirable that they should, and that Mr Webster’s solicitors should give proper consideration to their relevance, as there is otherwise likely to be an application for non-party disclosure, which will only add to the costs. Nevertheless, their non-production hitherto cannot be regarded as a default under the Unless Orders.

Documents relating to the purchase of a house at Lockington (apparently with trust monies) appear to be in Mr Webster’s mother’s control, but not his. Again, it would be prudent of him to take (as he apparently is doing) whatever steps he can to obtain these documents, as (apart from saving the costs of a non-party disclosure order) the cloud of suspicion (and the availability of adverse inferences) may otherwise remain. Nevertheless, I cannot characterise the non-disclosure hitherto of these documents as a default.

A valuation (potentially relevant to the tenancy point) said to have been obtained at the time of purchase of the Farm was not disclosed. Another valuation was disclosed in Schedule 2, and a copy has now been produced. However, that is a 2002 valuation. The Farm was purchased in December 1996. I am not persuaded that the earlier valuation (assuming one exists at all) fell within my disclosure order, which, though wide, was limited to the parties’ “trusteeship and management and control of the Farm since 18 December 1996”. Presumably, any valuation was obtained before the purchase, and thus fell outside the specified date. Moreover, a valuation obtained for the purchase does not relate to trusteeship, management or control of the Farm. Such a valuation might be relevant, but does not fall within the scope of the Unless Orders.

There is also said to be outstanding disclosure in relation to alleged landfill and other activities attracting the attention of the Environment Agency. Whilst such disclosure as there has been refers to a letter of 9 March 2009 from Derbyshire County Council, that letter has not been disclosed. It must have existed, but Mr Webster apparently does not have it. There were also dealings with White Recycling, but these were, on the evidence, mainly oral. I am not satisfied that there has been a default in these respects.

The obtaining of potentially relevant documents on environmental issues which one firm of solicitors (Walter Scott) held has been impeded, as the firm has been intervened, and the SRA has hitherto not been able to locate the documents. Whilst the approach might have been instituted earlier, I cannot conclude that an earlier approach would have met with any greater success. I am not satisfied that any default under the Unless Orders has been made out in this respect. Mr Webster does not have the documents himself.

In summary, therefore, I find default under the Unless Orders to have been proved, but not to the extent claimed by Mr Grammer. Moreover, there has been effective late disclosure of many (but not all) bank statements, and of the Robinsons file. Disclosure has also been made of other material which has been sought, even though I have found that there was no default in respect of these matters under my Unless Orders. Mr Webster’s present solicitors have been assiduous, as, belatedly, has Mr Webster.

Copies from the bank of all missing bank statements have been requested. As I have said, this will either result in the production of the missing statements, or the bank records will no longer be available to enable their production. If they cannot be produced, that is unfortunate but not a default, as Mr Webster can only produce documents in his control, not documents which are no longer in his control. There is no material from which I can properly infer that he has deliberately destroyed or secreted documents so as to undermine the discovery process. His response to the disclosure orders was tardy, but there is no evidence that the delay has contributed to the documents becoming unavailable in the meantime. Whilst, moreover, the disclosure process has contributed to slippage in the timetable, I consider with the benefit of hindsight that the original timetable was always unrealistic. The disclosure obligations were wide-ranging and always likely to encounter difficulties of the kind that have been encountered in this case. Moreover, there have been difficulties in agreeing instructions to a valuer, delays in the pleadings (which I do not accept are attributable to late disclosure, though some amendments may prove to be necessary in the light of late disclosure) and the 2 day time estimate was also unrealistic.

I have had regard to all the factors set out in CPR 3.9, and consider that this is an appropriate case to grant relief from the sanction imposed under the Unless Orders. The interests of justice militate in favour of Mr Webster having the ability to defend himself. The defaults I have found relate to the dealings point and (in part) to the damages point. They do not relate at all to the tenancy point, the sale point or the partition point, and I would be reluctant in any event that Mr Webster should remain debarred in respect of those claims.

To the extent that there have been defaults, they have been remedied so far as possible. The application for relief was made promptly in accordance with directions I gave on 29 January 2010. Any inability now to produce documents such as bank statements from many years ago cannot justify the continued debarring of Mr Webster, as that inability would have affected timely disclosure, and has not been caused by the tardiness with which Mr Webster initially approached the task. Moreover, Mr Webster was, for financial reasons, unable to engage solicitors at critical times. I do not consider that the defaults I have found proved have been intentional. Moreover, Mr Webster appears to have assumed that his previous solicitors (there was another firm, Geldards, before The Smith Partnership) had asked for and obtained the centrally relevant documents and this goes some considerable way to explaining his apparent tardiness, as it was only when his present solicitors received bank statements from The Smith Partnership that the gaps were noticed. So far as the late production of the Robinsons papers are concerned, his present solicitors were under the mistaken impression that they had been intervened when they had not. I do not consider it would be just to visit this misapprehension upon Mr Webster.

Mr Webster has also been in default of costs orders, but this is attributable to his lack of means, a point I return to below.

Mr Webster’s default under the second Unless Order was a continuation of his first default, but I granted relief from sanctions in respect of the first default by extending time and consider it appropriate to do so again. His continuing failure to respond to the Unless Orders in a timely way was in significant respects attributable to the financial difficulties he was labouring under, manifested by the proper assertion of a lien by The Smith Partnership, but the position has, as I have said, now been rectified. The prospective trial date has not been significantly affected (and none has yet been fixed) given the unrealistic timetable and estimate that was put in place. There were, as I have said, always likely to be difficulties and delays in obtaining full disclosure of documents going back over many years, and it is a relevant factor that the disclosure order was of unusual width. Moreover, if Mr Webster remains debarred, there will still be an onus on Mr Grammer to prove his case, which, as Mr McNall confirmed at the hearing, would involve the obtaining of non-party disclosure orders, which would add to the burden on Mr Grammer, and contribute to more delays.

Mr McNall for Mr Grammer submitted that, were I minded to grant relief from sanctions, I should only do so on condition that Mr Webster pays outstanding costs orders, with which Mr Webster has not complied fully. Mr McNall prays in aid the decision of the Court of Appeal in Crystal Decisions (UK) Limited v Vedatch Corp [2008] EWCA Civ 848, affirming Patten J at [2006] EWHC 3500 (Ch) at [16]. I have no doubt that I have jurisdiction to make such an order, and that it would ordinarily be appropriate to do so in the light of Mr Webster’s default under existing costs orders, which amounted at the date of the hearing (including costs then prospectively due of a further £15,000) to £77,255, to which some interest also has to be added. However, Mr Webster has explained, initially in a witness statement of last July, the difficulties he has encountered in raising monies in the current economic climate. He also makes the point that he is a one-third owner of the Farm, which is free of mortgage and has a substantial value. Mr Webster cannot raise money by way of mortgage, which he would wish to do to satisfy the costs orders, on his share in the Farm without the concurrence of Mr Grammer, which Mr Grammer understandably declines to do. If the existing costs orders are not complied with, or further costs are awarded at the Second Trial, Mr Grammer is entitled to ask for a charging order on Mr Webster’s share (or his partitioned interest, if ultimately I order a partition), and that of his brother also (who, though debarred, has unsatisfied costs orders against him and remains at risk of further adverse costs orders). That is in my judgment sufficient protection for Mr Grammer. In reaching that conclusion, I take into account that the beneficial interests of Mr Webster and his brother in the Farm have by my order of 11 May 2009 (which was extended by my order of 20 November 2009) been impounded until such time as they shall have paid to Mr Grammer such sums as may be found owing at the Second Trial, and outstanding costs orders. I now have some doubts about whether I should have made impounding orders of such width, but I did so without objection (as far as I can recall) and no-one has appealed those orders.

On 20 November 2009 also, I refused to increase the payment on account of damages previously ordered in the sum of £14,000. I was not satisfied on the evidence then before the court that I should make such an order and, whilst I cannot foretell with any certainty the outcome of the Second Trial, the material presently before the court does not persuade me that there is a real risk that Mr Webster’s share (and that of his brother) will not provide adequate practical means of recovery, both in respect of existing costs and any further costs orders that may be made. In the circumstances, I am not minded to make relief from sanctions conditional upon the payment of outstanding costs orders.

There will have to be a further supplemental list of documents from Mr Webster, to include all the material disclosed since the last list, and any identifiable documents or classes of documents which he no longer has. Subject to the provision of that further supplemental list, I grant Mr Webster relief against the sanction imposed by my Unless Orders.

I shall consider with Counsel following the handing down of this judgment the appropriate period for such supplemental list. No-one need attend the handing down of this judgment. A separate hearing to deal with outstanding matters such as the form of order and costs, and any further directions that may be appropriate for the Second Trial, should be arranged via my clerk. I shall wish to have a progress report on compliance with existing directions, and a realistic time estimate for the Second Trial. Any further requests for specific disclosure should be canvassed between solicitors in the first instance and may if necessary be raised before me at the next hearing.