Wearn (t/a Jonathan Wearn Productions) v HNH International Holdings Ltd

There are four applications before me, as follows:

When it is necessary to distinguish between them I shall refer to the defendant as “HNH1” and the second counterclaimant as “HNH2”. Otherwise I shall refer to them collectively as “HNH”.

The proceedings, in which the claimant is legally aided, were commenced on 4 October 2000 and concern events which occurred in the period 1996 to 1999. Until the issue of the first of these applications in August 2013, the matter had not been before the court since 12 December 2001 when Park J gave directions for a trial which was to take place in October 2002. It is common ground that virtually none of the procedural steps contained in those directions have been complied with, although unsurprisingly there is little agreement as to the reasons and responsibility for that non-compliance.

There has been one very recent development in relation to the application to amend the particulars of claim. On the afternoon before the present hearing began, the claimant informed HNH that certain allegations, which had been maintained for several years and were pleaded in draft amended particulars of claim originally supplied on 18 December 2013 (and further amended in June 2014), were no longer being pursued. I will need to refer to these allegations in more detail in due course, but in essence they accused HNH and others of fraudulent - and possibly criminal – conduct. The conduct alleged included deliberately and covertly tampering with and altering certain music master tapes supplied to HNH and its agents by the claimant, in order to make it appear that the defective quality of CDs produced using those master tapes was the fault of the claimant. At the same time as informing HNH that these allegations are no longer being pursued, the claimant has supplied a further draft of the proposed amended pleading, in which the assertions that the relevant alterations to the master tapes were done deliberately and with improper motives, are deleted.

The time estimate for these applications, which concern matters of some complexity (eg. the claimant’s skeleton argument runs to 234 paragraphs and HNH’s to nearly 100), was inadequate. There was some discussion at the start of the hearing as to how the matter should proceed. Both sides accepted that the strike out application was not dependent on the other applications, which could be dealt with at a later stage if that was appropriate.

The claimant is a sound engineer who specialises in restoring historic classical recordings. HNH1 is a Bahamian company that is part of a classical music publishing group, Naxos, which is owned by a Mr Klaus Heymann. The operational arm is HNH2, which is another company in the Naxos group. Its business is the commercial exploitation of sound recordings of classical music under the Naxos label.

By a contract dated 26 February 1997 (“the Agreement”) the claimant and HNH1 entered into an arrangement whereby landmark opera recordings created principally in the 1930s and 1940s at major opera venues would be restored, reproduced and sold in CD form by HNH1 throughout the world under the Naxos label.

It was envisaged that the scheme would operate in the following way. Mr Richard Caniell, a resident of Canada, owns a large collection of recordings of historic musical and operatic performances, amassed over many years. These had been recorded for contemporaneous broadcast on old 33 rpm records. Mr Caniell would carry out some initial restoration work on the original recording and then send the product to the claimant on a digital audio tape (DAT). This DAT would be dynamic range enhancement (DRE) encoded when it left Mr Caniell. The claimant would use equipment to decode the DRE and to carry out further work to improve the sound quality of the DAT. He would then send the resultant production master (“PM”) in the form of a DAT to K&A Productions Limited (“K&A”), a record production/mastering company, for quality-checking and production of a factory master, which would then be used for CD pressing by a company in Hong Kong. Under the Agreement HNH1 was to pay the claimant an advance of £1,250 per PM plus royalties calculated by reference to CD sales. I am told that K&A is 50% owned by Mr Heymann and that the Hong Kong company is also part of the Naxos group.

It seems that some 47 of the claimant’s PMs were made into CDs, published and distributed by HNH2 under the Naxos label pursuant to the Agreement. However, the relationship between the parties eventually broke down and the Agreement was terminated in October 1999. Both sides agree that the Agreement was brought to an end, but virtually everything else is apparently in dispute, including the quality of each side’s performance under the Agreement, the facts and circumstances in which termination came about (including who terminated) and the consequences of termination.

Following commencement of the claim on 4 October 2000, statements of case (including a number of Part 18 requests) were exchanged during the course of 2001. These original pleadings raised a wide range of issues by claim and counterclaim, which are summarised in an agreed case summary prepared by the parties for the purposes of the CMC before Park J in December 2001.

In brief, the claimant alleged various breaches of the Agreement by HNH1. These included: non-payment or underpayment of royalties/advances; wrongful refusal to accept delivery of PMs; wrongful interference with the sound quality of PMs, and an allegation that HNH1 on two occasions wrongly invoked the procedure under the Agreement for serving notice of termination. The claimant alleged that the breaches amounted to a repudiation of the Agreement by HNH1 which the claimant had accepted by solicitors’ letter. The claimant claimed payment of royalties, an account, and damages under various heads, including loss of profit.

HNH1 denied the breaches and (together with HNH2) counterclaimed alleging various breaches of the Agreement by the claimant. By its defence HNH1 justified retention of royalties/advances (primarily on grounds of set off); denied under-accounting; justified rejection of PMs on the ground that they were not what was ordered or on the ground of inadequate sound quality, and asserted that HNH1 was entitled to serve both notices of termination under the Agreement. By way of counterclaim HNH1 alternatively HNH2 alleged that the claimant himself had been in repudiatory breach of the Agreement inter alia by his wrongful purported termination thereof. On that basis HNH claimed for loss of profit resulting from the repudiatory breach as well as for costs incurred. The counterclaim also alleged that various recordings (those embodying performances by Toscanini and the Metropolitan Opera) could not reasonably be released in the USA because the intended release was met by threat of expensive and extensive legal proceedings; that the claimant was in breach of various warranties in the Agreement and/or had misrepresented matters in this regard; that the claimant had failed to deliver certain PMs; and that other PMs required remedial work putting HNH to expense.

Later, in a proposed amended pleading supplied to HNH on 18 December 2013, the claimant for the first time formally pleaded in a draft statement of case the allegations, which had already been articulated and maintained in correspondence over a considerable period; the allegations were that HNH and/or its agents had been guilty of what the claimant’s solicitor, Mr Desmond Hutchinson, described in a witness statement dated 20 January 2014 as “extremely serious fraudulent and criminal activities”. These consisted of deliberate reduction in the quality of PMs provided by the claimant under the Agreement, publication of these debased recordings under its own record label with knowledge of their defective quality, and then re-engineering of the original PMs in order to create the impression that the claimant was responsible, thus enabling the Defendant to terminate the Agreement.

As I have said, these serious allegations, the scope of which implicated a wide group of people within HNH and K&A – some of whom were named in Mr Hutchinson’s witness statement - were abandoned by the claimant the day before the hearing of the present applications before me began. In a letter to me dated 18 June 2014 Mr Nathan QC, who with Mr Tritton appeared on behalf of the claimant, explained that he and Mr Tritton had concluded that it is “not necessary” for the claimant to advance a case of deliberate breach of contract, as HNH’s intentions or purposes in committing the breaches do not matter, and it might be said that the claimant was pleading a new cause of action for fraud/dishonesty. Mr Nathan explained further in the course of oral argument that the reason for the abandonment of the fraud allegations was because of the obvious limitation difficulties, given the passage of time.

The upshot therefore appears to be that the claim is back in more or less the same position as originally pleaded in 2001, namely a “simple” breach of contract on the part of HNH.

The court is considering the fate of an action begun nearly 14 years ago, in which the pleadings are not yet complete, disclosure has not taken place, and evidence has yet to be exchanged. In order to see how this most regrettable situation has come about, it is necessary to examine the history of the proceedings in some detail, including the part played in that history by Mr John Watkinson, an expert sound engineer instructed by the claimant.

I have already outlined events up to the CMC heard by Park J on 12 December 2001. In that CMC, the learned Judge gave directions for a trial of the issues of liability only. In particular, he directed as follows (paraphrasing to some extent):

Problems appear to have arisen at the very outset, in that the parties were unable to agree a procedure for identifying and copying the relevant recordings, pursuant to the order of Park J. The prelude to this initial impasse was a somewhat arcane response by the claimant’s solicitors to HNH’s proposal that copying of the recordings be carried out by an independent firm. The response, which quoted at length from a document apparently prepared by the claimant’s expert Mr Watkinson, appeared to be suggesting that there be no copying procedure agreed at all, and that only the originals would suffice (see claimant’s solicitors’ letter 21 December 2001). In view of this, HNH’s solicitors replied to the effect that an absence of copies would run counter to the order of Park J and would also be inconsistent with the claimant’s own approach at an earlier stage. The claimant was asked to reconsider the matter with his expert (letter 8 January 2002).

The claimant’s solicitors then responded that their letter had been misunderstood, that copies were indeed needed but should be made in the presence of both parties’ experts (letter 11 January 2002). This having been clarified, HNH’s solicitors agreed that there was force in both experts comparing the original recordings at the same time, but queried whether it would be unnecessarily expensive for them both to sit through the copying process. They stated that they had identified an independent studio which would do the copying at a very reasonable rate, and sought the other side’s agreement, while suggesting that in the circumstances the time limits imposed by Park J’s order should be extended by 28 days (letter 27 February 2002).

On the 28 March 2002 the claimant’s solicitors wrote stating that Mr Watkinson was of the view that he must hear the relevant recordings before copying took place, and that the inspection should take place in the presence not only of both experts but also of the claimant in person and an appropriate representative of HNH. The claimant was content for this to be at the independent studio. In the interest of economy it was suggested that in the first instance only the items principally in dispute need be examined by the experts, together with two sample items not the subject of any complaint. At this point Mr Watkinson was said to be contemplating completion of expert reports by the end of April 2002. HNH’s solicitors replied that they were not sure what benefit there would be in having solicitors and clients present at the experts’ inspection, but they were content for the experts to discuss the issue. They also suggested that as HNH’s expert had a suitable copying machine, this might be used as an alternative to using the studio (letter 15 April 2002). The parties at this stage appeared to agree that the experts should discuss these matters and arrange a date to meet.

While a meeting was being arranged HNH’s solicitors wrote recording that whilst they had agreed that Mr Watkinson could have access to the original recordings rather than working from copies as envisaged by the court order, they were concerned that Mr Watkinson appeared to be insisting on an inspection procedure which did not take account of the fact that the court’s order expressly provided for the parties’ respective experts to investigate and report on separate aspects of the case (letter 30 May 2002). The claimant’s solicitors replied that Mr Watkinson had not been in a position to express a view at the time of the CMC, and stated that HNH had since then acquiesced in Mr Watkinson’s view that it was necessary for the experts to meet and hear the original recordings as part of the “identification” of relevant recordings. The solicitors also required HNH to provide reasons for their desire to include certain recordings in the copying process (letter 7 June 2002).

After further jousting by solicitors’ correspondence, the experts met on 29 August 2002. At the meeting the claimant indicated that there were further relevant recordings in his possession which he had not produced pursuant to the agreed arrangements for the experts’ meeting. These recordings apparently included PMs which had been supplied by the claimant to HNH and then returned to him in view of possible defects as a result of faulty equipment of the claimant. Both experts felt they should hear these additional recordings (see experts’ undated joint statement). The claimant’s solicitors later stated “there is a considerable amount of working recorded material and/or returned recorded material referable to [the Agreement] held by our client….which previously was not the subject of the experts’ consideration. Neither we nor our client could have had the remotest suspicion that such material would be required for copying or examination by the experts…” (letter 8 October 2002).

At the meeting the experts concluded that one of the purported PMs (Gotterdammerung) had “an absurdly low level” of sound. In the light of that the claimant suggested that the purported PM was not the recording he had delivered to HNH. It also emerged that the purported PM for Rosenkavalier was blank. In view of this, the experts were of the view that they should delay the copying process until the further recordings in the claimant’s possession had been examined (experts’ joint report following the meeting).

In September 2002 HNH’s solicitors had suggested that the case should be set down for trial in accordance with Park J’s order. They continued to press for this to be done. The claimant’s solicitors were resistant, stating in January that “This action cannot reasonably move forward until the experts have concluded their investigation.” (letter 8 January 2003).

The parties now resumed the jousting by correspondence. HNH was asked to explain the blank tape. In due course their solicitors produced a copy fax from K&A dated 19 June 1998 requesting the claimant to supply a replacement for one of three Rosenkavalier tapes as it was blank (letter 9 January 2003). This explanation was not accepted by the claimant who denied receiving the fax. His solicitors stated that “… the case generally cannot move forward until the experts study the “blank” tape, and sound anomalies further”. They stated that there should be no further correspondence on the subject “until we have the experts’ final findings” as this could affect the length of trial (letter 23 January 2003).

A further joint experts’ meeting took place on 12 and 13 February 2003. This was largely inconclusive. The experts appeared to be under the impression that that the claimant had not in the event provided them with the “recalled” PMs, which had been the reason for the experts’ abandonment of their first meeting. However, the claimant, through his solicitors, maintained that he had provided all in his possession (letter 4 April 2003). The experts were able to conclude that the purported PM of one item (La Scala) had not been DRE decoded, and that the published CD carried an encoded signal which was the cause of its “compressed” sound.

The claimant was “concerned” by the experts’ findings, which he found surprising. He did not accept that the DRE encoding was necessarily the sole cause of the poor quality of the recording and CD, or that it was the cause of poor quality on other recordings. He “require[d] the fullest experts’ investigation in a comprehensive way”. His solicitors suggested a further joint experts’ meeting, at which there should be “a joint instruction to the experts giving precisely what is now required in the light of the latest information and the original requirements.” (letter 4 April 2003). Although HNH was agreeable to a further joint meeting of the experts, the suggestion of joint instruction of experts (which was accompanied by a detailed draft instruction containing a substantial and technical “Terminology Annexure”) may have caused HNH’s solicitors unease. In any event they consulted leading counsel and as a result declined to agree to the suggestion; they stated that leading counsel had “advised in unequivocal terms that this litigation must be brought back on track as quickly as possible. This should be done by the copying of the recordings of the relevant titles as listed and agreed between us…so that the experts can proceed to prepare their own separate first reports, again as contemplated by the court’s directions.” The letter added that leading counsel was very concerned that if the delay and divergence from directions were not remedied there would be a risk of sanction (letter 11 June 2003). The claimant agreed to this course (letter 11 July 2003). The claimant sought and obtained confirmation from HNH that HNH’s expert had all PMs reflected by published CDs (letters 5 and 6 January 2004).

There followed a hiatus of nearly three and a half years, with little or no communication between the parties. Then, on 23 May 2007 the claimants solicitors wrote: “We enclose a copy of a Report prepared by Mr John Watkinson…..[He] has concluded that the purported [PMs] disclosed by your clients have been substantially tampered with and do not contain the recorded material as originally produced and delivered by [the claimant]. Mr Watkinson also concludes that in a number of cases the CDs released by your clients could not have been produced from the [PMs] disclosed by your clients.” The solicitors summarised the findings in Mr Watkinson’s report and concluded that in the light of the expert’s evidence a fair trial would not be possible given HNH’s and its associates’ dishonest tampering with the evidence and that in any event the defence and counterclaim should be struck out as an abuse of process because HNH had interfered with evidence and presented a false case. Several other allegations were also made, including that HNH had made specific viral and/or electronic attacks upon the claimant’s computer, and forgery of certain letters. If HNH did not consent to a strike out with damages to be assessed, the claimant would apply to the court. The claimant would also be applying for a third party costs order against Mr Heymann personally.

Mr Watkinson’s report, on which the solicitor’s letter was based, (“the First Report”) is 32 pages long with about 250 pages of annexes. In it Mr Watkinson does not confine himself to findings of a technical nature within his expertise; the report includes findings: that correspondence and documentary records have been forged by HNH and/or K&A; that legal obligations under the Agreement have been complied with by the claimant and breached by HNH; that HNH and/or K&A carried out deliberate and extensive tampering with PMs after making CDs from them, in order to shift the blame for poor quality CDs onto the claimant and thereby incriminate him in these proceedings; that HNH and/or K&A must have had access to DRE encoding equipment notwithstanding their assertions to the contrary.

Mr Watkinson also considered that he had been misled by HNH by being supplied with forged project sheets, PMs which were not what they purported to be and which had been deliberately tampered with, and by being falsely assured that DRE encoding equipment had not been used by HNH/K&A. This misleading was “a major reason” for the “inordinate amount of time” it had taken to produce his report. (See Executive Summary)

It is appropriate to set out verbatim a sample of the extra-curricular findings made by Mr Watkinson in the First Report:

“It is my considered expert opinion in this matter that from a technical standpoint those master tapes delivered by the Claimant that have not since been tampered with substantially met the obligations of the Agreement between the parties. My findings indicate that the responsibility for omissions from, and poor sound quality of, the published CDs lies primarily with the Defendant who failed to meet the terms of the Agreement” (See Executive Summary)

“I have found no evidence suggesting that the Defendant sought the Claimant’s permission to waive the terms of the contract at the time. Contrary to the Agreement, the Defendant carried out extensive editing, noise reduction, de-clicking……while this was going on, there was no attempt of which I am aware to seek the involvement or approval of the Claimant or Caniell whatsoever. If this is the case, the Defendant acted unilaterally.” (see 11.28)

“The digital workstations at K&A would also have been ideal for tampering with the Claimant’s Master Tapes, as indeed would any workstation…..K&A would have had easy access to blank project sheets that could have been completed to appear consistent with the tampering, although genuine project sheets could have been modified elsewhere.” (See **)

“I have been shown a project sheet that carries the K&A logo, stating that the level had been raised by 10dB. In my opinion this project sheet is an invention. (See **)

“It is my view that the Defendant [a term which Mr Watkinson uses to encompass K&A as well as HNH] re-wrote the Claimant’s Master because it did not support their case exactly as they did for La Forza del Destino and Fidelio.” (See **)

“I have been asked if I can explain why many of Master Tapes in this matter have been altered after the CDs had been made from them. After much consideration I cannot think of any possible reason other than to incriminate the Claimant in these proceedings.” (See Executive Summary)

“After discovery of the blank Master Tape, the Defendant produced a letter allegedly written to the Claimant regarding the blank tape, yet the Claimant has stated that he has neither any record of receiving it, nor of sending another tape. Had there been a replacement sent I would have expected to be provided with three tapes….However only two tapes have been supplied and the Defendant states …that there are no more tapes. In my opinion it cannot be ruled out that the letter produced by the Defendant is a later invention.” (See **)

“In my opinion the Defendant systematically re-wrote many of the Claimant’s Master Tapes at lower levels than the ones at which they had been delivered and invented new project sheets suggesting that the levels had been increased. Possible motives the Defendant might have had include a desire to substantiate the earlier allegation by Klaus Heymann about low level master tapes, a desire to conceal mistakes and a desire to shift blame onto or otherwise discredit the Claimant.” (See **)

“The scale of the re-writing exercise was extensive and would have required significant man power. That and the clear involvement of Klaus Heymann in the matter makes it almost inconceivable to me that the decision systematically to re-record tapes delivered by the Claimant and to invent project sheets was not made by, or known to, the management of the Defendant.” (See ** )

May 2007 to September 2008

By a response dated 25 May 2007 HNH’s solicitors stated that they would need to investigate “the very serious and extremely grave accusations made against our clients”. On 31 August 2007 the claimant’s solicitors wrote that they were awaiting funding authority from the Legal Services Commission for a strike out application. On 13 September 2007 HNH’s solicitors replied that their previous expert was no longer available in view of the passage of time and they were seeking a replacement.

The next communication was on 6 February 2008 from a different firm of solicitors for the claimant, the original firm having ceased to act for him on the discharge of his legal aid certificate in January 2008. However, Mr Hutchinson was still representing the claimant, having become a consultant with the new firm. The letter stated that the claimant was seeking to challenge the discharge, and in the meantime the new firm was acting pro bono but not as solicitors on the record. On 15 February 2008 those solicitors wrote to say that funding had been reinstated and that a third firm (French & Co) would henceforward be acting for the claimant. In June 2008 the latter firm wrote with formal notice of a change of solicitors. Mr Hutchinson continued to act, now as a consultant for French & Co.

By letter of 5 September 2008 the solicitors for HNH responded at length to the claimant’s letter of 23 May 2007 and the findings of Mr Watkinson on which it was based. The response was targeted specifically at the continuing threat by the claimant to seek summary judgment. In brief the letter stated that the case of fraud now put forward on the basis of the First Report was not yet even the subject of a pleading by the claimant, and that Mr Watkinson’s findings of fact were strenuously disputed by HNH; in those circumstances an application for summary judgment would be hopeless. The letter then undertook a refutation of Mr Watkinson’s findings of fact, by reference to the witness statements of 12 named individuals including those who had worked at K&A in the relevant period and who appeared to be within the scope of the allegations in the First Report. Some of the witnesses no longer worked there. Their evidence under oath had been obtained by HNH following receipt of the letter of 23 May 2007, and their statements were enclosed with the response of 5 September 2008.

The gist of these witnesses’ evidence was as follows:

HNH’s solicitors’ letter of 5 September 2008 concluded by asking whether the allegations of fraud and forgery were being pursued notwithstanding the evidence which provided “a wholly rational alternative conclusion” on the findings of fact in the First Report. The letter continued that, if an application to amend the particulars of claim in order to do so were made, HNH would put before the court “the quite extraordinary delays” for which the claimant was responsible.

After one or two chasing letters from the other side, the claimant’s solicitors wrote some four and a half months later on 27 January 2009 apologising for the delay and referring to the time taken by HNH to respond to the First Report; the claimant had no intention of giving up the claim; his expert (presumably Mr Watkinson) had “provided an initial response which is highly positive in favour of” the claimant; because HNH’s response had submitted detailed factual evidence it was necessary for an “exhaustive examination of the communications that took place between our client and your client and/or its engineers” to be made and for a detailed statement to be taken from the claimant; only then could the work of counsel begin; the claimant had been affected by illness; however it was hoped to send a draft statement to counsel soon and to “get an application to Court at the earliest possible moment.” The reference to “an application” appears to be to an application for summary judgment as already indicated.

On 19 February 2009 the claimant’s solicitors wrote stating that their estimate of when the draft statement of the claimant would be ready was over optimistic, but it would be ready soon; a summary judgment application was said to be the likely outcome.

Further time passed and on 25 March 2009 HNH’s solicitors wrote stating that the approach the other side was taking appeared to be inappropriate and disproportionate. They reiterated the points made in the 5 September 2008 letter as to the inappropriateness of a summary judgment application, in particular the conflict of evidence on relevant matters; in these circumstances the preparation of a detailed witness statement by the claimant was inappropriate; the main action needed to be focussed on; if the fraud case was being pursued then an application to amend the pleading should be made; the case needed to be put back on a proper footing and a CMC listed; a response was sought within 7 days as to how the claimant proposed to proceed.

The response from the claimant’s solicitors on 1 April 2009 did not take the matter much further; it stated that summary judgment was still the intention; there were other possibilities on which counsel’s advice was essential, but counsel did not wish to become involved until they had “all the data before them” given that the case was publicly funded; therefore there needed to be an “in depth factual response to the various factual allegations” of HNH’s witnesses; a full response to the letter of 5 September 2008 was hoped to be made within two months. That aim was not achieved (see letter 29 May 2009).

On 26 August 2009 HNH’s solicitors wrote again stating that if the claimant had not provided a clear response indicating how he intended to progress the litigation within 14 days, HNH would proceed as advised. By their response of 1 September the claimant’s solicitors stated that counsel had now advised with the benefit of “both our client’s expert’s responses and analysis of the witness statements supplied by you” and an extensive statement from the claimant dealing with those witness statements. As a result the claimant would be seeking legal aid authority for “a further test which our client’s expert considers may be crucial” and “his further analysis, title by title, by reference to the factual statements supplied by K&A personnel”. Legal aid would also be sought to amend the pleading to reflect Mr Watkinson’s findings. As presently advised there was “no intention to withdraw the allegation of fraud and/or misconduct”.

There followed another long hiatus (Footnote: ¹) – this time of 4 years’ duration - until 24 September 2013, when the claimant’s solicitor wrote enclosing the first application referred to in paragraph 1 above, to vary the December 2001 order of Park J, by essentially adjusting the 2001 timetable. The application was returnable on 12 December 2013 (later re-listed with the other applications in June 2014). The application notice referred to “a second report [by Mr Watkinson] which the Claimant maintains proves the said acts of sabotage by or through the direction of the Defendant”. The draft directions referred to amended particulars of claim although at that stage there was no draft amended pleading nor an application to amend, nor was the second report of Mr Watkinson (“the Second Report”) made available to HNH.

HNH’s solicitors made clear that an application to amend would be resisted inter alia on grounds that it would raise a new claim which was time barred; further, in view in particular of the delay, an application to strike out the proceedings as an abuse of process would be made by HNH (letter 31 October 2013).

The claimant’s solicitors suggested that the First Report was without prejudice, and could not be referred to. The other side pointed out that the report had been referred to repeatedly by both sides in open correspondence and that the claimant had threatened to apply for summary judgment in reliance upon it. (Letters 4 and 5 November 2013) This issue seems to have been dropped thereafter, and was ultimately retracted by Mr Hutchinson in a witness statement.

On 18 December 2013 HNH’s solicitors were served with inter alia the Second Report and draft amended particulars of claim containing the allegations of fraud. On 30 January 2014 HNH’s solicitors served the present strike out application, with their solicitor’s (Mr Michael Brookes’) witness statement in support. The investigation and analysis on which the Second Report is based was completed by Mr Watkinson in 2010.

For present purposes it is unnecessary for me to set out the detailed findings in the Second Report, which is 104 pages long, and was prompted by HNH’s solicitors’ letter of 5 September 2008 and the witness statements enclosed with it. Mr Watkinson states that it is now his opinion that “I was meant to conclude that [the claimant] had delivered masters of these recordings which he had failed to decode and such had led to the DRE-encoded CDs being published for these musical titles having very poor musical quality.” (Mr Watkinson’s emphasis). He goes on to describe the reasons for his coming to the conclusion in the First Report that the defective sound quality was not the claimant’s fault.

For the purpose of the Second Report Mr Watkinson analysed 10 CDs (ie the final published items) representing four of the works having admittedly very poor quality. He did so using a new statistical analysis technique developed with the assistance of colleagues specifically for this exercise. One of them had offered to write software that would enable existing equipment to perform the statistical analysis in question. The analysis creates a graph known as a Probability Density Function (“PDF”). The intention was to use this technique to see whether the CDs would reveal something about the processes that took place in the production sequence.

Mr Watkinson’s conclusions are set out in the Executive Summary. They are:

Thus, the conclusions in the Second Report appear to acquit K&A (but not HNH) of deliberate sabotage. However, in the body of the report, in a section where Mr Watkinson comments on K&A’s operatives’ witness statements, he seems to call into question the truthfulness of Mr Lang’s confirmation in his witness statement that the project sheets queried in the First Report are his and are genuine. Thus:

“Lang claims to be the author of the project sheets that I have challenged. He says that they are correct. There are a number of real peculiarities about these project sheets.” (para 263 (c) )

Mr Watkinson then gives reasons for his doubts. Some are based on the PDF statistical analysis. Others are unrelated to any technical or engineering expertise of Mr Watkinson. For example:

“The project sheet for La Traviata does not contain the correct telephone number for K&A. Also, the publication date for this project sheet is March 1998. Yet Lang did not start working for K&A until April 1998….” (para 263(h) )

Another example of an excursion beyond Mr Watkinson’s role of independent technical expert is in his conclusion at paragraph 266:

“My investigations have revealed significant and disturbing disparities from what I would have expected. The systematic nature of these disparities, the number of recordings concerned and the sudden departure from what was previously a successful co-operation between the parties suggests that what took place could only have been deliberate.”

There are many other such examples in both his reports where Mr Watkinson has apparently lost sight of his role as an independent expert in sound engineering, and has adopted a role more akin to an advocate, analysing and reaching conclusions on issues based on factors in relation to which he does not claim to have any particular expertise. Although I do not propose to quote further, this is also evident in paragraphs 274-284 of the Second Report.

I comment on these unfortunate aspects of the two reports, not to level gratuitous criticism at Mr Watkinson, or because of any view I may have formed either as to where the truth of any of these matters lies or as to any of the substantive issues in the case, but because these characteristics of the reports have a bearing on the issues before me.

CPR Rule 3.4(2) provides (so far as relevant):

The court may strike out a statement of case if it appears to the court –

CPR rule 1 provides, so far as relevant, as follows:

“1.1(1) These Rules are a new procedural code with the overriding objective of enabling the Court to deal with cases justly and at proportionate cost.

(2)

Dealing with a case justly and at proportionate cost includes, so far as is practicable –

…

HNH seeks to strike out the claim on the basis of one or both of the following grounds:

Under the head of abuse of process HNH submits that the claimant has been guilty of extraordinary and inexcusable delay which, when coupled with one or more of several additional factors, justifies the strike out order applied for. These factors include the following:

Under the head of non-compliance for the purposes of CPR 3.4(2)(c), HNH submits that the claimant has failed to comply with the order of Park J and/or with the CPR, including CPR 1.3 and also Part 35.

They refer to the fact that a trial that should have been set down in October 2002 would now not be possible until October 2015 at the earliest; that in the entirety of the intervening period the claimant did not correspond with the court until the issue of the CMC application in August 2013; that the claimant sought to depart from the terms of the order from the outset; that at no time did the claimant return to the court to seek a variation of the order and, in effect, treated it as irrelevant thereafter.

With regard to CPR 1.3, HNH contends that the claimant’s conduct of the litigation disclosed wholesale breaches of this rule. In particular the case has not been conducted so as to enable the court to: save expense (rule 1.1(2)(b)), deal with the case in a proportionate fashion bearing in mind the financial position of each party (rule 1.2(2)(c)), deal with the case expeditiously and fairly (rule 1.1(2)(d)), and ensure compliance with rules, practice directions and orders (rule 1.1(2)(f)).

With regard to Part 35, HNH submits that neither the First nor the Second Report comply with the requirements of the rules relating to expert evidence: the expert has not acted as an impartial and independent expert but has instead adopted the role of an advocate on behalf of the claimant; further, he has sought to express opinions and reach conclusions on matters outside his expertise.

HNH submits that the “stop/start” way in which the claimant has prosecuted (or failed to prosecute) its claim, and the resultant extraordinary delay, has caused serious prejudice to HNH and others, and has precluded or seriously impaired the ability to hold a fair trial. In particular HNH argue that the delays, which mean a trial is likely to take place 17 or 18 years after the events in dispute, result in two significant heads of prejudice: prejudice to a fair trial given the fading of witnesses’ memories/unavailability of witnesses, and prejudice in terms of increased irrecoverable cost.

In these circumstances, HNH submits that the unqualified discretion to strike out a claim under CPR rule 3.4(2)(b) and/or (c) is triggered, and that the only just and proportionate outcome here is to strike out the claimant’s claim, there being no measure short of that capable of addressing the unfairness arising. HNH is content for its own counterclaim to be struck out at the same time.

Mr Nathan and Mr Tritton, in opposing HNH’s application, submit that there was no abuse of process, that the delay in pursuing the proceedings in this case is all excusable, that much of it was the result of difficulties in obtaining/retaining public funding, that much of it was also entirely the fault of HNH, and that no relevant prejudice has resulted from the delay. As to non-compliance for the purposes of CPR 3.4(2)(c), it is submitted that both parties consensually departed from the order of Park J within the period 2002 to 2004, and that it was common ground from a very early stage that the parties would not be complying with its terms and that new directions would eventually be needed. HNH cannot be allowed to complain years later of an act of non-compliance by the claimant when it was itself a party to that non-compliance. In addition, HNH was in breach in failing to serve any expert report of its own, which should have been served simultaneously with the claimant’s expert’s report.

There is little dispute as to the principles to be applied in a case such as this, although each side understandably emphasised different aspects of the case law.

In relation to 3.4(2)(b) Explanatory Note 3.4.3.5 in the White Book 2014 states:

“Rule 3.4(2)(b) is not strictly relevant where the complaint is one of delay rather than a complaint as to the form or content of a statement of case (Western Trust & Savings Ltd v Acland & Lenson (a firm) [2000] L.T.L June 19, 200 (QB). However, in Habib Bank Ltd v Jaffer (Gulzar Haider) [2000] CPLR 438, CA, a claim was struck out where delays were caused by a claimant acting in wholesale disregard of the norms of conducting serious litigation and doing so with full awareness of the consequences (cf. Grovit v Doctor [1997] 1 WLR 640; [1997] 2 All ER 417, HL, noted in para 3.4.5 below). Delay, even a long delay, cannot by itself be categorised as an abuse of process without there being some additional factor which transforms the delay into an abuse (Icebird Ltd v Winegardner [2009] UKPC 24). The principles of Grovit and Icebird were considered and applied in Adelson v Anderson [2011] EWHC 2497 (QB)…”

In the latter case at [16]-[32] Tugendhat J set out and summarised the relevant case law (including the Grovit and Icebird decisions referred to in the Note above) on the interaction between delay and abuse of process. The guiding principle is that delay alone, even if it is inordinate and inexcusable, cannot be an abuse of process; but such abuse may arise when delay is combined with some other relevant factor (such as an absence of intention to take a case to trial).

In respect of the court’s jurisdiction to strike out for failure to comply with rules, practice directions and court orders, the White Book 2014 Explanatory Note 3.4.4 provides the following guidance:

“Rule 3.4(2)(c) gives the court an unqualified discretion to strike out a claim or defence where a party has failed to comply with a time limit fixed by a rule, practice direction or court order.

…

The relevant circumstances include any prejudice suffered by other parties but it is no longer necessary to consider prejudice in the way it was considered pre-CPR, or to ascribe it to a particular period or periods of delay (Axa Insurance Co Ltd v Swire Fraser Ltd (formerly Robert Fraser Insurance Brokers Ltd) [2001] CP Rep 17; [2000] CPLR 142, CA).

“I can see that were delay to have occasioned prejudice short of an inability of the court to be able to provide a fair trial, then there would be or may be scope for the use of other forms of sanction. But where the conclusion that is reached is that the prejudice has resulted in an inability of the court to deal fairly with the case, there can only be one answer and one sanction; that is for the [proceedings] to be struck out” (per Latham L.J. in Purefuture Ltd v Simmons & Simmons, May 25, 2000, CA).

The relevant circumstances may also include the weakness of the claim even if it is not so weak as to have no real prospects (Cohort Construction (UK) Ltd v M Julius Melchior [2001] C.P. Rep. 23, CA; cf Chapple v Williams [2000] LTL, December 8, CA, concerning applications under r.3.9).

The court’s power to strike out under r.3.4(2)(c) is not confined to circumstances in which the upshot of the party’s failure to comply with a rule, practice direction or order has been serious delay (of the kind that pre-CPR might have led to an application to strike out for want of prosecution), though that is the more usual case…

…

In Maqsood v Mahmood [2012] EWCA Civ 251, the Court of Appeal held that the judge had been justified in striking out the claim under r.3.4(2)(c) given the failure of the claimant to comply with court orders relating to specific disclosure, exchange of witness statements and delivery of trial bundles. The claimant should have been ready for trial but attended before the judge seeking an adjournment which had been rightly refused. Given the claimant’s hopeless position following the refusal of the adjournment, his case was doomed to be dismissed. The Court of Appeal made the point that the right to a fair trial was a right enjoyed by defendants as well as claimants.”

Further recent guidance is to be found in the judgment of Hamblen J in The Owners and/or Bailees of the Cargo of the Ship Panamaz Star v The Owners of the Ship Auk [2013] EWHC 4076 (Admlty) (“The Auk”). There a strike out was sought by reference to both delay and abuse of process, and Hamblen J examined the relevant case-law on each head. He helpfully summarised the principles derived therefrom as follows:

In The Auk the claim was issued in May 2000 and was subject to an agreed suspension of the procedural timetable until 2004. No steps were then taken between 2005 and 2013, when the claimant applied to list a CMC. The learned Judge struck out the claimant’s claim under rule 3.4(c) on the basis of delay, which he found had caused serious prejudice to the Defendant in that a fair trial was precluded. He so decided even though the defendant was partly responsible for the delay. In view of his finding on delay/breach of rules, the learned Judge made no determination on the alternative ground of abuse of process.

Both Mr Nathan and Mr de la Mare referred to the dicta of Neuberger J (as he then was) in Annodeus Entertainment Ltd v Gibson (unrep., 2000) identifying a number of potentially relevant factors to which he considered the court should have regard in addressing the question of whether an action should be struck out on grounds of delay. Mr de la Mare emphasised that in the Court of Appeal decision Audergon v La Baguette Ltd [2002] CP Rep 27 Jonathan Parker LJ had indicated (at paragraph 107) that one should be cautious about applying a judicially-created checklist which does not appear in the CPR itself, and which could compromise the flexibility the CPR was designed to achieve. He submitted that the factors in question are simply potentially relevant considerations within the broad range of such considerations under the flexible CPR test.

The list of factors identified by Neuberger J was set out in the judgment of Jonathan Parker LJ:

“51.

…..The list reads as follows (so far as material):

“First, a claimant has and always has had a duty to get on with proceedings, and is liable to sanctions if he does not.

Secondly, this duty was taken more seriously under the RSC even before the CPR came into effect: see Arbuthnot Latham v. Trafalgar Holdings [1998] 1 WLR 1426. This is a point of significance because part of the period of the delay was before the CPR came into force.

Thirdly, following the coming into effect of the CPR, keeping to time limits laid down by the CPR or by the court itself is accorded more importance than it was previously, see per Lord Woolf in Biguzzi v. Rank Leisure plc [1999]1 WLR 1926 at 1932G. One sees that principle reflected also in the observations of Lord Lloyd of Berwick in UCB Corporate Services Ltd v. Halifax SW Ltd (unreported 6 December 1999 at paragraph 17).

Fourthly, under the old law a claim could normally only be dismissed for want of prosecution where the plaintiff's default or delay had been intentional and contumelious, or where he had been guilty of inordinate and inexcusable delay, giving rise to a substantial risk that a fair trial would not be possible, or to serious prejudice to the defendant (see Birkett v. James [1978] AC 297).

Fifthly, the court is now prepared to dismiss a claim for delay even if neither of Lord Diplock's two requirements as laid down in Birkett v. James [1978] AC 297 is satisfied (see Biguzzi v. Rank Leisure plc [1997] 1 WLR 1926 at 1932 G).

Sixthly, the duty of a claimant to pursue an action expeditiously and in accordance with the rules is all the more important when the claimant has already had a significant benefit at the expense of the defendant from the action — for instance, in this case the benefit of the search order. This is perhaps even more true where the claimant has, and continues to have, the benefit of a continuing interlocutory injunction to the defendant's disadvantage, which injunction is to run to trial. …

Seventhly, the CPR enable the court to adopt a more flexible approach. The previous “all or nothing” extremes of either dismissing the claim for delay or permitting it to continue are now merely the two ends of a spectrum. The court has other sanctions at its disposal which it can and, in appropriate cases, should impose, rather than adopting one of the two extreme positions. …

Eighthly, in light of general principle and the overriding objective (see CPR r.1.1(2)) the sanction, if any, to be invoked by the court to deal with a particular case of delay should be proportionate. To dismiss a claim where the claimant appears to stand a reasonable chance of success and of recovering substantial damages is a strong thing to do. Particularly so bearing in mind Article 6(1) of the [ECHR] …

Ninthly, it appears to me that it is normally relevant to consider the following factors. First, the length of the delay; secondly, any excuses put forward for the delay; thirdly, the degree to which the claimant has failed to observe the rules of court or any court order; fourthly, the prejudice caused to the defendant by the delay; fifthly, the effect of the delay on trial; sixthly, the effect of the delay on other litigants and other proceedings; seventhly, the extent, if any, to which the defendant can be said to have contributed to the delay; eighthly, the conduct of the claimant and the defendant in relation to the action; ninthly, other special factors of relevance in the particular case.””

With these principles in mind I start by considering the delay in the present case. As I have said, the claimant contends that while the delay is lengthy, none of it is inexcusable so far as the claimant is concerned, and some of it was caused entirely by HNH. In order to make good their argument in this regard, Mr Nathan and Mr Tritton in their skeleton argument divided the overall period into several stages, to which I now turn.

Stage 1 predates the order of Park J. Prior to that order HNH had required the claimant, a legally aided claimant, to serve out of the jurisdiction. This is said to have been a tactic that caused seven months delay in that earlier period. I see little merit in this point; tactic or no, a potential litigant is entitled to insist on his legal rights. In any event no complaint is made (nor, it seems to me, could reasonably be made) of any time which elapsed prior to the order of Park J.

Stage 2 comprises the two years from December 2001 to Jan 2004, immediately prior to the first long silence of about three and a half years. The claimant submits that for this period of two years the parties “consensually” departed from the order of Park J, and that no blame for this can be attached to the claimant, who clearly wanted the proceedings to continue. I do not agree that this fairly represents what happened, or that no blame attaches to the claimant for the delay during this period.

Once the misunderstanding caused by the terms of the claimant’s solicitor’s letter had been cleared up, the timely implementation of Park J’s order encountered a further obstacle in the form of Mr Watkinson’s insistence that copying should take place in the presence of both parties’ experts, and that before that copying was carried out Mr Watkinson must be able to listen to the original recordings at a meeting at which were present both the experts, the claimant and HNH’s representative. It is true that HNH went along with this insistence on a joint meeting. However, they expressed concern that the approach Mr Watkinson was adopting seemed to run counter to the requirement of the order that experts should report separately on distinct issues. HNH also queried whether it was really necessary for the experts to be present during the copying process. The claimant’s solicitor’s reply is significant: it implied that Park J’s order would have been in different terms if Mr Watkinson had been able to express his view at the relevant time. Further issues were caused by the claimant asking for explanations of why HNH wished to have certain titles copied.

When the joint meeting was eventually able to take place, it came to a premature end when the claimant revealed that he had in his possession a considerable amount of further relevant recorded material. Curiously, his solicitors later stated that neither the claimant nor they could have had “the remotest suspicion” that the material in question was relevant. It is not clear why they took that view.

By this time about nine months had passed with little or no progress, and HNH’s solicitors, clearly concerned, pressed for the case to be set down for trial, as required by the order (albeit obviously with a later trial window). However, the claimant was resistant to that step and in January 2003 stated that the experts must “conclude their investigation” before the proceedings could move forward – a statement repeated later that month, and again after a second inconclusive joint meeting in the middle of February 2003. At the latter meeting the claimant seems to have produced little by way of the further relevant material said to be in his possession.

Next the claimant suggested that the experts be jointly instructed, and a complex document was produced as a draft of such joint instruction. HNH refused, and stated that the case “must be brought back on track as quickly as possible”; they pressed for the recordings to be copied for each expert then to prepare his own separate report, as required by the order. The claimant agreed. This takes us to July 2003, after which there was some further brief correspondence in January 2004 before the first long silence closes over the proceedings.

In the light of this it is clear that the order of Park J was effectively sidelined by the claimant virtually from the outset. Mr Hutchinson frankly acknowledges this in his evidence:

“….the adherence to [Park J’s order], the relevance of which had largely disappeared certainly by 2003…..if not earlier, meant that the Order was redundant …..

…..slavish adherence to [the order] ….was inappropriate, in that the Order has long since become irrelevant, ultimately superseded by the discovery and establishment in 2010 of fraudulent activity established by [HNH] designed to indicate the blame for the distortion lay with the Claimant”.

(See his fifth witness statement, at paragraphs 26 (19)(a) and 26 (48).)

This was almost certainly as a result of Mr Watkinson’s involvement and his advice. In view of this, and of what occurred later, it appears that from the time he became involved Mr Watkinson effectively took charge of the claimant’s case, or had a very powerful influence on how it was conducted.

I consider that it is untenable to suggest that the claimant’s side was not primarily responsible for the lack of progress during the two year period of “Stage 2”. Mr Watkinson’s insistence on various inspection procedures being carried out before copying, and on joint meetings of experts (with others in attendance) to listen to the original PMs, was not the procedure envisaged by Park J’s order, and resulted in considerable delays. Further, the claimant appears to have been largely responsible for the abortion of the first joint experts’ meeting. In addition, the claimant’s suggestion that the experts should be instructed jointly would have been a further departure from the process envisaged by the order, and inevitably caused some unnecessary expenditure of time and cost although it was a step too far for HNH.

To say that the departure from Park J’s order was “consensual” is not a fair assessment. It is true that HNH did not seek a peremptory order nor did they return to the court. It is also true that HNH went along with Mr Watkinson’s suggestions to some extent. However, this appears to have been done more in a spirit of co-operation with a view to advancing matters than with any great enthusiasm. When the claimant attempted to persuade HNH to abandon Park J’s order altogether and jointly instruct the experts, this led to HNH enlisting the support of leading counsel in an attempt to draw the process back to that envisaged in the order.

Stage 3 comprises January 2004 to May 2007. It is submitted by the claimant that throughout this period he was in the hands of the expert, Mr Watkinson, and that his investigations and researches took a long time, principally because they were the means by which he discovered that the PMs supplied to the expert by HNH were not the ones used to make the published CDs. The claimant also notes that HNH too was required by Park J’s order to supply its own expert report, which it never did. Thus, it is submitted, the only party guilty of inexcusable conduct is HNH, and there was no inexcusable delay or abuse of process by the claimant in this period.

Mr Watkinson includes in the First Report a section entitled “Why it has taken so long”, in which he places the blame for the length of time taken to produce it firmly on HNH for misleading him in the manner to which I referred earlier; this also included allegations of supplying forged project sheets and making untrue statements about access to DRE encoding equipment. Mr Nathan relied heavily on this allegation of misleading in order to explain the delay. However, it seems reasonably clear that Mr Watkinson was aware by November 2004 at the latest that the sonic interference which affected the CDs or some of them related to the presence of DRE, and that PMs retained by HNH/K&A (and produced for inspection) did not correspond with the CDs. Further, as I have said, Mr Watkinson’s investigation went far beyond the bounds of his expertise and strayed deep into areas of advocacy and even judgment, resulting in speculation and findings which are wholly inappropriate for an independent expert with his expertise. This unwarranted expansion of his investigation and conclusions must presumably have added significantly to the time taken to produce the First Report.

It is not clear how much time Mr Watkinson spent on preparing what is a very substantial document during this “Stage”. The chronology attached to the First Report indicates that all copying had been completed by February 2004 (Footnote: ²), that there was some investigatory work done in July 2004 and then about 13 days of further investigations in the 12 months from November 2004 (when Mr Watkinson states that “hard evidence of tampering was finally discovered”) to November 2005. As far as I am aware Mr Watkinson himself does not identify what if anything was done by him after November 2005. Mr Hutchinson refers to “analysis and investigation by Mr Watkinson” in the period “2004 to Oct 2006”, but gives no further detail (see his third witness statement, paragraph 10). Clearly the results of Mr Watkinson’s investigations during 2004-5 needed to be considered and written up, but this does not explain why the work appears to have been carried out so sporadically nor why the document was not supplied to the other side until towards the end of May 2007.

I do not have sufficient material before me to express a view on whether the instructions Mr Watkinson received were appropriate or adequate. He recites that they included asking him “to establish the nature and mechanism of any sound quality loss and also to establish if possible who was responsible.” (My emphasis.) I have no information about what if any explanation of the scope of the latter instruction was given to him. Clearly in seeking to fulfil it he allowed himself to stray into inappropriate areas.

In my view it does not assist the claimant to say that he was in the hands of the expert. It is not the expert’s role to direct the course of proceedings, as appears to have been the case from the outset of his involvement. Nor is it acceptable to allow inordinate time to pass in order to produce a report, particularly where the expert is pursuing an investigation outside the scope of his expertise. There is nothing to indicate that Mr Watkinson was warned by the claimant or his solicitors that he was taking on an inappropriate role. Indeed the claimant and his solicitors enthusiastically adopted his findings in their entirety and made them the basis of a threat to bring an application for summary judgment in the light of what they clearly regarded as unanswerable evidence of dishonest tampering with the PMs. Nor is there any indication in the material before me that the claimant or his solicitors took steps to press Mr Watkinson to report back in a timely manner.

It is true, as Mr Nathan pointed out, that at no stage during this three and a half years did HNH complain to the claimant or apply to the court. It is also true that they were not in a position to serve an expert report of their own, their expert having apparently ceased to be available in the meantime. As to the latter point, the order of Park J did not require expert evidence by either party, and was in permissive terms. However, HNH had not indicated that they did not intend to call such evidence, and after the service of the First Report stated that they were looking for a replacement expert.

As to the lack of any complaint or application to the court by HNH during this period, the clear inference is that HNH were “letting sleeping dogs lie”, probably in the hope that the matter would go away. In this connection Mr Nathan referred me to the following passages in the judgment of Clarke LJ (as he then was) in Asiansky Television Plc v. Bayer-Rosin (A Firm) [2001] EWCA Civ 1792, at paragraphs 47-8:

“47….Paragraph 2.7 of the Part 23 Practice Direction provides:

“Every application should be made as soon as it becomes apparent that it is necessary or desirable to make it.”

In my judgment that includes applications to strike out for breach of an order.

48.

It is no longer appropriate for defendants to let sleeping dogs lie……Thus a defendant cannot let time go by without taking action and then later rely upon the subsequent delay as amounting to prejudice and say that the prejudice caused by the delay is entirely the fault of the claimant. Such an approach would in my judgment be contrary to the ethos underlying the CPR, quite apart from being contrary to paragraph 2.7 of the Part 23 Practice Direction. One of the principles underlying the CPR is co-operation between the parties.”

This and other authorities make clear that HNH must bear some of the responsibility for the excessive delay in this period, and that this is a factor relevant to the exercise of the discretion whether to strike out or no. However, for the reasons I have given I do not accept the submission that the fault was all HNH’s and that the claimant was entirely blameless. In my view the greater responsibility for this inordinate elapse of time in order to produce a report (which fell below the standard required by CPR Part 35) must lie with the claimant, who had initiated these proceedings in 2000 and who was failing to pursue them in the manner envisaged by the order of Park J or with anything approaching reasonable expedition. It is also to be borne in mind that the claimant was (as I have found) largely responsible for the earlier lengthy delay at Stage 2.

Mr Nathan’s Stage 4 is the period from 23 May 2007 to September 2008. He submits that this too is a period where the delay was entirely caused by the fault of HNH in taking an inordinate time to respond.

As at 23 May 2007 HNH were faced with a situation where, on the strength of Mr Watkinson’s findings, an application for summary judgment was being threatened by the claimant’s solicitors based on unpleaded allegations of the most serious nature made against employees of HNH and K&A, as well as others. HNH were clearly entitled to a reasonable time to consider and respond to these allegations. They responded about 18 months later on 5 September 2008, by way of a detailed letter enclosing some 12 witness statements. 18 months was clearly longer than was reasonable, and Mr de la Mare accepted as much.

However, he pointed out that in September 2007 the claimant’s legal aid certificate was discharged and was only reinstated in mid February 2008, although HNH was not informed of this by Mr Hutchinson until just before the reinstatement. Mr de la Mare submitted that if that period is discounted (on the basis that HNH should have been informed and could not properly have been expected to continue working and incurring further irrecoverable expense in respect of a case which might well not go forward at all) then HNH should have been in a position to make a substantive response (along with supporting witness statements of fact) by about May or June 2008. On that basis he submitted that although in the event the preparation of the response took until September 2008, that was not a significant delay.

There is some force in these submissions. It had been necessary for HNH to digest the First Report and Mr Hutchinson’s detailed letter of 23 May 2007, both containing allegations of an entirely different and much more serious nature than those which had been pleaded; then they needed to identify, locate and proof a substantial number of witnesses of fact who fell within the scope of the allegations of fraud and criminal conduct, some of whom no longer worked for HNH/K&A. The focus had also now shifted to the need to respond to the threatened application for summary judgment. On any view this was going to take a little time. Therefore, while some of the 18 month period was undoubtedly excessive, I do not consider that this could amount to much more than about 3 months, on the assumption that the approximately 5 months period during which no legal aid certificate was in force is discounted. Although any unnecessary delay is reprehensible, this one may be seen as having somewhat less significance in the context of this case.

Mr Nathan’s Stage 5 runs from HNH’s response in September 2008 until July 2010. However, in the light of the inter-party correspondence summarised earlier in this judgment it seems more appropriate to treat the next stage as ending at about the start of September 2009 when that correspondence ground to a halt once more, and the second very long period of silence began.

As seen, HNH’s 5^th September 2008 response was targeted specifically at the threat that if the claim was not conceded by HNH then summary judgment would be sought. HNH’s solicitors pointed out that in the light of the extensive disputes of fact that were now revealed as between Mr Watkinson’s thus far unpleaded allegations of fraud and misconduct, and the proofs of evidence obtained by HNH, an application for summary judgment would be wholly inappropriate. They asked whether those allegations were to be pursued. Four and a half months later the claimant’s solicitors responded indicating an intention to pursue the allegations, and to make the application for summary judgment with the benefit of a detailed statement from the claimant, then in preparation.

The same intention was expressed by the claimant’s solicitors in another letter in February 2009, and again in April 2009, after HNH’s solicitors had once more pointed out the inappropriateness of summary judgment, and urged that the main proceedings should be the focus, and that a CMC should be listed to put the case on a proper footing. If the fraud case was to be pursued then an application to amend the claimant’s pleading should be made. This exhortation was repeated in August 2009. In response the claimant’s solicitors stated that the claimant would now be seeking legal aid to amend the pleading to reflect Mr Watkinson’s findings and to enable him to carry out further tests and analysis which he “considers may be crucial”. The letter did not expressly state that summary judgment was being abandoned. This was effectively the end of inter party communication for 4 years.

Was there inexcusable delay on anyone’s part during the 12 months from September 2008 to September 2009? The claimant was clearly entitled to a reasonable opportunity to consider HNH’s response. However, in the light of the claimant’s solicitor’s letters it appears that for much of that time the claimant was pursuing the obviously inappropriate course of preparing a summary judgment application, which included a very detailed witness statement by the claimant in support. It is not clear whether and if so when, at some point in this period, that course was abandoned. What is clear from the correspondence is that in spite of the evidence of fact supplied by HNH, the claimant was still pursuing the fraud allegations and was intending to amend his pleadings to reflect them. It is also apparent that once more Mr Watkinson was determining the way in which the claimant was seeking to pursue his claim.

In my view a significant part of this 12 month period was inexcusably wasted by the claimant’s apparent focus on what would have been a hopeless summary judgment application. If the claimant’s case was ever suitable for such an application (which is open to considerable doubt) it was certainly not so suitable once HNH’s detailed response (with evidence) to the First Report had come in. This misconceived approach by the claimant can only have been an unnecessary diversion from the main action. I see little reason to reproach HNH for not forcing the issue by bringing the claimant back to court in this period. They made several attempts to persuade the claimant to drop the summary judgment idea and focus on the underlying proceedings.

I turn to Stage 6, comprising 4 years from September 2009 to August/September 2013 – the second long silence, broken only when on 24 September 2013 the claimant served on HNH its application for further directions. The claimant submits that neither he nor his solicitors are responsible for any delay in this period, during which he was clearly seeking to pursue his claim, and in which the delay was attributable to difficulties associated with obtaining and maintaining legal aid funding.

The claimant returned to Mr Watkinson for a second report based on further tests and analysis which the latter had advised might be “crucial”. It seems that in November or December 2009 the claimant sought further funding for these tests, which were intended to support the allegation that the sonic interference had been caused deliberately (see Mr Hutchinson’s third statement, paragraph 10). The claimant states that this further funding was refused but that existing legal aid funding was, with the knowledge of the LSC, used to enable Mr Watkinson to carry out these tests and analysis and to produce a draft second report in July 2010. The claimant states that the “central thrust” of the draft report is consistent with the findings in the Second Report (see the claimant’s skeleton argument, paragraph 116). I have already commented on the Second report (paragraphs 45-53 above).

In these circumstances it is not clear why the matter could not at that stage have been brought back to the court for directions, including (if so advised) for permission to make the proposed amendments in order to plead the fraud allegations, which had now been extant for several years.

Instead of returning to the court, little if anything seems to have been done for 4 or 5 months until November/December 2010, when Mr Hutchinson states that further legal aid funding was again requested. Mr Hutchinson does not say what this was for, but presumably it was connected with the work already done and/or still intended to be done by Mr Watkinson in order to establish that the sonic interference at the heart of the dispute had been caused by HNH intentionally with a view to discrediting the claimant - an allegation now said by the claimant to be unnecessary.

As a result of the application for further funding another year passed without progress, at the end of which, in December 2011, the funding was refused, and an indication was given to the claimant that the legal aid certificate was likely to be discharged. In May 2012 it was discharged. That decision was appealed to the Adjudication Committee. On the recommendation of the Committee the certificate was reinstated in December 2012 but the refusal to increase funding was maintained. The claimant brought proceedings for judicial review in April 2013 and the LSC relented and granted limited further funding in May 2013.

My attention has not been drawn to anything which would indicate whether the discharge of the claimant’s certificate can in any way be attributed to the extensive delays in progressing the case and/or to any view taken by the LSC of the merits of the claim, including the proposed fraud allegations. It would be wrong to speculate.

However, notwithstanding the difficulties encountered in obtaining and retaining public funding, the claimant must in my view bear some responsibility for the delay from about July 2010 to the summer of 2013, in that he failed to return to court for directions in or around July 2010, and/or caused delay by seeking further legal aid designed, at least in part, to assist him in establishing allegations now said to be unnecessary for his claim (see paragraphs 102-104 above).

HNH, too, are not without fault in relation to this further extended delay, as again they let sleeping dogs lie and took no steps themselves to bring the matter back to court. They may initially have been discouraged from doing so by the claimant’s indication in September 2009 that further legal aid coverage was being sought with a view inter alia to seeking an amendment to the particulars of claim. Had such an application been made it would have provided HNH with an opportunity to complain to the court about delay. Equally, as time passed they may well have speculated that further legal aid had been refused (as in fact it was), and that there was little point expending further irrecoverable costs by returning to court if the case would not go ahead in any event. This would provide some mitigation for their failure to take the initiative, but does not absolve them from fault altogether. Therefore they too must bear some responsibility for the delay at this stage.

In the light of the above it is in my view clear that there has been inordinate delay to a quite extraordinary extent in the progress of these proceedings, for which the claimant is in large measure responsible. In particular, the claimant sidelined (indeed more or less disregarded) the timetable and other provisions set out in the December 2001 order of Park J. In doing so the claimant appeared to adopt an approach that no real progress could be made in the litigation until his expert, Mr Watkinson, had concluded whatever investigation he thought appropriate. Significant delays resulted from the claimant allowing the mode and timescale in which his claim was to be established to be determined to a considerable extent by Mr Watkinson, rather than by reference to the order of Park J. Additional delays were inevitably caused by Mr Watkinson investigating and making detailed findings about matters both outside his areas of expertise and outside the proper role of an independent expert, and about issues which are now said to be unnecessary to the claimant’s claim. There was also a very long delay which is largely unexplained, save by the statement that the claimant was “in the hands of” Mr Watkinson. Further significant delays were caused by the use of the First Report to threaten HNH with an inappropriate summary judgment application, and by maintaining that threat following HNH’s September 2008 response, in the face of clear disputes of fact. The claimant and his advisers largely disregarded attempts by HNH at intervals over the years to persuade the claimant to bring the case back on track, and to abandon the threatened application for summary judgment. While disputes with the legal aid authority undoubtedly played a part in the delay, particularly from about the beginning of 2011, for the reasons I have given the claimant must bear some responsibility for that delay. Moreover, for the majority of the time from December 2001 to date, legal aid funding has been in place, but unfortunately the claimant failed to make use of it appropriately.

For its part HNH was clearly at fault and contributed to some extent to the delay in letting sleeping dogs lie during two long periods. However, the fault of HNH is on a considerably smaller scale: it was primarily the claimant’s responsibility, having brought the claim against HNH, to progress it in accordance with the CPR and order of the court. This he has failed signally to do. HNH made attempts at intervals to persuade the claimant to respect the order of Park J, to return to court for directions and not to pursue a time-consuming and ultimately hopeless application for summary judgment. In so far as HNH was at fault in not seeking to remedy the delay by seeking a peremptory order of the court, there is some mitigation, for the reasons discussed earlier.

As Mr Nathan emphasised, delay on its own, however long or inexcusable, does not amount to an abuse of process; there must be something more. The authorities make clear that one such factor is where a party acts with wholesale disregard for the rules or orders of court, with full awareness of the consequences. In my view that is what the claimant has done in the present case. As Mr Hutchinson acknowledged in his evidence, the order of Park J was regarded as irrelevant, and the claimant at all times gave precedence to Mr Watkinson’s preferred approach (see paragraphs 76 and 80 above). The conduct of the claimant, taken overall, was also in breach of CPR 1.3 (d), (e) and (f): the claimant has failed to assist the court to ensure that the claim is dealt with expeditiously and fairly, has caused the court’s finite resources to be wasted and further resources to be expended unnecessarily by the present application, generated as it is by the extraordinarily long delay, and has not helped the court to ensure compliance with its rules and orders. The claimant has also sought to rely upon expert evidence which is clearly inconsistent with the requirements of CPR Part 35 and the relevant practice direction in significant respects: in particular, neither the First nor the Second Report can be described as “providing objective, unbiased opinions on matters within [the expert’s] expertise”, and in both reports Mr Watkinson clearly assumes the role of an advocate (see CPR 35(10) and PD 35PD.2). This breach is exacerbated by the fact that the production of these two reports has contributed materially to the delay which has ensued.

Other factors which in my view transform the inordinate and inexcusable delay in this case into an abuse of process are:

HNH has submitted that there is a further such factor, in that the claimant has “warehoused” his claim until it is convenient for him to pursue it. Mr Nathan argued strongly that this is very far from true, and that the claimant has at all times been seeking to advance the proceedings. In my view the claimant has generally been reluctant to take the matter forward until his expert had completed investigations to his and the claimant’s satisfaction, and was in a position to present a winning hand to HNH and the court. The claimant’s conduct in this regard, although not consistent with the aims of the CPR, is not the same as warehousing a claim without any firm intention of proceeding, or until convenient. Although I do not say that the claimant’s approach could not constitute the “extra ingredient” required to transform delay into an abuse, it is not necessary to decide this point, as there are other factors present here.

HNH also submits, by way of a further “extra ingredient”, that the delay here is such as to render the case stale, and to bring the process of litigation into disrepute. This factor overlaps with the questions whether and if so what prejudice has been caused by the delay, and whether the delay has been such as to be likely to obstruct the just disposal of the proceedings for the purposes of CPR 3.4(2)(b).

It is clear that if this matter goes to trial, that trial is unlikely to take place before 2016, given the embryonic state of the proceedings at present. That will be some 16 years after proceedings were commenced and nearly twenty years after the events which gave rise to the dispute.

HNH submit that, even with the recent abandonment of the fraud/deliberate sabotage allegations, the case is likely to turn upon the parties’, their agents’ and their operatives’ precise actions (and the sequence of those actions) in relation to each of the disputed titles, and therefore upon the witnesses’ recollection of a good many events a long time ago. There are likely to be several important witnesses of fact on each side (HNH states that it would wish to call 15-20), and some of the key witnesses are now quite old (for example, Mr Heymann would be about 79 at trial, and the claimant is of a similar age). In the light of this HNH submit that a fair trial has been rendered impossible or has at least been seriously impaired as a result of the passage of time, in that recollections will inevitably have faded. There must also be a question whether all the relevant witnesses will be available in 2016. Further, HNH point to a risk of degradation in the quality of the PMs which will need to be examined by a new expert on behalf of HNH (and perhaps on behalf of the claimant too).

The claimant disputes this. As far as the risk of fading memories is concerned, Mr Nathan submitted that a general assertion that memory fades with time is not sufficient for this purpose. He referred to a dictum of Auld LJ in the Court of Appeal in Slade v Adco Ltd [1996] PIQR 418, a case involving striking out for want of prosecution under the former Rules of the Supreme Court:

“Something more is required. Some evidence or circumstances from which it can be inferred that the delay has caused some specific problem for one or both of the witnesses, as distinct from a general impairment of memory from the passage of time, and that it is likely seriously to prejudice the party.” (p.428-429)

Mr Nathan also took me to dicta to the like effect in other authorities, including Rowe v Glenister (unreported) Court of Appeal 25 July 1995, at pp. 16-21.

These statements, which are admittedly from the pre-CPR era dealing with the requirement for “serious prejudice” in the context of a strike out for want of prosecution, still provide helpful guidance in this area, not least in discouraging reliance on mere generalised assertions of dimming memories based on the passage of time, in the absence of circumstances justifying an inference of a specific problem.

Mr Nathan submitted that there were no such circumstances here. He argued that Mr Heymann’s evidence was not particularly relevant. HNH’s case was that the claimant supplied defective PMs to K&A, and it was not alleged that Mr Heymann was involved at all in that process. The relevant employees at K&A had all signed witness statements in 2008 and there was no suggestion that their memories had faded. The claimant’s memory was fine and he had supplied two very detailed witness statements for the present applications. Ultimately this case was a matter primarily for expert evidence, and the evidence of the claimant and the K&A employees.

I do not accept these submissions. The precise chain of events in which each of the several disputed PMs (and any additions, replacements and returned recordings) moved between the parties and their agents will be highly material, as will the nature, time and sequence of the processes applied to each of them at each stage, all communications between the claimant and HNH/K&A relating to each of those items, and all internal documents (eg project sheets) relating to each of them. This would have required a substantial and difficult exercise in recollection for each of the witnesses in question, even if the trial had taken place in October 2002 as envisaged in the order of Park J. With the passage of some twenty years it seems very unlikely that it will be possible with any reasonable degree of precision.

It is true that 12 of the witnesses likely to be called by HNH were proofed in 2008. However, those witness statements are primarily dealing with the allegations of fraudulent and criminal tampering then being pursued in the context of a threatened summary judgment application. They are couched in relatively general terms, dealing with the systems employed and their experiences of working with the claimant, and the absence of any dishonest conduct on their part. In so far as particular recordings relevant to this dispute are referred to, it tends to be by way of example, and the witnesses do not descend to the particularity that will be required at trial.

Further, it is wholly unrealistic to suggest, given the serious nature of the allegations made against him by Mr Watkinson (whose reports Mr Nathan said would still be relied upon at trial if possible, notwithstanding the abandonment of the fraud claim), that Mr Heymann would not need (and wish) to provide a detailed account of his participation in the Agreement and the events which led to its termination, including all dealings with his associates in HNH, K&A and the Hong Kong company which produced the CDs. For him, too, there is bound to be a long and detailed exercise in recollection, in which he is bound to be seriously handicapped by the passage of so long a time.

I am also told that there are other issues of fact involved in the claim in addition to those related to the handling and processes carried out.

It will almost certainly be necessary for HNH to find and engage a replacement expert sound engineer to inspect and report on the originals and the copies of all relevant PMs and CDs. HNH raised the question whether after so long the quality of some or all of these may have been degraded, reducing or removing the validity of an inspection by that expert. I discount this point as I have no means of knowing whether degradation is or is not likely to have taken place.

HNH also rely upon a second category of prejudice. They refer to costs which they say have been wasted as a result of the claimant’s conduct of the case. These include the costs to date (excluding the costs of these applications) in the sum of about £200,000, including the costs of HNH’s original expert who is now no longer available, and the costs incurred in dealing with the claimant’s threat of summary judgment following the First Report. In addition, there are the costs of the present application, amounting to some £75,000, and the costs of the other applications before the court. HNH submit that, given the claimant’s impecuniosity and legally aided status, all these costs are almost certainly irrecoverable (other than by way of possible set off against any damages awarded to the claimant if he should succeed).

HNH also point to the wasted and irrecoverable costs incurred by the claimant/the public purse by reason of the extended conduct of the litigation, resulting in the retirement of one of the claimant’s barristers and the necessary instruction of a replacement counsel. HNH also suggest that there is at least a question mark over the value of the First and Second Reports if the case goes ahead, given the non-compliance with Part 35 and the related practice direction. Added to all this are the costs of the future conduct of the case, including substantial trials on both liability and quantum, where disclosure has not yet taken place and witnesses of fact need to be proofed, and expert evidence obtained. They submit that future costs will be very substantial indeed, and there is no realistic prospect of HNH recovering any past or future costs whatever the result of these applications or of any future trial.

The claimant contends in response that the fact that substantial costs may have been incurred is irrelevant to whether one can now have a fair trial. If the action had proceeded to trial earlier, those costs would still have been incurred. Furthermore, HNH is part of a substantial classical music empire, whereas the claimant is on legal aid. Nor, it is submitted, is it anything to the point that the cost of dealing with this application alone has amounted to £75,000; it was HNH’s choice to issue this strike out application which in the claimant’s view was wholly unnecessary. Similarly, it is submitted to be irrelevant that further costs will be incurred if the action is not struck out, for that applies in every strike out application.

In all the circumstances of this case I consider that the prospect of a fair trial now, at a distance of nearly twenty years from the relevant events, is probably impossible and at the very least seriously impaired in the light of the inevitable problems of detailed recollection of many witnesses in the context of such a factually and technically complex case. I do not see any particularly useful parallel between this case and the historic nature of certain recent criminal trials to which Mr Nathan referred. Apart from other considerations, a witness’s recollection of whether a specific event or even several specific events took place is materially different from the complexity of the factual issues raised here.

I also accept that prejudice relevant to whether a trial can fairly go ahead has been suffered by HNH in terms of additional irrecoverable costs caused by the claimant’s culpable delay, and his disregard of the order of Park J and the CPR, and more prejudice will be suffered if the proceedings continue.

A significant portion of the costs to date incurred by both sides have been wasted. This applies to the costs of the threatened but unrealistic summary judgment application, and all the costs associated with the now abandoned allegations of fraud and criminal conduct, and of those aspects of Mr Watkinson’s investigations and his two lengthy reports which stray beyond his area of expertise. There is also a not insignificant risk that if a trial goes ahead the evidence of Mr Watkinson may not be admitted in view of its content, in which case all or most of the costs thereof would be thrown away and a new expert would be required for the claimant as well as for HNH. The latter will certainly require a replacement expert, and the costs of their original expert are wasted in any event. Further, as a result of the delay the claimant has incurred additional costs by reason of the retirement of his original junior counsel and the need to instruct new counsel.

It is clear that none of the costs already incurred by HNH, nor the very substantial additional costs of a trial, are likely to be recoverable from the claimant, save possibly by way of a deduction from any damages awarded to the claimant, should he be successful in his claim and establish sufficient loss.

In view of my findings it is clear that the circumstances here give rise to a discretion to strike out the claimant’s claim under either or both CPR 3.4(2)(b) and (c). In deciding whether to exercise that discretion I remind myself that to strike out a claim, and thereby deprive a claimant of a trial and possibly of relief including an award of damages, is a draconian sanction, and that it is necessary to consider whether there is a different sanction for the delays and non-compliance here which better meets the requirements of proportionality.

I am told that the claim has been quantified in an amount in excess of £5 million, and I also have regard to that in considering the exercise of my discretion. I do not feel in a position to express even a provisional view on the merits of the claim, nor was I invited by either side to do so. HNH have not sought to argue that the claim is hopeless. It is likely that one material factor will be the trial judge’s assessment of factual evidence about the nature of the claimant’s working practices to which there is reference at paragraph 35 above.

In exercising my discretion I also need to take account of the fact that HNH bears some responsibility for some of the delay, and therefore for some of the prejudice which results from it. In this regard, however, for the reasons already explained I consider HNH’s fault to be in an entirely different league to that of the claimant, and not of such a nature as to preclude a striking out if that were otherwise the appropriate sanction. Similarly, I need to take account of the fact that some of the delay appears to have been caused by difficulties for the claimant in obtaining and/or retaining public funding. However, for the reasons discussed earlier, I do not regard this aspect as so major a mitigation as Mr Nathan submitted, in the light of the overall delay and the manner in which the claimant’s case has been conducted from the outset.

In my view there is no alternative sanction available in the present case, and certainly none which would be at all appropriate or proportionate in the light of the inordinate and largely inexcusable delay which has taken place since December 2001, and the claimant’s disregard for the order of the court and the CPR. As a result of these the prospect of a fair trial is, at the very least, seriously impaired, and probably impossible. Even if it were appropriate (which it is not), the usual alternative sanction of costs is simply not realistically available in this case in view of the claimant’s financial situation.

As I said towards the beginning of this judgment, the proceedings are not much further advanced than they were when the matter came before Park J in 2001. To say that they are stale would be a considerable understatement. Significant public funding has been wasted, not to mention costs incurred by HNH. For the matter to reach trial would require expenditure of very substantial further funds on both sides, including further significant public funding on behalf of the claimant. All costs incurred by HNH are likely to be irrecoverable whatever the result. The court would have to accommodate a lengthy trial some fourteen years after the time when it should have taken place, and in circumstances where the passage of so much time would probably preclude the process amounting to a fair trial. Justice and the overriding objective require that the proceedings should be stopped now.

In all the circumstances, I conclude that the appropriate and proportionate order is that the claim should now be struck out on each of the two grounds relied upon by HNH. The counterclaim should also be struck out by concession. The form of the order, together with further and consequential orders, should if possible be agreed by the parties.