Griffith & Anor v Gourgey & Anor

These applications relate to the sufficiency of further information which has been ordered to be given by the Respondents.

There are two applications. The first is an application by the Petitioners for final relief on their petitions, on the basis that the Respondents have failed to comply with an order requiring them to answer the Petitioners’ Part 18 Request for Information. The second is an application by the Respondents for relief against sanctions under CPR Part 3.9 in the event that they are found not to have complied with the order.

The proceedings involve three unfair prejudice petitions under s.994 of the Companies Act 2006, concerning three companies: Bankside Hotels Ltd (‘Bankside’), Pedersen (Thameside) Ltd (‘PTL’) and G&G Properties Ltd (‘G&G’), (compendiously referred to as the ‘Companies’). The Petitioners are shareholders in the Companies, which operate in the business of property investment and, in particular, investment in hotels.

Although the three petitions have not been formally consolidated, they are being case managed and tried together, and there is a single set of pleadings.

The Petitions cover four areas of complaint.

First, an allegation that Mr Gourgey (who is a director of the Companies) caused Bankside, its subsidiary Riverbank Hotels Ltd, and G&G to transfer substantial sums of money to other companies in which he (or others connected with him) had an interest and the Petitioners did not. It is said that the payments were not made in the interest of Bankside, Riverbank Hotels Ltd and G&G, were made without the Petitioners’ consent and approval, and were used for the personal benefit of Mr Gourgey and others.

As to this complaint, the Respondents contend that the businesses of the Companies and their subsidiaries were run as though they were a corporate group, which included various other companies owned by the Petitioners. These companies would routinely assist each other with funding requirements by the granting of loans. This was an arrangement of which Mr Griffith was aware, to which he consented and which did not prejudice the Petitioners since the loans were made on commercial terms and in many cases to companies in which Mr Griffith was directly or indirectly interested. It is also said that it was understood and agreed that management charges would be charged in respect of services provided to the group, payable to companies associated with them.

The second area of complaint relates to what is said to be the diversion of the opportunity to construct and fit out a hotel from PTL to Brentford Hotels Limited (‘BHL’), a company in which Mr Griffith had no interest.

This is denied by the Respondents who maintain that, due to difficulties in obtaining funding, it was not viable for PTL to take the project forward, and that it was consequently agreed that Mr Gourgey and his sons could pursue the project through BHL.

The third of the Petitioners’ complaints relates to the manner in which the Respondents have treated the proceeds from the sale of the Riverbank Plaza Hotel. They allege that a company associated with Mr Gourgey (Watchcourt Ltd) has been paid more than its fair share of the proceeds.

This too is not accepted by the Respondents. Their case is that the company which owned the hotel (Riverbank Hotels Limited) has not made a final distribution of the proceeds.

Fourthly, the Petitioners claim that the Respondents have refused to provide them with information to which they say they are entitled.

This too is denied by the Respondents, who contend that the Petitioners have not identified or established any right to the information and that, in any event, the Petitioners have been provided with the information to which they are entitled or have requested.

It is clear from this brief summary that a number of areas of enquiry are likely to be of crucial significance in the proper determination of the issues which arise on the Petitions: these include the purposes for which the relevant companies made payments, the identification of any express or implied agreement as to the making of loans and payments, how such payments were accounted for in contemporary documents and whether the Respondents have failed to provide material information.

The Petitioners served Points of Claim on 24 May 2013, and on2 August 2013 the Respondents served their consolidated Points of Defence. This was followed by the Petitioners’ Points of Reply which was served on 3 September 2013. The statements of case presently consist of a Re-Amended Combined Points of Claim (dated 7 March 2014), an Amended Consolidated Points of Defence (dated 24 March 2014) and an Amended Reply (dated 9 January 2015).

On 3 September 2013, on the same date as the original Points of Reply, the Petitioners served a Request for Further Information (‘the Request’).

The Request contained questions in relation to 44 paragraphs or sub-paragraphs of the Amended Defence. After an assurance that the Respondents would answer the Request was withdrawn, the Petitioners applied on 3 November 2013 for an order from the Court under CPR Part 18.1(b) that the Respondents should provide the information requested.

On 3 March 2014, some 6 months after the service of the Request, the Respondents consented to an order made by Mr Robin Hollington QC (sitting as a Deputy High Court Judge), which required a full response to the Request by 4 pm on 21 March 2014.

The Respondents failed to comply with this order and, at a case management hearing before Rose J on 4 April 2014, an order was made which provided:

(3)

The Respondents do file and serve their response to the Petitioners’ [Request] by 4 pm on 22 April 2014.

(4)

Unless the Respondents comply with paragraph 3 within the time specified, the Points of Defence [by this stage the Amended Points of Defence] be struck out.

The Respondents filed and served a response to the Request in purported compliance with the 4 April order shortly before the deadline on 22 April 2014. This document ran to some 28 pages.

The Petitioners took the view that this document failed to answer many of the questions in the Request and took issue with the way in which some of them were worded. On 27 May 2014, they sought directions for the future conduct of the proceedings on the basis that the Respondents had failed to comply with the 4 April order and that consequently the Amended Points of Defence was to be treated as struck out.

On 5 Junethe Respondents made an application for relief against sanctions under CPR Part 3.9, ‘if needed.’

The two applications came on for hearing in November 2014 before Mr Simon Monty QC (sitting as Deputy High Court Judge). In a full and clear judgment, see In the matter ofBankside Hotels Ltd and others, Griffith and another v. Gourgey and others [2014] EWHC 4440 (Ch), he ruled at [34] that the Respondents’ Response to the Request served on 22 April 2014 was,

plainly incomplete and insufficient and thus the Respondents were in breach of the unless order [of Rose J].

He was, however, prepared to grant relief against sanctions (see [63]) on the basis that the Respondents complied with two conditions: first, that they pay the Petitioners’ costs of both applications on an indemnity basis; and secondly:

… that there should be a further Unless Order requiring the Respondents to provide a full response to the request within a specified period of time, which I suggest should be no longer than 21 days, failing which the Particulars of Defence will be struck out. Without wishing to fetter the discretion of the court in the future, it should be noted that, barring something extraordinary, the court would expect complete compliance with such order and would not look kindly upon any further application for relief under either limb.

A Minute of Order was agreed following the judgment, dated 17 November (‘the Relief Order’). This reflected the content of the judgment and provided for relief against sanctions in terms of the reinstatement of the Amended Points of Defence, provided the Respondents complied with the two conditions set out in paragraph 4 of the order (the ‘two limbs’ referred to in [63] of Mr Monty QC’s judgment). Paragraph 4(a) was the condition that the Respondents pay the costs order in favour of the Petitioners by 4 pm on 27 November 2014; and paragraph 4(b) was a condition that the Respondents:

by 4 pm on 4 December 2014 file with the Court and serve on the Petitionersa full and complete response to (1) the [Request] and (2) any request made under paragraph 1 of this order.

Paragraph 5 was in similarly emphatic terms:

For the avoidance of all doubt, the response to be provided by the Respondents under paragraph 4(b) of this Order shall:

(a)

be verified with a statement of truth in accordance with Part 22 of the Civil Procedure Rules 1998, and

(b)

give a full and complete response to each and every request made in the [Request] and to any request made under paragraph 1 of this Order to which paragraph 3 applies,

and a response that fails to comply in all respects with the provisions of this paragraph at the time when it is filed and served shall be treated as not having been filed and served for the purposes of paragraph 4 of this Order.

Paragraph 7 provided:

Any application by the Respondents to extend the time for compliance with the conditions set out in paragraph 4 of this Order must be made by application notice duly filed with the Court and served on the Petitioners by 4 pm on 20 November 2014. In the absence of such application notice being filed and served as aforesaid, the Respondents shall not be entitled to apply for any such extension of time.

No such application for further time was made.

Paragraph 1 provided the Petitioners with liberty to request clarification or further information in relation to any matter which had been introduced by way of amendment to the Points of Defence since the service of the Request if so advised. A further Request For Information (‘the Second Request’) was served and filed on 20 November 2014.

On 27 November 2014, the Respondents paid the Petitioners’ costs in accordance with the first condition as provided by §4(a) of the Relief Order; and on 4 December they served their second response to the Request (‘the Response’).

In essence, the dispute between the parties is whether this Response constituted compliance with paragraphs 4(b) and 5(b) of the Relief Order. No separate issue now arises in relation to compliance with the Second Request.

Mr Brisby QC submitted that the limited time provided in the Relief Order for compliance with §4(b) was a material consideration, at least if it came to adjudicating on the Respondents’ application for relief. I disagree. The time set for the performance of the condition has to be seen against the background of default. The Request was served on 3 September 2013. On 3 March 2014 the Respondents consented to an order that they serve a response by 21 March. They failed to do so. Rose J made the ‘Unless Order’ on 4 April 2014 and the response which was filed on 22 April in purported compliance with this order was found by the Deputy High Court Judge on 13 November 2014 to be non-compliant. The Respondents have had a long time in which to prepare their responses to the Request.

Mr Brisby also suggested that the Request went rather further than might have been ordered on a contested application, although he did not develop this argument with great vigour. Whether right or wrong (and I am inclined to think he is wrong) an order was made by consent by Mr Hollington QC on 3 March 2014 and was made the subject of the ‘Unless Order’ by Rose J on 4 April 2014. It is far too late to complain now about its ambit, even as a forensic grumble.

The parties’ submissions as to how the Court should approach the issue of compliance with the Relief Order started from different points.

Mr Parker QC submitted that there was only one question to be answered: whether the 4 December Response to the Request complied ‘in all respects’ with the obligation in §§4(b) and 5(b) to serve a ‘full and complete response.’ He submitted that it did not. It followed that, by reason of CPR Part 3.8, the Amended Points of Defence was to be regarded as struck out, unless the Respondents obtained relief against sanctions. However, a second application for relief against sanctions (the first having been heard by Mr Monty QC) was in effect an application to vary or revoke the Relief Order under CPR Part 3.1 (7); and for such an application to succeed the Respondents would have to show either some material change of circumstance since the Relief Order had been made or that the Deputy High Court Judge had been misled in some way as to the correct factual position, see Thevarajah v. Riordan (No.1) [2014] EWCA Civ 14 at [31]. Neither of these matters had been demonstrated by the Respondents.

Mr Brisby QC submitted that, provided a response to a request for additional information has been served in good faith, and provided that it was not ‘illusory’, a party serving the response should be taken to have complied with the order. In any event, the Court had a residual discretion to do what was required in the interests of justice which should be exercised in favour of the defaulting party unless the Further Information considered as a whole fell significantly short of what was required, see QPS Consultants Limited v Kruger Tissue (Manufacturing) Limited [1999] BLR 366, Simon Brown LJ at p.371R.

Before considering these submissions in detail, there are three points to note which are not, or should not be, controversial.

First, in most of the cases which have come before the Courts in recent years in the context of relief against sanctions the relevant issue was not what was required to be done pursuant to the prior Court Order but the time by which it was done, see for example the cases on appeal in Denton v. TH White [2014] 3926 at [3-7] and the other cases referred to at [13-20].

The researches of Counsel have not identified any recent authority on the issue of the relevant test for compliance with an order made under Part 18, and the editors of the White Book 2015 appear to consider that what was said by the Court of Appeal in the QPS Consultants case (above) to be of continuing authority, albeit decided before the changes brought about by the introduction of the Civil Procedure Rules.

Secondly, it is clear that an order for clarification under CPR Part 18.1(1)(a) or additional information under Part 18.1(1)(b) should be confined to matters which are ‘reasonably necessary and proportionate’ to enable the party seeking clarification or information to prepare its own case or understand the case it has to meet, see Practice Direction 18PD.1 §1.2. In the present case, although there were a large number of requests (88), in view of the Orders of the Court, I proceed on the assumption that each request was necessary and proportionate, and that without the required information the Petitioner would not be able to prepare its own case or understand the Respondents’ case. The case involves potentially complex accounting issues and the information is critical to the identification of the issues between the parties and the extent of the dispute between them, see for example: McPhilemy v. Times Newspapers Ltd [1999] 3 All ER 775, Lord Woolf MR at p.783b.

Thirdly, it was common ground that if the failure in the Response was trivial (de minimis) or there had been what was plainly an accidental error, it was not to be regarded as non-compliance with an unless order. In the present case, for example, the Response to Request 84 exhibited two copies of a Completion Statement in relation to a property at 10-11 Albert Embankment SE1, and failed to exhibit the relevant Financial Statement. This was later corrected, although the contents of the Financial Statement raised another issue between the parties.

A number of cases were referred to in the course of the hearing, many of which predate the coming into force of the Civil Procedure Rules.

In Reiss v. Woolf [1952] 2 QB 557 at 560 Somervell LJ cited a passage from the judgment of Devlin J in which he referred to what was required in response to what was then a Request for Further and Better Particulars.

I do not … mean that any document with writing on it will do. It must be a document made in good faith and which can fairly be entitled ‘particulars.’ It must not be illusory … That is the test, in my judgment, and not, as the plaintiff contends, whether each demand for particulars has been substantially met.

It was this passage which founded Mr Brisby’s submission as set out above [36].

In Fearis v. Davies and another (1989) 1 FSR 555 the Court had made an Unless Order which required the plaintiff to serve Further and Better Particulars of the Statement of Claim. Having served some but not all of the particulars requested, the plaintiff argued that he was not bound to give some of the particulars sought. The Court of Appeal (May and Nourse LJJ) held that once the order was made following a hearing it was too late to make such a complaint. The argument that the adverse party was not entitled to particulars must be taken at the hearing. The contention that because the order was made by consent it should be construed differently to an order in the same terms after a contested order was described as a ‘novel and startling submission’ by Nourse LJ, who went on to add:

If a party against whom an order for particulars is sought wishes to contest the other party’s right to them, he must do so when the application is heard. If he consents to the making of the order, he waives his right to object and cannot thereafter decline to comply with the order so far as compliance is possible.

An issue may arise as to what order the Court should make if it is satisfied that the requested information does not comply with the terms of the order in respect of which it was made. Mr Brisby relied on an observation of Purchas LJ in Grand Metropolitan Co v. Evans(No.2) [1992] 1 WLR 1191 at p.1195F:

In a pleading containing many different issues, it would be a truly draconian step to strike out the whole of an extensive claim with many different facets because of the failure in respect of one or two of the many allegations to comply with an order to give further and better particulars, unless it was to mark the court’s displeasure at the deliberate and contumelious conduct of one of the parties. ... It might have been a far more appropriate course to consider whether the order should have been to strike out those particular paragraphs in toto but to leave the rest of the defence and counterclaim standing.

This issue was further considered in the QPS Consultants case (above) in which the Court of Appeal held that the test of compliance was not so exacting that the judge needed to find that the particulars as a whole were ‘illusory’ or that there had been ‘no genuine attempt to answer’ the requests before they could be struck out. In short, the Court held that such a test, deriving from Devlin J’s observations in Reiss v. Woolf, was no longer applicable (see Simon Brown LJ at 371). A breach of an order for the provision of particulars and the Court’s discretion was engaged on a less exacting test. He added:

That said, I would wish to sound two notes of caution. First, an order for further and better particulars (whether or not in Unless form) is not to be regarded as breached merely because one or more of the replies is insufficient. If the answers could reasonably have been thought complete and sufficient, then the correct view is that they require only expansion or elucidation for which a further order for particulars should be sought and made.

Second, although I would regard an Unless order as breached whenever a reply is plainly incomplete or insufficient, I would not expect the court's strike out discretion to be invoked, let alone exercised, unless the further and better particulars considered as a whole can be regarded as falling significantly short of what was required. Whether this would be so would depend in part on the number and proportion of the inadequate replies, in part upon the quality of those replies (including whether their inadequacies were due to deliberate obstructiveness, incompetence or whatever), and in part upon their importance to the overall litigation. Satellite strike out litigation is not to be encouraged and it must be recognised that even to strike out part of a pleading (unless … that would in any event be appropriate because, unparticularised, it is ‘vague and embarrassing’), is essentially penal.

In his judgment, Waller LJ concluded that the order required each of the requests to be answered, see 376L.

[Counsel] submitted that if that were the proper construction of the order or similar orders in the future, that it is going to lead to lengthy analyses before Masters relating to whether a request has been properly answered. That in my view should not be so, because what the court is concerned to examine is whether there has been a genuine attempt to answer the request. That is so, because the court will not contemplate enforcing the sanction of strike out either of the particular allegation unparticularised or of the whole pleading, unless there has been a failure, or failures, to make genuine attempts to answer the request or requests. Of course in a vast case like the present one, that still involves some inquiry and some time, but that is because of the nature of the action.

Waller LJ went on to conclude that, although there had been substantial failures to answer many of the requests, the sanction should be proportionate to the failures, and approved the approach of the judge at first instance.

This was not a case where the failures were such that the defendants should be debarred from defending or counterclaiming completely. It was a case where those matters which remained unparticularised, and where no genuine attempt had been made to particularise should be struck out.

Tuckey LJ agreed with both judgments.

An issue arises as to the extent to which the principles established by these cases are applicable since the introduction of the CPR.

As already noted, the editors of the White Book consider that they do, and I note that in his judgment in the present case at [34] Mr Monty QC adopted the formulation of the Court of Appeal in the QPS Consultants case in relation to the First Response.

I therefore conclude that the response was, to adopt the words used by the Court of Appeal in the QPS case, plainly incomplete and insufficient and thus the respondents were in breach of the unless order.

Without intending to summarise the principles beyond those which apply on the present applications, I propose to adopt the following approach.

(1) I am not concerned in the present case with (a) whether the Request was too widely drawn, nor (b) whether it would be regarded as a draconian step to strike out the Amended Points of Defence if I were to find that the terms of §4(b) and 5(b) of Relief Order had not been complied with, see the Grand Metropolitan (No.2) case (above). This is because an order of the Court has been made whose effect is that a response which ‘fails to comply in all respects’ with the requirement of ‘a full and complete response to each and every request’ is ‘to be treated as not having been filed and served for the purposes of this Order’, and consequently not compliant with the condition in the Relief Order for the reinstatement of the Amended Defence.

(2) It is unnecessary to form a concluded view as to whether a ‘genuine attempt’ to give additional information is sufficient, but I am doubtful that a party’s view (reasonable or otherwise) that a response was sufficient would constitute grounds (by itself) for relief against sanctions. It is sufficient to note that the Relief Order in the present case is clear in its terms; and that the stringent conditions (made against the background of default and delay) preclude the Respondents from successfully arguing that (a) individual responses should be treated as compliant if they could ‘reasonably be thought complete and sufficient’ subject to being expanded or elucidated by further order of the Court; and (2) that the Court should consider the Respondents’ responses ‘as a whole’ to see if they fall ‘significantly short of what was required,’ as suggested by Simon Brown LJ in the QPS Consultants Ltd case (above).

(3) Two further points may be noted. First, if cogent reasons were given, it might be open to a respondent to contend that it was unable to give a response or that its ability to give a full response was confined by the state of its knowledge. In this context I note that in [22] of his judgment Mr Monty QC noted that the Respondents have never sought to argue that they could not answer the requests. Secondly, if the Court were persuaded that there had been genuine attempts to answer a request this might bear on its view of the fullness and completeness of the answer. Conversely if the Court were to conclude that a respondent was avoiding answering difficult questions it would undoubtedly count against it.

(4) The Court is not concerned with the truth of responses. This would normally be investigated at trial or, in an egregious case, on a strike out application. Nor is it usually concerned with the logical coherence of the responses, unless it is relevant to the fullness and completeness of the response.

(5) Although I have looked at the witness statement of Mr Gourgey (dated 6 March 2015) in the context of the Petitioners’ application, I consider that its contents are properly directed to the Respondents’ application for relief against sanctions. It would plainly be inconsistent with the terms of the Relief Order if the responses could be supplemented months later by further necessary material. Furthermore, there are two broad points contained in his evidence which plainly could and should have been made in the Respondents’ response to the Request.

First, (in §14 of his witness statement ) Mr Gourgey says that the effect of new accounting software installed in August and September 2008 was that prior balances were brought forward to that date, but that details of the transactions giving rise to those balances were not. Thus a payment prior to September 2008 would show as a transaction as at September 2008 and would not help in identifying the precise reason for the particular payment. Despite thorough searches, he says that he has been unable to find any relevant hard copy documentation that would enable him ‘to provide a better response in those instances.’ This is a matter which would have been known well before the hearing in front of Mr Monty QC.

Secondly, in relation to requests 56, 58 and (particularly) 61, Mr Gourgey says that BTG Financial Consulting (‘BTG’), who helped John Podro (the Group’s ‘Financial Controller’) with the financial aspects of the Request and reviewed the historical accountancy transactions, provided a report which was based on figures provided by David Goldsmit of Berg Kaprow Lewis (‘BKL’) ‘the Company Accountant and Auditor.’ The death of Mr Goldsmit in October 2013 led to difficulties and an inability fully to reconcile the figures;

I therefore answered the request as best as possible.

This is also said to be the reason why the answers to requests 48, 54, 69, 74 and 76 were the best that could be given. Again the explanation for failing to answer the request with precision should have been in the Response and not advanced belatedly in the evidence.

In §24 of the Amended Points of Defence the Respondents pleaded:

The movements of monies between the companies were properly accounted and reconciled:

…

24.2

The intercompany balances were reviewed on a periodic (usually annual) basis with the companies’ in-house accountant, John Podro, and where appropriate set off against one another.

24.3

These balances were documented and discussed with BKL, as auditors, and in every case, were signed off in due course.

Request 22 was a request in relation to the words ‘these balances were documented and discussed with BKL’ in §24.3. The additional information sought was: ‘please provide copies of such documents.’

The response was:

The documents referred to comprise the accounts for the relevant companies. In particular, the transactions referred to are reflected within the accounts for the relevant companies. Copies of those company accounts have been disclosed to Mr Griffith and/or his legal advisers at their request. However, for ease of reference copies of the same are being compiled and will be provided to the Solicitors for Mr Griffith.

This point was picked up in a letter from Messrs Blake Morgan dated 9 January 2015 which raised 28 enumerated ‘instances where the requirements for the grant of relief [had] not been met.’ These included:

(2)

The documents referred to in the Reply to request 22 were not provided by 4 December 2013 (and have still not been provided).

Unlike the other complaints this is a timing failure: the documents referred to (the accounts of all 20 companies) should have been provided by 4 December 2014.

In his witness statement Mr Gourgey repeated his assertion that Mr Griffith and his advisors had been provided with copies of all the company accounts, adding that ‘the accounts were provided to Mr Griffith and Mr Hodge on an annual basis either by our financial controller or by the company auditors BKL.’

As Mr Parker QC submitted, the response claimed that the copies were being compiled and would be provided, but did not explain why they had not been compiled and provided by 4 December 2014. At §§6-11 of his 4th witness statement Mr Delme Griffiths (the Petitioners’ solicitor) explained in detail why Mr Gourgey’s statement that all accounts for the companies had been provided to the Petitioners was inaccurate. In particular, no accounts had ever been provided by the Respondents in relation to any companies apart from G&G and Bankside. In particular, no accounts had been provided in relation to Riverbank, BHL, Pedersen Group Management Ltd and Watchcourt Ltd, although some accounts had been obtained independently. I doubt if it was necessary for Mr Griffiths to explain which accounts had not been provided or that he had been able to obtain them from another source, since the request required the production of copies of the documents showing the balances. It was no answer to say that the documents had been provided in various and unspecified ways, as the Respondents themselves recognised in their promise to compile copies of the relevant documents ‘for ease of reference.’ However, the matter did not end there. Although various promises were made during the hearing that the documents were in the course of being compiled, they still did not appear to been produced at its conclusion, some 3½ months after the date when the documents should have been provided. In my judgment this constituted a clear failure to comply with the Relief Order.

Request 21 was directed to §24.2 (see above) and the Respondents’ plea that the intercompany balances were reviewed periodically by Mr Podro (‘the in-house accountant’) and, where appropriate, set off against one another. The request was in the following form;

State when (by date) such reviews were undertaken and provide full particulars of the balances before the review and the balances after such review, stating what debts were the subject of set-off and the debts that were set off against.

The response was:

The intercompany reviews would be carried out annually usually in August each year. The intercompany reviews were undertaken when finalising the year end accounts in order to simplify the group lending structure. By way of example if Company A owed Company B £10,000 and Company B owed Company C £10,000, the review may result in Company A owing Company C £10,000 with no intercompany position between Company B and Company C. This simplified the group lending structure.

The intercompany reviews took place in August 2013, August 2012, August 2011. The intercompany review for 2010 took place in May 2010.

For each review the balances before and after the review as between Bankside and the group companies were as follows:

There then followed a schedule showing the balances in the years 2010-2013 before and after the review between Bankside and a number of different companies: Pedersen (Temple Quay) Ltd, Pedersen Leisure Ltd, Pedersen (Chiswick) Ltd, Pedersen (Cardiff) Ltd, Pedersen (York) Ltd, Scorebridge Ltd, Riverbank Hotels Ltd, Pedersen Group Management Ltd, G&G, G&G Land Ltd, Pedersen (UK) Ltd, Pedersen (Liverpool) Ltd, Pedersen (Ealing) Ltd, Pedersen (Bristol) Ltd, Pederson (GB) Ltd, Watchcourt Ltd, Pedersen (Bromsgrove) Ltd and Brentford Hotels Ltd. Most of these were companies in which the Petitioners and Respondents both had a direct or indirect interest. The exceptions were Pedersen Group Management Ltd, Watchcourt Ltd, Brentford Hotels Ltd and Pedersen Leisure Ltd, in which the Respondents alone had a direct or indirect interest.

The response continued by asserting that the Petitioners were aware of the intercompany lending structure, reviews and balances as Mr Griffith was provided with the 2010 accounts for Bankside which made reference to the intercompany write-offs relating to Bankside Hotels Ltd with its bad debt provision of £7,425,368 to which the Petitioners took no objection.

Blake Morgan’s letter of 9 January 2015 pointed out that the request sought full particulars of the balances before and after the review, and that the response dealt only with the reviews as between Bankside and other companies. This was plainly correct.

Mr Gourgey’s witness statement elaborated on the response:

In answering the request it was necessary to look at the inter company position for all the group companies. To simplify the group lending structure the inter company balances would be transferred to Bankside, and that was what has been done in putting together the table included in the response.

…

As for the response once John Podro and I had looked at all of the intercompany balances, both before and after the review BTG were asked to review our responses and following this they were provided to our legal advisors for their advice.

The reply provides particulars of the intercompany balances before and after the review, and explanation of why the reviews were carried out and when they were carried out. It also provides full particulars for each of the group companies (ie all 20 group companies) as at each review date. It is a full response to the request made.

This explanation should plainly have been given in the response to request 21 since it provides the justification for answering the request exclusively by reference to Bankside, on the basis that all the intercompany balances and all the set-offs would be revealed by reference to the position of Bankside Hotels Ltd.

Furthermore, the Petitioners point out that this explanation is demonstrably false. There were intercompany reviews that did not involve Bankside at all.

First, the response to request 74, which sought to explain how G&G (a company in which the Petitioners and Respondent both had an interest) came to owe £622,296 to Pedersen Group Management Ltd (in which the Respondent alone had an interest) showed 2 intercompany balances which did not involve Bankside.

Secondly, the response to request 61, showed £15,000 paid by Riverbank Ltd to Scorebridge Ltd in November 2011 and repaid by way of an intercompany review which also did not involve Bankside.

In any event, even where Bankside was involved, not all the debts in question were transferred to the company; and there are balances between other companies which are not explained. Thus (and by way of example) there is an entry in the Bankside-Pedersen UK Ltd account which shows a debt owed by Bankside to Park Hotel (Sheffield) Ltd being passed to Pedersen UK Ltd. However, the response fails to identify what the resulting balance was as between Pederson UK Ltd and Park Hotel (Sheffield) Ltd.

The Petitioners’ analysis showed that Bankside did not in fact act in the manner of a ‘clearing bank’ through which all intercompany balances were reconciled; that the justification for the response to request 21 being framed exclusively by reference to Bankside was therefore unjustified; and that, consequently, the response to request 21 was not full and complete. In my view the Petitioners’ analysis is correct. The Respondents have failed to provide a full and complete response to this request.

Request 37 relates to §35 of the Amended Points of Defence which addressed an allegation in §28 of the Amended Points of Claim as to objectionable payments made from Bankside, including payments to Pederson Management Ltd in respect of unjustified management charges. §35 of the Amended Points of Defence pleaded:

It is admitted that certain payments (by way of loan or otherwise) were for the benefit of other companies owned or controlled by [the Respondents], though (unless otherwise stated herein) it was intended at all material times that the loans would be repaid. The payments represent sums legitimately paid in lieu of management fees; loaned to other companies as a result of specific funding requirements of different projects at the time; or lent to companies where Mr Griffiths has an interest and therefore suffered no prejudice.

Request 37 was in the following terms:

Please identify all sums said to have been paid legitimately in lieu of management fees, identifying the company making the payment, the date and amount, and the recipient, and explain what is meant by saying that the amount was paid ‘legitimately’.

The response was:

The payments were made by Bankside to Pedersen Group Management Ltd. Bankside and its subsidiaries did not have any direct employees and therefore utilized the resources in Pedersen Group Management Ltd. The use of the word ‘legitimately’ is intended to reflect the fact that it is alleged that both Mr Hodge and [the Petitioner] were aware that the management charges were paid and that they consented to the same and those management charges were paid in respect of services provided by Pedersen Group Management Ltd.

All the sums paid by Bankside to Pedersen Group Management Ltd are outlined as follows showing dates and amounts.

A 4-page schedule was included in the response showing a series of payments in respect of ‘management charges’ of the order of £6,000 to £8,400.

The Petitioners questioned the use of the words ‘in lieu’ of management charges since the schedule appeared to show management charges.

In his witness statement Mr Gourgey explained that §35 of the Amended Points of Defence should have been drafted to read ‘sums legitimately paid in respect of management fees’ rather than ‘sums legitimately paid in lieu of management fees.’ He also explained that, despite an apparent inconsistency between the financial statements of Bankside and the response to request 37, the figures in the schedule were correct.

I can see why the Petitioners have questioned this explanation, but in my view their criticisms do not establish insufficient compliance with the Relief Order in relation to this request; and the Petitioners appear to agree since Mr Parker QC did not pursue the complaint in the course of argument.

Request 73 relates to the plea in §58 of the Amended Points of Defence

Pedersen Management Ltd has rendered legitimate management charges against G&G Properties for services rendered by Mr Gourgey and his family.

This is plainly an important issue since it relates to payments made from a company in which the Petitioner and Respondents had an interest to a company in which the Petitioner did not have an interest.

Request 72 asked for particulars of the charges rendered by Pedersen Management Ltd and request 73 sought:

… full particulars of all services rendered by Mr Gourgey and his family.

The Respondents’ answer related to the services rendered by Pedersen Management Ltd to G&G over a period of 13 years. This included a 4% fee charged on the sale of G&G’s interest in premises at 10-11 Albert Embankment SE1 which,

… represented the additional work carried out over a 13 year period not covered by the monthly management charge. Mr Gourgey did not benefit from any of these management charges and the funds were loaned from Pedersen Group Management Ltd to other group companies.

It is not immediately clear what the significance of the last sentence is; but it is, at least, clear that no attempt has been made to identify any service provided by Mr Gourgey and his family or (if material) what the 4% fee was for.

I note that the previous response was one of the eight examples given by Mr Monty QC as being ‘wholly inadequate’ and demonstrating that ‘no serious attempt was made to answer the question’, (see [30.6] of his judgment).

Request 84 is a request relating to the proceeds of the sale by G&G of 10-11 Albert Embankment in July 2012. The Petitioners’ complaint (in §§81-82 of the Re-Amended Points of Claim) is that £4m of the net proceeds remain unaccounted for, despite requests for information.

§102 of the Amended Points of Defence pleaded:

After standard fees and charges, including legal and other professional fees, the balance remaining for G&G Properties was £2,500,000. In September 2012, this balance was transferred to Bankside.

The request was:

Please provide full particulars of all such fees, charges, legal and professional fees including the amount and date paid and the services provided for the same.

The response was short:

The fees related to legal fees of Messrs Howard Kennedy, HMLR, Pedersen Group Management, Dragonshare, Solid Foundations property fee and OMS Security fees, as outlined in the attached completion statement.

As already noted the completion statement was not attached and was added to the bundle during the hearing. This new document showed 3 relevant payments: £672,000 described as ‘Pedersen Group Management Fee’, £280,000 described as ‘Payment to Dragonshare Limited’ and £140,000 described as ‘Payment to Solid Foundation Property Consultants (inc VAT)’.

Neither the response, nor the completion statement relied on in support, nor Mr Gourgey’s witness statement provides full particulars of the date of payment nor the services provided. In my judgment the Respondents have failed to provide a full and complete response to this request.

Again I note that the previous response was found by Mr Monty QC to have been inadequate (see again [30.6] of his judgment).

I bear in mind on the one hand that the Petitioners’ challenge to the information provided by the Respondents was initially confined to 25 out of the 88 responses, that the number of challenges reduced during the course of the hearing, and that the Respondents have plainly spent time and effort in producing the responses to the Request. I also bear in mind that a finding against the Respondents will have particularly adverse consequences in the light of the terms of the Relief Order.

On the other hand, although I have not dealt with every criticism of the responses which were made by Mr Parker QC during the hearing, there was justification in his criticisms that responses to one request were inconsistent with responses to others, revealing an internal incoherence which was relevant to the overall adequacy of the responses.

However, focussing on the responses which I have identified above, I am satisfied that the Respondents have not given full and complete responses to each and every request made.

The question then is: what consequences should follow? In Denton v. White (above), the majority of the Court of Appeal drew attention to the importance of (a) litigation being conducted at proportionate cost, and (b) compliance with orders of the Court, see CPR Part 3.9(1). The history of this litigation shows repeated failures by the Respondents to comply with Court orders and a consequential need for court hearings and wasteful use of its resources. Furthermore, the consequences of a failure to comply with the Relief Order could not have been spelt out more plainly.

The failures in the provision of responses are not excusable failures in relation to matters at the fringes of the litigation. On the contrary the failures to provide full and adequate responses go to the heart of the allegations made against the Respondents; and a significant number of responses are not simply insufficient, they are evasive.

Subject to considering the Respondents’ application for relief against sanctions, the consequence of what I find to have been the failure to comply with §§4(b) and 5 of the Relief Order is that the Amended Points of Defence stands struck out.

Nor is this a case in which relief against sanctions could or should be granted in view of the history of the litigation and the form of the Relief Order; and the Respondents are not in a position to show that there has been some material change of circumstance since the Relief Order was made or that Mr Monty QC was misled in some way.

The exception to this is the documentation referred to in Request 22 above, which raises a timing issue rather than an adequacy issue. If, and to the extent that, it were open to the Respondents to apply for relief against sanctions in relation to the response to Request 22, I would have refused the application, applying the principles set out by the Court of Appeal in the case of Denton v. White (above). Put shortly, the Respondents had still not complied with the request at the close of the hearing, some 3 months after the time that the documents should have been produced. It was and remains a serious failure in the light of the history of the case and the importance of the documents. There has been no (or at least no sufficient) explanation of the reasons for the delay; and considerations which bear on the need for litigation to be conducted efficiently and at proportionate cost, and the importance of compliance with Court Orders point in only one direction: refusal of the application for relief in relation to this matter.

I will hear the parties on the form of the Order that should be made in the light of this judgment.