Appeal Court Ref CH/2015/0509
ON APPEAL FROM THE COMPANIES COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Before :
MR JOHN BALDWIN QC
(sitting as a Deputy Judge of the Chancery Division)
Between:
BRIAN HIGGINS | Claimant |
- and – | |
1. SWANLEA LIMITED 2. DAVID JOHN COOPER 3. SUSAN JANE COOPER | Defendants |
Reuben Comiskey (instructed by RIAA Barker Gillette) for the Defendants/Appellants
Claire Andrews (instructed by KPM Solicitors LLP) for the Claimant/Respondent
Hearing date: 12 April 2016
Judgment Approved
Mr John BaldwIN QC:
This is an appeal by the Defendants from an order made by Chief Registrar Baister on 8 October 2015 after his decision to refuse to strike out a claim pursuant to an application dated 17 April 2015 and heard on 27 July 2015.
The action started on 15 November 2012 by the Claimant (Mr Higgins) issuing a Part 8 claim for an order pursuant to section 782 of the Companies Act 2006 that the first Defendant company (Swanlea) and the second Defendant (Mr Cooper) do forthwith deliver to him a certificate for 190,000 redeemable preference shares of £1 each in Swanlea. The claim was supported by a witness statement of Mr Higgins dated 30 October 2012 from which it appears that the events which gave rise to the claim took place in the summer of 2007.
On 18 March 2013 Mr Cooper made a witness statement contending that the claim involved a substantial dispute of fact and that, in these circumstances, the matter was not suitable for the Part 8 procedure. There was a case management conference on 13 May 2013 before Mr Registrar Jones and he gave directions for the service of pleadings (Particulars of Claim by 7 June, Defence by 5 July, Reply by 2 August), disclosure (by 13 September), inspection (requests by 27 September) and exchange of witness statements (8 November). The trial of the clam was ordered to be heard on the first available date on or after 25 November 2013.
On 5 July 2013, the Particulars of Claim were served. They included a claim against Mrs Cooper who, at the time, was not party to the proceedings. This led to some correspondence which included an assertion on behalf of Mrs Cooper that any claim against her was statute barred.
On about 23 July 2013 the parties were informed that the Court had listed the matter to come on for trial on 2 and 3 April 2014.
On 31 July 1013 Mr Higgins made a without notice application to amend the Claim Form by adding Mrs Cooper as the third Defendant to the proceedings and by adding a claim for specific performance of an agreement that Swanlea would pay Mr Higgins the sum of £1 and that his investment would be converted into 190,000 redeemable preference shares of £1 each issued by Swanlea to him, and for an order that Swanlea do allot and issue to Mr Higgins the preference shares or for an order for damages in lieu. An order granting permission to amend was made on 1 August 2013 by Registrar Jones.
There was no appeal from the order granting permission to amend and it appears that re-service of the Particulars of Claim was dispensed with. A Defence on behalf of all three Defendants was served on 3 October 2013.
The dates prescribed by the case management order of 13 May 2013 for disclosure and exchange of witness statements came and went without any overt action by either party and in February 2014 correspondence began about the matter. On 28 February 2014 the Defendants indicated that they were ready to exchange disclosure lists and witness statements on 4March 2014. After some further correspondence the parties seem to have concluded that they were not ready for a trial on the dates in April which the court had fixed some 8 months earlier. A joint application to the court was made on 13 March 2014 seeking an adjournment of the trial date and the application was granted.
Subsequently there was further correspondence between the parties’ solicitors about the way forward and on 29 May 2104 the Defendants stated that the Claimant had failed to provide any disclosure and had indicated he was not in a position to exchange witness statements either. The Defendants suggested the Claimant must apply for relief from sanctions (CPR 3.9) for failure to serve witness statements and drew attention to CPR 32.10, which provides that if a witness statement is not served within the time specified by the court then the witness may not be called to give oral evidence unless the court gives permission. The Claimant’s response, on 11 July 2014, was to say that no such application would be made.
On 28 July 2014 the Court wrote to the parties stating that the April trial date had been wrongly vacated by Chancery Listing and that the matter had been listed for directions on 2 September 2014. On that date Ms Registrar Barber adjourned the matter to 3 December 2014 and ordered that any application for relief from sanctions shall be issued and served no later than 19 September. Directions for evidence on the application were also made.
The Claimant made an application for relief on 17 September and the Defendants made one on 9 September and the matter came before Chief Registrar Baister on 17 December 2014. He dismissed the Claimant’s application and made no order on the Defendants’. Neither party appealed his order.
On 17 April 2015 the Defendants issued an application notice for an order:
That the claim be struck out and that the Claimant do pay the costs of the claim to be assessed if not agreed, because
In the light of the Order made by Chief Registrar Baister on 17 December 2014;
Based on the evidence which the parties are entitled to adduce;
That there is no real prospect of success and/or the claim has no reasonable prospect of success or the claim is not reasonably arguable.
No evidence was filed in support of the application.
The application came before the court on 25 June 2015 and it was adjourned to be heard by Chief Registrar Baister on 27 July 2015. On 13 July 2015 Mr Higgins made an application for specific disclosure pursuant to CPR 31.12 and this also was dealt with on 27 July 2015.
Chief Registrar Baister gave judgment on 30 July 2015 dismissing the application but giving permission to appeal. It is the order made pursuant to that judgment which is the subject of this appeal. He also made an order for specific disclosure and, in compliance with that order, in November 2015 the second and third Defendants made witness statements confirming that there were no further documents to disclose (the original lists are dated 28 February 2014).
The Chief Registrar considered the strike out application under CPR 3.4(2) which is in these terms:
Power to strike out a statement of case
The court may strike out a statement of case if it appears to the court –
that the statement of case discloses no reasonable grounds for bringing or defending the claim;
that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings; or
that there has been a failure to comply with a rule, practice direction or court order.
He accepted Ms Andrews’ (counsel for Mr Higgins’) submission that this rule had no application and dismissed the application. He said this:
It should be noted, as Ms Andrews submitted, that the rule is precisely formulated: it gives power to strike out a statement of case. The particulars of claim disclose an arguable cause or causes of action, so I cannot say there are no reasonable grounds for bringing the claim. It was not argued that the statement of case in the form of the particulars should be struck out for failure to comply with a rule (... ). There being no argument that the statement of case discloses no reasonable grounds, but rather an argument as to whether the evidence supports the pleaded case, I accept the submission that CPR 3.4 does not apply here.
The issue before me is whether the Chief Registrar was right in refusing to consider any evidence on an application to strike out under CPR 3.4. In his submissions counsel for the Defendants accepted that CPR Part 24 provides a procedure for summary judgment on a claim or defence which was dependent on evidence but submitted that it had long been accepted that there was overlap between rule 3.4 and Pt 24 and that the court may use rule 3.4 to strike out a claim which has no prospect of success on the facts. He drew my attention first to a practice direction and then to authority.
Practice Direction 3A supplements CPR 3.4 and paragraph 1.7 is in these terms:
A party may believe he can show without a trial that an opponent’s case has no real prospect of success on the facts, or that the case is bound to succeed or fail, as the case may be, because of a point of law (including the construction of a document). In such a case the party concerned may make an application under rule 3.4 or Part 24 (or both) as he thinks appropriate.
This seems to cover precisely the matter I have to decide but I was told that the Chief Registrar took a different view. The matter is not free from authority and it is fair to note that the Chief Registrar was not shown any authority.
Regarding the overlap between the provisions of rule 3.4 and Pt 24, counsel relied on Three Rivers DC v Bank of England (No 3) [2003] 2 AC 1 and in particular [2]-[5], [10], [88], [94] and [192]. In [92] Lord Hope said this:
92 The overriding objective of the CPR is to enable the court to deal with cases justly: rule 1.1 . To adopt the language of article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms with which this aim is consistent, the court must ensure that there is a fair trial. It must seek to give effect to the overriding objective when it exercises any power given to it by the Rules or interprets any rule: rule 1.2 . While the difference between the two tests [rule 3.4 and Pt 24] is elusive, in many cases the practical effect will be the same. In more difficult and complex cases such as this one, attention to the overriding objective of dealing with the case justly is likely to be more important than a search for the precise meaning of the rule.
And in [192] Lord Millett said this:
I agree with my noble and learned friend Lord Hope of Craighead that, while cases should in principle be disposed of as expeditiously and cheaply as the circumstances permit, the most important principle of all is that justice should be done. But this does not mean justice to the plaintiff alone. It is not just to a plaintiff to strike out his claim without a trial unless it has no real prospect of success. It is not just to defendants to subject them to a lengthy and expensive trial to defend their integrity when there is no foundation in the evidence for the attack upon it.
Counsel next drew my attention to Moroney v Anglo-European College of Chiropractice [2009] EWCA Civ 1560 [20] – [25]. In [25] Ward LJ said this:
25 So it seems to me that the rule that there is an overlap between Part 3.4 and Part 24 is firmly established, and it is accurately recorded in the notes in the White Book at paragraph 3.4.6 to which Mr Broatch drew attention in his skeleton argument. Although the Rules give the court two distinct powers which may be used to achieve summary disposal of the issues which do not need full investigation at the trial, there is this overlap of approach. In those circumstances, I do not see how the judge can be criticised for dealing with the case either on the 3.4 route or on the Part 24 route, and to have approached the case asking whether there is a realistic prospect of success.
These authorities appear to me to reflect not only what is in the Practice Direction but also what is in rule 3.4(2)(b). However, there is a later Court of Appeal authority which takes a different view: Ministry of Defence v AB and others [2010] EWCA Civ 1317. The relevant passages of the judgment of the court are:
Strike out and summary judgment
As we have said, the judge declined to strike out the lead claims under CPR 3.4 or to give the defendant summary judgment under CPR 24 . We consider that he was right to do so, although our reasons for reaching the same conclusion are different from his.
CPR 3.4(2) permits the court (either on application or of its own motion) to strike out a statement of case if it appears to the court—
that the statement of case discloses no reasonable grounds for bringing or defending the claim;
that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings; or
that there has been a failure to comply with a rule, practice direction or court order.
In our view, this power is intended to be exercised on examination of the pleading itself, not after examination of the evidence supporting it. It is open to the court to raise the issue of strike out under this rule of its own motion. It should not be necessary and is not appropriate for evidence to be served in support of or opposition to an application to strike out under this rule. Moreover, provided that the party whose pleading is under attack has sufficient time to consider the arguments raised, it does not seem to us that the lack of a formal application need deter the court from making a decision.
The pleadings in the present case do disclose reasonable grounds for bringing the claim; they are not an abuse of the court's process and there has been no failure to comply with any rule etc. In our view it would be wholly inappropriate to apply rule 3.4(2) to these claimants' cases.
It will be seen that there is a direct conflict between the approach taken by the Court of Appeal in this latter case and that taken by the Court of Appeal and the House of Lords in the two former cases, neither of which were drawn to the attention of the Court in the latter case. In these circumstances, I think I am bound by and should follow the House of Lords and the Court of Appeal in the two earlier cases. That approach is more consistent with the overriding objective of the CPR as is evident, to my mind, from the facts of this case.
In these circumstances I consider the Chief Registrar was mistaken in concluding that CPR 3.4 was not open to the Defendants. Accordingly, I must go on to consider it.
Counsel for the Defendants (Mr Comiskey) relied upon the fact that Mr Higgins was precluded from adducing further oral evidence at trial, that he could not rely upon matters set out in his statement of case (by virtue of CPR 32.6) and that the witness statement he was allowed to rely on (being that served in November 2012) was insufficient to prove his pleaded case – which was that he had made an agreement with Swanlea whereby he receive redeemable preference shares in Swanlea. In these circumstances, submitted Mr Comiskey, CPR 3.4(2)(b) was directly engaged.
Moreover, Mr Comiskey submitted that Mr Higgins could not defend the application by relying on a case inconsistent with the pleaded case since if he did so, the pleading would need to be amended and there is no application in that respect.
The relevant paragraphs of the Particulars of Claim for present purposes are as follows:
In around the middle of July 2007, Mr Fisher, acting in his capacity as a director of Europa [a third party in the context of the pleaded agreement] attended a meeting with Mr Higgins in person at... At that meeting, Mr Fisher provided Mr Higgins with a copy of [an offer by Swanlea] and communicated the [offer by Swanlea] to Mr Higgins. Mr Higgins asked Mr Fisher for some time to consider the [offer by Swanlea] before he accepted it.
Subsequently, on or around 3 August 2007, Mr Higgins telephoned Mr Fisher to confirm that he would accept the [offer by Swanlea]. Accordingly, on 7 August 2007, Mr Fisher, acting in his capacity as director of Europa, met Mr Higgins at the offices of... At that meeting, Mr Higgins accepted the [offer by Swanlea] by signing a letter which had been drafted by [a financial advisor of Swanlea] and which Mr Fisher had brought with him to the meeting, which letter confirmed the terms of the agreement entered into between Mr Higgins and [Swanlea] on that date (the “Agreement”). Mr Higgins signature on the letter was witnessed by [a colleague of Mr Higgins].
Accordingly, by the Agreement, it was agreed that; [the relevant terms were set out]. A copy of the letter confirming the Agreement is attached to these Particulars of Claim.
In order to succeed in the action, Mr Higgins must prove the Agreement pleaded in the Particulars of Claim. The only evidence he is allowed to adduce is that set out in his witness statement of October 2012. The relevant paragraphs are:
I purchased shares in the company [Europa]. In 2004 I invested £190,000 (£150,000 shares and £40,000) loan) to acquire preferential shares in [Europa] and I refer to the Share Certificate [copy exhibited].
On 7 August 2007 I agreed to dispose of £4,800 ordinary £1 shares to Swanlea. Additionally, my £190,000 investment was converted into redeemable preference shares in denominations of £1 into Swanlea Ltd, fully redeemable in February 2012. I signed a letter of intent dated 7 August 2007 [copy exhibited] and the then managing director of [Europa] confirmed these conditions by letter dated 3 September 2007 [copy exhibited].
The controlling interest in [Europa] was sold to Swanlea in or around late 2007/early 2008....
Two things are immediately noticeable from this evidence. First, paragraph 9 refers to an agreement to dispose of £4,800 shares but it does not identify the party with whom the agreement was made.
Secondly, the letter of 7 August 2007 (which is the same letter as that referred to in paragraph 14 of the Particulars of Claim as a letter which allegedly “confirmed the terms of the agreement entered into between Mr Higgins and [Swanlea] on that date (the “Agreement”)”) is described as a ‘letter of intent’. Thus the evidence of Mr Higgins which will be before the trial judge is that the letter which purports to confirm the Agreement with Swanlea which he must prove to win the case does no such thing – it is a mere letter of intent. And in so far as it matured into a contract, it did so in September 2007 by virtue of a confirmation from the managing director of Europa.
The next matter is the content of the letter of 7 August itself. It is dated 3 August and was signed by Mr Higgins on 7 August. It is addressed to [Europa] and signed by Mr Higgins. It does not purport to record or confirm any agreement between Mr Higgins and Swanlea. On its face, it appears to be or to confirm an agreement with Europa. Moreover, although the letter does not specify the company in which the Redeemable Preference Shares will be provided, the most likely inference from the language is that it is Europa. There is little or nothing to suggest that it is Swanlea.
There is another dimension to the character of this letter and it is whether it records a written agreement or evidences an oral agreement. Mr Comiskey submitted that the pleaded agreement is a written agreement made on 7 August 2007 and the terms are as set out in the letter (see paragraph 14 of the Particulars of Claim set out above). In these circumstances, he contended, any subsequent correspondence is inadmissible as evidence of the terms or the contracting parties. Ms Andrews, on the other hand, contended that the pleading can be understood as contending that the letter merely evidenced an oral agreement, and that in those circumstances subsequent documentary evidence was admissible. Neither submission deals with the fact that the evidence of Mr Higgins is that the letter is no more than a letter of intent.
I have looked at the subsequent correspondence upon which Ms Andrews relied. Together with the written evidence of Mr Higgins and without further explanation or elaboration it is not sufficient to prove the pleaded case.
Ms Andrews drew my attention to the fact that there might be further relevant disclosure and that this was a reason for allowing the case proceed to trial. She also reminded me that the trial judge had, in any event, a discretion under CPR 32.5(3) to permit Mr Higgins to amplify his witness statement and give evidence in relation to new matters which have arisen since the witness statement was served. She submitted that the existence of this discretion supported her contention that the overriding objecting of achieving justice could only be satisfied if there were an actual trial of the issues in the case.
With respect to the first point, this seems to me to be in the ‘something might turn up’ category and, as such, and in circumstances where there has already been standard disclosure and an order for specific disclosure, it is not persuasive.
With respect to the second point, the first answer is provided by CPR 32.5(4) which provides that the court will give permission under 32.5(3) only if it considers that there is a good reason not to confine the evidence of the witness to the contents of his witness statement. In the present case the reason for confining the witness to the contents of his witness statement is his failure to comply with the court’s order with respect to witness statements and the refusal by the court to give relief from the sanction imposed by CPR 32.10.
Moreover the proposition that the Defendants only discover what evidence Mr Higgins will adduce when he adduces it at trial presents a wholly unsatisfactory scenario which is inconsistent with the regime established by the CPR. If the court were to entertain such a proposition it would be far more efficient to put it into effect by giving relief from the sanction in CPR 32.10 and providing for directions for timely service of a witness statement setting out that evidence. That route, however, is not open to Mr Higgins since it has already been tried and there has been no change in circumstances. In my judgment it would be inconsistent if the court were to ignore that state of affairs and permit Mr Higgins to present oral evidence to support his pleaded case for the first time at the beginning of any trial.
I turn now to the obiter reasons given by the Chief Registrar for dismissing the strike out. He looked at the evidence and accepted Ms Andrews’ submission that it was just about possible for the Claimant to make out a case at trial but he was not satisfied that it would suffice at trial. He said that the “strength of the inadequate evidence on each side needs to be explored”. He commented that it was difficult to know what might happen at trial and the only thing he could be reasonably certain of was that Mr Higgins would not be able to adduce orally the evidence he has not been able to lead in writing. He went on to say that neither side seemed to be in a strong position but the issue would have to be determined, even if only on the burden of proof.
The difficulty with the Chief Registrar’s approach is that unless Mr Higgins were able to adduce orally what he has not been able to lead in writing then (a) he would not be able to explain that he did not mean what he said when he said in his 2012 witness statement that the letter of 7 August was a letter of intent but was a letter confirming a contract and (b) he would not be able to explain that the contracting parties were not, as appears from the letter, himself and Europa but himself and Swanlea. Accordingly, the Chief Registrar did not recognise that the only thing he could be reasonably certain of was something which had the consequence that Mr Higgins could not succeed in proving his pleaded case. Since these two pieces of evidence go to the root of the case, I consider the additional reasons given by the Chief Registrar for his decision also to be flawed. In these circumstances I allow this appeal and strike out the claim pursuant to CPR 3.4(2)(b).