Hague Plant Ltd v Hague & Ors

Several issues have been raised at this CMC, which represents the latest in a lengthy, hard fought and acrimonious series of proceedings between members of a family. There are now applications for relief from sanctions, on the part of the claimant, and for the claim to be struck out, on the part of the defendants. Further issues in connection with a separate but related claim (Footnote: ¹) were originally intended to be dealt with at the same time as these applications, but at an early stage in the hearing a consensus emerged that those matters would need to be dealt with separately, not least in view of the time required for these applications. The claimant is represented by Mr Christopher Parker QC, and the defendants are represented by Mr Gregory Pipe.

The sorry history of the litigation goes back to about 2008. The present action (known as “Hague 5”), which was begun in 2011, has involved more than 20 interlocutory applications. The two with which I am dealing have taken 4 days of oral submissions.

It is necessary to set out some of the background and procedural history in order to render this judgment intelligible. I shall do this as briefly as possible. Much detail is already contained in the judgment of Norris J of 26 October 2016, in which he decided certain preliminary issues in the case (“the PI Judgment”). (Footnote: ²)

The first defendant, Martin Hague (“Martin”), was a director of the claimant company (“Plant”) and is a director of the third defendant (“MHH”). The second defendant, Jean Angela Hague, (“JAH”), is Martin’s wife. Also intimately involved in the family businesses were David Hague (“David”) and Dianne Hague (“Dianne”) who are Martin’s siblings, and Douglas and Jean Hague (“Jean”) who are the parents of Martin, David and Dianne. David, Dianne, Martin and Jean are owners of Plant. The ownership of MHH was the subject of earlier litigation between David/Dianne as claimants and Martin and JAH as defendants. This resulted in a judgment of HH Judge Behrens QC, who held (Footnote: ³)inter alia that all the shares in MHH were legally and beneficially owned by Martin and JAH. The outcome of that case appears to have led to the present claim.

For many years prior to 2009, Plant and MHH shared a site owned by MHH at Carlisle Street East, Sheffield (“Carlisle St”) where waste processing/recycling and waste transfer operations were carried on. Both Plant and MHH carried on business there. In the judgment referred to above HH Judge Behrens QC made the following statement:

“The arrangement was beneficial for both Plant and [MHH]. Materials would be brought to site by Plant or third parties, [MHH] would charge a tipping fee, which in Plant’s case was less than the commercial rate, Plant employees would recycle the material either by crushing or screening as appropriate, Plant would sell the recycled product or materials. Insofar as any of the original material was waste or not recyclable, [MHH] would pay Plant to transport it to a tip. The arrangement proved profitable for both Plant and [MHH].” (Footnote: ⁴)

David and Dianne caused Plant to bring the present proceedings against Martin, JAH and MHH, the essential contention of which is that over a period of approximately 23 years Martin consciously and dishonestly breached his fiduciary and director’s duties to Plant by procuring payments, goods and services from Plant to MHH far in excess of any value or payment provided by MHH to Plant, and that MHH and JAH dishonestly assisted him in that regard. (Footnote: ⁵)

One particular of this allegation relates to the alleged payment by Plant of “false invoices” rendered by MHH. The alleged invoices and payments were admitted and averred by the defendants in their defence. They contended that these were pursuant to a practice known as “cross-invoicing”, which had been an habitual arrangement within the parties’ businesses, known to and accepted by all concerned, throughout the material period. Cross-invoicing involved one company rendering to the other an invoice for fictional services with a view to reducing the incidence of corporation tax in a particular year. Payment of tax would only be delayed, as a false invoice for a similar amount would be raised by the other company at a later period, with a view to reaching a neutral position as between the companies.

The trial of preliminary issues took place before Norris J in 2015. The issues to be determined posed a number of questions, including “Were the unjustified payments made pursuant to a cross-invoicing arrangement? Were the payments each way calculated to balance out? Was the practice known to or consented to or authorised by David and Dianne as co-directors of Plant? Did the payments in fact broadly balance out?” (Footnote: ⁶) In the PI Judgment Norris J answered each of these questions in the affirmative. He made an express finding that cross-invoicing was “known by, permitted by and participated in by Plant, by Dianne and by David”, rejecting David and Dianne’s denial of knowledge of the arrangement. (Footnote: ⁷) In relation to the issue whether, in the light of the answers to the cross-invoicing questions, Plant could now put forward a case based on the inaccuracy of inter-company invoicing, the learned Judge stated:

“Perhaps Plant can put forward a case based on a challenge to the accuracy of some invoices. Plant may be able to complain that invoices are inaccurate where part of a cross-invoice is said by Martin to take into account a genuine charge the value of which he has assessed…” (Footnote: ⁸)

An argument relied upon by the claimant in support of its unsuccessful denial of a cross-invoicing arrangement related to the business model adopted for Plant with respect to its activities at Carlisle St. Plant argued that a practice of cross-invoicing was inconsistent with what Plant contended to be its role as a sub-contractor, all of whose services had to be paid for by MHH. The defendants’ case was that Plant’s role was not so restricted, and that it carried on a business on its own account from Carlisle St, doing some processing, levelling and stacking of recycling materials on its own account and some levelling and stacking for which MHH had to pay. In the PI Judgment Norris J described the arrangements at Carlisle St, and the possible business models, as follows:

“Martin was in effect the operations director (i.e. the board member charged with the supervision of the business) of both. The site was operated by [MHH]. The operation involved taking in, processing, sorting, stacking and in some cases recycling waste products. Such material was received both from Plant itself (which had the benefit of reduced tipping rates, conferring upon it a substantial competitive advantage when quoting for work) and from third parties. The physical processing was undertaken by men and machines employed and owned by Plant but who worked under the direction of the Carlisle Street site manager. The relevant consents and licences were held by [MHH] whose director (Martin) oversaw the operation. The essential question as to the business model is whether Plant was functioning as a subcontractor providing services all of which had to be paid for by [MHH]; or whether it was conducting its own recycling business, processing everything in return for the right to sell the recycled material and to keep the sale proceeds for itself; or whether it occupied an intermediate position when it did a bit of both (some processing where it did levelling and stacking of recycling materials on its own account and some waste work where it did levelling and stacking for which [MHH] had to pay). The relevance of the question is that the answer to it informs the decision what invoices passing between Plant and [MHH] might be regarded as "genuine" and what might be regarded as fictitious invoices carrying into effect a "cross–invoicing" scheme.” (Footnote: ⁹)

It is clear that the Judge preferred the defendants’ “intermediate” model. (Footnote: ¹⁰) He confirmed this in his judgment of 30 November 2017 (“the November Judgment”). (Footnote: ¹¹)

Following the PI Judgment there was a further hearing to deal with consequential matters. Mr Pipe, for the defendants, submitted that further particulars needed to be provided to enable the defendants and the court to understand the nature of the claimant’s pleaded case on dishonesty. Mr Parker, for the claimant, submitted that in view of the court’s finding for Martin on the business model adopted for Plant, Plant needed

“to amend to point out the dishonesty of the business model that was being utilised. And asking us to provide details of the value of the goods and services provided to [MHH] is just them forcing us to trial on a case they hol[e]d below the waterline by changing the business model….[B]ecause that business model doesn’t involve Plant providing goods and services to [MHH] it is pointless asking for further information about the allegation in its present form.

The dishonesty now is no longer no[t] paying Plant for doing recycling services for [MHH]. The dishonesty now is having Plant do all the work for Plant’s recycling business, but not allowing Plant to take any of the fees from the people that were depositing the material to be recycled and in charging Plant for actually taking its material to its own recyling place to be recycled by Plant. So they have [MHH] taking all these profits and doing nothing…

…[W]e say that much the better course is to allow the claimant to say what its case is in light of the preliminary issue and not have the defendant[s] force us to persist with a case that is untenable in the light of Martin’s change of story.

In the Consequentials Judgment the Judge stated that in the light of the PI Judgment the defendants had established a defence

“to substantially the whole of the claim based on…cross invoices. The defence is not complete because there remains the question of examining some of Martin’s valuations, if anyone thinks that exercise worth while…” (Footnote: ¹²)

The Judge declined to direct that the claimant be permitted to produce Re-Re-Amended Particulars of Claim at that stage (while not precluding an application to amend being made in the future), but considered that the existing pleading should be clarified

“because years have passed since the contest of what the business structure was first emerged and at least 4 months have passed since I determined, so far as material to the preliminary issues, what I understood the business structure to be.

19.

I shall therefore start with the case as it remains pleaded 4 months after the determination of the preliminary issue. I think it right that there should be some clarification of the pleaded statement of case…

20… I consider the defendants are entitled to serve a request for further information in relation to the remaining heads of claim. It may well be that the claimant will choose to answer those in the sense that this head of claim is no longer pursued in the light of the preliminary issues determined.”

In his judgment, the Judge directed that each party’s replies to any Part 18 Request should be filed by 21 April 2017. He made an order accordingly (“the First Order”), which (so far as relevant) stipulated:

“By 4:00pm on 24 March 2017:

the Claimant shall if so advised serve a request for further information by which it asks the Defendants to identify cross invoices which they say contain a valuation element (that is, those which do not involve the simple settlement of arithmetic balance but include some off-set or charge which involved the assessment of value); and

the Defendants shall if so advised serve a request for further information by which they ask the Claimant to set out full particulars of the calculation and valuation of each claim on which it relies.”

This, together with the other directions made by the Judge, was intended to steer the claim to a trial to begin on the first available date after 1 February 2018.

On 24 March 2017, pursuant to the First Order, the defendants’ solicitors served on the claimant’s solicitors a Part 18 Request for Further Information (“the Request”). In the meantime, the claimant had, by letter dated 10 March 2017, served a copy of draft Re-Re-Amended Particulars of Claim on the defendants. The defendants’ substantive comments on this draft were in letters dated 24 March (first and third defendants) and 27 March (second defendant). In essence, the defendants noted the lack of any explanation for the proposed amendments but indicated that save for one exception the defendants did not object to proposed deletions from the existing pleading but otherwise opposed the amendments, not least because they amounted to an entirely new case which was inadequately particularised. In a response of 28 March the claimant’s solicitor stated that the reason for the amendments was the change of business model put forward by Martin in his evidence. The letter stated that an application to amend would be issued, and that the deletions were made on the basis that the amendments were allowed. It also indicated that if provisions of the existing pleading were deleted there was no point responding to the Request, and an application for extension of time would therefore also be made.

The claimant did not provide any of the information required by the Request. Instead the claimant prepared an application to re-re-amend the particulars of claim and for an extension of time for replying to the Request until 21 days after the outcome of the application to amend was known. The application documents bear the date 6 April 2017. However, the documents were served on the defendants on 26 April 2017, and appear to have been formally issued and sealed at about that time, which was after the date (21 April 2017) by which the First Order required the replies to the Request to be provided.

The application to amend was supported by a witness statement of Martin Leslie Scott, the claimant’s solicitor, dated 6 April 2017. At paragraph 2.4, Mr Scott referred to Mr Parker’s submissions about the “need to amend the claim” made at the earlier consequentials hearing in February 2017. Mr Scott recorded one such submission as being that

“[Plant] are now in a position to finalise the case in circumstances where the case as originally presented…. now has to be changed to take account [sic] the changes in the business model that Martin Hague says was operated…”

On 5 May 2017 the defendants issued an application for an “unless” order requiring the claimant to comply with the First Order on pain of having the claim struck out with costs.

Both the claimant’s application to amend, and the defendants’ application for an “unless” order, came before Norris J on 16 May 2017. He gave judgment on 2 August 2017 (“the Amendment Judgment”) (Footnote: ¹³) in which:

In so refusing, Norris J recorded that by its application the claimant was once again seeking to introduce into this action some of the same allegations made in a separate claim by the claimant against the defendants known as “Hague 6”. Those proceedings are currently stayed pending the determination of the present case. Norris J stated that the commencement of Hague 6 had been the claimant's response to the refusal in 2014 by HHJ Behrens and the Court of Appeal to permit these (and other) allegations to be included in a proposed re-re-amended particulars of claim in the present case. Norris J stated that issues should not be duplicated. He also relied upon the following considerations: that the introduction of a “substantially different case” would derail the existing proceedings 6 years after they had begun; that the application was late and the delay was unjustified – Plant had had many years to decide how to put its case, and the reason given for changing tack now (Martin’s description of the business model) had not convinced the Court of Appeal and did not convince him (Footnote: ¹⁵) – the real reason was the outcome of the preliminary issues hearing and not any change of case by Martin; that the new case faced limitation hurdles which would be better addressed in Hague 6. In these circumstances the claimant had failed to satisfy the heavy burden applicable for a late amendment application. The Judge concluded: “An amended pleading must be served by 4pm on 1 September 2017.”

The Judge’s directions relating to the Request and the proposed amendments were incorporated in the order dated 9 November 2017 (“the Second Order”), paragraphs 1-3 of which provided:

“1.

The Claimant do have permission to re-re-amend the re-amended Particulars of Claim in the form as outlined in the Schedule to this Order.

2.

The Claimant shall serve such re-re-amended Particulars of Claim on the Defendants by 4pm on 1 September 2017.

3.

Unless the Claimant shall provide replies in accordance with CPR Part 18 to the Defendants’ Request dated 24 March 2017 by 4pm on 1 September 2017, the claim shall be struck out and the Claimant shall pay the Defendants’ costs of the action…”

Following the Amendments Judgment, the claimant served Re-Re­Amended Particulars of Claim (“the RRAPC”) on 31 August 2017. It is accepted that the document which was served retained passages of the Re­Amended Particulars of Claim (“the RAPC”) which the claimant had sought to have deleted and/or which the claimant had indicated at the hearing in May contained allegations which were no longer tenable, and which the defendants had agreed should be deleted. These paragraphs, or parts of paragraphs, were 20(1), 20(2) 21-24, 29, 34(a) and (b), 36, 44(1), 44(3), 46(2) and 46(5). Further, it is not in dispute that in relation to certain of the passages in question - paragraphs 20(2)(ii), 23 and 44 - the claimant had amended the amounts claimed. In particular, in paragraph 20(2)(ii) the claim for labour and plant had been increased in value by about £500,000.

In addition to these features, the defendants assert (and the claimant has not disputed) that there were many inaccuracies in the document, including: omissions to remove/strike through words that were already deleted in the Amended Particulars of Claim or the RAPC; failure to underline amendments already made in the existing pleading; and omission of words/numbering that appeared in that pleading.

Having been alerted to these issues by the defendants, the claimant served a further version of the RRAPC on 16 October 2017, which rectified some of the technical errors identified by the defendants but still retained those parts of the pleading which were to have been deleted, together with the altered amounts of the claims.

It is appropriate to record the observations of Norris J on this pleading served by the claimant in response to the Amendment Judgment. At paragraphs 5-9 of the November Judgment he said:

“5…I refused permission for these amendments [relating to the new case] because such amendments would de-rail the trial of the action and would duplicate what was already in issue in Hague 6. The permitted amendments therefore lay within a very narrow scope.

6.

At the amendment hearing I had before me a text entitled “Re-re-amended Particulars of Claim” concluding with a reference to their intended re-service in March 2017 (“the Draft”). The amendments for which I gave permission (and the only amendments allowed) were the Re-re-amendments shown in purple:

(a)

In paragraph 9 of the Draft;

(b)

In paragraph 13 of the Draft;

(c)

In paragraph 20(1A)(i) of the Draft; and

(d)

In other paragraphs that had been consented to by the [defendants]…

7…

8.

The Re-re-amended Particulars of Claim served pursuant to the directions contained in the Amendments Judgment do not strictly conform to the Draft. One can ignore errors in reproducing the form of the pleading… though these errors of reproduction should be corrected…But matters which in the Draft were deleted (and where the deletions were consented to) now appear to be retained, and there is an alteration in sums claimed. Examples include paragraphs 20(2), paragraphs 21 to 24, and paragraphs 44(1) and 44(3). This is not permissible. Furthermore, it contradicts the position adopted when seeking the amendments viz. that as a result of the [PI] Judgment, it appeared that significant parts of the Particulars of Claim had proceeded on a false basis.

9.

Permission was given to re-re-amend in the form of the permitted alterations to the Draft identified in paragraph [6] above, and it is to a statement of case in that form that the schedule to the order reflects.”

The Judge indicated that if the defendants wished the court to consider striking out the claim, whether for serving a statement of case for which permission had not been given or for a defective response to the Request, then the appropriate course was to issue an application.

It is perhaps worth taking stock of the position reached at this stage. The Judge having held that the claimant’s application to re-re-amend was essentially unsuccessful (reflected in his order that the claimant should pay costs of the application on an indemnity basis), the claimant proceeded to file a re-re-amended pleading in a form which the Judge held to be impermissible as being outwith the limited permission granted.

I now turn to the claimant’s conduct in respect of the “unless” element of the Second Order, relating to the Request.

At the same time as serving the first version of the RRAPC on 31 August 2017, the claimant served its replies to the Request (“the Replies”). The defendants submit that the Replies are non-compliant. It is in respect of the Replies that the claimant now applies for relief from sanctions, and that the defendants apply for the claimant’s claim to be struck out.

I will need to return to these contentions, but should first complete the procedural history by referring to a very recent development.

In its skeleton argument for the present applications, which is dated 26 February 2018 – that being a reading day immediately before the hearing of the applications was due to start – the claimant for the first time informed the defendants and the court that it no longer intended to rely upon the RRAPC filed (in two versions in September/October 2017) following the Amendment Judgment. The claimant’s skeleton explained the position as follows:

“40.

Accordingly, [Plant] not having availed itself of the permission granted to it (because, as the Judge clarified in his November Judgment), the Re-Re-Amended Particulars of Claim that were served were not in accordance with the permission he granted, the relevant Particulars of Claim remain those before the Application to re-re-amend. On that basis the issue over the terms of the statement of truth does not arise and the Ds’ Application to strike out is redundant.” (My emphasis.)

In other words, the claimant, having (twice) served a re-re-amended pleading, purportedly pursuant to the permission granted (but in fact admittedly inconsistent with that permission), now wishes to revert to the RAPC, served 4 years ago on 31 March 2014. Thus, the claimant seeks to re-espouse a formulation of the claim, including the nature and basis of the alleged dishonesty, which had apparently been abandoned by the claimant as recently as May 2017 as being “false” and “holed below the waterline” and “untenable”. Mr Parker sought to explain this volte face by the claimant in this way:

“…because it might be said [that]…Plant was only providing goods and services to [MHH] if it wasn’t conducting its own business. And the business model that says it’s its own business could, therefore, be said to say that Plant isn’t providing goods and services to [MHH] at all. And that is Martin’s position. Martin’s position is because it’s – [MHH] is engaged on its own recycling business, there’s no question of Plant being paid. And I say, and said something similar at the May hearing, 2017, when I applied to amend that I was wrong to do so because the change wasn’t significant and I now see that as a matter of substance the plea remains good. Plant was providing goods and services to [MHH] as a matter of substance because the benefit of the goods and services was being taken by [MHH].” (Footnote: ¹⁶)

At another point in his submissions Mr Parker put the case as follows: (Footnote: ¹⁷)

“But we say the substance…is they’re still doing [the recycling] for the benefit of [MHH]. They’re not doing it for the benefit of Plant. Plant’s not making any money out of this.

…you have a very simple situation, … Plant doing all the recycling work and not receiving any money for the benefit it confers upon [MHH] in doing so.

… Under version 1, when you get to the question of quantification, you would like to know how many hours that the Plant employees and the Plant equipment have spent on recycling. Version 2, because of the question of, well, did they actually - did Plant actually make any money out of this, because it did get some income, some revenue from selling the recycled product, you would like to know precisely how many hours the Plant men and equipment spent on recycling. But it’s a - in my submission, we shouldn’t lose sight of the fact it’s a quantification problem. It’s not a - it shouldn’t - it’s not a problem for liability in terms of the Claimant’s case. You have the simple situation under either of the labels that Martin has attached of Plant doing the recycling work which enables [MHH] to receive the gate receipts, and Plant doesn’t ---

… The site would fill up; it gets recycled; it gets moved; they can take more waste in and they can get more gate receipts. And the vice is that Plant is not getting a penny from [MHH] for doing that recycling work. Now, that’s dishonest. It’s clearly a conflict - it’s clearly profits to [MHH] resulting from a conflict of interest irrespective of dishonesty, but we also say it’s dishonest.”

Therefore, Mr Parker submits that, contrary to the view he had strongly urged on the court at the amendment application, the substance of the original claim for labour and equipment remains good.

The claimant’s application for relief from sanctions pursuant to CPR 3.9 was issued on 17 October 2017. The claimant applies for relief “(if needed) for its failure to ensure that its Part 18 Responses…contained a compliant statement of truth pursuant to CPR 22.1(1)(b)". The application is supported by a short witness statement of Susan Alison Harris, the claimant’s solicitor, dated 17 October 2017.

The defendants’ application to strike out the claimant’s claim pursuant to CPR 3.4 was issued on 20 February 2018. It is supported by a witness statement dated 20 February 2018 from Mr Robert Tranter, an in-house solicitor of the First and Third Defendants, and by the 16^th witness statement dated 6 November 2017 of Mr Richard Wadkin, the external solicitor of the First and Third Defendants (filed in response to the claimant’s application for relief from sanctions).

The defendants submit that the claim should be struck out on the basis that the Replies are non-compliant in two respects. First, as is common ground, the document was not supported by a compliant statement of truth, in that the form used by the claimant was:

This technical defect is the reason for the claimant’s present application for relief from sanction. In her witness statement, Ms Harris states that the error was hers in preparing a draft of the Replies, and that her colleague, Mr Martin Scott, had now re-signed the document, this time with the correct wording.

The claimant’s application for relief from sanctions applies only to its failure to attach to the Replies a statement of truth in the correct form. The claimant does not apply for relief on any other basis. In particular, it does not, even contingently, apply for relief in respect of the substance of the Replies, or in respect of its service of a pleading which Norris J has held to be inconsistent with the permission he granted and to be “impermissible”.

The second ground on which the Replies are said to be non-compliant is more substantial than the first. In summary, the defendants submit that they subvert the court’s intention, as explained in the various judgments of Norris J, and make it impossible to know the case the defendants are required to meet, and therefore impossible to focus expert and factual evidence. They also submit that the particulars have not been produced in good faith, in that they purport to particularise a claim the claimant knows, and has stated, to be untenable. To comply with an order to produce Part 18 replies, it is not enough to deliver any document which purports to answer the Request: the answers must be given bona fide and must not be illusory, as it is contended the Replies are.

The claimant denies that the Replies are in any way defective, let alone in bad faith or illusory.

The following issues therefore arise:

The following further issues have also been argued before me:

I propose to consider first the effect of the Second Order.

Mr Parker pointed out that the claimant had been given permission to amend by reference to draft re-re-amended particulars of claim which contained the deletion of the principal claims pleaded in the RAPC. He stated that the claimant had only sought those deletions on the basis that it would also be allowed to amend the claim to plead what he called “version 2” of the labour and equipment claim, which was based on an alleged disparity of profits. However, that amendment had not been allowed by Norris J. In those circumstances the claimant submits that it was entitled not to exercise the permission to amend that Norris J had granted, with the result that the pleaded case would remain as it had been before the application to amend – in effect in the form of the RAPC - save that there are some heads of claim in that pleading which the claimant is still content to abandon. These, however, do not include the claims in respect of topsoil (paragraph 20(2)(i)), labour and equipment (20(2)(ii)) and scrap metal (20(2)(iii)) which, along with the tipping claim (paragraphs 21 to 24), the claimant had deleted in the proposed re-re-amended particulars of claim, but now wishes to pursue.

Mr Parker’s submission is that the Second Order (the terms of which are set out at paragraph 22 above) was not mandatory in the sense of obliging the claimant to serve a re-re-amended pleading in the form of the document attached to the Second Order, for which permission had been granted. Rather, the claimant was entitled to elect not to pursue the amendments allowed by Norris J and to revert to the original pleading – the RAPC. The claimant had simply declined to exercise the permission granted.

As to why the claimant had in fact served a re-re-amended pleading - the RRAPC (in two versions) - Mr Parker said that he had believed that the Amendment Judgment allowed the claimant to make some minor amendments to which the defendants had consented, but without being obliged to abide by the deletions of the principal claims, notwithstanding the defendants had consented to these deletions as well. He explained that it was only when he saw the perfected Second Order and the November Judgment at some point in November 2017, that the penny dropped, and he realised that Norris J intended the permission to be, in effect, a complete package. (Footnote: ¹⁸)

In developing his submission that the permission to amend granted by Norris J was not mandatory, Mr Parker stated that while there was little guidance in Part 17 CPR as to the effect of the grant of permission to amend, the former Rules of the Supreme Court were clearer. In this context he took me to Order 20 r.9 which provided:

Mr Parker submitted that Order 20.r.9 made clear that leave to amend did not import an obligation, and any question of an election was predicated on the service of an amended pleading "in accordance with the order". If that was not done before the expiration of the relevant period, then the order ceased to have effect, and the leave or permission lapsed. He submitted that CPR Part 17 should be construed in the same way, despite the absence of any provision corresponding to Order 20 r.9. However, he accepted that it was necessary to take account of the Court of Appeal's judgment in Fresenius Kabi Deutschland gmbh v CareFusion 303, Inc [2011] EWCA Civ 1288.

In that case the court was considering an order (of Norris J, as it happens) granting permission (not to the full extent sought, but as to part) to amend a statement of case. The context was a claim for revocation of a patent, together with a counterclaim for infringement. The relevant parts of Norris J's order were as follows:

Although the claimants there had been given partial permission to amend their grounds of invalidity, they did not in fact re-serve a statement of case containing those amendments, and the question arose whether the grant of permission was mandatory so as to oblige the claimants to make the amendments, or whether all that had happened was that the claimants had obtained permission to make amendments, which they were able to act upon or not as they wished. The Court of Appeal concluded that the permission to amend was mandatory.

In so concluding they took account of a number of factors, none of which was said to be decisive on its own. First, the language of the order (“shall serve…as soon as practicable”) was mandatory, and was not to be interpreted as meaning simply that if the claimants decided to take up the permission to amend they had to serve the amended pleading as soon as practicable. The emphatic language used was to be contrasted with the standard form of order giving a party “permission to re-serve”. The second and third factors were that certain procedural steps by other parties had to be taken by fixed dates, which made it unlikely that those parties were being required to act in ignorance of the issues in the case. Fourth, if the claimants were being given an election whether to amend, the court would have made a different order for costs by providing for the contingency of wasted costs if the option to amend was not in the event exercised. The fifth, sixth and seventh factors were particular to that case. As an eighth factor, Lewison LJ (who gave the lead judgment) noted that in no other area of litigation did the court, in granting permission to amend a statement of case, give the applicant the opportunity to repent of his decision to apply for the amendments. Finally, the court indicated that the context in which the order was made rendered a contrary construction improbable. The context was, essentially, that there was a tight timetable, the trial date was imminent, and if an amendment was permitted, consequential pleadings might become necessary and evidence would have to be gathered and exchanged.

Mr Parker accepted that in the light of this decision the order here falls to be construed in the light of the context, including but not limited to its wording. In this respect he relied, in particular, on the “unless” element of the order requiring a response to the Request. The Request related to allegations that would necessarily have been deleted if the grant of permission imported an obligation. Therefore, the Part 18 “unless” order made sense only if permission meant permission, rather than an obligation.

He also argued that it would be contrary to the basis on which the amendment application was made to compel the claimant to delete claims which it had never formally abandoned and, in particular, to delete a tipping claim about the merits of which he had expressed no reservations. Although that claim, too, had been deleted in the draft pleading, this was done with the aim of replacing it with a reformulated claim, and not because there was any difficulty with it as a freestanding claim.

Mr Parker also prayed in aid Norris J’s reference in the November Judgment to the appropriateness of the defendants issuing a strike out application. He submitted that this was inconsistent with the Second Order having immediate effect, in the way the order had in the Fresenius case.

He submitted that in the light of all these factors the Second Order could not sensibly be said to have been requiring the claimant to abandon virtually the whole of its case, but that if I was against him on this point, then the claimant should be directed to serve a pleading that complied with the Second Order, which would leave surviving a claim for £112,000.

Mr Pipe, with respect to the relevant context, referred to the fact that, at the time Norris J perfected the Second Order in November 2017, he had already heard and decided the preliminary issues and the amendment application. It had also been drawn to the attention of the Judge that there had been developments since the Amendment Judgment. In particular, Norris J had been informed by the defendants’ skeleton argument of 27 September 2017 that following the Amendment Judgment the claimant had served two versions of the RRAPC in which claims previously deleted as “untenable” in the draft re-re-amended particulars of claim put forward by the claimant on the amendment application, had been reinstated and, in one case, increased in value. Norris J had also been informed about the defendants’ contention that the Replies were deficient. Further, the Judge himself had stated that the claimant had been “unwilling to excise from the statement of case claims that are bound to fail unless it is permitted to introduce amendments which put its case another way” – a stance he regarded as “designed to build a position on costs”. (Footnote: ¹⁹)

Mr Pipe submitted that the Second Order should be interpreted in the light of Norris J’s knowledge of these matters. He pointed out that the Judge, having considered these developments, drew up a schedule to the order identifying precisely what elements of the amendment application were, and what were not, permitted, so that there could be no confusion. In the second paragraph of the Second Order, he used the words “shall serve”, without any such qualification as “shall, if so advised, serve”, or “shall have permission to serve”. The wording of the Second Order thus reflected the phraseology used in the Amendment Judgment: “must be served”. (Footnote: ²⁰)

He also referred to the Judge’s view that some of the deleted claims, in particular those in paragraph 20(2) of the RAPC, were untenable. He emphasised that the application to amend had been made expressly on that basis, with the claimant praying in aid their non-viability as an excuse for having ignored the First Order, which had required further particulars of those claims to be provided. Mr Pipe asked rhetorically whether in these circumstances it was realistic to consider that the Judge, when he made the Second Order, was intending to allow the claimant to persist with any claim which both he and the claimant itself considered untenable, and which if pursued would, therefore, be a waste of time, costs and the court’s resources. The mandatory language of the Second Order should be interpreted consistently with what he submitted to be the obvious answer to that question.

Reliance was also placed on the Judge’s comments, in the November Judgment, that the retention of claims which had been deleted (with the defendants’ agreement) in the draft pleading used at the amendment application was “not permissible”. (Footnote: ²¹)

Mr Pipe submitted that, in the light of these factors, the Judge in making the Second Order was not giving the claimant a choice either to proceed with the permitted amendments or to revert to the RAPC.

In response to Mr Parker’s argument that, if the Second Order was mandatory in the sense suggested, the Judge would not at the same time have made the “unless” order requiring the claimant to answer the Request, Mr Pipe submitted that the “unless” order was clearly a reaction to the claimant’s contumelious default in refusing to provide the particulars required by the First Order, and in effect ignoring it.

It is appropriate to recall the context in which the amendment application came before Norris J in May 2017. The present proceedings had then been on foot for about 6 years, and the claimant had not yet alighted upon a formulation of its claim which it regarded as satisfactory. Some, if not a substantial part, of the delay in bringing the claim to trial expeditiously was the result of steps taken by the claimant in the case and its stance on certain issues.

It had originally been envisaged that a trial would take place in 2015, but that did not materialise. The reason appears to have been the claimant’s application to amend and reformulate its case at the end of 2013. When that application was refused by HH Judge Behrens QC, the claimant appealed to the Court of Appeal. That appeal, too, was unsuccessful, but in the meantime the parties agreed to have determined the preliminary issues to which I have referred, with a view to narrowing the scope of the eventual trial. One of these issues was whether cross-invoicing had occurred with the knowledge and consent of all parties throughout the relevant period, in the way and to the extent that the defendants had contended in their defences. The defendants were successful in the preliminary issues trial before Norris J, and a very substantial costs order was made against the claimant. As well as finding for the defendants on the cross-invoicing issue, Norris J upheld the defendants’ contention as to the business model adopted by the claimant, and rejected the claimant’s assertions in that respect. That determination led the claimant to regard the current formulation of the principal elements of its case as untenable and/or inappropriately formulated, and to seek to re-formulate it in the manner put before Norris J at the amendment application in May 2017.

A further aspect of the context is that Norris J delivered the Amendment Judgment and made the Second Order in the knowledge that in 2014 the claimant had commenced Hague 6, in which it was making the very same claims as were sought to be introduced in Hague 5 by the amendment. Further, in refusing to allow the claimant to reformulate Hague 5, the Judge noted inter alia that to have acceded to the application would have jeopardised the then anticipated trial window in February 2018.

When the terms of the Second Order are considered in this context, and in the light of the factors to which Mr Pipe referred, it is clear that the Judge’s intention was to limit the then imminent trial to a determination of those issues which the claimant had not deleted from the statement of case as being either hopeless in view of the PI Judgment and/or inappropriately formulated.

The language used by the Judge was clear, unequivocal and expressed in mandatory terms, both in the Amendment Judgment: (“An amended pleading must be served by …”), and in the Second Order: (“The Claimant do have permission to re-re-amend the re-amended Particulars of Claim in the form as outlined in the Schedule to this Order. The Claimant shall serve such re-re-amended Particulars of Claim on the Defendants by…”). (My emphasis)

This language, and the Judge’s action of annexing to the Second Order a schedule setting out the form of the pleading required to be served by the specified date, puts the matter beyond doubt. There is further support in the Judge’s unambiguous statement in the November Judgment that the purported revival in the RRAPC of those passages which had been shown as deleted in the draft pleading was “not permissible”.

The Judge’s “unless” order does not lead me to a different conclusion. It is important to note that he expressly envisaged that there might well be responses to the Request indicating that some claims were not being pursued. Faced with what Mr Pipe characterised (in my view, correctly) as a contumelious disregard by the claimant of the First Order, it is hardly surprising that the Judge decided that the claimant should not be relieved of the obligation to respond to the Request, notwithstanding that some responses might well be predicated by the deletions which the claimant had proposed.

Nor do I consider that there is any inconsistency between the basis of the application to amend and a mandatory order. All the deletions in question, including the tipping claim, were proposed by the claimant and agreed by the defendants. They were put before the court in a formal application to amend, as being untenable and/or inappropriately formulated. No more formal abandonment was required in the circumstances. The claimant itself appears to have eventually understood that in the Amendment Judgment Norris J was holding the claimant’s “original case to have been irrevocably abandoned”. (Footnote: ²²) Neither the claimant nor Norris J sought to distinguish the deletion of the tipping claim from the deletion of the claims in paragraph 20(2) of the RAPC. The fact that the claimant deleted the tipping claim because it was regarded as, in part, not worth pursuing and, for the remainder, as subsumed in a reformulated claim based on disparity in profits which the claimant wished to make in these proceedings as well as in Hague 6, is nothing to the point. Finally, I do not consider that the reference in the November Judgment to a potential striking out application was in any way inconsistent with the Second Order having mandatory effect.

For these reasons, I do not agree with Mr Parker’s interpretation of the Second Order, and I conclude that it had mandatory effect. The claimant was therefore under an obligation to serve a re-re-amended particulars of claim in the form of the pleading scheduled to the Second Order. In particular, the claimant was bound to serve a pleading which reflected the deletions which had been put before Norris J and to which the defendants had consented. Those deletions included paragraph 20(2) (claims for topsoil, labour and equipment, and scrap) and paragraphs 21 to 24 (claim for tipping).

It follows that the claimant is in breach of the Second Order, having served a re-re-amended particulars of claim - the RRAPC - which failed to reflect the terms of the Second Order because, in particular, the deleted passages in question have been re-instated, and the pleading is non-compliant in other respects, including by increasing the amount of certain claims. The claimant has not applied for relief from sanctions in respect of this breach. I shall consider this matter further later in this judgment.

It also follows that, contrary to the claimant’s contention, it did not have a choice either to re-re-amend its pleading in accordance with the permission granted by Norris J, or to revert to the original pleading – the RAPC. Its obligation was to comply with the mandatory terms of the Second Order and to serve a pleading in the scheduled form. This obligation subsists.

In view of my conclusion that the Second Order was mandatory and did not provide the claimant with a right of election, certain other issues identified earlier either do not strictly speaking arise or become less significant.

Thus, it is not strictly necessary for me to consider the alternative submission of Mr Pipe, that even if the Second Order allowed the claimant a right to elect whether to amend or not, the claimant exercised and exhausted that right when it served the RRAPC, and it is not now entitled to re-elect.

Further, the issue whether, by reason of the content of the Replies and the form of the supporting statement of truth, the claimant is in breach of the “unless” element of the Second Order, in one or both of the respects alleged by the defendants, has much less significance. This is because the specific allegations in the RAPC in respect of which the Replies are said by the defendants to be deficient, are in any event precluded from being pursued as a result of the mandatory effect of the Second Order.

However, as the issues in question were argued, I shall consider them.

On the assumption that, contrary to his primary position, the claimant had a right to elect, Mr Pipe submitted that it is not entitled to two bites at the cherry. He relied on the principle that one cannot both approbate and reprobate. Once one has elected that is the end of the matter, and absent some form of waiver by the court, one is stuck with the election made. Mr Pipe stated that here the RRAPC, albeit defective and in breach of the Second Order, was served. The defendants have been put to substantial costs in preparing comments and submissions in respect of the RRAPC, only to discover on the day before this hearing began that the claimant is not now proposing to amend at all.

Mr Pipe acknowledged that he had been unable to find an authority precisely on the point. He drew my attention to an old authority dealing with the circumstances in which a party to a contract could elect to rescind the contract for fraudulent misrepresentation where that party had not yet affirmed it. The circumstances of that case were so different that I did not, frankly, derive much assistance from it.

I understand the claimant’s position in relation to the election to be that, in so far as the RRAPC was not compliant with the Second Order, it could be treated as a nullity and ignored, thus enabling the claimant to say that it had not acted upon the permission to amend and revert to the RAPC. Had this been a live issue, I would have been inclined to prefer Mr Pipe’s argument that by purporting to serve a re-re-amended pleading following the grant of permission, any right to elect for the original pleading would be lost, notwithstanding that the pleading served was non-compliant. I do not see why the RRAPC should be treated as a nullity, simply because it represents a clear breach of the Second Order. I would have been inclined to hold that if the claimant now wished to revert to the original pleading, an application by the claimant and an order of the court would have been required.

Non-compliant Statement of Truth

I have already set out the nature of this complaint at paragraphs 38-40 above. Even if the technical defectin the wording of the Statement of Truth attached to the Replies amounts to a breach of the Second Order, I regard it as of insufficient seriousness or significance to justify any sanction. The slip was minor, and clearly unintentional, and it has been explained by Ms Harris and corrected, without prejudice of any kind to the defendants or the administration of justice. Mr Pipe, rightly, did not press this point very strenuously.

The substance of the Replies

As I have said, the defendants submit that the Replies are not provided in good faith and are illusory. The focus of the complaint relates to the allegations in paragraphs 20(2)(i), (ii) and (iii) of the RAPC which relate respectively to the claims in respect of “topsoil”, “equipment and manpower”, and “scrap”, and the allegations in paragraphs 21 to 24 relating to “tipping”.

Paragraphs 20(2)(i), (ii), and (iii) are specific allegations under the heading “Dishonesty of Martin”, and are particulars of a general allegation quoted below (omitting deletions made by virtue of earlier amendments to the original pleading):

“Dishonestly, in deliberate and conscious breach of his fiduciary duties, Martin:

…

(2)

Procured Plant to provide goods and services to MHH at a level which Martin knew to be far in excess of the value of monies transferred, or to be transferred, by MHH to Plant.

(i)

£994,106, if alleged cross-invoices and/or allegedly misdescribed invoices are not taken into account alternatively £1,066,871 if alleged cross-invoices and/or allegedly misdescribed invoices are taken into account, being the difference between payments made from MHH to Plant purportedly in respect of topsoil and the actual value of the topsoil supplied to MHH by Plant, over their entire trading relationship as particularised in Appendix J;

(ii)

£12,311,437, being the difference between payments made from MHH to Plant purportedly in respect of equipment and manpower and the actual value of the equipment and manpower provided to MHH by Plant, in respect of the year ending February 1999 to the year ending February 2009:

(iii)

£314,357, being the value of the scrap steel supplied to MHH by Plant (for which no payment was ever made), in respect of the year ending February 1990 to the year ending February 2009, as particularised in Appendix K.”

In relation to “tipping”, the allegation in the RAPC (also apparently under the overall heading “Dishonesty of Martin”) is that:

“21.

Between the year ending February 1987 and 30 June 1997 [Plant] paid to MHH money purportedly in respect of tipping charges the sum of £3,280,945.

Mr Parker told me that the discrepancy in charges for tipping services would now be reduced by £500,000 to reflect cross-invoicing. (Footnote: ²³)

Thus, as pleaded in the RAPC, the claims in respect of “topsoil”, “equipment and manpower”, and “scrap” allege failure by MHH to pay Plant a sum for goods and services “provided to” or “supplied to” MHH by Plant which reflected the value of the goods/services provided/supplied to MHH. The tipping claim alleges overcharging by MHH for services supplied by MHH to Plant. In both cases dishonesty is alleged on the basis of the facts pleaded.

I remind myself that the Chancery Guide, at paragraphs 10.1-10.2, states:

“Setting out allegations of fraud

10.1

In addition to the matters which PD 16 requires to be set out specifically in the particulars of claim, a party must set out in any statement of case:

•

full particulars of any allegations of fraud, dishonesty, malice or illegality, and

•

where any inference of fraud or dishonesty is alleged, the facts on the basis of which the inference is alleged.

10.2

A party should not set out allegations of fraud or dishonesty unless there is credible material to support the contentions made. Setting out such matters without such material being available may result in the particular allegations being struck out and may result in wasted costs orders being made against the legal advisers responsible.”

As I have said, the RAPC was served on 31 March 2014. It is the same pleading of which leading counsel for the claimant made the comments to Norris J quoted at paragraph 11 above, stating that the pleaded case was “holed below the waterline” and “untenable” in the light of the outcome of the preliminary issue, that it was “pointless” asking the claimant for further information about the currently pleaded allegations as Plant did not provide goods and services to MHH, and that it was necessary for the claimant to amend the pleading because the nature of the dishonesty being alleged had changed. According to Mr Parker, the dishonesty now intended to be alleged was:

“no longer no[t] paying Plant for doing recycling services for [MHH]. The dishonesty now is having Plant do all the work for Plant’s recycling business, but not allowing Plant to take any of the fees from the people that were depositing the material to be recycled and in charging Plant for actually taking its material to its own recyling place to be recycled by Plant. So they have [MHH] taking all these profits and doing nothing…”

In his submissions to me Mr Parker summarised the position as it stood at the amendment application hearing before Norris J:

“We wanted to plead Plant and Equipment version 2, which is the version that looks at the disparity between the profits that [MHH] was getting from the recycling and the profit, if any, that Plant was getting.” (Footnote: ²⁴)

Another, somewhat different, formulation of the alleged dishonesty in version 2 as stated by Mr Parker in his submissions was:

“based on the disparity between the benefit provided to [MHH] by Plant by its recycling work and on [sic] the fact that Martin knew or did not care that Plant made no profit from the recycling work.” (Footnote: ²⁵)

Mr Parker explained that, whereas “version 1” of the Plant and Equipment claim (viz the claim set out in paragraph 20(2)(ii) of the RAPC) focussed on the disparity between the value of the recycling work done from which MHH benefitted and the amount of any payments made by MHH to Plant, “version 2” (viz the proposed re-re-amendment disallowed by Norris J in the Amendment Judgment) focussed on the disparity between the profits MHH earned as a result of Plant’s recycling work, and the profits (if any) earned therefrom by Plant. He submitted that version 1 would involve an assessment of the market value of the recycling work done, and version 2 was “far simpler”. He explained that in version 1, the dishonesty alleged was twofold: in respect of the earlier period, when only landfill (and no recycling) took place at Carlisle St, Plant was overcharged for depositing waste there; in respect of the later period, when recycling was carried out, the alleged dishonesty was in MHH not paying for the recycling work. In version 2, the dishonesty arose from the disparity between the profits earned by MHH and those earned by Plant. (Footnote: ²⁶)

Having failed to persuade Norris J that it was appropriate to re-re-amend the pleading to allege this new (version 2) formulation of dishonesty (already apparently an alternative claim in Hague 6), Mr Parker now seeks to revert to the allegations in the RAPC (ie version 1) some of which he had abandoned as untenable in the light of the PI Judgment. In a 180 degree swerve from his submission quoted at paragraph 11 above, he now submits:

“….so for the purposes of explaining the case we can now see that really the focus is on the recycling which he simply didn’t pay for and which from about 1991 onwards was the majority of the work. So that’s the dishonesty. You took the benefit of these services; you didn’t pay for them.” (Footnote: ²⁷)

It is to be noted that there is a subtle difference in the way Mr Parker now describes those original allegations: whereas the RAPC itself refers to MHH’s failure to pay Plant the correct sum for goods and services “provided to MHH” or “supplied to MHH” by Plant, Mr Parker’s emphasis now is on Plant’s recycling activities having been “for the benefit” of MHH. Thus, the following interchange took place during the hearing: (Footnote: ²⁸)

“MR PARKER:…Norris J found that Martin did adopt the business model that Martin said he adopted, but that's not to decide the substance of whether the services were actually being provided for the benefit of Excavations, and…, as your Lordship has seen, we have answered the Part 18 on the basis that these were being provided for the benefit of Excavations.

MR JUSTICE BARLING: Everything?

MR PARKER: Yes.

(My emphasis)

Thus, the claimant has answered the Request on the basis that Norris J's upholding of the business model put forward by Martin and his rejection of the subcontracting model urged by the claimant, make no difference to the substance and viability of the version 1 formulation as pleaded in the RAPC. (Footnote: ²⁹) The claimant now contends that all the recycling work at Carlisle St benefitted MHH, and that therefore in the Replies there was no need to distinguish between work done at the site for the purposes of Plant's own businesses, and services/material provided specifically to MHH. The defendants submit that that approach is not consistent with the case as pleaded in the RAPC.

I now turn to consider the Request and the Replies in the context of the individual claims, bearing in mind that it was to the allegations as formulated in the RAPC that the Request was directed.

The topsoil claim existed in the RAPC, was deleted in the draft re-re-amended pleading put before Norris J, and was sought to be revived/retained in the “impermissible” RRAPC. By the Request, information was sought as to the amount and date of each supply of topsoil, the location to which it was supplied, its value, the payment made for it, and how the value was arrived at. In the relevant response, the claimant provides monetary values for hundreds, and possibly thousands, of loads of topsoil over the whole of the 23 years of this element of the claim. For each year the total is in fact the same figure as in Appendix J to the RAPC (dating from 2014, when that pleading was served). The defendants state (Footnote: ³⁰) (and this does not appear to be disputed) that the claimant's approach has been to identify all topsoil taken to Carlisle St over the 23 year period, based on an assumption that all the material was supplied by Plant to, and was required to be paid for by, MHH.

However, in his witness statement Mr Wadkin points out that the claimant sold topsoil from Carlisle St; that it used topsoil taken from Carlisle St on contracts it was performing for its own clients; that it used topsoil taken to Carlisle St to blend with other materials to make lower grade soils, which it then sold or utilised on contracts for its own businesses. In all such cases the material, some of which it had taken to Carlisle St, was its own.

The claimant has not sought to dispute Mr Wadkin’s account, nor has it adduced any evidence of its own to contradict it. I note, too, that what Mr Wadkin says is consistent with HH Judge Behren’s findings and those of Norris J in the PI Judgment about how each of the two companies ran its own business at/from Carlisle St.

The defendants submit that, in the light of the nature of the companies’ respective businesses, the assumption that all topsoil taken to Carlisle St over the 23 year period was supplied to MHH is simply untenable. They point out that in the Replies there is no attempt to identify which of the loads were for use by the claimant’s businesses and no credit has been given by the claimant for any disposal, use or sale of such material in its businesses. They submit that the same is true of the claims in respect of manpower and equipment and scrap (ie the claims in paragraphs 20(2)(ii) and (iii) of the RAPC).

The manpower and equipment claim was also deleted from the draft re-re-amended particulars of claim placed before Norris J in the amendment application, and was sought to be revived/retained in the “impermissible” RRAPC. It is common ground that the original claim against MHH contained in the RAPC was pleaded and particularised on the basis that all the supplies and work carried out by Plant at Carlisle St were carried out as subcontractor to MHH, and that therefore MHH was under an obligation to pay Plant a reasonable price for all of it. However, in the PI Judgment, Norris J had found that Plant operated its own businesses at and from Carlisle St, where all its men and equipment were based. Its operations included a skip business, demolition and site clearance, recycling, and supply/sale of topsoil, scrap, and other recycled material. Norris J also found that, as well as those operations carried out on its own account, Plant carried out some landfill and recycling work for MHH.

The defendants submit that insofar as these operations were carried out on the claimant’s own account, the supplies of goods and services did not constitute supplies to MHH for which that company would be expected to be invoiced, and that in the light of the PI Judgment, and in particular Norris J’s findings as to the actual business model on which Plant had operated, a claim that MHH was under an obligation to pay Plant a reasonable price for all work carried out and supplies made by Plant at Carlisle St is not sustainable. Indeed, as I have already noted, Mr Parker himself was saying the same thing on behalf of the claimant at the consequentials hearing after that Judgment, and at the hearing of the amendment application.

Mr Pipe submits that in order to give a genuine answer to the question “What labour and equipment was supplied to MHH?” it is necessary for Plant, by reference to the records, to make a bona fide attempt to allocate the use of men and equipment as between its own businesses and that of MHH. It is impossible to say that all men and equipment were throughout deployed exclusively for MHH, because it has been found that that was not so. He submits that if no such allocation is made, not only are the findings in the PI Judgment being ignored, but dishonesty is being alleged by reference to a position which is known by Plant to be untrue.

The defendants point out that despite these considerations, in response to a request for further information about the allegation in paragraph 20(2)(ii), the claimant has not in the Replies attempted any allocation between men/equipment used for its own businesses and men/equipment used to supply services to MHH. It has simply provided details of all the labour and plant deployed at Carlisle St as recorded in the Grey Books over the period of the claim. The defendants submit, and this does not appear to be in dispute, that the particulars provided are essentially the same figures as were originally provided in 2014, save that the total has been increased by about £500,000 to allow for what the claimant states to be the effect of cross-invoicing.

The defendants contend that, as with the topsoil claim, this makes it impossible for them (and the court) to deal with the claimant’s case, as it is necessary to know which items of the labour and equipment were deployed in supplying services to MHH, as distinct from those used for the purposes of the claimant’s own businesses. They submit that it is necessary to know this in the first instance in order to deal with liability, since the fundamental allegations against the defendants are based on an inference of dishonesty to be drawn from an alleged disparity between the value of services provided to MHH, and the payments made by that company. Unless the claimant identifies the services in question, the defendants submit they cannot answer the claimant’s case: for example, they cannot instruct experts to value the relevant services. More fundamentally, they submit that in the light of this deficiency the case which the claimant now wishes to run on the basis of the RAPC does not get off the ground, the pleading is an abuse of process and embarrassing, and the claimant is in breach of the “unless” element of the Second Order.

As I have said, the claimant’s answer is that it is immaterial whether (as the claimant had originally contended in the preliminary issues trial before Norris J) the claimant at all times deployed its men/equipment as a subcontractor of MHH, or whether (as Norris J found) it also deployed them for the purposes of its own various businesses. This is now said to be immaterial because all the equipment and manpower deployed by Plant at Carlisle St from about February 1998 to February 2009, and all the recycling work carried out there, was ofbenefit to MHH. Accordingly, there is no need for the claimant to identify and give credit for the work done for its own businesses. Thus, the claimant contends that a dishonest breach of fiduciary duty can be inferred from the difference between the value attributed by the claimant to all that manpower/equipment/recycling work and such payments as were made by MHH to Plant in respect of landfill and recycling. The resultant sum was originally said to be £12,311,437 – a figure which is now increased, as described above.

Turning to the claim in respect of scrap (paragraph 20(2)(iii) of the RAPC), as with the topsoil and manpower/equipment claims, this element was deleted in the draft re-re-amended particulars of claim placed before Norris J at the amendment application, and was revived/retained in the “impermissible” RRAPC. The approach adopted in the Replies appears to be the same as for topsoil: the claimant has identified all scrap taken to Carlisle St, on the assumption that the material was all taken by/supplied to MHH. However, it is not disputed (and there is a finding of the court) that the claimant sold scrap from Carlisle St as part of its own business. The defendants point out that no credit is given in respect of Plant's sales of this material from Carlisle St. They submit that, as with the topsoil claim, the claimant was, in effect, ordered to identify not what scrap came into the Carlisle St site, but what was the scrap that was allegedly dishonestly taken without payment by MHH – in effect, stolen. Therefore, they submit, the claimant has answered the wrong question; the information provided is illusory; it does not enable the defendants to defend the claim, and is a breach of the “unless” element of the Second Order.

I noted earlier that Mr Wadkin’s analysis of the claimant’s approach to the provision of particulars of the claims in paragraphs 20(2)(i), (ii) and (iii), does not appear to have been disputed by the claimant, and that no contradictory evidence from the claimant has been drawn to my attention. In his submissions to me Mr Parker made a general point, which he appeared to apply to each of these claims. He submitted that any failure to account for the proceeds of sale of any of the recycled material, or any failure to make an apportionment such as the defendants have stated to be necessary, or any other factor or error which led to imprecision in the figures referenced in the Replies, was only relevant to quantum, and that the “allegation of dishonesty is not predicated on the precision of the figures.” (Footnote: ³¹) He submitted that if, for example, the defendants were only shown to have taken two thirds of the topsoil or scrap alleged, it would still be dishonest.

I do not consider that the Replies in respect of the allegations in paragraphs 20(2)(i) (ii) or (iii) are such as to render those allegations (and in particular the allegation that dishonesty is to be inferred from the facts pleaded) intelligible or justiciable. Nor do the Replies enable the defendants to understand the case they are required to meet. I consider that the pleading, together with the Replies in question, is embarrassing.

It is incontrovertible that the claimant operated its own several businesses from Carlisle St, and there is uncontradicted evidence that the claimant used topsoil and scrap from Carlisle St, together with the men and equipment based there, in the pursuit of those businesses. In those circumstances it is effectively meaningless to provide a list of all topsoil, all scrap and all deployment of men and equipment in purported particularisation of these claims. For the reasons stated by the defendants, there must be pleaded some plausible allocation of these elements as between the businesses of the claimant and the third defendant respectively.

First, in the light of the PI Judgment it is not properly open to the claimant to allege that all such material/services were supplied to MHH, as the RAPC alleges. Second, in the absence of a pleaded allocation, it is not possible for the defendants or the court to understand the basis of the alleged inference of dishonesty. As paragraph 10.1 of the Chancery Guide states, (Footnote: ³²) the facts on which that allegation is made must be set out. Given that it is not tenable for the claimant to rely upon the supply of all such material/services to MHH, as things stand no proper case based on an inference of dishonesty is pleaded.

Nor is the claimant rescued by the suggestion that allocation of this kind is unnecessary because it goes only to quantum and not liability. This is manifestly incorrect. It is upon the basis of the pleaded facts that an inference of dishonesty is alleged. The RAPC alleges dishonesty by reference to the size of the disparity between the value of services/goods supplied to MHH and payment made (“Procured Plant to provide goods and services to MHH at a level which Martin knew to be far in excess of the value of monies transferred…”) Therefore, the pleading is deficient and embarrassing unless one is told the size of the disparity.

Nor, so far as the claim in paragraph 20(2)(ii) is concerned, is the claimant assisted by the gloss now sought to be placed upon the pleaded case by Mr Parker in his oral submissions. The RAPC does not allege dishonesty on the basis that MHH in fact benefitted from all the recycling work at Carlisle St, but on the basis that Plant supplied goods/service to MHH for which it did not pay the appropriate amount.

For these reasons I consider that the Replies do not comply with the requirements of the “unless order”, and are illusory so far as these claims are concerned. In the light of the Replies, the allegations in question as currently pleaded are embarrassing. Further, the overall approach which the claimant has taken to this aspect of the proceedings is very arguably an abuse of the process of the court. It is certainly such as is likely to obstruct the just disposal of the proceedings. The provision of particulars which add little or nothing to those provided several years ago before the PI Judgment, and which are inconsistent with the findings of the court in that Judgment and also with the case pleaded in the RAPC is, in effect, a meaningless exercise. I therefore uphold the defendants’ submissions.

As I have already noted, there is no application for relief from sanctions other than in relation to the non-compliant statement of truth. I would, in any event, have been most unlikely to have granted relief in the present circumstances: the claimant, having pursued an amendment application in reliance upon the untenability of allegations in its pleading, then seeks to resile from the abandonment of those allegations whilst failing properly to particularise them in breach of an “unless” order. I regard the breach here as manifestly significant and serious for the purposes of the Denton principles. There is no justification for the breach, and having regard to all the circumstances, including the overriding objective, relief should not be given. Therefore, even if I had found in the claimant’s favour on the mandatory nature of the Second Order, these allegations would still fall to be struck out pursuant to CPR 3.4 and/or the court’s inherent jurisdiction.

Finally, I turn to the claim for tipping in paragraphs 21 to 24 of the RAPC. As there pleaded, the claim is made on the basis that Plant was dishonestly charged by MHH for depositing more waste at MHH sites than it actually deposited. Mr Parker emphasised that the concerns which the claimant had expressed to Norris J about the viability of the paragraph 20(2) claims did not apply to the tipping claim, which had nothing to do with the business model that Plant had adopted. However, the claimant’s current stance in relation to this claim is somewhat confused.

As we have seen, this claim, too, had been deleted in the draft re-re-amended particulars of claim put before Norris J at the amendment application hearing, and the deletion was agreed by the defendants. Mr Parker explained that the deletion was because the claimant had wished to focus on an alleged disparity in profits, and the alleged overcharging for tipping inflated the profits of MHH. Thus, if the RAPC formulation of the tipping overcharge claim had been retained in a re-re-amended pleading based on disparity in profits, there would be double recovery. So, the original tipping claim was deleted in the amendment application, and Norris J (by the Second Order) had also removed the tipping claim from the permitted re-re-amended pleading. The claimant now wished to reinstate it, or at least part of it.

Asked why he had not pleaded it in the alternative, Mr Parker stated

“…if we could get the profits claim, about which we’re very confident, there’d be simply no point investigating the question of whether or not there had been excessive charging for tipping.” (Footnote: ³³)

At another point in his submissions he said (Footnote: ³⁴)

“…our point is if - if we can call it the alternative, if the alternative way of formulating our claim is pursued, then the tipping charge falls away because we are seeking the alternative claim is for the period 1991 to 2009. It picks up all the profits of [MHH]. That simply leaves for the tipping claim a rump of ‘86 to ‘91, which we don’t consider is worth pursuing.”

And also: (Footnote: ³⁵)

“Under the old claim, HPL claimed for being overcharged for the accounting years ending February 87 through February 98. The plant and equipment claim was for the accounting years 1990 through to February 2009.

However, with the new claim, the focus is the profits from Excavations for the recycling years, 1991, when planning permission was taken to use Carlisle Street as a recycling centre and one talks about how the landfill would (inaudible) to a recycling operation to 2009 inclusive. As it followed that practically all the material dumped at Carlisle Street in those years was recycled and no records were kept of what (inaudible), it followed that the only accounting that could be given was of all the profit from Carlisle Street less all costs. The effect was that as a matter of mathematics, the claim for overpayment by Plant for the years 91 to 98 would be subsumed in the claim for Excavations’ profits. In such circumstances, Plant would not propose pursuing the running of the tipping claim separately, so that would just leave a claim for the years February, accounting years ending February 87 through to 91.

So, the bulk of the tipping claim gets subsumed in the reformulated plant and equipment claim. We say that was an investigation and determination of whether Plant had been overcharged and whether (inaudible) and Angela.

So, when you pay the effect of the claim of the Hague number six, as streamlined, as we wish to streamline it, is to reduce both the scope and number of years in which the financial effects of operations between Plant and Excavations would need to be considered and it also means that the only site that we are concerned with is then the Carlisle Street site because the tipping claim was in respect of all Excavations’ sites.”

Finally, in the claimant’s skeleton argument the matter is put thus:

“37.

HPL also claimed that for many years it was overcharged for the waste that it dumped at Carlisle Street (and MHH’s other sites). HPL’s case was that it was defrauded by MHH, first by being overcharged by MHH for its tipping at Carlisle Street (and MHH’s other sites) (the Tipping Claim) and then, as the Carlisle Street site became used principally as a recycling centre, by being underpaid for the work that it did there. HPL claimed for being overcharged for the accounting years ending February 1987 through February 1998. The Plant and Equipment Claim v1 was for the accounting years ending February 1999 through February 200.

38.

However, with the Plant and Equipment Claim v2 the focus of the Plant and Equipment Claim is the profits of MHH from recycling for the years 1991 (when planning permission was obtained to use Carlisle Street as a recycling centre) to 2009 inclusive. As it followed that practically all the material dumped at Carlisle Street in those years was recycled (and no records were kept of what small proportion was landfill) it followed that the only account that could be given was of all the profit from Carlisle Street less all costs. The effect was that, as a matter of mathematics, the claim for overpayment by HPL for the years 1991-1998 would be subsumed in the claim for MHH’s profits. In such circumstances HPL would not propose pursuing the rump of the Tipping Claim separately. This avoids an investigation and determination of whether HPL had been overcharged and of whether this was deliberate on the part of Martin and Jean Angela.

39.

Thus the effect of the claim in Hague No. 6 (as it is to be streamlined) is to reduce both the scope and the number of years in which the financial effect of operations between HPL and MHH would need to be considered. The removal of the Tipping Claim and focus on recycling reduced the number of MHH’s sites relevant to the claim to Carlisle Street.”

Therefore, the current position of the claimant appears to boil down to this: the major part of the tipping claim, i.e. that for the years from 1991, is subsumed in the “disparity in profits” version of the claim (“version 2”), which Norris J did not allow to be included in the present proceedings by amendment, but which forms part of the Hague 6 claim. The remainder or “rump” of the tipping claim (referable to the years 1986-1991) is not worth pursuing.

Turning to the calculation of the tipping claim for dishonest overcharging as pleaded in the RAPC (ie in “version 1”), the claimant has added up the amounts invoiced by MHH for tipping, using the rate applicable to the claimant (which Norris J found (Footnote: ³⁶) to be preferential and competitively advantageous to Plant). The resultant amount has then been compared with the amounts tipped by Plant at Carlisle St, as recorded in the Grey Books. This comparison is said to result in a global discrepancy of some £2 million, once cross-invoicing is accounted for. The figures in the Replies are unchanged from those originally provided in 2014, save in respect of cross-invoicing. In his 16^th witness statement, Mr Wadkin states that in the Replies:

“…the Claimant appears to ignore the material going from Carlisle Street to [MHH] (Footnote: ³⁷) tips despite the fact that [Plant] ran its business from Carlisle Street and disposed of material that it had there (not being the waste from recycling). The Claimant ignores the fact that Dianne, on behalf of [Plant], was the person creating the tipping figures for the invoicing yet it still puts the claim against the Defendants as a fraud claim (deliberate dishonest breach of fiduciary duty).”

Thus, the defendants submit that one major category of tipped material that attracted invoices from MHH (viz, where, as part of their own business at Carlisle St, Plant sent material from there to other MHH tips) has been excluded from the claimant’s calculation and from the particulars on which an allegation of dishonesty is founded.

Again, this evidence of Mr Wadkin does not appear to have been disputed by the claimant, and no contrary evidence has been shown to me. However, it appears that the same general submission made to me by Mr Parker, i.e. that any imprecision in the figures pleaded goes to quantification rather than dishonesty, also applies to the tipping issue.

True, it may be, that the tipping claim does not look very promising in the light of Mr Wadkin’s evidence, and, indeed, in the light of the factors which led the claimant itself to delete this claim at the amendment application. An allegation of dishonesty is a serious matter. It may also be that the claimant would have difficulty in establishing that if Dianne (who is a co-owner of the claimant, and who with her brother David effectively brings these proceedings) was in charge of the figures on which MHH produced invoicing for tipping, then any discrepancies in charging for the claimant’s tipping at MHH sites was the result of dishonesty on the part of Martin and JAH.

However, the allegation has been pleaded and, as I understand it, the Replies simply put flesh on the number, type and date of tipping loads, together with amounts invoiced for tipping, in the relevant period. In view of the subject matter of the allegation, the Replies are not subject to the fatal deficiency from which those relating to the allegations in paragraph 20(2) suffer. No question of allocation of supplies as between the parties’ respective businesses arises.

In those circumstances, I am not satisfied that in relation to the tipping claim the Replies can be characterised as illusory or otherwise in breach of the “unless” order. The fact that there may be an issue as to whether the Replies have failed to take account of tipping by the claimant at other MHH sites, does not render the Replies defective. There is no way in which that issue of fact could be resolved at this stage.

Nevertheless, the claimant has on any view served an obviously non-compliant RRAPC containing the tipping claim, which was deleted in the permitted version of the re-re-amended pleading. The purported reinstatement of that claim (as well as of the other deleted claim) would still have been a breach of the Second Order, even if the claimant had succeeded on its argument that the Second Order was not mandatory in the sense discussed earlier. It would, therefore, have been necessary for me to consider whether that breach justified a sanction which included the striking out of the tipping claim. In the event, I do not need to consider this aspect, as the tipping claim is removed by the effect of the Second Order.

I have found that the claimant is in breach of the Second Order in at least the following respects: (1) in failing to serve by the required date a pleading in the terms specified, as the claimant was obliged to do by virtue of the mandatory nature of that order; and (2) in failing to serve Replies which comply with the “unless” element of the Second Order, in respect of the claims in paragraph 20(2) of the RAPC. For reasons which are clear from this judgment, each of these breaches is serious and significant, and there is no justification for any of them.

It remains to consider what the court should do. There is no relevant application for relief from sanction. Mr Parker submitted that if I were against him on the mandatory nature of the Second Order, I should order the pleading required by paragraph 2 of the Second Order to be served by the claimant, incorporating an “unless” element if thought appropriate. This would allow the remaining claim for £112,000 to go ahead. The alternative would be to strike out the whole claim, as Mr Pipe submitted I should.

I have decided to accede to Mr Parker’s suggestion. Although the claimant will no doubt consider carefully whether the surviving claim for £112,000 is worth pursuing, in my view a sanction more severe than the deletion of the much larger claims (which takes effect in any event by virtue of the mandatory nature of the Second Order) would be disproportionate.

I therefore invite the parties to agree the terms of an order which disposes of the applications in a manner which reflects this judgment. The order must require the claimant to serve re-re-amended particulars of claim in the form specified in the schedule to the Second Order (subject only to any variations which may be agreed between the parties) by a date not later than 14 days (or such other period as may be agreed between the parties) after the date on which the order is made. The order must also contain an “unless” provision, to the effect that if a pleading in the required form is not served by the date specified then the whole claim will be struck out automatically with an order for costs of the claim in favour of the defendants without need for further reference to the court.

The parties are requested to send me an agreed draft of the order not later than 14 days after the date on which this judgment is handed down. Failing agreement, the parties should send me by the same deadline their rival versions of the proposed order for my consideration.