Inner Mongolia King Deer Cashmere v Haian Ma

The first item on today’s agenda, pursuant to the order of HHJ Pelling KC, sitting as a Judge of this court, dated 4 April 2025, was the substantive disposal of the claimant’s application issued in October 2024 for a debarring order, or an unless order with debarring sanction, so far as that application related to the defendant’s failure to discharge various costs orders which, in turn, related to his in the event unsuccessful application to stay proceedings under section 9 of the Arbitration Act 1996.

The principal sum by way of costs covered by orders and, therefore, indirectly covered by that item on today’s agenda was £229,000. In detailed circumstances which I will not take up further time now rehearsing but are set out in the evidence and correspondence, the costs in question have, in fact, now been paid. Although Mr Bacon’s position for the claimant at the hearing today stands a little in contrast to the position advanced in his skeleton argument, he has indicated that there may be reasons for that to do with the lateness with which the payment of the costs was finally made. His position today is to acknowledge that there is no ongoing substance to his client’s debarring order or unless order application, as regards those costs. However, he proposes that the court should mark that effective success or partial success of the debarring application, as he would submit that it was, by a costs order made today, providing that the defendant is to pay the costs of and occasioned by that application, as issued in October 2024, so far as it was founded on what I can call, for convenience, the section 9 costs.

For that purpose, the claimant’s solicitors have prepared a costs schedule in the format familiar to the court from costs schedules for summary assessment, albeit with, perhaps, a somewhat greater degree of detail in the narrative explaining the items in the schedule, for a total, rounding things off for present purposes, of £130,000. Although not fully evidenced, but on instructions, Mr Bacon was kind enough to indicate that that may be only £25,000 or £26,000 or so short of what those instructing him would say has been the total in costs incurred on his side in the debarring order application.

For his part, Mr Marshall KC for the defendant acknowledges that it will be argued that the issuance and pursuit of the debarring order should be regarded by the court as having achieved a significant outcome for the claimant, although he does not concede that that will necessarily be the final conclusion of the court seized of the balance of the debarring order application, if pursued. He then observes, firstly, that there are likely to be real difficulties in the process attempted by the solicitors for the claimant of separating out costs that can be said, somehow, to be referrable to that part of the application which the claimant might be able to argue should be treated as having succeeded.

It seems to me, provisionally but sufficiently for the purposes of deciding what is the correct order today, that there is some real force in that. Indeed, the very fact that, having taken instructions, Mr Bacon’s indication to the court amounts to the suggestion that something in excess of 80% of the entirety of the claimant’s costs of the debarring application have been said to be associated with the section 9 costs, causes one to have real concern as to the basis upon which that exercise has been undertaken.

Secondly, Mr Marshall notes that the sense in which, as it will be argued, the claimant would say that the debarring order has had partial success is that it will be said to have been the real and effective, and probably sole, cause of the defendant finally making payment of those costs, that he faced today what is likely to have been assessed on his side to be at least a real risk of at least an unless order forcing him to pay those costs, such that, as it were, the game was finally up and he might as well put his hand in his pocket or whatever other pocket it is to which he has access from which payment has now been made. That, however, as Mr Marshall points out, is not what was sought. What was sought was, at least primarily, the immediate dismissal, because of immediate debarring, of the defendant’s current and most important or substantive application, which is his application issued in July of last year to set aside a number of previous decisions or orders in the case, most significantly of all a judgment in default of service of the defence, which, in round figures again, is a judgment, if valid, worth on the face of it around £15 million.

Indeed, as Mr Marshall reminded the court, on the face of things the application for immediate debarring and, therefore, dismissal of the set-aside application, alternatively unless order relief, was persisted in up to and including the service of the claimant’s skeleton argument, which goes back to the point I mentioned earlier of it becoming clear only in the oral presentation of the hearing today that what was pressed was rather more limited.

Thirdly, for that reason, and it may also be for the reason that the balance of the debarring relief application, if pursued, might not succeed, Mr Marshall submits there are good grounds to think that a court, seized of the matter in the round and not with its discretion in effect circumscribed by a prior partial costs order within the application, might take the view that the best way to reflect what might then be a mixed degree of success and failure of different aspects of the application, is any one of a number of different possible orders, ranging from a costs order in the claimant’s favour, but with percentage deductions, down, it might even be, to an order such as no order as to costs overall.

In those circumstances, I was persuaded by Mr Marshall’s submissions that, standing back, the better outcome from the court’s perspective, apart from anything else, and one that does better justice to the parties is, indeed, to say, at this stage, and if I then need to make a specific order confirming it, that the costs of the claimant’s application of October 2024 incurred to date are simply reserved to be dealt with by whatever judge in due course hears and disposes of that application, which remains a live application, albeit its scope now narrowed by the payment of the section 9 costs.

Then as regards Mr Marshall’s application, that is the second item on the agenda set for us today by the order of HHJ Pelling KC, the defendant seeks permission to rely on medical evidence, including medical experts’ evidence.

The brief but sufficient background or immediate background to that is that the defendant’s set-aside application was issued on 30 July 2024. It squarely raised, supported at that stage only by the solicitor’s witness statement prepared so as to be available with the application as issued, a clear issue as to whether Mr Ma’s ill health affected his ability to participate in the proceedings in the period December 2023 to July 2024 (inclusive), to an extent that the court might consider it material to the merits of the set-aside application, at least as regards the default judgment, it may arguably be also as regards other aspects.

That, as I say, was squarely raised at the outset by the set-aside application as issued and supported by the solicitor’s witness evidence. That witness evidence, in turn, acknowledged that, to pursue that aspect of the facts relating to the application, the court would expect to see fuller medical evidence from sources other than simply Mr Ma’s word, as reported through the solicitor, and indicated that the medical evidence that, as advised, Mr Ma would seek to rely on fully to support that line of his application was going to be prepared and provided.

It was, but only five weeks after the application had been issued, in early September 2024. It took the form of a direct statement from Mr Ma himself, documentary evidence, and reports from two consultant medics, a cardiologist and a psychiatrist, providing, taking those sources together, both primary factual evidence of what it will be said has been the nature and impact of Mr Ma’s ill health, and admissible medical expert opinion about that. In particular, the ill health, seemingly evidenced by that material, extends to a heart attack, at least two TIAs, sometimes referred to as mini strokes, and, across the period of interest, a depressive illness affecting daily function.

It is submitted boldly by Mr Bacon, on behalf of the claimant, that the court can see today, reviewing that medical evidence, that it is effectively incapable of having any material bearing on the set-aside application, such that it should be excluded and it would be disproportionate to require the claimant to respond.

As I observed, in the course of argument, there will be no obligation on the claimant to respond, although, of course, in fairness, the claimant will have the opportunity to respond through expert medical evidence, if so advised, if the expert evidence relied on by the defendant is allowed.

For immediate purposes, I consider it sufficient to note that the expert report of Dr Pilgrim, consultant psychiatrist, discloses, on the face of things, that he was instructed to express an opinion as to whether Mr Ma’s health conditions could have prevented him from participating in the proceedings, specifically from January 2024 onward “including, but not limited to” a short list of specific hearings in the proceedings, listed by date. Dr Pilgrim’s overall opinion, stated in summary form at the start of the report and developed by the detail that follows on the matters within his expertise as a psychiatrist, is as follows:

“Mr Ma likely suffered from an episode of depression from December 2023, which was present at a moderate/severe degree of severity and steadily improved from July 2024. This impacted substantially on his daily functioning and is likely to have prevented him from being able to participate meaningfully in the proceedings…”

In my judgment, accepting the submissions to this effect made by Mr Marshall, the bold general submission and the various particulars put forward to support it advanced by Mr Bacon as to why a court, he will say in due course, will be unimpressed by the medical evidence or insufficiently impressed by it to regard it as supporting a well-founded application to set aside anything that has occurred so far in the proceedings, is a submission and are particulars going to, in truth, the merits of the set-aside application that I am not in a position to express any view about today and I am not attempting to decide today.

It seems to me it is, at least, realistically arguable that the medical evidence as served, might be regarded by a court hearing the set-aside application as, at least, material to the decision that that court has to make, whether to set aside, on any view, the default judgment, and it may also be at least some of the other matters still in issue under the set-aside application (for example, a costs order made in the context of freezing order, if and to the extent a submission is accepted that that freezing order and/or the costs order relating to it was, to a significant extent, dependent on the existence of a validly entered default judgment).

In those circumstances, it seems to me the claimant’s solicitors were, with respect, correct and realistic in what was evidently their instinctive reaction to the service upon them of this medical evidence in early September, as advertised by the application, when it was issued in late July. That reaction was to treat it as evidence properly in play and in respect of which the claimant, as advised, would need to consider carefully a response, possibly extending to expert evidence to counter what was said.

The application, in reality, therefore, if any application in truth needed to be made at all, is only really an application to be given permission to rely on this evidence, although it came five weeks after the application notice it was intended to support, rather than being served with that application notice. I am not going to lengthen this ex tempore ruling by walking all the way through the Denton criteria. Even if it is appropriate to regard this as a matter engaging the relief from sanctions regime, it is perfectly obviously a case in which the court would grant any necessary relief from sanctions to allow the defendant to rely on that evidence.

As I observed during the course of the argument and, rather regrettably, in a case already described by HHJ Pelling KC as a case being conducted in an uncompromisingly hostile manner -- it may be, to some extent at least, on both sides -- the defendant faced the most unwelcome dilemma that, if to avoid the need potentially to make a specific request for permission to rely on the expert evidence, he had waited to issue his application only when that expert evidence was to hand, thus allowing a further four or five weeks to go by, he would immediately have been met with a vigorous argument that the set-aside application had been impermissibly delayed and should be dismissed on that basis. Instead, he has ultimately faced, but only when the claimant’s solicitors on the face of things had a change of instinct as to the stance to advise the claimant to adopt, the suggestion that the expert evidence should be excluded as insufficiently relevant and having arrived a few weeks late.

In my judgment, the correct order here and the only just outcome is that the defendant has permission to rely on his third witness statement dated 5 September 2024, and on the experts’ reports, as served, of Dr Yunhong Wang and Dr John Pilgrim, respectively dated 31 August 2024 and 19 August 2024. The claimant will, of course, have permission, but no obligation, to file, serve and rely upon expert evidence in response. It may be that there will then need to be provision for, if so advised, further evidence in reply from the defendant. But we can come on to that as part of dealing with directions for the final disposal of what is left of the debarring application and the set-aside application.

At this stage, so as to deal with the expert evidence application itself, I propose to say, subject to polishing up the wording, it may be, when I see it in the form of a draft order, that the claimant is to have liberty to file, serve and rely upon expert evidence from such field or fields of medical expertise as it may be advised (I do not propose to dictate to the claimant or to limit it to the particular fields from which the defendant has served expert evidence, there being, at least to date, an issue raised by the claimant as to whether a different field of medical expertise would be the more telling expertise to engage), and that will be on the issue of the extent to which, if at all, the defendant’s ability to engage effectively with the proceedings, including, but not limited to, providing instructions to solicitors or attending at court hearings, was adversely affected between December 2023 and July 2024 by the defendant’s physical or mental ill health.

The order as to principal will be that the defendant has his costs of that application. There will be a payment on account which, rounding off, because I do not like to pretend to exact science, is approaching 40% of the sum claimed; so, that will be £23,500 to be paid within 14 days of the final determination of the set-aside application.