Karbhari & Anor v Ahmed

The claimants in this case, father and son, claim the repayment of monies, together with interest thereon, which they say they advanced to the defendant in a series of transactions alleged to have taken place between 15 February 2007 and 23 June 2008.

The trial was listed to start on 12 December 2013 with an estimated length of hearing of seven days.

On the morning of the first day of the trial, the defendant’s counsel informed the court that he had received an email from his client on the evening before and that the contents would necessitate an application to amend the Defence and to adduce a supplementary witness statement. He waived privilege on the email a copy of which was provided to the claimants and to the court.

In the light of this development, the matter was adjourned until the morning of the following day to give the defendant time to make, sign and serve a proposed supplementary witness statement and for a proposed Amended Defence to be drafted. There also fell to be determined the status of two other proposed witness statements served on behalf of the defendant from a Mr Vorajee and a Mr Debar, dated 10 and 12 December 2013 respectively.

On 13 December 2013, counsel for the defendant sought to persuade me to accede to the applications to amend the Defence and allow oral evidence to be given by the authors of the new witness statements. The claimants invited me, in response to these recent procedural developments, to strike out the Defence in its entirety. My adjudication on these issues forms the subject matter of this judgment.

It is not necessary for the purposes of this judgment to set out the factual background in a narrative of any great detail save in those respects which are most salient to the resolution of the specific issues which I am required to address.

In summary, the claimants allege that, in the context of more than 20 transactions taking place over a period of nearly 18 months, they handed over to the defendant millions of pounds in cash and cheques pursuant to an agreement that the defendant would repay the monies after a fixed period together with a guaranteed return. A typical transaction would involve the payment of a sum of tens of thousands of pounds to be repaid in 18 months together with an uplift of 100%.

Some of these transactions involved monies allegedly provided directly by the claimants. Others involved third parties who, it is said, provided the first claimant with monies upon the promise of a return lower than that which had been offered by the defendant to the first claimant thus leading the latter to expect to earn a substantial commission on these deals.

The sceptical observer might readily have formed the conclusion that all this was far too good to be true. He would have been right.

The investors, it is said, understood that the returns were being generated by seemingly inexhaustible profits generated in the Dubai property market through a company by the name of Profile FZ LLC (“Profile”). The vehicle through which investment monies were channelled into “Profile” was an undertaking called Property Network.

By September 2008, rumours were beginning to circulate that the defendant was no longer good for the money. They proved to be well founded. In the vast majority, if not all, cases neither the original investments nor any return was recovered. Eventually, the claimants commenced these proceedings.

In his Defence, the defendant denied entering into the transactions which were the subject matter of the claim or having anything to do with transferring payments to Property Network. Paragraph 5 stated:

“The defendant denies paragraphs 9, 10, 11, 12, 13, 14 and 15 of the claimants’ Particulars of Claim. He denies that he received any of the sums as claimed either payable to himself or to the company described as Property Network, either by way of cheque, cash or telegraphic transfer…”

A statement of truth signed by the defendant was appended to this Defence.

A draft Amended Defence was produced to the court on the morning of the second day of the period over which the matter had been listed for trial. It purported to strike out the original Defence almost in its entirety. The original paragraph 5 was swept away. A new paragraph 4 (d) admitted that the defendant received four cheques from four different investors which he passed on to a representative of Profile.

A “supplementary witness statement” from the defendant was also drafted in support of the Amended Defence. Its contents were wholly at odds with the Defence as originally pleaded. It, too, admitted that the defendant did indeed receive cheques for onward transmission and investment. Paragraph 19 concedes that “…Mr Mohammed Hanif Patel in Dubai had authorised me to sign receipts on Profile’s behalf.”

In paragraphs 3 and 4 of his supplementary witness statement the defendant says:

“3.

I should explain to the court why I am making this further statement. The reason that my statement dated 29 April 2013 was so short of facts and detail was that I was concerned that if I told the full story I could get a number of other people in trouble in connection with money laundering. As far as I am concerned I am personally not at risk should any investigation take place.

4.

Now that it is clear to me that the trial is going to go ahead I have decided that I must tell the whole story.”

Counsel for the Defendant realistically admitted that the supplementary witness statement did not simply provide additional evidence but evidence which, at least in part, contradicted the content of the Defence as originally pleaded. He further volunteered the unavoidable concession that his applications were “extraordinarily late.”

CPR Rule 32.10 provides:

“32.10

Consequence of failure to serve witness statement or summary

If a witness statement or a witness summary for use at trial is not served in respect of an intended witness within the time specified by the court, then the witness may not be called to give oral evidence unless the court gives permission.”

In this case the court ordered witness statements to be served by 29 April 2013. The supplementary witness statement of the defendant was, therefore, proffered over seven months late and, even more importantly, on the second day of the period over which the matter had been listed for trial.

Boyle v The Commissioner of Police of the Metropolis [2013] EWCA Civ 1477 was a decision of the Court of Appeal with respect to a case arising before the commencement of the more stringent regime introduced by way of the reforms recommended by Sir Rupert Jackson which came into force on 1 April 2013.

In that case, the claimant sought my permission as trial judge to introduce an expert’s report which had been served upon the defendant one working day before the trial was due to start. I refused permission. The claimant appealed to the Court of Appeal. Longmore L.J. held:

“As I say, the report had been served on Friday of the week before the trial was due to begin. This was absurdly late, especially since the trial was originally due to start on Monday 25 February. The judge of course had a discretion in the matter, and whether one calls his decision a case management decision or not, which is what Mr Bishop submitted it was, does not seem to me to matter very greatly. In fact, the judge considered the matter carefully. He followed the notes to part 35 in the White Book which said that a late application to call expert evidence was effectively an application for relief from the sanction of being unable to call expert evidence which had not previously been served. The judge considered all the matters he was required to consider under the then current version of CPR 3.9 (it has since April of this year been considerably simplified). It is, in my judgment, impossible to see that the judge has gone wrong in his assessment of those factors in any way, especially in the light of the fact that the claimant's solicitors had been expressly invited, in correspondence from the defendant's solicitors, to serve the necessary evidence. There was not before the judge, and there still is not, any explanation of how the matter came to be ignored or overlooked.”

Rule 35.13 relating to the consequences of failing to serve an expert’s report is drafted in similar terms to Rule 32.10 relating to the service of witness statements:

“35.13

Consequence of failure to disclose expert's report

A party who fails to disclose an expert's report may not use the report at the trial or call the expert to give evidence orally unless the court gives permission.”

In my view, no legitimate conceptual distinction can be drawn between the consequences of a failure to serve an expert’s report and a failure to serve a witness statement. Where the court has ordered witness statements to be served by a certain date and they have not been served by that date then, to obtain the court’s permission under CPR 32.10, the party in default must persuade the court to grant relief under CPR 3.9(1) which provides:

“On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need—

(a)

for litigation to be conducted efficiently and at proportionate cost; and

(b)

to enforce compliance with rules, practice directions and orders.”

The proper approach to applications for relief from sanctions was considered by the Court of Appeal in Andrew Mitchell MP v News Group Newspapers Limited [2013] EWCA Civ 1537:

“40 We hope that it may be useful to give some guidance as to how the new approach should be applied in practice. It will usually be appropriate to start by considering the nature of the non-compliance with the relevant rule, practice direction or court order. If this can properly be regarded as trivial, the court will usually grant relief provided that an application is made promptly. The principle “de minimis non curat lex” (the law is not concerned with trivial things) applies here as it applies in most areas of the law. Thus, the court will usually grant relief if there has been no more than an insignificant failure to comply with an order: for example, where there has been a failure of form rather than substance; or where the party has narrowly missed the deadline imposed by the order, but has otherwise fully complied with its terms. We acknowledge that even the question of whether a default is insignificant may give rise to dispute and therefore to contested applications. But that possibility cannot be entirely excluded from any regime which does not impose rigid rules from which no departure, however minor, is permitted.

41 If the non-compliance cannot be characterised as trivial, then the burden is on the defaulting party to persuade the court to grant relief. The court will want to consider why the default occurred. If there is a good reason for it, the court will be likely to decide that relief should be granted. For example, if the reason why a document was not filed with the court was that the party or his solicitor suffered from a debilitating illness or was involved in an accident, then, depending on the circumstances, that may constitute a good reason. Later developments in the course of the litigation process are likely to be a good reason if they show that the period for compliance originally imposed was unreasonable, although the period seemed to be reasonable at the time and could not realistically have been the subject of an appeal. But mere overlooking a deadline, whether on account of overwork or otherwise, is unlikely to be a good reason. We understand that solicitors may be under pressure and have too much work. It may be that this is what occurred in the present case. But that will rarely be a good reason. Solicitors cannot take on too much work and expect to be able to persuade a court that this is a good reason for their failure to meet deadlines. They should either delegate the work to others in their firm or, if they are unable to do this, they should not take on the work at all. This may seem harsh especially at a time when some solicitors are facing serious financial pressures. But the need to comply with rules, practice directions and court orders is essential if litigation is to be conducted in an efficient manner. If departures are tolerated, then the relaxed approach to civil litigation which the Jackson reforms were intended to change will continue. We should add that applications for an extension of time made before time has expired will be looked upon more favourably than applications for relief from sanction made after the event…

46 The new more robust approach that we have outlined above will mean that from now on relief from sanctions should be granted more sparingly than previously.”

Applying this approach to the present case, I find that the defendant’s breach was far from trivial. The delay of over seven months and the timing of the application on the second day of trial amounted to a serious departure from the terms of the order of the court relating to the service of witness statements. The supplementary witness statement which extended to a length of 32 paragraphs was no mere formality but sought to introduce wholly new (and inconsistent) material to the case as originally presented.

As to the issue of “good reason”, I am entirely satisfied that no good reason has been made out. Money laundering is a serious criminal offence. Omitting until the very last moment large volumes of evidence in order to protect those guilty of this offence on the unwarranted assumption that the case might not come to trial is a thoroughly bad reason.

It follows that I refuse permission for the defendant to rely on his supplemental witness statement. Indeed, for the avoidance of doubt, I would have exercised my discretion to not to allow service of the statement even if, contrary to the views I have expressed above, CPR 3.9 in its present incarnation were not of direct application but merely a helpful aide memoire with respect to some, at least, of the relevant factors to take into account when deciding whether or not to extend time under CPR 32.10.

In this case there was nothing in the supplementary witness statement that could not and should not have been incorporated in the witness statement originally served. I ought, however, to sound a note of caution about the late service of witness statements generally.

There will be other cases in which there are evidential developments which postdate the time at which earlier witness statements have been served. It is, by way of example only, by no means unusual in personal injury cases for updated witness statements to be served in order to cover a claimant’s progress over the period since the original witness statements were served. This situation falls within the approach of the Court of Appeal in Mitchell at paragraph 41 which I repeat for ease of reference:

“Later developments in the course of the litigation process are likely to be a good reason if they show that the period for compliance originally imposed was unreasonable, although the period seemed to be reasonable at the time and could not realistically have been the subject of an appeal.”

My refusal to give permission to the defendant to serve his supplementary witness statement out of time does not, however, ameliorate the impact which the defendant’s defaults has already made upon the deployment of the court’s resources. No substantive work was achieved on the first day of trial which was devoted to the defendant’s application to adjourn to allow time to draft the Amended Defence and supplementary witness statement. Arguments were presented by the parties’ advocates on the morning of the second day but, doubtless as a result of the speed with which the procedural developments had overtaken events, they were able to provide me with but limited assistance upon the proper legal approach to the issues arising, particularly against the background of the new regime. This judgment is, therefore, handed down on the fourth day of the seven days listed for trial and there is no realistic prospect that the trial could be accommodated within the time remaining. Court time is a scarce and valuable commodity which should be fairly distributed between all litigants and extra tranches of which ought not readily to be dispensed to those in serious default whose very failures have wasted such reasonable time as has already been allocated to them.

There is a further issue which is certainly no less important. The defendant has chosen to append signed statements of truth to documents the contents of which are irreconcilable. This is not a case of mistake. The defendant’s actions were deliberate. The seriousness of this is reflected in CPR 32.14:

“False statements

(1)

Proceedings for contempt of court may be brought against a person if he makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth.”

Furthermore, the defendant’s professed motivation of covering up for the money laundering activities of others amounts to a flagrant abuse of the process of the court.

In some cases, refusal to permit a party in default from relying upon evidence contained in a witness statement served late will be sanction enough but in this case the contents of the supplementary statement forensically contaminate the rest of the defendant’s case. It would be pointless and absurd if the defendant were allowed to present a case based solely on evidence contained in his original witness statement which he now says is inaccurate and incomplete. Moreover, it would be inevitable that cross examination would afford the defendant the opportunity to introduce by the back door the evidence to which the court has refused admittance by the front door.

CPR 3.4(2) provides:

“(2)

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

(a)

that the statement of case discloses no reasonable grounds for bringing or defending the claim;

(b)

that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings; or

(c)

that there has been a failure to comply with a rule, practice direction or court order.”

Under CPR 2.3(1) a statement of case includes a Defence.

In the particular circumstances of this case, I am satisfied that the proportionate response to the defendant’s breaches, in accordance with the overriding objective, is to strike out the Defence. The applications with respect to the amendment of the Defence and the introduction of the two new witness statements from the other witnesses must also fall away as a consequence. I take into account the seriousness of the implications of this decision to the defendant, particularly bearing in mind the high value of the claim, but this is counterbalanced by the following features:

If follows that I strike out the defence in this case and give judgment for the claimants.

I am, however, deeply concerned that the circumstances, in which very large sums of money changed hands under transactions which were ineffectually documented and involving large numbers of participants, do indeed give rise to prima facie objectively justifiable concerns that these dealings may have involved money laundering and/or tax evasion. Accordingly, I am minded to stay execution of judgment pending investigation by the police and HM Revenue and Customs in accordance with the practice most recently referred to in In the Matter of an application by Her Majesty’s Solicitor General for the committal to prison of Jennifer Marie Jones for alleged contempt of court [2013] EWHC 2579 (Fam). I have requested the attendance of a detective officer of the Economic Crime Unit at court when this judgment is handed down and will hear representations from the parties upon such further directions as may be appropriate.