Fouda v London Borough of Southwark & Anor

This is yet another appeal concerning the proper application of CPR 3.9 as to relief from sanctions. In this case His Honour Judge Lochrane refused to admit witness statements filed late. Having done this he then struck out the appellant’s case by reference largely to the pleadings. The appellant contends that the judge was wrong in refusing relief from sanctions. Secondly, he submits that the judge was also in error in finding in favour of the first defendant, the Mayor and Burgesses of the London Borough of Southwark (“Southwark”) on its counterclaim.

The litigation concerns the seizure and removal of the appellant’s vehicle on 13 February 2011, pursuant to a warrant for unpaid council tax liability orders dating back some seven years. The council tax was payable to Southwark, the vehicle being seized by Newlyn Plc (“Newlyn”), acting under contract to Southwark. The appellant did not deny his liability to pay Southwark tax but his case was that the vehicle was exempt from seizure because it was a taxi used for his business: see Council Tax (Administration and Enforcement) Regulations 1992, r. 45 (1A).

Following the seizure of the vehicle, it is common ground that the appellant contacted Southwark on 8 March 2011 through Community Legal Advice contending that the vehicle was a taxi and therefore could be classed as a tool of trade. With the appellant’s subsequent witness statement, and before the judge, was a letter from Southwark to the appellant stating that if he wished his vehicle to be returned he had to provide evidence that it was in fact used as a taxi. Also exhibited to his witness statement was an email and a further letter from Southwark both sent after the appellant did indeed produce evidence that the vehicle was a licensed taxi. The email dated 18 April stated that Southwark was prepared to return the vehicle to the appellant but on condition that he provided consent to entry to his property. This is a reference to Newlyn’s intention to obtain a Walking Possession Agreement so that should the appellant not pay the unpaid council tax, it could execute against the appellant’s possessions. The undated letter refers to the difficulties associated with resolving the matter.

The story is taken up in the debtor history, kept by Newlyn, recording contact between it and the appellant regarding the vehicle. This debtor history was disclosed by Newlyn during the discovery process and I return to it later in the judgment. Suffice to say that the debtor history confirms that agreement was not reached between the parties, and the vehicle not returned to the appellant, until June 2011.

The particulars of claim dated 24 July 2012 set out, in short form, the appellant’s case that the vehicle had been unlawfully seized and detained. The amount claimed in damages was over £90,000. This was calculated in terms of income lost of £160 per day and the cost of road tax and insurance. The loss of income stretched beyond June 2011 because the vehicle had been seized a second time in June 2011 because it did not have a current tax disc. The loss of income was dated from June 2011 until the month the particulars of claim were lodged, and was coupled with an additional sum for the value of the vehicle which was apparently never returned.

Southwark’s defence stated that as soon as the appellant had provided documentary evidence of his use of the vehicle for private hire it had given instructions for its release. The appellant lodged a reply which stated that Southwark and Newlyn mutually agreed in principle to the return of the vehicle but could not agree with terms and conditions of the re-delivery with the appellant, so this did not occur until June 2011.

There were a number of case management decisions in relation to the litigation, including one of 30 September 2013 which ordered the appellant to file and serve a list of documents by 14 September 2013 or the claim would be struck-out without further order. Moreover, the order also stated that all witness statements should be filed with the court by 16 December 2013. The case would be fixed with a 2-3 day time estimate.

It seems that there was an informal agreement between the parties that that date for filing witness statements should be somewhat extended until 2 January 2014. In any event Southwark served its witness statement on the appellant and on Newlyn on 20 December 2013. The appellant served his witness statement on Southwark on 13 January 2014 and on Newlyn on 6 February 2014. Newlyn had not intended to file a witness statement. Because the appellant’s solicitor, Mr Lindner, had failed to include Newlyn’s documents in the bundle for trial, including the debtor history, referred to earlier, it served a witness statement on 28 March 2014 in an attempt to have Newlyn’s documents considered at the hearing.

When the matter came on Central London County Court, the first day was occupied by discussions between the parties as to preparation of a suitable bundle for the hearing. I return to this later in the judgment.

The matter came before the judge, the following day, 1 April 2014. The judge himself raised the point that the witness evidence had been served out of time and that this was in breach of CPR 32.10. He allowed an adjournment for the parties to consider their position. Mr Lindner drafted a witness statement from the appellant and made an oral application for relief from sanctions. Subsequently, there does not seem to have ever been a formal application for such relief. That witness statement, signed by the appellant, asserted that he had been unwell for approximately one month and was unable to give instructions. There was a hospital letter showing that he had an appointment that day in relation to his diabetes. Both Southwark and Newlyn were content that their witness statements would not be admitted. However, they objected to the admission of the appellant’s witness statement.

The judge rejected the appellant’s application for relief from sanctions. He said that there had been no explanation as to why an application to extend time had not been made before the expiry of the time provided for the exchange of witness statements. The medical evidence about the appellant’s health was at the least equivocal and it was not clear to him that the appellant’s condition in December necessarily prevented the preparation of a witness statement. The appellant’s solicitors had to be taken to be fully aware of their obligations in relation to the filing of evidence under the rules. While circumstances did arise where relief from sanctions would be granted in this type of case, it was important that the evidence was provided upon which the court could make a decision. That evidence was not before him, and therefore it was

“not appropriate for me to grant the relief from sanctions which the claimant would have to satisfy me would be appropriate on the evidence which he produces… That has left us with the evidential position before the court being based entirely upon the pleadings…”

The judge added that the appellant’s pleadings were unimpressive, condescending to very few particulars in relation to the basic allegations surrounding the apparent illegality of the vehicle’s seizure. The quantification of the appellant’s apparent loss was rudimentary to say the least, and the particulars did not deal with any attempts at mitigation or allowances to be made in respect of loss of income such as running expenses and taxation.

“It is very basic rather rudimentary and, frankly, rather unsatisfactory pleading.”

As a matter of law, said the judge, the burden rested on the appellant to satisfy the court that the vehicle was exempt from seizure. The defences of Southwark and Newlyn suggested that they had taken relatively swift action to return the vehicle to the appellant but that the appellant failed to engage. As to the lawfulness of the vehicle’s seizure, the judge said

“30… It is apparent from the submissions made that it is accepted on behalf of the claimant by Mr Lindner that, in reality, the only information upon which the defendants, or either of them, could base any decision as to the status of this vehicle as a vehicle which should not be seized prior to the end of March or the early part of April, was the existence of this [licensed taxi] sticker. It is apparent from the evidence, even indeed from the claimant’s witness statement which is not admitted, that it is not suggested, either in the pleadings or in the witness statement, that Mr Fouda did in fact tell the bailiffs at any stage that it was a private hire vehicle which should not be seized prior to the submission of the documentation later in March or in the early part of April.

31… In those circumstances, it seems to me, on the evidence before the court, the suggestion on behalf of the claimant that he can prove that the seizure of the vehicle and its subsequent removal was unlawful because the defendants knew or ought to have known, on the information available to them at the time, that the vehicle was subject to the exemption in 45(1)(a), is quite unsustainable. There is nothing on the evidence to support that conclusion and indeed, to be fair, Mr Lindner in his submissions, had to accept I think that in reality the simple existence of the sticker in the window is nowhere near sufficient to satisfy the requirement for the claimant to prove that the vehicle was necessary for his personal use in the course of his business.”

As to the subsequent detention of the vehicle, after it had been returned, which occurred because it was untaxed on the road, the judge said that the evidence in the pleadings was in dispute. However, the appellant had failed to discharge the burden that the continued detention of the vehicle was wrongful. Given that there was no realistic prospect of the appellant satisfying the burden in respect of the first seizure and removal of the vehicle, the second fell by the wayside. Even if the defendants were liable, it was highly doubtful that they would be held responsible for the second detention and removal based, as it was, upon the failure to renew the vehicle excise licence. It was the appellant’s vehicle excise licence and his vehicle, and he must have been aware of the expiry date. It was a matter for him to renew his licence and it could not be suggested on any sensible basis that the defendants could be liable for the appellant’s failure to renew.

The judge then turned to Southwark’s counterclaim. In respect of the costs of seizure and storage the figure given as at 26 November 2012 was approximately £20,000 and that had more or less subsequently doubled. The judge noted that the defence to the counterclaim did not address in any sense directly the question of the costs of seizure and retention. In the absence of the witness statements there was no evidence beyond the pleadings to substantiate the counterclaim, but there was no effective denial in respect at least of important elements of the cost of seizure and retention after the second seizure. They were not itemised or a daily rate pleaded. Allowing for the fact that the appellant did not plead to the counterclaim, in breach of the spirit if not the letter of the CPR,

“it seems to me that the best that can be done is for the claim, as I have already indicated to be struck-out and, in light of the pleadings, for judgment to be entered for the first defendant in the sum of £20,825 as pleaded in the counterclaim…”

Following the judge’s order, a week later, on the 8 April 2014, there was an application lodged in the county court to strike-out Southwark’s defence and counterclaim. It was asserted that Southwark and Newlyn were entitled to court fees only since they had failed to file cost budgets. There was also an application to extend the deadline for filing an appeal against the judgment.

On 11 June 2014 the judge heard Newlyn’s wasted cost application. At that hearing Mr Lindner withdrew the 8 April 2014 application after the judge indicated that Mr Lindner’s firm, MartynsRose, had no locus to issue the application in its own name, which is what had happened.

The judge decided that MartynsRose should pay £2000 to Newlyn by way of wasted costs. In his judgment the judge reiterated the concerns he had at the hearing about the competency of the appellant’s solicitors. The case had been “extraordinarily badly prepared” and the appellant had been “peculiarly ill-served by his solicitors who had… appeared, on the face of it, to be advising him in completely unrealistic terms”. The application of 8 April, issued in the name of MartynsRose, not the appellant, was “inexplicable and bizarre” and confirmed his judgement about the solicitors’ behaviour. Given the woeful way the case was presented it was difficult to say whether some kind of claim was properly sustainable. The judge added that the particulars of claim were wholly inadequate although they may have been prepared directly on the appellant’s instructions. The quantification of the appellant’s case was wholly unrealistic, but again that was asserted to be on the appellant’s explicit instructions.

The judge then turned to disclosure and the preparation of the bundle for trial. The documentation disclosed a particularly confused attitude to the obligation of disclosure by the appellant’s solicitors. If it was the appellant’s case that he had no documentation and specifically intended to rely on his own witness evidence, that could have been made plain at an earlier stage. A different approach would then have been taken by the other side in pursuing documentation. Moreover, the bundle was prepared late and without consultation with Southwark or Newlyn. The judge said that the result was the loss of the first day of trial and part of the second.

“23 As a result, when the parties attended on the first day of the trial, admittedly in the unassigned list, when they were asked whether or not they were ready to be assigned they had to accept that the bundles were not ready and accordingly they will almost certainly have missed the opportunity of a slot in front of a judge on the first day of the trial. As it turns out, during the course of that first day a significant period of time was spent attempting – with only partial success – to resolve the significant difficulties in the content of the bundle created by the solicitors instructed by [the appellant].

24 The trial accordingly was not in a position to start even until the beginning of the second day when it came in front of me, another matter which had been in front of me having settled the day before. As I have said, on that occasion I took the view that the state of the pleadings and the failure of the parties, the [appellant] in particular, to comply with the orders and Rules was so significant that effectively the claim was ultimately struck out.”

So it does seem to me that there is significant default on the part of the solicitors in relation to the discovery issues and the bundle, and a significant amount of time and energy, and indeed the first day of the trial, was lost as a result of that. That is not Mr Fouda’s fault; clearly that is evidently the responsibility of the solicitors. Accordingly, the judge made a wasted costs order in relation to what he found was the significant fault on the part of the solicitors’ disclosure obligation and the failure to prepare the bundle for trial. (During the hearing Mr Lindner said, for example, that the appellant had instructed that he had not filed a tax return for the year after he started his business in 2010.)

There were appeals launched against both the judge’s decision at the substantive hearing and on the wasted costs order. On the 4 August 2014 Patterson J had to grant an extension of time so an application for permission to appeal and for a stay of execution on the substantive issue could be considered. There were subsequent orders on the 26 September and 27 October 2014 by Jay and Hickinbottom JJ extending time for the appellant to file the appeal bundle. On 14 January 2014 Green J granted permission to appeal on the basis that, without any consideration of prejudice, the judge had refused to permit witness evidence. Although the judge was of the view that the pleadings were defective, he proceeded to reject the appellant’s claim and granted summary judgment on the defendant’s counterclaim for a very large, wholly unspecified amount. Green J said that the judgment conveyed the strong impression that the judge adopted a particularly technical approach. I note in passing that the current appeal was never served on Newlyn.

The application to appeal on the wasted costs order, having been initially rejected by Carr J on the papers, was further refused by Blair J on 20 January 2015 at an oral renewal hearing.

CPR 32.10 provides that if a witness statement or a witness summary for use at trial is not served within the time the court has specified, the witness may not be called to give oral evidence unless permission is given. The White Book 2015 notes at paragraph 32.10.2 that, since its amendment, the courts have been less willing than previously to grant relief from procedural sanctions under CPR 3.9, including the sanction taking effect by operation of CPR 32.10. The leading authority on relief from sanctions is the majority judgment (Lord Dyson MR and Vos J) in Denton v T H White Ltd [2014] EWCA Civ 906; [2014] 1WLR 3926. At the time of the judge’s decision the Court of Appeal had not decided Denton v T H White and the leading authority on relief from sanctions was Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537; [2014] 1 WLR 795.

In Denton v T H White the Court of Appeal held that an application for relief from sanctions should be dealt with in three stages. The first stage is to assess the seriousness or significance of non-compliance with the relevant rule, practice direction or court order: [25]. A useful measure in assessing this is whether the breach imperils future hearing dates or otherwise disrupts the conduct of litigation, including other litigation as well as the instant case. At least initially that will not involve a consideration of other unrelated failures occurring in the past: [26]. If a judge concludes that a breach is not serious or significant, relief from sanctions will usually be granted and it will usually be unnecessary to spend much time on the second or third stages: [28].

The second stage is to consider why the default occurred, particularly where the default is serious or significant: [29]. The third stage is to evaluate all the circumstances of the case, so as to enable the court to deal justly with the application, including the factors in CPR 3.9 (a) and (b), in other words the need (a) for litigation to be conducted efficiently and at proportionate cost, and (b) to enforce compliance with rules, practice directions and orders: [31]-[32]. Factor (a) made it clear that the court must consider the effect of the breach in every case. Factor (b) emphasized the importance of compliance with rules, practice directions and orders, because the old lax culture of non-compliance is no longer tolerated: [34].

“35 Thus, the court must, in considering all the circumstances of the case so as to enable it to deal with the application justly, give particular weight to these two important factors. In doing so, it will take account of the seriousness and significance of the breach (which has been assessed at the first stage) and any explanation (which has been considered at the second stage). The more serious or significant the breach the less likely it is that relief will be granted unless there is a good reason for it. Where there is a good reason for a serious or significant breach, relief is likely to be granted. Where the breach is not serious or significant, relief is also likely to be granted.

36 But it is always necessary to have regard to all the circumstances of the case. The factors that are relevant will vary from case to case. As has been pointed out in some of the authorities that have followed the Mitchell case [2014] 1 WLR 795, the promptness of the application will be a relevant circumstance to be weighed in the balance along with all the circumstances. Likewise, other past or current breaches of the rules, practice directions and court orders by the parties may also be taken into account as a relevant circumstance.”

In advancing the appeal before me, Mr Salis abandoned many of the grounds of appeal as drafted to concentrate on two issues, the failure of the judge to provide relief from sanctions because of the late service of the witness statements, with the result that no witness evidence was admitted, and the decision to give judgment to Southwark on the counterclaim for storage charges for the vehicle, having struck-out the appellant’s case and having disallowed all the witness evidence.

Relief from sanctions

As to the first point, Mr Salis submitted that albeit that Denton v T H White Ltd [2014] EWCA Civ 906; [2014] 1 WLR 3926 had not been decided at the time of his decision, the judge in refusing relief from sanctions had not assessed factors it identified – the seriousness of the breach, the reasons for it or the general circumstances of the case in accordance with its precepts. In Mr Salis’s submission in terms of the first stage of enquiry laid down in Denton v T H White this was not a significant or serious breach of the rules. The appellant’s witness statements had been filed late but, when they were, there were still several months before the trial itself. Mr Salis contended that late service had no effect on this case or on litigation generally. It had not imperilled future hearing dates nor disrupted the conduct of the litigation. The parties themselves had assumed that there would be a trial in the ordinary way with witnesses and it was the judge himself who had raised the issue.

At the second stage, Mr Salis conceded that the reason for non-compliance – failure to appreciate the effect of CPR 32.10 and relief from sanctions under CPR 3.9 – was not a good reason when advanced by a solicitor. As to the third stage Mr Salis had also to accept that the conduct of the case by the appellant’s solicitors was hardly commendable. But they had been penalised as a result of the wasted costs jurisdiction and the solicitors’ failures should not be held against the appellant himself. At the third stage, said Mr Salis, the effect of the breach had to be considered and the judge did not do that. Had the appellant been able to give evidence he would have explained that well after he had given information about the use of vehicle as a taxi, Southwark and Newlyn continued to retain it.

For Newlyn, Ms Power submitted that the judge had considered the impact of non-compliance, albeit implicitly, and that there was no prejudice to the appellant raised when it applied for the relief of sanctions before the judge. None of the parties were able to adduce witness statements so they were all in the same position. Considering all the circumstances of the case there was no prejudice to the appellant. Denton v T H White Ltd had not at that point been decided but the judge in effect considered what is now the three stage test. Had the appellant been able to adduce his witness statement and give evidence, it would not have advanced his cause since he was the author of his own misfortune. The evidence was that Southwark and Newlyn made strenuous efforts to return the vehicle. The appellant had not disputed Newlyn’s attempts to return it and could have recovered it much earlier if he had given a Walking Possession Agreement.

Counterclaim

Mr Salis conceded that he was recasting the very appeal as compared with the way the matter was advanced in the grounds of appeal. Essentially his submission was that the judge was wrong to decide the matter on the pleadings, given that they were incomplete on the point (as the judge acknowledged) and not evidence. There was no explanation in the pleadings as to how any figures for storage were calculated. The appellant may not have contested the figures but he certainly did not admit them. The appellant’s case was that the vehicle had been wrongly seized and so he was stating, in effect, that Southwark was not entitled to claim any storage charges.

Southwark was not represented at the appeal. Apparently it takes the view that enough public money has already been spent on the litigation and it cannot justify more. In its skeleton argument prepared at an earlier stage it said this in relation to the counterclaim:

“The learned judge’s conclusion was that there was no effective defence but merely a bare denial of the counterclaim and that the storage of the vehicle had effectively been admitted. On this basis the Respondent was entitled to judgment on the pleadings.

The learned judge’s conclusion was both reasonable and rational.”

Discussion

First instance judges must contend with the changing fashions of appellate courts. Under our common law system the current fashion applies retrospectively; we have not adopted a system of prospective overruling to mitigate the extreme cases. In the present litigation the judge was applying, in effect, the approach of Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537; [2014] 1 WLR 795. Because Denton v T H White [2014] EWCA 906; [2014] 1 WLR 3926 had not been decided he obviously did not follow the three stage approach of the majority there.

In my judgment, however, if the judge had worked through the majority approach in Denton v T H White he would have reached the same conclusion he did. Certainly non-compliance with the rules – CPR 32.10 in this case – was not significant or serious in this case. But the reason for non-compliance – the second stage in Denton v T H White – was, as Mr Salis conceded, against the appellant. Most importantly, the non-compliance with CPR 32.10 was within a context where the appellant’s solicitors had been serial offenders. There was their dismissive attitude to their disclosure obligations and the unsatisfactory way the case was pleaded. Significantly, the solicitors’ failure to contact Southwark and Newlyn to prepare a bundle for the hearing culminated in the loss of the first day of the hearing. (I note in passing that the solicitors’ errant behaviour continued with the bizarre application of 8 April 2014. There was also the need for them to seek leave in this court to file the application to appeal out of time.) Addressing all the circumstances of the case, including past and current breaches of the rules, which is required at stage three of the Denton v T H White approach, the judge would have been perfectly entitled to refuse relief from sanctions.

As I have said Southwark did not appear at the appeal to defend the judge’s decision on its counterclaim. For the reasons Mr Salis has advanced, it seems to me that the appellant succeeds on this point.

For the reasons I have given I dismiss the appeal as regards relief from sanctions but allow it in relation to Southwark’s counterclaim.