Todary v W1 Cars Ltd (t/a Westone Cars Ltd) & Anor

On 16 and 17 January 2017, I heard a number of applications in this litigation and I now give my rulings on the Defendants’ application for specific disclosure. The claim is brought in respect of a number of communications which contained the imputation the Claimant had been running a minicab company in the period June to September 2014 which was trading without the necessary licence under the Private Hire Vehicles (London) Act 1998. The Defendants rely on various defences including a plea of truth in accordance with s.2 of the Defamation Act 2013. That is the most significant for present purposes.

Originally, there were two Claimants in the case. The minicab company, Green London Trading Ltd, was the first Claimant and Mr Todary the second. The company went into administration on 11 May 2015, having ceased to trade three days earlier, and in due course notice of discontinuance was served in December of the same year. (This was at the behest of the administrators.)

There has so far been no evidence on the relevant matters from the Claimant himself and there are a number of points which he needs to clarify and explain. At the stage of costs budgeting, it was said on his behalf that there would be disclosure of extensive documents (at least three lever arch files) and the budget was fixed on that basis. Yet when he provided standard disclosure, on 5 September 2016, only 29 documents were in fact listed. That needs to be explained. Also, when a disclosure statement had been signed, on 27 July, it was said that the 29 documents in the list were the only ones in his control. Later, however, others were supplied (on 12 October, 18 November and 8 December respectively). The Defendants were troubled by this and seek evidence from the Claimant as to the discrepancies: they wish to be assured that all proper searches have in fact been carried out.

In the July statement, the Claimant had said that he had not disclosed documents which had been in his control previously but which could no longer be obtained, the reason being that the company had failed and gone into administration. Despite this, his solicitor, Mr Hutchings, stated in a witness statement that some documents had been obtained from the administrator in November 2015. It thus seems clear that the mere fact that documents have been in the possession of the administrator does not mean that they are unobtainable and the Defendants ask that Mr Todary should explain himself what efforts have been made to obtain any that have not been listed.

Furthermore, it is relevant to know whether the administrators took into their possession all the hardware (i.e. the computers on which the documents had been stored) as well as the documents themselves; and whether Mr Todary sought at that time to retain copies for the purposes of the litigation which had been commenced on his authority, and in respect of which he presumably knew he had disclosure obligations.

A troubling aspect of the administrators’ report is that their team encountered difficulties in collecting information about the group that was needed to enable them to discharge their statutory duties. Also, specifically, they had problems in obtaining answers from Mr Todary about the fact that the company’s business appeared to have been transferred at some point. Not surprisingly, therefore, the Defendants require to be reassured that they have not been deprived of information and/or documents in the disclosure process. There are four categories in particular which they have highlighted in respect of which they are entitled to have frank explanations.

The first relates to documents concerning the business carried out by the company between June and September 2014, since it is common ground that it was not granted the relevant licence until 19 September. The Defendants at first only pleaded that there were reasonable grounds to suspect that the Claimant had been running a minicab company without a licence, and therefore illegally, whereas later the Defendants amended to allege that the Claimant was indeed carrying on the business illegally. In other words, they moved from pleading a “Chase level 2” defence to “Chase level 1”: see Chase v News Group Newspapers [2002] EWCA Civ 1772.

It is thus clear that the Defendants are entitled to see the books and records of the company, and any other material, which throws light on its activities during that period. The Claimant must produce a witness statement dealing fully and frankly with this aspect of the case. In particular, there needs to be an explanation of the relationship between the company and another entity called Embassy Cars, since it seems that, according to one explanation at least, Green London may have been trading (impermissibly) in reliance upon a licence granted to that company. There is even one document purporting to be an invoice in respect of “renting” that licence. This confusion needs to be cleared up and all documents identified. These Embassy documents, in so far as there are or were any, form the second of the Defendants’ categories.

The next category is that of documents relating to the reasons for the failure of the company. It was originally suggested that this was caused by the publication of the words complained of. That is no longer pursued, but the Defendants allege that this claim was made falsely and it therefore remains an issue in the case. (They suggest, in the light of the administrators’ report, that Mr Todary must have known that there was no such causal link.) The Defendants are entitled to have a witness statement from the Claimant dealing with this aspect of the case also and, in particular, as to what efforts have been made to obtain the relevant documents. It is said by Ms Marzec that there are likely to be documents relevant to any alleged downturn in revenue, a sales ledger, invoices, documents recording projected sales, and so on. Also, since it is the Defendants’ case now that the failure of the company was in large measure due to Mr Todary’s own failure to honour its commitments, and specifically in respect of a £225,000 debt owed to a financier called Bibby, there should also be disclosure of any communications between him and that creditor.

Another category of documents has been identified as those relating to an investigation carried out by Transport for London (“TfL”) into the affairs of the company (specifically between June and August 2014) and its outcome. It seems now not to be in dispute between the parties that such documents would be disclosable at least in so far as they contain any explanation as to what activities were carried out during the relevant period or otherwise throw light on that issue.

Mr Todary complained to TfL that they had revealed confidential information to the Defendants, and also that it had been inaccurate in certain respects. That complaint was looked also into by TfL and a settlement reached over the dispute, as a result of which he was paid the sum of £5000. If there are documents throwing light on his allegation of inaccuracy, they are also likely to be of relevance to the defendants’ plea of truth. He should therefore deal with the matter in his witness statement.

I am less convinced by another of Ms Marzec’s arguments on the TfL settlement; namely, that there is a risk of double recovery and, accordingly, that it is necessary to know exactly what the payment from TfL was supposed to cover. Mr Bennett says that there is a clear distinction between compensation for breach of Data Protection rules and/or breach of confidence, on the one hand, and damages for defamation on the other. The complaints were made in relation to different communications: the breach of confidence involved revealing information to the Defendants, whereas the publications by them were to various third parties. Thus, it seems unlikely that there could be any question of double recovery and, therefore, there is no reason for disclosure of documents relating to TfL’s payment of compensation. It is possible, I suppose, that part of the payment was intended to cover the consequences of TfL’s alleged breach: it might thus relate to onward republication by the Defendants and to any embarrassment thereby caused to Mr Todary. If this was so, then I see that relevant documentation should be disclosed on the issue of potential double recovery, although the point is rather theoretical.

At the close of argument on 16 January, I indicated to the parties that I was going to make an order that Mr Todary should provide a detailed witness statement on the issues of disclosure. I have now given my reasons for doing so. It was agreed the following day that the parties were to make written submissions as to the exact terms of the order, if they wished to do so, by 4 p.m. on 23 January. Following a brief extension, they did so. I have taken those into account. Ms Marzec produced a draft order setting out the areas to be covered in the witness statement, and Mr Bennett made it clear that the only remaining objections related to documents about TfL investigation and settlement. I have now ruled on those disputes (see above).

I now turn to some remaining issues on costs. Ms Marzec submitted a draft order after the hearing to which Mr Bennett had two objections, the first of which related to the ruling I had made that the Claimant should pay the costs of the Defendants incurred in defending the claim brought by the company and later discontinued. As to paragraph 3, there was a dispute as to how one arrived at the right figure to represent that element of costs. Mr Bennett sought the inclusion of the qualifying words “… in so far as those costs were not incurred in defending the Claimant’s claim”. In other words, he submitted that it would be unfair, at least for the time being, for his client under this head to have to reimburse the Defendants in respect of any costs which they would have incurred in any event in dealing with his claim. Liability for costs in that regard should await the determination of the merits of his claim.

Mr Bennett is correct in his recollection that I was sympathetic to that submission. The difficulty is the practical one of dividing up the total costs incurred in such a way as to identify those solely attributable to the company’s claim. Solicitors in such circumstances will generally apportion the costs between the claimants pro rata. Here, Mr Bennett suggests that this would be unfair because it would result in his client having to pay out, at this early stage, in respect of costs incurred at least partially in defending his own claim – which may in due course succeed.

This problem will often arise in relation to multi-handed litigation on a detailed assessment and it may, by that stage, be appropriate for the costs judge to proceed on the basis of splitting them equally. At this point, I am only being asked to order a payment on account. That I can do without assuming that the ultimate outcome will be an even split. The exercise requires the court to take a conservative view as to how much was expended only in respect of the Claimant’s case. I do not believe that it would be right to make “no order” under this head (as Mr Bennett has argued), since the fact that the Defendants are entitled to recover the costs of a claim that has been abandoned needs, according to modern practice, to be reflected in a payment on account so as to keep them “out of pocket” for as short a time as is practically possible. I will, therefore, make an order for payment on account of £2,500.

Secondly, on paragraph 7 of the draft, Mr Bennett took a point on the witness statement his client had produced to explain why amendments were being made to paragraphs 13.5 and 15 of the re-re-amended particulars of claim. They concerned the question of whether the words complained of had caused the failure of the company and/or loss to Mr Todary personally. He argues that the issue of costs should remain open for the time being and, if the Claimant ultimately succeeds, he should be able to recover them as costs in the case. I regard the costs incurred over the witness statement as part and parcel of seeking the amendment. The Defendants (and the court) were entitled to know the reason for the changes which required permission – even though in many cases the abandonment of part of a case will be uncontroversial and thus go through “on the nod”. I would, therefore, include the rather unusual formula Ms Marzec proposed: “For the avoidance of doubt, the Claimant shall not recover the costs of the Claimant’s witness statement dated 15 November 2016”.

I believe I have now dealt with all the issues raised.