McGlinn v Waltham Contractors Ltd & Ors

JUDGMENT

( No. 2 )

HIS HONOUR JUDGE PETER COULSON QC :

1 This action concerns the alleged existence of major defects in the large house that the Claimant, Mr. Ian McGlinn, had built in Jersey between 1998 and 2002. It is his case that, so extensive were these defects, the house had to be demolished and rebuilt. The First Defendant, who were the building contractors, are in administration and are playing no part in these proceedings. The Second, Third and Fourth Defendants were the relevant professional team being, respectively, the architects, the mechanical and electrical engineers, and the quantity surveyors. The trial of the defects case, where the damages claimed are in the region of £4 million, is due to commence next month. The Claimant lives abroad and has been resident abroad, on the material that I have seen, for about 20 years.

2 By an application dated 11 ^th September 2006, the Claimant seeks an order, pursuant to CPR 32.3, that he is allowed to give evidence by means of a video link rather than coming personally to the trial in London. The reason for the application is a little unusual. It is said that, if the Claimant comes to London to give evidence, there is a real risk that he will be liable to pay Capital Gains Tax of about £50 million, in relation to the money he recently made when he sold his substantial shareholdings in The Body Shop organisation.

3 The court has a wide discretion under CPR 32.3. Annexe 3 to the Practice Direction that accompanies Part 32 says at para.2:

“VCF may be a convenient way of dealing with any part of proceedings: it can involve considerable savings in time and cost. Its use for the taking of evidence from overseas witnesses will, in particular, be likely to achieve a material saving of costs and such savings may also be achieved by its use for taking domestic evidence. It is, however, inevitably not as ideal as having the witness physically present in court. Its convenience should not therefore be allowed to dictate its use. A judgment must be made in very case in which the use of VCF is being considered, not only as to whether it will achieve an overall costs saving, but as to whether its use will be likely to be beneficial to the efficient, fair and economic disposal of the litigation. In particular, it needs to be recognised that the degree of control a court can exercise over a witness at the remote site is, or may be, more limited than it can exercise over a witness physically before it”.

4 This rule has recently been the subject of detailed scrutiny by the House of Lords in Polanski v Conde Nast Publications Ltd [2005] 1 WLR 637. In that case the film director, Mr. Roman Polanski, who was pursuing the publishers of “Vanity Fair” in a libel action in the UK, wanted an order under CPR 32.3 that he be allowed to give his evidence by video link. His concern was that if he came to London to give evidence personally, he faced the real risk of arrest and extradition to the United States of America where, in the late 1970’s, he pleaded guilty to unlawful sexual intercourse with a 13 year old girl before fleeing the country. He was therefore properly described as “a fugitive from justice”.

5 Eady J granted the order for a video link but the Court of Appeal overturned that decision. In the House of Lords, by a majority, the Judge’s ruling was reinstated. It is important to note that all five of their Lordships considered that, as between the parties, the video link order had been rightly made. Mr. Polanski would have been severely prejudiced if the order had not been made, whilst the making of the order had no prejudicial effect upon the defendants. The point on which their Lordships were divided was the public policy question of whether the courts should be seen as assisting a fugitive from justice.

6 On that point, the majority decided that the public policy consideration did not outweigh the other factors in favour of the order. Lord Nicholls of Birkenhead said:

“30 I understand the intuitive dislike of relieving a fugitive of a disadvantage which until recently was inherent in his self-created

status …

31 … But overall the matter which weighs most with me is this.

Despite his fugitive status, a fugitive from justice is entitled to invoke the assistance of the court and its procedures in protection of his civil rights. He can bring or defend proceedings even though he is and remains a fugitive. If the administration of justice is not brought into disrepute by a fugitive’s ability to have recourse to the court to protect his civil rights, even though he is and remains a fugitive, it is difficult to see why the administration of justice should be regarded as brought into disrepute by permitting the fugitive to have recourse to one of the court’s current procedures which will enable him in a particular case to pursue his proceedings while remaining a fugitive.”

7 With these points in mind, I now turn to the Claimant’s application in the present case. It is opposed by all the Defendants in very clear terms. They say:

(a) There is no evidence of any risk that a visit to London by the Claimant will lead to any substantial CGT liability.

(b) There would be prejudice to the Defendants if the order was made because the Claimant would not be subject to the pressures of the witness box and it might logistically be more difficult to cross-examine him by way of a video link.

(c) The application is made late, and was deliberately made late because the Claimant is keen to avoid a careful scrutiny of his tax position.

8 I should make it plain at the outset that I regard the basis of the application as inherently unattractive. It does seem to me that the Claimant wants to use the system of justice provided by the UK to its citizens, but he does not want to contribute to the costs of that system, because he does not pay and does not wish to pay UK taxes. Indeed, he seeks the video link order so as to ensure that his status, as someone who does not pay UK taxes, is not put in jeopardy by his desire to give evidence at the trial which he has instigated. Mr. Williamson QC is a fine advocate but not even he can paint that application in attractive colours.

9 That point made, I accept Mr. Williamson QC’s submission that the facts in Polanski were much more extreme than the present case. Notwithstanding the facts in that case, of course, the House of Lords considered that the video link order should be made. I am obviously bound by Polanski . The points set out in the speech of Lord Nicholls, therefore, apply with the same or perhaps more force in this case, where it must be remembered that there is nothing to suggest that the Claimant, far from being a fugitive from justice, has done anything unlawful whatsoever.

10 I therefore turn to the particular facts of the case so as to consider the proper exercise of my discretion. In analysing the points that have been made in argument, I have concluded that there is a very clear case in favour of granting the order sought by the Claimant. I set out my reasons below.

11 First, I do not consider that the making of the order sought causes or could cause any significant prejudice to the Defendants. They can cross-examine the Claimant effectively over a video link. Whilst, of course, that is never quite as satisfactory as direct cross-examination, no real prejudice to the Defendants has been or, in my judgment, could be identified as a consequence of this. I note that in Polanski , the House of Lords did not see any prejudice to the defendants in the mere fact that Mr Polanski’s cross-examination was going to be conducted by way of a video link rather than in person, yet that was a case where his credibility was directly in issue and where the circumstances of his cross-examination were therefore of the greatest significance. I accept that giving evidence at a video suite may be less stressful than being in the witness box but that, it seems to me, is a matter which the court can take into account when it comes to the evaluation of all of the witnesses in the case.

12 A particular point, raised by Mr. Bartlett QC, was the logistical difficulties that would be involved in cross-examining the claimant in this case over a video link. Mr. Bartlett QC referred to the problems that can be encountered in cross-examining a witness in a video suite where one needs to look at photographs and possibly extracts from videos and DVDs, and the need to ensure that the respective bundles are compatible. Mr. Bartlett is right to say that there are times when cross-examining a witness in a video suite is not the easiest task, but I do not regard those potential difficulties as being of any real weight in this case. It seems to me that the matters which have been referred to are often difficulties that arise and, in my experience, there are always ways round them.

13 Secondly, I exercise my discretion in favour of the order sought because I do not consider that, in the round, the Claimant’s own evidence will be of critical importance at the trial. I quite accept that the Claimant gives factual evidence on a variety of important matters which are in dispute. However, many of the vital issues, such as, for example, the reasonableness or otherwise of the decision to demolish the house, are likely to depend not on the evidence of the Claimant, but on the expert evidence, of which there is a considerable amount.

14 Thirdly, I have concluded that the Claimant will be prejudiced if I do not make the order. The principal reason for that is because, in my judgment, there is a real, rather than a fanciful, risk that if the Claimant comes to London, he might be liable to pay a substantial sum by way of Capital Gains Tax. There are a number of strands to that conclusion, and I develop them in turn below.

15 In the course of their forceful submissions, both Mr. Bartlett QC and Mr. Reese QC argued that, on the evidence, it had not been shown that CGT could be levied on the Claimant on the basis of one brief visit to London. They said that on the wording of the Taxation of Chargeable Gains Act 1992 there was no prospect of a one or two day visit rendering the Claimant liable as a UK resident to pay CGT. This was contested by Mr. Williamson QC on behalf of the Claimant. The first question for me, therefore, is to determine the right approach to a dispute of this sort. Is it appropriate for the court to endeavour to decide the detailed question of the Claimant’s potential tax liability, or is it sufficient for the court to determine whether there is a real, rather than a fanciful, risk that CGT liability would be imposed?

16 Contrary to the submissions of Mr. Reese QC, I consider that it is unrealistic to argue that the court should determine the complex tax issue on an application of this kind. It is simply not possible for the court, on an application for permission to give evidence by way of video link, to consider all of the relevant material and then give a binding judgment on the Claimant’s potential tax liability. Therefore it seems to me that the right approach is for the court to determine whether, on all the evidence, there is a real, as opposed to a fanciful, risk of such liability.

17 I consider that there are four reasons why, on the evidence, I should conclude that the risk is real, not fanciful. They are:

(a) The Claimant has received specialist financial advice that there is such a risk. The advice comes from his financial adviser, Mr. Andrew, and his solicitor, Mr. Raper. The court should be very slow to substitute a completely different view on the basis of a handful of documents, one or two cases and a couple of hours’ argument.

(b) If the Claimant does not come to the UK, it is agreed that there is no risk of CGT liability. If he does come, then, at the very least, he must lay himself open to the possibility that he will be liable for CGT. In that event it would be for him, pursuant to the Act, to demonstrate how and why he was not a resident and therefore not liable. That would then turn on a potentially complex investigation by reference to the regulations governing residency. At all times, the risks would be imposed on the Claimant and they would all have been triggered simply by the visit to London.

(c) Thirdly, I accept that The Body Shop sale was a high profile news story. The Claimant will know that HMRC will be very interested in his tax status and the effect of the sale.

(d) The sum involved by way of a potential liability could be as much as £50 million. That is a very large sum by any standard. It is of such a size for me to conclude that, by way of the r32.3 order, the Claimant is entitled to be protected against the possibility of a liability in such an amount, even if that risk is a modest one.

For all those reasons, therefore, I conclude that there is a real, as opposed to a fanciful, risk of CGT liability.

18 There was some debate about the financial benefit to Mr. McGlinn if he gave his evidence by way of video link. He plainly would save money by not having to travel and by not having to stay in London. I think as a matter of principle Mr. Williamson QC is right to say that it matters not that, due to his wealth, such a saving would be of little significance to him. That is, therefore, a further factor that I am bound to take into account in the exercise of my discretion, although I accept the Defendants’ argument that, in the overall scheme of things, it is perhaps of relatively small significance.

19 Finally, I should say that I do not accept the proposition that the application was made late. Paragraphs 12.4.1 and 12.4.2 of the second edition of The TCC Guide provide that, if there is a possibility of a witness giving evidence by way of video link, that possibility should be raised in advance of the PTR so that any dispute about it can be dealt with at the PTR. That is precisely what has happened here. It seems to me, therefore, that it is not fair to criticise the application as having been made late. In addition, I accept the submission made by Mr Williamson QC that no prejudice to the Defendants has arisen in any event as a result of the timing of the application.

20 For all those reasons, therefore, I grant the order sought by the Claimant pursuant to CPR 32.3.