E Group Ltd & Anor v Baker (t/a 'Hello')

The claimants engaged the defendant to design a computer system, including a search engine. It is alleged that the defendant failed to provide any workable system. The claimants bring this action to recover the sum of £687,000 which they have paid to the defendant for that work which, so the claimants say, is wholly useless. The defendant counterclaims £147,000 in unpaid fees and that sum was, as a gesture of good faith, paid into court by the claimants at the outset of these proceedings.

There have been unacceptable delays in the progress of this litigation. I am confident, having reviewed the file, and having myself had a small involvement in the case management of this litigation in the past, that these delays can be traced back to the conduct of the defendant. She has not instructed solicitors and no firm is on the record as acting for her. On numerous occasions in the past, she has claimed, with diminishing credibility, that she was unaware of a particular order made by the court or an imminent court hearing. She has regularly requested the adjournment of court hearings. Unhappily, this attitude has resulted, not only in delays, but considerably increased costs to the claimants.

In one sense, the consequences of the defendant’s obstructive attitude reach their culmination this morning, because I am being asked to determine the claimant’s application to strike out the defendant’s defence and counterclaim for non-compliance with an unless order. Although the documents recently sent to the court by and on behalf of the defendant indicate that the defendant is aware of this hearing, and its purpose, and although those same documents indicate that she has instructed a solicitor who is also aware of this hearing and its purpose, neither the defendant nor anyone representing her has appeared this morning on her behalf.

It is necessary to start by setting out some of the background of this litigation although I hope to do so relatively shortly. Following a number of delays in the early life of the case, on 12^th February 2008 Ramsey J made an order that:

“The address provided to the court today by the defendant is the proper address for service on the defendant, such address not to be disclosed to a third party without an order of the court.”

This was a highly unusual order, but it was designed to ensure that the claimants knew when and where they could serve documents on the defendant, so as to avoid the difficulties that were being created by the defendant and her persistent claims that she had not received documentation.

I also note that, in the order made by Ramsey J, the defendant was obliged to pay costs of and occasioned by various applications arising out of the delays, in the total sum of £4,500. This was the first of a number of costs orders made against the defendant. That particular order was made final on 19^th March 2008. However, neither those costs, nor any of the other sets of costs which the defendant has been ordered to pay to the claimants, have in fact been paid. It appears that notwithstanding the large sums of money originally paid by the claimants to the defendant, the defendant now claims to be impecunious.

On 19^th March 2008 I had to consider the defendant’s application to strike out the claim. The application was entirely misconceived and I dismissed it with costs. I also ordered that the defendant provide standard disclosure by list by 5.00 p.m. on 20^th March 2008. This was because, although the claimants had given disclosure by list, the defendant had not, and the absence of documentation from the defendant was hindering the further progress of the action. In one sense, it is my order of 19^th March 2008 that has still not been complied with, and it is that non-compliance which lies at the heart of the later court orders.

The defendant having failed to comply with my order, Ramsey J ordered on 16^th May 2008 that:

“The defendant do by 4.00 p.m. on Friday, 23^rd May 2008 file and serve on the claimant’s solicitors a witness statement dealing with each item on the claimant’s wish list exhibited as pages 1 to 3 of JB1 in the witness statement of John Banks dated 9^th May 2008 stating whether such documents ever existed in hard or soft copy and, if so, and if they are not available for inspection, what has happened to such documents. If they are available for inspection the defendant will, in the witness statement confirm the means by which inspection can be given, such inspection to be given by not later than 28^th May 2008.”

Also as part of his order, Ramsey J fixed the trial for 20^th October 2008 and ordered various steps to be taken in the run-up to that trial, including the exchange of witness statements, experts’ reports and the like. It is again important to note that the defendant’s failure to comply with my original order in relation to disclosure had already been the cause of delay, and the later directions ordered by Ramsey J could not be complied with by either party until disclosure had been given by the defendant.

The wish list was in relatively conventional form and sought documents in particular categories. There was nothing difficult or unusual about the documents sought. There should therefore have been nothing difficult about complying with the order. Indeed, I note that at the subsequent hearing on 25^th July 2008, Akenhead J said:

“It would be very easy for Ms. Baker to comply with the order by saying simply whether the documents existed in hard or soft copy and if they are unavailable what has happened to such documents. She has not particularly identified whether the documents are available for inspection. She has not indicated what has happened to such documents and it is clear that she has not complied in substance with the order.”

As that quotation indicates, the defendant failed to comply with the order of 16^th May 2008 made by Ramsey J. She provided a document dated 23^rd May 2008. It was not a witness statement. That document was considered by Akenhead J on 25^th July 2008 and he concluded that: “It does not begin to comply with the order.” His judgment on that occasion set out in some detail why it did not. I respectfully agree with his analysis and do not repeat the points again.

Accordingly, on 25^th July 2008, the claimants sought an unless order in relation to disclosure which was in terms that, unless the defendant complied with the order of Ramsey J, the defence and counterclaim should be struck out. There was a witness statement provided by the claimant’s solicitor on that occasion which summarised much of what had gone before. It is, I think, fair for me to read into this judgment the crucial parts of Mr Thrower’s skeleton argument prepared for that hearing:

“5.

The disclosure is critical to the issues in the case not least because the defendant had in effect sabotaged the software she produced under the court order and it was impossible practically and/or economically to test or use the software. The order of Ramsey J was made after a hearing attended by both sides and after hearing argument by both sides.

6.

As set out in the witness statement of Mr. John Banks, the claimants are now thoroughly frustrated by the defendant’s attitude to this litigation. Although she has been paid some £687,000 she has represented herself in the litigation and claims she has no money. A number of applications have been made before the court recently on all of which the defendant has been ordered to pay the costs which have been summarily assessed. No costs have been paid to date. She has raised irrelevant or misconceived points at every hearing at times on little or no notice without ever giving proper disclosure on matters which are fundamental not just to the claimant’s case but also the defendant’s. She is causing the claimant to incur huge legal costs which, on the face of it, cannot be recovered because the defendant now claims she has no money.

7.

The claimants have an appointed expert who needs the disclosure sought to prepare his report and advise the claimants on the points to be addressed in their witness statement. The defendant has raised issues on the claimant’s disclosure which have been answered time and again in correspondence and with disclosure of documents which seem to have no relevance but which the claimant has given simply to try and get the case to trial. The defendant has made little relevant disclosure and though for example she claims the financial document is with her accountant, she has not given proper disclosure even in relation to that.”

Typically, there was a difficulty with the defendant and her attendance at the hearing on 25^th July; although she was aware of the hearing, she declined to attend. Akenhead J went so far as to offer her the facility of a telephone conference so that she could participate in the hearing even though she was not in London, but she also declined that invitation.

Akenhead J made an unless order in the following terms:

“1.

The defendant do by 4.00 p.m. on Friday 8^th August 2008 file and serve on the claimant’s solicitors a witness statement dealing with each item on the claimant’s wish list exhibited at pages 1 to 3 of JB1 in the witness statement of John Banks dated 9^th May 2008 (and a copy of which is attached hereto) stating whether such documents ever existed in hard or soft copy and, if so, and if they are not available for inspection, what has happened to such documents. If they are available for inspection the defendant will, in the witness statement, confirm the means by which inspection can be given, such inspection to be given by not later than 13^th August 2008.

2.

If the defendant fails to comply with the provisions of paragraph 1 above, her defence and counterclaim be struck out and the claimants be at liberty to enter judgment for damages to be assessed.

3.

The amount of £25,765 be paid to the claimants out of the £147,500 paid into court by the claimants in April 2007. The remaining monies be paid out to the claimants on the lodging with the court of a bond in the sum of £121,735 in a form agreed by the parties or approved by the court.

4.

The defendant shall pay the costs of this application which costs are assessed on the indemnity basis at £5,000.”

The evidence demonstrates that the order was immediately sent to the defendant by first class post. Moreover, there can be no doubt that the defendant was aware of the order because she sent an e-mail to the claimants’ solicitors dated 8^th August 2008 which expressly referred to it. I ought to note one oddity: although the defendant is representing herself, she signs herself “Ilaw” and the first part of her email address is ‘bay@ilaw’.

The defendant’s e-mail of 8^th August referred to the defendant’s own claims for outstanding documents, a strategy which Mr. Banks had already identified in his witness statement before the court as one of the defendant’s most persistent tactics. The e-mail also referred to the proposed appeal against the costs order made by Akenhead J on 25^th July. There has been no such appeal.

The material part of the e-mail for present purposes concerns the question of documentation. Despite Akenhead J’s criticism of the one document that she did provide in purported compliance with the order of Ramsey J, all that the defendant did on 8^th August was to re-submit the same document with the following ‘additional information’:

“All WB items are no longer available for inspection as they were routinely rubbed out.

All HC items are available for inspection at a time and day agreed by the parties.

All NA items did not/do not exist in the forms requested.”

There can be no doubt whatsoever that the response of 8^th August did not comply with the order of the court. It sought to re-submit a document which the court had already made plain was not in compliance with the order. It made generalised and, in part, incomprehensible further comments in relation to one or two of the entries within that document. It was not a witness statement. Thus the defendant wholly failed to do what Akenhead J noted was such a simple thing, namely, to comply with the original order of the court. It is difficult not to read the e-mail of 8^th August 2008 as constituting anything other than an expression of the defendant’s contempt both for the claimant and for the court.

Even though the defendant had not complied with the order of Akenhead J, the claimants considered that perhaps the best way forward was to try and inspect the documentation that the defendant had, particularly given that the defendant had indicated that at least some material was available for inspection. That seemed to me to be a pragmatic response. On two occasions in August, the 18^th and the 20^th, the claimant’s solicitors sent requests to inspect documentation to the defendant. These requests were sent by both first class post and by e-mail. There was no response to those requests.

On 12^th September 2008, with the trial just 6 weeks away, the claimant issued an application to strike out the defence and counterclaim for failure to comply with the unless order of 25^th July. The evidence is that the application was sent by first class post to the defendant at the address identified by Ramsey J in his order of 12^th February 2008 and was also sent by e-mail the following day, Saturday 13^th September, to the e-mail address to which I have already referred. Subsequently, in communications with the court, the defendant has again alleged that she did not receive those documents. However, there is no evidence before the court which begins to support how and why that could possibly be the case. In the light of the history (some of which I have set out in this judgment) I am unable to accept the defendant’s proposition that those documents were not received.

In any event that may be academic because, as I have already indicated, both the defendant and a firm of solicitors, FWD Law – to whom the defendant has recently gone, apparently, for legal advice – were aware of this hearing no later than the middle of yesterday, but as I have said, they have declined to attend. That is despite their knowledge that the claimants would be seeking to strike out the defence and counterclaim.

I now turn to that application. The first point to make is that, as noted above, the unless order made by Akenhead J on 25^th July has not been complied with. Given that, as Akenhead J found, the failure to comply with the original order was almost total, the minor tinkering set out in the e-mail of 8^th August cannot begin to amount to compliance. The defendant is clearly not prepared to provide a witness statement or to go through the claimants’ wish list, item by item, explaining what documents are in each category and what documents are still retained. No reason or explanation for this non-compliance has been provided by the defendant.

In those circumstances, this application and this hearing are – at least in one sense – unnecessary. The defendant has failed to comply with the unless order. Pursuant to CPR 3.1(3), the court has made an order which was subject to conditions and specified the consequences of the defendant’s failure to comply with those conditions. In those circumstances, as the note at paragraph 3.4.4.1 of the White Book makes plain:

“The consequence (i.e. the striking out and dismissal sanctions) follows automatically upon the party’s failure to comply with the condition, without any further order of the court.”

Of course, the automatic but draconian consequence of non-compliance in a case of this sort highlights the need for the court imposing the unless order to be sure that such an order is appropriate: see Marcan Shipping (London) Ltd v Kefalas [2007] EWCA Civ 463. But in the present case, in the light of the history which I have set out above, it seems to me that the order of Akenhead J of 25 July was entirely justified. As a result, the defendant’s failure to comply with that order means that the defence and counterclaim is struck out without further ado as an automatic consequence of paragraph 2 of that order. Thus, whoever had appeared this morning on behalf of the defendant, it seems to me that, in all probability, they would have been unable to prevent that automatic consequence of the defendant’s non-compliance.

The fact that there has been an application to strike out, and a hearing this morning of which the defendant is aware, has amounted to a further opportunity to the defendant to come and explain to the court any material factors which she says are relevant to her non-compliance and its consequences. As I have indicated, that would probably not have prevented the automatic striking out of the defence and counterclaim. But in any event such speculation is unecessary because the defendant has chosen not to avail herself of that final opportunity. Accordingly, it seems to me that, given the non-compliance, I should confirm on the detailed material before me that the defence and counterclaim should be struck out and judgment entered on behalf of the claimant.

There is a trial fixed for 20^th October 2008 which, as I have indicated, has been much delayed as a result of the defendant’s default. I note that, in their letter to the court, FWD Law asked for an adjournment of the strike-out hearing for 28 days. For the reasons which I have indicated, I am not in a position to allow any such adjournment. But as Mr. Thrower rightly points out, if the application had been adjourned in accordance with that request, then that would automatically have meant that the trial would have had to have been adjourned too. That perhaps illustrates the extent to which the defendant’s conduct has prejudiced the proper case management of this litigation.

The defendant’s failures to comply with the orders of the court have meant that, in any event, no effective trial on the merits would have been possible on 20^th October. However, given that those defaults mean that there is now no defence to the claim on liability, it seems to me that the trial on 20^th October can go ahead for the assessment of the quantum of the claimants’ claim. I therefore make that order in the hope that that hearing can then be sensibly utilised so as to complete these proceedings.