UK Highways A55 Ltd & Ors v Hyder Consulting (UK) Ltd & Ors

There are three applications before the court. The first, dated 15 October 2012, is by the First Defendant ("HCL"). That is for summary judgment or to strike out the claim, the Claimants having failed to serve Particulars of Claim within 14 days of the service of the Claim Form. The second, dated 29 October 2012, is by the Second Defendant ("HL"). That is to strike out the Particulars of Claim on the same ground and for an order that, if the Claimants were to apply for an extension of time, it should be refused.

The third application, dated 6 November 2012 is by the Claimants. That is for an extension of time to 12 September 2012 within which to serve the Particulars of Claim, and to 28 September 2012, within which to serve the Particulars of Quantum. (Footnote: ¹) However, it is the Claimants’ primary case that they do not require such an extension of time. The reason why the Claimants say they do not need an extension of time is that, before the time for service of the Particulars of Claim had expired, the parties agreed that the action should be stayed for three months. The Claimants, represented by Mr Andrew White QC and Mr Rupert Choat (Solicitor Advocate), submit that the effect of a stay is to abrogate any existing time limits by which future steps in the action had to be taken.

Mr White put it very simply. He said that if Particulars of Claim have to be served within 14 days of service of the Claim Form, as the rules require, then if, within that period, the action is stayed for a period in excess of 14 days, it becomes impossible to serve the Particulars of Claim within the prescribed time. Thus the effect of the stay must be to abrogate that time limit.

The Defendants submit that the effect of a stay is to suspend the proceedings until the stay is lifted or expires, whereupon they resume automatically from where they left off. The effect of the stay, therefore, is simply to shunt back any outstanding time limits by an amount of time equivalent to the length of the stay.

If the Claimants are wrong about this, then they submit that the time for service of the Particulars of Claim should be extended because it would be unjust not to do so.

I heard the applications on a Friday and then reserved judgment. However, I indicated that if I was able to reach any conclusion on the outcome fairly quickly, I would make an order reflecting that conclusion and then deliver a judgment giving my reasons later. Having reflected on the issues over the weekend I was able to reach a clear conclusion as to what the outcome should be, and so I issued an order giving effect to my conclusions on the following Monday. This is the judgment in which I give my reasons for making that order.

The First Claimant is a special purpose company incorporated for the purpose of entering into a design, build, finance and operate ("DBFO") contract for a road in North Wales which is now known as the A55. The Second and Third Claimants were members of a joint venture who contracted with the First Claimant to fulfil its DBFO obligations.

HCL was engaged to provide design services in relation to the design of the road. HL, now in voluntary liquidation, was the parent company of HCL and guaranteed the performance by HCL of its contractual obligations.

It is not necessary to say any more about the contractual arrangements, save for the fact that the contracts with HCL and HL were under seal and so there is a 12 year limitation period. HCL carried out its design obligations in the late 1990s and the road was constructed between March 1999 and March 2001, when it was opened to traffic. Within a year or two the road showed signs of surface degradation and investigations were put in train to discover the cause.

The Claimants’ case is that, first, the upper and lower roadbases were inadequately bonded throughout the entire length of the road and, second, that the road surface was not properly waterproofed.

Various tests and investigations carried out between 2007 and 2009 are said to establish the presence of these defects and to show that they were the cause of the problems.

On 13 October 2009 the Claimants’ solicitors, CMS Cameron McKenna, wrote to HCL and HL a letter in accordance with the Pre-Action Protocol for Construction and Engineering Disputes ("the Protocol"). The letter was in the usual form: it set out the relevant contractual arrangements, identified the defects that I have mentioned and asserted that "by failing adequately to address the two matters of bonding between the roadbase layers, and waterproofing of the road, [HCL] failed to use all the reasonable skill, care and diligence of a Consultant Engineer experienced in the provision of services of the nature of the Services for projects of the size and scope of the A55 Project . . .". The case against HL was confined to its role as guarantor.

On 5 November 2009, Macfarlanes, the solicitors for HL, responded in the following terms:

“We are in the process of obtaining all of the relevant background documentation to this matter from the existing files in the possession of Messrs Jones Day and we intend to meet with our clients in order to take instructions, including instructions as to how long the liquidators may reasonably require for their response to your letter of 13 October 2009."

On 22 December 2009, Kennedys, the solicitors for HCL, wrote in the following terms:

“In practical terms, we are making slower progress than we anticipated in respect of our investigations. It has taken longer than we expected for our clients to locate and obtain the relevant documentation relating to the pavement design. Likewise it would appear that only a limited number of the original design team are still employed by our clients. Clearly this presents a series of practical difficulties in terms of progression or investigations and preparation of our response. In addition, we have to take account of the Christmas break and absence of relevant personnel during this period. In the circumstances the prospect of us responding by 15 January is too optimistic."

In the event, Kennedys responded to the protocol letter on 2 March 2010, and Macfarlanes did so on 9 March 2010. Kennedys said that HCL had instructed a Professor Stephen Brown, an expert in pavement engineering. Macfarlanes said that HL had been placed in such a position by the Claimants and HCL that it was unable properly to consider the claim that had been made against it.

For the purposes of these applications the evidence before the court included a substantial amount of without prejudice and/or privileged material. It was accepted on all sides that it was legitimate for the court to look at this material on an application of this sort: see Family Housing Association (Manchester) Ltd v Michael Hyde and Partners Ltd [1993] WLR 354.

At 18:10 hours on 6 May 2010 CMS Cameron McKenna served the Claim Form and Response Pack on Kennedys, on behalf of HCL, and, I assume, served the same documents on Macfarlanes, on behalf of HL, at about the same time. By CPR 7.4(1)(b) the Particulars of Claim "must" be served on the defendants within 14 days after service of the claim form.

On 10 May 2010, and before the period for serving the Particulars of Claim expired, CMS Cameron McKenna wrote to the other parties and invited them to agree to a stay of the proceedings in order to allow the Protocol process to run its course. They explained that proceedings had been issued in order to avoid any argument about whether or not the claim was out of time.

HCL and HL agreed to a stay and a consent order was made on 17 May 2010 (being the date of the order) staying the proceedings so that the parties "may attempt to fulfil the requirements of the Construction and Engineering Pre-Action Protocol". The order provided that the stay was to be lifted on the application of any party and, in any event, within three months of the date of the order. The stay expired, therefore, on 17 August 2010 (if not lifted by the court before then).

By 17 August 2010 the stay of the proceedings had not been renewed. On about 3 September 2010 the parties agreed to a further stay and an appropriate consent order was made on 10 September 2010, by which the proceedings were further stayed until 23 November 2010 (if not lifted before then). This order provided that the proceedings were being stayed so that the parties "may attempt to narrow the issues in dispute, and explore whether it is possible to resolve the dispute by ADR".

It is clear from this, if the Defendants’ submissions are correct, that the period for service of the Particulars of Claim must have expired prior to 10 September 2010 when the second consent order was made. Interestingly, this fact was not pointed out by any of the parties in their skeleton arguments. It seemed that it suited each party's case to treat the first two stays as if they had been an unbroken continuum. A third stay was subsequently agreed and an appropriate consent order was duly made on 30 November 2010, in terms identical to those of the second order apart from the expiry date, which was 23 February 2011. It will be seen that, again, the second stay had expired before the order for the third stay was made.

A fourth stay was made by a consent order dated 24 March 2011. This was until 23 June 2011. Therefore over a month elapsed between the expiry of the third stay and the making of the fourth stay.

No further stay was agreed after this. By this time there had been at least one meeting between Professor Brown and his opposite number, Professor Knapton, who had been instructed on behalf of the Claimants, and there had been substantial exchanges of documents and other information.

On 9 June 2011 CMS Cameron McKenna e-mailed Kennedys to discuss the way forward in relation to the expert discussions, indicating that in their view what was needed was a further report from Professor Brown. They said that unless Kennedys had an alternative suggestion, the most meaningful way forward was for the pavement experts to distil their views so that the parties might ultimately be able to settle the dispute without the Claimants being required to resume the litigation. Further exchanges of e-mails followed in which dates for another meeting of the experts were put forward and discussed.

On 12 August 2011 Kennedys sent a report from Professor Brown to CMS Cameron McKenna. On 28 September 2011 there was a without prejudice meeting between the two pavement experts with representatives of the parties in attendance.

On 24 October 2011 CMS Cameron McKenna sent a long e-mail to the solicitors for the two Defendants. Mr White described this as a very important document. Effectively, it set out the Claimants’ views on the possible ways forward. There were three options. The first was for the litigation to resume. The second was for the parties to agree to mediate the dispute, the proceedings being stayed in the meantime. The third was for the litigation to resume and for a mediation to take place in parallel. So far as the experts were concerned, the Claimants proposed a meeting of the quantum experts. Finally, the Claimants raised the question of the future participation of HL. It was suggested that HL should agree to be jointly and separately bound by any judgment against HCL, or the terms of any settlement agreed by HCL, so that the proceedings against HL could be stayed indefinitely.

Macfarlanes replied to this e-mail on 17 November 2011. In relation to the future involvement of HL, they made two points. First, that it was not in the interests of any of the parties for HL to do anything more than the minimum steps required to comply with the Protocol. Second, HL was not prepared to agree to a stay on the terms proposed: however, Macfarlanes were actively investigating other ways of limiting HL's participation in the action.

In the meantime, Kennedys had sent a holding reply to the e-mail on 4 November 2011. On 23 November 2011, following a chaser from CMS Cameron McKenna, Kennedys sent a further e-mail in which they attached Professor Brown's notes of the meeting of 28 September 2011. They said that they were taking their client’s instructions as regards mediation, but that their preference would be for the quantum experts to meet before any proposed mediation took place. They told CMS Cameron McKenna that Professor Brown was going to be in Australia from December until the third week in February 2012.

It should be noted that in this e-mail Kennedys were not committing their clients to mediation. Indeed, they made it clear that their reference to the absence of Professor Brown in Australia was predicated on the assumption that their clients would agree that the next step would be a mediation. By contrast, there was no hint or suggestion in this e-mail that the Claimants should follow the litigation route without further ado.

During the following two months the solicitors continued to communicate with each other in relation to the provision of information, supply of further documents and possible dates for a mediation.

On 24 February 2012 Mr Bailey, of CMS Cameron McKenna, sent an e-mail to Mr John Farrell, of Kennedys, in the following terms:

“John, may I take it that, despite several months have elapsed since I first tried to get mediation dates in the diary, your client is not interested in mediating (either at all, or at any time in the near future). If that's not the case (and your client is interested in mediating in the near future) please me know as soon as possible."

Later the same day, Mr Farrell replied as follows:

“Julian,

I’m (sic) have been chasing for instructions but what I can say it (sic) that Hyder are not saying that they are "not interested mediation".

In the meantime I suggest we get some new dates in late April and May?

You should note that Prof Brown returns next week that is also a factor here for my clients.

I accept we are outstanding on some documents your clients have requested. We have had difficulties locating documents and/or staff that worked on this project to complete our efforts to find documents."

Mr White submitted that this was an important exchange. HCL was being asked in very clear terms what its intentions were in relation to mediation. The reply, whilst somewhat equivocal, was quite clearly intended to rebut any suggestion that HCL had no genuine interest in mediation. Mr Paul Reed QC, who appeared for HCL, stressed that at no stage did HCL agree to mediate: the most that it agreed to do was to consider it as a possibility. He pointed out, quite correctly, that there was no commitment to mediation in any of the consent orders.

Whilst Mr Reed had a fair point, it takes matters only so far. I consider that up to this stage at least, the Claimants were progressing the dispute in good faith in the hope that they might get the parties round a table once the experts had reached an appropriate stage in their respective discussions and any outstanding requests for information or documents had been dealt with.

On 5 March 2012 CMS Cameron McKenna wrote an open letter to the parties formally seeking from each of them its "agreement to act with expedition and in good faith to attempt to resolve the A55 dispute by way of mediation" and to agree to do so on the earliest possible date. Kennedys replied on 15 March 2012 to say that they were taking instructions.

In his witness statement served on behalf of the Claimants, Mr Rupert Choat of CMS Cameron McKenna, said that by this point both CMS Cameron McKenna and their clients were increasingly fed up with the failure of HCL to commit to the mediation process. Having heard nothing further following Kennedys’ holding response of 15 March 2012, the Claimants considered the possibility of making a direct approach to HCL on a client to client basis.

In the meantime, CMS Cameron McKenna wrote again to Kennedys on 26 April 2012 pointing out that they had still received no substantive response to their letter of 5 March 2012. They said that they saw HCL’s behaviour as a delaying tactic. The letter concluded as follows:

“It will now be difficult for a mediation to happen on any of the various dates we suggested (and set aside in diaries) for up to and including 9 May. This leaves our clients with no option in order (sic) to pursue their due entitlement which they intend to do.

There may still be a window for mediation by 9 May, but that is a matter for you. In the meantime, we take this opportunity to inform you that we have entered into a Conditional Fee Agreement with our clients. We attach a Notice of Funding of Case or Claim."

Shortly after this the Claimants identified a Mr Bell, a Business Director for HCL's highways business, as a possible person within HCL with whom to discuss the A55 dispute. On 14 June 2012 Carillion’s Mr Holmes met Mr Bell. Mr Holmes says that he made it clear to Mr Bell that the Claimants would be resuming the court proceedings if they could not get agreement on some kind of ADR process and, that if there was to be a mediation, it should be done within 5-6 weeks (and before the Olympic Games). Apparently, Mr Bell said that he would come back to Mr Holmes early the following week with HCL's response. Thereafter, apart from a desultory exchange of messages during the latter part of June 2012, nothing more happened.

Mr Holmes said that it "later" became clear to him that HCL was not interested in mediating the A55 dispute and so the Claimants instructed their solicitors to take steps to resume the proceedings and, in particular, to finalise and serve the Particulars of Claim.

On 28 August 2012, and before the Claimants got around to serving their Particulars of Claim, Kennedys wrote to CMS Cameron McKenna requesting the Claimants to issue a Notice of Discontinuance, failing which they would apply to the court for the claim to be struck out. They referred to CMS Cameron McKenna's last open letter of 5 March 2012 and what they described as "the extraordinary delays" in the progress of the claim and asserted that “no cause of action” had been put forward.

Although I am slightly puzzled by this last point - since the letter of claim sent on 13 October 2009 seems to me to raise a perfectly coherent cause of action (whether well or ill founded is another matter), this letter made it abundantly clear that all bets were off (if they were ever on) and that the inevitable outcome would be applications to the court such as those that have in fact been made.

The response by CMS Cameron McKenna (in their letter of 4 September 2012) was, in short, that the responsibility for the delays remained firmly with HCL and that if HCL did not wish to mediate the Claimants would resume the litigation and ask the court to list a case management conference.

Subsequently, the Claimants made it clear that their primary position was that they did not need to apply for an extension of time for service of the Particulars of Claim. However, they would, in the alternative, make an application for an extension of the time within which to serve the Particulars of Claim if they needed it.

However, it was not until 6 November 2012, two days before the hearing of the applications, that the Claimants served their own contingent application for an extension of time for service of the Particulars of Claim.

In addition to his short point that if an action is stayed for a period that is longer than the relevant time limit it becomes impossible to serve the Particulars of Claim within the prescribed time, Mr White relied also on the definition of a stay in the Glossary to the CPR, which says that "Proceedings can be continued if a stay is lifted". Mr White submitted that this shows that proceedings do not automatically continue once a stay is lifted: they can be continued. He makes the point that nowhere in the CPR is it provided that time limits such as those in rule 7.4(1)(b) continue to run following the expiration of a stay. In this he is correct.

However, Mr Alexander Nissen QC, who appeared for HL, pointed out that rule 3.1, which sets out the court’s general powers of case management, provides that the court may "stay the whole or part of any proceedings or judgment either generally or until a specified date or event".

Mr Nissen submitted that the contrast between staying proceedings generally or until a specified date is obvious. In the former, the stay remains in force until it is lifted. In the latter, it automatically ceases when the specified date is reached. This must mean, he submitted, that the proceedings start up again at the point where they left off when the stay was imposed.

It seems to me that this submission avoids the impossibility problem raised by Mr White and has the sensible result that the proceedings can resume where they left off without any party having to go to the trouble and expense of making an application to the court in order to enable that to happen. There is nothing in the rules which provides that, once stayed, no further step need be taken in the proceedings unless there has been an order of the court even if the stay has been lifted automatically (because it expired on a particular date or the happening of a particular event).

For these reasons, I prefer the Defendants’ submissions on this point and so I find that the time for service of the Particulars of Claim had in fact expired before the second stay was imposed by consent on 10 September 2010.

However, since it was plainly the intention of the parties that the proceedings should be stayed from the date of the first consent order, on 7 May 2010, until the expiry of the fourth consent order on 23 June 2011, it would clearly be unjust if the Defendants were permitted to take the point that the Particulars of Claim should have been served in August or September 2010. Further, by agreeing to the making of the subsequent consent orders, I consider that they probably waived any such right.

However, following the expiry of the stay imposed by the fourth consent order, the position changed. Although no further stay was agreed, Mr White submitted that there was a de facto stay thereafter. I have to say that I find that a difficult submission to accept, at several levels. First, as I have already noted, the rules give the court the power to impose a stay: it is not something that can be imposed by a party individually, or by the parties collectively, because the rules confer no such power. If the parties do not have the power to impose a stay by express agreement in the absence of an order of the court, and in my view it is clear that they do not, I cannot see how they can impose a stay by implication. For that is what Mr White's de facto stay amounts to.

Further, in an e-mail dated 6 July 2011, CMS Cameron McKenna suggested that there might be a further stay of the proceedings, to 21 October 2011 (and on certain conditions), but they made it clear that their clients regarded any further stay as the last one. Kennedys did not reply until 12 August 2011, but their letter did not deal with the question of a further possible stay. At that point, discussions about a further stay seem to have petered out.

In these circumstances, I find it hard to see how the parties can be said to have accepted a de facto stay, when one party had suggested a further stay and, having received no response, took no steps to follow it up.

I therefore reject the Claimants’ suggestion that there was a de facto stay from 23 June 2011 onwards.

It is reasonably clear from the correspondence between June 2011 and March 2012 that the parties were continuing to discuss the claim and to exchange information on a without prejudice basis. No one suggested that the Claimants should serve their Particulars of Claim, still less criticise them for not doing so. In my view, the Claimants could reasonably take the view that the Defendants were acquiescing in this situation.

Whilst I would not go so far as to say that whilst this continued HCL could be taken to have waived its right to object to the failure to serve the Particulars of Claim, it would in my view be quite unjust if it could turn round and require the Claimants to serve a notice of discontinuance or be permitted to have the claim struck out for failure to serve the Particulars of Claim within the time prescribed. This is because I am satisfied that the Claimants were pursuing the course of exchanging information and experts’ views in the genuine and not unreasonable belief that something might come of it. I am less confident that HCL was approaching the situation on the same basis, but I am not prepared to find that it had deliberately adopted a course of stringing the Claimants along with a view to closing the trap when sufficient time had elapsed.

Mr Nissen submitted that during this period the Claimants never had any reasonable ground for believing that there would be a mediation. I am doubtful about that. But I consider that the Claimants were still holding on to the belief that there was further room for narrowing issues and reducing the scope of any potential trial.

In my view, this state of affairs continued until CMS Cameron McKenna wrote their letter of 5 March 2012. As I have already said, this elicited nothing more than a holding reply from Kennedys, after which the inter-solicitor correspondence effectively dried up. On 26 April 2012 CMS Cameron McKenna wrote to say that their clients had no option but to "pursue their due entitlement”.

By this time I consider that the Claimants no longer had any reasonable ground for not serving their Particulars of Claim and pursuing the litigation as they had said they would do. This was an old claim and it was arguable that the Claimants had already allowed the relatively unproductive debate to drag on for too long.

Although at this point the Claimants made the attempt to start a dialogue on a client to client basis as I have already described, given the relative lack of productivity of the discussions to date I do not consider that this provided a good reason for delaying service of the Particulars of Claim any longer.

Accordingly, I consider that it is open to the Defendants to complain about the failure to serve the Particulars of Claim between late April 2012 and 12 September 2012 when they were eventually served.

Both HCL and HL relied strongly on the decision of the Court of Appeal in Price v Price [2003] 3 All ER 911, in which Brooke LJ, giving the judgment of the court said:

“3.

At that time there was an unresolved dispute as to whether a court had power in any circumstances to extend the time for serving particulars of claim pursuant to the general power to extend time which is contained in CPR 3.1. In Totty v Snowden [2001] EWCA Civ 1415; [2001] 4 All ER 577 it was held that this power did exist. However, CPR 7.4(1)(b) contains the mandatory word "must", from which it can readily be inferred that the longer the period a claimant allows to elapse before he/she applies for an extension of time, the slower a court may be to exercise a favourable discretion. In the event no application for an extension of time was made until 16^th July 2002, over 14 months out of time.

4.

By this time this court had made it clear in Sayers v Clarke Walker (a firm) [2002] EWCA 645; [2002] 3 All ER 490 that in a case of any complexity, when a court was considering an application for an extension of time made after the time prescribed for the taking of a step in proceedings had expired, the court should follow the checklist given in CPR 3.9. Although the present case is concerned with an extension of time for serving particulars of claim, and not with an extension of time for appealing, the underlying logic is the same. If the court is not willing to extend time, the action will be at an end because the claimant will not be able to proceed with it any further.

. . .

37.

By CPR 1.3 a claimant is required to help the court to further the overriding objective of being able to deal with his case justly. By CPR 1.4 the court is under a duty to further the overriding objective by managing the case actively.

38.

In his seminal judgment in Biguzzi v Rank Leisure plc [1999] 1 WLR 1926 Lord Woolf MR made it clear that the new Civil Procedure Rules had ushered in a new regime, and that it was no longer useful to look back at decisions under the pre-CPR regime because that was a different regime. We no longer have to succumb feebly to the argument that a defendant was already so prejudiced that any further prejudice caused by a further long delay could not be regarded as significant. On an occasion like this we have to look objectively at the extent to which the defendant would be prejudiced if the case was allowed to continue, whether on the enlarged basis for which the claimant is now contending or at all, and then consider whether and the extent to which the claimant's cumulative defaults have caused that prejudice. Our final duty is to decide whether it would be a disproportionate response to stop the case now by refusing the extension of time outright, or whether it may be possible to fashion a more proportionate response.

. . .

41.

The claimant is in serious default in relation to his duty to help the court to deal with his case fairly. He has also made it impossible for it to manage the case actively because until he served his particulars of claim and the defendant responded to it, there was nothing for the court to manage. Although it would have been open to the defendant's solicitors to incur the expense of seeking directions from the court, as suggested by Chadwick LJ in Totty, they were certainly not obliged to incur this expense, especially where the claimant's solicitors were holding them at bay with statements which turned out to be some way distant from the whole truth.

42.

In my judgment this is a case in which this court has to say "enough is enough", and like the judge (though for different reasons) to refuse the extension of time sought, unless it were possible to impose conditions on any order for an extension. There are just too many considerations pointing in favour of the defendant to allow the claimant's right of access to a court for the purpose of prosecuting his enlarged claim to trump those considerations on the facts of this case. It is not only that he (or his advisers) failed to comply with the pre-action protocol, and that he (or they) failed to serve the particulars of claim within the time prescribed by the rules or to answer the questions asked of them often more than once. It is also that the defendant's insurers (and, in turn, their solicitors) acted impeccably throughout this history in seeking the information they needed to evaluate the claim properly with a view to resolving it, if possible, without the need for the expense of court proceedings at all. In other words, they complied with their CPR 1.3 duty: the claimant did not. The result was that the court was deprived of the opportunity of managing the case actively in pursuance of the overriding objective by reason of the claimant's defaults, and it would not now be possible to deal with the case in a manner that is fair to both sides if the court simply extended time unconditionally.

43.

There is, however, a route available by which the court could do effective justice to both sides. The operation of CPR 3.1(2)(a) and 3.1(3)(a) give the court power to extend time for compliance with a rule subject to conditions. In Walsh v Misseldine (CAT 29^th February 2000) this court made effective use of this power, which needs to be more widely used on appropriate occasions.”

Mr White relied on a passage in the decision of Silber J in Wiemer v Zone [2012] EWHC 107 (QB), at paragraph 17, which is in the following terms:

“It is worthwhile setting out some of the relevant facts in this case which to my mind are of critical importance and which should have been considered in deciding how the Master should have reached a decision in compliance with the overriding objective of dealing with the present case justly. Those facts are that:

(a)

The particulars should have served by 19 August 2010, and if that had occurred, the second respondent would have had no cause to complain. Significantly, the appellant was only seeking an extension according to the term of his summons until 30 October 2010 which would have meant that there was a delay of just over 10 weeks;

(b)

there is no evidence whatsoever that the second respondent would have been or indeed was prejudiced by the delay either during the period between 18 August 2010 and 31 October 2010 or at any time prior to this date. It is true that Mr David Prichard, the second respondent’s solicitor in his detailed witness statement of 12 January 2012 does assert that to accede to the appellant's application "would occasion significant prejudice to the second respondent". What is important and telling is that he does not give any details of what he means by "significant prejudice" and no doubt they would have been particularised if they could have been identified. It is noteworthy that it was not suggested by Mr Prichard or the second respondent that, for example, some witnesses were now dead or would no longer be available or that significant documents had disappeared during either of those periods; and that

(c)

If the application was not to be granted, the appellant would have lost the benefit of his claim and it would be time-barred. No cogent argument has been put forward on behalf of the second respondent to show that there was or could have been no merit in it and indeed I was not asked to consider the particulars in the bundle. The Master did not avail himself of the opportunity to look at the pleading and I heard no submissions on them."

The claim in that case was for a sum in excess of £2 million and arose out of the break-up of the parties’ business arrangements. Two additional points need to be noted in relation to that passage. First, it appears that the claim form was issued right at the end of the 6 year limitation period. Second, the application for an extension of time for serving the particulars of claim was made within the time prescribed for service.

Mr Nissen reminded me that, in the absence of an order of the court and unless the rules otherwise provide, by CPR 2.11 time for compliance with a rule may be varied by the written agreement of the parties. He submitted, correctly in my view, that there was no such written agreement in this case in relation to any period after 23 June 2011, when the last stay expired.

Mr Nissen relied also in his skeleton argument upon the observation of Lewison LJ in Fred Perry (Holdings) Ltd v Brands Plaza Trading Ltd [2012] EWCA Civ 224, at paragraph 15:

“. . . courts at all levels have become too tolerant of delays and non-compliance with orders. In so doing they have lost sight of the damage which the culture of delay and non-compliance is inflicting on the civil justice system. The balance therefore needs to be redressed."

Accordingly, bearing this observation in mind and following the decision in Price v Price, I shall, like the parties, focus on the provisions of CPR 3.9. The circumstances identified in that rule are as follows:

“(a)

the interests of the administration of justice;

(b)

whether the application for relief has been made promptly;

(c)

whether the failure to comply was intentional;

(d)

whether there is a good explanation for the failure;

(e)

the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant preaction protocol;

(f)

whether the failure to comply was caused by the party or his legal representative;

(g)

whether the trial date or the likely trial date can still be met if relief is granted;

(h)

the effect which the failure to comply had on each party; and

(i)

the effect which the granting of relief would have on each party."

I shall take these in turn, bearing in mind always that if these applications are decided in favour of the Defendants, the Claimants will be deprived of the right to bring this claim before the court. This is not one of those cases in which it can be said that the claim is weak or without merit: there simply is not the material upon which the court could form a view about this, and no one has suggested otherwise.

The interests of the administration of justice

Mr Reed, for HCL, reminded the court that fairness applies to defendants as well as claimants. He submitted that in this case, whilst it may be possible for HCL to find witnesses and to persuade them to attend court, many witnesses will have retired and they will have little enthusiasm for helping HCL.

He emphasised the very long time that has passed since the relevant design work was carried out, so that the recollection of the individuals involved is now unlikely to be good. Further, he submitted that HCL was now facing a claim regarding supervision which had been articulated for the first time, and in a completely unparticularised manner, in the Particulars of Claim.

Mr Reed submitted also that the Claimants knew that limitation was an issue so had an obligation to proceed promptly: however, they had not done so with any degree of enthusiasm. He submitted that the court was entitled to look at the whole period of the delay, and not just that since the issue of the claim form.

Mr Nissen, for HL, made the additional point that the court had been deprived of the opportunity of managing the case properly in pursuance of the overriding objective. He rejected a suggestion, made in the evidence served on behalf of the Claimants, that the court itself could have called a case management conference and issued directions.

But Mr White made the point, which I consider to be a fair one, that the administration of justice would not be served if Defendants were allowed to sit on their hands, in apparent acquiescence with the conduct of the Claimants, and then without warning turn round and make an application to strike out the claim.

Whilst it is true that the court has been deprived of the opportunity of managing this case properly, it is likely that it would have acceded to a further stay beyond June 2011 if the parties had been agreed that it should do so. But this is a dispute between commercial parties who are quite capable of applying for a case management conference at any particular time if they consider that any inactivity by the Claimants is resulting in prejudice to their position. As to the position of other litigants, I do not consider that the delays in this case will have made any difference: indeed many other litigants may have had their cases heard sooner than they otherwise would have done because this case was not taking up the time of the court. All in all therefore, I do not consider that this is a particularly strong factor in this particular case.

Whether the application for relief has been made promptly

Mr Reed and Mr Nissen submitted that the period of delay exceeded 12 months, and so plainly the application was not made promptly. Further, they submitted, when the Claimants were challenged about the need for an extension of time they responded by saying that it was not necessary.

Mr White submitted that the Claimants should not be criticised for not making the application promptly when they had a genuine belief that they were not under any obligation to seek an extension of time.

In my view either an application is made promptly or it is not, and this one was not; but if there is an explanation for it - albeit one that I have held to be misconceived - that should probably be taken into account in the Claimants’ favour. But again I do not regard this in itself as a factor that should attract very much weight in the circumstances of this case.

Whether the failure to comply was intentional

It clearly was an intentional failure, in the sense that it was not an oversight. However, Mr White submitted that this limb of the rule was directed to cases where a party was deliberately ignoring time limits, rather than to a case where a party believed in good faith that it was entitled to act as it did.

I consider that there is some force in Mr White's point. I think that this factor will carry weight where there is evidence of a deliberate decision not to comply with a deadline, or a persistent course of failing to comply with deadlines, either for reasons of expediency or of tactics. That is not really this case.

Whether there is a good explanation for the failure

Mr Reed and Mr Nissen submitted that there is no good explanation for the failure. Mr Nissen submits that it was, or ought to have been, obvious to the Claimants within a very short period of the expiry of the stay in June 2011 that the process was going nowhere. Indeed, he submits that the Claimants themselves had concluded by early 2012 there was no point in chasing Kennedys any further.

Mr White submitted that there was a good explanation in the form of the Claimants’ belief that they were entitled to act as they did.

Whilst I consider that this is an explanation - it clearly is - it was not a "good" explanation. Further, it was always open to the Claimants to check that their understanding of the position was shared by the other parties.

The extent to which the party in default has complied with other rules, practice directions, court orders and any relevant preaction protocol

The parties appeared to accept that this factor probably added nothing, although Mr Nissen made the point that the Claimants’ evidence in respect of the present applications was served late and out of time. However, I consider that little weight can be attached to this in the context of these applications.

Whether the failure to comply was caused by the party or his legal representative

The answer is probably both. But, as Mr Nissen pointed out, in the context of the present applications an inquiry into this point would be sterile.

Whether the trial date or the likely trial date can still be met if it is granted

There is no trial date, so this is not a relevant consideration. All that may be said is that any trial will take place later than it would otherwise have done.

The effect which the failure to comply had on each party

On the Defendants’ side, there were witness statements before the court from Mr Farrell, a partner in Kennedys, Ms Mary Herbert of HCL, and Mr Wass, a partner in Macfarlanes.

Mr Farrell's observations in relation to prejudice were made in fairly general terms. He mentioned matters such as the effect of the passage of time on individual memories and the possibility that documents may no longer be available. Ms Herbert's witness statement, by contrast, was far more specific. She said that there were about 27 potentially relevant witnesses of fact, of whom only one, an employee of HCL, was left who could give assistance to HCL with evidence that may be relevant to the issues in the case. She set out the position concerning several individual witnesses in some detail.

She said that many of the important factual witnesses had retired or moved on to new jobs. Of those who had been traced, some were only able or prepared to devote limited time to assist HCL. They indicated also that they had a more limited recollection of events now than they would have had if the proceedings had been pursued with expedition (I am not quite clear whether this refers to events since the issue of the claim form, or the overall period between the first discovery of defects and the service of the Particulars of Claim). She points out that many of these witnesses are now in their late 60s or 70s and are reluctant to devote the time required to assist HCL. Inevitably, some of the more senior staff of HCL at the time of the project fall into this category.

In relation to documentation, it appears that the computers used by the HCL staff were provided by the Claimants who took them back at the end of the project. Ms Herbert says that she has located 4 CDs onto which documents were copied in April 2001, but that these appear to have a far from complete record of what was originally created. She says also that the data are fragmented and not in a form that can be readily searched or collated. Some of the material is in software that is no longer in use.

Ms Herbert says that key site staff also maintained personal day books which are not in the possession of HCL. These are obviously likely to be relevant documents if the litigation will raise issues about what did or did not happen during trials or during construction. She refers also to the physical evidence that was retained during the works, including core samples and evidence relating to pavement trials. In relation to this she makes the point that the Claimants have not confirmed that these have been retained and will still be available for examination.

It seems that in about May 2005 it was discovered that HCL's storage company had accidentally destroyed 21 boxes of project documents. Based on the contents sheets for 15 of these boxes, Ms Herbert says that some of them contained important information relevant to the dispute. For example, she says that documents relating to the pavement trials have not been found.

Mr Wass explained that the position of HL, as guarantor of HCL's liabilities, is largely parasitic upon the position of HCL. As I have already said, HL is in liquidation. The winding up commenced on 14 November 2002. CMS Cameron McKenna, in a letter dated 19 September 2011, assert that at that time the company's balance sheet showed net assets of about £11 million.

CMS Cameron McKenna suggested in that letter that this appeared to be a case where a voluntary liquidation had effectively deprived their clients of any effective remedy against HL. The letter says that HL knew of the problems with the road because a meeting was held on 25 July 2002 between representatives of the Claimants and HCL to discuss the early failures of the pavement. Mr Wass says that the assertions made in this letter amount to thinly veiled allegations against the directors of HL or the liquidators personally.

In addition, Mr Wass says that the effect of the present proceedings has been to prevent the liquidators from distributing the outstanding assets and closing the liquidation.

Although the delay since the issue of the claim form must have aggravated some of the difficulties outlined by Ms Herbert, in particular further impairment of memories as time passes, the reality appears to be that virtually all this prejudice had been suffered before the claim form was issued. Subject to one point, the additional prejudice since April 2012 must or should have been relatively slight. So far as documents are concerned, it looks as if nearly all of the relevant prejudice had been sustained within a few years of completion of the road’s construction.

Whilst the court is bound to consider the effect of delay in its totality, both Mr Reed and Mr Nissen accepted that, in the context of the present applications, any additional prejudice caused by post claim form delay carries greater weight than prejudice that had already occurred within the limitation period. Nevertheless, it was submitted that in the light of Price v Price the court did not need to find very much additional prejudice in order to tip the balance in the Defendants’ favour. As Mr Reed put it, if a party chooses to wait until the limitation period is about to expire and then pursues the claim slowly, the court should consider the overall delay and not just the delay that has arisen after the issue of the claim form.

One point, which is of some importance, is that both Mr Reed and Mr Nissen submitted that the Particulars of Claim introduced a new allegation, which was compendiously described as a failure to supervise. In relation to the lack of bond, this was in the following terms:

“[HCL] failed to check or specify checks in order to determine whether bond was achieved between the upper and lower roadbase layers in the pavement, whether in trial or as constructed."

This allegation was preceded by a reference to a requirement for paving trials to be performed before the laying of the road commenced. It was alleged that these trials were conducted under HCL's supervision (in around 2000), but that HCL did not specify that any testing should be conducted to determine whether the upper and lower roadbase layers had bonded or would bond using its design. In relation to the lack of waterproofing, the allegation was as follows:

“[HCL] failed to check or specify a test for checking, the permeability of the pavement either at trial phase or during construction."

In response to this point, Mr White submitted that the pre-action letter of 13 October 2009 did say that HCL's duties included "designing the new road and checking the implementation of that design". However, the letter did not identify any breach of this particular duty - that came in for the first time in the Particulars of Claim.

I am satisfied that the letter of 13 October 2009 identified with sufficient precision the complaints of negligent design so that both HCL and HL could take appropriate steps to investigate them. However, in my view the same cannot be said of the allegations in relation to "supervision". I consider that the point raised by HCL and HL in this respect is well made. The consequence of service of the Particulars of Claim being delayed until nearly three years after the pre action letter is that the Defendants’ ability to investigate that allegation has been delayed throughout that period.

The effect which the granting of relief would have on each party

So far as the Claimants are concerned, it would have the effect of giving the Claimants a longer period within which to serve their Particulars of Claim than the rules permit. So I turn to the position of the Defendants.

By way of a general submission, Mr Nissen relied on the observations of Lord Oliver in the decision of the House of Lords in Donovan v Gwentoys Ltd [1990] 1 WLR 472, at 479-480, where he said:

“A defendant is always likely to be prejudiced by the dilatoriness of a plaintiff in pursuing his claim. Witnesses’ memories may fade, records may be lost or destroyed, opportunities for inspection and report may be lost. The fact that the law permits a plaintiff within prescribed limits to disadvantage a defendant in this way does not mean that the defendant is not prejudiced. It merely means that he is not in position to complain of whatever prejudice he suffers. Once a plaintiff allows the permitted time to elapse, the defendant is no longer subject to that disability, and in a situation in which the court is directed to consider all the circumstances of the case and to balance the prejudice to the parties, the fact that the claim has, as a result of the plaintiff's failure to use the time allowed to him, become a thoroughly stale claim, cannot, in my judgment, be irrelevant."

This is a powerful point. However, as I pointed out during argument, the design of a project like this ought to be recorded in the project documents. I think that both Mr Reed and Mr Nissen were disposed to accept this. However, evidence from the designer will be relevant if there are any issues about what the designer was instructed to do or as to what information he was given. Whilst one can never be certain, I would have thought that in a project such as the design of a highway, for which the relevant design criteria are generally well-established (in, for example, documents such as the Specification for Highway Works), issues of this sort are unlikely to arise and none have been identified (although this is perhaps unsurprising in the circumstances). Accordingly, the impairment of the memories of those involved is much less likely to result in any significant prejudice to the Defendants where design issues are concerned, rather than where there are issues concerning the supervision of trials or inspections carried out during construction.

It is probably self-evident why different considerations apply when the court is considering issues about what actually happened during the trials or construction. There, individual recollections about what occurred may well be crucial to the outcome. Further, documents such as day books or site diaries are also likely to be very important, since they may contain a record of what happened or what was seen.

As I have already indicated, it seems to be the case that HCL was put on notice of the existence of defects in the road at sometime in 2002. However, it seems doubtful whether at that stage anyone knew precisely what the problem was or what defects there might have been in the design. As far as I can tell, the investigations that revealed the nature of the defects were not carried out until 2007 (and then through to 2009).

If the claim proceeds against HCL, the latter will not have the advantage of having available all the relevant contemporaneous documents, as Ms Herbert’s witness statement demonstrates. But the unavailability of these documents is not a consequence of the delay in pursuing this claim: it was the result of things done within a few years of the construction of the road. The fact that certain boxes of papers that were being stored on behalf of HCL were accidentally destroyed has nothing whatever to do with the conduct of the Claimants. But, as I have already noted, the unavailability of the documents is more likely to have an impact on the claim in relation to "supervision", rather than the claim in respect of the design. It is, of course, fairly obvious that if the Claimants themselves cannot produce the documents that constitute the design, their claim is likely to fail. It is of course possible that the Claimants may assert that they have all the relevant documents, when in fact some are missing. But from experience of these projects, in which the key documents are usually well cross-referenced to each other, the likelihood of the design documentation being incomplete - or, equally importantly, incomplete without anyone being aware of the respect in which it is incomplete - seems to me to be rather unlikely.

As I have already noted, the claim against HL is parasitic on the claim against HCL. Prejudice to HCL is prejudice to HL. The only area in which HL may suffer prejudice to which HCL is not subject is in relation to the liquidation. Whilst the inability to finalise the liquidation may be inconvenient, I do not consider that it is a factor that should weigh very heavily in the overall balancing exercise. In relation to Mr Wass’s concern that allegations are being made about the conduct of those involved in the liquidation, that is not relevant to any claim being made in these proceedings and so I do not see how it is relevant to these applications.

In my judgment, there is a route which may eliminate or significantly reduce the potential prejudice to the Defendants if the Claimants are granted the relief that they seek. That is to follow the guidance given in paragraph 43 of the judgment in Price v Price and to impose suitable conditions on the granting of an extension of time for the service of the Particulars of Claim which would enable the claim to proceed but in a manner that minimised the prejudice to the Defendants caused by the delay.

I consider that the appropriate conditions would be to disallow those parts of the Particulars of Claim which will raise the “supervision” issues so that the claim is confined to one based on allegations of negligent design alone. The issues would then become primarily a matter for resolution by expert evidence, rather than by evidence of fact. Of course it will be necessary for the Claimants to adduce evidence of fact in relation to the actual condition of the road, but that will presumably take the form of the results of the investigations that were carried out between 2007 and 2009. For the reasons that I have already given, I think that there will be limited, if any, need for evidence of fact from the actual designers. Either the design that they produced was satisfactory (in the Bolam sense), or it was not: that is a matter for the opinion of experts.

Of the delay which occurred between June 2011 and service of the Particulars of Claim in September 2012, I do not consider that it would be just to allow the Defendants to place any reliance on that part of the delay which occurred up to the end of April 2012, or shortly before, because they must be taken to have acquiesced in it.

The Defendants have been prejudiced by the overall delay which has occurred since the conclusion of the design some 12 or more years ago. That prejudice consists of the loss of documents, the unavailability of many witnesses and the inevitable impairment of individual memories of what happened. However, as I have already noted much of that prejudice had arisen within a few years of the completion of the construction.

If the factual investigation at a trial were to involve determining what happened on site, or during preliminary trials, then the Defendants would be placed in a difficult position if the claim were allowed to proceed. However, if the investigation at a trial is confined to the question of whether or not HCL's design for this project was carried out with the appropriate degree of care and skill, then it seems to me that the potential for any prejudice is greatly reduced, if not eliminated. For the reasons that I have given I would expect the design to be largely a matter of record, and then it is for experts to say what they think of it.

In my judgment, if the Claimants are allowed to pursue a claim based solely on negligent design, the balancing exercise that the court has to carry out having regard to the matters listed in CPR 3.9, in the context of the history and circumstances of these proceedings, falls to be resolved in favour of allowing the claim to proceed. Accordingly, that is the course that I propose to adopt.

I have already made an order to that effect and the purpose of this judgment is to give my reasons for it. I will hear counsel on any unresolved issues in relation to costs, or anything else arising out of the form of relief.