Court of appeal overturns wrong application of Mitchell and grants relief (McTear v Engelhard)

scalesThe Court of Appeal has overturned a decision refusing relief from sanctions in relation to witness statements which had been served 50 minutes late and in relation to new documents which had been found after the deadline for disclosure set out in the disclosure order and initially exhibited to the witness statements and subsequently disclosed by way of a supplemental list of documents.

In doing so, it found the first instance judge had incorrectly applied Mitchell (note, at the time of the first instance decision, Denton had not yet been decided) and ought, among other things, to have considered whether refusing to grant permission was just or proportionate. This decision also reiterates that the parties’ other behaviour, while potentially relevant to applications for relief under CPR 3.9(1) ought only to be considered under Denton stage three (and not at Denton stage one). This judgment is of particular interest in the guidance given to practitioners as to how to disclose, and seek permission to rely on, documents found and/or disclosed after the deadline for disclosure. In this context, the Court of Appeal considered the tension between the ongoing disclosure obligation under CPR 31.11 and the need to comply with rules, practice directions and orders.

Practical implications

  1. Courts and practitioners should seek to balance relief with the parties obligations to comply with other rules (in this case, the ongoing disclosure obligation—see further, below under 'Balancing relief from sanctions with other duties'
  2. Bear in mind the dim view courts take of uncooperative parties:

'Denton makes clear the undesirability of both a lack of cooperation between litigating parties and of seeking to take inappropriate advantage of the other party's mistakes'

For further guidance, see Practice Note: Relief from sanctions—the courts’ approach — Practical implications for the prospective respondent

  1. Immediate steps should be taken on discovering additional disclosable documents after the disclosure deadline has expired—here, the Court of Appeal suggested the appropriate steps to take in such circumstances could be to:
    • alert the other parties of the existence of these documents—depending on the volume of documents and the urgency (for example, if the documents are found close to trial), this could be done in the first instance by way of a letter informing the other parties of the fact, preferably enclosing copies of those documents, and with an assurance that a supplemental list of those documents will be provided as soon as possible (para [38])
    • provide an explanation as to why those documents were not disclosed earlier and in accordance with the terms of any disclosure order(s) and/or other obligations. Note: this explanation will also be needed by way of supporting evidence to the applications referred to below
    • apply for:
      • an extension of time under CPR 3.1(2)(a) of the time limit set out in the order under which the documents fell to be disclosed—see Practice Note: Case management—court's powers — Changing the time for compliance—Rule 3.1(2)(a)
      • permission to be able to rely on these documents under CPR 31.21 (though, arguably, such an application may not be necessary where the party has served a list in relation to those documents and has, therefore, disclosed them)—see Practice Note: Disclosure—introduction — Failure to comply with disclosure obligations—Rule 31.21, and/or
      • relief from sanctions under CPR 3.9(1)—see Practice Note: Relief from sanctions—the application
  2. ensure documents have been disclosed before referring to them in witness statements. Further, always consider whether there is a need to exhibit documents to the witness statement at all
  3. consider alternative ways in which, even if permission for new documents and/or adducing witnesses is not granted, witnesses can be permitted to give evidence without referring to the new documents and/or other witnesses be allowed to give evidence
  4. where the other side objects to your calling a factual witness on grounds their evidence constitutes expert evidence (for which permission has not been granted), consider seeking permission for that factual witness to be called to give evidence 'insofar as [they do] not give expert evidence' (para 44]). For further guidance, see Practice Note: Witness statements—general drafting points — Admissibility of expert evidence within factual witness evidence.

The appeal

The defendants' main grounds of appeal, listed at para [25], had included:

  • the first instance judge had wrongly and unjustly applied Mitchell to the facts of this case—this had resulted in the defendants' witnesses being excluded from giving evidence and, ultimately had resulted in their being denied a fair trial
  • the judge reached conclusions on the substantive claim that he would not have reached had he not excluded the defendants' evidence
  • the judge was wrong to refuse to allow reliance on the new documents where, among other things, had he looked at the documents he would have seen that no adjournment of the trial would have been necessary

Summary of key findings

The Court of Appeal determined:

  • the defendants ought to have been granted relief in respect of the late service of the witness statements and be permitted to call the witnesses whose statements they had served
  • the new documents ought to have been admitted and the defendants be entitled to rely on them
  • there was a need for a re-trial of all the substantive issues before a new judge, and
  • the issue of whether the defendants be permitted to re-amend their defence be decided as a case management issue when directions are given for the new trial

In allowing the appeal, setting aside the first instance judgment and ordering a re-trial, the Court of Appeal found the first instance judge: ought to have granted relief and ought not to have excluded the defendants' oral evidence, because, among other things:

Ought to have granted relief and ought not to have excluded the defendants' oral evidence, because, among other things:

  • the applications relating to late service of witness evidence and late disclosure ought not to have been treated together. Although there was a proper connection between the two applications, this connection ought to have been limited to 'stage three', namely the 'stage at which all the circumstances were being considered'. Considering the applications together was problematic not least because the documents which had been disclosed late, were in fact of limited, if any, relevance to the pleaded issues in the case (although they were sufficiently relevant to require disclosure under CPR 31 (paras [36], [37] and [41])
  • the judge had been wrong to find the defendants had deliberately chosen a method of disclosing the new documents which was intended to disrupt the litigation process—here, the Court of Appeal drew the distinction between behaviour which is misguided, 'inappropriate and wrong' and that which is improper (para [49])
  • applying the Denton three-stage test:
    • stage one: the 50 minute delay in serving the witness statements was neither serious nor significant
    • stage two: although the excuse for the delay was 'poor', it was 'not non-existent'. Here, the primary fee-earner had attended his father's funeral the day before the day fixed for exchange of witness statements. However, as the court also recognised, the delay was more likely caused, in reality, by the 'inappropriate decision to exhibit hundreds of pages to Michael's statement, and by the tetchy [inter partes] email correspondence...' (para [41])
    • stage three: there was no evidence that the delay had been part of a deliberate plan to subvert the litigation process:

'They did not disrupt the course of the litigation and, had the judge properly analysed the new documents, he would have realised that an adjournment of the trial could not possibly have been required to allow the claimants a fair opportunity to deal with them.' (para [42])

  • stage three: 'the judge seems to have ignored the most important factor at the third stage in this particular case, which was the question of whether it was proportionate and just to exclude the defendants from giving their evidence as a result of their 50-minute delay in serving witness statements. In my judgment, it was not'. Particularly where the directors' integrity and good conduct was 'impugned', it was 'hard to see how a fair trial could have been undertaken without hearing their explanations for what had occurred'. Further, the Court of Appeal did not consider the claimants were correct to submit that the new evidence would not have made a difference to the outcome of the trial. However, given that the court ordered a re-trial of the substantive issues, it considered it better not to say any more about that at this stage (para [43])
  • ought not to have dismissed the application concerning the new documents, where, among other things:
    • the judge was not right to treat the application in relation to the new documents as 'purely one for relief from sanctions' (para [48])
    • 'the important question was whether, in all the circumstances, the defendants were to be permitted to rely upon them at the forthcoming trial'—this depended, among other things, on:
      • whether the claimants would have wished to rely on them
      • why they had not been disclosed previously—here, the Court of Appeal accepted that the failure to produce the documents at the initial disclosure stage was a 'significant breach' but for which there was an (albeit 'not very well explained') excuse
      • their relevance to the issues
      • whether the claimants could have properly dealt with them at the forthcoming trial—the court found they could have done, being documents which were not very important, which had probably been in the claimants' possession and which did not require any significant work for accountants to digest (para [49])
    • had the judge, as he ought to have done:
      • considered the applications concerning the witness statements and the disclosure separately
      • dealt with the application relating to the statements first, and
      • concluded that the defendants' witnesses ought to give evidence
    • he would also have concluded that the new documents should be admitted

Note: the Court of Appeal:

  • considered the first issue to be addressed was the relevance of the 'excluded' evidence ie the Court of Appeal needed to consider whether, had the first instance judge allowed that 'excluded' evidence, would it have made a difference to the outcome of the trial—the claimants submitted that it would not as there was no material evidence in the witness statements that was excluded (para [27])
  • made it clear that, had it found he defendants' behaviour had been a deliberate attempt to 'bury or disguise significant documents by exhibiting them to a witness statement rather than openly disclosing them', there might have been justification in excluding them—however, although the Court of Appeal considered the defendants had not acted 'correctly' (in that they had not taken the most appropriate steps on discovering the new documents), it was not right to infer (as the first instance judge had done) 'impropriety from the defendants' conduct' (para [49])
  • made no finding on whether the first instance judge ought to have allowed the defendant's permission to amend where, in the light of the order for a re-trial, the issue of whether the defendants be allowed to re-amend their pleadings 'should be determined by the first instance court well in advance of that re-trial' (para [51])

Relevance of other breaches of rules or orders

The Court of Appeal was clear that, although the court may take into account the parties' other breaches or defaults, this should only be done at 'Denton stage three', and not at 'stage one' (para [33]).

This is in line with other, albeit lower court, judgments—see Practice Note: Compliance and relief from sanctions—key decisions.

Balancing relief from sanctions with other duties including ongoing disclosure obligations

A particularly interesting aspect of this decision is the extent to which the court needs to take into account other duties, for example (as in this case) the ongoing duty to disclose under CPR 31.11 with the need to comply with orders setting out deadlines for disclosure.

Here, the Court of Appeal found at para [34] that, although the ongoing duty to disclose under CPR 31.11 did not excuse the breach of the disclosure order's deadline:

'in considering the extent of any permitted usage of documents that are found after such an order has expired, the court does have to take these duties into account'

For the full findings in the first instance decision, which was overturned by this appeal, see paras [15]–[24] and our News Analysis: Sanctions applied but disproportionate strike-out rejected for various breaches (McTear v Englehard).

 

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