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Cite as: [2015] EWHC 1117 (TCC)

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Neutral Citation Number: [2015] EWHC 1117 (TCC)
Case No: HT-13-460

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
London EC4A 1NL
22 April 2015

B e f o r e :

MR. JUSTICE EDWARDS-STUART
____________________

Between:
Simon Cockell
(t/a Cockell Building Services)
Claimant
- and -

Martin Holton
Defendant
(No 2)

____________________

William Webb Esq (instructed by Wright Hassall LLP) for the Claimant
Robert Bourne Esq (instructed by Blythe Liggins) for the Defendant
Hearing dates: 1st April 2015; 21st April 2015

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Mr. Justice Edwards-Stuart:

    Introduction

  1. This is an application by the Defendant for relief from sanctions. He failed to comply with an "unless" order to serve and file with the court a re-pleaded Counterclaim by 4 pm on 20 March 2015. Whilst it appears that an amended Defence and Counterclaim was served just in time on the Claimant, owing to an error in typing an email address it was not filed with the court until a few days later.
  2. The claim arises out of a fire which broke out on 29 December 2010 in the Defendant's Grade II listed house, "Greys Mallory", causing substantial damage.
  3. The Claimant, a builder, was engaged initially to remove the debris and make the building safe. That he did. Thereafter he was engaged, with the agreement of the Defendant's buildings insurers, to carry out the remedial work. This work was known as Stage 2. However, there is a dispute as to the terms of that contract. The Defendant's position is that the Claimant is entitled to a reasonable sum in respect of the work done for Stage 2. The Claimant's case is that he was entitled to charge agreed rates for labour, materials at cost plus a 20% mark-up to cover administration, management, overheads and profit.
  4. During the course of the work the Defendant's insurers became concerned about the level of costs being incurred by the Claimant and raised this with the Defendant. The Claimant was instructed to stop work in September 2011. Thereafter the Defendant instructed forensic accountants to investigate. They concluded that the Claimant had been overcharging and had been overpaid by some £238,000.
  5. During the course of meetings that took place in early 2012 the Claimant was prevailed upon to sign a document admitting that he had overcharged the Defendant by £238,000. The Defendant subsequently obtained a charge over the Claimant's partner's house in order to secure the debt. The Claimant now says that both of these documents were obtained under duress. He alleges, for example, that threats were made by a man associated with the Defendant to harm the children of the Claimant and his partner.[1]
  6. All this is fiercely disputed by the Defendant, but the one thing about which there can be no dispute is that the result of these allegations is a high degree of animosity between the parties. There is no unwillingness on either side to take any point that can be taken to the detriment of the other.
  7. In addition to disputing that he overcharged the Defendant, the Claimant alleges that he has in fact been underpaid by about £200,000, plus £42,000 that he repaid to the Defendant following the agreement allegedly made in January 2012. The problems to which this dispute has given rise were aggravated by the fact that when the Claimant carried out the work, using one or more bank accounts in the name of his father, he was an undischarged bankrupt.
  8. The Defendant's counterclaim, served in May 2014, made generalised allegations of bad workmanship in relation to the repairs to the fire damage. They were summarised in one page. It was alleged that the Defendant's insurers would have to pay about £1.6 million to strip out the work carried out by the Claimant and to carry it out again. This counterclaim, as first pleaded, was framed in the most general terms and was wholly inadequate as an agenda for any trial.
  9. Accordingly, on 12 December 2014, at a hearing that was primarily concerned with other matters, Akenhead J directed the Defendant to re-plead his Counterclaim, both in relation to liability and quantum, and to do so "… with the particularity to be relied upon at trial". This was to be done by 4 pm on 21 January 2015. The order also provided that, following service of the re-pleaded Counterclaim, the parties were to agree, if possible, directions in relation to the scope and timing of expert evidence.
  10. Mr. Robert Bourne, who appeared for the Defendant (as before), submitted that this meant "… with the particularity upon which the Defendant wishes to rely at trial". I reject this submission. In my judgment, it is clear from the wording of this order that Akenhead J was requiring the Defendant to produce a counterclaim that would be fully particularised and would not need to be clarified by requests for further information. After all, the poor quality of the original pleading was why the direction was required in the first place.
  11. The primary focus of the hearing on 12 December 2014 was a very extensive application by the Defendant for specific disclosure in relation to an allegation that the Claimant was carrying on business in partnership with his father. That allegation was denied and the court had given directions for the hearing of a preliminary issue to determine whether or not there was such a partnership.
  12. The hearing of the preliminary issue was to take place on 23 January 2015. However, shortly before that hearing, on 20 January 2015, the Defendant indicated his intention to discontinue those parts of his counterclaim in which he made that allegation, the disclosure application having yielded not a single document that supported the Defendant's case.
  13. It is understandable, if not excusable, that those acting for the Defendant paid little attention to the production of the amended Counterclaim whilst they were preoccupied by preparing for the hearing of the preliminary issue. However, there is no obvious explanation or excuse for the failure to address the order in relation to the service of an amended counterclaim once the preliminary issue had been disposed of.
  14. Unfortunately, 21 January 2015 came and went without the service of an amended counterclaim. The Claimant's solicitors wrote to the Defendant's solicitors on more than one occasion[2] chasing the amended counterclaim but never received a reply. As a result on 17 February 2015 the Claimant made an application for an unless order. That application was granted on paper on 12 March 2015 when I made an order requiring the Defendant to serve the proposed pleading by 20 March 2015 "… pursuant to paragraph 7 of the Order of 12 December 2014", in default of which the counterclaim would be struck out.
  15. At 15:46 on 20 March 2015 the Defendant's solicitors sent the Amended Defence and Counterclaim by email to the Claimant's solicitors. Mr. Barnes, a Litigation Executive handling the case on behalf of the Defendant, then sent an email to the court, with, ostensibly, the same attachments. However, he mistyped the email address and the message was returned marked undeliverable. This occurred on a Friday and so the Amended Defence and Counterclaim was not filed with the court until early the following week once the problem had come to light. However, as a result of this one error in the typing of an email address, the Counterclaim was automatically struck out.
  16. On 25 March 2015 the Defendant applied for relief from sanctions in order to restore the counterclaim. If error in the typing of the email address had been all that had happened, one would not have expected an application for relief from sanctions to be opposed. However, as the Claimant pointed out in its skeleton argument in opposition to the application, this error on 20 March 2015 was not an isolated incident but was the culmination of a course of conduct that amounted to a continuing breach of the order that had been made on 12 December 2014. In addition, the Claimant objected to the grant of permission to amend the Defence and Counterclaim, which it submitted was required. This objection could and would have been maintained even if the Amended Defence and Counterclaim have been served in time.
  17. The Defendant's position was that the degree of non-compliance with the unless order was trivial, particularly as the amended pleading had been served on the Claimant within the time limit and in compliance with the order.
  18. However, it was clear at the hearing of the Defendant's application that Mr. Bourne either had not considered whether the Amended Defence and Counterclaim as served complied with Akenhead J's direction that it should be particularised to the extent that would be relied on at trial, or had concluded that it did comply (on the basis of his argument that I have now rejected). If the Claimant was taking this point, which in substance he appeared to have been because he was objecting to the grant of permission to amend, it did not emerge very clearly from his skeleton argument.
  19. But when reading the papers prior to the hearing it seemed to me that, in the form served, the Amended Defence and Counterclaim fell well short of compliance with Akenhead J's order so far as the degree of particularisation was concerned. At an early stage in the hearing I made this clear to Mr. Bourne and, indeed, demonstrated this by reference to one paragraph in the pleading. I had the very clear impression that Mr. Bourne was rather taken aback by this and was not in a position to defend an attack on the pleading.
  20. The witness statement served by the Defendant's solicitor

  21. During the course of reading the papers prior to the hearing I became concerned also about the nature of the evidence that had been served in support of the application. The Claimant had already made the point in his skeleton argument that the Defendant's application notice failed to attach the draft order that it was seeking. Since the relevant box on the application form contained the words "See attached draft order", this was a fairly fundamental defect.
  22. The papers that had been sent to the court in advance of the hearing included two small ring binders bearing the name and logo of the Defendant's solicitors. One contained a copy of Mr. Barnes's witness statement, which had been stamped by the court, and which had attached to it the Amended Defence and Counterclaim and the schedules to it. These ran to 78 pages.
  23. The other of the two ring binders was described as the application bundle for the hearing. That contained a copy of Mr. Barnes's witness statement and, again, the Amended Defence and Counterclaim together with the schedules to it. This time these ran to 71 pages. It had already been pointed out by the Claimant that one version of the Amended Defence and Counterclaim did not bear a signed statement of truth. In the two files in my possession, this was the one attached to the witness statement that had been filed with the court. The version of the Amended Defence and Counterclaim that was in the application bundle did contain a signed statement of truth.
  24. I then noticed that the two witness statements of Mr. Barnes, one of which purported to be a copy of the other, were not in fact the same. There were three differences. First, the signatures at the foot of each witness statement, although probably by the same person, were not identical. Second, paragraph 4 of each statement differed in the number of pages that were said to constitute the exhibit. One referred to pages 3-80, the other referred to pages 3-81. Third, in one version the number of pages (3-74) did not even correspond to the page numbers given in the witness statement. However, in each case the last page of the exhibit was the same: clearly something had gone wrong.
  25. But what really concerned me was that Mr. Barnes appeared to have produced two different versions of his witness statement whilst apparently representing them to be the same. When I raised this with Mr. Bourne early on in the hearing he told me that he understood that the version of the witness statement in the application bundle was a copy of the witness statement that had been filed with the court. I then pointed out to him the differences that I have mentioned. He was clearly surprised by this and told me, and I have no reason to doubt it, that he was wholly unaware of them.
  26. At this point I decided that the only appropriate course was to adjourn the application. This was for three reasons. First, I considered that the court should have an explanation from Mr. Barnes as to the reason for the differences in the two versions of his witness statement. It seemed to me that it was at least a possibility that the second version of the witness statement had been prepared to disguise the fact that the Amended Defence and Counterclaim that had been filed with the court did not have a signed statement of truth. However, I was not prepared to draw any conclusion to this effect without giving Mr. Barnes a proper opportunity to explain what had happened. I therefore directed that he was to make an affidavit setting out the position.
  27. Second, since I was considering refusing relief from sanctions on the ground that the Amended Defence and Counterclaim, as served, did not comply with the requirements of Akenhead J's order and since it was apparent that Mr. Bourne was not in a position to deal with this point, I considered that he should be given a proper opportunity to do so.
  28. The third reason was that Mr. Barnes's witness statement was very vague about the reasons for the very long delay in producing the Amended Defence and Counterclaim between Akenhead J's order on 12 December 2014 and its service on 20 March 2015. A difficulty mentioned in the witness statement was that of obtaining instructions from the insurers to pursue a subrogated claim on their behalf. Mr. Barnes said that the Defendant had "… pressed insurers to provide details on numerous occasions". However, the witness statement did not say when those details were received. In a witness statement dated 31 March 2015 Mr. Holton said simply that:
  29. "Instructions were received by my solicitors from insurers to enable them to produce that pleading on Wednesday, 18 March 2015".

    That was confirmed at the hearing. Since that was only two days before the final date for service, that in itself required explanation.

  30. In the circumstances, I felt that I should give the Defendant, or rather his insurers, a proper opportunity to provide an explanation. This was, perhaps, rather overgenerous given that they had already had such an opportunity when making the application. However, the value of the Counterclaim is very substantial and I was not prepared to strike it out without being confident that I had all the relevant information.
  31. On 10 April 2015 Mr. Barnes swore and filed his affidavit. Witness statements were served by Mr. Richard Thornton, the senior partner of the Defendant's solicitors, and by Mr. Holton. The former was to confirm and support the contents of the affidavit by Mr. Barnes. The latter dealt with the question of the reason for the delay in the provision of instructions in relation to the amended Counterclaim. I propose to deal first with the affidavit by Mr. Barnes, then with the Amended Defence and Counterclaim and finally with the reasons for the delay.
  32. The affidavit sworn by Mr. Barnes

  33. In an affidavit running to over 50 paragraphs Mr. Barnes gave a detailed and, I thought, candid account of the events leading up to the filing and service of the Amended Defence and Counterclaim. In short, there had been a catalogue of minor clerical mistakes. Having prepared and signed a witness statement, Mr. Barnes realised, just before it was due to be sent out, that it contained errors. He therefore prepared a second version of the witness statement, intending to dispose of the first version. To cut a long story short, the second version of the witness statement was the one that was sent to the court but the first version, a copy of which had remained on the file, was in error sent to the Claimant's solicitors and also found its way into the application bundle prepared for use at the hearing.
  34. Mr. Barnes has stated, and I accept, that he had no intention to mislead the court and, indeed, that he was not aware that there were two versions of his witness statement in circulation until I raised that fact at the hearing. He has, very properly, taken full responsibility for the mistakes that occurred and I am happy to be able to say that there is no ground for impugning his integrity as a result of what happened. However, Mr. Barnes's affidavit shows only too clearly how things can go wrong when everything is left until (or has to be done at) the last minute.
  35. I now turn to deal, in some detail, with the Amended Defence and Counterclaim as served on 20 March 2015.
  36. The proposed Amended Defence and Counterclaim

  37. At the first hearing of this application on 1 April 2015 the pleading that was before the court was, of course, the one that had been served on the Claimant's solicitors on 20 March 2015. However, following some observations that I made in the course of that hearing, the Defendant took the course of preparing a further draft pleading, which was attached to the skeleton argument served by Mr. Bourne on 20 April 2015. That was the first time that those acting for the Claimant saw this further draft. I shall have more to say about it later in this judgment. But since it is the re-pleaded Counterclaim that was served on 20 March 2015 that is the subject of the application for relief from sanctions, it is that pleading that I must consider.
  38. The allegations of breach of duty in the Counterclaim are that the work was not carried out with due skill and care or using proper materials. The breaches alleged are in relation to the roof, chimneys, gutters and rainwater goods, windows, stone mullions, electrical work and damage to the drive and soft landscaping.
  39. The original case

  40. The case originally pleaded by way of counterclaim was broadly that:
  41. i) Non-stress graded timber had been used throughout.

    ii) Green wood with a high moisture content had been used and every piece would have to be removed and stress tested.

    iii) None of the wood had been treated with preservative.

    iv) The woodwork was of a poor standard and the joints had excessive notching.

    v) The supports for the roof had been taken off non-load bearing walls causing the roof to deform.

    vi) Tiles and gutters had deformed as a result of shrinkage and movement.

    vii) The roof as constructed did not comply with listed building permission because it did not match the original.

    viii) The glazing was defective.

  42. In addition, it was alleged that a failure to protect the site had resulted in damage to the drives, soft landscaping, chimneys, stonework, render and the glazing. As a result of the defects and the failure to protect the site it was alleged that the work could not be remedied except by stripping it all out and starting again, at a cost of about £1.6 million. Finally, there was a counterclaim for repayment of £206,498.80, being the sum allegedly overpaid less some initial repayments by the Claimant. The order made by Akenhead J on 12 December 2014 was not directed towards this part of the Counterclaim and I do not consider, on a proper reading of that order and the one that I made on 12 March 2015, that the sanction included the striking out of this separate counterclaim for repayment.
  43. When considering the allegations in the re-pleaded Counterclaim it is important to bear in mind that all, or nearly all, of the work done by the Claimant has now been stripped out so there is little of relevance that experts instructed by the Claimant can inspect. So all that the Claimant and his experts were provided with at this stage was what was pleaded in the Counterclaim.
  44. I will take the groups of allegations in turn, starting with the roof.
  45. The allegations in relation to the roof

  46. These are in section A. Paragraph (1) is introductory. Paragraph (2) alleges that the work was carried out without any due skill and care and using improper materials, and then it says "The Defendant relies on the matters set out below".
  47. Paragraph (3) says that "served herewith" is a room plan of the house "together with" a plan T4725/01. In fact there is no room plan, as such, only the drawing, which does show a room layout albeit not in the detail that enables one to identify the room numbers.
  48. Paragraph (4) gives a description of the trusses installed by the Claimant. It is not clear whether this is simply a description of the "as built" construction, or whether it is also an allegation that the configuration described was defective. There is no allegation in the counterclaim of poor design as such, although since it appears that the work was to install a new roof, it might have involved an element of design. There are references to trusses being supported by corridor walls, which might suggest that the design is being criticised. However, what is quite apparent is that the nature of the allegation is not clear and in this respect this part of the pleading is objectionable for lack of clarity.
  49. Paragraph (5) begins with the allegation that "The Claimant's workmanship was general [sic] poor". Details are then given in six sub-paragraphs which follow. I will take these in turn.
  50. i) "The connections between the principal rafters and the queen posts were poorly executed and displayed opening of the joints. The open joint [sic] demonstrated a combination of cross grain shrinkage of the post combined with inaccurate fabrication."

    From this it is not clear whether the only defect alleged is the "opening of the joints". The phrase "poorly executed" implies that there were other defects but, if so, they are not identified. Further, no indication is given as to either how widespread was the opening of the joints or as to the extent of the opening in each case (was it, say, less than 1 mm or was it several millimetres?).

    ii) "Typically the connection consisted of a post mortice rather than a tenon with 2 wooden dowels 10-12 mm in diameter through the tenon and a pair of horizontal 50 × 10 straps tying the rafter to the truss head strut."

    This sentence can be parsed in at least three ways. Mr. Bourne said that there should have been a comma after "post mortice", but he was quite unable to tell me what the sentence meant. I pointed out to him that if he could not tell me what it meant, it was hard to see how the Claimant could be expected to understand it. Turning to the specific allegation, so far as I am aware a mortice is not in itself capable of being a joint (although a "post mortice" may be something different): a typical joint used in woodwork consists of a tenon (the tongue at the end of a length of timber) and a mortice, which is a slot or hole (usually rectangular in cross section) into which the tenon slots. If well-made it will be a tight fit, but the tenon is then usually secured in place with wooden dowels. The most obvious reading of the paragraph is that the connection consisted only of a "post mortice", instead of a tenon (and mortice) with dowels through it. However, if this is correct, it does not sit very easily with the allegation in the next paragraph.

    iii) "The dowels were too small with insufficient edge distance to possess a calculable shear capacity."

    Leaving aside the difficulty of reconciling this allegation with the one in the previous sub-paragraph, neither the diameter of the dowels installed nor the allegedly correct diameter is stated and no indication is given as to what is meant by "with insufficient edge distance".[3]

    iv) "The straps were not properly bolted with bolts coinciding with timber joints."

    This is ambiguous. The word "with" may be there to show that what follows is a description of the defect. However, it can also be read as indicating how a strap should properly be bolted - although the latter seems unlikely since inserting bolts at the position of joints is not what one would expect.[4]

    v) "The tenons were cut too long causing the joints to open due to shrinkage."

    The meaning of this is not obvious, although what I anticipate is being said is that the length of the tongue of the tenons was such that the end of the tenon was in contact with the base of the mortice so that if the timber in which the mortice had been cut were to shrink across its grain, a gap would open up at the point where the two pieces of timber should have been in contact. This is probably acceptable as a description of the defect, but as with other allegations, it is not clear whether this occurred in the case of every joint, or a proportion of the joints. (This is now explained in more detail in the new draft.)

    vi) The allegation in this sub-paragraph is self-explanatory (although it no longer appears in the new draft).

  51. Paragraph (6) complains of the high moisture content of the timbers and the absence of preservative. The latter is clear enough, but no figures were given of the moisture content of the timbers referred to. It does not explain what is meant by "… an expected further shrinkage in the wood in excess of 2 mm". Whether or not a shrinkage of 2 mm would matter would depend upon where it is expected to occur and, in particular, over what length of timber.[5] As pleaded, at least in terms of its consequences, the allegation is almost meaningless.
  52. Paragraph (7) is an allegation that the roof battens were "wet as a result of water sprayed to extinguish the fire and weather damage" and that galvanised nails were driven into these wet battens instead of aluminium or stainless steel nails. It is perhaps a little surprising that battens survived in order to be drenched by the fire brigade, as one might have expected the original battens to have been destroyed in the fire. However, the allegation can be understood.
  53. Paragraph (8) is an allegation that the construction of the trusses was not carried out with proper materials or skill and particulars are given in five sub-paragraphs. Again, I need to deal with some of these in detail.[6]
  54. i) "Truss 1 - T members were adequately sized but the maximum compressive strength in the principal rafter was 1.83N/mm2 which was well below the permissible measure."

    The "permissible measure" is not stated, which it should have been. In addition, it is not clear to me why the compressive stress of a rafter is of particular importance - I would not expect it to be in compression. However, I accept that this may be self-evident to an appropriate expert.

    ii) "Trusses T2 and T3 was [sic] undersized. The Trusses were taking support from a non-load bearing partition and the first floor joists below. Additional support was required. Trusses T2 and T3 required the addition of a support post beneath the bottom chord, to be set immediately inside the line of the existing partition between the corridor and rooms 1.10 and 1.11. The head and base of the posts required a bespoke steel bracket for fixing purposes."

    This is unacceptable at a most basic level: no dimensions are given either of the trusses as installed or of what they should have been. Further, if the trusses were not properly supported as alleged, the causal relevance of the trusses being undersized is not immediately obvious.

    iii) "Truss T4 was supported on the 103 mm internal corridor wall and stairwell between rooms 1.01 and 1.06. The members were adequately sized. The maximum bending strength is 4.2325 N/mm2 in the bottom chord at the offset bearing adjacent to the wall. Maximum compressive strength in principal rafter was 1.85 N/mm2 well below the permissible. The corridor wall was not load-bearing."

    The relevance of the maximum bending strength is wholly unclear. If it is immaterial it should not have been mentioned. If it is material, the pleading should say why it is material. In relation to the compressive strength of the principal rafter, the same point arises as that in relation to paragraph (1).

    iv) "Trusses T5 and T6 - These trusses were overstressed by a factor of 4 or more. Trusses were both undersized. The corridor wall between rooms 1.01 and room 1.03 was non-load bearing. Trusses were taking support via a non-load bearing partition and first floor joists below..."

    Again, no details are given of the actual dimensions of the trusses or what they should have been.

    v) This allegation is clear enough.

    The allegations in relation to the chimneys

  55. Paragraphs B(1) and (2) set out the facts: in effect, that there are 26 chimneys that are held in position by parts of the roof structure.
  56. Paragraph (3) is as follows:
  57. "The roof [sic] the loss of the roof support left the chimneys exposed to the elements and wind permitting movement in wind and damage internally and externally."

    I assume that the first two words "The roof" are surplusage. I think that the pleader is saying that the loss of support was the result of the fire, rather than any subsequent defects in the Claimant's construction of the roof. I will proceed on this basis.

  58. It is alleged at paragraph (4) and (5) that the Claimant should have checked the chimneys and made them stable before completing work on the roof. It is alleged that the only work carried out by the Claimant was some pointing of the outside of the chimneys, which is said to have been of no value.
  59. Paragraph (8) sets out the remedial work that was required to the chimneys. The cost of this work is claimed against the Claimant, but it is not clear on what basis. If the Claimant had done the work, he would have charged for it and so the Defendant would have paid for this work in any event. Accordingly, the basis of the claim for the costs of this additional work is unexplained.[7]
  60. Gutters and rainwater goods

  61. The allegation here is that the gutters and rainwater goods should have been made of cast iron to match the original. Whilst the basis of the claim is clear, it is an entirely new claim. The original complaint was that the gutters had deformed.
  62. The windows

  63. It is alleged in paragraph D(1) that the Claimant did not seek or obtain the required listing building consent for the reinstatement of the windows. However, whilst the allegation is clear enough, no indication is given of the consequence of this failure in relation to a claim for damages.
  64. Paragraphs (2), (3) and (4) contain allegations of defects in workmanship, but no information is given as to the extent of these defects: for example, "panels of glass were cut too long". Did this apply to every window, or only to some of them? How is the Claimant to know?[8]
  65. Paragraph (5) alleges that when the window frames were replaced "… the Claimant simply screwed them back into place", but it is not said what he should have done. However, this at least is an example of a defect in the pleading that could fairly readily be cured by a short response to a request for information.
  66. Damage to stone mullions

  67. Section E alleges that the Claimant threw fire debris out of the windows causing damage to the mullions, but no indication is given as to how many mullions were damaged in this way or the nature of the damage caused. An additional complaint is that the mullions were thereafter shot blasted, which was the wrong way of cleaning them.
  68. The implication appears to be that the damage was such as to be capable of being remedied by cleaning, but that the Claimant used an inappropriate method of cleaning. Alternatively, it may be the case that the shot blasting allegation is a freestanding complaint. The position is unclear.[9]
  69. The electrical work

  70. This is an entirely new head of claim. There are three allegations of defects in workmanship. First, the electrical cables were not contained in conduits to protect them from damage by vermin. Second, bundles of cables were unidentified and so it was not possible to assess whether or not the work was safe. Third, cables were passed through holes drilled in structural timbers.
  71. Whilst the nature of the claim is reasonably clear, the absence of detailed particulars as to the extent of the defects is likely to make it very difficult for the Claimant's expert to assess whether or not these defects justified wholesale replacement. This is not satisfactory.
  72. Driveway and landscaping

  73. This section contains fairly generalised allegations of damage to the driveway and to the soft landscaping by vehicles and storage of materials. I accept that it is difficult in a pleading to give satisfactory particulars of allegations such as this, but if there is some form of photographic or written record of the damage it should have been provided with the Amended Counterclaim.
  74. Does the Amended Counterclaim (as served) comply with the order?

  75. I would not have thought that it was necessary to cite authority for the proposition that the closer to trial an amendment is made, the clearer and better particularised it must be. But if authority is needed, it can be found in the judgment of Hamblen J in Brown & Others v Inovatorone plc [2011] EWHC 3221 (Comm), where he said, at paragraph 14, that one of the factors to be considered was:
  76. "… whether the text of the amendment is satisfactory in terms of clarity and particularity."
  77. I have already mentioned the order made by Akenhead J on 12 December 2014. It contained the following paragraphs:
  78. "7. The Defendant is to re-plead the liability and quantum of his Counterclaim with the particularity to be relied upon at trial by 4 pm on 21st January 2015.
    11. The scope and timing of expert evidence will be addressed following provision of full particulars of the Counterclaim as set out above and will be the subject of application to the Court if not agreed."
  79. The wording used by Akenhead J at paragraph 7 is not in standard form. That, or a similar form of wording, is used only when the intention is that the pleading that is served should achieve the necessary degree of particularity the first time round. Further, if a party, in breach of an order such as this, delays service of the proposed pleading until a date that is significantly later than the date fixed by the original order, it is all the more important that the new pleading is clear and properly particularised.
  80. It must have been self-evident to the Defendant that the Claimant would not be in a position to instruct experts, or even to choose appropriate experts, until the amended Counterclaim had been served. As I have already said, since the work complained of has been stripped out, it is all the more important that the pleading should set out the case in clear and detailed terms.
  81. The analysis that I have carried out in the previous section of this judgment amply confirms my initial impression that this re-pleaded Counterclaim lacks clarity, is in places incoherent and generally falls far short of the degree of particularisation required at trial.
  82. The submissions made at the adjourned hearing

  83. As I have already mentioned, on the day before the adjourned hearing the Defendant produced a new draft of the proposed counterclaim. It will be apparent from the observations that I have made in the context of the re-pleaded Counterclaim as originally served, that this new draft is altogether a clearer and better particularised document. Although I consider that there is a need in places for clarification by way of further information, most of it provides sufficient detail for the Claimant to know the case that he has to meet.
  84. At the adjourned hearing of the application Mr. Bourne felt bound to accept, as in my view he had to, in the light of the contents of the new draft, that the counterclaim as served did not in some respects "… condescend to the particularity required at trial".
  85. Mr. Bourne emphasised, as he had done before, that the failure to file the re-pleaded Counterclaim with the court had no impact on the Claimant. He submitted that the Claimant's submissions to the effect that there was insufficient time in which to respond to the new pleading in time for a trial in July were misconceived, because he would have been in exactly the same position if the re-pleaded Counterclaim had been filed and served by the deadline. However, this submission overlooks two points. First, the order of 12 December 2014 contemplated service of this document in January 2015, not March 2015. Second, the order contemplated that what would be served would be a pleading that was clear and properly particularised. That never happened.
  86. In the course of the hearing I canvassed the possibility that I might refuse to grant relief from sanctions to the extent of striking out the counterclaim, but that I would consider permitting the Defendant to rely on the allegations in the new draft as a defence to the Claimant's claim that he had been underpaid. I gave the parties a short time in which to consider this.
  87. Mr. Bourne was not in a position to consent to such an approach, but he made it clear that if that was what I was minded to do he could not usefully add to the submissions that he had already made.
  88. Mr. William Webb, who appeared for the Claimant (as before), opposed this course. Whilst he conceded that he could see why such an approach might be fair in principle, he submitted that it would still impose an intolerable burden on the Claimant to prepare his case in time for a trial in July. He had already made the point in his skeleton argument, which I consider to be a good one, that whilst the Claimant had to start virtually from scratch in order to respond to this claim, the Defendant knew exactly what his claim was because it had already been assembled and considered by his experts over a substantial period.
  89. The appropriate approach

  90. In Denton v TH White Barnes Limited [2014] EWCA 906, the Court of Appeal said, at [24], that the approach of the court when considering an application for relief from sanctions should involve three stages:
  91. "The first stage is to identify and assess the seriousness and significance of the 'failure to comply with any rule, practice direction or court order' which engages rule 3.9(1). If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to consider why the default occurred. The third stage is to evaluate 'all the circumstances of the case, so as to enable [the court] to deal justly with the application including [factors (a) and (b)]'. We shall consider each of these stages in turn identifying how they should be applied in practice. We recognise that hard-pressed first instance judges need a clear exposition of how the provisions of rule 3.9(1) should be given effect. We hope that what follows will avoid the need in future to resort to the earlier authorities."
  92. I shall follow this approach.
  93. The seriousness and significance of the breach

  94. In the light of my analysis of the proposed Counterclaim I consider that the proposed amendments fall far short of the degree of particularisation and clarity that was necessary in order to comply with Akenhead J's order of 12 December 2014. In those circumstances, even if the amended Counterclaim had been filed in time, the Defendant would still not have complied with the order. It is therefore not correct to say, as Mr. Bourne submitted in his skeleton argument, that an amended Defence and Counterclaim that complied with the order of 12 December 2014 was served on the Claimant in time.
  95. But even if this was simply an application to amend the Counterclaim, with a trial three to four months away I would have needed strong persuasion to allow it. This is because I consider that there is simply insufficient time for the Claimant to take the necessary steps by way of response and then prepare himself for a trial in July of the issues raised by the Counterclaim: for example, he would have to make a detailed Request for Information, receive a coherent response (which in itself, given the history, cannot be taken for granted) and have that response considered by his experts. All this would have to happen before the opposing experts could meet in order to discuss the issues and then prepare reports. To achieve all that, without putting unfair pressure on the Claimant's team, would be very difficult. Indeed, the time would not have been generous if the order made on 12 December 2014 had been complied with. But the trial having been fixed for 15 July, there is an enormous difference between serving a new pleading on 21 January and serving it on 20 March.
  96. I should add, for the sake of completeness, that I consider that Mr. Webb's submission that the Defendant needed permission to amend in order to allow him to rely on the re-pleaded counterclaim is correct. The court very rarely gives permission to amend a statement of case in terms that it has not seen. In my view, the order made by Akenhead J on 12 December 2014 required the Defendant to produce a draft re-pleaded counterclaim by 21 January 2015. That draft, assuming that it was filed and served in time, would still have to be approved by the court. Of course, Akenhead J would have anticipated that, if the re-pleaded Counterclaim complied with the order in terms of the degree of particularity, permission to amend would probably follow almost automatically because there would be no good reason to object. It follows, therefore, that even if the re-pleaded Counterclaim had been filed and served time, it would still have been open to the Claimant to oppose an application to amend the Defence and Counterclaim in those terms.
  97. I therefore conclude that this was not just a technical breach as a result of a failure to file the document with the court in time, but a serious and substantial breach of the terms of Akenhead J's order. It cannot be dismissed as anything approaching trivial or de minimis. Further, I consider that the events of March 2015 cannot be considered in isolation: as Mr. Webb pointed out, the Defendant had been in breach of Akenhead J's order for some two months. I consider that this is an example of a case where the persistent failure to serve the re-pleaded Counterclaim after 21 January 2015 is a factor that can be taken into account at the first stage: see Denton, paragraph 27. However, in this case it probably does not matter very much whether it is considered at the first stage or at the third stage.
  98. Since I have concluded that in this case the breach was both serious and significant, I must move to the second stage.
  99. The reason why the default occurred

  100. The order that I made at the hearing on 1 April 2015 was that the Defendant should serve a witness statement
  101. "… addressing (i) when instructions were received from the Defendant's insurers in respect of the counterclaim and why they were not received earlier; and (ii) if, as appears to be the case, no responses were sent to the Claimant's letters in January and February 2015 seeking information about the re-pleading of the counterclaim, why this was the case."
  102. Whilst I am conscious of the fact that the terms of this order might have presented the Defendant with some difficulty in relation to the need to protect his and his insurers' legal professional privilege, it did not seem to me that this would be an insuperable obstacle to providing an explanation in at least general terms for what had happened. In any event, this was something that he should have done the first time round in support of the original application for relief from sanctions.
  103. Following this direction Mr. Holton made a fourth witness statement, dated 10 April 2015, in which he gave a rather sparse outline of the relevant events. For example, he said that the insurers confirmed their instructions to pursue the counterclaim following the Case Management Conference on 10 October 2014. He says, understandably, that he does not know why instructions were not given earlier.
  104. What Mr. Holton described as "the final instalment" of the instructions, being the information used to compile the Amended Counterclaim, was not finally produced to his solicitors until 18 March 2015. It was provided by the loss adjusters. He then explained that there were several reasons why it took until 18 March 2015 for this information to be provided. These were as follows.
  105. i) The advice that was given to himself and underwriters. However, he says that neither he nor the insurers are prepared to waive privilege in this advice.

    ii) There appears to have been a breakdown in communications between the insurers and the loss adjusters: each seemed to think that the other was responsible for providing the relevant information to Mr. Holton's solicitors. This misunderstanding was not resolved until 12 March 2015.

    iii) For the past two years the Claimant has spent a lot of time "harassing Mr. Kendall", the forensic accountant retained by Mr. Holton. He then says that he believes that this behaviour by the Claimant "… may have inhibited witnesses and the production of information".

    iv) It was a "commercial decision influenced by advice and instructions received and given which is privileged".

    v) The unless order which imposed the deadline of 20 March 2015 for service of the Amended Counterclaim.

  106. In relation to the failure to respond to the letters from the Claimant's solicitors in January and February 2015, Mr. Holton confirms that there were no such responses and that this was because his solicitors "did not have any instructions to reply".
  107. I have to say that I find this explanation for the failure to provide the relevant information until 18 March 2015, if indeed it can be called an explanation, wholly unsatisfactory. No less so because it makes no mention whatever of the assertion made by Mr. Barnes in his witness statement that Mr. Holton had pressed the insurers on numerous occasions to provide the details necessary to re-plead the Counterclaim. At best, it seems that there was a communication failure between the insurers and the loss adjusters about who was to provide the relevant information to the Defendant's solicitors. No attempt at all has been made to explain whether or not the Defendant's solicitors, who were presumably instructed by the insurers in relation to the counterclaim, took any steps to inform the insurers of the order made on 12 December 2014, of the letter from the Claimant's solicitors dated 4 February 2015 in which they said that if they did not receive the re-pleaded Counterclaim by 6 February 2015 they would make an application for an unless order or, indeed, when they were told of the unless order itself.
  108. I fail to see the relevance of the alleged harassing of Mr. Kendall by the Claimant. Whilst I can see that this might have deterred Mr. Kendall from providing information, no reason is given as to why this should have prevented either the insurers or the loss adjusters from providing the Defendant's solicitors with the necessary information in good time. In any event, it is not said that any of the information that was provided for the purpose of settling the Amended Counterclaim came from Mr. Kendall.
  109. In short, the explanation provided by Mr. Holton appears to suggest that, first, the failure to provide the Defendant's solicitors with the information necessary to re-plead the counterclaim was a misunderstanding between the insurers and the loss adjusters as to the responsibility for providing that information. Second, that neither the Defendant nor his solicitors took any steps to chase up that information or to tell the insurers that they did not have it.
  110. There is also a faint suggestion that the delay in providing the information was in some way the result of a deliberate decision taken for tactical reasons ("… it was a commercial decision influenced by advice and instructions received and given" - paragraph 13 of Mr. Holton's witness statement). But even if this were the case, it hardly helps the Defendant. On the contrary, it suggests a cynical disregard for the orders of the court.
  111. But, whichever way one looks at it, things were clearly left to the very last minute. By an e-mail dated 20 March 2015, timed at 11:53, from Mr. Bourne to his instructing solicitor, Mr. Bourne provided his draft of the Amended Defence and Counterclaim, together with the schedules. He noted that these were "slightly later than promised".
  112. If Mr. Bourne was not provided with the relevant information until 18 March 2015, then I doubt very much whether he can be criticised for the want of particularity or clarity in the re-pleaded Counterclaim. It looks as if he had only a little over 24 hours in which to produce the new pleading and that much of it had to be cut and pasted from some document with which he had been provided.
  113. In my judgment, no good, coherent or even faintly plausible reason has been advanced to justify the astonishing delay in the receipt by the Defendant's solicitors of the information that was required to re-plead the Counterclaim. The order for its production by 21 January 2015 was made on 12 December 2014 and the unless order for its production was applied for on 17 February 2015, yet no relevant information was provided to the Defendant's solicitors until two days before the final deadline.
  114. Furthermore, it is reasonably evident that the information that was provided then fell short of what was required to provide a re-pleaded Counterclaim of sufficient particularity and clarity. Whether the responsibility for that failure rests with the insurers themselves, the loss adjusters or the Defendant's solicitors, or a combination of all three, is neither here nor there. The ultimate responsibility for the conduct of the counterclaim rested with the Defendant's insurers.
  115. The third stage

  116. In the circumstances, the question posed at the third stage of the Denton inquiry really answers itself. There is in my view no excuse whatever for the failure to serve a properly pleaded Counterclaim in time. For the reasons that I have already given when considering the text of the re-pleaded Counterclaim, I consider that the Claimant would be irretrievably prejudiced if he were to be required to meet that claim in time for a trial on 13 July 2015.
  117. In fact, I would go further. This was a case where, for whatever reason, the provision of the necessary information for the re-pleading of the Counterclaim was left until the eleventh hour. Those who leave necessary steps until just before the deadline must take the risk of a last minute slip up. As the Claimant submitted, the unfortunate mistake that led to the Amended Defence and Counterclaim not being filed with the court in time was simply the final straw following a period of two months in which the Defendant had been in persistent breach of the order of 12 December 2014.
  118. CPR 3.9 (1), as interpreted by the majority of the Court of Appeal in Denton, requires the court to have regard in particular to the two factors there mentioned, namely the need: (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders.
  119. So far as a factor (a) is concerned, I have already indicated that to permit the Defendant to advance his counterclaim on the basis of the version served on 20 March 2015 would disrupt the efficient conduct of the litigation. The trial would almost certainly have to be adjourned, with all the cost and inconvenience that such adjournments entail.
  120. So far as factor (b) is concerned, this is a paradigm case in which to enforce compliance with court orders. The Defendant's insurers have been more than just cavalier: the evidence, such as it is, demonstrates a complete absence of any regard for the orders of the court.
  121. Standing back for a moment, the Claimant has had a claim against him for £1.6 million hanging over his head for a year. Solely as a result of the conduct of the Defendant and/or his insurers, no proper details of that claim were advanced either at the time it was made or during the subsequent year. The details when finally produced, on 20 March 2015, were manifestly defective, as I have already demonstrated. So defective and so late in fact that there would have to be an adjournment of the trial if the Claimant were to be given a proper opportunity to deal with them. That is not fair.
  122. I accept, of course, that to deprive the Defendant's insurers of such a substantial claim is no small thing. But that was the probable consequence of doing so little so late, as they should have known. They have brought the prejudice on their own heads.
  123. However, I am concerned at the prospect that the Defendant might have to meet the Claimant's claim for underpayment without being able to deploy a legitimate defence, namely the defects in the work. It has been settled law since the decision in Mondel v Steel (1841) 8 M&W 858, that an employer under a building contract who is sued for the balance of the price can defend himself by asserting that the work was defective and not worth the sum claimed. This is not some form of set-off or counterclaim, it is a simple defence. To deprive the Defendant of the ability to do that would be to impose on him or his insurers an additional source of prejudice over and above that caused by the striking out of the counterclaim. I do not see how the issue of the Claimant's claim for additional payment can be fairly determined without permitting the Defendant to deploy his allegations of defective work as a defence. There is in principle no additional prejudice to the Claimant in permitting this: such a defence existed in the form of the counterclaim. For the reasons that I give below, I consider that it is at least very possible that this can be done without an adjournment of the trial, although I consider that justice requires that this option should remain open if the Claimant finds himself in difficulty.
  124. Any evaluation of all the circumstances, therefore, points to refusal of relief: the Claimant has not contributed in any way to the breach. On the contrary, his solicitors did their best to prevent it. The prejudice to the Defendant and/or his insurers can be limited by permitting the Defendant to deploy his allegations of defective work as a defence to the Claimant's claim for underpayment.
  125. The appropriate course

  126. The Claimant's claim for underpayment is for about £240,000. That is the balance of the amount which he contends he is entitled to be paid for his work, and it includes about £40,000 that the Claimant paid pursuant to the January 2012 agreement. As I have indicated, in the ordinary course of events it would be open to the Defendant to deploy his allegations in respect of the defects in the Claimant's work by way of abatement of the Claimant's claim. But a defendant can only deploy such a defence to the extent necessary to defeat the claim: he cannot recover any excess. To do that he must also make a counterclaim.
  127. It follows that if the counterclaim in respect of the defects is struck out that would not prevent the Defendant from applying to amend his Defence to allege that the Claimant's work was not worth the amount claimed owing to the presence of the defects. Indeed, I have already concluded that it would be unfair to allow the Claimant to pursue his claim for the balance of the value of his work without giving the Defendant the right to deploy that defence.
  128. It may be said that to permit to this would just be to allow the counterclaim in by the back door having just shown it out of the front door. I do not think that this would be correct. The counterclaim in relation to the defects, excluding the electrical works (which is a new claim) is for almost £800,000, so it is more than three times the amount of the Claimant's claim. It may well not be necessary at trial to explore the precise extent of every defect or the precise cost of repairing it. For example, the claim for the remedial works to the roof, including scaffolding etc, is worth about £400,000. If the court were to form the view that it is for the most part a good claim, even if there is some doubt the precise quantum of it, it may be in a position to conclude that on any view it is sufficient to defeat the Claimant's claim without having to get to grips with the minutiae.
  129. So in order to address a defence of this kind, it may not be necessary for the Claimant to investigate every nut and bolt of the claim. If it appears at a reasonably early stage that the Defendant's allegations in relation to the defects are substantially justified, the Claimant's claim will fail. It does not matter whether the true cost of putting right the defects is £350,000 or £750,000, either way it would be more than sufficient to defeat the claim by the Claimant.
  130. The matter only becomes problematical if it appears that the claim for defects is very substantially overstated and is, in truth, likely to be worth only a fraction of the amount asserted. In this event, it might well become necessary to investigate the minutiae of the claim because every pound by which it falls below the amount of the Claimant's claim is a pound that the Claimant can potentially recover.
  131. All one can say at this stage is that, whilst not unknown, it is fairly unusual for an extensive claim for defects prepared and formulated by experts to have no, or only little, substance. If that should prove to be the case here, then, as I have already said, the Claimant's experts will probably be able to form a view at a fairly early stage as to whether or not there is any real prospect of reducing the amount claimed in respect of the defects to an amount that is below the sum claimed by the Claimant. If they conclude that there is not, then further pursuit of the Claimant's claim would be pointless.
  132. If, on the other hand, the Claimant's experts form the view that the claim in respect of the defects has been grossly exaggerated, and that it needs to be investigated in detail because there is a real prospect that it may be worth substantially less than the sum claimed by the Claimant, then the Claimant's advisers will have to take a view as to whether or not this is an investigation that can be carried out within the present timetable so that it can be determined at the trial commencing on 13 July 2015. I have already indicated that, if the Defendant is permitted to deploy the defects claim as a defence to the claim by the Claimant, the Claimant would have the right to apply to have his claim determined separately to the issues in relation to the alleged overpayment if it appears that it would not be possible to have a fair determination of these issues at the trial in July.
  133. In the light of these considerations, I have concluded that the fairest course would be to permit the Defendant to deploy his new draft counterclaim as a defence to the Claimant's claim in respect of the alleged underpayment. However, for the reasons that I have already given I do not consider that the Defendant should be granted relief from sanctions so as to permit him to pursue a counterclaim, either in the form that was served on 20 March 2015 or in the form of the new draft.
  134. Conclusions

  135. In these circumstances, I refuse relief to the extent that the following paragraphs of the re-pleaded Counterclaim as served on 20 March 2015 are to be struck out:
  136. i) Paragraphs 93 and 94.

    ii) The first 10 words of paragraph 95.

    iii) Paragraph 96.

  137. The Defendant may have permission to amend his Defence to plead, by way of abatement of the sum claimed by the Claimant, the material in the new draft of the Counterclaim (as attached to the Defendant's skeleton argument for the hearing on 21 April 2015). If the Claimant considers that a further information in relation to the new draft is necessary, he is to formulate a request by 28 April 2015 and the Defendant is to provide the information requested, save to the extent that proper objection is made to the validity of any particular request, within 14 days of receipt of the request.
  138. However, this permission does not extend to the particulars given in relation to either the electrical work or the work to the interior. The former allegations were introduced for the first time in the re-pleaded Counterclaim and the latter allegations appeared for the first time in the new draft. I consider that it is too late for either of these allegations to be included, particularly since the Claimant has not instructed an electrical expert.
  139. The issues for the trial in July 2015 raised by the Defence and Counterclaim will therefore be confined to:
  140. i) whether or not the Claimant overcharged the Defendant, together with the circumstances in which the "January Agreement", the "February Agreement" and the March Deed came to be made and/or signed; and

    ii) whether or not the Claimant is entitled to recover any further sum in respect of the work carried out having regard, amongst other things, to whether or not the work was defective in any of the respects alleged by the Defendant.

  141. Accordingly, the Defendant's application for relief from sanctions fails. Whilst I have allowed the Defendant to rely on the allegations relating to the defects in the work as a defence to the Claimant's claim for underpayment, that is not a course that was canvassed by the Defendant prior to the hearing of the application. It was a course that occurred to the court after having seen the new draft of the Counterclaim.
  142. At the conclusion of the hearing I gave further directions in relation to the service of witness statements and expert evidence, but I will hear counsel if there are any other questions concerning the directions leading up to the trial on 13 July 2015. I will hear counsel also on any questions relating to costs or the form of relief that cannot be agreed.

Note 1    It is alleged that they were told that “you have lovely children .... It would be a shame if anything was to happen to them”.    [Back]

Note 2    Letters of 23 January, 4 and 11 February 2015 from the Claimant’s solicitors chasing service of the new Counterclaim all went unanswered.    [Back]

Note 3    Interestingly, neither this nor the preceding allegation is included in the new counterclaim. The reference to the “post mortice” has disappeared and it is now alleged that there were no dowels in the joints at all, only screws.    [Back]

Note 4    This allegation is explained in more detail in the new draft.    [Back]

Note 5    For example, 2 mm of shrinkage across the grain of timber accommodating a mortice could be significant. However, if a long horizontal timber were to shrink by 2 mm it may not matter. This allegation is now pleaded more fully in the new draft and the reference to “2 mm of shrinkage” no longer appears.    [Back]

Note 6    These allegations have been both expanded and modified in the new draft and, as a result, are much clearer.    [Back]

Note 7    The new pleading is clear in identifying the work carried out by the Claimant and what is alleged to have been wrong with it. However, the causation point raised here is not addressed, although the figures claimed for the different aspects of work are reasonably clear.    [Back]

Note 8    These claims, and that mentioned in the following paragraph, are now much more clearly identified in the new draft.     [Back]

Note 9    The new draft makes the position rather clearer, but since the sum claimed against this head is about £20,000, it is not a major item. For example, the windows affected are now identified individually.    [Back]


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