The Honourable Mr Justice Julian Knowles:
- This is my judgment on the Pre-Trial Review of this claim. There are three matters which require my determination:
a. The Defendant's application for 'reverse summary judgment' on the whole of the claim pursuant to CPR r 24.2 on the grounds, it submits, that the claim has no reasonable prospect of success;
b. The Claimant's application that he be allowed to cross-examine Derek Hood (who, it is common ground, is the Defendant's owner/controller/directing mind and will) on allegedly fraudulent misrepresentations made by him in the course of his dealings with the Claimant;
c. The Claimant's application for a declaration that a Notice to Prove dated 6 February 2018 was either served in time and/or alternatively for an extension of time and relief from sanctions pursuant to CPR r 3.1(2)(a) and CPR r 3.9 respectively.
- The Claimant was represented by Mr Brannigan QC. The Defendant was represented by Mr Pymont QC and Mr Atkins.
- The trial of this claim is currently listed for later this month.
The factual background
- This case involves the sale and purchase of expensive classic cars. The Claimant, Mr Tuke, is a private individual with an interest in such cars. The Defendant is and was at all material times a restorer and dealer in classic cars. As I have said, its owner/controller/directing mind is and was Derek Hood.
- In summary, Mr Tuke claims that from December 2009 onwards the Defendant through Mr Hood acted as his agent for the buying and, in particular, selling of classic high value cars. In this action he seeks the delivery up of all documents concerning the sale of 19 classic cars between April 2011 and March 2015. He also seeks an account and an order for the payment of the sum shown on the account.
The Claimant's case in outline
- In 2009, after a successful business career, Mr Tuke sold his company for a figure in excess of £60 million. After tax, that sale netted him about £40 million. According to his witness statement, he was not overly impressed with the investment opportunities for the money he had made, and he therefore decided to invest in classic cars, which had been increasing in value in recent years. Prior to that Mr Tuke had had dealings with the Defendant. In February 2006 he had bought a Jaguar XK140 from it for £85 000. In October 2007 he bought a Jaguar SS at auction and asked the Defendant to carry out an appraisal of it and to do some work on it.
- Mr Tuke's case, according to the Re-Amended Particulars of Claim ('the PoC') and his Schedules of Facts Relied On (which were served pursuant to the order of Walker J of 1 February 2018), is as follows. On 18 December 2009 Mr Tuke and Mr Hood had a meeting at the Defendant's premises. Mr Tuke's summary account of that meeting contained in Schedule 2 ('Facts constituting the factual matrix during the period after 17 December 2009 up to and including 27 September 2010') is as follows:
"MT and DH had a long and amiable meeting lasting several hours. MT told DH that he had sold his business and that he was dissatisfied about the rate of interest that he was likely to receive from the proceedings, and that as a result he was interested in putting money into building up a collection of classic cars for investment purposes.
There was further discussion about MT's investment in classic cars. DH said that classic cars were better than banks, and that he could advise on and help with both the buying and selling of cars: in particular he could advise in relation to the price and types of cars to invest in, and when and how to sell them, and could help source such purchases and sales. DH said that he could double MT's money. DH also proposed a campaign of racing the cars to increase their value."
- The Claimant's pleaded case at para 5 of the PoC is that the advice and assistance which Mr Hood agreed to provide consisted of:
a. The Defendant sourcing classic cars for Mr Tuke to purchase (either for cash and/or as a part exchange for other cars) and advising on the same;
b. The Defendant undertaking servicing, maintenance and restoration works to these cars;
c. The Defendant finding potential buyers for the Claimant's cars (either for cash and/or as a part-exchange for other cars), and advising on the same.
- Paragraph 6 of the PoC pleads that between 18 December 2009 and 7 March 2013 Mr Tuke purchased 40 classic cars sourced by the Defendant with a total value (as advised by the Defendant to Mr Tuke) of nearly £40 million.
- Paragraph 8 of the PoC avers that (sic):
a. On 2 February 2010 Mr Tuke emailed Mr Hood and said: '… I will have to see how much the market can be wound up and what our "arrangement" if I agree to a sale process for a short term gain. I guess you work on a % ?'
b. The Defendant did not disagree, but the matter was left in abeyance under September 2010 because the Claimant did not wish to sell any of his classic cars at that time. In September 2010 the Claimant wished to raise funds and so on 24 September 2010 wrote to Mr Hood as follows: '… How it work for JD on selling, 10% on uplift from purchase seems sensible ?'
c. Mr Hood responded on 27 September 2010 stating: 'I am on the case with the sale of cars, more interested in moving cars for you that think of my uplift on the profit at the moment but 10% seems fair'.
- Paragraph 9 of the PoC is important and so I will set it out verbatim:
"9. The proper meaning and effect of the relationship referred to at paragraphs 5(c) [ie, my para 8(c), supra] as further set out at paragraph 8 above [ie, my para 10, supra] was that:
a. The Defendant would act as the Claimant's sale agent for the sale of the classic cars, identifying potential buyers of those cars and advising on the sale. The relationship was thus one of principal and agent.
b. The Defendant would be remunerated for this service by a commission of 10% on the "profit", being the difference between (1) the aggregate of the price paid (either in cash and/or by a part exchange for other cars) by the Claimant for a particular car and any charges for servicing, maintenance and restoration, and (2) the price paid (either in cash and/or by a part exchange for other cars) for that particular car by the purchaser."
- Paragraph 10 of the PoC contains further material which Mr Tuke alleges evidences the terms of what he says was the agency relationship between him and the Defendant, namely:
a. The Defendant's commission Invoice 3635 dated 4 May 2011 and corrected on 5 May 2011 which refers to a "Commission charge of 10%" levied on "Profit after all invoicing for each vehicle".
b. The parties' correspondence on 5 May 2011 concerning Invoice 3635, in particular (sic):
(i) An email timed at 7.59 on 5 May 2011 in which Mr Hood on behalf of the Defendant said that '… I have taken the £80K (a reference to an arrangement fee) from my 10% uplift on your profit on the cars you sold as we agreed early last year.'
(ii) An email in reply from Mr Tuke at 9.48 that day, in which he said that, '… 10% on uplift was meant to get quick sales last year but stand of course. Can it apply to my costs too please. I calculate my profit to exclude your various further works costs to me.'
(iii) An email in reply from Mr Hood at 10.03 that, '… I have already calculated all your costs in the cars sold and deducted them.'
c. An email sent by Mr Hood on behalf of the Defendant on 2 October 2013 in which he confirmed that Mr Tuke had. '… said 10% on cars that sell for a profit.'
d. Mr Tuke's response dated 3 October 2013, in which he said that '… the principle I put in writing was 10% on the profit, not on the gross.'
- Paragraph 11 of the PoC avers that pursuant to this agency relationship, at various times between 28 April 2011 and 23 March 2015 the Defendant sold 19 classic cars on behalf of Mr Tuke ('the Sold Cars'). At para 13 of the PoC, Mr Tuke avers that by reason of the agency relationship that he said existed between him and the Defendant, he is entitled to the production or delivery up to him of all documents concerning the sales of the Sold Cars that have been prepared or held by the Defendant for the purpose of that agency relationship.
- The Defendant was requested to deliver up the documents in June 2016 but declined to do so on the basis that no agency relationship existed. I will say more about the Defendant's case later.
- Paragraph 18 of the PoC pleads that by virtue of the agency relationship that existed between the parties, the Defendant owed Mr Tuke the following fiduciary and/or equitable duties:
a. The duty to keep and produce upon request accurate accounts of all dealings and transactions undertaken on behalf of Mr Tuke during the course of the agency.
b. The duty to produce upon request all books, correspondence and documents under its control relating to Mr Tuke's affairs.
c. The duty to account in equity to Mr Tuke.
- Accordingly, Mr Tuke seeks:
a. An order for delivery up and production of the documents relating to the Sold Cars;
b. An account and an order for payment of the sum shown to be due by the account.
The Defendant's case in outline
- By its Amended Defence, the Defendant denies that there was an agency relationship between it and Mr Tuke. Its defence is helpfully summarised in paras 2 – 4, which I will set out verbatim:
"2. The Claimant is claiming an order for the production of documents and an account relevant to the sale of various cars upon the basis that the Defendant sold those cars to third parties on behalf of the Claimant as his agent. The claim is misconceived because the Defendant did not sell those or any cars to any third parties as agent for the Claimant.
3. Annexed to this statement of case is a schedule (the Schedule) which lists all of the 18 cars material to the claim (referred to in the Re-Amended Particulars of claim as the 'Sold Cars') together with the invoices and other documents referred to in the Schedule. The following is clear from the schedule, the documents which accompany the Schedule and the further documents relied upon by the Claimant:
(1) The Defendant first sold each of the Sold Cars to the Claimant under the invoices listed in the third column of the Schedule.
(2) In all but one case, the Claimant then sold the sold cars back to the Defendant under the invoices listed in the fifth column of the Schedule. Some of the cars were then sold by the Defendant to third parties.
(3) In one case the Claimant sold the car direct to a third party under a sale arranged by the Defendant. This is car number nine on the Schedule. The Claimant sold this car direct to Morris & Welford UK Limited for £4.5m under a written contract dated 25 May 2012. Of the £4.5m, £3m was to be paid to Close Finance and £1.5m to the Defendant. The Defendant was also paid a commission on the sale agreed as £107 640. As the Claimant sold the car direct the buyer, the commission cannot have been payable to the Defendant for selling the car as the Claimant's agent. The commission was a finder's fee for having arranged the sale.
(4) The parties agreed what they called a "commission charge" for the sale of four of the Sold Cars (numbers 1, 4, 10 and 15 on the Schedule). The parties agreed that the Defendant would be given 10% of the capital profit made by the Claimant on the purchase from and sale back to the Defendant of those four cars. The profit was £1 155 020 and so the Claimant was invoiced for £115 502, less a discount of £80 000 to reflect the difficulty which arose when a driver arranged by the defendant for the Mille Miglia rally withdrew short notice. The Defendant bought all four cars for itself; it was not selling any of them to a third party as agent for the Claimant.
(5) The "commission charge" was agreed only for the four cars mentioned above. The parties talked about a similar arrangement for other cars but in the event none was ever agreed. In each case, however, the 10% was to be payable on the difference between the price paid by the Claimant when buying a car from the Defendant and the higher price paid by the Defendant when buying the car back from the Claimant, less agreed expenses. It was a simple profit-sharing arrangement. The key point is that the profit arose on the sale and repurchase of cars between the Claimant and Defendant only. No third parties were involved and at no point did the defendant sell any of the Sold Cars on behalf of the Claimant. Where the Defendant sold a sold car, having bought it back from the Claimant, it did so as principal on its own account. It is the defendant's policy always to buy and sell stock is principal on its own account, so that it is directly responsible for any transaction.
4. The Claimant has thus misunderstood the nature of his commercial relationship with the Defendant, with the result that his claim lacks any foundation in law. He is not entitled to any information about the sale or other disposal of any car which he has sold to the Defendant and which the Defendant has then sold on to one of its other customers, nor is entitled to any account of the proceeds of any such sale."
The Claimant's Reply
- In his Amended Reply, Mr Tuke denies that the Sold Cars were sold back to the Defendant as a principal counter-party. He avers that at all material times the parties conducted themselves on the basis that the Defendant would act as Mr Tuke's agent, sell those cars to third parties, and remit the proceeds of sale to him.
Other claims between Mr Tuke and the Defendant
- This case is one of four claims brought by Mr Tuke against the Defendant arising out of their dealings. In two of them (with an amendment pending in a third) the claims are also brought against Mr Hood personally. The other three claims are as follows
a. Claim CL-2016-000799 (which the parties have called the 'Group C Claim'). This is a claim against the Defendant and Mr Hood in the Commercial Court about a transaction by which Mr Tuke acquired a collection of Jaguar Group C racing cars in April 2011. It was issued on 20 December 2016. The statements of case have closed. There is to be a costs and case management conference (CCMC) which has yet to be fixed. One of the issues for the CCMC will be whether the claim should be consolidated or managed and tried together with the next two claims - but not the present claim - following an unsuccessful application by the Claimant to consolidate all four claims. The application was dismissed by His Honour Judge Waksman QC in the Commercial Court in November 2017.
b. CL-2018-000109 (formerly claim HQ17XO1441) ('the XK120 Claim'). This is a claim against the Defendant (now transferred to the Commercial Court) about Mr Tuke's purchase of a Jaguar XK120 from the Defendant in 2011. This claim was issued on 26 April 2017. The statements of case have closed but Mr Tuke has recently indicated that he wants to amend the claim to join Mr Hood. This claim is subject to an application by the Defendant for strike out, to be determined at hearing (yet to be listed).
c. CL-2018-000106 (formerly claim HQ17X04076) ('the Additional Cars Claim'). This is a claim against the Defendant and Mr Hood about the Claimant's purchase of six other cars from the Defendant (a Ferrari 250TR, an E Type Roadster, a Lister Knobbly, an E Type Lightweight, an AC Aceca and a Mercedes Gullwing) between 2009 and 2013. This claim was issued on 8 November 2017 and the statements of case have closed. The claim is subject to applications by the Defendants for summary judgment and strike out.
- The Claimant has claimed basic damages of c. £9 million across the three claims; he also has claims for loss of investment opportunity (which the he says are likely to exceed that sum given the movements in the classic car market since 2011), and for exemplary damages.
Applications on the Pre-Trial Review
- With that introduction, I now turn to the matters falling for determination on the Pre-Trial Review. Although at the hearing it was agreed that if the Defendant's application for reverse summary judgment succeeded it would not be necessary for me to determine the other two matters, I heard argument in relation to all of the matters de bene esse.
(1) The Defendant's application for reverse summary judgment
The parties' submissions
- On behalf of the Defendant, Mr Pymont QC submits that the whole claim should be struck out pursuant to CPR r 24.2 as having no reasonable prospects of success. The relevant rule provides:
"24.2 The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if –
(a) it considers that –
(i) that claimant has no real prospect of succeeding on the claim or issue; or
(ii) that defendant has no real prospect of successfully defending the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
- Mr Pymont submits that even on Mr Tuke's own case, taken at his highest, his claim has no reasonable prospects of success. He says the evidence relied on by Mr Tuke in support of his pleaded case, in the form of his second witness statement of 12 February 2018 and his Schedule of Facts Relied On, amounts to no more than evidence of an advice and assistance agreement between him and the Defendant, which does not impose any fiduciary or equitable duties on the Defendant so as to entitle Mr Tuke to the relief sought. He says that in the absence of any evidence that Mr Hood on behalf of the Defendant agreed to an agency relationship the claim must fail.
- Mr Pymont submits that the facts upon which Mr Tuke relies do not and cannot provide any basis for the alleged agency agreement. He points out that in his witness statement Mr Tuke does not allege that that the alleged agency agreement was made expressly. Further, he says none of the facts relied upon, whether taken collectively or individually, provide any basis upon which the alleged agency agreement may be inferred.
- On behalf of Mr Tuke, Mr Brannigan QC submits that there is clear evidence which supports the existence of an agency agreement. He criticises Mr Pymont's approach of focussing on the meeting on 18 December 2009 as being the sole point at which the agreement was formed. He says that the Claimant's case is that the agreement was contained in what was said at the meeting together with the parties subsequent course of conduct as contained in the emails which have been pleaded to and are referred to in the PoC. By way of illustration, he points to the language in para 9 of the PoC (emphasis added): 'The proper meaning and effect of the relationship referred to at para 5(c) as further contained and/or evidenced in the emails set out at paragraph 8 above was that …'
- Mr Brannigan submits that in circumstances where there are documents which Mr Tuke says support his case, the court should reject the Defendant's contention that the claim has no real prospects of success. In summary, by way of example, he points to the fact that those emails refer extensively to the payment of a 10% 'commission', to the Defendant sourcing and 'pushing' buyers on behalf of Mr Tuke, and to the Defendant chasing third party buyers so that Mr Tuke (as that buyer's counter-party) could get paid.
Discussion
- There was no dispute between the parties as to the proper approach to CPR r 24.2. In Easyair v Opal Telecom [2009] EWHC 339 (Ch), para 15, Lewison J (as he then was) gave the following guidance on whether or not the court should give summary judgment:
a. The court must consider whether the claimant (ie, the party resisting the application for summary judgment) has a 'realistic' as opposed to a 'fanciful' prospect of success: Swain v Hillman [2001] 2 All ER 91
b. A 'realistic' claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472, para 8.
c. In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman, supra.
d. This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel, supra, para 10.
e. However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550.
f. Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63
g. On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725
- These principles have been approved on a number of occasions by the Court of Appeal: most recently see, for example, Global Asset Capital Inc v Aabar Block SARL [2017] 4 WLR 163, para 27.
- So far as (e), supra, is concerned, the parties were agreed that there is no prospect of any further evidence becoming available this case, and thus that the application for reverse summary judgment falls to be determined on the material before me.
- It follows that the issue for me is whether the evidence provides a realistic prospect of Mr Tuke showing that there was an agency relationship between him and the Defendant. If it does, then I must let the matter go to trial. If it does not, then the Defendant should succeed on its application.
- Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation. The one on whose behalf the act or acts are to be done is called the principal. The one who is to act is called the agent: Bowstead and Reynolds on Agency (21st Edn), para 1-001. No particular formalities are required for the creation of an agency agreement. An agent may be appointed and authority conferred by deed, by writing, or by word of mouth: Ibid, para 2-035.
- The relationship of principal and agent may be constituted (a) by the conferring of authority by the principal on the agent, which may be express, or implied from the conduct or situation of the parties; (b) retrospectively, by subsequent ratification by the principal of acts done on his behalf. I am not concerned with ratification in this case.
- The starting point is that, as Mr Pymont rightly observed, it is not Mr Tuke's case that there was an express agreement to the effect that Defendant would act as his agent, in the sense that the specific words 'agent' or 'agency' were used at the meeting on 18 December 2009, or subsequently. Paragraph 8 of his Second Witness Statement makes this clear:
"I do not think the word agency was used in any formal sense, but I was quite sure when I came away from that meeting that he was going to take charge of the buying and selling of these cars, and I was going to simply do what I was advised to do by him. I trusted him implicitly as he came across as being very sincere."
- However, that it not the end of the matter because it is not necessary for the parties themselves consciously recognise that there is an agency relationship, or to use the terms 'agent' or 'agency' in their dealings. To that extent, when I put to Mr Pymont in argument what on his case would have been required to have been said at the meeting on 18 December 2009 to establish an agency relationship, and he replied, 'Mr Hood saying, "I will act as your agent"', I do not accept that as a correct statement. An agency agreement can be created by implication from the way in which the parties behave. Agreement between principal and agent for the conferral of authority may be implied in a case where one party has conducted himself towards another in such a way that it is reasonable for that other to infer from that conduct assent to an agency relationship: Bowstead and Reynolds, para 2-029. As Lord Wilberforce said in Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552, 587:
"While agency must ultimately derive from consent, the consent need not necessarily be to the relationship of principal and agent itself (indeed the existence of it may be denied) but it may be to a state of fact upon which the law imposes the consequences which result from agency."
- Although Lord Wilbeforce dissented in that case, what he said is wholly consistent with what was said by Lord Pearson in Garnac Grain Company Incorporated v HMF Faure & Fairclough Ltd [1968] AC 1130, 1137, with which the rest of the House of Lords (including Lord Wilberforce) agreed:
"The relationship of principal and agent can only be established by the consent of the principal and the agent. They will be held to have consented if they have agreed to what amounts in law to such a relationship, even if they do not recognise it themselves and even if they have professed to disclaim it, as in Ex parte Delhasse [7 Ch.D. 511] But the consent must have been given by each of them, either expressly or by implication from their words and conduct. Primarily one looks to what they said and did at the time of the alleged creation of the agency. Earlier words and conduct may afford evidence of a course of dealing in existence at that time and may be taken into account more generally as historical background. Later words and conduct may have some bearing, though likely to be less important. As to the content of the relationship, the question to be asked is: "What is it that the supposed agent is alleged to have done on behalf of the supposed principal ?"
- It was common ground, and Mr Pymont expressly accepted, that in determining the application for summary judgment I am required to take Mr Tuke's case at its highest. The starting point, therefore, is that I must take as being right Mr Tuke's account (which in important respects is disputed by Mr Hood) of the meeting on 18 December 2009, namely that at that meeting Mr Hood on behalf of the Defendant said he would: (a) advise on and source classic cars for Mr Tuke to purchase; (b) he would service, etc, the cars; and (c) he would advise what and when to sell and find potential buyers for Mr Tuke's cars.
- Mr Pymont sought to characterise this as merely an advice and assistance agreement, and by implication argued that that characterisation of it excluded the possibility that it could be an agency agreement. But I do not think that that is right. There can be advice and assistance agreements that are also agency agreements, and there can be such agreements which are not agency agreements. In this case, it is Mr Tuke's evidence that at that meeting Mr Hood in effect agreed to act on his behalf, and undertook to tell him what and when to buy and what and when to sell, and that he, Mr Tuke, would trust Mr Hood and act on that advice given that Mr Hood was the expert and he was not. His pleaded case is that Mr Hood told him that he would double his money. In my judgment Mr Brannigan is right when he submits that there is at least a real prospect that an observer would consider that what had been agreed was an agency, and that the subsequent emails stand as evidence making clear that that is what both parties understood the position to be because they conducted themselves as principal and agent.
- But in any event, Mr Tuke's case is not that the agency agreement just arises out of what was said (on his case) at the December meeting. It is quite clear that Mr Tuke's case is that the agency agreement also arose out of the subsequent course of dealings between the parties and in particular the emails, that having been the principal method of communication between the parties. To the extent that Mr Pymont submitted to the contrary, then I reject his submission. For the reasons set out in the following paragraphs, in my judgment there is sufficient evidence in the emails set out in the Claimant's Schedules from which it can be inferred from their conduct subsequent to the meeting that Mr Tuke and Mr Hood on behalf of the Defendant entered into an agency agreement. It would be open to the trial judge to conclude that at the relevant times the Defendant through Mr Hood was not buying and selling cars on its own account but was doing so on behalf of Mr Tuke as his agent.
- The Defendant's Skeleton Argument criticises Mr Tuke's Schedules (as does its own Schedule) because it says they 'contained very few facts indeed. For the most part they merely listed extracts from the email correspondence between the parties in the relevant period.' It is said that this is a breach of Walker J's order that the parties serve schedules 'specifying those facts that are relied upon'. Referring to the order of Walker J requiring the production of Schedules, para 5 of the Defendant's Schedule complains that (original emphasis):
"The court required the Claimant to provide schedules of facts which are said to comprise the factual matrix in and from which an agency relationship may be inferred. Apart from the four items mentioned, the Claimant has provided a schedule of evidence, the meaning and relevance of which is, moreover, not explained."
- I do not consider that there is any force in this criticism. It is perfectly apparent on the face of the emails what facts they are said to disclose which are supportive of Mr Tuke's case. For example, there is a cluster of emails (entries 3 – 7) showing Mr Hood negotiating a price for a car, and then telling Mr Tuke that the car is his. It is obvious that what is being relied on are the facts that (a) Mr Hood had Mr Tuke's authority to negotiate a price; and (b) having negotiated price, Mr Hood completed the sale on behalf of Mr Tuke. In other words, the emails evidence the Defendant through Mr Hood acting as Mr Tuke's agent in the purchase of a car.
- Entries 3 to 7 on Mr Tuke's Schedule 2 relate to a purchase of a Jaguar XKSS in early January 2010. In entry 3, having referred to the history of negotiation to a price of $5.5 million Mr Hood emailed Mr Tuke:
"The car is Racing Green with Green interior; these are the ultimate high performance period road/rally cars. Only 2 XKSS's have come on to the market in the last 3 years, I sold one of the cars last year for £4.7M Sterling. Mike this would be a very good buy at this figure. It has an excellent upside and is one of the best investment cars. The car would attract 5% VAT on the purchase price when it returns to the UK."
- There was then an exchange, before Mr Hood said at entry 6:
"Mike it should be bought. Would you like me to call you later today ?
- Two days later Mr Hood emailed:
"The XKSS is yours, I have transferred the deposit and said balance will be paid next week."
- To my mind this exchange is far more consistent with Mr Hood acting as Mr Tuke's agent, and negotiating the price on his behalf, than it is with the Defendant's case that it purchased vehicles on its own account which it then sold on to Mr Tuke. Otherwise, why else would Mr Hood have said: 'Mike this would be a very good buy at this figure' and 'Mike it should be bought' ? The inference is that Mr Hood was acting as Mr Tuke's agent by advising him to buy and negotiating with the seller on his behalf.
- This interpretation is reinforced by the entries at 11, 12 and 13, in early February 2010. In number 11, Mr Hood told Mr Tuke (emphasis added) (sic):
"Had two calls this week asking if I would sell the XKSS, we are on to a future winner with this car. The car will be here next week as we have had trouble getting a flight."
- Mr Tuke then emailed back:
"Trouble is I will fall in love with it so will have to see how much the market can be wound up and what our "arrangement" if I agree to a sale process for a short term gain. I guess you work on a %age ? Any idea which days you will actually have the XKSS and the Veyron actually there ?"
- In this email, Mr Tuke was enquiring of Mr Hood what his percentage would be for arranging a quick sale of the XKSS at a profit. Again, this is wholly consistent with the relationship between Mr Tuke and the Defendant having been one of principal and agent, with the agent taking a percentage on the deal.
- Mr Hood's reply to this email is equally revealing (entry 13) (emphasis added):
"Mike you should hang onto these cars until we get an approach for a decent profit, and the time is right to sell and if you want to sell, the market is climbing for the rights cars, I will advise when the time is right, the cars have a long way to go yet. Taking a 100K profit now would not be a good move."
- The use of the word 'we' in entries 11 and 13 – which I have emphasised - is striking and consistent with Mr Hood regarding himself as acting on behalf of Mr Tuke in the sale of these cars. It is inconsistent with the Defendant acting as a contractual counter-party.
- Also striking is the absence of any response from Mr Hood to the question about his percentage. This absence of response is evidence of him having undertaken to act as an agent on a percentage commission.
- At this point, given the reference to 'I will advise …' in entry 13, it is right to observe that this email is seemingly at odds with para 7 of the Defendant's Amended Defence where it is averred:
"It is denied that the Defendant provided advice on investing in classic cars. The Claimant identified which he wished to acquire, the Defendant would then buy those cars, which he would then sell to the Claimant."
- Indeed, there are numerous similar examples in the emails of Mr Hood proactively advising Mr Tuke about the purchase of cars and informing him of cars which that come to Mr Hood's attention that he thought Mr Tuke should buy, and encouraging him to do so: see, eg, entries 3, 9, 10, 15, 17, 21, 28, 34, 48, 50 in Schedule 2.
- Other relevant entries in Schedule 2 are the second part of number 13 and number 14, relating to an Aston Martin Volante Vantage. In entry 13 Mr Hood advised Mr Tuke to buy it. In entry 14 Mr Hood said (emphasis added):
"With a lot of ear bending this afternoon I have done the deal at 680. You now have the rarest road Aston."
- This is consistent with the Defendant via Mr Hood having negotiated the deal with the seller as Mr Tuke's agent. It is not readily consistent with the Defendant having purchased the car itself and then sold it to Mr Tuke as a principal.
- There are numerous similar entries, all of which are consistent with the Defendant via Mr Hood having acted as Mr Tuke's agent. Numbers 15 – 19 concern a Lister Jaguar. At number 17 Mr Hood said:
"Mike I understand you being nervous; I would not get you to invest in cars that do not have an upside. I would like to agree to the car tonight because he is going to wake up to what he is letting go at this price."
- A few hours later Mr Hood asked Mr Tuke, 'Can I push the button on the Lister ?', and Mr Tuke replied, 'Ok Derek, go ahead'. This is an example, therefore, of Mr Hood seeking Mr Tuke's authority to go ahead and purchase a car. The conferring of authority to act on the agent by the principal is the essence of agency, and so this exchange is thus in my view a particularly clear example of evidence which supports Mr Tuke's case.
- Entries 21 – 25 relate to the purchase of a AC Aceca Bristol Competition Car. Mr Hood told Mr Tuke on 11 March 2010 that he had been offered the car. He told Mr Tuke (emphasis added):
"He wants £325K for it but I believe we should pay £270 to 280K …"
- Later, after pressing Mr Tuke, he said (entry 23) (emphasis added) (sic):
"I do not want to let the AC opportunity to pass … I would say the car is going to be worth 400K plus by the end of the year. After speaking to the owner yesterday we have today to go in with a firm offer. We should do this one."
- Later that day Mr Hood told Mr Tuke that the car had been purchased for £254 000, and asked, 'Do you want the invoice sent to home ?'
- Again, this is consistent with the Defendant through Mr Hood having acted as Mr Tuke's agent.
- All of these entries were concerned with the purchase of cars and, for the reasons I have given, support Mr Tuke's case that the Defendant through Mr Hood acted as his agent, and accordingly owed the fiduciary duties to Mr Tuke that are pleaded. I note that the Defendant's Skeleton Argument (settled by Mr Atkins) does not address them at all.
- It is in the context of these entries that the Schedule entries about the sales of cars are to be read. On 24 September 2010 (entry 60 in Schedule 2) Mr Tuke emailed Mr Hood (sic):
"How it work with JD on selling, 10% on uplift from purchase seems sensible ?"
- Mr Hood replied:
"I am on the case with the sale of the cars, more interested in moving cars for you than think of my uplift on the profit at the moment but 10% sounds fine."
- To my mind this exchange is again consistent with there having been a straightforward principal/agent relationship between Mr Tuke and the Defendant by which the Defendant took a 10% commission from any profit made by Mr Tuke on the sale of a car.
- There are numerous other examples of exchanges between the two men which to my mind are capable of demonstrating an agency relationship. It is clear that by September 2011 Mr Tuke was becoming disillusioned with what he had entered into with the Defendant and Mr Hood. On 23 October 2011 he wrote to Mr Hood:
"What exactly is wrong with buyers or the system you so fervently encouraged me to invest in ?"
- Mr Hood's replied:
"Do you want me to fire sale some cars ? If so what is the minimum you need before the end of the year ?"
- This reply is entirely consistent with the Defendant through Mr Hood having acted as Mr Tuke's agent by offering to sell his cars for reduced prices, and seeking his authority for the minimum price to be achieved.
- Another similarly clear example is entry 46, referring to a group of Jaguar cars:
"… If we go for selling Group C cars as we are and MUST I want you incentivised so lets agree you have 5% of ALL of them sold, this is instead of the 10% on different to what paid which does not play on these …"
- By October 2013 relations were becoming strained between Mr Tuke and Mr Hood because Mr Hood had not produced the sort of returns which Mr Tuke thought Mr Hood had promised, and there were a number of testy exchanges between them. Entry 76 on Schedule 3, however, is revealing. Mr Tuke wrote to Mr Hood (emphasis added):
"… the principle I put in writing was 10% on the profit, not on the gross …
… you have sold 3 cars for me this year but I have 4 cars in return and only 2 of the cars sold got me some cash but only 800K on 3 deals totalling 3.3m, did you get 10% of this ?"
- This was a direct and specific averment by Mr Tuke that the Defendant through Mr Hood had acted on his behalf – ie, as his agent – in the selling of cars. Mr Hood did not demur.
- From all of this, I conclude that Mr Tuke has demonstrated that he has at least a realistic prospect of prevailing on his claim against the Defendant. Mr Tuke's account of what was agreed at the December meeting and the subsequent course of dealings between the parties was such that it is open to a court of trial to conclude that they had entered into a principal and agency relationship, with the Defendant through Mr Hood buying and selling cars on behalf of Mr Tuke and acting on his instructions and with his authority.
- It therefore follows that I dismiss the Defendant's application for reverse summary judgment under CPR r 24.2.
(2) The Claimant's application to cross-examine Mr Hood on alleged fraudulent misrepresentations
- The next application which falls for determination is the application by Mr Tuke for permission to cross-examine Mr Hood on alleged fraudulent misrepresentations said to have been made by him to Mr Tuke in the course of their dealings. Walker J in his order of 1 February 2018 ordered that these be set out in a Schedule and that the matter be determined at this Pre-Trial Review. The background to the application is as follows.
- As I have set out, this claim is one of four claims between the same parties, arising out of the same relationship, and involving some of the same cars. The other three claims are pending in the Commercial Court. According to para 33 of Mr Tuke's Skeleton Argument, all three involve serious allegations of fraud against the Defendant and Mr Hood. I am told that in a number of cases, the Defendant and Mr Hood have made open offers to settle those claims (without admission of liability) for what is said to be their full value. In one case, no defence has been entered on the merits.
- Paragraph 34 of Mr Tuke's Skeleton Argument is as follows:
"The Claimant says that Mr Hood is a serial fraudster who has consistently lied about the provenance, authenticity and value of the cars with which the parties dealt over many years. He would wish to cross-examine Mr Hood on matters that go to his credit, which would be particularly germane in determining who the Court should believe as to what happened at the meeting in December 2009."
- This reference to the December meeting refers to the fact that there is a dispute between Mr Tuke and Mr Hood about what was said at that meeting. I have already set out Mr Tuke's summary account, as set out in his Schedule. The Defendant's account of that meeting as set out in its Schedule 2, entry 1, is as follows:
"The Defendant admits that MT and DH had an amiable meeting on 18 December 2009. The meeting lasted approximately 1.5 to 2 hours. The Defendant does not consider that anything turns on the length of the meeting.
During the meeting DH walked MT around the Defendant's showroom in Essex and MT pointed out the cars that he was interested in acquiring. MT subsequently acquired four of the cars he had identified for a total price of £3 000 000.
The Defendant admits that MT told DH that he had sold his business. However, MT told DH that, having sold his business, MT wanted to acquire classic cars in order to enjoy those cars. DH told MT that, in his opinion, he should enjoy having and using some classic cars rather than having money tied up in the bank and earning no interest. The Defendant also admits that DH understood that MT was looking to build a collection of classic cars is a long-term venture, to promote those cars through racing and participation in events, and ultimately (although an exit plan was not specifically discussed) to sell those cars in order to upgrade his collection and generate returns on the capital invested.
The Defendant denies that: (a) MT told DH that he was dissatisfied about the rate of interest that he was likely to receive from the proceeds (it is assumed Claimant means) of the sale of his business; (b) DH told MT that he could advise on or help with the buying and selling of cars (including the particular types of advice alleged by MT); or (c) DH told MT that he could double MT's money.
During the meeting, DH explained to MT that part of the Defendant's business was to race cars in order to increase their value and that any cars empty acquired could be races events alongside the Defendant's cars."
- It is therefore clear that there is a dispute between the parties as to what happened at that meeting. Perhaps most importantly for the purposes of this claim is the dispute about whether or not Mr Hood told Mr Tuke that he could advise on and help with the buying and selling of classic cars. That is because, as I have set out, it is Mr Tuke's pleaded case at paras 5(c), 8 and 9 of the PoC that the proper meaning and effect of Mr Hood offering to advise him on and assist him with the buying and selling of cars was that the Defendant would act as the Claimant's sales agent for the sale of classic cars, identifying potential buyers of those cars and advising on their sale. Hence, whether not there was an agreement that Mr Hood would act in this capacity and provide advice is a very important matter.
- The Schedule of Assertions of Fraudulent Misrepresentations served by Mr Tuke pursuant to the order of Walker J sets out six matters upon which Mr Tuke wishes to cross-examine Mr Hood:
a. Alleged fraudulent misrepresentations as to the provenance of an AC Aceca acquired by Mr Tuke in March 2010;
b. Alleged fraudulent misrepresentations as to the value and provenance of a Jaguar E Type Roadster involved in a part exchange with the Claimant's Bugatti Veyron in November 2011;
c. Alleged fraudulent misrepresentations as to the provenance of a Lister Knobbly involved in a part exchange with the Claimant's Jaguar XKSS in December 2011;
d. Alleged fraudulent misrepresentations concerning the sale of a Mercedes Gullwing;
e. Alleged fraudulent misrepresentations concerning a replica Ferrari Testarossa involved in a part exchange with the Claimant's GT40s in November 2012;
f. An alleged fraudulent attempt to part exchange a replica Jaguar D Type for the Claimant's Jaguar XK120 by falsely representing that it was genuine.
- Four of those matters have given rise to claims in the Additional Cars Claim (the AC Aceca; Bugatti/Jaguar E Type Roadster part exchange; Lister Knobbly/XKSS part exchange and Ferrari/GT40s part exchange) but no defence has been entered on the merits to the Bugatti/Jaguar E Type Roadster claim. No claim has been made in respect of the Jaguar D Type because the Claimant did not complete the transaction.
- As an example of what Mr Tuke alleges to have been fraudulently misrepresented, in relation to the AC Aceca, the Schedule of Alleged Fraudulent Misrepresentations avers that the Defendant dishonestly induced Mr Tuke to buy the AC Aceca car by misrepresenting its provenance. The Schedule states the following facts are relied on:
"On 11.3.2010 Mr Hood of the Defendant wrote to the Claimant to say that "on Monday a very rare AC Aceca Bristol Competition car came in for me to inspect and service for the coming season, I then got a call this afternoon asking if I wanted to buy it."
The email went on to say that: "the owner wants a sale to be kept private. He wants £325K for it but I believe we should pay £270-280k…I have looked in my record books and found one of the eight cars was used on the Mille Miglia in 1956 which would also make this car eligible, with these facts this is a £450k plus car. "
On 13.3.2010 Mr Hood advised that the "AC would have an immediate upside if you wanted to sell quickly. I would like to go in with a bid of 250K".
On 17.03.2010 Mr Hood said that the "…car is going to be a worth 400K plus by the end of the year". He then put the Claimant under severe time pressure to buy the car by saying, untruthfully, that the seller had said that "we have today to go in with a firm offer".
Relying on these representations the Claimant bought the car for £254,000 on 17.3.2010.
The representations were fraudulent in that there was at the time of the relevant emails no third party seller. In fact on 22.2.2010, priors (sic) to the emails, the Defendant had bought the AC for £84,000 by part exchanges on 22.2.2010 (i.e. just three weeks earlier). At the time the representations were made therefore, the Defendant owned the car itself and could not reasonably have believed that it was worth £450,000 at the time or would be worth £400,000 plus by the end of 2010."
- The matters alleged in the final paragraph as to the ownership of the car are taken from the Defendant's defence in the Additional Cars Claim. Mr Tuke alleges that it is therefore apparent that the Defendant's defence in this claim differs from what he represented to Mr Tuke in the emails that I have referred to.
- Another example of what Mr Tuke says were fraudulent misrepresentations by Mr Hood in relation to the Mercedes Gullwing. It is asserted that the Defendant through Mr Hood dishonestly represented that it had sold Mr Tuke's Mercedes Gullwing to an American buyer for £1 500 000, and persuaded Mr Tuke that the Buyer could only pay the price over several months. It is alleged that in fact the Defendant did not sell the car to a third party at all, and several months later entered it into Bonham's Auction and sold it for about £1 622 000. The Schedule recites the following facts in support of these assertions:
"The Claimant purchased this car via the Defendant for £1.8m in August 2012.
In November 2013 the Defendant (Mr Hood) allegedly found a buyer for the car, and on 15.11.2013, Mr Hood wrote to the Claimant as follows;
"I have got £450k on the Gullwing payable now with the balance of £1.050,000 payable before the end of April. If the balance is not paid in full by 1st May you will get £150k extra payment."
This followed a sequence of emails on 13.10.2013 and 14.10.2013 in which the parties discussed the sale of the Gullwing for £1,500,000 in cash. In emails timed at 08:09 and 13:18 the Defendant set out what purported to be the different payment terms it had negotiated with the buyer.
On 17.11.2013 Mr Hood wrote to the Claimant:
"Deal will be with JD (i.e. the Defendant in this case) as the buyer is off-shore."
Mr Hood subsequently continued to represent that there was a third party buyer but made excuses for this supposed buyer's late payment. Thus on 22.11.2013 he said that "payment due to me on Wednesday then straight on to you". On 3.12.2013 he said that "Gullwing money should be with me any time now". On 5.12.2013 Mr Hood said that the buyer "has just been in for over an hour, he had a last minute wobble, money with us tomorrow". On 14.12.2013 Mr Hood said that the "Gullwing money should be with me Monday…". On 19.12.2013 he said that the "Gulwing money due with me today".
On 15.01.2014 Mr Hood twice asked the Claimant to have the Gullwing taken off Sam Thomas's website [the website of another agent] as it was sold.
On 24.01.2014 Mr Hood again said that the "Gullwing deal is done as you know, next payment due today…". The money eventually arrived on 04.02.2014. At or around this time, as evidenced by his email to Mr Hood on 05.02.2014, the Claimant became aware that the Gullwing was being marketed on the Defendant's stand in Paris. Mr Hood said that he put it on the stand to "promote the car for the buyer".
In fact there was no buyer; the reason for the delayed payments to the Claimant was that the Defendant itself bought the car by instalments and sold it at Bonhams in its own name on 12.7.2014 for £1,662,000 (€2,1000,000)."
- As I have set out, Mr Tuke's case involves a direct attack on Mr Hood's honesty and credibility. He therefore wishes to cross-examine Mr Hood on these matters in order to demonstrate his dishonesty and his unreliability. The issue which this is said to go to, as I have explained, is what occurred at the meeting in December 2009 and whether Mr Hood did offer to advise Mr Tuke on the buying and more particularly the selling of cars so as to become his agent. Mr Tuke's case is that the court should prefer his evidence on this over that of Mr Hood.
- In my judgment, it is proper to allow cross-examination on these matters. As a matter of law, cross-examination as to credit is permitted, however no evidence can be called to rebut the testimony of a witness on matters not material to the instant case: see Hobbs v Tinling [1929] 2 KB 1. I accept the submission of Mr Tuke that the fraud allegations are material because they arise out of the same relationship with which this action is directly concerned. They are not extraneous or collateral to this matter. This is most obviously so in the case of the Mercedes Gullwing, which as well as featuring as part of the Additional Cars Claim, was sold by the Defendant – Mr Tuke says, on his behalf – and which is therefore inextricably bound up with the question of sales agency. Furthermore, it seems to me that the differences in the accounts of Mr Tuke and Mr Hood about what happened at the December meeting cannot be explained away at this stage as being the genuine product of differing recollections of a meeting which took place over eight years ago.
- I do not accept that the Defendant's objections to cross-examination have much force.
- First, it is said that the allegations in the Schedule are much the same as those made in Mr Tuke's previous witness statement which Walker J excluded from the trial of this claim by para 4 of the Order. But Walker J also made an order that the alleged fraudulent misrepresentations be scheduled and determined on the Pre-Trial Review. His striking out of Mr Tuke's first Witness Statement is therefore not dispositive.
- Next, it is said that all but one of allegations in the Schedule are allegations made in the Additional Cars Claim, that that is the proper forum for determination, and that this proposed cross-examination cannot be dealt with within the current trial timetable. But the fact that there is an overlap with another claim does not provide a reason why these matters should not be explored in this claim if they are sufficiently relevant to the issues arising, which in my judgment they are. In civil litigation matters are frequently explored in evidence which span more than one cause of action. So far as timetabling is concerned, it will be for Mr Brannigan on behalf of Mr Tuke to conduct his cross-examination so as to accommodate all of the topics he wishes to cover. If the current timetable stands it may be that he will have to sacrifice other matters on which he might otherwise have cross-examined Mr Hood in order to accommodate these matters. That will be a matter for his professional judgement. But I see no unfairness to the Defendant in allowing this cross-examination for that reason.
- I also reject the argument that the proposed cross-examination would be disproportionate. For the reasons I have given it seems to me that Mr Hood's credibility is squarely in issue and that it is therefore proper that it be tested by reference to material which is available which goes to that issue. I do not accept, as the Defendant states in its Skeleton Argument at para 9(3), that 'little or nothing turns upon the credit of Mr Hood as a witness.' On the contrary, for the reasons I have given, there are important differences in Mr Tuke's and Mr Hood's accounts of what was or was not agreed at the December meeting and these are relevant to an issue which lies at the heart of this claim.
- I therefore permit cross-examination on the six matters set out in the Claimant's Schedule of Assertions of Fraudulent Misrepresentations.
(3) The Claimant's application for a declaration that the Notice to Prove dated 6 February 2018 was validly served in time, alternatively for an extension of time to serve its Notice to Prove and relief from sanctions
- The background to this application is as follows. As part of its case the Defendant relies upon certain invoices which it sent or says it sent to Mr Tuke. His case is that he never received a number of these. In its Amended Defence the Defendant also relies upon a number of invoices said to have been furnished to third parties. The procedural history (which is uncontroversial and which I have taken from Mr Tuke's Skeleton Argument for the Notice to Prove application) is as follows.
- This claim was issued with Particulars of Claim attached and served on 5 September 2016. The (undated) Defence was duly filed and the Reply filed in October 2016. The pleadings were last amended (by consent) in November 2017, when Mr Tuke re-amended his Particulars of Claim to advance a claim for an account; this is denied by the Defendant.
- The matter was listed for a costs and case management conference on 18 May 2017 but in the event the parties were able to agree directions and costs budgets. A consent order recording that agreement was approved by Master Eastman on 17 May 2017.
- The parties subsequently agreed an extension of time for the giving of standard disclosure to 13 July 2017, and standard disclosure was given in accordance with that agreement on that date.
- The Claimant was not satisfied by the Defendant's disclosure and on 1 August 2017 he applied for specific disclosure of five categories of documents. Two categories were:
a. Un-redacted copies of some invoices said to have been sent to third parties in respect of the cars.
b. The electronic copies of certain invoices said to have been sent to Mr Tuke. Mr Tuke says and relies upon the fact that he did not receive those invoices at the time (as set out in entry 85 on Schedule 3 of the Claimant's Schedules of Facts Relied Upon).
- The specific disclosure application was supported by a witness statement from Mr Tuke's solicitor, Michael Gerrard Grenfell. Paragraph 5 of that witness statement stated that Mr Tuke had '[c]onsiderable doubts … as to the genuineness of the information on these invoices'.
- Witness statements were exchanged on 24 August 2017. The Claimant served statements from himself, Sam Thomas, and Richard Hudson-Evans. The Defendant served a statement from Mr Hood. Paragraphs 82 to 86 of Mr Hood's statement dealt with what he said was the Defendant's invoicing procedure.
- On 27 October 2017, the Defendant served a second witness statement from Mr Hood in response to the specific disclosure application. Paragraphs 5 to 8 stated that no electronic copies of invoices were kept, because the electronic template was overwritten by Mr Hood's personal assistant every day a new invoice was issued. Mr Hood also said, at paras 9 to 11 of that second statement, that the Defendant retained no day books, notes or other records (electronic or otherwise) of its transactions, other than as set out in the invoices.
- The specific disclosure application came before Master Thornett on 6 November 2017. The application for disclosure of the electronic copies of the invoices was not pursued, but the application in respect of unredacted invoices said to have been sent to third parties was pursued. Mr Tuke's Skeleton Argument served on that occasion said that the Claimant wanted to '…test whether the documents furnished to date and upon which the Defendant places reliance provide a true and accurate of what the Defendant says happened'. In the event, that part of the application was adjourned by the Master.
- The adjourned application came before Walker J on 30 January 2018. He dismissed the remaining part of the Specific Disclosure Application and struck out all of the factual witness statements served in the action (with the exception of Mr Hood's second and third witness statements dated respectively 27 October 2017 and 13 November 2017). He then ordered that the parties produce the schedules of facts and matters relied upon that I have referred to earlier, and that further witness statements directed at the matters disputed in those schedules be served by 20 February 2018.
- The Notice to Prove, dated 6 February 2018, was served on 7 February 2018. It required the Defendant to prove certain invoices, namely (a) those invoices said to have been issued to Mr Tuke but not received by him at the time, and (b) those invoices purportedly issued to third parties, but which have been disclosed only in redacted form.
- The Defendant's solicitors responded to that Notice to Prove on 7 February 2018, claiming that it was served out of time as it should have been served by 24 August 2017, which was the date by which witness statements had to be served.
- On the application before me, Mr Brannigan's primary position is that the Notice to Prove was served in time. CPR r 32.19 provides that:
"(1) A party shall be deemed to admit the authenticity of a document disclosed to him under Part 31 (disclosure and inspection of documents) unless he serves notice that he wishes the document to be proved at trial.
(2) A notice to prove a document must be served –
(a) by the latest date for serving witness statements; or
(b) within 7 days of disclosure of the document, whichever is later"
- Mr Brannigan points to the deadline for the service of a Notice to Prove as being the 'latest date' for serving witness statements. Walker J on 1 February 2018 in para 3 of his order struck out certain witness statements and in para 7 ordered that any further witness statements be served by 4pm on 20 February 2018. Hence, says Mr Brannigan the Notice to Prove was in time. He says that where more than one round of factual witness statements is contemplated, then the 'latest date for serving witness statements' coincides with the date for serving the final round of those witness statements. He says that that is the natural and ordinary meaning of CPR 32.19(2)(a).
- Alternatively, if the Notice to Prove was not in time, then Mr Brannigan seeks an extension of time pursuant to CPR r 3.1(2)(a), and relief from sanctions pursuant to CPR r 3.9, pursuant to the three-stage approach set out in Denton v TH White Limited [2014] 1 WLR 795. The three-stage approach requires the court to consider first the seriousness and significance of the failure to give the required notice. Next, the reason for the failure must be considered. Finally, the court must consider all the circumstances of the case, giving particular weight (in accordance with the guidance given in Denton) to the need for litigation to be conducted efficiently and at proportionate cost and to enforce compliance with rules, practice directions and orders. Mr Brannigan relies on the decision of Richard Salter QC sitting as a Deputy High Court Judge in McGann v Bisping [2017] EWHC 2951 (Comm), para 21, where an extension of time and relief from sanctions was granted in relation to a Notice to Prove. I am not especially assisted by that case, whose facts were different. Whether to grant an extension of time and relief from sanctions requires a fact-specific analysis.
- First, Mr Brannigan says that the non-compliance was not serious or significant. He says that the Defendant has known since at the latest 1 August 2017 that the authenticity of these invoices were in issue because of Mr Grenfell's witness statement made in support of the specific disclosure application said that it was the Claimant's position that there were '[c]onsiderable doubts…as to the genuineness of the information on these invoices…'. He also said that Mr Hood's first and second witness statements dated 24 August 2017 and 27 October 2017 have addressed the Claimant's doubts about the genuineness of the invoices, so it will not be not prejudiced. So Mr Brannigan says that the point taken against him is a technical one and the Defendant has known for months that the authenticity of the invoices has been in issue, and has adduced evidence as to the alleged procedure by which the invoices were created. On the second Denton point, the reason for the default, Mr Brannigan frankly accepted that it occurred through an oversight on the part of Mr Tuke's legal team. On the third point, he submitted that the honesty of Mr Hood's account is in issue in these proceedings and he places substantial weight upon the invoices (see, eg, paragraph 3 of the Defence, and the Defendant's Schedules), and it is therefore right that their authenticity should be tested.
- On behalf of the Defendant, Mr Pymont submits that the Notice to Prove was out of time because the deadline for service was 24 August 2017, and that that is relevant date for the purposes of CPR r 32.19(2)(a). He says this is not a case where more than one round of factual witness evidence was contemplated. The new witness statements ordered by Walker J were not a further round of statements but new ones, to replace the ones excluded. Second, he argues that if a litigant has admitted (or has been deemed to admit) something, that will remain the case unless and until the admission has been withdrawn. Mr Tuke has not said that he has withdrawn the admission he made by his failure to serve a notice to prove last August, and the rules do not allow him to do so in any case. Hence, there having been no Notice to Prove served by 24 August 2017, Mr Tuke must be taken to have admitted the genuineness of the invoices.
- Further or alternatively, Mr Pymont submits that I should not grant an extension of time and relief from sanctions. He submits that the default by the Claimant is serious and significant and that the rules are there for a reason and should be enforced. He submits that what Mr Grenfell said in his witness statement did not put in issue sufficiently clearly the authenticity of the invoices and that the Defendant was entitled to believe and did believe that the Claimant was not challenging the authenticity of the Invoices right up until the Notice to Prove was served. As to the second Denton point, in its Skeleton Argument the Defendant said no reason had been given for the failure to serve, but it now has the benefit of Mr Brannigan's admission at the hearing that it occurred through the fault and oversight of Mr Tuke's legal team. On the third Denton point the Defendant accepts that the invoices are important and says that it precisely why a notice should have been served in time, and that it would be unfair at this late stage to allow their authenticity to be challenged.
- I agree with Mr Pymont that the Notice to Admit was not served in time in accordance with CPR r 32.19, and I reject Mr Brannigan's submission that the decision of Walker J in January 2018 to strike out the bulk of the existing witness statements and to set a fresh deadline for the service of replacement statements had the effect of setting aside the deemed acceptance by the Claimant of the invoices' authenticity which occurred once the date of 24 August 2017 passed. Given that the statements, and in particular Mr Tuke's statement, were struck out because they were 'scandalous' (as Mr Pymont put it), it would be an odd result if Mr Tuke were thereby to be granted the benefit of further time to serve his Notice to Prove. In effect, he would be benefitting from his own wrong (or rather, that of his lawyers).
- However, in my judgment it is appropriate and in the interests of justice to extend time for service of the Notice to Prove under CPR r 3.1(2)(a) and to grant the Claimant relief from sanctions under CPR r 3.9.
- I must first consider the seriousness and significance of the Claimant's failure to give the required notice. In my judgment, it was neither serious nor significant, on the facts of this case. The Defendant was not misled in any way by the Claimant's failure. I accept that the Defendant has known since at least August 2017 that the Claimant was doubting the authenticity of these documents. The invoices were specifically referred to in the Defence at para 3, and the Claimant's Reply at para 4 made no admissions about the Schedule of cars attached to the Defence, which in turn referred to the invoices. The Defendant cannot properly have genuinely believed that there had been a considered change of position by the Claimant on this issue, which is why no doubt Mr Hood dealt with the matter in his witness statement, as I have explained.
- I must then consider why the default occurred. As I have said, it occurred through the oversight of Mr Tuke's legal team. Mr Brannigan candidly accepted there was no real excuse for the failure.
- Thirdly, I have to consider all the circumstances of the case, giving particular weight (in accordance with the guidance given in Denton) to the need for litigation to be conducted efficiently and at proportionate cost and to enforce compliance with rules, practice directions and orders, in the language of CPR r 3.9. As to this, there is of course a requirement on litigants and their lawyers to comply with the CPR, and I give this very serious weight. 'Rules are rules', as Mr Pymont put it. But this is not a case of a deliberate and intentional flouting of a rule designed to deliberately wrong foot an opponent. This was an honest oversight by those advising Mr Tuke, and no doubt the point has been taken on board for the future. It would in my judgment be artificial and not in accordance with the overriding requirement to deal with cases justly and at proportionate cost to allow this case to go forward on the basis of a deemed acceptance of genuineness of the invoices when the factual reality is different and has been known at all times by both sides to be different and the matter has been squarely put in issue in the proceedings and has been dealt with in evidence by Mr Hood on behalf of the Defendant.
- Taking these matters together, in my judgment it is in the interests of justice to extend time for the service of the Notice to Prove and to grant relief from sanctions.
Conclusion
- For these reasons:
a. The Defendant's application for reverse summary judgment is dismissed.
b. The Claimant's application to cross-examine Mr Hood on the six alleged fraudulent misrepresentations set in the Schedule of Assertions of Fraudulent Misrepresentation is granted.
c. The Claimant's application for an extension of time for service of the Notice to Prove dated 6 February 2018 and for relief from sanctions is granted.
- I turn to the question of costs. I indicated at the hearing that I would provide a provisional view on costs in my draft judgment, and give the parties leave to file written submissions in the event they disagreed with my view. I gave a provisional view in the draft judgment, and I received written submissions from the Defendant. The Claimant has indicated that he will not be providing any submissions.
- The Claimant's revised costs figure is in the sum of £90 000 plus VAT. The Claimant has apportioned this as follows: Pre-Trial Review: 40%; Notice to Prove application: 10%; reverse summary judgment application: 40%; Claimant's cross-examination application: 10%.
- The Defendant submits that I should not summarily assess the Claimant's costs because it takes issue with its schedule, saying that it may include costs not attributable to matters arising on the Pre-Trial Review. However, following objections from the Defendant's solicitors to the first costs schedule supplied by the Claimant's solicitors, and service of an amended schedule, the Claimant's solicitors have certified that no costs are claimed other than those relating to the proceedings before me. In those circumstances, there is no reason not to order a summary assessment, in accordance with the general rule in para 9.2 of Practice Direction 44.
- The costs order I make is as follows:
a. I summarily assess the Claimant's costs at £90 000 plus VAT.
b. The Defendant is to pay the Claimant's costs of the reverse summary judgment application and the cross-examination application, ie, 50% of £90 000 plus VAT, ie, £45 000 plus VAT.
c. There is to be no order as to costs in relation to the notice to prove application. Given this was necessitated by an error on the part of the Claimant's legal team I do not consider that the Defendant should pay the costs of that, notwithstanding that the Claimant prevailed on it.
d. The costs of the Pre-Trial Review are costs in the cause.
e. There is to be no order as to costs of today's hearing.
