Aside from the striking increases in issue fees, the key
development in civil litigation in 2015 has been an increasing willingness by
the courts to use rules of court to exert greater control over the parties’
conduct of litigation. That development has been seen in a series of judgments
on costs and costs budgeting, on which a future column will take stock, and in
two significant judgments about statements of case, discussed here.
The background to these judgments includes the facts that:
Despite this background, it is a matter of some notoriety
that the rules concerning statements of case that the 2007 Working Party introduced
into the Commercial Court (set out in the Admiralty
& Commercial Courts Guide (Commercial
Court Guide)) have often not been followed. Over the last two years there have
been growing signs of a willingness by some judges in that court to take a
tougher approach.
That has now been confirmed in Tchenguiz and others v Grant
Thornton UK LLP and others [2015] EWHC 405 (Comm) (see Legal update, High Court disallows costs of
drafting noncompliant particulars of claim).
In Tchenguiz, Leggatt J:
The three orders made show the range of sanctions available
to the court in the event of noncompliance with the Commercial Court Guide.
They must be among, if not the, most draconian orders made by the court early
in proceedings for some years. Whether they were fully justified or not is very
hard to say without sight of the pleading impugned and the correspondence
involved. Absent a successful appeal by the claimants, however, that is not the
point. The point is that the court has the power to impose such de facto
sanctions and is increasingly willing to use them. Paragraph 17 of the judgment
confirms that, having seen the judgment in draft, the judge in charge of the
Commercial Court list endorsed the principle that “flagrant disregard of
the guidance applicable to statements of case may lead to adverse costs
orders”. The significance of such orders in cases where many months have
been spent drafting particulars cannot be underestimated. In Tchenguizitself, four counsel had been involved in that task.
Aside from the threat implicit in the orders themselves,
however, the main interest of the judgment lies in its statements of principle.
Leggatt J’s analysis starts with the principles that:
“Statements
of case must be concise. They must
plead only material facts, meaning
those necessary for the purpose of formulating
a cause of action or defence, and not background facts or evidence. Still
less should they contain arguments,
reasons or rhetoric. These basic rules were developed long ago and have
stood the test of time because they serve the vital purpose of identifying the
matters which each party will need to prove
by evidence at trial.” (emphasis added)
(Tchenguiz and others v Grant Thornton UK LLP
and others [2015] EWHC 405 (Comm), at paragraph 1.)
The words in bold show the classic austerity of this
approach, and rather beg the questions of where the line is drawn between a
material fact and a background one and why “reasons” should be
excluded from statements of case. A common complaint of parties faced with allegations
of fraud or serious impropriety is that the full case against them has not been
set out in the pleadings. That, in turn, can and does lead to requests under
Part 18 and applications to adjourn made during trial. The latter very often
turn on the classic submission that “that was not the way the case was put before”. Those words, in turn, often
engage an analysis not limited to whether the material facts were pleaded and
whether (for example) the tort of deceit was pleaded. Rather, the focus can
become on whether the matters on which the claimant was relying at trial to
allege that deceit could be inferred were
“properly” set out in the pleading. That, in turn, can make it highly
desirable to plead the “reasons” why a party is alleged to have
behaved fraudulently.
The points that follow are:
If the second point is correct, then the judgment becomes
not simply more coherent but, in truth, hard to gainsay. Many commercial practitioners
(including the author) will have had more than a wistful look at the Commercial
Court Guide when pleading defences to belligerent, rambling and off the point
pleadings of inordinate length that (as often seems the case) see fit to throw
allegations of fraud and dishonesty around like confetti before the parties
have even been properly introduced, presumably on the basis that there is
minimal expectation that anyone apart from the core legal team will read beyond
page 5 of the document. Once one adds to the equation the possibility that the
pleader or reviewer of those introductory salvoes may not be the pleader or
reviewer who has dealt with the section of the pleading where the facts
material to the fraud or dishonesty have actually been pleaded, then one sees
the ensuing risk of confusion and obscurity.
It seems plain from Tchenguiz that those irritated by
“expansive” pleadings include judges as well as defence lawyers:
“The particulars of claim which have been served in
the present case flout all these principles. They are 94 pages in length. They
include background facts, evidence and polemic in a way which makes it hard to
identify the material facts and complicates, instead of simplifying, the
issues. The phrasing is often not just contentious but tendentious. For
example, the defined term used to refer to three of the defendants is ‘the
Conspirators’. Nor can headings such as ‘the plot’ and ‘the plot evolves’ be
supposed to be ‘in a form that will enable them to be adopted without issue by
the other party’.
…This case is not in essence a complicated one. It is of
course necessary to specify the statements allegedly made to the SFO by the
defendants and to give particulars of the matters relied on in support of the
allegation that the defendants did not believe those statements to be true.
Those matters are in fact pleaded, starting at page 61 of the particulars of
claim. However, this operative part of the statement of case is preceded by
some 50 pages of narrative, liberally interspersed with assertions of fraud,
falsity, dishonesty and improper motive which are not at that stage
particularised. This form of pleading is typical of Complaints in United States
litigation where pleadings serve different purposes and different practices
obtain. It has no place in English civil procedure.”
(Tchenguiz and others v Grant Thornton UK LLP
and others [2015] EWHC 405 (Comm), at paragraphs 56.)
While my sympathies tend naturally to be with any legal
team pulled up by the court for procedural noncompliance, and while I am conscious
of not having seen the pleading in question, these comments will definitely
ring true with many of those defending some of the “expansive” fraud
and conspiracy cases currently proceeding with great fanfare in the High Court.
If Leggatt J’s judgment leads even to a partial reining in of some of the
pleading practices that have been seen in such cases, he will be assured of
some popularity among practitioners. If, on the other hand, it leads to an
overly austere approach to statements of case, thus triggering a string of Part
18 and adjournment requests, then this will have proven to be something of a
false dawn.
The Chancery Division is not possessed of the page limit on
statements of case applied by the Commercial Court. Accordingly, the interest
of Fielden
v Christie-Miller and others [2015] EWHC 752 (Ch) lies in its
application, in a slightly different procedural context, of Tchenguiz.
Having cited paragraph 1 of Tchenguiz, Sir William Blackburne adjudged that the
requirements set out therein were “well established, well known and of
universal application.” He went on to measure a proposed counterclaim
against them:
“…The pleading is excessive in length, difficult to
comprehend and not as logically ordered as it should be. It contains matters
which are more in the nature of background facts or evidence than necessary
averments. There are also paragraphs which are in the nature of argument.
I give some instances. Paragraph 7, the first paragraph of
the counterclaim, repeats the whole of Stephen’s defence. That defence runs to
50 pages. Most of it is concerned with Stephen’s case in relation to Sam’s
claim concerning the 20 March deed of appointment. The proposed amendments
(they are exclusively concerned with Stephen’s estoppel claim against the Settlement
trustees) are, it would seem, in amplification of paragraphs 10 and 11 of that
defence. Together with the new additions made since I gave judgment on 22
January, the proposed amendments run to some 22 pages. They are numbered 11A to
11N. Paragraph 11A does not bode well: it states that Stephen refers to his
reply to the defence to counterclaim of the Settlement trustees ‘and, in
particular, paragraphs 4.1.1 – 4.1.3, 4.5.1 – 4.8, 4.10.1 – 4.10.4, 4.13.2 –
4.13.8, and 4.19 and, ‘so far as is necessary, incorporates the same as part of
this amended counterclaim…’. The reader immediately asks himself: which of
those many paragraphs is it ‘necessary’ to incorporate into the pleading and
for what purpose?…
The overall result of these and other infelicities is that
the reader has great difficulty in following what is being said, and to which
issue the particular allegation is said to relate. He has to rummage backwards
and forwards and has frequently to dip into the defence and occasionally into
the reply to understand what is being alleged. Even then, it is difficult at
times to see where the plea fits in to the overall picture. If for no other
reason, the pleading if it is to be amended, must be recast so as to comply
with the requirements summarised in the citation from Tchenguiz.”
(Fielden v Christie-Miller and others[2015] EWHC 752 (Ch), at paragraphs 11-12 and 14.)
It is accordingly plain that Tchenguiz is not an
isolated decision. In light of it, litigation teams should ensure that:
