Buckingham Homes Ltd v Rutter and Others

APPROVED JUDGMENT

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THE DEPUTY JUDGE: There is an application to strike out the witness statement of Mr Geoffrey Davidson dated 24 October 2018. The basis on which the defendant says the witness statement should be struck out or the evidence excluded (it amounts to the same thing) is that it contains inadmissible material in the form of expert evidence which the claimants do not have prior permission of the court to rely upon.

The way in which this witness statement comes into existence is a slightly unusual. The Claimant announced its intention to rely on the report in its Reply and Defence to Counterclaim which was served on 23 November 2017. The claimants had previously in their claim pleaded that certain invoices that had been issued by PRC A&P had been “diverted” and that this diversion was improper, dishonest and had sought to benefit PRC A&P, Mr Rutter, Mr Gilmore, Mr Crawford, Mr Symes and that it was at the expense of the creditors of the insolvent PRCA.

All that was said in the Particulars of Claim at paragraph 2.14(2) was that just two working days after PRCA went into administration, PRC A&P issued a large number of invoices, uncharacteristically, on 21 December 2009 including the invoice dated 15 December 2009. These invoices totalled £297,000. It was suggested that this was unusual invoicing activity amounting to diversion which was an improper act of the defendants.

The defendants' response to this allegation in paragraph 18.5 of the Defence was to say that, without seeing the specific alleged documents (because no list or table had been provided at that stage) the defendants are unable to plead to the above on the issue of a “large number of invoices” save to say that this type of invoice issuing activity would be usual for that month.

What the claimants said in their Reply at paragraph 25, was that with regard to paragraph 18.5 of the Defence: “The claimants will disclose the relevant documentation.” That is point 1. Point 2, they said, “The claimants will serve as witness statement from an accountant or suitable person particularising the material allegations in detail.”

That was on 23 November 2017, so nearly a year ago. That in my judgment was not a proper course for the claimants to take. It is of course normal to say that the relevant documentation will be disclosed. It is a bit of a waste of pleading breath, because the disclosure of the relevant documentation is something that would happen in any event by order of the court. But to say in response to a plea in effect, “We do not know what invoices you are talking about,” that the defendant should wait to hear and to receive a witness statement from an accountant or suitable person (putting aside for the moment whether that person who makes the witness statement is actually an expert or not) particularising allegations in detail, is not an appropriate way to proceed.

I am somewhat surprised that when these proceedings came before the court at the costs and case management conference this point was not picked up on. It seems to me that what ought to have happened was that in the ordinary course of things the defendants ought to have served a Part 18 request saying, “Please particularise the allegations of diversion of invoices,” and then the claimants ought to have been ordered, if they did not do it voluntarily, to provide the details with the schedules and for such inferences to be drawn from the words on the invoices fully setting out their case on diversion.

But that did not happen. Instead an order was made in relation to witness statements on 7 March this year by Deputy Master Cousins. At the CCMC there was discussion of one category of expert evidence, that of valuation, but no permission was given. In relation to this point about the invoices, just before the costs and case management conference, a skeleton argument was served on behalf of the claimants which at paragraph 3.7 said this:

“C's have made it clear that they intend to adduce evidence from an accountant with regards to the alleged diversion of invoices by PRCA, but their current intention is that this will be a factual and not an expert statement. No specific direction is sought on this. C's are simply taking the opportunity to notify the court and D of their intentions in this regard.”

That is what the court was told, and it is obvious that the claimant in this regard had been open throughout of their intentions. They said in their pleaded case that they were going to serve a witness statement setting out these allegations, and they have repeated that just before the CCMC. The order that was made at the CCMC in relation to witness statements was that the parties were limited to six witness statements each and that witness statements should not exceed 25 pages of A4 in length, so both may serve witness statements of up to 150 pages.

Witness statements were ordered to be exchanged on 20 July 2018, but by one (or possibly two) consent orders that date extended to 24 October 2018. It is on that date that the witness statement of Mr Geoffrey Davidson was served on the defendants.

The defendants immediately objected to the statement saying that it was in reality an expert report albeit dressed up as a witness statement of fact, and by letter dated 1 November 2018 they gave what they call formal notification of objection.

In response the claimants asked the defendants to identify which paragraphs they objected to on the grounds that they contained expert evidence. The defendants declined to do so and instead said they maintained their position that the entire witness statement was inadmissible because it was opinion evidence dressed up as a factual witness statement. They added in their letter of 5 November that, should the application proceed and be successful, they would be seeking indemnity costs.

The defendants also sought a copy of the letter of instruction to Mr Davidson, and that was provided under cover of a letter dated 6 November. In addition, the claimant's solicitors stated that Mr Davidson has been paid for professional work conducted on this case although before me Mr Clegg explained that is not actually the position. The position is that he expects to be paid; he has given an indication of his hourly rate which is a professional hourly rate, and that he will be paid for the work that he has done on the case producing his statement and any work going forward. Mr Clegg did not have the exact figures today as to what that would be, but he accepted that the sum would reflect Mr Davidson's standing as a professional forensic accountant.

The letter of instruction that was disclosed was dated 2 August 2018. Mr Clegg submits that it was a very carefully drafted letter of instruction and that it makes very clear to Mr Davidson that he is not required to set out any expert opinion. The letter of instruction goes on to say:

“It may be that expert opinions are called upon in due course, and so we would ask you to ensure that your work is impartial and carried out as if you were instructed to prepare it on an independent basis for the court.”

But the letter of instruction is clear that he is to produce in the first instance a factual witness statement.

Mr Prentis submits that it is a matter of substance and not form for the court to decide whether or not the document that has been produced and served purporting to...