QB-2020-000092 - [2025] EWHC 002154 (KB)

The first, fourth, sixth and seventh claimants’ application for relief against sanctions

The claims were struck out because the claimants failed to comply with a series of orders requiring them to pay costs. The orders have been set out by Mr McMeel at paragraphs 3 – 18 of his skeleton argument and, for brevity, those paragraphs are not recited here but are appended as a schedule to this judgment. Suffice it to say that non-compliance led the James Hay & AJ Bell defendants to seek unless orders, which process generated costs upon costs culminating in the claimants having to pay a total of £22,996.22, £3,000 of which was paid and £18,996.22 was not.

The substantive relief which this series of orders related to was a Request for Further Information. That further information was ordered on 12 January 2024 and was eventually supplied on 30 June 2024.

The costs have now been paid.

The claimants are now very competently represented by Northridge Law LLP.

The strike-out of claims which may be worth millions of pounds would be a very draconian step and the more so when the costs liability was (a) modest and (b) has now been paid. What clearly emerges from what I, on the last occasion, called the “lamentable procedural history” of the claim is that these claimants have been badly let down by their solicitors. They were simply unaware of the costs orders non-compliance with which caused their claims to be struck out. They did not know of the extension application. They did not know that their claims had been struck out. The defendants’ solicitors were not to know the full state of the claimants’ ignorance. But (subject to a topic I deal with below) they know now. And they could scarcely have failed to appreciate at the time that the claimants’ legal representation was shambolic and ineffective. Given that, prior to amendment, CPR rule 9(1)(f), listed a relevant factor as “whether the failure to comply was caused by the party or their legal representative”, and given that (though no longer explicit) this is still a factor to be taken into account, I consider that the James Hay & AJ Bell defendants’ opposition to the application for relief against sanctions has a degree of opportunism about it. The resources and energy they have invested in their resistance could perhaps have been better expended elsewhere.

Applying the familiar three stage Denton criteria:

The breach was serious because the costs were unambiguously payable and were not paid.

There was no good reason for the breach.

But the breach was attributable to fault on the part of the claimants’ advisors. It has been rectified and to strike out (or allow to remain struck out) a valuable claim because of the non-payment of costs amounting to less than £20,000 (now paid) would be to apply a sanction that was out of all proportion to the breach. The claimants acted with promptness when they came to learn of the true position and their former solicitors had already made an application for an extension, albeit that an application for relief from sanctions would have been the more appropriate application. The claimants are now in a position to take the claim forward in an efficient manner. No trial date or other timetabled direction has been affected by the breach.

The James Hay & AJ Bell defendants took two specific points, which I must deal with before coming to my overall conclusion on the application for relief against sanctions.

The first was an attack on the merits. In relation to the first, fourth and seventh claimants, it was said that they were in the same position as Mr Sedgley, the eighth claimant, i.e. they lacked locus standi because they had assigned their claims to the FSCS. I have considered that argument above and rejected it. No or no substantially different considerations apply to these claimants and I reject it in their cases too.

In relation to the sixth defendant, Mr Kitson, it was said that he lacked standing because he was made bankrupt on 4 April 2017 and this claim had therefore vested in his trustee in bankruptcy. I reject this also. Section 11(1) of the Welfare Reform and Pensions Act 1999 states that:

Where a bankruptcy order is made against a person on a bankruptcy application made or petition presented after the coming into force of this section, any rights of his under an approved pension arrangement are excluded from his estate.

It is true (as Mr Van Sante submitted) that the claim is presently formulated as a claim for damages for a lost investment, not a claim to assert or protect pension rights. But such a claim could, it seems to me, be put forward on the basis of the pleaded facts and the custodian duty. As already noted, the court does not generally strike out claims that can be cured by amendment. Further, Mr Kitson intends if necessary to procure an assignment back to him of this claim from his trustee. Similarly to the other claimants, I would not expect him to have appreciated the fact / effects of the statutory assignment on bankruptcy. It is a matter of common experience that many bankrupts do not and Mr Kitson is neither sophisticated nor knowledgeable in business and legal affairs. If this claim was assigned to his trustee (which, in at least one possible formulation of it, I find it was not) then I am not prepared to strike it out in circumstances where he would have been, at the very least, uncertain about that and where he intends to and can remedy the defect swiftly. In relation to the latter requirement, I note that the case from which the requirement of “swift” action emanated (Walter & Sullivan Ltd v J Murphy & Sons Ltd [1955] 2 QB 584) stipulated that the claim had to be put into proper form “within a fixed period”; see at 589 final paragraph. If necessary, I will so direct.

Mr Van Sante’s second point was an attack on the credibility and bona fides of the claimants. This was derived from enquiries that the James Hay & AJ Bell defendants’ solicitors, Pinsent Masons, had made of Ryans Solicitors – who acted for the claimants (without ever coming on the record) between about January and July 2024. The enquiries were designed to elicit evidence as to the extent of the claimants’ ignorance of the steps taken by their solicitors on their behalf and of the orders made. In making such enquiries, Pinsent Masons were on dangerous ground. First, any response from Ryans was all too capable of trespassing on matters that were prima facie privileged. Second, given that the conduct and representation of Ryans was criticised, their response was almost bound to be (adopting Mr McMeel’s expression) “defensive and self-serving”. That is, indeed, how the responses read. I doubt that it was wise for Pinsent Masons to have embarked on these enquiries in the first place and they have contributed very little to the matters at issue. The high point of Ryans’ responses to the enquiries was that it was speculated by them that the first claimant, Mr Lee, might have discussed the extension application with Mr McCulloch on 23 January 2024. In order to rebut this, the claimants waived privilege in an email dated 14 May 2024 from Ryans to Mr Lee. The sense of the email was that there was no such discussion.

Mr Van Sante relied upon the decisions in Goldcrest Distribution v McCole [2016] EWHC 1571 (Ch) and Devon & Cornwall Autistic Community Trust v Cornwall Council [2015] EWHC 129 (QB). The judges in those cases (respectively Master Matthews, as he then was, and Green J) criticised what I might call bald assertions by a party in default that it was their solicitor who was to blame for the conduct that had led to the need to apply for relief from sanctions. Green J, for example, commented that all he had before him was “a series of unsubstantiated assertions of a particularly serious nature about the conduct of previous legal advisors”. Master Matthews commented that the claimant “should have waived privilege and enabled a full explanation to be given by the lawyers of their criticised conduct”. These cases led Mr Van Sante to submit to me that “Cs should themselves have waived privilege and presented a full account to the Court, exhibiting all relevant documents and obtained evidence from their former legal representatives to substantiate their position.”

I have taken careful note of the decisions of Master Matthews and Green J. But there are some obvious points of distinction. In this case, the claimants have given a full explanation of their state of ignorance and the lack of progress of their claim. It is abundantly clear from the succession of retainers and instructions from one set of solicitors to the next (what Mr McMeel, not inappropriately, called a game of “pass the parcel”) that their interests were neglected. Their ignorance of what was actually happening is not bare assertion and is only too plausible. Mr Van Sante nevertheless insisted that it was incumbent on the claimants to “put in the file”, i.e. to disclose the solicitor’s entire (privileged) file of documents and provide evidence and explanation from the relevant firm through whose hands the file had passed. This would amount to a mini-trial of a satellite issue and would be completely disproportionate. Further, Mr Van Sante’s real point was that without disclosure of the file his clients and the court could not be satisfied that, for example, there was not a note of a discussion on 23 January 2024 or some other date between Mr McCulloch and Mr Lee at which Mr Lee was – contrary to what he has maintained – in fact acquainted with the true position. As Mr McMeel pointed out, this amounted to a conspiracy theory involving his instructing solicitors, Northridge Law. It is scarcely likely that they would have suppressed such a document thereby actively misleading the court and I regard the stance taken by Mr Van Sante and his solicitors on this matter to be unreasonable and unrealistic.

Having rejected Mr Van Sante’s specific points, I return to the Denton criteria. As will already be apparent, my view is that weighing up those criteria (and especially the last) the balance comes out clearly in favour of granting relief from sanctions.

I invite counsel to submit an order reflecting the determinations in this judgment. If that and/or costs cannot be agreed, I will list a further short hearing.

Postscript

I distributed copies of this judgment in draft for editorial corrections. These were duly supplied by Mr McMeel KC and Mr Day. Mr Van Sante supplied a document of a somewhat different character. It was prefaced with the following statement:

“D3-D6 note in providing suggested corrections that it is incumbent on them to point out if they consider reasoning in a judgment is inadequate in line with paragraph 32(e) of Wuhu Ruyi Xinbo Investment Partnership Enterprise (Limited Partnership) v GLAS SAS (London Branch) [2025] EWCA Civ 933 to permit such perfections as are permitted under paragraph 32(f) of that judgment, and have therefore sought to do so where relevant.”

Almost the whole document consisted not of editorial corrections but an attack on my reasoning and conclusions.

The sub-paragraphs of the judgment of Falk LJ in the GLAS SAS case which Mr Van Sante relied upon were drawn from her summary of the methodology that judges might bring to the task of expressing their reasoning. This is what she said:

Before leaving the topic of inadequate reasoning, I will draw together some threads from the authorities and comment on how they may be applied in the context of an interim application or case management decision such as this. These points should come as no surprise to experienced judges, but they may assist those at earlier stages of their judicial careers:

A judgment or ruling given in an applications list such as the Friday Commercial Court list, or at a case management hearing where there may be a multiplicity of issues to address in a limited time, is unlikely to be, and need not be, a polished product like a reserved judgment.

What is required will depend on the context. However, summaries of background facts and uncontroversial legal principles may be omitted in appropriate cases, or at least significantly trimmed. If a judge is able to do so, preparation of notes in advance will assist him or her to include the minimum required to make the judgment understandable. If essential, cross-references to skeleton arguments or other documents can be made, although it is preferable for these to be "read in" to the transcript, or for the approved transcript to include the information referred to (see further below).

As Males LJ explained in Simetra, the best approach is to identify the issue or issues, refer to any relevant evidence (again by cross-reference if needed) and then give the core reasons for the judge's conclusions. Again, the issues and relevant evidence may well be capable of being noted in advance. If the judge has formed a provisional view, it may also be possible to reflect that in a tentative draft, but that will of course require careful review in the light of oral argument. If necessary, the judge should rise (or send the parties out) to allow enough time for that review. This applies whatever the time pressure may be. Even 10 minutes might make all the difference. Alternatively, if necessary and provided that the judge is sure as to the outcome, a decision could be announced with reasons to follow. In other cases judgment might have to be reserved, however unpalatable that is.

As a rule of thumb, it will usually be more important in practice to focus on the reasons why the losing party's case is being rejected rather than the (positive) attractions of the winning party's case. That approach is not only transparently fair and should minimise the chance of an appeal being made, or at least permission to appeal being granted, but it also helps to ensure rigour. Accepting the winning party's arguments "for the reasons they give" (or equivalent) will usually not suffice without saying something specific about the losing party's case.

Importantly, counsel should immediately point out if they consider that reasoning is inadequate. It is regrettable that this was not done in this case. A failure to do so cannot prevent an appeal being made, but it is conduct that might be taken into account by the appellate court in determining the appropriate order for costs, since raising the issue might have resulted in an unnecessary appeal being avoided.

A judge also has scope to perfect a transcript of a judgment when he or she is asked to approve it. Ex post facto justifications are of course not appropriate, but amendments are possible to ensure that the approved transcript clearly conveys what the judge intended to say, in a way that is understandable both to the parties and to an appeal court. This is not limited to correcting obvious errors or infelicities. For example, the content of cross-references that have not been read in to the transcript could be expanded, and reasoning can be clarified. The structure, or order in which text appears, can also be altered if required to improve clarity. If further reasoning was in the judge's mind but was omitted in error, a post-script could be added explaining that.”

My judgment in this case is not an ex tempore judgment given orally in the middle of a busy list (as was the first instance judgment in the GLAS SAS case). Editorial corrections, which are what I invited, in respect of a reserved, written judgment are not generally an occasion to mount an attack on the judge’s reasoning. That is perhaps especially so when that judge has made the opening remarks I have made at paragraph 6 above. To those opening remarks – and given the tenor of Mr Van Sante’s document – I might now add that not every argument or consideration urged on me by the parties has been central to my decision and not every argument has required from me the detailed analysis found in the skeletons; see generally Commissioner of Customs & Excise v A [2002] EWCA Civ 1039 at paragraphs 80 – 84. I do not read Falk LJ’s judgment in the GLAS SAS case as altering this general rule. The position was summarised by Baker LJ in a recent case concerning family proceedings; see YM (Care Proceedings) (Clarification of Reasons) [2024] EWCA Civ 71.

The delivery of a judgment is not a transactional process. Its contents are not open to negotiation. Just as the trial is "not a dress rehearsal" but rather "the first and last night of the show" (per Lewison LJ in Fage UK Ltd v Chobani UK Ltd, [2014] EWCA Civ 5 at paragraph 114), so the judgment is not a draft paper for discussion but the definitive recording of the judge's decisions and the reasons for reaching them. It is therefore inappropriate to use a request for clarifications to reiterate submissions or re-argue the case, or to cite a part of the evidence not mentioned in the judgment and on the basis of that evidence ask the judge to reconsider the findings.”

The third to sixth defendants’ List of Proposed Corrections provides examples of all these vices. The List does not, in truth, seek clarification or elaboration of my reasoning. It invites me to adopt different reasoning and/or to take into account considerations which these defendants think are important, but which I did not. I therefore decline the invitation to embark upon the “perfections” that were urged upon me. I will deal with them in the context of any application for permission to appeal, which seems to me to be the proper forum for them.