Spencer McGuinness v Kevin Mawer

HHJ PAUL MATTHEWS:

1. This is an application by notice, dated 7 October 2024, by the claimant in these contempt proceedings, Spencer McGuinness, for relief in relation to an order that was made by HHJ Hodge KC on 17 July 2024. He seeks a declaration that the defendant, to whom the order was addressed, is in breach of that order. He also asks for an order compelling compliance with paragraph 3.8(b) of that order, as well as further directions in this matter.

2. That application notice is supported by a witness statement, the fourth of the claimant, also dated 7 October 2024, and in addition, a subsequent witness statement, his fifth, dated 18 October 2024, in which the claimant replies to a witness statement opposing the application made by the defendant’s solicitor, Toby Rouse, dated 17 October 2024.

3. The application is made in the context, as I have said, of contempt proceedings. These were commenced by a contempt application notice, dated 6 June 2024, and accompanied by points of claim - which were actually dated 24 May, but that does not matter - and supported by a witness statement also dated 24 May by the claimant. There are also schedules to the application which give particulars of the alleged contempts. The alleged contempts fall within the category of knowingly or recklessly making false and misleading statements in sworn documents or documents supported by a statement of truth, and also interference with the administration of justice.

4. The type of alleged contempts means, under rule 81.3(5), that the claimant should apply for and obtain permission to make this contempt application. That application for permission was, of course, as is usual, made in the application notice itself.

5. Now, that was the on 6 June. Six days later, on 12 June, the claimant issued another application, this time for certain paragraphs in a witness statement made by the defendant, Mr Mawer, dated 13 March 2024, to be struck out, and for disclosure of documents which contained or related to the retainers by the defendant of his previous solicitors. That second application by the claimant was supported by his witness statement of the same day, 12 June, and opposed by a witness statement made by the defendant on 9 July.

6. That application came before HHJ Hodge KC on 17 July 2024, when he heard the application. He granted it to a certain extent, and refused it to a certain extent. The result of that order, in substance, was that the defendant was to give disclosure of certain documents, and it is desirable that I make clear what they were. In paragraph 3(a), it is provided that, “The respondent do by 4 pm on 16 August 2024 give to the applicant disclosure of the documents specified in the schedule hereto in accordance with the provisions of CPR Practice Direction 31.”

7. I should say, by the way, that there was some discussion before the learned judge as to whether this was a case which should proceed under the disclosure provisions of Part 31 of the CPR or whether it should proceed under the provisions of Practice Direction 57AD, which is appropriate for cases in the Business and Property Courts. This application is clearly intituled “In the High Court of Justice, Business and Property Courts of England and Wales”. However, it appears that, after some discussion, the judge concluded that this was appropriate to be dealt with according to the provisions of Part 31. He gave reasons for that view, which I have not, however, seen because apparently the recording of his judgment was not of sufficient quality to enable a transcript to be obtained. Nevertheless, that is why he made the order that he did, that it should be in accordance with the provisions of CPR Practice Direction 31.

8. Returning to the narrative, the order therefore provided that disclosure be given of the documents specified in the schedule. Now, the schedule says this: “All documents containing or evidencing the advice given to the respondent referred to in paragraph 18 of the witness statement of Andrew John McAulay, dated 8 September 2022, namely,” and then it sets out five categories of advice, 1, 2, 3, 4, 5, and they track the words of paragraph 18 of that witness statement of Mr McAulay and it is therefore probably better that I simply set out what paragraph 18 actually says.

9. Paragraph 18 of Mr McAulay’s witness statement, which was made on 8 September 2022, says this: “The only advice that the receiving party,” that is Mr Mawer, the defendant in this proceeding, “was given by Mr Rouse,” that is an associate solicitor at Clarion Solicitors, “or my firm,” that is Clarion Solicitors, “in respect of the retainers, which I must accept appears to have been given without sufficient detailed consideration, was without any waiver of privilege or confidentiality, that the retainers may fall within the definition of conditional fee agreements; that even if they were conditional fee agreements, they complied with the Act,” that is the Courts and Legal Services Act, “that the retainers would not be unenforceable on a solicitor own client basis, but that the success fee might not be recoverable; and that the second retainer was not relevant in any event because nothing turned on the receiving party leaving Begbies Traynor to become a director of Forensic Recovery Limited because his appointment as trustee in bankruptcy was personal and the first retainer between him and Ward Hadaway continued to have effect. The receiving party was also advised not to disclose the retainers as the paying party had not disclosed a genuine issue that would justify that step. Obviously, the advice in relation to disclosure is likely to have been conditioned by the view that the retainers appeared unproblematic and that the question of the second retainer on moving firms was essentially irrelevant.”

10. So that is paragraph 18 of Mr McAulay’s witness statement of 8 September 2022. What the defendant in the present proceeding was required to disclose or, more properly, to disclose by way of production of copies, was all documents containing or evidencing that advice, the advice referred to in paragraph 18 of the witness statement.

11. In compliance with that order, the defendant produced a disclosure statement, dated 15 August 2024, accompanied by documents or copy documents in 34 categories. There was then correspondence between the parties. The claimant complained that the disclosure was inadequate and did not comply with the order. The defendant, through his solicitors, Clyde & Co, refuted that. Ultimately, as I have said, the claimant issued an application by notice, dated 7 October 2024, saying that the defendant was in breach and he wanted an order to compel the defendant to comply.

12. As I have also said, there were already contempt proceedings on foot in the context of which this application was being made, but there was required to be an application for permission to be heard and decided by the court before the contempt application could proceed. That hearing was fixed to take place today, or within a short window commencing today. Because of the existence of this logically prior application, it was agreed between the parties that the application of 7 October should be heard today instead of the permission application, and a draft consent order was prepared and submitted to the court, I think, on 17 October. As it happens, I did not see that until it was referred to me yesterday, when I immediately made that order. I understand that it has now been sealed and sent out to the parties.

13. Accordingly, today, I am dealing with the application of 7 October and not the application for permission to carry on the contempt proceedings. I am concerned with possible breaches of the order for disclosure of 17 July. A declaration is sought as well as a further order compelling compliance.

14. The rules of the CPR which deal with this kind of situation are, in effect, twofold. One is rule 3.4(2)(c), which empowers the court in appropriate circumstances to strike out a statement of case for failure to comply with an order. That is not being sought in the present case. The second relevant rule is rule 31.12, which is commonly used in disclosure cases for failure to comply with an order by enabling the party concerned to make an application for specific disclosure of documents. I have already mentioned that this application is not being carried on under the rules applicable to disclosure in the Business and Property Courts. If it were, then the relevant paragraphs would be 17 and 18 of Practice Direction 57AD.

15. In principle, there are four allegations made of breaches of the order which the claimant, Mr McGuinness, has set out in his fourth witness statement, dated 7 October 2024. The first is that no disclosure has been given for any documents in the period after 16 March 2022, up to 8 September 2022, when Mr McAulay’s witness statement was made. The second is that the search for the documents appears to be incomplete. The third is that some documents appear to have been removed, both from the email chains and elsewhere. And the fourth is that there are no attendance notes or other records of any oral or verbal advice.

16. In order to make the application and my judgment on it intelligible, I need to go further into the background of this matter. It appears that there was insolvency litigation between the parties, and that the defendant was the insolvency practitioner who occupied the office concerned. Ultimately, in January 2019, the court - that is to say Insolvency and Companies Court Judge Jones, made costs orders against the claimant and in the defendant’s favour. Detailed assessment was ordered of those costs and, in 2021 and 2022, there were hearings in the Superior Courts Costs Office before Costs Judge Leonard.

17. The detailed assessment of the costs began on 15 March 2022. Up until that point, the defendant had disclosed only one solicitor’s retainer. Yet earlier I mentioned that, at the beginning, the defendant had instructed Ward Hadaway and subsequently Clarion Solicitors. And as I say, until that point, the defendant had disclosed only one solicitor’s retainer which was, I think, with Ward Hadaway, apparently on the advice of Clarion.

18. However, for reasons which I am not entirely clear about, but appear to have arisen on the first day of that detailed assessment hearing, it was brought home to the defendant that, if there was another retainer, it was of some importance. It appears that there was indeed another retainer. This was disclosed by the defendant by a witness statement made on 16 March, the next day. That was the third witness statement of the defendant in those earlier proceedings, not in the present proceedings. The day after that, Costs Judge Leonard ruled that that the second retainer was unenforceable. The detailed assessment was not abandoned but it was, at any rate, adjourned, with directions given and, indeed, later further directions were given.

19. It became apparent to all that if the second retainer was unenforceable and that that kicked in from a certain period after the first retainer, a considerable amount of the costs which were otherwise to be dealt with in these proceedings would fall away, so everybody needed time to take stock of the situation.

20. In April and in July of that year, 2022, the claimant made at least two further applications against the defendant relating to the consequences. One of those was in relation to seeking the revocation of earlier orders. The other was, I think, his asking for certain disclosure. It does not particularly matter what they were for. But in that context and in response to those two witness statements, on 8 September 2022, first of all, the defendant made a further witness statement explaining how it had happened that he had not disclosed the second retainer and what had happened to him. Secondly, Mr McAulay, who was a partner in Clarion, also provided a witness statement explaining how the failure to disclose the second retainer had occurred.

21. As a result of all this further information being supplied to all the parties, on 27 October 2022, the defendant conceded his costs application and agreed to pay the claimant’s costs.

22. Nearly two years later, on 6 June of this year, the claimant began his application for contempt proceedings against the defendant, as I say, on two particular grounds.

23. So, with that brief look at the background to the matter, I now turn back to the four allegations of breach of the order of 17 July of this year. The first one is that there has been no disclosure of any documents containing or evidencing advice given to him following 16 March 2022, up to 8 September 2022. Here, the question is simply one of the construction of the order. What is it that the defendant was required to do by the order of HHJ Hodge KC? Was he required to disclose advice up to 8 September or only up to 16 March 2022? That order was made in the context of the court holding the privilege in that advice, whatever it was, had been waived by paragraph 18 of Mr McAulay’s witness statement, notwithstanding his rather forlorn attempt to preserve it by the words which he included in that paragraph. It is obvious that there was no power, short of statutory sanction, for the court to order the production of any documents in which legal professional privilege still subsisted.

24. What I need to do is to see which are the other documents in which privilege has been waived. These are, as I say, the documents referred to in paragraph 18 of Mr McAulay’s witness statement of 8 September. This was, of course, the paragraph relied upon by the claimant in his application notice of 12 June 2024 which led to that order of 17 July. We can see this, in particular, from paragraph 18 of his witness statement of the same day.

25. So the order specifically said that the defendant had to disclose all the documents containing or evidencing legal advice to the defendant which were referred to in paragraph 18. But in their context, that can only be advice given up to 16 March 2022, when the defendant disclosed the second retainer, because that is what Mr McAulay is dealing with in paragraph 18. In my judgment, there was no waiver of privilege in any later advice than 16 March 2022, and, therefore, there could be no order by HHJ Hodge KC to disclose any documents following that because they would still be privileged.

26. I add only this, to say that the defendant is not even required, therefore, in relation to such documents post-dating 16 March, to say whether there are any advice documents falling outside the scope of the order after that date. That is simply irrelevant. So the first complaint is not made out.

27. The second complaint is that there has been an incomplete search of the files by the defendant. It is worth reminding myself that the defendant’s disclosure statement made in accordance with the order of HHJ Hodge KC had to be in the form required by the Practice Direction to Part 31, which is a standard form. It is dated 15 August 2024, it is signed by the defendant, and it says, “I have carried out a search.” Yet, the witness statement made by Mr Rouse, his current solicitor, says that, in relation to the documents that came from Clarion’s files, it was Clarion that carried out the search. Mr McGuinness, the claimant, founds on this disparity in the evidence before the court.

28. However, the form of the disclosure statement is, as I have said, prescribed. Although it requires that a party should personally sign the disclosure statement - except in certain limited cases, for example, a limited company and in some other cases too, but we need not go there - it does not require that a party should personally conduct the search which is stated to have been made. It is usual, in ordinary litigation, for a party’s solicitors to conduct the searches. But the party, except in those rare cases that I have mentioned, has personally to sign the statement to say that the searches have been carried out. This is intended to bring home to the party that person’s own responsibility for the searches and the completeness of the list. In other words, the party cannot say, Well, I did not carry out the search myself, and therefore it is not my fault. The point is, it is the responsibility of the party, whoever in fact carries out the search. What, in that case, the party is saying by signing the statement is, I have caused to be carried out such and such a search and I am responsible for the consequences.

29. Now, the claimant here complains that there has not been any or any sufficient search of Clarion’s records. This is because the claimant says, and it is true, that the defendant did not go and look at Clarion’s records and neither did Clyde & Co. What happened was, Clarion did not hand over the file to someone else - to Clyde & Co or to the defendant. They simply reacted to what they were told by Clyde & Co. What we know happened appears from the witness statement of Mr Rouse at paragraph 6. In summary, this says that a copy of the court order of 17 July was given to Clarion. Clarion searched their own files. They provided material which, in their view, was of any relevance to what was being sought to Clyde & Co. The defendant searched his own files and provided material that he thought was caught by the order to Clyde & Co, and then Clyde & Co decided, out of all the material with which they had been supplied, what fell within the scope of the order, and they disclosed that.

30. So, the result of the evidence of Mr Rouse is that it cannot be said that no search at all was carried out. It can also be said, well, Clarion are solicitors. They understand the disclosure rules. They have a professional reputation to uphold, and if their client instructs them to carry out a search as part of a disclosure exercise, then they can be relied on to do it. And thirdly, it is Clyde & Co, not the defendant, who made the final decision as to what ought to be disclosed, and yet the defendant signed the disclosure statement personally.

31. In my judgment, it is not possible for the claimant to impeach that process unless he can show either that the wrong test has been applied in searching for documents and disclosing them or some other mistake of law has also been made - and the court would be able to tell that, if it had the relevant information - or there was a sufficiently strong basis to go behind the witness statement that Mr Rouse had made. For example, if it were to appear on the face of the documents, whatever they were, that there may be other documents as well which have not been disclosed. In that case, the solution for the claimant is to make an application for specific disclosure under rule 31.12. It is not enough for the claimant simply to assert that Clarion may have, for example, had an interest in not disclosing something. That would be simply fishing. In this case, we have got a disclosure list in proper form and, subsequently, a witness statement of Mr Rouse, the defendant’s solicitor, explaining in some detail what has actually been done.

32. In the course of the hearing, I referred the parties to the decision of the Court of Appeal in Fayed -v- Lonrho plc . This is reported only in The Times of 24 June 1993, and I think The Independent for the day before (because in those days, The Independent had law reports like The Times ). It is a decision of Stuart-Smith LJ, who gave the leading judgment, McCowan LJ and Kennedy LJ.

33. In that case, the judge at first instance had made an order that the defendants, the Fayed brothers, should be cross-examined on the affidavits of documents they had made. This was under the old rules, the rules of the Supreme Court, where in certain circumstances an affidavit of documents could be required. That was simply verifying the list of documents that had been made. Nowadays, under the CPR, it is all in one: it is made in a list of documents which is made subject to a disclosure statement, and therefore has the same effect. But in any event, there is the further witness statement made subject to a statement of truth by Mr Rouse. So the two cases are, in my judgment, on the same footing.

34. And in that case, the Fayed brothers appealed against the order for cross-examination on their affidavits of documents. The appeal was allowed by the Court of Appeal. The Court of Appeal said that the judge should not have made the order for the cross-examination of the Fayed brothers on their affidavits. And in so deciding, Stuart-Smith LJ went through the entire history of this part of the law and recited a large number of cases.

35. He said on page 5 of the transcript: “The important issue of principle raised in this appeal is whether the oath or affirmation of the deponent in proper form in pursuance of an order for specific discovery under order 24, rule 7, is conclusive or can the other party by cross-examination or otherwise, seek to show that it is untrue so that an order can be made under rule 16.”

36. And after going through all of the authorities in, as I say, considerable detail, on page 10 of the transcript, he says this: “The reasons for the rule that the statement and the affidavit of documents is conclusive, save to the extent that a further affidavit may be ordered, are not far to seek.” And then omitting a few words, he goes on: “In the great majority of cases where it is alleged that one party or the other has supressed documents, this issue will be crucially relevant to the issues in the trial and can only properly be determined after the judge at trial has heard all the evidence. To try the issue at an interlocutory stage could involve injustice to both sides. Assume it is the defendant who is alleged to have suppressed documents. The judge might believe the defendant despite the cross-examination. That would be an injustice to the plaintiff who had not deployed all his evidence. If the judge disbelieved the defendant simply on the cross-examination, that could be an injustice to the defendant, because there might be other evidence which he could call which might persuade the judge that he was telling the truth or, at least, leave the matter in doubt so that the plaintiff would not have discharged the burden of proof. Mr Pollock says here that there is nothing to prevent the defendants calling other evidence at the interlocutory hearing. I do not agree. That was not what the judge had ordered. He has only ordered cross-examination of the deponents. Such a procedure would subvert the normal method of trial. The defendants would be subjected to an inquisitorial enquiry without having the advantage of hearing first the plaintiff’s case and their own evidence adduced in chief.”

37. So the point I get from that decision is simply that it was actually quite hard, under the old rules, to go behind an affidavit of documents, and similarly, under the current rules, a list of documents verified by a disclosure statement. In these circumstances, I conclude that there is no basis here to go behind the list of documents and the witness statement of Mr Rouse, and that the fact that the defendant personally did not search Clarion’s files is irrelevant.

38. The next point which the claimant complains about is that information has been removed. He points to three things: first of all, he says that some of the email threads are incomplete. That is to say, intermediate emails appear to have been removed from it. Secondly, that there are too few emails from the defendant. And he says thirdly that the defendant is not entitled to cherry pick documents.

39. As to the first of these points, there is no requirement in the order of HHJ Hodge KC that the defendant should disclose the whole of chains of emails. The requirement of that order was to disclose documents falling within stated categories. Documents not falling within those categories are not required to be disclosed. So it may happen that some emails in a chain fall one way and others fall another.

40. During the course of the argument, I asked Mr McGuinness, the claimant, to give me some examples of cases where it was obvious that the email that we were given depended in some way on another in order to have a complete understanding of the advice, but that other had not been disclosed. Mr McGuinness took me to several examples, but none of them showed, in my judgment, that there must have been a further document forming a part of the advice, whether preceding or following the email that we could see, which had not been disclosed.

41. In my judgment, it was not wrong to remove those falling outside the scope of the order from the chain. In my judgment, it is not even suspicious, but normal.

42. As to the second point, too few emails from the defendant, Mr Rouse’s witness statement says that all the emails in scope have been disclosed and, of course, there is also the disclosure list itself and its statement of disclosure having been given. Again, the claimant cannot impeach the process unless he shows either that something has gone wrong in the law, like applying the wrong test, or there is some proper basis for going behind Mr Rouse’s witness statement. Again, this is simply fishing.

43. And in relation to the third point, the concept of cherry picking, Mr McGuinness referred me to two cases in particular, PCP Capital Partners -v- Barclays Bank and Clements -v- Frisby . In these cases it was made plain that a party is not entitled to cherry pick. But the cherry picking argument is really relevant in considering whether the court should make an order in relation to documents in which it is said that privilege has been waived. In other words, it goes to the width of the waiver of privilege. But once that has happened, and the order has been made, the question is no longer one of cherry picking. It is simply one of complying with the terms of the order. In the two cases which Mr McGuinness referred me to, they are both of the former kind, before the order is made for specific disclosure, and not of the latter kind, where there is a complaint of non-compliance with an order for specific disclosure.

44. The last point Mr McGuinness complains of is that there must have been verbal communications and verbal advice given which is not recorded anywhere in writing. There just do not seem to be any attendance notes of advice, for example. Now, the first point I would make is that the order of 17 July concerned the disclosure and production of documents and not of communications. Communications can be oral, documents cannot. Documents are documents, if I may be permitted to say so. So, no verbal communication can have been ordered by the judge to be disclosed, and the claimant therefore cannot complain that they have not been.

45. To the extent that the claimant is complaining that there were no attendance notes, well, first of all, as I observed, I think, during the argument, one of the peculiarities of insolvency litigation is that there are circumstances in which, by statute, insolvency practitioners are sometimes able to override legal privilege, and that has, as I understand the matter, caused a practice to develop in which some insolvency law advice is not given in writing by lawyers to their clients. It is given orally and that is intended, as I understand it, to get over this problem or, if that is a problem.

46. But the second point is, simply that, whether or not that is true and whether or not that is what has happened in the present case, the fact is that the claimant did complain in correspondence before issuing his application perfectly properly that there were no attendance notes. He wanted to know where they were. Clyde & Co on behalf of the defendant responded at least twice in letters dated 21 August and 30 August, that they had been told by both the defendant and by his former solicitors, Clarion, that there were no attendance notes of advice or calls between them. That was then confirmed by Mr Rouse in his witness statement at paragraph 6. In my judgment, once again, there is no basis for going behind these statements.

47. And so I conclude that none of the four complaints made by the claimant in his application is made out.

48. I want to add just two final comments on matters which have arisen in this case. The first is that I was referred to a statement by Mustill LJ in a decision of the Court of Appeal called Berkeley Administration -v- McClelland [1990] FSR 381 , at page 383. And in that decision, Mustill LJ said this: “Plainly, the atmosphere in the case is such that the plaintiffs have grave scepticism about anything said on behalf of the defendants, but it is not a purpose of discovery to give the opposing party the opportunity to check up on whether the discovery has been properly carried out. If they do not believe the deponent, they should call for him to appear and be cross-examined on his oath. Alternatively, if they wish to do so, they may seek the opportunity at the trial to explore the matter further.”

49. Now, this was one of the decisions which was examined in his judgment by Stuart-Smith LJ in Fayed -v- Lonrho . He quoted that particular dictum and he said this: “The remark is clearly obiter and was made in the course of an ex-tempore judgment. None of the authorities to which we have been referred were cited to the court.” And I take it from that that he therefore disapproved of the dictum of Mustill LJ to the extent that he suggested that it was possible to require the deponent of an affidavit of documents to appear and be cross-examined on his oath. According to Stuart-Smith LJ, that was not possible, for the reasons which he gave in his judgment. I do not, on the other hand, think that Stuart-Smith LJ was in any way disapproving of the earlier part of the dictum that it was not a purpose of discovery to give the opposing party the opportunity to check up on whether the discovery had been properly carried out. I think that that was intact. If I may respectfully say so, I agree with it. That is the first point I wanted to comment on.

50. The second point was one about a penal notice. It appears from emails that were passing between the defendant’s counsel and the court on 26 July, after the order of HHJ Hodge had been made, that it was the judge who had decided to attach the penal notice to the order himself, even though it had not been sought in the application by the claimant. In those circumstances, in the terms in which the judge expressed himself, that it was appropriate in view of the relevant imminence of the permission hearing, to attach the penal notice, I think the claimant was wrong to suggest in his skeleton on the final page that the judge had done this to try to ensure compliance due to the history of the case. That does not appear from the reasoning of the judge in the email and I thought I should make that point plain.

51. I only add this: That, in my judgment, it is not actually a matter for the judge at all as to whether a penal notice is attached, because, as I understand the matter, a penal notice is not part of the order. The penal order is necessary because a party obtaining the order wishes to be able to enforce that order by committal, but you cannot enforce a court order by committal without a penal notice being attached. And that is why, if you look in the Chancery Guide at paragraph 16.30 to 16.33, you will see the explanation given that it is always the party that wants the penal notice added that has the burden of saying so or doing it if that party is drafting the order or supplying it to the court, if the court is drafting the order. I have never understood that it was part of the judge’s function actually to insert a penal notice, certainly, against the wishes of the parties. That concludes my judgment. --------------- This transcript has been approved by the Judge