William Helfrecht v James Chapman and Others - Judgment

¶ IN THE GRAND COURT OF THE CAYMAN ISLANDS ClVlL DIVISION CAUSE NO. 59 of 2013 BETWEEN: AND WILLIAM HELFRECHT JAMES CHAPMAN BODDEN LITIGATION LTD. Plaintiff lSt Defendant 2nd Defendant TOUCH AND TETUE LTD. 3rd Defendant Appearances: Ms. Krista-Lynn Wight and Mr Aristos Galatopoulos of Maples and Calder for the Plaintiff Mr. Alan Turner of Turners for the I"', 2nd and 31d Defendants Before: Hon. Justice Richard Williams Heard: 14Ih March 2014 Date of Judgment: 14'~ March 2014 HEADNOTE Practice - Case management hearing- Application for an unless order due to .faillrre to comply with court orders in relation to discovery - When the Grand Court should exercise discretion to make an unless order - GCR 0.24 r.20(1) - Application for costs on indemnity basis 201-1031-1 Helfechr v Chapman & Ors Judgment Page I of21

¶ [1] The parties having concluded their submissions, rather than reserving judgment I have decided to give an ex tempore ruling. The parties should understand that this is not intended to read as neatly as a formal written ruling, but I feel the benefit of this approach is that the parties will have an immediate decision as well as hopefully being able to deduce my reasoning for making it. A transcript of this ruling will be provided to the parties shortly after the hearing.

¶ [2] Having noted the nature of the dispute between the parties, although at this stage only dealing with substantive directions which will lead to trial, I expressed to the parties at the outset of the hearing that they should still 'leave the door open' to enable there to be constructive discussions to try and find a timely, and far less costly, resolution to their current differences. I now reiterate that view again. Background

¶ [3] On 22nd February 2014, the Plaintiff, William Helfrecht, issued a Writ and Statement of Claim seeking a number of declarations as well as orders which aim, using the Plaintiffs words, to "achieve an orderly winding up of Bodden and Bodden Litigation and thus an orderly separation of the business affairs" of 20140314 Helfiechr v Chapman & Ors Judgment The Defence and Counterclaim was filed on behalf of all three defendants on 191h July 2013. The Defendants' case is that at no time was the Plaintiff an equity partner in Bodden & Bodden Litigation, the contention being that he was merely an employee. The First Defendant counterclaims, in the alternative, for damages primarily for breach of duty which he claims were owed to him by the Plaintiff. The Plaintiff filed the Reply to Defence and the Counterclaim on 31'' July 2013. Therefore, pursuant to GCR 0.24, r. l(l), automatic exchange of lists of discovery documents was due on 2sth August 2013. The Plaintiff in a letter dated 23rd August 2013 set out his position on the relevant categories of documents he expected to receive and the discovery sought. It does not appear that there has been a substantive response to that letter in relation to the scope of discovery. By way of a very brief overview of the issues from the pleadings (and not by way of any settled finding of fact) the background is as follows. The Plaintiff claims that in September 2006 he and the First Defendant became partners in Bodden & Bodden Litigation, which he says was set up at the same time. The Plaintiff claims that the partnership remains and that there are various binding arrangements. The Defendants assert that Bodden & Bodden Litigation was 20140314 Helfrechr v Chapman & Ors Judgment formed by the First Defendant in or about July 2006. It is further asserted that Mr. Chapman was and remains the sole equity partner of Bodden & Bodden litigation. The skeleton argument prepared on behalf of the Plaintiff helpfully summarises the procedural events. For convenience sake in this ex tempore ruling I will read from uncontentious parts of the skeleton argument. The parties agreed an extension for the exchange of lists to 3oLh September 2013. I note that that was approximately 5% months ago. At a hearing on 3 lSt October 2013 of the Plaintiffs Summons for Directions dated l lth september 2013, Quin J. was informed of the Defendants' failure to meet the agreed deadline for exchange of lists. Quin J. made an order, importantly by consent, granting a further extension of time for the exchange to 29" November 2013. Apparently this date was one suggested and agreed by the Defendants. On 27" November 2013, two days prior to the afore-mentioned deadline set by Quin J. in a Court Order for the exchange to take place, the Defendants indicated that they were not in a position to exchange "...bur ,fully expected to be in a position to do so on Friday, 6 December 2013. " The Plaintiff agreed to this further extension. 20140314 Helfrechf v Chapman & Ors Judgment However, in the late afternoon on 6"' December 201 3 the Defendants informed the Plaintiff that a complete review of the documents could not be completed: "...although the majority of documenls have been reviewed. .. ,, A further request was made by the Defendants, again acceded to by the Plaintiff, this time to extend time for the provision of a preliminary list on 9" December 2013, with a supplemental list being provided on 1 6 ' ~ December 2013. The Plaintiff contends that at the time he still reserved his rights to later assert that the Defendants were in breach of paragraph 4 of Quin J.'s order of 3 1" October 2013. Although the Defendants were able to provide a preliminary list as promised on 91h December 2013, they failed to provide a supplemental list by or on 16" December 2013. As a consequence, the Plaintiff filed a Summons dated 1 8 ' ~ December 2013 in which he sought an order that: "Unless the Defendanls served their complete list of discovery documents forthwith and the Defendants produce all of their discovery documents for inspection within seven days of service of their lists, the Defendant's Defence and Counterclaim be struck out andjudgment be entered for the Plaintiff" The Summons also sought an order that the Defendants forthwith pay the Plaintiffs costs of the application on the indemnity basis. 20140311 Helfiecht v Chapman R Ors Judgrnenr 1

¶ [12] 1 have been informed this morning that in relation to part one of Schedule 1 of the 2 Initial List of Documents that the first 18 items have been disclosed. I am told that 3 in relation to the email correspondence referred to in paragraphs 19 to 24 the 4 Defendants are in a position to disclose emails up to the end of 2010, but hrther 5 time is required to analyse them and produce emaiIs up to and including 201 2 . 6 7

¶ [13] The Defendants responded with their Summons dated 1 9 ' ~ December 2013 8 requesting an order that: 9 "The First Defendant be granted an appropriate extension of time to complete a supplemental list of documents to provide aii relevant doczrments forming part of items 19-21 of his initial list of documents dated 9th December 2013. " An affidavit in support of the Summons sworn on 1 8Ih December 2013 by Laura Clemens, an attorney at the law firm of Bodden & Bodden, Attorneys at Law was filed on 1 9Ih ~ecember 20 13. In this first affidavit Ms. Clemens indicated that she has been tasked with reviewing the files and email correspondence maintained by the firm to assist in the discovery process, as the First Defendant was out of the jurisdiction dealing with personal and family matters. Ms. Clemens therein expressed her view that all of the books and records of Bodden & Bodden litigation were not discoverable. 2014031d Helfiechf v Chopmon A. Ors Judgment She stated that, having regard to the nature of the firm's business as a law firm, a careful review was necessary of all items maintained by Bodden & Bodden Litigation to determine which documents were relevant to this matter, and then, for any document that was potentially relevant and/or discoverable to ensure that disclosing it would not be releasing client information, and if the need arose, to redact any such client information if possible. Ms. Clemens indicated that it would not be possible for the work to be undertaken to enable discovery to take place by the due date and she requested an extension to at least 3 1' March 2014 to provide an adequate list of documents. At the end of the affidavit Ms. Clemens indicated that monthly updates would be provided. Regrettably, save for discussions between her and the attorney for the Defendants, this appears not to have occurred. Monthly communications to a Plaintiff may in certain cases reduce the concern that a Plaintiff might otherwise have and could prevent the type of situation we now find ourselves in. I am delighted to hear today Ms. Clemens' good news today. I accept that this may naturally affect the number of hours that are appropriate for her to work. Fortunately for the Courts, Ms. Clemens frequently appears before this Court and I have always found her to be an attorney that fully prepares her cases and assists the Court. Anything I say at this hearing is not intended to be a criticism of Ms. Clemens, but of the system to ensure compliance that has hitherto been put in place by the Defendants, a system which has evidently overburdened Ms. 20110311 Heljrrchl v Chapman & Ors Judgment Clemens, who may well have strived to work diligently, especially as there is no evidence of her having any substantial support. The Defendants are the ones who bear the responsibility for putting in place an adequate mechanism to ensure discovery and importantly compliance with court orders. It is apparent that over many months insufficient resources have not been made available towards this task. When I say this, I have regard to the Note of Henderson J.'s judgment in R. Ebanks, Powery, A. Ebanks and Bodden v Brooks [2004-05 CILR Note 281 which records: "Ordinarily a defaultingparty will no1 be excused if the,fault was not hi.spersonal1y but that of his legal representative, since- ( I ) the client, rather than the other party to the litigation, should suffer,for the,failure of the legal representatives; (2) the client may have a reme& in damages or in respect of wasted cosrs; (3) it would be almost impossible,for the court to apporlion blame between a client, his attorney and his counsel; and (4) the court is entitled to expect that its officers and counsel who appear before it are more observant of the duty owed to the court than the party himself (Hytec &stems Ltd v Coventry City Counci1,[1997] 1 WL.R 1666, applied)" On 13'~ January 2014 the parties again appeared before Quin J. It appears that Quin J. adjourned the hearing of the Plaintiffs application for an unless order on the basis that the parties would agree further timetabling and due to the fact that he felt he should recuse himself from hearing the application due to his rofessional familiarity with the parties. The parties submitted a Consent Order ted 23rd January 2014 in which the parties agreed that the Defendants would rve their complete list by 28Ih February 2014. Quin J. signed and approved the onsent Order, thereby ensuring that it was the Court case managing this case, 5 and as a consequence the Court is entitled to expect that Quin J.'s Order would be 6 fully complied with. 7 8

¶ [17] On the 14'~ and 21S' February 2014 the attorneys for the Plaintiff wrote to the 9 Defendants' attorney seeking confirmation that there would be compliance with 10 the consent order. Regrettably, it appears that those letters went unanswered and I I that the agreed date of 28Ih February 2014 arrived and went with yet further non- 12 compliance with an order of the Grand Court. The Defendants indicated to the 13 Plaintiff that: 14 "A ,folder of ,further documents will be available .for 15 delivery. . . before close of business on Monday. '" 16 17 The Defendants requested a further extension until 3 March 2014. Yet again, the 18 Plaintiff agreed to the extension. 19 20

¶ [18] The Defendants failed to comply by 3rd March 2014, a date which they had 21 requested. As a consequence, on 4'h March 2014 the Plaintift7s attorney wrote to 22 the Listing Office, copied into the Defendants' attorneys, giving notice of the 23 intention to apply for an unless order today. 1

¶ [19] Yesterday an affidavit sworn on that very same day by Ms. Clemens was filed at Court. It is not clear from her affidavit evidence whether Ms. Clemens was nsulted before any of the agreements for extensions were made following the n-compliance with the order of Quin J. If she had been, then her current request for an extension to mid-May 2014 seems questionable when one considers that the Defendants had already given indications that they would be in a position to comply by dates which have already come and gone. In this, the second affidavit, Ms. Clemens reiterates the time-consuming and, in her words, "complex" nature of providing the discovery especially resulting from privilege issues concerning the firm's clients. She said it was difficult to estimate the amount of time needed to complete the full discovery, and requested that the Court should take into account the work that she has for other clients. Ms. Clemens indicates that she had volunteered to assist in the discovery work because of the First Defendant's health. I understand that his mother passed away in November 2013 and, although no details have been provided to me, that he has been very unwell for quite some time. It may well be that Ms. Clemens has a great deal of other work to do, and I am sympathetic to her predicament, but that in itself is not a reason for non-compliance with Court orders. We are now fast approaching the seven-month after the date for automatic discovery or at least 5% months after the date that the parties initially agreed for that to take place 20140314 H e h c h l v Chapmon & Ors J~rdgrnet~l 1

¶ [21] The Plaintiff rightly stresses to the Court that he has given great leeway to the 2 Defendants by agreeing to every extension of time requested by them based on their assurances that they "jiull~~ expected" to comply with deadlines and that the "majority of the docutnents (had) been reviewed." It does appear that the impression was continually being given by the Defendants, Ms. Clemens' affidavits apart, that discovery was very close at hand.

¶ [22] I find that the Defendants have breached, on more than one occasion, orders made by Quin J. and further that they have also failed to adhere to deadlines agreed between the parties which actually extended the time permitted by Quin J. They have not taken a proactive role in seeking the Court's approval for any extension of time, save for one application for an extension for limited discovery made to the Court. They have also not been proactive by providing timely communications to the Plaintiff to give him informed updates as to the difficulties they were having in complying. There appears to be an inconsistency between the assurances for compliance given by the Defendants' attorney when seeking extensions in correspondence and the content of the affidavit evidence of Ms. Clemens. Comments Concerning the Requirement to Comply with Court Orders

¶ [23] Before I go on to deal with the law in relation to unless orders, I would like to make some general observations. Although the recently gazetted Practice 20140314 Hel/iecht v Clmpman & Om Judgment rcular No. 1/2014 has been issued by the Chief Justice in relation to ompliance with court orders in a different division, namely the Family Division, the sentiment expressed therein may often be equally applicable to the Civil Division. A copy of the Circular was provided to the parties by the Court this morning before their submissions. In any event, Counsel for the Plaintiff at the time informed the Court that they had intended to bring it to the Court's attention during the hearing this morning. In my view, the sentiments expressed in paragraph 1 of the Practice Circular may equally apply to this Division. If one replaces the words 'Family Division' with 'Civil Division' it could then read: "Orders made by the Civil Division of the Grand Court are not preferences, requests or mere indications; they are orders. Practitioners and those who appear before the Grand Court are reminded that orders, including interlocutory orders must be complied with to the letter and on time. " At paragraph 2 of the Practice Circular, reference is made to the following statement of Sir James Munby, the President of the Family Division in England and Wales in Re W (A Child), Re H (Children) [2013] EWCA Civ 1177 at paras. 52 & 53: "The court is entitled to expect - and from now on family courts will demand - strict compliance with all such orders. Non- 20140314 Heljrecht v Chapmon & Ors Judgment compliance with an order should be expected to have and will usually have a consequence. " Here I break from the President's statement and introduce the word 'Civil Courts' instead of 'Family Courts'. The President continued: "Let me spell it out. An order that something is to be done by 4 PM on Friday, is an order to do that thing by 4 PM on Friday, not by 4:21 PMon Friday let alone by 3.01 PMthe foNowing Mondayfor some time later the following week. A person who finds himself unable to complv timeouslv with his obligations under an order should avplv for an extension of time before the time for comdiance has expired. It is simply not acceptable to put forward as an explanation for non-compliance with an order the burden of other work. If the time allowed for compliance with an order turns out to be inadequate the remedv is either to applv to the court for an extension o f time or to pass the task to someone else who has the available the time in which to do it." Paragraph 3 of the Practice Circular reiterates Sir James Munby's following views expressed at page 6 of his f h View from the Presidents Chambers, January "What ... is for me a real concern is something symptomatic of a deeply rooted culture in the family courts which, however long established, will no longer be tolerated. I refer to the slapdash, lackadaisical and on occasions almost contumelious attitude which stiN far too frequently characterises the response to orders made by family courts. There is simply no excuse for this. Orders, 20140314 Helfrecht v Chapman & Ors Judgment ,- ~ . ., . , 3 > ? ... ' including interlocutory orders, must be obeyed and complied with to the letter and on rime. Too open they are not. They are not preferences, requests or mere indications; they are orders. This principle applies as much to orders by way of interlocutory case 5 management directions as to any other species of order. The court 6 is entitled to expect - andfrom now on,family courts will demand - 7 strict compliance with all such orders. Both parties and none 8 parties to whom orders are addressed must take heed. ..Non- 9 compliance with order should be expected to have and will usually 10 have a consequence. " 11 12

¶ [27] Paragraph 6 of the Practice Circular informs that: 13 "...persons who appear before the Grand Court are expected to 14 comply with their plain and unqualzj?ed obligation to comply with 15 the terms of a court order made against or in respect of them. 16 unless or until it is discharged. This obligation applies ro al1,forms 17 of orders including interlocutory case management directions. " 18 19

¶ [28] Paragraph 7 of the Practice Circular provides: "Ifparties are unable to comply with the terms of an order, they are nof entitled to agree a variation of the order without obtaining the court's approval, and therefore must make the appropriate application to the Grand Court ,for the time ,for compliance has expired. " 26

¶ [29] As I have already clearly acknowledged, this Practice Circular relates to 27 procedures in a different Division of the Grand Court. I am acutely conscious that 20140314 Heljiecht v Chapman R Ors Judgment differences exist in procedure between the two Divisions. However, I am of the view that the sentiments expressed in the Circular are ones which attorneys who appear before the Civil Division should also take heed of. In a number of cases, 4 this being one of them, the concerns expressed about the state of affairs in the 5 Family Division in England and Wales and in the Cayman Islands are equally 6 applicable to proceedings in the Civil Division of the Grand Court 8 The Law- Jurisdiction of Court to Make Unless Orders 9

¶ [30] GCR Order 24 1.20 (1) provides that: 10 "Where the court has made an order ,for discovery (either qf 11 documents or by way of oral examination) against any party and 12 such party fails to comply, the court can make such order as it 13 thinks just, including, in particular, an order that the action be 14 dismissed or, as the case may be that the defindants be struck out 15 andfinal judgment entered. " 16 17

¶ [31] The overriding objective to GCR places a responsibility on the Court to regulate 18 proceedings and to deal with every cause or matter in "a just, expeditious and 19 economic all way. " 20 21

¶ [32] Henderson J. in Robert Ebanks and others v Esua Brooks [2004-051 CILR 175, 22 when considering the application of the defaulting party to set aside a stay 23 imposed following non-compliance with an unless order, rightly helpfully stated 24 that: "An unless order is granted on the basis that the respondent has failed to do what he is required to do in a timely manner. " Note 28 in the Reports indicates Henderson J.'s view being that: " ( I ) an unless order is an order of last resort, made only ifthere is a history offailure to comply with previous orders". In the matter before me, there have been failures to comply with previous orders as well as with agreements made between the parties extending the time provided for in the orders. The reported Note goes on to provide that: "(2) it is the parry's last chance toput his case in order and failure to do so would ordinarily result in the sanction being imposed: (3) the sanction is a weapon which the administration of justice requires to be deployed unless the most compelling reasons is advanced excuse his failure. " Conclusions

¶ [33] In reaching my decision I have taken on board the representations made by Ms. Clemens in her two affidavits concerning the complexity and the time-consuming nature of the work required for full discovery. I have taken on board also her and the First Defendant's personal circumstances. However, even having regard to those matters. I am satisfied that the Defendants have failed to do what they have 20140314 Helfrecht v Chopmon & Ors Judgment 3 agreed extended dates for discovery. The Defendants have, save one occasion, 4 failed to make appropriate and timely (by that I mean in good time prior to the 5 orderedidue date for compliance) applications to the Court for an extension. 6 Although 1 have regard to Ms. Clemens' and the First Defendant's (who 1 note is 7 an experienced attorney one can expect to be well aware of the procedures in the 8 Grand Court and of requirements in relation to court orders in this jurisdiction) 9 personal circumstances, that does not prevent the need for him or his attorneys to 10 have put in place in good time additional adequate mechanisms to ensure that 11 there was compliance with court orders. As I have already remarked, compliance 12 is not discretionary, it is mandatory. 13 14

¶ [34] I am not satisfied, due to the number of past failed assurances given by the 15 Defendant, that there will be compliance with court orders without the protection 16 of an unless order. I am not satisfied that a sufficient system would be put in place 17 to ensure compliance without the protection of an unless order. I have already 18 remarked that if Ms. Clemens' understandably busy practice and circumstances 19 prevents and has in the past prevented her from carrying out the discovery 20 exercise by a date set in orders (or by the extension dates agreed by the parties) 2 1 then that in itself is not a reason for failing to do what is required in a timely 22 manner. Z0/403/4 Helfrecla v Chapman & Ors Judgment 1

¶ [35] In all of this it has to be remembered that, for a Defendant, litigation is not a voluntary process. In order to bring a dispute to a just and speedy resolution courts will use their powers to ensure that non-compliant parties abide by the rules, and by timetable set for compliance with directions and orders. It is not acceptable for a Defendant to seek to avoid this process by relying upon workload 6 as an excuse for non-compliance with the Court order. 7 8

¶ [36] In the circumstances of this case, I find it proper to make an unless order to ensure 9 compliance with the obligation to give discovery. I wish to make it clear that this 10 is not a punishment for previous non-compliance. It is an order that has now 11 become necessary, due to the past and ongoing failure of the Defendants, to 12 ensure the effectiveness of court orders, and proper case management of this case. 13 14

¶ [37] However, I will give longer than the additional five-day period sought by the 15 Plaintiff in the letter to the Listing Officer. I will allow some additional time, 16 namely to 11"' April 2014. I am of the view that in all the circumstances, that it is 17 realistic and as such the Court is entitled to expect full compliance by that date 18 and to expect the Defendants to now put in place the necessary resources and 19 system to ensure that there is due compliance. 20 21

¶ [38] Accordingly, I order that unless the Defendants serve their complete list of 22 discovery documents and produce all of their discovery documents for inspection 20140314 Helfiecht v Clrapmon R Ors Judgment 4 Costs 5 (Submissions on costs made by Plaintiff- Court indicates that does not thereafier 6 need to hear from Defendants). 7 8

¶ [39] I now go on to consider the Plaintiffs application for a costs order to be made on 9 an indemnity basis. I am satisfied that the Defendants, who have been successful 10 in their application, must pay the costs of the Plaintiffs application. I have to 11 decide whether it should be on the standard basis or indemnity basis. 13

¶ [40] 0.62 r.4(11) provides that the Court may make an inter partes order for costs to be 14 taxed on the indemnity basis only if it is satisfied that the paying party has 15 conducted the proceedings, or that part of the proceedings to which the order 16 relates, improperly, and unreasonably or negligently. 18

¶ [41] Page 1 14 of Cook on Costs (Third Edition) expresses the principle as follows: 19 "Costs out of afund and cost interpartes are to be on the standard 20 basis except where it appears to the court to be appropriate to 2 1 order costs to be faxed on the indemnity basis. " 20140314 Helfrrcht v Chapman & Ors Judgment I am aware that it has long been established that in practice costs on the indemnity basis should only be awarded in exceptional cases (e.g. Billson v Residential Apartments Ltd [I9921 1 AC 494). Examples when the awarding of costs on an indemnity basis may be appropriate are when the paying party's conduct is considered to have been wholly unmeritorious, or oppressive or in contempt of court. Of course this list is not exhaustive. This general approach to the making of indemnity costs orders in England and Wales has been followed by the Courts in the Cayman Islands and by Henderson J. in the case of Bennett v The Attorney General [2010] 1 CILR 478. In Kiam v MGN Ltd [2002] 1 WLR 2810, a case referred to by Henderson J. at paragraph 8 of his judgment wherein the Court of Appeal stressed: "To my mind, however, such condtict would need to be trnreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight." Having regard to the background in this matter, I have had to consider the Plaintiffs application for indemnity costs vary carefully. Due to the number of breaches of court orders coupled with the failure to adhere to agreed dates for discovery, I view this as a borderline case for making such an exceptional order. However, when considering the issue of costs I do have regard to the content of Ms. Clemens' affidavit concerning the nature of her task, as well as the personal 20140314 Hemcht v Chopman R Ors Jt<dgme,,f difficulties being experienced by the Defendant. Although these are factors which do not excuse the non-compliance with court orders they are factors I have considered. On this occasion, I am satisfied that the order should be for the Defendants to pay the Plaintiffs costs of this application and that those costs are to be paid on the standard basis. However, those who do not comply with court orders for discovery should, especially in matters where the discovery may not be as detailed as evidently required in this matter, carefully heed the warnings given by me during this hearing and note the concerns outlined in the Family Division Practice Circular.

¶ [46] We will now move on to deal with directions that will flow from this judgment. -~ - ....... .! ...................................................................... The Honourable Mr. Justice Richard Williams 20 JUDGE OF THE GRAND COURT