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IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

HIS HONOUR JUDGE THORNTON QC

HQ10X02365



Sir Alan Ward:

Introduction

"It seems to us that to oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to the court."

Was this observation obiter? Some have argued that it was. Was it wrong for us to have been persuaded by the silky eloquence of the éminence grise for the ECHR, Lord Lester of Herne Hill QC, to place reliance on Deweer v Belgium (1980) 2 EHRR 439? See some extra-judicial observations of Sir Anthony Clarke, The Future of Civil Mediations, (2008) 74 Arbitration 4 which suggests that we were wrong. Does CPR 26.4(2)(b) allow the court of its own initiative at any time, not just at the time of allocation, to direct a stay for mediation to be attempted, with the warning of the costs consequences, which Halsey did spell out and which should be rigorously applied, for unreasonably refusing to agree to ADR? Is a stay really "an unacceptable obstruction" to the parties right of access to the court if they have to wait a while before being allowed across the court's threshold? Perhaps some bold judge will accede to an invitation to rule on these questions so that the court can have another look at Halsey in the light of the past 10 years of developments in this field.

The background

"Whereas:

(a) CW is the holder of £50,000 shares in MWS

(b) CW has agreed to sell the shares to TWI (TWI) for the price and in the manner hereinafter appearing.

(1) CW will sell and TWI will purchase the shares at a price being £35.50 per share (the total price hereinafter called "the share price").

(2) TWI will pay the share price by way of equal instalments (or such other payments as may be agreed between the parties of £ [the original document referred to by the judge did not have any figure filled in after the £ sign].

(4) Payment of the total share price will be over such period as may be agreed between the parties being not more than 5 years from the date of this agreement.

(5) Payments of the total share price are to be made monthly on the 28th of each month and in the event of TWC failing for any reason to pay any of the said payments within 14 days of the said 28th of each month then CW will have the option to terminate this agreement by giving not less than 1 month's notice in writing to TWC.

(6) In the event of the agreement being terminated by CW then CW shall be entitled to return the shares from TWC and TWC will sign appropriate transfer forms."

"17. Thus, from the outset, there emerged a somewhat tangled accounting picture which involved MW's ongoing director's loan account which he would have to repay, the payment to him of consultancy fees by MWS, the payment by MWS to TWI of dividends and the payment of dividends and instalments of the share sale consideration by TWI to MW. This accounting structure became even more tangled when, as occurred on several occasions, MW loaned MWS substantial sums to assist it in short-term cash flow difficulties and MWS repaid those loans and also made occasional payments, by way of loans, to MW. On one occasion, MW's then wife also made a substantial loan to MWS."

"19. Mr Pritchard had to prepare annual accounts for both companies for 2002 onwards in conjunction with preparing their tax returns. He submitted a detailed witness statement which has been invaluable to an understanding of what would otherwise have been an impenetrable series of accounts. The accounts that he prepared have formed the basis of MW's claim for the alleged unpaid portion of this share sale consideration owed to him by TWI for the alleged unpaid consultancy fees owed to him by MWS and for the rival contentions that the entire consideration had been paid and no consultancy fees were ever due and none in consequence remained outstanding."

"Each year, once the draft accounts had been completed, I would have a meeting with [Mr Turner] and Mr Wright to talk them through the draft figures, question them about queries that had arisen, and to do what I could to help them understand the figures that they would be asked to approve. As part of this process each year, the movement in funds to and from Mr Wright were discussed. In some years, Mr Wright had been paid more than the available dividend and he was asked to repay [to MWS] the excess. Accordingly, identifying and agreeing these movements was always of importance in our meetings."

It is, therefore, obvious that he was a vital witness to resolving the several issues which the judge was able to identify.

The judge's conclusions

"(1) An order requiring NT and TWI jointly and severally to take all necessary steps to transfer to CW all of MWS's issued shares that are all currently registered in TWI's name;

(2) An order requiring NT and MWS jointly and severally to take all necessary steps to enable MWS to re-register all of its issued shares in the name of CW;

(3) A declaration that CW is and is entitled to be the registered shareholder of all the issued shares in MWS with effect from the date of this judgment;

(4) Judgment for MWS in the sum of £87,515;

(5) An order dismissing MWS and TWI's counterclaims against CW;

(6) The costs of the consolidated action to be the subject of detailed assessment if not agreed."

It is against that order made by Judge Anthony Thornton QC sitting in the High Court of Justice Queen's Bench Division on 10th February 2012 that this appeal is brought.

The allegation of procedural irregularity

"We are relying on Menzies' schedules that we have prepared that Mr Wright checked to say that actually there was the payment and that payment out to him for £6,000 was correct."

Mr Wright took issue with matters in that report. At p. 32 Mr Turner again stated that he was relying on the schedules that were produced by Menzies and in answer to the judge he confirmed that he stood by every single payment recorded in the schedule that showed that he was not liable "for one penny extra". The discussion continued but by the time of the luncheon adjournment the judge was inviting the parties to consider whether they could complete the hearing allowing one hour for each side that afternoon. Mr Turner preferred to have an adjournment to have more time to prepare the documents and to look at the documents submitted by the claimant. He indicated that he was in favour of mediation but the judge observed:

"Mr Wright, rather, is opposed to mediation. It is not something I can force on the parties."

(It is, however, only fair to Mr Wright to record another of the judge's comments about mediation, "Both of you are putting up insuperable obstacles to mediation.") The upshot was that the judge informed the parties that once they had set out their cases in writing he would "direct that you return for a procedural hearing which would enable me to determine whether I feel there should be a further hearing for evidence and if not I would then decide the case on the basis of the written documents." An order was drawn up to that effect and the parties were directed to serve schedules dealing with the disputed matters item by item. The judge's parting words were his urging the parties at least to attempt ADR.

"I set out below the terms of the issues that I am minded to decide and the terms of the answers to those issues I am minded to give. However, the defendants are to consider whether they wish to apply for an oral hearing for any of these issues since they have not been the subject of any oral hearing and the defendants have not served any written submissions in relation to those issues."

In the body of the judgment he said at [7]:

"The parties produced a consolidated schedule and a bundle of cross-referenced documents and at the adjourned hearing at the request of the parties, I agreed to dispense with the trial and to determine the claims and counterclaims on the documents that had been lodged."

"Well, at the moment, it is not a judgment, it is only a draft. It is what I am minded to publicise, but I am mindful of the fact that several of the issues have not featured very prominently in the trial to date, and so you have the opportunity, if you want, of applying to me for permission to make further submissions, whether they be in writing or orally, on the issues raised."

Mr Turner responded at p. 5:

"Yes, Sir, I think we do need an oral hearing.

[Judge Thornton]: And would you want to adduce further evidence at this hearing?

Mr Turner: I think if we are to make an oral submission to you sir, we would ask that any further evidence we adduce to enable us to make that argument, we would ask to produce it.

[Judge Thornton]: So, you are wanting to re-open the trial?"

There followed a great deal of discussion about accountancy evidence and in particular about the evidence Mr Pritchard could give. Mr Turner was making it plain that he relied "heavily" on the document from Menzies within the file. There was discussion about the help that Mr Pritchard could give on all these disputed areas.

"Mr Turner should also provide all evidence now available and any witness statement (i.e. any further evidence in addition to that provided) to show that Mr Wright agreed to treat a payment made for consultancy services as being a payment towards the share sale agreement debt. It is, to say the least, surprising, that he should have agreed this and the only evidence to support this is said to be the minutes (not yet disclosed) of a meeting between him and the accountant. Clearly the direct evidence in a written statement of the accountant (with an explanation as to why this was agreed by Mr Wright) is the best evidence but any further evidence should be provided."

That further hearing was fixed for 30th September 2011.

"Well, that's why we've requested an oral hearing, because we'd like Mr Steven Pritchard to come in as a witness. That's why we requested it. We'd like him to come in and explain it properly."

"The only practical problem is that the parties still, I am afraid, seem to have a rather more tortured way of looking at documents than judges have and, despite the great mass of documentation, I find it virtually impossible to thread my way through it without explanation. Look at the difficulty I was having trying to work out what the position was with these consultancy payments."

The judge was beginning to appreciate the difficulty in sifting through the shifting sands of the dispute and so at p. 26 he said:

"But I do feel that in order for me to fully understand the parties' cases through this myriad of documents, that I do need a short hearing at which the parties, and in particular this accountant, if the defendants wish him to do so, to come and talk their way through it. I would envisage a hearing of half a day to allow for each side. Because at the moment I do not feel able to reach a conclusion only by going through the documents. So what I am minded to do is to order that this should be, again, adjourned, this time for the last time, for a day's hearing at which Mr Pritchard should be called to present himself for cross-examination by Mr Wright "

One can readily understand why the judge needed help. However, Mr Wright objected and requested that Mr Pritchard was not involved, believing that the documents already presented to the court would indicate his situation. The judge then seemed to indicate he did not necessarily require a hearing. Mr Turner at p. 27 repeated his request that Mr Pritchard should attend. The judge gave a short judgment.

"I have now directed that there will be one further opportunity for each side to submit a document by way of explanation. This is not an evidence document. It is a written submission which enables them to draw together in whatever way they think appropriate all the strands needed to explain their case as follows:

(1) Whether the parties have agreed (and the court has ordered) that all remaining payment disputes between the two companies and Mr Wright (and vice versa) are to be treated as having been set out in the collective schedule that has now been served and

(2) To explain as simply as possible why the mass of material now before the court in all the trial bundles, summary bundles, schedules and comments show item by item why that item is not due. Those submissions (which should not be supplemented by any further documents but which) must be served no later than Friday 21st October 2011. The court will issue a direction that the material will be served as set out in this judgment and I will then endeavour to deliver judgment within a further 14 days."

"The parties produced a consolidated schedule and a bundle of cross-reference documents and at the adjourned hearing, at the request of the parties, I agreed to dispense with a trial and to determine the claims and counter-claims on the documents that had been lodged."

It is apparent from that judgment, which is the judgment on the merits of the various issues he needed to decide, that the judge relied heavily upon the detailed witness statement produced by Mr Pritchard which had been "invaluable to an understanding of what would otherwise have been an impenetrable series of accounts." It is pertinent to recite the concluding paragraph of that witness statement:

"In summary I am satisfied that the schedule exhibited at SP- p. 1 is an accurate account of the payments made to Mr Wright after taking into account the loans made by him to the company and that therefore he has been paid in full for his shares in Michael Wright (Supplies) Ltd."

That is not what the judge found. Without going into detail of the various items, it is plain that the judge did not accept the totality of Mr Pritchard's evidence and found, contrary to his explanations, that money was in fact still unpaid.

Conclusion

Mr Justice David Richards:

Lord Justice Hughes: