Grundy & Anor v Naqvi

An unless-order sanction must be proportionate to the breach and the justice required in the circumstances. Striking out a defence and entering judgment for the claimant is an exceptional, supreme penalty. Where non-compliance with an order to exchange witness statements is closely connected with a bona fide application to amend the defence, refusal of the amendment does not automatically justify judgment on the whole claim. The court must consider whether less severe measures can secure a fair and efficient trial.

The defendant appealed from a decision of Steel J in the Manchester County Court, which upheld a district judge’s refusal to permit amendment of the defence and counterclaim and the consequential entry of judgment for the claimants. The proposed amendment concerned a substantially enlarged counterclaim relating to defective work. The Court of Appeal refused permission to challenge the refusal of amendment, because the amendment would prejudice the claimants and prevent a fair trial after the property had been sold and refurbished.

The appeal concerned whether failure to exchange witness statements under an unless order justified striking out the original defence and entering immediate judgment, particularly while the application to amend remained outstanding.

1. Appeal allowed in part. The refusal of permission to amend the defence and counterclaim stood. The order entering judgment for the claimants was reversed.
2. An order debarring a party from defending and entering judgment for the full claim is the supreme penalty. Before imposing it, the court must consider proportionality and whether other case-management measures can achieve justice.
3. The defendant’s failure to exchange witness statements was closely connected with a bona fide application for leave to amend. It was therefore understandable that statements had not been exchanged while that application was pending. The defaults were criticisable, but were not so blatant as to justify striking out the original defence and entering judgment immediately.
4. Refusing the amendment and entering judgment on the whole claim were distinct consequences. The latter would impose a second punishment for defaults already relevant to the refusal of amendment. No equivalent prejudice or unfairness would result from allowing the original defence and counterclaim to proceed.
5. The matter was remitted to the district judge for further case management. The appeal succeeded on stringent terms: payment of £50,000 into court within 14 days and exchange of witness statements within seven days. The district judge was to fix a trial date and make consequential directions, including directions concerning the experts and a Scott Schedule if appropriate. There was no order as to costs before Steel J or in the Court of Appeal provided the order was complied with.

• Court of Appeal (Civil Division): The appeal was allowed to the limited extent that the order entering judgment for the claimants was reversed. The refusal of permission to amend was left undisturbed, and the matter was remitted for further case management.