Bailey v Wood & Ors

A party should be debarred from defending only where its conduct creates a substantial risk that a fair trial cannot take place or that any judgment in its favour would be unsafe. The jurisdiction is protective, not punitive. Alleged inaccuracies in disclosure, destruction of a document, or dishonest conduct will not ordinarily justify strike-out where the matters can be explored by cross-examination and corrected at trial. Preliminary determination of alleged misconduct is inappropriate where the issue is closely connected with the substantive dispute, would require a substantial evidential hearing, and would not determine the outcome. The court must avoid allowing satellite disputes about misconduct to consume disproportionate resources.

The claimant, an equity partner in a solicitors’ firm, alleged that the defendants had repudiated the partnership by deciding to terminate the firm’s criminal practice. The defendants contended that the claimant had agreed to leave the firm and transfer the criminal department to another practice.

The claimant applied under CPR Part 3.4(2) and the inherent jurisdiction to strike out the defence, or the part relying on the alleged agreement, on the basis of dishonest disclosure, alteration or destruction of documents, and repeated disclosure failures. He also sought cross-examination under CPR Part 32.7(1). The central issue was whether the alleged misconduct made a fair trial impossible or unsafe.

1. Application dismissed. The court’s power under CPR Part 3.4(2) and its inherent jurisdiction is engaged only where the litigant’s conduct has created a substantial risk of injustice if the action proceeds to trial. Debarring a party is a serious protective measure, not a punishment for contempt or other bad behaviour.
2. The principles in Logicrose Ltd v Southend United Football Club Ltd (The Times 5 March 1988) and Arrow Nominees Inc v Blackledge ([2006] BCLC 167) were accepted. Where document interference is continuing and may affect the testing of evidence, unfairness may be inferred. Past misconduct which has been corrected will ordinarily not threaten a fair trial.
3. The alleged misdating and later modification of the typed note, and the destruction of its earlier hard copy, did not create the risk identified in Arrow Nominees. There was no allegation of forged documents. The relevant dates and destruction had been explained, and the claimant remained able to cross-examine the witnesses about their conduct, recollection and credibility.
4. It would be inappropriate to determine the alleged insertion into the handwritten note or the destruction of the earlier typed note as preliminary issues. Those questions were closely connected with the evidence about what was agreed at the meeting, would require evidence from the claimant, defendants and other witnesses, and would not determine the substantive dispute. A preliminary hearing would therefore duplicate the trial and consume disproportionate resources.
5. Even if dishonesty were established, the consequence would be that the relevant witness’s evidence might be rejected. It would not follow that a fair trial was impossible. The defendants were therefore not debarred from defending or from relying on the alleged agreement.

First-instance decision. No appellate history is stated in the judgment.