D Morgan Plc v Mace & Jones (a firm) & Anor

An unless order should be made only after careful consideration of whether the sanction is appropriate in all the circumstances. The court should also allow a period with which the defaulting party has a reasonable prospect of complying. Repeated breaches, inadequate explanations, prejudice to the opposing party and the importance of the outstanding material may justify an unless order. A substantial loss of profit claim must be properly pleaded and supported by the expert evidence; it should not remain dependent on a report that has not yet been served.

The claimant pursued substantial damages for alleged negligent planning advice concerning a quarry. The court had previously ordered service of a forensic accountant’s report addressing the loss of profit claim. The claimant repeatedly failed to comply and sought a retrospective extension of time. The defendants sought an unless order requiring service within 14 days. The issues were whether an unless order was appropriate, what period should be allowed, and what further requirements should apply to the pleading and expert support for the loss of profit claim.

1. Unless order. The court applied the principles in Marcan Shipping (London) Limited v Kefalas, [2007] EWCA Civ 463, including the need to consider carefully whether the sanction was appropriate in all the circumstances. The claimant had repeatedly failed to comply with orders requiring the forensic accountant’s report. Its explanations were inadequate, and the continuing absence of the report prejudiced the defendants’ ability to respond and impeded settlement or ADR.
2. The claimant’s reliance on the illness of one director did not justify the delay. The report could have been commissioned earlier, the difficulty was not raised promptly with the court or defendants, and the evidence did not establish that the director was uniquely necessary to instruct the accountants. The court was also concerned that excessive client involvement might compromise the independence of the forensic expert.
3. The loss of profit claim was improperly pleaded. A claim of this size had to be set out in pleading form and could not be advanced solely by reference to a future expert report. A properly pleaded claim had to be served no later than the report.
4. The court allowed until 4 p.m. on 21 April 2010 for service. That date reflected the expert’s stated completion date and gave the claimant a reasonable prospect of compliance, while being the maximum appropriate period. If the report was not served by then, the Part 3 loss of profit claim would be struck out automatically. A fully pleaded loss of profit claim also had to be served by that time.