Reeds Carpeting Contractors Limited v Martin Cairns & Ors

Failure to comply with disclosure obligations may justify striking out a defence where there is a substantial risk that a fair trial cannot take place. Strike out remains a draconian sanction and should be imposed only where no lesser, proportionate case-management order can protect the fairness of the trial.

The court should assess the seriousness and reasons for the default, its continuing effects, the availability of further disclosure orders, and the proportionality of depriving a defendant of the right to defend. A party may receive relief from the sanction preventing reliance on documents disclosed late where refusing relief would be disproportionate and the opposing party has adequate time to consider the material.

The claimant, a flooring supplier, brought proceedings alleging that its former employee and director diverted business to companies connected with him and that the other defendants knowingly assisted the breaches.

The applications concerned repeated deficiencies in the defendants’ extended disclosure, including late disclosure of a large volume of documents, missing searches and inadequate disclosure of documents relating to business formation, customer contacts and work for the Frieze Art Fair. The claimant sought judgment and strike out of the defences. The defendants sought extensions of time and relief from sanctions.

The central issues were whether the defences had already been struck out under an unless order, whether the continuing disclosure failures justified strike out under the Civil Procedure Rules 1998 and Practice Direction 57AD, and what consequential orders were proportionate.

1. Unless order. The 8 February 2023 unless order concerned re-inspection of documents already disclosed and a witness statement addressing specified concerns. It did not require the defendants to conduct a fresh disclosure exercise. Its terms therefore did not cover the admitted failures relied upon by the claimant, and the defences had not been struck out under it. An unless order is a powerful sanction and its terms require careful scrutiny before it is treated as terminating a party’s participation in the litigation, applying Marcan Shipping v Kefalas [2007] EWCA Civ 463.
2. Strike out for disclosure default. The defendants had failed adequately to disclose material concerning the establishment of their business, client contact lists, the booking of a shipping container for the Frieze event and a proposal made to Frieze. Their approach showed that disclosure obligations had not been taken sufficiently seriously. The failures were serious, had caused the loss of a trial date and made further judicial oversight necessary.
3. Strike out was nevertheless refused. The court distinguished the present case from deliberate disobedience of an unless order. The defendants had engaged to some degree with disclosure, had produced some adverse documents and had not deliberately concealed documents. It remained possible to secure a fair trial through a final, proportionate disclosure order expressed in peremptory terms. Strike out should ordinarily be reserved for cases involving a substantial risk of an unfair trial or where a fair trial is otherwise in jeopardy, and should not be imposed where a lesser effective measure remains available. The approach in Biguzzi v Rank Leisure Plc [1999] 1 WLR 1926 and Mozambique v Credit Suisse International [2023] EWHC 1650 (Comm) was applied.
4. Relief from sanctions. The defendants were granted extensions of time for disclosure certificates and relief from the sanction in Practice Direction 57AD paragraph 12.5. It would be disproportionate to determine individually whether the late-disclosed documents could be relied upon. The trial had been vacated, giving the claimant time to consider the documents, and the practical interests of justice favoured permitting reliance upon them. McTear v Engelhard [2016] 4 WLR 108 was applied.
5. The claimant’s application for judgment was dismissed, but its application for further disclosure orders was otherwise allowed. The defendants’ application was allowed. Further searches, a revised disclosure certificate and disclosure list were ordered in peremptory terms, with strike out of the defences upon default. Costs were reserved.

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