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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Reachlocal UK Ltd & Anor v Bennett & Ors [2014] EWHC 2161 (QB) (03 July 2014) URL: http://www.bailii.org/ew/cases/EWHC/QB/2014/2161.html Cite as: [2014] EWHC 2161 (QB)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		03/07/2014

Mr Justice Nicol:

1. This is the hearing of an application by the 1^st and 3^rd Defendants for relief from sanctions. The Claimants claim damages and an injunction for libel, slander, malicious falsehood, breach of confidence, breach of contract and conspiracy. The Claim Form was issued on 12^th March 2014. Particulars of Claim were served on 27^th March 2014. Following an application on notice at which only the 1^st Defendant appeared, Sir David Eady, sitting as a Deputy High Court Judge, granted an interim injunction on 28^th March 2014. He also gave directions which included requiring defences to be served by 22^nd April 2014. None were. The Claimants gave notice of another hearing on 30^th April 2014. None of the defendants appeared. Tugendhat J. extended time for the defences to 6^th May 2014 and ordered that a defendant who did not serve a defence by that time would be debarred from defending. Still no defences were served. The Claimants issued a further application seeking judgment in default. Since the relief they sought included injunctions, this had to be on application to the court – see CPR r.12.4(2). The matter again came before Sir David Eady on 9^th June 2014. At this hearing the 1^st and 3^rd Defendants appeared in person. No other defendants appeared or were represented. Sir David directed that, if any defendant wished to seek relief against sanctions, an application would have to be made by 16^th June 2014, and a witness statement filed and served explaining why none of the previous opportunities had been taken for serving a defence and what the nature of their defence would be. In the event, the 1^st and 3^rd Defendants did issue such applications and did file and serve witness statements indicating the nature of their defences. None of the other Defendants has made any similar application and none of the others appeared or were represented at the hearing before me.
2. The Claimants are part of an international group of companies which provide internet marketing services. The 1^st Claimant is a UK company. The 2^nd Claimant is based in the Netherlands. One of the Claimants' clients was the 5^th Defendant with whom they signed an agreement in March 2013. The 3^rd Defendant signed the contract on behalf of the 5^th Defendant. He and the 4^th Defendant are directors of the 5^th Defendant. The 1^st Defendant is not a director of the 5^th Defendant, but he styles himself as 'managing partner' of Yoda London and, when asked by the Claimants' solicitors, Norton Rose Fulbright, if he was authorised to respond on behalf of the 5^th Defendant, said he had full authority to respond 'with the blessing of our owners'.
3. The essence of the claims is that the Defendants are alleged to have accused the Claimants, in a variety of communications, of trickery and defrauding their clients by either not revealing the full extent of the fees they charged their clients or dramatically understating how much they were taking for themselves. In broad terms, the 1st Defendant would wish to defend these allegations as true (the Claimants deny that they are). The 3^rd Defendant's position is that the publications were nothing to do with him and he has not been responsible for any of the other matters of which the Claimants complain.
4. In his statement explaining why he had not filed a defence and which he made on 16th June, the 1st Defendant said,

"the defence for my case was not filed due to a number of personal family issues; I recently split with my fiancée and was involved with sorting out a new house and custody issues with my daughter. I did state that it was due to being away. The reason I said this was due to not wanting to disclose this matter, as it was personal and I was very upset, as I'm sure you can imagine it was something that hit me hard. I have spent the last three months helping her sort a new house as well as locating one for myself. To add insult to injury, her mother died which hit my family and I extremely hard. It's been a very difficult and emotional couple of months, which with this case has taken its toll on me. If I'm honest the last thing on my mind was this case although I should have filed my defence. As I'm sure you can appreciate my main concern was looking after my daughter and her mother while she grieved."

5. The passage 'I did state that it was due to being away' refers to comments which the 1st Defendant had made to Sir David Eady on 9th June 2014. Although he was not then sworn (or affirmed) as a witness, there was a lengthy exchange with Sir David. The 1st Defendant said the reason he had not filed a defence was that he had been away with his family in Turkey. They had left in the beginning of May and returned at the beginning of June.
6. In his statement the 3rd Defendant said that he had written to the Court on 25th April 2014 (and he produced a copy of that letter). In that letter, he said that the 5th Defendant had operated for only 3 months in the beginning of 2013. He had not been involved with the day to day running of the company which had ceased trading in March 2013 when he and the 1st Defendant had suffered a breakdown in their relations. Another of his companies, J.D. Chauffeurs Ltd, went into liquidation in August 2013. That company had signed a lease for premises at 49 Skyline Villages, London E14 9ST but the lease of those premises was then cancelled. The letter said that the landlord had recently brought to the attention of the 3rd Defendant that a large amount of mail had recently arrived and it was only then that he had discovered that the Claimants had brought these proceedings. He said he had no knowledge of the accusations contained in the legal documents. In his 16th June statement, the 3rd Defendant said that he thought this letter of 25th April was a correct filing of a defence or response to the allegations which the Claimants were making against him. His defence of 16th June 2014 repeated that he had nothing to do with any of the actions alleged. He believed there may have been confusion between the 5th Defendant (Your Online Digital Agency Ltd) and Yoda London, an organisation run by the 1st Defendant.
7. In his skeleton argument for the purposes of this hearing, Mr Singla, on behalf of the Claimants, made it clear that they did not accept that either witness statement was truthful. In those circumstances, it seemed to me to be fair that both the 1st and 3^rd Defendants should be given the opportunity to have their evidence tested by cross examination. Both agreed to do so and they were both cross examined by Mr Singla. After each had been cross examined I gave them the opportunity to add anything in explanation or elaboration in the same way that, if they had been represented, their counsel or solicitor would have been able to re-examine them.
8. The 1st Defendant produced some papers which had been sent to him by solicitors acting for his former girlfriend. They showed that proceedings in the Family Court had been issued on 30th April 2014 for a prohibited steps order in relation to his young daughter (now aged 18 months). Those papers said that the 1st Defendant and his girlfriend had separated on 24th March 2014. The hearing of the application was listed on 23rd May 2014. All these papers had been sent to the 1st Defendant under cover of the solicitors' letter dated 6th May 2014. In his evidence the 1st Defendant said his girlfriend's mother had died just after his girlfriend's birthday on 18th March 2014. He said that he had been off work for about two and half months. He was asked about two emails dated 1st April 2014 which had been written to customers of the Claimants asking to make contact with them. They appeared to be signed by 'Jamie Bennett' and they came from an email address that used his name, but in evidence he said he did not send either email. They had been sent by Liam Shepherd who worked for him and to whom he had given his password so that he could operate his email account.
9. The 1st Defendant was asked why he had not attended the hearing before Tugendhat J. on 30th April 2014. He said, initially, that he gave priority to the Family Court proceedings in relation to his daughter which were on the same day. However, on looking again at the documents which had been sent by his girlfriend's solicitors, he accepted that 30th April was the date the family proceedings were issued, the hearing was on 23rd May and the papers had only been sent to him on 6th May. He was asked about an email which he had sent to Norton Rose Fulbright on 29th April 2014 (the day before the hearing in front of Tugendhat J.). That said, 'I've just come back from being away for a couple of weeks as I have been working on an important deal to take my business to the next level.' Although his answers were at times equivocal, I understood his final position to be that this statement was true and he had been away working in the two weeks prior to that email. The last sentence of the same email said, 'I have not even begun to underdress your client yet and have many more things up my sleeve so look forward to more up and coming public humiliation.' He denied this was a threat.
10. On 6th May 2014 the 1st Defendant wrote to Norton Rose Fulbright and said, 'I just want to make it clear that you have not received a comprehensive answer as I have been away in India working on a partnership deal with a new agency.' In his evidence the 1st Defendant said that was not true. He had, as he put it, 'sugar coated' the explanation because he did not want to reveal what had been going on in his personal life. However, it was the case that he had been working on a partnership deal for a couple of weeks, but this had not led to a concluded agreement. When asked about the explanation which he had given to Sir David Eady as to why he had not filed a defence, he said he had 'told a few porkies'.
11. In a witness statement for this hearing, Jonathan Ball of Norton Rose Fulbright had drawn attention to a high powered sports car whose picture had been posted on the 1st Defendant's Facebook page while outside his home and which the caption referred to as 'my little play thing.' The Claimants suggested that this belied the appearance which the 1st Defendant wished to create that he was impecunious. In his evidence the 1^st Defendant said that the car was not his. It had only been lent to him by a friend. He said he lived in rented accommodation and did not own anything.
12. In his evidence the 3rd Defendant agreed that he had been appointed a director of the 5th Defendant. He had not resigned and so, if the 5th Defendant continued to exist, he continued to be one of its directors.
13. He had acted as a director of several companies and had briefly studied law. He appreciated what a registered office was. He agreed that on 13th September 2013 a change of registered office had been filed with Companies House showing that the new registered office of the 5th Defendant was 49 Skyline Village E14 9TS because he could see the document produced by the Claimants showing that entry from Companies House, but he said that filing had not been done by him and he had no knowledge of it. He was asked about emails sent by Norton Rose Fulbright on 28th March, 31st March and 1st April 2014 to '[email protected]' and for which receipts had been generated showing that the emails had been read. He denied that those emails had been read by him. D. Khabra was the name by which he was known. These email accounts had been set up at some stage in the beginning of 2013 but this was not an email address he used any longer. The domain, 'emailyoda.co.uk' was not registered to him; it must have been used by the 1st Defendant or someone else. He had written to Norton Rose Fulbright around March 2014 to give them his current email and postal addresses. He had employed the 1st Defendant in the past, but their ways had separated in about March 2013. It was the first time he had seen the 1st Defendant's email which said he was acting 'with the blessing of our owners'. The 4^th Defendant was also a director of the 5^th Defendant. He did not know where she was. He had last spoken to her 3 – 4 months previously.
14. He was asked about a screen shot of a page from the Linked In website for Dee Khabra which described him as the Owner/President of Khaven Group (of which Yoda London was said to be part) and which also described him as Owner/President of Yoda London. He said he had been Company Secretary of Khaven, but was not now employed by them and did no work for them. This LikedIn profile was not one which he operated. The First Defendant had handled this sort of thing. He was asked about a screen shot for the Khaven website which referred to 'Dee Khabra - Chief Investor'. He said he did not know anything about that. He agreed that he had not attended the hearing before Tugendhat J. on 30th April 2014. He thought that by then he had filed his defence and that hearing just concerned procedural matters which did not require his attendance. He had gone to the hearing on 9th June because, by then, he did realise that he needed to appear.
15. After the hearing I received a copy of a letter from Norton Rose Fulbright to the 3^rd Defendant dated 25^th June 2014 and a copy of the 3^rd Defendant's email reply of 26^th June 2014. There was no provision in the hearing for such further evidence. Since it may be said that the matters to which they refer arose unexpectedly out of the 3^rd Defendant's cross examination, I have taken them into account but they have not altered the conclusions which I set out below in relation to the 3^rd Defendant's application.

The principles to be applied in connection with an application for relief from sanctions

16. CPR r.3.9 provides that on such an application,

"the court will consider all the circumstances of the case, so as to enable it to deal justly with the application - including the need - (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders."

17. This version of the rule was introduced in April 2013 as part of the package of reforms following the report by Sir Rupert Jackson. At the same time, the overriding objective was amended to make it clear that dealing with a case justly included enabling it to be resolved at proportionate cost and that included taking into account allocating to it an appropriate share of the court's resources, while taking into account the need to allot resources to other cases.
18. As is well known to legal practitioners, the Court of Appeal underlined the more robust approach which was to be taken to applications for relief from sanctions in Mitchell v News Group Newspapers Ltd. [2014] 1 WLR 795 CA. While all the circumstances of a case were to be taken into account, the two specifically mentioned in r.3.9 were to be given particular weight. Trivial breaches might lead to the grant of relief - see [40], but more substantial defaults would have to be explained if they were to lead to relief from sanctions. An application for an extension of time before the deadline occurred would be regarded more favourably than an application for relief from sanctions after the event - see [41].
19. It is plain that the Defendants' failure to file and serve defences in time cannot be characterised as trivial. They did not provide defences within the first deadline set by Sir David Eady (i.e. 22nd April 2014) nor within the time set by Tugendhat J, (i.e. 6th May 2014). Furthermore, the second order was peremptory in the sense that it was expressly provided that, if no defence was served by that second date, the defendants would be debarred from defending. The applications for relief from sanctions were not made until almost 6 weeks after the expiry of that second deadline. The directions made by Sir David Eady on 28^th March included an order for expedition and envisaged a trial before the end of July. The Defendants' defaults mean that would no longer be possible.
20. There are, two important aspects of the present case which did not feature in Mitchell and which have to be taken into account. The defaulting party in that case was represented by solicitors and counsel. The 1st and 3rd Defendants are representing themselves. While litigants in person are not immune from the obligation to observe the Rules and directions made by the court, to some extent a greater latitude will be given to them to reflect their unfamiliarity with court processes. Mr Singla relied on Hobson v West London Law Solicitors [2013] EWHC 4425 (QB) to support his proposition that the firmer approach to compliance with rules and directions applies even to litigants in person. In that case, though the Claimant (who acted in person) was described as not 'litigation naïve' and could not claim to be ignorant of the law's concern that litigation be brought in time and prosecuted with due and proper diligence with proper observance of timetables set by rules and orders – see [26]. As always, the facts of the decision were important to the decision. I do not consider that Hobson is contrary to the proposition that, while litigants in person are not immune from the obligation to observe the Rules and directions of the court, to some extent a greater latitude will be shown to them to reflect their unfamiliarity with legal procedures.
21. The second difference from Mitchell is the importance which is accorded to freedom of expression. Article 10 of the European Convention on Human Rights provides,

"(1) Everyone has the right to freedom of expression. This right shall include freedom to…impart information an ideas without interference by public authority…."

This is not an absolute right because Article 10(2) says,

"The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such …restrictions…as are prescribed by law and are necessary in a democratic society, in the interests of…for the protection of the reputation and rights of others…"

The Court, as a public authority, is prevented from acting incompatibly with this Convention right - see Human Rights Act 1998 s.6(1) and the Court is required to have particular regard to the importance of the Convention right of freedom of expression - see s.12(4). Although Mitchell was itself a defamation case, these provisions were not directly engaged since it had been the Claimant who was the defaulting party and who was seeking relief from sanctions.

The application of the 1^st Defendant for relief from sanctions

22. With these principles in mind, I turn to the position first of the 1st Defendant. His default in failing to serve a defence within the time prescribed by the Court's directions is serious. He gives an explanation that he was distracted by the break up of his relationship with his girlfriend, the Family Court proceedings regarding his daughter and the sad death of his girlfriend's mother. On the information which he has given, the break up and the bereavement did occur towards the end of March 2014 and at about the time when his defence first became due. However, the 1st Defendant did not learn of the Family Court proceedings until 6th May and so after the first deadline set by Sir David Eady. He did nothing in response to that deadline or the second deadline set by Tugendhat J. Furthermore, these upsets in the 1st Defendant's personal life did not prevent him from carrying on with his business. In his evidence he agreed that he had been working on business for the two weeks prior to his email to Norton Rose Fulbright on 6th May 2014. That evidence is also inconsistent with what he had said earlier in his cross examination, namely that he had taken two and a half months off work. Furthermore, there is evidence that the 1st Defendant was arranging meetings with people who were, or had been, customers of the Claimants in emails on 1st April 2014. I am afraid that I simply do not accept his evidence that these emails were sent by someone else under his signature. There would be no point in doing that if it was someone else who was trying to set up the meetings. Since the 1st Defendant was able to engage in these activities, his excuse that he was too distracted by the events in his personal life to attend to filing a defence in these proceedings is unconvincing. I do not accept that there was a good reason for him not to do so. I make no findings one way or the other as to financial resources which he has available to him, but, if I assume in his favour that he has none, that would still not prevent him from responding to the Particulars of Claim in outline at least. He did not do so.
23. In addition, the requirement in r.3.9 to take into account all the circumstances of the case must include the behaviour of the party seeking relief from sanctions. It is a striking feature of this case that the 1st Defendant admits he lied to Sir David Eady on 9th June when he was then asked why he had not filed a defence. He also lied in some detail. He not only said he had been away, but he named a country (Turkey) to which he said he had made this fictional journey. He gave false times when he had left the UK (beginning of May) and when he had returned (beginning of June). He also admitted that he had lied to Norton Rose Fulbright when he said in his email of 6th May that he had been abroad in India. Behaviour of this kind puts any litigant, including one who is representing himself, at a grave disadvantage if they later seek the exercise of a discretion in their favour, or when a judgment has to be made as to whether a restriction on his freedom of expression is proportionate and necessary in a democratic society. In addition, the 1^st Defendant has failed to comply with other court directions. 'Craig Anderson' named as the 2^nd Defendant is, the Claimants suspect, a pseudonym for the 1^st Defendant. He denied that was so when he appeared before Sir David Eady on 28^th March. Part of Sir David's order was that he should provide a witness statement confirming that assertion. He did not do so. It is, though, right to add that in the course of his evidence before me, he did maintain that 'Craig Anderson' was not him. In addition, he had not provided an affidavit as required by Sir David's order, confirming what, if any confidential information of the Claimants was or had been in his possession and confirming also that all traces of it had been destroyed.
24. Mr Singla also relied on the email which the 1^st Defendant wrote on 11^th March 2014 to Norton Rose Fulbright in which he said,

"There are only 2 ways that the current series of events can go namely we continue to actively target RLOC clients from the info which we have obtained which is in the public domain and hence no legal action can be successfully taken against us or RLOC comes to a financial arrangement with us whereby we agree no longer actively target current or future RLOC clients in return for financial remuneration within the remit of a legal and valid commercial agreement between the 2 parties."

Mr Singla was entitled to comment that this indicated the 1^st Defendant's true motive of the threatened publication was to pressurise the Claimants into paying money to all or some of the Defendants. Quite how far that takes him is not clear cut. A defendant sued for libel can rely on a defence of justification (or post the Defamation Act 2013, 'truth') irrespective of motive – see Holley v Smyth [1998] QB 726 CA, though for some of the other causes of action on which the Claimants rely (such as malicious falsehood and conspiracy) a defendant's intention may be critical.

25. However, in all the circumstances, I am not persuaded that the 1^st Defendant has made out a case for relief from sanctions. His application is refused. The consequence is that he remains debarred from defending the action by the order of Tugendhat J.

The application of the 3^rd Defendant

26. I have found this a more difficult question.
27. On the one hand, as Mr Singla submitted, there is good reason to view aspects of his evidence with considerable scepticism. It is remarkable that a LinkedIn page and an email account in his name should have been operated without his authorization or knowledge and again, apparently without his knowledge or approval, he should be described as the Chief Investor in Khaven when this was not true.
28. On the other hand, unlike the 1^st Defendant, the 3^rd Defendant did take steps to respond to the first order of Sir David Eady by his letter to the court on 25^th April 2014. This was after the first deadline of 22^nd April, but that default was by a relatively short time. The letter was not in the conventional form of a defence. It was not in the form required by CPR r.16.5 and it was not supported by a statement of truth as required by CPR Part 22 and the Practice Direction to Part 16 paragraph 11. On the other hand, it did set out the substance of the 3^rd Defendant's answers to the Claimants allegations. Mr Singla is right to observe that the 3^rd Defendant did not attend at the hearing before Tugendhat J. on 30^th April even though he agreed he had received communications from Norton Rose Fulbright telling him of the hearing. A proper examination of the documents which were served on him would have shown that Norton Rose Fulbright were under the impression that he had done nothing in response to Sir David Eady's directions. The 3^rd Defendant's letter to the Court of 25^th April may not have been simultaneously copied to Norton Rose Fulbright, but it is their evidence that they received a copy on 29^th April 2014. While I have expressed concerns about the accuracy of the evidence which the 3^rd Defendant has given, I do not feel able on the present state of the evidence to make a positive finding that he has lied to the Court.
29. On balance, it seems to me that I should give the 3^rd Defendant relief against sanctions and allow him to defend the action. I bear in mind that he is a litigant in person (even if he has a smattering of legal knowledge from his previous studies). In addition, while it is his case he was responsible for none of the publications of which the Claimants complain, the remedy sought against him also includes an injunction which would be a curb on his freedom of expression. Given that he did make some effort to comply with Sir David Eady's 28^th March directions, I consider it would be disproportionate to debar him from defending the action now. He, too, was ordered by Sir David Eady on 28^th March to provide an affidavit covering the same matter as I have mentioned in connection with the 1^st Defendant. The 3^rd Defendant has not provided that affidavit either, but in his case that default does not deflect me from ordering that he should be relieved from the sanction of a debarring order.

Conclusion

30. The application by the 1^st Defendant for relief against sanctions is refused. The application by the 3^rd Defendant for relief against sanctions is allowed.