Payments to witnesses contingent on outcome of litigation were contrary to public policy but did not result in strike-out

The High Court has found that agreements entered into by a successful claimant to make payments to witnesses contingent on the success of the litigation were contrary to public policy and should not have been made. However, in the circumstances of this case, it was not appropriate to strike out the claim or to order a retrial: Energysolutions EU Ltd v Nuclear Decommissioning Authority [2016] EWHC 1988 (TCC).

The issue arose in a most unusual way, with the claimant's solicitors asking the court to delay handing down a draft judgment in their client's favour, as they had (belatedly) been notified of the agreements. The defendant applied for the claims to be dismissed or struck out, or alternatively for a retrial to be ordered.

Although, in the particular circumstances of the case, the court concluded that the draft judgment should be handed down and the defendant's application dismissed, the decision should not in any way be taken to legitimise agreements of this nature. At the very least (as here) they will affect the weight given to the evidence of the relevant witnesses. In an extreme case, where the court finds that there is dishonest or fraudulent conduct, the claim may be struck out.

Michael Mendelblat, a professional support lawyer in our construction team, discusses the case further below.

Background

On any reading this case was very substantial indeed. Some 20 days of trial had taken place and the judge had handed down a draft judgment of nearly 300 pages. However, before he could deliver the judgment, the claimant's arrangements with its witnesses came to light and the claimant's solicitors (who were previously unaware of them) disclosed them to the court and the defendant. The defendant applied for an order that the claim be dismissed, and/or struck out, and/or that the trial on liability be declared as a mistrial and of no effect.

The claimant's solicitors, their in-house counsel, their vice president and all of their witnesses gave evidence in relation to the arrangements.

The court accepted that the claimant's solicitors were unaware of the arrangements until they were notified of them, after the draft judgment was sent out.

Decision

The court (Mr Justice Fraser) noted that English law is hostile to agreements to pay witnesses dependent upon the outcome of litigation because of the temptation to a witness to give untruthful evidence. Therefore, such agreements are contrary to public policy. However, did this justify the defendant's application succeeding?

The court decided that the application should be refused. Its principal reasons were:

• The agreements should not have been entered into but, of itself, that did not entitle the defendants to succeed on their application.
• The existence of such agreements went to the weight to be given to the evidence of each witness and the defendants were entitled to (and did) cross-examine them about the agreements.
• Some guidance could be found from English cases. In Alpha Rocks Solicitors v Alade [2015] EWCA Civ 685 the Court of Appeal held that the power to strike out should only be used in exceptional circumstances where it was just and proportionate to do so, and where the claimant's misconduct was so serious that it would be an affront to the court to permit him to continue. In Arrow Nominees [2001] BCC 591, a "campaign of forgery" was held to justify striking out as it was such an abuse of the process of the court as to render further proceedings unsatisfactory and to prevent the court from doing justice.
• In the court's judgment, these cases illustrated that conduct at the very extreme end of the scale – for example forging documents or mounting a campaign of dishonesty – was necessary before the courts would strike out a claim.
• The agreements in the present case did not involve any hint of dishonesty or fraudulent conduct. The defendant's contention that the agreements were "inherently corrupt" could not be supported. The agreements had to be seen in the context of the subject matter of the proceedings, which was the claimant's challenge to a procurement contest run by the defendant. On the claimant's case, if the defendant had acted lawfully, the claimant would have won the contest and each of the witnesses in question would have been paid bonuses. To some extent, the agreements could be seen as payment for work additional to their normal employment responsibilities, which must have involved work out of normal working hours, for which in the claimant's company culture a bonus might have been expected.
• The court did not accept that there was any fraudulent conduct but, even if there had been, it concluded that the evidence of the witnesses in question was not material to the findings which the court had made. Even if that evidence was discounted entirely, the findings would have been the same.