Recent decisions show continuing trend for tough approach to rule breaches

Recent months have seen a number of decisions in which the English courts, both at first instance and on appeal, have re-emphasised the message that those who fail to comply with procedural rules should expect little sympathy, at least where they fail to take prompt steps to put matters right.

Over the past few years the courts have backed off from the excessively draconian approach seen immediately following the high-profile Mitchell decision in November 2013. This more measured approach was prompted in particular by the Court of Appeal's decision in Denton in July 2014 (considered here) which "clarified" the Mitchell guidelines.

However, since Denton we have continued to see cases which illustrate that the courts remain willing to take tough decisions against those who flout the rules. The decisions outlined below are consistent with that trend, and arguably mark an uptick in the frequency with which such decisions are being made in a wide variety of contexts. The obvious overall messages for litigating parties are:

  • ensure compliance with rules and orders so far as possible;
  • make an early application for more time where it appears a deadline cannot be met; and
  • apply promptly for relief from any applicable sanction where things have gone wrong.

A second application for relief            

Griffith v Gourgey [2017] EWCA Civ 926 acts as a reminder that parties will not be given a second bite at the cherry when it comes to relief from sanctions. The court cannot hear a second application for relief unless there has been a material change of circumstances since the first application was determined. That will be the case whether the first application was refused outright or was granted on conditions which have not been fulfilled.

Background

A consent order was made requiring the defendants to respond by a particular date to CPR Part 18 requests for further information in respect of their defences to unfair prejudice petitions. The defendants failed to do so. An "unless order" was made (by Rose J) requiring them to file and serve their response by 22 April 2014, failing which the defences would be struck out.

The defendants purported to serve their response shortly before the deadline, but the petitioners alleged that this response was deficient and therefore the defences stood struck out for a failure to comply with the unless order. The defendants applied for relief from sanctions.

The court (Mr Monty QC sitting as a High Court judge) granted relief on strict conditions, including that the defendants would serve a full and complete response by 4 December 2014. The order provided that if the defendants complied with those conditions the defences would be "reinstated".

The defendants served a further response, but the petitioners alleged that this response was still deficient and so the defences remained struck out. The defendants made a further application for relief from sanctions, which was refused by the High Court (Simon J). The defendants appealed.

Decision

The Court of Appeal (Longmore and Sharp LJJ) dismissed the appeal. They agreed with Simon J that the second application for relief could not be entertained by the court unless there had been a material change of circumstances since the first application was refused.

The court referred to Thevarajah v Riordan [2015] UKSC 78 (considered here) in which the Supreme Court held that a second application for relief was, in substance, an application under CPR 3.1(7) to vary or set aside the previous order refusing relief and so, applying established principles, should not have been granted unless there had been a material change of circumstance since the previous order was made.

That applied equally to the present case. Mr Monty QC's order did not apply a new sanction different from the strike-out sanction imposed by Rose J. It granted conditional relief from that sanction, but the original sanction was activated when the defendants failed to comply with those conditions. There was no relevant difference between a refusal to grant relief and a decision to grant relief on conditions which have not been fulfilled.

Accordingly, Simon J could not entertain the second application for relief unless there had been a material change of circumstances since Mr Monty QC's order was made. No such change of circumstances had been established. 

Late costs budgets

Lakhani v Mahmud [2017] EWHC 1713 (Ch) is another example of the courts imposing the so-called "Mitchell" sanction for filing a costs budget late, namely that (under CPR 3.14) the party is treated as having filed a budget limited to court fees. It acts as a reminder that where the rules require a budget (or anything else) to be filed a certain number of days before a hearing, this should be "clear" days, meaning that the first and last day of the time period are excluded from the calculation. This means that the deadline may well be a day earlier than it first seems.

The decision also shows that in some cases it may be better for a party to accept there has been a breach and make a prompt application for relief, rather than seeking to argue (on weak grounds) that there has in fact been compliance. It also shows that in most cases it will be difficult to appeal successfully against a first instance judge's decision as to whether relief should be granted.

Background

In the present case, the parties were required to file and serve their costs budgets 21 days before the costs and case management conference (CCMC) scheduled for 10 January 2017. The claimants served their budget on 19 December 2016, the correct day. The defendants' budget was filed a day late, on 20 December (being 21 calendar days before the deadline, but not 21 "clear days" as the rules require).

The defendants initially argued in correspondence that the budget was in time, but ultimately accepted that it was not. They did not make an application for relief from sanctions until just before the CCMC. The circuit judge refused the application and the defendants appealed.

In considering an application for relief from sanctions, the court will apply the three-stage test set out in Denton, namely: (i) the seriousness and significance of the breach; (ii) whether there was good reason for the breach; and (iii) all the circumstances of the case, giving particular weight to the two factors set out in CPR 3.9(1), ie (a) the need for litigation to be conducted efficiently and at proportionate cost and (b) the need to enforce compliance with rules, practice directions and orders.

Decision

The court (Mr Daniel Alexander QC sitting as a deputy High Court judge) dismissed the appeal. He noted that it was common ground that the appeal was a review not a rehearing and the court should not interfere with a case management decision of this kind unless satisfied the judgment was plainly wrong and fell outside the generous ambit of the trial judge's discretion.

The court rejected the contention that the circuit judge had erred in assessing the seriousness of the breach. He noted that other judges might have taken a different approach, and this was in his view "on the borderline" of sufficient seriousness to warrant refusal of relief, but the court could not properly interfere with the circuit judge's decision on this point.

The judge noted that the evaluation of seriousness or significance of a breach is not a binary question of primary fact, but a "multifactorial question of degree". It is impossible to list the full range of factors that may be relevant, but the judge included within this list:

  • The absolute and relative amount of time lost by missing the deadline – here although the budget was only a day late, that delay was more significant because the time period for seeking to agree the budgets was already limited by closure of the defendants' solicitors' offices for much of the Christmas and New Year period.
  • Whether the delay affected the litigation or was likely to do so – although here the parties had been able to comment on the budgets of the opposing party despite the delay, the judge was not obliged to treat that as a conclusive factor on the question of seriousness. A court is entitled to consider the risk of difficulty that a failure to meet a deadline has created, even if it has been possible to perform the task required despite the breach.
  • The direct consequences of missing the deadline and how it was addressed – here the circuit judge was entitled to take into account the distraction caused by the debate over what the time limit was and whether there was a breach, rather than the defendants taking prompt steps to minimise its impact.

The judge also said there was no basis for challenging the circuit judge's conclusion that there was no reasonable excuse for the default. The defendants' solicitors only started to prepare the costs budget after receiving the claimants' costs budget, so on any basis the work was done at the last minute. While some judges might have taken a more charitable view as to the error in calculation of time, and whether days had to be "clear days", it could not be said the circuit judge's evaluation was clearly wrong.

Interestingly, the judge also noted that the circuit judge's decision did not operate to deprive the defendants of a trial altogether. He commented that, if that had been the case, the situation would have merited more detailed scrutiny than the judge gave it. In the circumstances, the judge said it was hard to criticise the decision as disproportionate. 

Preventing or setting aside default judgment

Two recent decisions of Coulson J, outlined below, illustrate how the court's approach to relief from sanctions is relevant where a defendant has missed the deadline to file a defence or acknowledgement of service.

Redbourn Group v Fairgate Development [2017] EWHC 1223 (TCC) acts as a reminder that an application to set aside default judgment under CPR 13.3 is also an application for relief from sanctions, as the setting aside results from a failure to comply with the deadline for filing an acknowledgement of service or a defence.

Therefore, the court will not only consider the factors set out in CPR 13.3 (essentially, whether the defendant has a real prospect of successfully defending the claim and whether the application to set aside has been made promptly), but must also consider the three-stage test set out in Denton.

The very recent decision in ADVA Optical Networking v Rotronic Instruments [2017] EWHC 1813 (TCC) shows that, even where default judgment has not been entered, a defendant who wishes to file a defence or acknowledgement will need to meet the Denton test.

Redbourn

Background

The claimant obtained judgment in default against the defendant on the basis of the defendant's delay in serving its defence.

The defence was originally due on 25 January 2017. At the defendant's request for a 28 day extension, the claimant offered an extension to 1 February. The defendant did not accept the offer but applied on 1 February for an extension to 22 February. However, it failed to fix a hearing date for that application or to serve the defence before 22 February. On 23 February the claimant applied for judgment in default, which was entered on 9 March.

On 14 March, the defendant applied to set aside the default judgment under CPR 13.3.

Decision

Coulson J dismissed the application to set aside. He noted that there had originally been some debate as to whether CPR 3.9 (governing relief from sanctions) is relevant to an application under CPR 13.3. However, it had since become clear that it is, as endorsed by the Court of Appeal decision in Gentry v Miller [2016] EWCA Civ 141 (considered here) – an important decision which he noted was not referred to in the note in the White Book under CPR 13.3 (an omission he said should be rectified in the next edition).

Accordingly, on an application to set aside default judgment, the court must consider the three-stage test set out in Denton after considering the elements set out in CPR 13.3.

Here, on the basis of CPR 13.3, the court concluded that it should not set aside the judgment in default. The defendant had no realistic prospect of defending the claim, and had not acted promptly after judgment was entered, in particular because they had not attached the draft defence and counterclaim to their application to set aside. The draft was not provided until 11 May (a week before the hearing on 19 May).

In case the judge was wrong on either of the two elements under CPR 13.3, he went on to address the Denton test – ie the seriousness of the failure, the reason for it, and all the circumstances of the case.

Here Coulson J was satisfied that the failure in allowing judgment in default to be entered was serious, there was no explanation at all for the failure, and a consideration of all the circumstances of the case (including the defendant's repeated failure to provide information it had promised to the claimant) also led to a conclusion adverse to the defendant.

Accordingly, even if the judge was wrong in his assessment under CPR 13.3, he would have concluded that relief from sanctions should be refused and so the application to set aside would still have failed.

ADVA

Background

The defendant was due to file an acknowledgement of service or defence by 24 March 2017. No default judgment was entered, but at a CMC held on 16 June the court (Carr J) ordered that if the defendant wanted relief from sanctions it had to issue its application no later than 23 June. (The claim was related to a separate set of proceedings, and the CMC was held in respect of both actions.)

On the last day, 23 June, the defendant applied for an extension of time for service and/or relief from sanctions.

Decision

Coulson J said there had been some suggestion that the defendant did not require relief at all, but that had (rightly) not been pursued. He added:

"The correct approach is that a retrospective application for an extension of time to serve or file a document should be dealt with on the same principles as a claim for relief from sanctions."

However, he granted relief from sanctions on the unusual facts of this case, saying this was one of those "relatively rare" cases of serious default where it was appropriate to grant relief.

Although he was satisfied that the breach was serious and there was no good reason for it, the third stage of the test led him to conclude that he should grant relief. This was in particular because (i) the delay had not had any real effect on the course of the proceedings because of amendments that had been made in the related proceedings, and (ii) the claim against the defendant was contingent, and would only give rise to liability if the claimant was found liable in the related proceedings (contrary to its case in those proceedings). The judge said he was uncomfortable about a situation where the defendant would be made the subject of a judgment which (as things stood) the claimant did not need and which was contrary to its primary case.

Challenges to jurisdiction

Apex Global Management v Global Torch [2017] EWCA Civ 315 suggests that, where a party may wish to challenge the court's jurisdiction in some circumstances, that is a point that should be raised early – even where the basis for challenge will only arise if the party's primary case is unsuccessful. Otherwise the court may find that the right to challenge jurisdiction has been lost due to the delay in making the application.

Background

In the underlying dispute, the parties each brought unfair prejudice petitions against one another. They relied on competing versions of a share sale and purchase agreement (SPA), each alleging that the other version was forged.

The court ultimately entered judgment in favour of the respondent on its counterclaim, having found that the version of the SPA relied on by the respondent was the true version. The petitioner then applied for a stay of execution of the judgment on the basis that the respondent's version of the SPA contained an exclusive jurisdiction clause in favour of the courts of Saudi Arabia. It argued that once the judge had reached that conclusion, he should have declined jurisdiction on the basis of the clause.

The judge refused the application for a stay of execution and the petitioner appealed.

Decision

The Court of Appeal (Gloster and Black LJJ and Sir Christopher Clarke) dismissed the appeal on various bases, including on the basis of the petitioner's lateness in challenging jurisdiction.

Under CPR Part 11, a party who wishes to challenge the court's jurisdiction must make an application within 14 days after filing an acknowledgement of service. A party who fails to do so is deemed to have accepted that the English court has jurisdiction.

A late application for a stay was in substance an application for relief from sanctions and so had to be determined in accordance with the three-stage test established in Denton. In the court's judgment, the application of this test clearly resulted in a refusal of the application. The decisive factor was the lateness of the petitioner's jurisdiction challenge.

The court rejected the petitioner's argument that the proper time to make the application in relation to the jurisdiction clause was after the judge had handed down judgment; it was open to the petitioner to seek to reserve its position in relation to jurisdiction, even while disputing that the true contract contained any such jurisdiction clause.

The petitioner could not, in the court's view, remain silent about the effect of the jurisdiction clause until after judgment had been given on the basis of not extant issues relating to jurisdiction. The court added: "The obvious but fundamental point is that challenges to jurisdiction must be made as early as possible."

Group Litigation Orders

Kimathi v The Foreign & Commonwealth Office [2017] EWHC 939 (QB) illustrates the application of the Denton principles in the context of group litigation, in particular where claimants have missed the cut-off date for adding their claims to the group register. It suggests that, where a Group Litigation Order (GLO) has been made to enable relatively modest claims to be managed together so that costs are not disproportionate, the court may give even more weight than usual to the need to enforce compliance with rules, practice directions and orders.

Background

On 30 November 2016, 32 claimants applied for an order granting relief from sanctions and permitting their claims to be added to the group register for the Kenyan Emergency Group Litigation, despite having failed to comply with the "cut-off date" in the GLO for claims to be added to the group register without permission of the court (30 May 2014).

By the time of the application, the trial was well underway, having started in May 2016, but it was not expected that final submissions would finish before spring 2018.

It was said that the applicants had instructed GT Law solicitors to claim in the GLO. GT Law went into administration in November 2015 and its claims were transferred to IC Law, but the applicants were apparently not aware of that. They had confirmed to their current solicitors (Hugh James) that from the date of signing or marking the retainer with GT Law they heard nothing from either GT Law or IC Law.

Decision

The court (Stewart J) refused the application.

A number of the 32 applicants were claiming wholly or in part as personal representative of a relative who had died. Claims brought on behalf of deceased family members were not within the GLO, unless personal claims had been made and entered on the register and the person had since died. Applications by those claiming on behalf of estates of those who had died therefore could not succeed.

As the judge said, to add this new type of claim nearly three years after the cut-off date would be wholly wrong in all the circumstances of the case, including because all solicitors involved in the litigation had abided by the decision that such claims would not be litigated, and there were no test claimants in this category.

In respect of the other applicants, there was some limited information on the few GT Law files that had been received, which showed that there may be reasons these claims had not been entered onto the group register initially (ie because they did not suffer any injuries).

It was therefore not possible for the court to assume that the default in not registering the applicants was entirely that of GT Law rather than the applicants personally. In any event, in the judge's view, there was no good reason for the default, whether caused by the solicitors or the applicants.

The judge then went on to consider all the circumstances of the case, giving particular weight to the need:

  • for litigation to be conducted efficiently and at proportionate cost – the court noted that the efficient conduct of the litigation would not be affected by adding the personal injury claims but would by adding the estate claims (which were not to proceed in any event as noted above); and
  • to enforce compliance with rules, practice directions and orders – ie that the old lax culture of non-compliance is no longer tolerated.

The judge also took into account the fact that the application was far from prompt, as well as his conclusions that the breach was serious and significant and there was no good reason for it. In conclusion he said the application should not be granted, commenting that to do so would undermine the discipline of the litigation and render the cut-off date meaningless.

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