The High Court has refused an application for relief from sanctions in relation to a failure to comply with an unless order for the payment of costs arising from a failed interlocutory application: Consult II SRO v Shire Warwick Lewis Capital Ltd  EWHC 286 (Comm).
In refusing to provide relief from sanctions, the court has provided a timely reminder of the need for a party seeking relief to provide detailed and cogent evidence as to why the relevant failure has occurred. Where the breach is a failure to pay a costs order, and the applicant seeks to rely on an inability to pay, the court will expect full and frank disclosure of the applicant’s financial position, including the prospects of raising the necessary funds.
It is worth noting in particular the court’s comment that the standard of evidence required to explain a failure to comply, on an application for relief from sanctions, should be no lower than the standard expected when the court decides whether to impose a sanction in the first place.
Alex Sharples, a senior associate in our disputes team, outlines the decision below. Continue reading
In a recent decision, the High Court has considered the proper approach to be taken in a second action where a previous action bringing the same claim has been struck out for failure to comply with an unless order: Davies v Carillion Energy Services Ltd  EWHC 3206 (QB).
In summary, where the first action was struck out as an abuse of process, or the conduct of the first action was otherwise inexcusable, the second action will be struck out as an abuse save in “very unusual circumstances”. Where the first action was struck out for a single failure to comply with an unless order, the claimant will not necessarily be debarred from pursuing a second action, even if the claimant failed to apply for relief from sanctions in the first action – though that may be relevant in considering whether the conduct of the first action was inexcusable.
Each case will turn on its facts. In this case, the court’s decision appears to have been influenced by some doubt regarding the basis on which the first action was struck out and the fact that the claimant was a litigant in person. Although the court accepted that being a litigant in person did not excuse failures to comply with the CPR or court orders, it was appropriate to make some allowance for lack of familiarity with the detailed rules, in this case relating to pleading. Continue reading
The High Court has penalised a claimant in costs for requiring the defendant to apply for relief from sanctions, where the defendant had relied on a letter from the court which (arguably) set out the wrong date for filing costs budgets: Freeborn v Marcal  EWHC 3046 (TCC).
The court emphasised that, following the court’s tougher approach to granting relief from sanctions established in Mitchell and Denton (as outlined here), it is extremely important for parties to ensure that they comply with the CPR. However, parties should not abuse this tougher approach. Parties need to consider whether it is proportionate and appropriate to require their opponent to make an application for relief from sanctions, or to oppose that application, in all the circumstances of the case.
This judgment is consistent with the warning in Denton that the courts are willing to penalise parties who try to hold their opponents to what the court sees as an overly strict approach to compliance with rules and court orders, and illustrates the fine balance litigating parties need to strike.
Laura Askew, an associate in our disputes team, outlines the decision below. Continue reading
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.
Lord Justice Jackson has delivered the leading judgment dismissing an appeal against imposition of the so-called "Mitchell" sanction where a party failed to file a costs budget when required to do so, so that he was treated as having filed a budget limited to court fees: Jamadar v Bradford Teaching Hospitals NHS Foundation Trust  EWCA Civ 1001.
Over the past couple of years the court's approach to procedural failings has eased off from the overly draconian approach taken in the aftermath of the high-profile Mitchell decision in November 2013, in particular in light of the Court of Appeal's "clarification" of the Mitchell guidance in its Denton decision in July 2014 (see post). There are fewer cases these days in which parties even attempt to take their opponents to task for minor breaches – in part because heavy costs sanctions may be imposed on those who seek to take unreasonable advantage of an opponent’s breach.
However, it is by no means plain sailing for those who fail to comply with court rules and orders. The present decision highlights the continued scope for tough decisions, and the appeal courts' reluctance to interfere with a lower court's decision in this area; here, Jackson LJ commented that other judges might have taken a more lenient view, but the judge made no error of principle and it was a decision he was entitled to reach within the ambit of his discretion.
The decision also acts as a reminder that costs budgets must be filed in time or a party risks facing serious restrictions on its recoverable costs. If in doubt as to whether a budget is required, the safe course is to assume that it is.
In case we were all in danger of thinking the courts' approach to breaches of rules and court orders had relaxed nearly to pre-Jackson levels of tolerance, two very recent Court of Appeal decisions act as a bit of a wake-up call. As these decisions show, there is clearly continuing scope for tough decisions against those who fail to comply, particularly where they do not make a prompt application for relief from sanction. The lesson for litigating parties is obvious.
In British Gas Trading Ltd v Oak Cash & Carry Ltd  EWCA Civ 153, the court dismissed a defendant's appeal against the strike-out of its defence resulting from a two-day delay in filing a listing questionnaire pursuant to an unless order. That means a default judgment entered against the defendant for some £200,000 will stand.
Significantly, Lord Justice Jackson (who gave the leading judgment) suggested that a prompt application for relief from sanctions would have been granted; however, the delay in applying for relief had led to substantial disruption in the progress of the action, in particular the loss of the trial date, and so it was not appropriate to grant relief.
In Gentry v Miller  EWCA Civ 141, the Court of Appeal held that the lower courts should have refused to set aside default judgment, where the defendant had delayed in making the application, despite evidence that the claim may have been fraudulent. This decision also highlights the fact that the Denton test for relief from sanctions (outlined here) applies equally to an application to set aside default judgment for failure to file an acknowledgement of service or defence.
The two decisions are considered in more detail below.
The Supreme Court has upheld the Court of Appeal’s decision overturning the grant of a second application for relief from sanctions for failure to comply with an unless order: Thevarajah v Riordan  UKSC 78 (and see our blog post on the Court of Appeal’s decision).
The second application for relief was, in substance, an application under CPR 3.1(7) to vary or set aside the previous order refusing relief. Therefore, applying established principles, it should not have been granted unless there had been a material change of circumstance since the previous order was made.
Interestingly, the Supreme Court commented that, even if CPR 3.1(7) did not apply, it would not normally be open to a party to ask for relief from sanction which required a previous interlocutory order to be varied or set aside unless there had been a material change of circumstance since the order was made. The impact of the Supreme Court’s decision may therefore extend more widely than to second applications for relief from sanctions.
In terms of what might amount to a material change of circumstance, the decision confirms that the mere fact an order has been complied with, albeit late, will not ordinarily be sufficient. However, the court did not rule out the possibility, particularly where late compliance is accompanied by an explanation as to why the party could only comply belatedly.
The Court of Appeal has dismissed an appeal against a High Court decision refusing to strike out a claim for procedural failures even though, in the judge's position, it would have struck a different balance between the competing factors: The Commissioner of Police for the Metropolis v Abdulle & Ors  EWCA Civ1260.
The decision emphasises that the court will not lightly interfere with a case management decision, whether that is to grant or refuse relief from sanctions or to grant or refuse an application to strike out a claim.
In recent months we have seen a number of decisions which show a greater willingness to grant relief from sanctions for breaches of rules and court orders, compared to the more draconian judgments of the immediate post-Mitchell era, and which illustrate the risks for those who seek to hold their opponents to strict compliance – though there clearly remain risks for those who flout the rules as well. It seems there is also a continuing lack of certainty as to when relief from sanctions is in fact required.
In Michael Wilson & Partners Limited v Sinclair and others  EWCA Civ 774 the Court of Appeal set aside its previous order refusing to lift a stay imposed for failure to provide security for costs and striking out the appeal. The court concluded that in making the previous order, the single lord justice had taken an overly draconian approach, based on his understanding of the principles laid down in Mitchell. It was not until the Court of Appeal’s restatement of the Mitchell guidance in Denton (see post) that it became clear that approach was mistaken.
In Viridor Waste Management v Veolia Environmental Services  EWHC 2321 (Comm), following Denton, the Commercial Court not only granted relief from sanctions to a claimant who had served particulars of claim late as a result of an administrative error, in circumstances where a new claim would have been time barred, but penalised the defendant in indemnity costs for contesting the point. This contrasts sharply with a previous Commercial Court decision to strike out a claim for late service of particulars following the guidance in Mitchell (in Associated Electrical Industries Limited v Alstom UK  EWHC 430 (Comm) – see post).
In Solland International Limited v Clifford Harris & Co  EWHC 2018 (Ch) a Chancery Master held that relief from sanction was not required where claimants were 31 months late in filing their allocation questionnaire (now a directions questionnaire). There was no automatic sanction for the failure – the rules gave the court a complete discretion as to what, if any, sanction to apply – nor was there an implied sanction (as, for example, where a party fails to file a notice of appeal in time and therefore cannot pursue the appeal absent an extension). However, the claim was struck out as an abuse of process.
Each of these decisions is considered further below.
The High Court has held that claimant liquidators were in breach of an “unless order” for disclosure where the low quality of OCR copies of scanned hard copy documents, to which key word searches had been applied to narrow down the pool of documents for review, meant the court could not be satisfied that a reasonable search had been conducted. This was a serious and significant failure, for which there was no satisfactory explanation, and in all the circumstances of the case it was not appropriate to grant relief from sanction: Smailes v McNally  EWHC 1755 (Ch).
The decision highlights the potential pitfalls that can arise where hard copy documents are scanned into an electronic database and OCR (optical character recognition) software is applied to them, so that key word searches can be used to identify potentially relevant documents for manual review. Where the OCR copies are of low quality, there may be doubt as to whether the searches have identified all (or even most) key word responsive documents. Depending on the extent of the problem, the court may find that a reasonable search has not been carried out and therefore there has been a breach of the party’s disclosure obligations.
The practical message is that where hard copy documents are to be scanned and searched by reference to OCR copies, it is important to ensure appropriate quality control procedures are in place so that the process is not vulnerable to criticism. James Farrell and Maura McIntosh comment further on the decision below. Continue reading