Revocation of order granting relief from sanction

The High Court has revoked its previous order granting relief from sanction under an unless order, where the respondents had given false information in purported compliance with the terms of the court's orders, and has refused to grant further relief: JSC BTA Bank v Ablyazov and others [2011] EWHC 2506 (Comm). The decision illustrates that where the court has been misled into granting relief from sanction under an unless order, it can revoke the order and impose the sanction without having to revisit the arguments as to whether it was appropriate to grant the unless order in the first place.

The case also serves as an example of how the court can, in an appropriate case, take a firm line in considering whether to grant relief from sanction under CPR 3.9. As previously reported (see here) the Civil Procedure Rule Committee is currently considering an amendment to the rule, with a view to both simplifying it and clarifying that it will be the exception to allow relief for non-compliance. This follows Lord Justice Jackson’s recommendation that the courts “should be less tolerant than hitherto of unjustified delays and breaches of orders”. The Senior Master has described the current rule and the decisions relating to it as “a constant problem for interlocutory and other judges who wish to pursue a firm case management line”. It will be interesting to see what changes are proposed and what effect they have in practice.

Background

The respondents (a number of the defendants to the action) were subject to a freezing order which required them to disclose certain information. In August 2010, the High Court (Christopher Clarke J) ordered that unless the respondents served affidavits setting out the required information, they would be debarred from defending the proceedings (the "unless order").

The respondents purported to comply with the unless order. In December 2010, Clarke J found that there had been material non-compliance, but granted relief against sanction and permission to defend the claim subject (in the case of most of the respondents) to conditions requiring further affidavits. Again, the respondents purported to comply. After further information came to light, the claimant made an application to set aside the relief from sanction and enter judgment against the respondents. The claimant contended that in granting relief the court was misled into believing that the respondents had made a genuine effort to comply with the freezing order.

Revocation of order granting relief

Clarke J found that, in light of the further material presented to the court, the picture given by the defendants' affidavits was seriously misleading, and it was appropriate to revoke the order granting relief from sanction and to enter judgment.

He pointed out that if the defendants had failed to provide the information required by the unless order, the sanction provided under the order would have taken effect without further order of the court (unless the court decided to grant relief from sanction), as established in Marcan Shipping (London) Ltd v Kefalas [2007] EWCA Civ 463. No question would have arisen as to whether the court should have made an unless order in the first place, and it would not have been material that giving effect to the sanction might deprive the respondents of a defence they might otherwise have had.

The position is the same if, although information is provided, it is materially false. As the judge put it, "The Respondents cannot be better off by putting untruths before the Court than they would have been if they had said nothing at all."

Refusal to grant further relief

The judge refused to grant further relief from sanction against non-compliance.  He set out his consideration of each of the factors under CPR 3.9, which provides that in deciding whether to grant relief against sanction the court will consider a number of factors including the interests of the administration of justice, whether the application has been made promptly, whether the failure to comply was intentional, whether there is a good explanation for the failure, and the effect of both the failure and any decision to grant relief.

The judge commented that it is in the interests of the administration of justice that the court's orders are obeyed and that sanctions for disobedience take effect unless solid grounds are advanced for the court to grant relief against sanction for a second time. Here there were no such grounds. The failure was intentional and no good explanation for it had been put forward. The application for relief had been made at the last minute. If relief were granted, it would deprive the claimant of the judgment to which, on account of non-compliance, it would otherwise be entitled, and the likelihood was that the repondents would continue to fail to provide the information and documents required.

Clarke J did not accept that the court should be deterred from refusing relief by the fact that so doing would mean the respondents facing judgment for over $1 billion. He commented that if the size of the claim precluded the court giving effect to the sanction, the armoury of the court in cases of very large international fraud would be likely to be seriously weakened.