High Court decision highlights continuing tension between procedural strictness and justice of the case

The High Court has granted a second application for relief from sanctions for failure to comply with an unless order, reinstating a defence that had previously been struck out: Thevarajah v Riordan [2013] EWHC 3179 (Ch).

This case highlights the recent tension between the new strict approach heralded by the Jackson reforms, in which courts are to be “less tolerant than hitherto of unjustified delays and breaches of orders”, and the desire to do justice in the individual case and prevent parties exploiting minor errors for tactical gain. Here the judge referred to two recent unreported Commercial Court decisions in which, he said, the court "still had principal regard to the requirement to do justice between the parties" while accepting that the purpose of the reforms is to counter a culture of deliberate delay.

All eyes are on the Court of Appeal, which is due to hear an appeal in the high-profile Mitchell case on 7 November. In that case the court imposed a harsh sanction for the claimant's failure to file a costs budget on time, and refused to grant relief from that sanction. It is hoped that the Court of Appeal will give some guidance as to where the line should be struck between the competing considerations of procedural compliance and the justice of the individual case.

Background

Since 1 April this year we have seen a string of decisions emphasising the court’s new strict approach toward failures in compliance as a result of changes brought in by the Jackson reforms (see for example our posts Fons, Atrium and Mitchell).

These changes include an amendment to Civil Procedure Rule (CPR) 3.9 which governs applications for relief from sanctions imposed for failure to comply with any rule, practice direction or court order. The new wording requires the court to consider all the circumstances of the case including the need “for litigation to be conducted efficiently and at proportionate cost” and “to enforce compliance with rules, practice directions and orders”. These two factors replace the previous (non-exhaustive) list of nine circumstances the court would consider on such applications, which included whether the failure to comply was intentional, whether it was caused by the party or his legal representative, and the effect of both the failure and the grant of relief on each party.

Here the underlying claim was for breach of alleged oral agreements. There were substantial disputes as to whether any agreements had been entered into and if so on what terms. The claimant obtained a worldwide freezing order against the defendants as well as a disclosure order requiring them to provide details of their assets and liabilities.

The defendants provided certain information by affidavit, but there were deficiencies in the information provided and on 21 June 2013 Henderson J made an "unless" order requiring the defendants to provide certain information by 4 pm on 1 July failing which they would be debarred from defending the claim.

The claimant complained that the defendants had failed to comply with their disclosure obligations under Henderson J's order and applied to debar the defendants from defending the claim. The defendants applied for relief from sanctions under CPR 3.9. On 9 August, Hildyard J declared that the defendants had failed to comply with the unless order and refused relief from sanctions. The defendants were therefore debarred from defending the claim. Judgment was not however entered for the claimant, who still needed to prove its case.

The defendants then instructed new solicitors and prepared a lengthy further affidavit. They then made a fresh application for relief from sanctions, saying (amongst other things) that the breach of the unless order had been remedied, they had made considerable efforts to comply, the failings were at least in part due to their former solicitors, and to refuse the application would lead to an unjust result as these were substantial claims involving allegations of dishonesty which turned on witness evidence and the court could not assess the merits based on the documentation alone.

Decision

The court (Mr Andrew Sutcliffe QC sitting as a Deputy Judge) granted the application for relief from sanctions and reinstated the defendants' defence.

He referred to Lord Justice Jackson's interim and final reports which indicate that in proposing the amendment to CPR 3.9 he considered whether to recommend an approach to the effect that non-compliance with deadlines would no longer be tolerated save in exceptional circumstances but concluded that he did not advocate such an 'extreme course or any approach of that nature'.

The judge also referred to two recent decisions of the Commercial Court, Rayyan al Iraq Co Ltd v Transvictory Marine Inc (unreported, 23 August 2013) and Wyche v Care Force Group plc (unreported, 25 July 2013 - see our outline here). He listed the following principles that could be gleaned from those decisions:

1. The matters contained in the old checklist in CPR 3.9 remain relevant to an application for relief from sanction.
2. The recent change does not mean that relief should be refused where that would be a disproportionate response and would give the opposing party an unjustified windfall.
3. The court should not apply the new rules unthinkingly and should make allowance for human error.
4. The amended rule should not be permitted to encourage parties to exploit minor errors for tactical gain.

Here the judge took into account that the disclosure required of the defendants had gone beyond that ordinarily required as ancillary to a freezing injunction, and the deficiencies on which the debarring order had been based came down to two or three omissions. Although the claimant submitted that the defendants still had not complied with the order, the judge concluded that the omission in question did not amount to a breach, or if it did it was de minimis and would not justify a finding that the defendants had failed to comply. The defendants had therefore complied (albeit belatedly), the failure had been at least in part down to their former solicitors (who had advised the defendants that the unless order had been complied with), and the claimant had also failed to comply with certain orders.

The judge concluded that in all the circumstances the interests of justice dictated that the defendants should be granted relief from sanction. He considered and rejected the claimant's submission that the current application was an abuse of process, referring to Court of Appeal authority that a second application for relief is permissible in some circumstances (Woodhouse v Consignia plc [2002] 1 WLR 2558). Here the defendants were entitled to make a second application for relief, bearing in mind that the defendants' disclosure obligations were significant and wide-ranging, there was no evidence that the defendants had wilfully failed to comply, and the defendants had now complied.

Comment

The judge said he was referred to the following passages in support of the claimant's submission that relief from sanction was difficult to obtain prior to April 2013 and became significantly harder after April 2013 in the light of the Jackson reforms:

• Fred Perry Holdings Ltd v Brands Plaza Trading Ltd [2012] EWCA Civ 224 quoting the following from Lord Justice Jackson's report: "courts at all levels have become too tolerant of delays and non-compliance with orders; in so doing they have lost sight of the damage which the culture of delay and non-compliance is inflicting on the civil justice system. The balance therefore needs to be redressed."
• Mitchell v Newsgroup Newspapers Ltd [2013] EWHC 2355: "Judicial time is thinly spread and the emphasis must be, if I understand the Jackson reforms correctly, upon allocating a fair share of time to all as far as possible and requiring strict compliance with Rules and orders even if that means justice can be done in the majority of cases but not all."
• Lord Neuberger MR's 18^th Jackson Implementation Lecture: "The tougher more robust approach to rule compliance and relief from sanctions is intended to ensure that justice can be done in the majority of cases. This requires an acknowledgement that the achievement of justice means something different now." 

The judge said that he had full regard to these dicta, but was quite satisfied that in the circumstances of this case it was entirely appropriate to grant relief from sanction under CPR 3.9.

The decision is also of interest for the court's comments on the effect of an order debarring a party from defending, in circumstances where the claimant still has to prove its case. In the judge's view, subject to the court's inherent jurisdiction to regulate its own process, the defendants would still be entitled at trial to cross-examine the claimant's witnesses and to make submissions on the appropriate form of relief. In any event, the point did not arise since the court granted the application for relief from sanctions and lifted the debarring order.