?Introduction
Background
Decision
Comment


Introduction

In Theverajah v Riordan [2013] the High Court considered the factors relevant to an application for relief under amended Civil Procedure Rule (CPR) 3.9, which came into force in April 2013. In this case, the court concluded that doing justice between the parties remained of overriding importance, notwithstanding the purpose of the 2013 Jackson reforms to encourage strict compliance with rules, orders and directions. The decision represents an unexpected departure from the hard-line approach on compliance failures adopted by the judiciary in light of the Jackson reforms and creates some uncertainty as to how the court will approach such failures in the future.

Background

The proceedings concerned a dispute as to the terms of a transaction involving the acquisition of certain pubs by the claimant from the defendants.

In March 2013 the claimant issued a Part 8 claim seeking certain declarations and an application for injunctive relief against the defendant directors. The claimant subsequently discovered that the fourth defendant was an undischarged bankrupt and had been disqualified as a director. The claimant also discovered that one of the pubs that he believed he had acquired from the defendants was subject to encumbrances arising out of the defendants' financing arrangements. This led the claimant to apply to the court, without notice, for a worldwide freezing order together with an order for the provision of information about the defendants' assets and liabilities. On May 9 2013 the court granted the application on certain terms. An amended order was made, in consultation with the defendants, at the return hearing on May 17 2013. This order required the defendants to provide wide-ranging and detailed financial information. The court also gave directions for disclosure and witness evidence, and for a speedy trial.

The claimant subsequently issued and served a Part 7 claim. In the particulars of claim, the claimant complained that the defendants had not properly complied with their disclosure obligations. On June 10 2013 the claimant applied for an unless order. On hearing the application, the court was satisfied that the defendants' disclosure had been inadequate and made an order that unless the disclosure was provided by July 1 2013, the defendants would be debarred from defending the claim.

The defendants having failed to comply with the unless order, the claimant applied to debar the defendants from defending the claim. The defendants countered with an application for relief from sanction under CPR 3.9. The matter came before Justice Hildyard on August 9 2013. He considered that the defendants had not taken all reasonable steps to secure compliance with their disclosure obligations. He declared that the defendants were debarred from defending the claim and struck out the defence and counterclaim, and made provision for a disposal hearing to determine the relief due to the claimant. He ordered the defendants to pay the claimant's costs on an indemnity basis.

The defendants did not appeal this decision. Instead, they instructed new solicitors who oversaw the provision of the disclosure required by the May 17 2013 order and prepared a further application for relief from sanction under CPR3.9.

The application for relief came before Andrew Sutcliffe QC (sitting as a deputy judge in the Chancery Division) on October 10 2013. The defendants sought relief from sanction on the following grounds:

  • They had taken further steps which meant that they had complied with their disclosure obligations.
  • The delay in non-compliance with the disclosure orders had been caused in part by the wide-ranging nature of the disclosure sought, which depended on the cooperation of third parties and the limitations on the availability of funding for legal costs resulting from the freezing orders.
  • They had not deliberately failed to comply with the disclosure requirements, but had made considerable efforts to obtain and provide disclosure.
  • While accepting that they were principally responsible for compliance with court orders, the reason for non-compliance was in part a result of their former solicitors' actions and advice. As evidence of this, the defendants waived privilege in certain communications with their solicitors in which they had been advised that they were not in breach of their disclosure obligations, as most of the gaps had been plugged.
  • The effect of the refusal of relief was to leave the court in circumstances where:
    • there was a substantial dispute of fact incapable of resolution by reference to the documents alone;
    • the claimant had not provided disclosure or witness evidence in accordance with the directions of May 17 2013; and
    • the defendant's participation in the trial of the claim would be limited to the question of the relief due to the claimant, rather than issues of liability.
  • Breach of the unless order had no detrimental effect on the underlying proceedings, which remained capable of fair resolution.
  • The claimant had suffered no prejudice that had not already been visited on the defendants in costs.

The claimant objected to the application on the grounds that it was an abuse of process, as the defendants were seeking to re-litigate issues that had already been determined by a court of commensurate jurisdiction. The claimant further argued that the unless order and the striking out of the defence and counterclaim were wholly warranted given the defendants' historic non-compliance, and that the latter attempts at compliance were far too late.

Decision

The deputy judge considered the provisions of the new CPR 3.9 and Lord Jackson's interim and final reports on the reforms. He considered it significant that Jackson had decided not to recommend an approach whereby non-compliance with deadlines would be tolerated only in exceptional circumstances, and that Jackson had commented that he did not advocate such an "extreme course or anything of that nature".

The deputy judge was also influenced by two recent unreported decisions of the Commercial Court, Rayyan al Iraq Co Ltd v Transvictory Marine Inc and Wyche v Care Force Group plc, from which he extracted the following principles:

  • The matters contained in the old CPR 3.9 checklist remained of relevance when considering an application for relief from sanction.
  • The change to CPR 3.9 did not mean that relief should be refused where that would give the opposing party an unjustified windfall.
  • The court should not apply amended CPR 3.9 unthinkingly and should make allowance for human error.
  • The amended rule should not permit parties to exploit minor errors for tactical gain.

Taking account of these considerations, the deputy judge concluded that while the purpose of the amended CPR 3.9 is to counter a culture of deliberate delay, the court must continue to have regard principally to the requirement to do justice between the parties when dealing with an application for relief from sanction.

Applying this conclusion to the facts of the case, the deputy judge reached the "very clear" view that the interests of justice dictated that the defendants should be granted relief from sanction. That the omissions in the defendants' disclosure, when viewed in the context of the disclosure provided as a whole, had been "de minimis", and that the defendants had been advised by their solicitors that they had in fact complied with the disclosure requirements, were prominent features in the deputy judge's reasoning. He considered his decision to be fortified by the fact that the claimant had not complied with the trial directions, meaning that the case was not ready for trial in any event.

In reaching his decision, the deputy judge acknowledged the hardened approach of the court to applications for relief from sanction in light of the Jackson reforms, making particular reference to the first-instance decisions in Fred Perry Holdings Limited v Brands Plaza [2012] and Mitchell v Newsgroup Newspapers Ltd [2013]. He was nonetheless satisfied that it was entirely appropriate to grant relief given all circumstances of the case.

The deputy judge rejected the claimant's submission that the defendants' application was an abuse of process. Relying on the Court of Appeal's decision in Woodhouse v Consignia plc [2002] and with particular reference to the judgment of Lord Justice Brooke, the deputy judge was satisfied that it was within his discretion to allow the defendants a "second bite at the cherry", and that it was in the interests of justice to do so.

Comment

This decision highlights the difficulties facing the judiciary in applying Jackson's approach of making compliance with court rules, orders and directions the priority. While the new approach requires the court to look beyond the interests of the parties in a particular case and prioritise the efficiency of the court system and justice as a whole, members of the judiciary are clearly drawn by the historic and natural instinct of the court to see that justice is being done in the case at hand.

The deputy judge in Thevarajah was evidently concerned not to deprive the defendants of the opportunity to participate fully in the defence of the claim and was satisfied that the instances of non-compliance with disclosure obligations could be explained or excused given the wider considerations of justice. Nevertheless, this represents a divergence from recent cases where, for example, a litigant has been denied the opportunity to fight its case at all because the particulars of claim were served two weeks late (Venelum Property Investments Ltd v Space Architecture [2013]).

The appeal of the decision in Mitchell v Newsgroup, which concerns an application for relief following a failure by the claimant to serve a costs budget, is due to be heard by Lord Dyson in early November 2013. This should clarify how the court should approach applications for relief under amended CPR 3.9.

For further information on this topic please contact Sarah Trimmings or Tim Brown at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ([email protected] or [email protected]). The RPC website can be accessed at www.rpc.co.uk.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.