RELIEF FROM SANCTIONS APPLICATION: COSTS AWARDED AGAINST "INNOCENT" PARTY

Mediatelegal

The case of Lakatamia Shipping -v- Nobu Su [2014] EWHC 796 has been dealt with before  on this blog in relation to a successful application for relief from sanctions. The judge’s comments on the costs of the application are now available on Bailli and make interesting reading. The judge ordered that the claimant (who opposed the application for relief from sanctions) should pay the majority of the defendant’s costs. The comments at paragraphs 6 – 8 are particularly telling.

MR JUSTICE HAMBLEN:

  1. I need to deal with the question of costs on this application.
  1. This was an application for relief from sanctions which was opposed by the claimant and which resulted in a half day hearing before the court. I granted relief against sanctions, because, as explained in my judgment, the breach in issue was a trivial breach, being essentially a 15 minute delay in the provision of disclosure. I take the view that it was a clear case for relief in accordance with the guidance provided in the Mitchell case. The claimant submits, nevertheless, that the defendant should pay all of the costs of the application because the need for those costs all flowed from its original default and that they should therefore be paid by the defendant. The defendant submits that it should be paid the bulk of its costs because it succeeded on the application at the hearing and the claimant’s conduct in positively opposing the application was in all the circumstances unreasonable.
  1. In relation to court’s discretion as to costs, I have been referred to CPR44.3 and the relevant matters set out in CPR44.3(4), which include (a) the conduct of all the parties, and (b) whether a party succeeded on part of its case. In relation to the parties’ conduct, CPR44.4(5) states that that includes whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue ((5)(b)), and the manner in which that has been done ((5)(c)).
  1. I accept that the starting point in a case such as this is that the defendant had to apply to the court to seek relief from sanctions. It needed to seek the court’s indulgence and it needed to persuade the court that this was an appropriate case for relief. In those circumstances, in my judgment, ordinarily the applicant should pay the costs of making that application, including supporting evidence. I also consider that it was reasonable for the claimant to set out the position before the court in relation to the procedural history and to correct any statements in the supporting evidence of the defendant that it considered to be incorrect or incomplete. It did this in the witness statement of Mr Gardener, which set out the history but did not positively oppose the application. I also accept that, given the importance of the application (the claim in this case involves some $45 million), the application is one which was always likely to be made orally before the court, and the original application was listed with a half hour estimate. Against that background, I consider that the defendant should pay the costs of its own application and of the claimant’s costs of its witness statement.
  1. However, the bulk of the costs which have been incurred in relation to this application relate to the hard fought half day hearing. For that purpose, both sides put in extensive skeletons and the claimant’s position in the skeleton was vigorously and positively to oppose the grant of any relief, and it was this opposition which necessitated a hearing that took a full half day before the court. The claimant’s position was not simply one of setting out the history and ensuring the court had the full picture, but was one of positive opposition, in which opposition it failed, and by some margin. In my judgment, the hard fought contested hearing should not have been necessary because, once the factual materials were fully set out, this was a clear case for relief in accordance with the guidance given in the Mitchell case. This was, on any view, a trivial breach and the guidance in the Mitchell case is that usually in those circumstances relief will be granted. Although there was a prior history of non-compliance, as stated in my judgment, even if one accepts everything that was said by the claimant about that, it did not come close to being a sufficiently compelling circumstance to justify the continuation of the sanction for such a trivial breach. I take the view that the opposition at the hearing was unreasonable in all the circumstances and that that was the cause of the substantial costs of the hearing, and in those circumstances, in the exercise of my discretion, the bulk of the costs relating to the hearing should be paid by the claimant.
  1. The claimant submitted that, in every case where the other party is seeking relief from sanctions, the so-called “innocent” party is entitled to come before the court and to argue that there should be no such relief and that the court should stick to the sanction originally imposed. In my judgment, that is a mistaken approach. The CPR is quite clear that parties should conduct litigation in a reasonable and realistic manner, an approach which is echoed in the Commercial Court Guide – see, for example, A1.4. In this court we expect parties so to conduct themselves. In my judgment, in vigorously opposing this application at a hearing, the claimant failed to do so.
  1. I also consider that it is important that the message goes out that when a party applies for relief from sanctions, the other party should not assume that it is going to get a free costs ride in opposing that application. If the court considers that it was unreasonable to do so, then there will be cost consequences, and I consider that that is what should occur in this case. The Mitchell guidance was provided in order to help to avoid endless satellite litigation. If parties consider that they can always come to court to oppose any application for relief, then there will be no end to that satellite litigation.
  1. For these reasons, I have reached the conclusion, in the exercise of my discretion, that the defendant should pay the costs of making the application, the costs of the witness statements, including those of Mr Gardener, and a proportion of the costs of the hearing, since it would have had to have come to court anyway, but that the bulk of the costs of the hearing should be paid by the claimant.”

 

DAMNED IF YOU DO AND DAMNED IF YOU DON’T?

This case illustrates the dilemma for the litigator.  If you fail to oppose an application for relief from sanctions then you could be sued. There have been plenty of reported cases where minor breaches have led to actions or defences being struck out.  However if an application is opposed, and the judge takes the view that it should not have been opposed, then the “innocent” party is at risk of having to pay costs (£24,000 in this case I am reliably informed).   This problem is exacerbated by the different approaches taken. In some cases a delay of a few hours will not attract relief from sanctions; in other relief is granted despite numerous breaches.  There is no clear definition of what is meant by “trivial”.   This is hardly easy, or fair.