RELIEF FROM SANCTIONS GRANTED WHEN WITNESS STATEMENT SERVED LATE: DECISION UPHELD ON APPEAL

In  Petrou v Lambrou (t/a KCJ Builders) [2019] EWHC 166 (Comm) Mr Justice Freedman upheld the decision of a circuit judge who granted the defendant relief from sanctions when a witness statement was served late. Interestingly the judge, on appeal, exercised his discretion afresh, holding that the circuit judge failed to take into account a peremptory order. However the end result was the same, relief from sanctions was granted.

THE CASE

The claimant brought an action against the defendant in relation to building works.  Directions were given and the court ordered witness statements to be served by the 21st April 2017.  The defendant was a litigant in person, he wrote asking for an extension of time in relation to service of the witness statements, he did not make a formal application.   The court made a peremptory order stating that unless the defendant served witness evidence then the defence and counterclaim would be struck out.

The defendant was abroad at the time the order was made and thereafter suffered a bereavement in his family.   The claimant made an application which was, effectively, an application for relief from sanctions. The day before the application was heard on the 16th March 2018 the defendant served a statement that dealt with the substantive issues.

At the hearing the judge granted relief from sanctions and extended time for the defendant to serve the witness statements to the 29th March.

The claimant appealed the decision granting the defendant relief from sanctions.

THE JUDGMENT ON APPEAL

Mr Justice Freedman considered the history of the matter and the Denton criteria.

BREACH OF DIRECTIONS OR UNLESS ORDER

On appeal the question was asked as to which particular order relief from sanctions was required or granted.

“d. The breach of the Directions Order or the Unless Order?
    1. I shall return to the exercise of the discretion of the Judge later in this Judgment. However, there was an examination in the course of the hearing, instigated by the Court, as to whether the concentration in the case was on the breach of the Directions Order and the need for relief from sanctions rather than on the failure to comply with the Unless Order. The order that was made by the Judge was to extend the time to exchange witness statements to 29 March 2018, which seems to be a variation of the Directions Order, which had provided for exchange on 21 April 2017. It does not appear to be by reference to the Unless Order: had it been, there would have been the following, first the setting aside of the Judgment in default, and, second, an extension of time for service of the witness statements under the Unless Order.
    2. Although this is technical, it is important to see the application in its correct context. The application which was made by the Defendant was to extend the time for compliance with the unless order. It was not for relief from sanctions for the failure to serve the witness statement on 21 April 2017. This shifts the analysis for the purpose of the Denton test. Each of the steps is in the first instance by reference to the Unless Order, albeit that as I shall set out, the breach of the Directions Order is not unimportant. How then would the analysis be different if the three-stage test was by reference to the Unless Order, and not the Directions Order?
    3. As to the first stage of the Denton test, the seriousness or significance of the breach is the failure to serve the witness statements. The period of delay is the period from 13 October 2017 and not from 21 April 2017. In the instant case, although the unless order was served validly, the evidence was that it did not come to the attention of the Defendant until his return to the UK on 21 October 2017, by which time a default judgment had been entered. It has not been suggested that his evidence was false. Further, although there was some significant delay after the time of the family bereavement, this delay is not relied upon by the Claimant. It was said that there was therefore a delay of about 2 – 3 weeks
    4. That said, in assessing the seriousness or significance of the breach of the unless order, the Court of Appeal has held that it is also necessary to look at the underlying breach. “The court must look at what X failed to do in the first place, when assessing X’s failure to take advantage of the second chance which he was given”: per Jackson LJ in British Gas Trading Ltd v Oak Cash and Carry Ltd [2016] EWCA Civ 153[2016] 1 WLR 4530 at paragraphs 38-39.
    5. Seen this way, it is not right to look at the breach of the Unless Order in isolation. Taking into account the seriousness and significance of the delay of the breach of the Directions Order, the failure to comply with the unless order was both serious and significant. The Judge was plainly right to conclude that, albeit that he appears to have done so by reference to the Directions Order alone. Given the reasoning in British Gas Trading Ltd v Oak Cash and Carry Ltd above, that makes no practical difference in the circumstances of this case. The breach against the background of the breach of the Directions Order was serious and significant.
    6. As to the second stage of assessing whether or not there was a good reason, this is to be assessed by reference to the default in failing to comply with the Unless Order. The Judge’s view was based on whether there was a good reason for not complying with the Directions Order, for which plainly there was no good reason: see paragraphs 7 and 12 of the Judgment. It is a more difficult question to answer as regards the Unless Order. Given the Defendant’s evidence which was not challenged about his not knowing of the Unless Order until his return to the UK on 21 October 2017 by which time the default judgment had been entered, was it a good reason that he did not know about the Unless Order? On balance, I have come to the view that there was not a good reason. There is a reason, but it is not a good reason, because the Defendant ought to have taken more steps than he did.
    7. The reason for non-compliance according to the evidence is that the Unless Order did not come to his attention due to his absence in Cyprus and to the absence of email reception in Cyprus. Considering that reason afresh, it seems to me that the Defendant has provided an explanation for his default, but that reason is not sufficient to amount to a good reason. The Defendant has not explained what happened as a result of the email sent by the Claimant’s solicitor of 26 September 2017 stating that an application was going to be made for an unless order. Whilst it appears that he personally did not receive the Unless Order, there was some culpability in not making arrangements before going to Cyprus to have a means of checking the post and of finding a method to check emails after receiving such an email. Further, when hearing from his daughter on 11 October 2017 about some papers arriving, it seems to me that he should have made enquiries as to what they were and have them read to him instead of leaving it until he returned.
    8. I have considered whether allowance could be made for the fact that the Defendant is a litigant in person. A litigant in person generally cannot be afforded a different standard for compliance than a represented person: see Barton v Wright Hassall LLP [2018] UKSC 12 at [18]. To that end, it seems to me that I am unable to find that there was a good reason for a litigant in person in circumstances where it would not have availed a person legally represented. However, the fact that a person is a litigant in person may affect the matter at the ‘margin’ as Briggs LJ observed in Nata Lee Ltd v Abid [2015] 2 P & CR 3, [2014] EWCA Civ 1652 as approved in Barton v Wright Hassall LLP above. In my judgment, the fact that the Defendant is a litigant in person should not enable him to say that he had a good reason. However, the Court is entitled to factor that into the assessment of the overall circumstances to a limited extent.
    9. I now consider the third stage. Here, if the first focus is on the Unless Order, then even although a good reason has not been established, the reason is nonetheless relevant to the overall justice of the matter at the third stage. Although I am of the view that the circumstances in which the Defendant do not amount to a good reason, they do amount to an explanation. The default was not intentional. There is no serious culpability that attaches due to the default.
    10. The Judge bore in mind a concern about the Defendant not receiving court documents, although he was not precise as to which orders he was referring to. If he had concentrated on the Unless Order, it seems to me that this would be a very significant factor in respect of the exercise of the discretion. Exercising the matter afresh, I regard this as a very significant circumstance.
    11. There was some delay in respect of the making the application, but most of the delay prior to 29 December 2017 is conceded not to be relevant having regard to the bereavement, and so the relevant delay was said to be about two to three weeks. This depends on whether the time period is said to start from the time when the Defendant was served with the order (but did not know about it) or 13 October 2017, the latest date for the service of the witness statements or a later date when the Defendant opened the email (16 October 2017) or returned to the UK (21 October 2017). The delay was imprecise and short before the bereavement. More criticism can be made as regards the failure to serve the witness statement until the day before the hearing.
    12. In looking at all of the circumstances, the Court was entitled to look at the breach of the Directions Order requiring service of the witness statement on 21 April 2017 and the continued breach which led to the need for the Unless Order. The same reasoning as in the British Gas Trading case applies. However, in calibrating the factors, in my judgment, the importance of not knowing about the Unless Order assumes a greater significance.
    13. The Judge took into account the three matters above on the basis that he was considering the question of relief from sanctions relating to the failure to serve the witness statements by 21 April 2017. The second of those matters was the fact that the Defendant did not receive the relevant orders. Where the focus is in the first instance on the Unless Order, that seems to me to be a weighty point at the third stage of the Denton analysis. Although there was not a good reason for this, the default was not intentional and the culpability was low. There is a marginal significance to the fact that the Defendant was a litigant in person.

 

THE APPEAL COURT EXERCISED ITS DISCRETION AFRESH

Because the circuit judge failed to take into account the fact that there was a breach of a peremptory order the matter could be considered afresh on appeal.

    1. To the extent that the Judge did not analyse matters in this regard, it would fall to the appellate court to exercise the discretion afresh. The Court takes into account the serious and significant breach of the Directions Order and the damaging effect which this has had on the disposal of this case. There is also to be taken into account the absence of a good reason for this, and the failure of the Defendant to seek relief from sanctions.
    2. However, in the end, in my judgment, it is an important matter that the Unless Order was worded in a manner which enabled the Defendant not to have to obtain relief from sanctions. When asked, Mr Page did not seek to contend that relief from sanctions would be required in the event that the Defendant had served the witness statements by 13 October 2017. Although the Defendant does not give a ‘good reason’ for that failure, the Defendant has gone a long way to do so, albeit not such as to have established a ‘good reason’ which could have ended the analysis at the second stage. Looking at all the circumstances including the breach of the Directions Order and the failure to apply from relief from sanctions, the matter which weighs the heaviest is the fact that if the Defendant had known about the Unless Order during its currency, he would have had the opportunity to act so as preserve his ability to defend and counterclaim. He would then have been able to act at that time rather than, as he did, after the judgment had been obtained against him. Thus, exercising the discretion afresh, relief from sanctions should be granted, by extending the time to comply with the Unless Order and setting aside the Judgment.
    3. If the above approach is wrong, and the matter falls to be dealt with by reference to the Directions Order as the Judge had done, then in my judgment, the Judge did not exercise his discretion improperly or wrongly. To the extent that he made any error in the four factual matters referred to above, none were material for the reasons above set out. His three factors for exercising his discretion were not wrong. He bore in mind the fact that the litigation had not been pursued particularly diligently, there were issues about the Defendant’s knowledge of Court orders and the Defendant’s complaint warranted investigation by the Court. I conclude after this examination, as did Cheema-Grubb J, that “the Judge had a discretion whether to grant relief from sanction. The breaches were serious and the Defendant’s approach to the litigation was slow and showed little regard for the process of the court. However, the judge correctly considered the overall context of the case and granted relief in order to do justice. While he appears to have mis-stated some of the background he was giving in an ex tempore judgment within a list of cases. Putting those matters to one side his approach to the third aspect of the Denton v TH White Ltd [2014] EWCA Civ 906 test was principled and his conclusion was one reasonably open to him.”
    4. At the permission application where permission was granted, Mrs Justice Yip expressed a concern about the order made by the Judge locked the Claimant into facing a Counterclaim from an apparently impecunious litigant. That has led to a refinement of the position of the Claimant who offers openly to abandon the claim subject to receiving the costs of already ordered by the Judge and the costs of the appeal, provided that the Defendant does not pursue his Counterclaim. The Defendant has refused this offer. This was not a matter which was raised before the Judge. It can only therefore be raised if the discretion is being exercised afresh. On the basis of my reasoning above, the discretion is not to be exercised afresh if the key order is the Directions Order. However, on my analysis that the key order is the Unless Order, then this matter can be factored into the third stage of the Denton analysis. There is some concern about the economics of the litigation, but the Court is unable to form a view about the Counterclaim, and having regard to the Judge’s view that there was a complaint which warranted investigation, this new consideration does not lead to a different outcome.
Conclusions
    1. The conclusions which are not comprehensive or even a full summary are as follows:
(1) The Court ought to have focussed more on the Unless Order and in particular the reasons for not complying with the Unless Order;
(2) That was a serious error because the effect of the Unless Order would have been, if complied with, to allow the witness statements to be served without having to seek relief from sanctions due to the default relating to the Directions Order;
(3) That enables the Court to do the Denton exercise afresh by reference to the Unless Order, but taking into account the default relating to the Directions Order. Doing so, the Court concludes that in the exercise of the discretion of the Court, it would be appropriate to extend time for compliance with the Unless Order and to set aside the default judgment. In short, it is to reach the same conclusion as the Judge, but for different reasons.
(4) If that approach is wrong, and the Judge was right to consider the matter by reference to the Directions Order, then I have come to the conclusion that the Judge was entitled to come to the view which he did in the exercise of his discretion.
(5) These conclusions are not affected by the willingness of the Claimant to forgo its claim on certain terms. Nevertheless, I reiterate the remarks of Mrs Justice Yip to encourage the parties to consider alternative dispute resolution and to explore the settlement of this litigation as a whole.
  1. There is a matter which merits further consideration arising out of this case, but which, in the event, has no impact on the result. It is that where a party is seriously in breach of a directions order, it may make a difference as to whether the application is for an unless order or some other course which would force the defaulting party still to make an application for relief from sanctions. That might be seeking a striking out order due to the default, to which a defaulting party might have to apply for relief from sanctions to be able to serve the witness statements. Alternatively, it might be to seek an unless order which provides as the event not the service of the witness statements, but the making of an application for relief from sanctions so as to be able to serve the witness statements. An unless order such as the one in this case had as its effect that a party could serve the delayed witness statements within the time provided in the unless order freed from the burden of having to seek relief from sanctions.
  2. In any event, for the reasons which I have given, the result is the appeal is dismissed.