ANOTHER FAILED APPLICATION FOR RELIEF FROM SANCTIONS: MORE LESSONS TO LEARN

October 9, 2013 · by · in Civil Procedure, Relief from sanctions

The decision in Michael –v- Middleton [2013] EWHC 2881 (Ch)   provides another example of the difficulties that arise in making an application for relief from sanctions.  However close examination of the judgment also provides some interesting lessons in conducting litigation and making applications for relief.

THE FACTS

The case itself revolved around the nature of agreements between the claimants and the defendant (who was the claimants’ former solicitor); applications were made to set aside deeds of trust on the grounds of fraudulent misrepresentation.

BREACHES OF THE RULES

The action was listed for trial in April 2012. In January 2012 an unless order was made against the claimants in relation to service of a disclosure list.   A list of documents was served, however the defendant took the view that these did not comply with the rules. Further the claimant shad failed to serve witness statements in accordance with directions.

FAILURE TO SERVE WITNESS STATEMENTS

One surprising aspect of the claimant’s failure was that this was a deliberate decision on the part of the claimants’ (then) solicitor.   The solicitor had a number of witness statements in his possession but was holding them back until he had received signed copies of two other witness statements that he was awaiting. A hearing was held to consider the defendant’s application to strike out the claim because of the claimants’ breach.

The judge observed:

“I was extremely critical at that hearing of that as a tactic, Mr Davies having apparently held back the witness statements that could have been served as some form of tactic to a point which by then was only some seven days before the anticipated start of the trial.” Further the reasons given for the failures to serve an appropriate list of documents were described as a “very unsatisfactory account…”.

Consequently the judge struck out the action.

SUBSEQUENT CONDUCT OF THE ACTION

What happened afterwards is, perhaps, even more surprising. The claimants stated that they were not told of many of the court orders and certainly were not told of the striking out or the costs order against them.  A default costs certificate was obtained and their solicitor paid the costs out of funds on client account, but without consultation with them.  The claimants were not told until October 2012 that their action had been struck out in February of that year.

The claimants sought assistance from a relative who was a retired solicitor and an application was made to have the case reinstated.   That was refused, partially because the applicant had no proper standing but primarily because there was no evidence to show that the claimants were in any position to remedy the breaches.

THE NEW SOLICITORS

A second set of solicitors were instructed in January 2013.  However they did not apply for reinstatement until July 2013.

THE POINTS MADE IN SUPPORT OF THE APPLICATION

The judge found that the new (post April) CPR 3.9 applied. He considered a number of points.

1. That the issues between the parties needed to be resolved by litigation.

2. That the action was not statute barred and proceedings could be issued again.

3. There had been considerable misconduct by the claimants’ previous solicitor and it was a specific consideration under the old rules whether the default was due to the party or their solicitor.

WEAK POINTS OF THE APPLICATION

It is interesting to note that:

1.  Although the claimants were seeking to amend the pleadings there was no proposed                         amended pleading before the court.

2.  The claimants were not in a position to correct the default that led to the striking out of the action in the first place.  The position in relation to the witness statements were uncertain and the claimants were not in a position to serve an amended disclosure list.

THE JUDGE’S DECISION

The judge refused the claimant’s application  for relief from sanctions – to set aside the order striking out the action.

1. There was a significant possibility that, even if the claimant served witness statements promptly, further or supplemental statements would have to be served.

2. The conduct of the case by the claimants’ previous solicitors was very seriously inefficient.

3. Even at the date of the application there had been no progress in terms of the actual conduct of the litigation.

4. The judge stated:

“Standing back it seems to me that the justification for imposing this sanction, which has not been appealed against, is that the original trial date could not be met by reason of the default in the conduct of the action by the Claimants’ solicitors. It is right, it seems to me, to consider also that the effect of granting relief from sanctions now that the original trial date has gone past would be not only significantly to extend time but also, it seems to me, to give the wrong impression that a failure to comply with a timetable leading to a sanction imposed because the case cannot be dealt with within the timetable set by the court may be overcome once that timetable is out of the way simply by setting a new timetable and effectively granting a very great extension of time for the matter to be put back on track. A court, in my view, should be slow to accept that the effects of timetabling and the discipline imposed on the parties that are sought to be achieved can be effectively sidestepped in that way.”

 

THE RELEVANCE OF THE FACT THAT LIMITATION HAD NOT EXPIRED

The judge noted that in many cases a claimant, whose action had been struck out, was limited to an action against the legal advisers.  In the current case it was accepted that the issues between the parties could still be litigated.   However this served to substantially reduce the force of the claimants’ argument that they would be disadvantaged if they did not obtain relief from sanctions.

“Given that I am not satisfied that there is anything wrong with the order imposing the sanction in the first place, that it would send the wrong message effectively to allow the timetable to be extended once the pinch point of the trial date has gone past and, further, that the Claimants will not be prejudiced in terms of loss of relief available to them and are likely in pursuing that relief to require substantially to amend their Claim, in all the circumstances it seems to me that the right order here is to refuse the Claimants relief from sanctions and that, if they are to maintain the position that they sought to advance in this Claim, they should start again having paid, as they already have, the costs of the action and, as they accept they must, the costs of this application with fresh proceedings based on the form of relief that they seek to pursue to trial and in circumstances where they will be freshly advised and able to focus on that litigation with a clean start.”

 

DOES THIS REPRESENT THE POST-JACKSON APPROACH ?

It is doubtful how far this can be taken as a beacon of the new approach under Jackson. It would have been  extremely surprising if the application to set aside had been granted under the previous CPR 3.9.   It is no surprise at all that relief was not granted under the new regime. The claimants were in breach; the action had been struck out and a considerable amount of time had passed before the application to set aside the striking out was made.

LESSONS TO LEARN

There are obvious lessons to learn in relation to the conduct of the first solicitor. Not least is that it is unwise to delay service of witness evidence. Decisions made “strategically” to delay the service of evidence are rarely (if ever) viewed with favour by the courts.  Further:

1. If you are presented with a situation where an application needs to be made for relief from sanctions it is important that this is made promptly.  The time taken for the application to be made is no longer an express part of CPR 3.9 however it would be foolish to think that this is not a highly relevant factor.

2. If you are making an application for relief because of default put that default right before the hearing if at all possible.  It may well categorised as shutting the stable door, however it is probably an essential element in any application. The judge has to consider “the need for litigation to be conducted efficiently…”. The fact that steps have been taken; a clear timetable can be set and there will be no further delays could well be an important factor in some cases.

USEFUL LINKS

The case is not available on BAILLI but is available on Lawtel to subscribers.   However there is a discussion of the case in Litigation Futures at http://www.litigationfutures.com/news/refusal-relief-sanctions-also-highlights-negligence-risk-solicitors-warns-qc

RELEVANT POSTS

Discussions of relief from sanction applications can be found at: