SG DG PETROL: A (HIGH COURT) POST-MITCHELL DECISION ON RELIEF FROM SANCTIONS

There is a High Court decision on relief from sanctions at http://www.bailii.org/ew/cases/EWHC/Comm/2013/3920.html An application for relief from sanctions was dismissed. The judge went on to make general observations about how applications for relief from sanctions should be conducted.

In SG DG Petrol SRL -v- Vitol SA Mr Robin Knowles CBE QC refused the claimant’s application for relief from sanctions when it failed to comply with an order for security for costs.  The claimant sought both an extension of time for complying and relief from sanctions.

The judge reviewed, succinctly, the  principles to be derived from Mitchell.In Mitchell (above) the Court of Appeal recognised that the reference to dealing with the application “justly” was “a reference back to the definition of the “overriding objective””: see [37]. However the Court of Appeal observed that the considerations singled out for specific mention at (a) and (b) in the rule “should now be regarded as of paramount importance and be given great weight”: see [36]. As the rule says, regard should be had to all the circumstances of the case, but (subject to the guidance given by the Court of Appeal) “the other circumstances should be given less weight than the two considerations which are specifically mentioned”: see [37].

 The guidance given by the Court of Appeal included the following:

(1)               “It will usually be appropriate to start by considering the nature of the non-compliance with the relevant rule, practice direction or court order”: see [40]. “If the non-compliance cannot be characterised as trivial, then the burden is on the defaulting party to persuade the court to grant relief. The court will want to consider why the default occurred. If there is a good reason for it, the court will be likely to decide that relief should be granted.”: see [41].

 (2)               “Later developments in the course of the litigation process are likely to be a good reason if they show that the period for compliance originally imposed was unreasonable, although the period seemed to be reasonable at the time and could not realistically have been the subject of an appeal.”: see [41]. “… [G]ood reasons are likely to arise from circumstances outside the control of the party in default”: see [43].

 (3)               On an application for relief from a sanction a submission that the sanction should not have been imposed in the first place would be “misguided”: see [44]. “On an application for relief from a sanction … the starting point should be that the sanction has been properly imposed and complies with the overriding objective”: see [45]. “An application for relief from a sanction presupposes that the sanction has in principle been properly imposed. If a party wishes to contend that it was not appropriate to make the order, that should be by way of appeal or, exceptionally, by asking the court which imposed the order to vary or revoke it under CPR 3.1(7)”: see [44].

 Other applicationsThe application before me seeks both an extension of time (under CPR 3.1(2)) and relief from sanctions (under CPR 3.9(1)). When the court is considering an application for an extension of time for appealing, the Court of Appeal has held that “it is equally appropriate to have regard to the check-list in CPR r 3.9 … in a case of any complexity”: see Sayers v Clark Walker (a firm) [2002] 1 WLR 3095 at 3100C; [2002] EWCA Civ 645 at [21]. I consider the same approach applies for the extension of time sought in the present case.

 Sayers was decided before CPR 3.9 was amended, and when it contained a checklist running from (a) to (i). However it seems to me that even though the amended CPR 3.9(1) does not have a checklist, it is still to the amended rule that regard should now be had “when court is considering an application for an extension of time … in a case of any complexity”. This is, briefly, because (a) the reasoning given by Sayers (see at [21]) still holds good, (b) the amended rule still requires the court to consider all the circumstances of the case, even without listing them, and (c) it is always necessary to have regard to the overriding objective.

THE REFUSAL OF RELIEF FROM SANCTIONS

The judge gave detailed reasons for refusing relief from sanctions.

“(1)   The non-compliance cannot be characterised as trivial. The Claimant realistically accepts as much through Mr Scorey. The burden is therefore on the Claimant to persuade me to grant relief.

 (2)   Eder J’s order required security to be provided and provided in good time. He had already allowed an extension of time, and even that had been materially exceeded. 

(3)   It has been the Claimant’s choice to confine its efforts in the last 6 months to provide security to attempts to realise certain assets, rather than to respond to circumstances by extending its efforts to seeking other sources for the security. Whilst the Claimant offers explanations of why it has been frustrated in its attempts to realise assets of its choice, there is no good reason for the default. 

(4)   The creditors of the Claimant stand to gain if the Claimant is successful in the proceedings. The absence of any evidence from the Claimant of the ability (or rather, any inability) of the creditors of the Claimant to resource the security from their own assets, leaves me further unpersuaded. 

(5)   Although “good reasons are likely to arise from circumstances outside the control of the party in default”, and some things have happened that are outside the Claimant’s control, the Court has not been provided with anything like an adequate account of matters within its control. 

(6)   Individual developments in the form of challenge to the realisation of the land and the view of the Syndic Judge have not rendered the period for compliance originally imposed unreasonable. The Court was setting a period for the provision of security for costs. The fact that it considered evidence and argument directed to the realisation of particular assets does not mean that its order was confined to the realisation of those assets. 28 days was first allowed at the first Case Management Conference. The Claimant then effectively enjoyed a further period of twice that length between the expiry of the 28 days and the hearing of the second Case Management Conference. Eder J then allowed a further six weeks. That period remains in my view reasonable. 

(7)   It is most unlikely that the Claimant and its creditors, with the benefit of their experienced legal advisers, would not have given thought to how to resource the litigation, including potential security for costs or ultimate adverse costs orders, before the litigation commenced. By the date of the first Case Management Conference the application for security had been pending for a month and the litigation had been on foot for six months. This too was all time available to the Claimant. 

(8)   To grant an extension of time and relief from the sanction would be to leave compliance with an order for security for costs unenforced in a case in which the provision of security was justified. The litigation woul
d have to remain idle for a further extended period; there is little that could appropriately be done in the meantime to manage it towards trial. Already Eder J’s case management directions marshalling the case towards the point of consideration of the appropriateness of a Mediation Order or a split trial have been disabled, yet such consideration is a material part of the active case management that the Court is required to give to further the overriding objective (see CPR 1.4(1) and (2)(d) and (e)).   

(9)   I have referred to the submission of the Claimant that it could issue fresh proceedings if the present claim remains struck out. If it was clear that it could, then considerations of efficiency and proportionate cost might argue in favour of relief from the sanction of a strike out in some cases. But it is not accepted by the Defendants that the Claimant could issue fresh proceedings without being met successfully by, for example, an argument of abuse of process. This point being at issue, and taking into account also the possibility that what underlies the breaches of order that have occurred is the fact that the Claimant is not serious about its claim and so might choose not to start again, I am not persuaded that considerations of efficiency and proportionate cost argue in favour of relief from the sanction of a strike out in the present case.  

(10)           The application for an extension of time was not made promptly. The day it was issued was the day the claim stood struck out. The Claimant knew that that was the inevitable position when it decided to leave it until 17 October to issue the Application in circumstances where only an order and not the mere issue of an application seeking an order would prevent the sanction taking effect automatically in accordance with the order of Eder J.

 Overall, taking account of all the circumstances of the case, so as to deal justly with the application, and including the need for litigation to be conducted efficiently and to enforce compliance with orders, this is not in my judgment an appropriate case in which to extend time further or grant relief from the sanction.

GENERAL GUIDANCE

The judge went on to make some general observations from his position of having considered an application for relief based on the Mitchell decision.

” However with the benefit of seeing how the application in the present case was advanced and opposed in light of the handing down of the decision of the Court of Appeal in Mitchell, I hope it may be helpful to offer the following two brief further observations. In so doing I intend no criticism of Counsel or Solicitors, who were in fact of real assistance throughout.

 On an application under CPR 3.9(1) the Court will be engaged in looking more widely than at the case in hand, as well as at the case in hand; “the new approach … seeks to have regard to a wide range of interests”: see [51]. I respectfully offer the observation that there are limits to the contribution that a party, especially a non-defaulting party, can usefully make in evidence or argument in respect of circumstances extending beyond the case in hand – for example on what is needed “to enforce compliance with rules, practice directions and orders.” This is pre-eminently an area for the judge. In Mitchell the Court of Appeal was not putting an enhanced tactical weapon into the hands of non-defaulting parties to the litigation. This is clear from the nature of the factors specified at (a) and (b) of CPR 3.9(1). It is reinforced by the concern of the Court of Appeal to reduce satellite litigation: see [60].

 The second observation arises from the fact that when citing the Court of Appeal in Mitchell the parties referred me closely to the examples given by the Court of Appeal, with the Defendants (the non-defaulting parties) pressing me with the point that the case in hand was not within one or more examples. I respectfully doubt that is the right approach. The examples are there simply to illustrate the principles described by the Court of Appeal. The Court’s inquiry should be guided by the principles. My own view is that ideally the jurisdiction to extend time and grant relief from sanctions is one in which (as Lord Templeman urged in The Spiliada [1987] AC 456, HL in relation to service out of the jurisdiction) a judge would not be referred to other decisions on other facts”