THE APPROPRIATE CRITERIA FOR REINSTATEMENT WHEN AN ACTION IS STRUCK OUT OF COURT'S OWN MOTION: HALEY -v- SIDDIQUE CONSIDERED
In Haley -v- Siddique  EWHC 835 (Ch) Judge Hodge Q.C., sitting as a judge of the High Court, considered issues arising from a striking out order made of the court’s own motion. His judgment states that the case provides a salutary lesson to litigators.
The action had been stayed to allow mediation. That mediation had been largely successful. However there was a direction that the parties notify the court whether further directions were needed by the 10th November 2013. However that directions order did not provide for any specific sanction.
The parties did not notify the court by the 10th November and the court consequently made an order, of its own motion.
“(1) The claim be struck out. (2) Because this order has been made without a hearing, the parties have the right to apply to have the order set aside, varied or stayed. A party making such an application must send or deliver the application to the court (together with any appropriate fee) to arrive within seven days of service of the order.”
THE APPLICATION FOR REINSTATEMENT
The claimant made a prompt application for reinstatement. This was neither supported nor opposed by the defendants. That application was refused by the District Judge applying Mitchell type criteria. There was an appeal to the Circuit Judge.
CONSIDERATION OF THE APPEAL: THE APPEAL WAS ALLOWED BECAUSE THE DISTRICT JUDGE APPLIED THE WRONG CRITERIA
Judge Hodge allowed the appeal because the District Judge had applied the wrong criteria. An application to vary a without notice order was fundamentally different to an application for relief from sanctions and was not subject to either the Tibbles or Mitchell criteria.
- No doubt District Judge Khan had proceeded pursuant to CPR 3.4(2)(c). That provision provides that the court may strike out a statement of case if it appears to the court that there has been a failure to comply with, amongst other things, a court order. Subrule 3.4(3) provides that when the court strikes out a statement of case it may make any consequential order it considers appropriate. CPR 3.4(4)(b) recognises that one of the consequential orders that the court may make, when striking out a statement of case, is one requiring the claimant to pay costs to the defendant. In fact, District Judge Khan’s order of 6th December had contained no provision governing the payment of costs by any party to the litigation to another. In that regard, it seems to me that it was calculated to lead to further litigation, rather than avoiding such litigation. Be that as it may, however, District Judge Khan’s order, having been made without a hearing, correctly stated (in paragraph 2) that because the order had been made without a hearing, the parties had the right to apply to have it set aside, varied or stayed. Such a provision is required where a court has dealt with an application of the court’s own initiative: see CPR 3.3(4), (5) and (6)). There are corresponding provisions in CPR 23.8, 23.9 and 23.10 where an application has been dealt with without a hearing. Where an order has been made by the court of its own initiative, or without a hearing, the parties are entitled to apply to the court to have that order set aside or varied. On such an application, unlike one to set aside an order made at a hearing which the parties have either attended, or had an opportunity to attend, the restrictions contained within CPR 3.1(7), as laid down by the Court of Appeal in the case of Tibbles –v- SIG plc  EWCA Civ 518,  1 WLR 2591 have no application. Since the parties have not had an opportunity of making representations to the court before an order was made without a hearing, or of the court’s own initiative, the parties are entitled to invite the court to review whether it was appropriate to make the order in the first place.
- In my judgment, on such an application to review an order made without a hearing and/or of the court’s own initiative, the restrictions upon applications for relief from sanctions, as set out by the Court of Appeal in the case of Mitchell –v- News Group Newspapers Limited  EWCA Civ 1537 [now reported at  1 WLR 795], have no application. In my judgment it is wrong to approach an application to set aside an order made without a hearing, or of the court’s own initiative, as though the restrictions on an application for relief from sanctions apply. CPR 3.8 makes it clear that where a party has failed to comply with a rule, practice direction or court order, any sanction for failure to comply imposed by the rule, practice direction or court order has effect unless the party in default applies for and obtains relief from the sanction. That has no application to a situation where the court’s order, made without a hearing and of its own initiative, is imposing a sanction for the first time. It is only in cases where a party has failed to comply with a sanction that an application under CPR 3.9 is necessary; and it is only in that situation that the restrictions in Mitchell and subsequent cases apply. As was made clear in Mitchell (at paragraph 45), 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. In my judgment, no such assumption applies where a sanction has been imposed by an order made without a hearing, or of the court’s own initiative, and an application is made to vary it or set it aside.
- In my judgment, the district judge, encouraged, no doubt, by the way in which the matter had been presented to her, fell into error in treating the application fundamentally as one for the grant of relief against sanctions. I am entirely satisfied that that is what she did when one looks at what she said, both in her judgment, and also in the form N460. The district judge said that the starting point was the provisions of CPR 3.9. She stated that the court had to consider whether there had been any good reason for any failure to comply with the July 2013 order. She said that there was no good reason for non-compliance. The only elements of the overriding objective to which the district judge had regard were those set out in CPR 1.1(2)(e) and (f), relating to allotting to the case an appropriate share of the court’s resources (e), and (f), enforcing compliance with rules, practice directions and orders. She said nothing about the other constituent elements of the overriding objective in CPR 1.1(2)(a) through to (d) of ensuring that the parties are on an equal footing, saving expense, dealing with the case in ways which are proportionate, and ensuring that it is dealt with expeditiously and fairly. At no stage did the district judge consider whether it had been reasonable or proportionate for District Judge Khan to have imposed the drastic sanction of striking out the claim for the failure to comply, on the part of all parties, with their joint obligation (contained within the July 2013 order) of notifying the court in writing of the outcome of negotiations and what, if any, directions were required.
- In the case of Marcan Shipping (London) Limited –v- Kefalas  EWCA Civ 463,  1 WLR 1864 Lord Justice Moore-Bick, in delivering the leading judgment of the Court of Appeal, had pointed (at paragraph 36) to the need, before making a conditional order, particularly orders for the striking out of statements of case, for the judge to consider carefully whether the sanction being imposed was appropriate in all the circumstances of the case. He noted that a conditional order striking out a statement of case was one of the most powerful weapons in the court’s case management armoury, and should not be deployed unless its consequences could be justified. He found it difficult to imagine circumstances in which such an order could properly be made for what could be described as “good housekeeping purposes”. Those observations apply with even more force where the court is not considering the making of a conditional, or unless, order, but is proposing to make an immediate order striking out a claim, where no sanction to that effect has previously been imposed.
- In my judgment, the district judge fell into error in the way she approached the application that was before her. Although emphasis may not have been placed upon the application to set aside the order as one having been made without a hearing, and of the court’s own initiative, in my judgment that basis of application was sufficiently encompassed within paragraph 1 of the application notice. Had the district judge focused upon that aspect of the application, rather than upon the application in paragraph 2 for relief from sanctions, she would not have fallen into the error of applying the principles in Mitchell to the application that was before her. I should also add that it seems to me that even if the district judge had been considering what was truly an application for relief from sanctions, she may also have fallen into error in failing to consider whether the breach was trivial before she went on to consider whether good reason for the breach of the court order had been shown. But it is unnecessary for me to develop that aspect of the matter further since I am satisfied that, in applying the principles in Mitchell, the district judge had fallen into error.
- I am satisfied, for the reasons I have given, that there is a real prospect of success on appeal and, therefore, permission to appeal is given. Indeed, I am satisfied that the decision of the district judge was wrong or, alternatively, was unjust because of a serious procedural irregularity in the proceedings before her in that she focused upon the wrong basis for the application that had been made to her. In those circumstances, I will also allow the appeal.
- In my judgment the circumstances of the present case afford a salutary lesson potentially to other litigants in other litigation in ensuring that applications to the court to set aside orders made without a hearing, or of the court’s own initiative, are properly presented as such, and not simply as applications for relief from sanctions. Because of that, and pursuant to the power I have to make an order subject to conditions, I will make it a condition of giving permission to appeal, and allowing the appeal, that a transcript of this judgment will be obtained at the expense of the claimant.
- I have discussed, before delivering this judgment, what costs order should be made. I think both counsel are in agreement that, whatever the position may be as between the parties to the litigation and their respective solicitors, as between the parties the appropriate order to make, in relation to both the costs of the application and also the costs of the appeal, is simply to make no order as to costs. The justification for that is that it had been the joint responsibility of all parties to comply with the July order, and it was their joint failure to do so that has led to this application and appeal.”
COMMENT: A WITHOUT NOTICE ORDER IS FUNDAMENTALLY DIFFERENT TO AN ORDER MADE ON NOTICE
There are two cases, not cited in the judgment, which could have been of considerable assistance to the claimant had they been cited to the District Judge (they may have been but it appears unlikely).
The observations of the Court of Appeal in Tombstone –v- Raja  EWCA Civ 1444 about exercising a discretion where an order is made without notice to the party affected.
“They are determined by the court exercising the discretion given by that rule in accordance with the overriding objective. Where the order is one which affects the rights of the affected party in an important respect (a judgment is the most obvious example), it will only be in the most exceptional circumstances that the discretion will not be exercised to set aside the order.” (paragraph 84).
- The observations of the Court of Appeal in Ryder Plc -v- Dominic James Beever  EWCA Civ 1737 where the court was critical of a decision to make a “strike out order” without notice.
- Smith L.J’s observations in the Ryder case: “I recognise of course that the court has the power to make an order of its own motion but, particularly where there is a possibility of a ‘strike-out unless’ order, it is far preferable for an application to be taken out, in which case notice of the application must be served on the opposing party. The saving of costs is not a good reason for adopting the informal process used in this case. True, costs would be incurred but the claimant would be ordered to pay them and almost certainly to pay them immediately. If, contrary to the view I have expressed, a court regards it desirable to make an ‘unless’ order without the issue of an application, the court should surely be slow to make such an order without giving the party affected the opportunity to be heard, as happened here. In short, I deprecate the practice followed here. The CPR are intended to make solicitors comply with orders or to face the consequences with their eyes open. They are not intended to create traps for the unwary or slightly incompetent. In my view, these circumstances are highly relevant to the exercise of the court’s discretion on the grant of relief.”
See the earlier post where these authorities are considered.