RELIEF FROM SANCTIONS REFUSED IN GROUP LITIGATION CASE: THE “THIRD STAGE” IN DENTON CONSIDERED IN DETAIL

In the judgment today in Kamathi -v- The Foreign & Commonwealth Office [2017] EWHC 939 (QB) Mr Justice Stewart refused an application for relief from sanctions. The Denton principles were considered in detail in the context of a late application to be included in the register of a group litigation order.

THE CASE

There is ongoing litigation in the courts between a large number of the litigants and the defendant which is the subject of a Group Litigation Order.  An order had been made  in November 2013 that no claim be added after  30th  April 2014 t. This was extended by court order to the 30th May 2024.

The trial of the matter is ongoing. Evidence has been heard on several issues and the remaining evidence appears likely to take several months.

There were 33 applicants who were not on the court register.  In order to get on the register at this stage they required relief from sanctions.

THE APPLICATION

The 33 applicants applied for relief from sanctions and to be joined to the register. The lead firm of solicitors in the GLO were neutral. The defendant opposed the application.

THE DENTON TEST

The failures were caused by the applicants’ former solicitors (who were now in administration).  The judge was clear in relation to two points:

• The failure was serious and significant.
• There was no good reason for the default.

1. I cannot find, even if the Hugh James’ assertions are correct, that there is good reason for the default. Moreover, I am not convinced that the default is due to failings by GT Law. That is a possibility, or a possibility in the case of some of the Applicants, but the evidence is unclear.

2. What can be said therefore is there was no good reason for the default, whether or not it was caused by solicitors and/or Applicants.

THE THIRD STAGE

The Third Stage

1. 1. Having reached this point, Denton mandates that the application for relief from sanctions will not automatically fail because the Court will consider “all the circumstances of the case, so as to enable it to deal justly with the application.” I have to give particular weight to the need (a) for litigation to be conducted efficiently and at proportionate cost and (b) to enforce compliance with rules, practice directions and orders. Also (c) the promptness of the application is a relevant circumstance to be weighed in the balance along with all the circumstances. Finally, (d) I have to take into account the seriousness and significance of the breach (stage 1) and any explanation (stage 2). The more serious or significant the breach, the less likely it is that relief will be granted unless there is a good reason for it.

   2. I deal first with (a) and (b):

(a) The Applicants’ submission is that the breach does not prevent the litigation from being conducted efficiently and at proportionate cost and that the addition of the claims will not affect the trial timetable or prejudice the ongoing trial. This is correct in respect of the claims for personal injury by the Applicants. It is not correct in respect of estate claims. If they were permitted, they would require selection of Test Claimant(s) and that would impact substantially on the litigation. Since those applications are not being permitted in any event, I do not deal with them further.

(b) The Court must bear in mind the need for compliance with orders as, to quote Denton “The old lax culture of non-compliance is no longer tolerated.” In this GLO, the comments by Thirlwall J (as she then was) in para 17 of her judgment in the PIP Breast Implant Litigation case have particular force.

1. 1. I now consider (c):

50.1 The promptness of the application. First, and importantly, the application is far from prompt. The register closed 2½ years before the application was issued. In that period there were numerous CMCs and hearings and the trial was underway for 6 months.

50.2 The Applicants allege that the reasons for the lack of promptness are due to their personal circumstances which are far divorced from the conditions in the UK and due to lack of information from GT Law and IC Law. Even assuming everything in their favour in this regard (which is far from made out) the fact remains that the application is incredibly late. Further, there is some dispute as to whether all the delay could be justified on that basis. The Defendant criticises Hugh James for delay between their first involvement in November 2015, the date of forms of authority instructing Hugh James in December 2015 and the date of issue of this application which was sealed on the 8 December 2016. As can be seen from the Applicants’ chronology attached to this judgment the predominant justification for this was lack of communication from IC Law and the complaint made by IC Law to the SRA which was not resolved until 17 October 2016. In relation to this period of some 12 months, I make the following comments:

a. Hugh James requested the transfer of ten files from IC Law by letter dated 23 December 2015. Eight of these were received between 24 March 2016 and 6 April 2016. On 7 April 2016 IC Law told Hugh James that they did not appear to have received the files for two of the Applicants (Applicants numbers 4 and 30). Therefore it was known that these two files probably would not be forthcoming. A request for remaining files held by IC Law was sent by Hugh James on 15 April 2016. It was then that IC Law made a complaint to the SRA. Mr Ellis says (first statement, paragraph 34) that initially it was anticipated that IC Law would provide the files of the various Claimants in order that these could be fully reviewed before an application to the Court was made. However, by 7 April 2016 Hugh James knew that IC Law did not have two of 10 files they requested. It is also of note that the Lead solicitors were not approached until 16 March 2016. This was in respect of ten clients only. Tandem Law replied the same day saying that eight of them were on the group register but two were not (again Applicants numbers 4 and 30). Mr Cosgrove-Gibson of Tandem Law stated: “The two of these are not on the register you would need to make special application and give reasons why they should be put on the register.” On 21 April 2016 Hugh James provided a further list of 291 names to Tandem Law and a further 49 on 17 May 2016. Tandem Law responded quickly and told Hugh James that there were a total of 69 names which could not be matched with entries on the group register. Mr Ellis says that he considers it reasonable for Hugh James to seek the files of papers and to review the contents as it was reasonable to assume that the file of papers may have explained reasons for the claim not being placed on the register at all or being removed once it had been on the register. Also he says he believes it is reasonable for Hugh James to have awaited the outcome of the SRA investigation.

b. On analysis:

(i) It took some three months before contact was first made with the Lead solicitors

(ii) As at April 2016 Hugh James had been told by IC Law that they did not have files for two of the Applicants; also Hugh James had been told that the Applicants were not on the Register.

(iii) As a result of a dispute between the Applicants’ former solicitors, IC Law and Hugh James at least eight months was lost (April-November 2016 inclusive) before this application was made, including six weeks after the conclusion of the SRA proceedings.

(iv) The Defendant was wholly unaware of what was going on and indeed was not given any notice of this application. Nor was the Court given any notice.

Therefore, some 12 months were lost for reasons which can be categorised as the responsibility of either former or current representatives of the Applicants.

50.3 In the PIP Breast Implant Litigation (paragraph 26) Thirlwall J stated the fact that if the applicants were to suffer loss as a result of the failure to join the group then they would have a strong claim against their solicitors. For reasons which I have mentioned above I am not satisfied that GT Law were in default here. If they were then the Applicants would have a claim over against them. If GT Law were not negligent then reasons for this may well be that the Applicants did not have a good case and/or were themselves responsible for not being on the register. Assuming, for the purposes of this judgment, that GT Law were in default, the Applicants submit that GT Law is in Administration and there is no evidence it has a valid policy of insurance in place. However no enquiries have apparently been made and the expectation is that solicitors who were validly practising would have professional indemnity insurance, something which Leading Counsel accepted in argument. Insurers are named in the 2013 retainer documents. Further, the Applicants say that there would be inevitable prejudice proceeding against those previously acting for them and that any claims would be for loss of a chance which inevitably would result in reduced recovery for the Claimants. Also there would be significant delay for the Applicants, many of whom are elderly. These would not be claims against GT Law for personal injury but rather for professional negligence and would not attract the protection of QOCS. They would be obliged to obtain insurance cover. There is of course some merit in these points, which have for the most part often been argued in respect of claims over against solicitors. I take them into account, but they cannot wholly undermine the argument that, on the Applicants’ contention, there would be a valid claim against GT Law. Therefore the Applicants’ prejudice is not totally answered by this point but it is partially answered.

50.4 In terms of prejudice to the parties, if the GLO claims fail there will be no prejudice to either party whatever the outcome of the application. If the GLO claims succeed, the Applicants may well lose their right of action and be left only with their less favourable potential claim against GT Law. I do not underestimate this prejudice. As far as the Defendant is concerned, Ms Smith says that there will need to be a process of considering which issues in the test cases were successful and mapping those to the other 40,000+ Claimants. She says this would be a considerable exercise in both time and costs for the Defendant. The costs of 33 additional claims against the cost of the cohort as a whole is likely to be a small percentage of the work, but will result in additional costs and time for the Defendant which is likely to run into a not insignificant sum which she puts at “tens of thousands of pounds”. The Applicants point out that no attempt is made to show how this figure is arrived at. Nevertheless, if the Test Claimants are successful, particularly if they are successful only on some issues, there will be a not inconsiderable amount of extra work and cost incurred by the Defendant.

50.5 An additional point is that in respect of 4 of the 17 personal injury Applicants there are very substantial discrepancies as to their age. This point having been raised by Ms Smith, Mr Ellis said (para 88, 3^rd statement) that the relevant Applicants have confirmed their dates of birth to him as follows:

– Applicant 7: d.o.b. 1943 (ID card states 1968)

– Applicant 19: d.o.b. 1932 (ID card states 1951)

– Applicant 27: d.o.b. 1933 (ID card states 1960)

– Applicant 30: d.o.b. 1930-1935 (ID card states 1957)

It is true to say that, on the evidence heard by the Court from the Test Claimants and their witnesses, there have been some inconsistencies as to the ID cards, though they are usually of only a few years and not such that the date of birth given on the ID card was during or after the Emergency. A reason given has been that ID cards stated a date a few years after the actual date of birth so as to avoid paying a specific tax prior to Independence. No explanation is provided by Mr Ellis as to the reasons for the discrepancies in these four Applicants’ cases. Apart from being a possible reason why GT Law did not put these claims in the register, the important unexplained discrepancies are, for these four Applicants, a yet further factor which militate against the grant of relief.

50.6 The uncertainty over whether there was valid reason for GT Law not putting the Applicants’ claims on the register is material, particularly because the claims on proper analysis may be weak or impermissible, as some of them have been demonstrated to be. It may well be that GT Law subjected them to greater scrutiny than has been practicable in all the circumstances by solicitors such as Hugh James, who are late arrivals on the scene of this GLO, and therefore may not be aware of many of its wider aspects. An obvious example of this was the estate claims issue.  This uncertainty is therefore a factor in the reasoning not to accede to the applications. It also goes to potential prejudice to the Defendant who, if the GLO succeeds may spend resources weeding out individual claims which should fail.

1. I now turn to factor (d) set out in paragraph 54 above. I repeat that the breach was serious and significant. That makes it less likely that relief will be granted unless there is a good reason for the breach. I have dealt with that second stage in some detail and have found there is no good reason. I have considered above the circumstances of the case and especially those to which I need to give particular weight. All these circumstances have been considered, in accordance with CPR rule 3.9(1) so as to enable the Court “to deal justly with the application”. I have come to the clear conclusion that relief from sanctions should not be granted. There are many factors as set out above which militate against the granting of relief. I add that, while the cut off date in this litigation has not been regarded as a trip wire, as can be seen from the two earlier grants of relief in respect of allowing applications, nevertheless, to quote paragraph 30 of Thirlwall J’s judgment in the PIP Breast Implant Litigation, to grant these applications “would undermine the discipline of this litigation. The cut off date would be rendered meaningless.”

2. For those reasons the applications are dismissed.