CASE NOT STRUCK OUT AFTER A FOUR YEAR DELAY: ALTERNATIVE “SANCTION” ORDERED INSTEAD

In  Alba Exotic Fruit SH PK v MSC Mediterranean Shipping Company S.A. [2019] EWHC 1779 (Comm) HHJ Rawlings considered the appropriate sanction where there had been a four year delay by the claimant in pursuing an action. This case is important because it shows the very important distinction between an application for relief from sanctions and an application to strike out for non-compliance with the rules.  The proportionality of the result is assumed to be correct in an application for relief from sanctions. The proportionality of the result is an important factor in an application to strike out. In this case the judge was clear that relief from sanctions would not have been granted, however this was an application to strike out and striking out the entire claim would be a disproportional result.  A different sanction was imposed instead – the claimant was ordered to give security for costs.

“It must be stressed, however, that the ultimate question for the court in deciding whether to impose the sanction of strike-out is materially different from that in deciding whether to grant relief from a sanction that has already been imposed. In a strike-out application under rule 3.4 the proportionality of the sanction itself is in issue, whereas an application under rule 3.9 for relief from sanction has to proceed on the basis that the sanction was properly imposed…”. I accept that as a statement of the correct legal principles.”

KEY POINTS

This is a very subtle decision.

  1. The judge found that if this was a case involving relief from sanctions then the claimant would not have been granted relief from sanctions.
  2. Although the tests for striking out and relief from sanctions were similar a key issue in striking out was whether the result was proportional.
  3. It was not proportional to strike out on the facts of this case.
  4. The judge also decided that it was not appropriate to make an order for security for costs – applying the conventional test for such applications.
  5. However security for costs was ordered on the basis that this was an appropriate response to the defendant’s application to strike out and the claimant’s failure to comply with the rules.

THE CASE

The claimant issued proceedings alleging that bananas had been damaged in transit.  Proceedings were issued in September 2014, a defence and counterclaim in September 2014 and a Reply and Defence to counterclaim in October 2014. The claimant should have applied to court for a CCMC by 24th September 2014. It did not do so (and still had not done so at the date of the application). The claimant changed solicitors in June 2018 who made an application to amend the Particulars of Claim. This was met by an application from the defendant that the claimant provide security for costs.

The defendant then made an application to strike out the case on the grounds that the delay was an abuse of process.

THE JUDGMENT

The judge considered the alternative arguments in relation to striking out in these circumstances.

Counsel’s Submissions
    1. The Strike Out Application is made under CPR 3.4 (2) (b) and (c).
    2. CPR 3.4 (2) (b) provides that the court may strike out a statement of case if it appears to the court that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings.
    3. CPR 3.4 (2) (c) 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 a rule, practice direction or court order.
    4. Mr Coffer says that there are three categories of case in which the court will exercise its power under CPR 3.4 (2) (b) to strike out a claim as an abuse of process, as a result of delay by the claimant:
(a) there has been inordinate and inexcusable delay and as a consequence of such delay there is a substantial risk that a fair trial will not be possible or of serious prejudice to the defendant;
(b) there has been intentional and contumelious delay involving a complete and total disregard for the rules of the court with full awareness of the consequences; and
(c) the claimant has made an intentional decision not to progress the claim.
Mr Coffer asserts that consideration of the principles applied by the court in deciding whether or not to grant a party relief from sanctions under CPR 3.9 is relevant to the question of whether or not the court decides to strike out the claim but he accepts that (unlike an application for relief from sanctions under CPR 3.9) the court must consider the proportionality of the strike out sanction.
  1. Mr Butler on behalf of Alba says that inordinate and inexcusable delay, no matter the reason for it, of itself is not sufficient to amount to an abuse of process justifying strike out of the claim. In order to amount to an abuse of process justifying strike out of the claim there must be something more and that something more is a substantial risk that a fair trial will not be possible or of serious prejudice to the defendant.
  2. Mr Butler says that if the court finds that there has been inordinate and inexcusable delay which poses a substantial risk that a fair trial will not be possible or of serious prejudice to the defendant, then the court’s approach to an application for relief from sanctions under CPR 3.9 is not relevant and the court should consider whether there is a less draconian sanction available to it, which does not involve the striking out of the claim and if so apply that sanction.
  3. As to CPR 3.4 (2) (c) Mr Coffer says that there has been a clear breach of Alba’s obligations under CPR PD 59 paragraph 7.2 to apply to the court for a CMC within 14 days of service upon it of MSC’s Defence and Counterclaim. That period expired over four and a half years ago, on 25 September 2014. That breach of the practice direction justifies the striking out of the claim under CPR 3.4 (c) and the fact that the MSC could itself have applied to fix a CMC is either irrelevant or insufficient to justify the court in not striking out the claim. Mr Coffer accepts that as for the application to strike out under CPR 3.4 (2) (b), the court must consider the question of the proportionality of striking out the claim.
  4. Mr Butler accepts that the court has an unqualified discretion to strike out the claim under CPR 3.4 (2) (c) but he says that considering whether or not to strike out a claim is very different from considering whether or not to grant relief under CPR 3.9, to a claimant whose claim has already been struck out. He suggests that striking out the claim would be disproportionate and I should consider a more appropriate sanction such as making an unless order against Alba.

THE JUDGE’S FINDINGS ON THE LEGAL PRINCIPLES

CPR 3.4 (2) (b) Legal Principles-my findings
    1. I accept that Mr Coffer is right in his description of the three circumstances in which the court will strike out a claim as an abuse of process under CPR 3.4 (2) (b), save that in the case of a claimant making an intentional decision not to pursue a claim, the length of the delay, degree of the claimant’s responsibility for it and reasons given will be relevant to the question of whether or not an intention by the claimant not to pursue a claim will amount to an abuse.
    2. Mr Butler accepts that inordinate and inexcusable delay combined with a substantial risk: (a) that a fair trial will not be possible; or (b) of serious prejudice to the defendant is a ground upon which the court may strike out a claim (subject to considering the proportionality of that sanction).
    3. In Habib Bank v Jaffer [2000] All ER (D) 424 Nourse LJ said “delay which involves complete total or wholesale disregard, put it how you will, of the rules of court with full awareness of the consequences is capable of amounting to such an abuse, so that, if it is fair to do so the action will be struck out or dismissed on that ground.” There is nothing in the judgement of Nourse LJ that suggests that in circumstances where there has been a complete, total or wholesale disregard for the rules of the court with full awareness of the consequences, that it is necessary to show, in addition that the delay involves a substantial risk that a fair trial will not be possible or of serious prejudice to the Defendant. For that reason I am satisfied that Mr Coffer is right that delay which involves a complete total or wholesale disregard of the rules of the court with full knowledge of the consequences, is a ground upon which the court may decide to strike out a claim even if there is not a substantial risk that a fair trial will not be possible or of serious prejudice to the Defendant.
    4. In Arbuthnot Latham Bank Limited v Trafalgar Holdings [1998] 1 WLR 1426 Lord Woolf MR at page 1437 identified what he termed as “warehousing” as an abuse of process which, without more may justify the strike out of proceedings. Lord Woolf MR said “Whereas hitherto it may have been arguable that for a party on its own initiative to, in effect, “warehouse” proceedings until it is convenient to pursue them does not constitute an abuse of process, when hereafter this happens this will no longer be the practice. It leads to stale proceedings which bring the litigation process into disrespect…… If they are brought and they are not to be advanced, consideration should be given to their discontinuance or authority of the court obtained for their being adjourned generally. Courts exist to assist parties to resolve disputes and they should not be used by litigants for other purposes.”
    5. In Asturian Foundation v Ibrahim [2019] EWHC 274 (CH) HHJ Cooke sitting as a High Court Judge considered that, in Arbuthnot, Lord Woolf MR was not setting down any rule that a decision by a claimant to pause the progress of proceedings for a period would necessarily be abusive of itself but rather that it may become abusive if the claimant maintained that position for an unreasonable period of time (see paragraph 26 of the judgement). Having carried out a review of Arbuthnot, at paragraph 41 of his judgement HHJ Cooke said “…. It is now established that delay may amount to abuse of process in circumstances short of a finding that the Claimant has permanently abandoned any intention to pursue them, but the court will examine all the circumstances in which the delay occurred, including the length of delay, the degree of the claimant’s responsibility for that delay and the reasons given for it, and assess whether they amount to an abuse of process, as distinct from “mere” delay. “warehousing” may be descriptive of some circumstances which show abuse, primarily where for an extended period the claimant has no present intention of pursuing the claim but keeps going in case it decides to do so in future, but application of that term is not determinative one way or the other. If abuse is found, the question then arises whether striking out is an appropriate sanction.”

CPR 3.4 (2) (c) Legal Principles-My Findings

  1. There is a large measure of agreement between Mr Coffer and Mr Butler as to the position under CPR 3.4 (2) (c). They both agree, that my discretion under CPR 3.4 (2) (c) is a broad discretion. Whilst Mr Coffer emphasises that it is relevant to take into account the court’s approach to an application for relief from sanction under CPR 3.9, in deciding whether or not to strike out Alba’s claim for a breach of CPR 3.4 (2) (c), he nonetheless accepts that the question of the proportionality of striking out the claim is a matter that I should take into account under CPR 3.4 (2) (c), which is not taken into account in an application for relief from sanction under CPR 3.9. Those points are made by Richards LJ in Walsham Chalet Park Limited (T/A Dream Lodge Group) v Tallington Lakes Limited [2014] EWCA Civ 1607 at paragraph 44 of his judgment, Richards LJ says “The judge treated the principles in Mitchell as “relevant and important” even though the question in this case was whether to impose the sanction of a strike-out for non-compliance with a court order, not whether to grant relief under CPR 3.9 from an existing sanction. In my judgement, that was the correct approach. The factors referred to in rule 3.9, including, in particular, the need to enforce compliance with court orders, are reflected in the overriding objective in rule 1.1 to which the court must seek to give effect in exercising its power in relation to an application under rule 3.4 to strike out for non-compliance with the court order. The Mitchell principles, as now restated in Denton, having a direct bearing on such an issue. It must be stressed, however, that the ultimate question for the court in deciding whether to impose the sanction of strike-out is materially different from that in deciding whether to grant relief from a sanction that has already been imposed. In a strike-out application under rule 3.4 the proportionality of the sanction itself is in issue, whereas an application under rule 3.9 for relief from sanction has to proceed on the basis that the sanction was properly imposed…”. I accept that as a statement of the correct legal principles.
THE DECISION IN THE CURRENT CASE
    1. The failure of Alba to apply to the court to fix a CMC by 21 October 2014 is a breach of PD 59 paragraph 7.2. CPR 3.4 (2)(c) provides that a court may strike out a statement of claim if there has been a failure to comply with a practice direction. I therefore have jurisdiction under CPR 3.4 (2)(c) to strike out Alba’s claim.
    2. In Walsham Chalet Park (see paragraph 35 above) Richards LJ gave guidance as the approach to be taken by the court when considering an application to strike out a claim under CPR 3.4 (2) (c). Lord Justice Richards said that in considering an application to strike out a claim under CPR 3.4 (2) (c) the matters which the court is directed to take into account under CPR 3.9 are relevant to the court’s decision as to whether or not to strike out the claim under CPR 3.4 (2) (c). Richards LJ went on however to make it clear that in the case of an application for relief from sanctions under CPR 3.9 the court has already decided that the sanction of striking out the claim in the event that the claimant does not comply with the unless order is a proportionate sanction to apply to that default, whereas, in the case of an application under CPR 3.4 (2) (c), the court has to decide whether striking out the claim is a proportionate response to the failure of the Claimant to comply with a rule, practice direction or court order and the overriding objective under CPR 1.1 generally.
    3. I propose, in light of the guidance given by Richard LJ in Walsham Chalet Park to approach the question of what sanction to apply to the claimant for its failure to comply with PD 59 paragraph 7.2 by: (a) considering whether or not I would grant Alba relief from sanction under CPR 3.9 if its claim had already been struck out because of a failure to comply with an unless order, requiring it to apply to fix a CMC in accordance with PD 59 paragraph 7.2 and providing that its claim would be struck out if it failed to do so; and (b) in the event that I decide that I would not have granted relief from sanction I will go on to consider the overriding objective under CPR 1.1 generally and in particular whether striking out Alba’s claim is a proportionate response to its failure to comply with PD 59 paragraph 7.2 or whether some other sanction should be imposed upon Alba. If I decide that I would have granted Alba relief from sanction, in the event that its claim had already been struck out (because of a failure to comply with an unless order) then it follows from the guidance given by Richard LJ that I should also find that it is not appropriate to strike out Alba’s claim under CPR 3.4 (2) (c).
    4. In Denton v TH White [2014] EWCA Civ 906 in the Joint Judgment of the then Master of the Rolls, Lord Dyson and Lord Justice Vos (as he then was) it is said that a three-stage approach should be taken to considering whether or not to grant relief from sanctions under CPR 3.9:
(a) Assess the significance of the failure to comply with the rule, practice direction or order. If the breach is trivial then relief from sanctions will normally be granted;
(b) Consider whether there is a good excuse for the default. If there is then relief from sanctions will normally be granted; and
(c) if the failure to comply is not trivial and there is no good excuse for the default then the court should consider all the circumstances of the case, so as to enable it to deal with the application justly including: (i) the need for litigation to be conducted efficiently and at a proportionate cost; and (ii) to enforce compliance with rules, practice directions and orders.
    1. As to the first stage of the test, a delay of 4 years and 7 months (and counting) by Alba in applying to the court to fix a CMC cannot on any basis be described as trivial. It is necessary therefore to progress to the second stage of the test, namely whether there is a good excuse for the default. The reasons given for the default are those set out in the first and second witness statements of Mr Chaudhry which I have summarised above. Mr Chaudhry refers to failings on the part of Alba’s legal representatives, failings on the part of Alba or misunderstandings between Alba and its legal representatives. For the purposes of an application for relief from sanction, the fact that the default giving rise to the imposition of the sanction may be attributable in whole or in part to the fault of the sanctioned party’s legal representative does not amount to a good excuse for the default. There is therefore no good excuse for the default and it is necessary therefore to pass to the third stage of the test.
    2. As for all the circumstances of the case, Mr Butler says that the following circumstances support the court concluding that it should not strike out the claim (and therefore would favour the court granting relief from sanctions, if this were an application under CPR 3.9 for relief from sanctions):
(a) It was open to MSC to apply to fix a date for the CMC itself and the CPR does place an obligation on all parties to assist the court in achieving the overriding objective (of dealing with cases justly and at a proportionate cost). Against that, however, PD 59 paragraph 7.2 places an obligation on Alba to apply to fix a CMC within 28 days of service upon Alba of a Defence. No such obligation is placed upon MSC which is merely provided by the rules with the ability to apply to fix a CMC but not an obligation to do so; and
(b) the striking out of the claim would deprive Alba of the ability to pursue what, on its face is a legitimate claim against MSC for damage caused to bananas loaded in 28 containers and shipped by MSC to Alba in circumstances where I have not found that a fair trial is no longer possible or that MSC has suffered material prejudice as a result of Alba’s delay.
    1. The following circumstances are matters which favour my refusing relief from sanctions (if this were an application for relief from sanctions under CPR 3.9):
(a) the length of the delay which is currently 4 years and 7 months;
(b) the reasons given by Alba for the delay are not only not good reasons but the explanation of the reasons is vague and unsatisfactory, there are inconsistencies in the explanation and inadequate evidence has been provided to support the explanations that are given;
(c) the need to conduct litigation efficiently and at proportionate cost favours the refusal of relief from sanction because Alba’s delay has prevented a claim which should have been tried and resolved some years ago from proceeding beyond the close of pleadings. The delay also increases the cost of the proceedings for both parties (including the cost of MSC’s application to strike out the claim);
(d) the need to enforce compliance with rules, practice directions and court orders also favours the refusal of relief from sanction because Alba has failed to comply with its clear obligation under PD 59 paragraph 7.2 to apply to fix a CMC within 28 days of service upon it of the Defence and Counterclaim of MSC. Refusing relief from sanctions acts as a strong incentive for parties to comply with rules, practice directions and court orders as was made clear by the Court of Appeal in Mitchell v News Group Newspapers Limited [2013] EWCA Civ 1537 as clarified by the Court of Appeal in Denton.
  1. Taking all of the circumstances into account my conclusion is that the factors set out in paragraph 70 above in favour of refusing relief from sanction greatly outweigh those factors set out in paragraph 69 above in favour of granting relief from sanction. In particular the length of the delay, the absence of any good reason for it, its effect upon the progress and cost of the proceedings and the need to enforce compliance with rules, practice directions and court orders outweigh the prejudice to Alba caused by it being unable to pursue what, on its face appears to be a legitimate claim.
  2. In accordance with the guidance given by Richards LJ in Walsham Chalet Park I should next consider whether striking out Alba’s claim is consistent with the overriding objective and in particular is a proportionate response to its failure to comply with its obligations under PD 59 paragraph 7.2.
  3. Mr Butler, on behalf of Alba, says that striking out the claim is a draconian sanction for the Alba’s delay and is disproportionate. He suggests that a more appropriate and proportionate remedy would be to impose an unless order upon Alba in relation to the remaining steps to trial so that Alba’s claim would be struck out, in the event that it delays again in progressing its claim to trial.
  4. Mr Coffer accepts that striking out the claim is a draconian sanction, extinguishing Alba’s substantive rights but he submits that Alba’s intentional conduct and disregard for the rules of the court together with the length of the delay and continuing non-compliance are such as to justify the court striking the claim out. He suggests that no other sanction is proportionate, given the seriousness and extent of Alba’s breach.
  5. I have already made findings that I am not satisfied that: (a) Alba’s delay was intentional and contumelious in full awareness of the consequences; and (b) Alba did not make a conscious decision to maintain but not to progress the claim until a time convenient to it (referred to in the relevant cases as “warehousing”). The delay here is nonetheless very significant (over 4 years and 7 months and still continuing) and as indicated above the explanation for that delay is unsatisfactory.
  6. Counsel accept that an alternative sanction, for Alba’s default in failing to apply to fix a CMC to striking out the claim would be for me to order Alba to provide security for MSC’s costs of the proceedings.
  7. There is a complication here in that MSC has separately made the Security for Costs Application pursuant to CPR 25.12. MSC may therefore be entitled to security for costs under CPR 25.12 in any event and if it is so entitled, then ordering Alba to provide security for MSC’s costs, as a sanction for its failure to apply to fix a CMC pursuant to PD 59 paragraph 7.2, would simply duplicate any order I made under CPR 25.12.
  8. What I propose to do therefore is to consider whether MSC is entitled to security for its costs from Alba pursuant to the Security for Costs Application and then decide what sanction should be applied to Alba for its failure to comply with PD 59 paragraph 7.2 (strike out of Alba’s claim, an unless order or security for costs) having regard to the proportionality of the sanction and the overriding objective.

THE DECISION: SECURITY FOR COSTS ORDERED RATHER THAN STRIKING OUT

In the event the judge decided that the appropriate sanction was to order the claimant to provide security for costs.   The judge had previously decided that it was inappropriate to order security for costs on the “traditional” basis. Rather it was ordered here as an appropriate response to the claimant’s failure to comply with the rules.

    1. I now need to decide on the appropriate and proportionate sanction for Alba’s failure to comply with PD 59 paragraph 7.2 having regard to the overriding objective under CPR 1.1.
    2. Mr Coffer says that striking out the claim is the only proportionate response given the length of the delay (over 4 years and 7 months) and its impact on the progress of the litigation. Mr Butler says that the striking out of the claim is a draconian step and is not proportionate to Alba’s default. Mr Butler suggests that the proportionate response would be to make an unless order so that, if Alba fails to comply with any direction going forward in respect of disclosure, witness statements or other directions then Alba’s claim will be struck out.
    3. The overriding objective set out in CPR 1.1 (1) is to deal with cases justly and at proportionate cost. CPR 1.1 (2) explains that dealing with a case justly and at proportionate cost includes, so far as practicable:
(a) ensuring that the parties are on equal footing;
(b) saving expense;
(c) dealing with cases in ways which are proportionate:
(i) to the amount of money involved;
(ii) to the importance of the case;
(iii) to the complexity of the issues; and
(iv) to the financial position of each party;
(c) ensuring that it is dealt with expeditiously and fairly;
(d) allotting to it an appropriate share of the court resources, while taking into account the need to allot resources to other cases; and
(e) enforcing compliance with rules, practice directions and orders.
    1. Ensuring that the parties are on an equal footing, saving expense and ensuring that cases are dealt with expeditiously and fairly are all factors relevant to deciding what directions to give in relation to preparing a matter for trial or in relation to the trial itself, but I do not regard them as relevant factors in deciding what sanction should be applied for Alba’s default.
    2. The proportionality of the sanction to be applied to Alba is very much an issue that I need to consider, and I will do so below however I do not consider the amount of money involved, importance of the case, complexity of the issues or financial position of the parties is of direct relevance to this issue. Issues relevant to the proportionality of the sanction relate more to the seriousness of Alba’s default, the prejudice suffered by MSC as a result of that default and the effect on Alba of the sanction.
    3. As to ensuring that this matter is allotted an appropriate share of the court’s resources, while taking to account the need to allot resources to other cases, and the need to enforce compliance with rules, practice directions and orders, these factors tend to support the imposition of a sanction which encourages parties to progress their cases efficiently and in compliance with rules, practice directions and orders. In my judgment these factors would therefore tend to support the imposition of a more serious sanction, but the most significant question that I need to answer is the question of which sanction is the most proportionate response to Alba’s default.
    4. I do not accept that the proportionate response in this case is, as Mr Butler suggests, to make an unless order against Alba. Whilst such an unless order may ensure that Alba complies with any directions that the court may make in relation to preparations for trial (and would encourage Alba to comply with directions orders going forward) it would not amount to a sanction in relation to Alba’s default, namely its failure to apply, in accordance with PD 59 paragraph 7.2 to fix a CMC.
    5. As to the choice between striking out the claim on the one hand or ordering that Alba provide security for the MSC’s costs on the other hand I consider that the choice is finely balanced however I have come to the conclusion that the most proportionate sanction is to order that Alba provide security for MSC’s costs. My reasons are as follows:
(a) the delay by Alba in applying to fix the CMC is a long one (4 years and 7 months and Alba has still not applied to fix a CMC. Nonetheless I have found that the delay has not resulted in a fair trial no longer being possible or substantial prejudice to MSC in terms of the evidence that MSC can produce at trial. It is for this reason that I refused to strike out the claim under CPR 3.4 (2) (b) as an abuse of process (on the basis of my finding that there had been inordinate and inexcusable delay);
(b) whilst it is true that the obligation fell on Alba, under PD 59 paragraph 7.2 to fix the CMC it is also true that it was open to MSC to apply to fix the CMC itself. Whilst therefore MSC is not itself in breach of any practice direction, MSC could have ensured that the matter progressed to trial without the delay caused by Alba’s default, by applying itself to fix the CMC; and
(c) depriving Alba of the ability to have the court determine what on its face appears to be a legitimate claim in circumstances where I have found that a fair trial is still possible and that there has been no substantial prejudice to MSC’s ability to defend the claim (as a result of Alba’s default) appears to me to be too draconian a step to take.
  1. I have, by a small margin decided that the risk of MSC being unable to enforce a costs award against Alba is not sufficiently serious to justify an order being made that Alba provide security for MSC’s costs under CPR 25.12. The question of security for costs, when considered afresh as a sanction for Alba’s default is different. Alba’s default is a serious one, it has delayed the litigation significantly and increased the costs of the litigation. If MSC is ultimately successful in defending the claim and receives a costs order in its favour then it would, in my judgment be grossly unfair if MSC were unable to enforce that costs order. In order to avoid that potential consequence and having regard to the need to impose some sanction upon Alba for its default, it appears to me that the most appropriate course of action is to order Alba to provide security for MSC’s costs under CPR 3.1(5). I considered that requiring Alba to provide security for MSC’s costs is a fair and proportionate sanction to impose for its default.