IF YOU WANT RELIEF FROM SANCTIONS – PUT THE DEFAULT RIGHT AT ONCE, AND CERTAINLY WELL BEFORE ANY APPLICATION FOR RELIEF: DEFENDANT FAILS ON APPEAL WHEN WITNESS EVIDENCE SERVED LATE

In the many posts I have written about seeking relief from sanctions one matter that has been stressed is the overwhelming importance of rectifying the breach immediately. The dangers of  not doing so are exemplified in the judgment of Mr Justice Trower today in Thomas v Smalling [2020] EWHC 3186 (Ch).  The defendant in the action was in breach of an order for the service of witness statements, applied from relief from sanctions, and did not serve statements or have them available on the date fixed for trial.

 

“JUDGE LUBA: Where are the actual witness statements for the trial?

MR ROACH: Well, your Honour, the defendant’s position was that they would await until the relief from sanction application has been heard and then they would take it from there.

JUDGE LUBA: Right. So if I allow this application notice now and permit you to rely on your witness statements at trial have you got them?

MR ROACH: We don’t have a witness statement at present your Honour.”

THE CASE

The defendant was appealing a decision of the Circuit Judge (HHJ Luba QC) who refused relief from sanctions and permission to appeal in an action where the claimant sought possession of residential premises.

THE RELIEF FROM SANCTIONS APPLICATION

The defendant was in default of serving witness evidence.  On the morning of the trial the defendant did not have the witness evidence available. If relief from sanctions was granted the trial would have to be adjourned. This did not impress HHJ Luba, nor did it impress Mr Justice Trower.

THE JUDGMENT ON THIS ISSUE
    1. The first matter dealt with by the judge was the defendant’s application for relief from sanctions. Relief was sought because the defendant had not complied with case management directions that had been given at a CCMC conducted by DDJ Grout on 22 July 2019. Those directions required the parties to exchange lists of documents by 19 August 2019, to supply copies of documents requested by the other by 2 September 2019 and to exchange signed witness statements of themselves and all witnesses on which they intend to rely by 4pm on 30 September 2019. There was a sanction attached to the third of these directions as it was provided that no oral evidence would be permitted from a witness unless a statement had been served in accordance with the order except with permission of the court.
    2. A pre-trial review took place on 9 October 2019 before Judge Luba QC at which both parties were represented by counsel. As the judge explained in his judgment, counsel for the defendant accepted that his client was in breach of each of those three orders for directions made by DDJ Grout. The defendant’s counsel was left in no doubt at that hearing that urgent steps would need to be taken by the defendant to regularise the position in the light of her non-compliance with the court’s orders.
    3. One of the orders made at the PTR was the setting down of the case for trial on 16 December 2019, together with certain further directions to facilitate the conduct of the trial such as the preparation of bundles and skeleton arguments. One of the principal reasons for the trial being listed in December 2019 was because Judge Luba QC was satisfied (as had been DDJ Grout in July) that it was urgent. The urgency arose out of the fact that the claimant had acquired the property on what she said was a buy-to-let basis and she sought possession of the property so that she could sell it in order to assist in funding the repayment of a mortgage that she had taken out on her own home.
    4. Five days later on 14 October 2019, the defendant’s newly instructed solicitors issued an application seeking relief from sanctions and sought permission to amend her defence. The application was supported by a witness statement from the defendant which deals with the underlying dispute between the parties in great detail but gave little information about the circumstances in which she had failed to comply with the case management orders made by DDJ Grout.
    5. No steps were taken by the defendant’s solicitors to obtain an urgent hearing of the application for relief from sanctions. The judge was very critical of this failure, and in my judgment he was entitled to be so, because it was plain that the application for relief needed to be heard as a matter of urgency in order to ensure that the hearing of the trial (which the judge had already concluded was itself urgent) was not put in jeopardy. The defendant said that part of the reason that no steps were taken was that the court only listed the application to be heard after the date listed for the trial. That is correct, but the judge did not accept that this provided any legitimate explanation for the failure of the defendant or her solicitors to take steps to bring the application before the court on an expedited basis. Having considered what occurred, I think that the judge was entitled to take that view.
    6. Despite the fact that the court had recorded the urgent need for the trial to be heard on two occasions (once in the order made by DDJ Grout and then again in the order made by Judge Luba QC on 14 October 2019), it was only at the opening of the trial on 16 December 2020 that the defendant made her application for relief from sanctions. It was dismissed by the judge, who approached the application by applying the test articulated by the Court of Appeal in Denton v. TH White Ltd [2014] EWCA 906. He considered first whether the departures from the court’s orders were serious and significant, secondly the reasons for those departures and thirdly whether in all the circumstances of the case it was appropriate to grant the relief sought.
    7. As to the first stage of the Denton test the judge was satisfied that the breaches of the court orders were significant and serious. On this appeal, Mr Thomas Dumont QC who appeared for the defendant accepted that this was a conclusion that the judge was entitled to reach. It is plain to me that he was right to do so. It had been said at the hearing that the delay was relatively minimal because the witness statement of 14 October 2019 contained details of the defendant’s case and it was made and filed at court together with the application notice in support of the application for relief from sanction which was only two weeks late. This was no real answer because there was obvious urgency in relation to the trial, such that any non-compliance with the tight timetable for service of evidence was likely to be serious and significant. In any event, there was no indication that the defendant intended this witness statement to be treated as her evidence for the trial; indeed, and as I shall explain shortly, quite the contrary was the case.
    8. As to the second stage of the Denton test, the judge considered why the default had occurred and held that there was no good reason for it. The defendant submitted that the judge was wrong to reach that conclusion.
    9. The defendant said that the explanation was that her previous solicitors had come off the record and that new solicitors had been appointed only six days before the deadline. They were unable to put a witness statement together in that period as they could not obtain the file. However, the defendant provided no detail as to what had occurred in the relationship between her and her solicitors between the time of the order made by DDJ Grout and the time at which she instructed new solicitors shortly before the PTR before Judge Luba. Furthermore, even after the default on 30 September 2019, the judge said that there was no proper explanation for what had happened between then and the beginning of the trial at which the application for relief from sanctions was made. He also pointed out that the defendant had disclosed no documents in accordance with the order that had been made by DDJ Grout.
    10. Strictly speaking, these last two points arise for consideration at the third stage in the Denton test, because the second stage is concerned with the reasons why there was non-compliance on or before 30 September 2019. Looking at the position as at that date, it is in in my view clear that the judge gave full consideration to the very limited information that he himself was given about the circumstances of the breakdown in the defendant’s relationship between the defendant and her solicitors and the engagement of new solicitors. In my judgment, the judge’s conclusion that there was no good reason for the defendant’s failure to comply with the order made by DDJ Grout was a decision to which he was entitled to come. Indeed, in the absence of a proper explanation as to why so much time passed before the new solicitors were in place, it is difficult to see how he could have come to any other conclusion. It is plain to me that there is no basis on which an appeal court could interfere.
    11. The third stage of the Denton test is whether, in all the circumstances of the case, it is appropriate for relief to be granted so as to enable the defendant to put in her witness statements late. The judge proceeded on the basis, which all parties accepted at the hearing before him, that if that were to happen the trial would have to be adjourned. The judge was influenced by the fact that it had been made clear in more than one court order that the listing of the trial was urgent, and he placed great weight on the fact that, if the relief sought were to be granted, the trial would have to be adjourned. He reached the conclusion that (as he put it in paragraph 18 of his judgment):
“this is the clearest possible case where the application of the three stage Denton approach leads to the conclusion that the applications must be dismissed, and the trial must proceed. I am not satisfied that it would do justice in this case either as between the present parties or having regard for the interests of other court users, to adjourn this trial and allow the applications.”
    1. In his oral submissions in support of the application for permission to appeal, Mr Dumont QC submitted that there was no reason why the witness statement dated 14 October 2019 and made in support of the application for relief from sanctions could not have stood as the claimant’s evidence for the trial, thereby allowing the trial to proceed on 16 December. He said that the judge himself could have suggested that this was an appropriate way forward and he relied on the fact that, as the judge himself recognised when criticising the absence of evidence by way of explanation for the default, this witness statement “descends into a great deal of detail as to the underlying dispute between the parties”.
    2. The difficulty with this submission is that it is clear from the transcript of the hearing before Judge Luba QC that Mr Owen Roach, who then appeared on his own as counsel for the defendant, made it quite clear that the evidence the defendant wished to adduce at trial was not yet ready. This was apparent from much of what Mr Roach had to say in support of the defendant’s application for relief from sanction (and also from his submissions on an application for the adjournment of the trial that was also before Judge Luba QC). The defendant’s position was most clearly expressed in the following exchange:
JUDGE LUBA: Where are the actual witness statements for the trial?
MR ROACH: Well, your Honour, the defendant’s position was that they would await until the relief from sanction application has been heard and then they would take it from there.
JUDGE LUBA: Right. So if I allow this application notice now and permit you to rely on your witness statements at trial have you got them?
MR ROACH: We don’t have a witness statement at present your Honour.
    1. It was against this background that the judge recited in his judgment, that if relief from sanctions were to be granted so as to give the defendant an opportunity to put in evidence in support of her case, the trial would have to be adjourned. In my view, it is clear that this was the only basis on which he could proceed when determining whether or not to grant the relief sought.
    2. There was also a debate about the very short period of adjournment which would be required in order to finalise the defendant’s evidence and it was suggested on the defendant’s behalf that that this meant that the trial could then take place within a matter of days. This seems to me to have been a wholly unrealistic suggestion and reflected a failure to appreciate the other demands on the time of a busy County Court and the interests of other court users.
    3. In her grounds of appeal the defendant also contended that the judge’s decision was disproportionate because it effectively deprived the defendant of the ability to defend the claim for possession of her own home. It is said that it also made it effectively impossible for her to defend the claim to a monetary judgment on facts which the judge himself described as extraordinary. It is said that it prevented the defendant from being able to put her case in accordance with the pleadings.
    4. Mr Dumont QC further amplified this point in his skeleton argument. He submitted that:
“even if the trial date did risk being jeopardised, it was with respect crucial that Ms Thomas’s evidence should be heard on so important a matter. This was not simply a commercial dispute about money, it involved Ms Thomas’s home, into which she had poured her life savings and where she had lived, paying the mortgage (via the Claimant) for 5 years. There was on any footing an arrangement between the parties, under which the property was purchased. Each side asked the court to adjudicate on the respective beneficial interests. That could not properly and justly be done without the evidence of Ms Thomas.”
    1. I do not accept that it was necessary for the judge to give the overwhelming weight to this consideration which is suggested by the defendant. It remained open to the defendant’s counsel to cross examine the claimant and to advance her case at trial, and that is what he did. Of course, it was a consequence of the judge’s order that the judge did not have the advantage of the defendant’s evidence against which he would have been able to test the credibility of the claimant’s account. But it nonetheless remained the case that the claimant was required to prove her case in circumstances in which it remained open to the court to reach a conclusion that she had not done so.
    2. Mr Dumont QC also submitted that there was no indication that the judge balanced this consideration in carrying out the exercise that he was required to carry out in accordance with the Denton principles. I do not agree. It was self-evident that the judge would be faced with a trial at which the defendant would not be in a position to adduce evidence in support of her case. That was at the core of the application for relief from sanctions. Furthermore, the judge clearly stated that he had had regard to Mr Roach’s submissions on this point, during the course of which Mr Roach had submitted that the principal factor that went into the balancing exercise in favour of his client was the importance of the issues that were at stake between the parties and that the consequence of relief not being granted was that the court would be hearing only one side of the story.
    3. In considering the way in which Judge Luba QC carried out his balancing of all the circumstances of the case to determine whether relief from sanctions should be granted, I bear in mind that an appeal court will not interfere lightly with the exercise of judicial discretion in a case management decision of which this is one. As the Master of the Rolls said in Clearway Drainage Systems Ltd v Miles Smith Limited [2016] EWCA Civ 1258 at paragraph 68:
“it must be remembered that this is a case management decision with which the court should not lightly interfere. The fact that different judges might give different weight to the various factors does not make the decision one which can be overturned the must be something in the nature of an error in principle or something wholly omitted or wrongly taken into account or a balancing of factors which is obviously untenable”
  1. In my view it is clear that the judge took into account the fact that his overriding duty was to exercise his discretionary case management powers in a manner which did justice between the parties fairly and proportionately. He then gave very considerable weight to the fact that, if relief from sanctions were to be granted, the trial would have to be adjourned. He also gave weight to the fact that the defendant and her solicitors had taken no positive steps to expedite the hearing of the application for relief from sanctions so that it could be heard and determined without prejudicing the date of the trial, a trial which the court had made clear on more than one occasion needed to be dealt with as a matter of urgency. I am also satisfied that he had regard to the impact which the refusal of relief would have on the defendant’s case.
  2. In all these circumstances, I do not consider that it is arguable that the judge went wrong in taking the course that he did. It was a robust case management decision, but there were good reasons for him to reach the conclusion he did. It is very far from a case in which the balancing exercise that the judge carried out was “obviously untenable”. Indeed, in my judgment, it is plain that he was entitled to reach the conclusion that he did, and I am satisfied that any argument to the contrary had no real prospect of success. It follows from this that, in accordance with normal principles, permission to appeal the judge’s decision to refuse relief from sanctions should itself be refused.

PUTTING THE BREACH RIGHT IMMEDIATELY

This case emphasises the importance of  making an application for relief promptly and remedying any default immediately if a party is applying for relief from sanctions.  This was a point made in an earlier post – Applying for relief from sanctions: two classic mistakes and a reminder of 10 key points.  It is worthwhile

1. IF YOU ARE MAKING AN APPLICATION FOR RELIEF MAKE IT AT ONCE

The speed with which an application is made is a factor that the court can take into account when considering the discretion.

  1. Speed here is probably best measured in hours, days at the most. If it is measured in weeks then the writing is probably already on the wall.
“I also have in mind, although this is a point of more minor weight, that there was a delay which I regard as excessive in making this application to seek relief from sanctions. It was a week after Flaux J’s order and almost two weeks after the deadline had expired.” Popplewell J Sinclair -V- Dorsey & Whitney (Europe) LLP [2015] EWHC 3888 (Comm) …

5. PUT THE BREACH RIGHT BEFORE THE HEARING

Any default is going to be compounded if it is not put right before the hearing. The fact that a party remains in default at the date of the hearing is likely to be a major, if not determinative, factor.

” Further, even now, some eight weeks after the extended deadline, the claimants are still not offering security which is satisfactory. “

(Mr Justice Popplewell in Sinclair -v- Dorsey & Whitney [2015] EWHC 3888 (Comm).)