DEFENDANT REQUIRES RELIEF FROM SANCTIONS WHEN THERE WAS £92 MILLION AT STAKE: DENTON CONSIDERED AND APPLIED

When I wrote earlier about the decision in Various Claimants v G4S Plc [2021] EWHC 524 (Ch) I noted that it required more than one post. Here we look at the judge’s decision in relation to relief from sanctions. Relief was granted to the defendant who made an application under CPR 17.2 late.  It is a reminder that 14 days applies to this provision, and that there are dangers in overlooking basic time limits.

“In that context I bear in mind that the whole problem has arisen because of the obvious last minute rush to issue proceedings and gather in claimants, in the face of an obvious potential limitation date, and an apparent failure to get all the claimant’s ducks in pen, let alone in a row, when that could have been done some time before. That does not attract a lot of sympathy.”

THE CASE

The claimants brought actions alleging breaches by the defendant led to inaccurate share prices which led to losses.

Proceedings were issued and, after issue, numerous amendments made to the claim form.  Numerous new claimants were added.  The added claimants had a significant impact on the value of the claim they added up to £92 million of the £102 million claimed.

THE DEFENDANT’S CHALLENGE

After proceedings were served the defendant challenged the addition of the claimants who were added after issue of the claim form.

THE DEFENDANT’S LATE APPLICATION

The defendant made a number of applications. None of them were, initially, said to be under CPR 17.2. This gives a party a right to seek to set aside amendments made without permission. However it also imposes a time limit of 14 days after service.  The defendants failed to do this but, instead, made the application during the course of the hearing.

CPR 17.2

Power of court to disallow amendments made without permission

17.2

(1) If a party has amended his statement of case where permission of the court was not required, the court may disallow the amendment.

(2) A party may apply to the court for an order under paragraph (1) within 14 days of service of a copy of the amended statement of case on him.

THE JUDGE’S DECISION ON RELIEF FROM SANCTIONS

The judge found that there was a time limit of 14 days to apply under CPR 17.2 and the defendant was in breach.  The defendant required relief from sanctions.

1. 1. I have held that the 14 days matters. That means that if Mr Rabinowitz is to be allowed to make his application he needs to get the equivalent of an extension of that time period. Mr Onslow submitted that what Mr Rabinowitz should have done is apply for an extension as if applying for relief from sanctions, on the basis of an implied sanction. He relied on the doctrine of implied sanction as it is described in the notes to CPR 3.9 in the White Book (para 3.9.15):

“3.9.15. The term out-of-time application refers to an application for an extension of a time limit specified by a rule, practice direction or order which is not made until after the relevant time limit has expired. Some rules, practice directions and, on occasions, orders expressly state a time limit for the taking of a procedural step but do not expressly state what sanction applies if step in question is not taken in time. For r.3.9 to apply, the sanction in question has to be specified in the rule, practice direction or order in question. Nevertheless, the law and practice as to r.3.9 should be applied to such cases. A party’s inability to take the procedural step in question once the time limit has expired does not amount to an express sanction. However, for the applicant seeking an extension of the time limit, the consequences are exactly the same as if it did (Sayers v Clarke Walker [2002] 1 WLR 3095; [2002] 3 All ER 490, CA. For over a decade now, out-of-time applications for an extension of time have been treated as if they were the same as applications for relief from sanctions (Altomart Ltd v Salford Estates (No.2) Ltd [2014] EWCA Civ 1408). The principles involved here have come to be known as the “implied sanction” doctrine.”

1. 1. The doctrine was recently confirmed in R (Hysai) v Sec of State for the Home Department [2015] 1 WLR 2472.

1. 1. Mr Rabinowitz did not challenge this as an exposition of the law. He said it did not apply in this case because the 14 day period in CPR 17.2 was not mandatory. I have already held that that view is wrong. It is a time limit which falls within the sort of provision to which the principles just expounded applies. Accordingly, in order not to be found out of time, G4S has to make, and succeed in, an application for relief from sanctions.

1. 1. Having heard Mr Onslow’s first submissions on the point, Mr Rabinowitz has done just that. In case he is wrong, he has made an application for relief from sanctions. His evidence in support is short. Mr Bushell of Herbert Smith Freehills (solicitors for G4S) explains that his firm did not appreciate the ability to challenge the addition of the added claimants until after the 14 day period had expired, though he does not say when. When counsel was instructed in June Best Friends was identified as giving a basis on which the addition could be challenged, and that it seemed that a 4 month delay in that case was not a bar. It was decided to take that approach. Nothing is said as to whether CPR 17.2 was spotted and rejected as a route of challenge, and if so why, or whether it was not spotted. He then briefly urges the disproportionality of disallowing relief because the consequence might well be to allow in statute barred claims which should not have been allowed in under the Chandra principle, and he suggests that the claimants have suffered no prejudice from the delay.

1. 1. Mr Onslow’s response is that the application is made late, especially since it was pointed out in evidence in September that an application for relief from sanctions would have been necessary for the purposes of 17.2 and it was not made then; in giving evidence of the reasons for not doing it earlier Mr Bushell has not been candid; prejudice to the claimants was not necessary and the application could fail on other grounds; and in any event significant prejudice had been caused to the claimants. He also complained that it was unattractive for G4S to be taking the technical points that it was taking in this litigation while at the same point trying to get itself off the hook for its own technical failure. I did not think that this last point was Mr Onslow’s best. He made further points under an “All the circumstances” heading to which I will come so far as I consider them to be significant.

1. 1. I shall consider this matter under the now familiar three stage test in Denton v TH While Ltd [2014] 1 WLR 3926 – whether the default was serious and significant; why it occurred; and then considering where justice lies, considering the circumstances as a whole.

1. 1. In considering the first point there are two elements – what was the default, and for how long did it subsist?

1. 1. The first question arises because of the unusual development of the facts in this case. G4S challenged the joinder 10 weeks after service, not specifying a basis under CPR 17.2 but nonetheless advancing a case about the arguability of limitation which would be the sort of point they could take under 17.2. They therefore advanced a 17.2 point in all but name 8 weeks late. They have made their actual application for relief from sanctions, and sought to run their 17.2 challenge, over 8 months late. Mr Onslow’s submissions treat the application as though it was a simple 8-months-late challenge. I do not think that it is as simple as that. One cannot ignore the fact that the basis of a challenge was laid down in the July application. The inadmissibility of amendments made at a time when there is an arguable limitation case, which is the basis of what would be a 17.2 challenge on this hypothesis, was plainly raised in G4S’s nullity argument. Paragraph 13 of the supporting witness statement of Mr Bushell clearly takes the point that an arguable limitation case prevents an amendment unless the requirements of CPR 19.4 or 19.5 are fulfilled, and there is no attempt to argue (on this point) that they have.

1. 1. So the nature of a 17.2 challenge was always apparent in the July application. That is confirmed by Mr Onslow’s concession (which was correct, in my view) that an early application to amend the application notice to add a reference to 17.2 could not have been resisted. The concession is right not because it would have been made early enough to be dealt with in the application, but because it would have made no real difference to the nature of the application, or required any different evidence.

1. 1. That means that the relief from sanctions point should be treated as one geared to justifying the 8 weeks delay, because that is the real material delay in this matter. It is not as though Mr Rabinowitz was suddenly making a new application 6 months late; he is seeking justification for an application made 8 weeks late. I acknowledge that delay in making the relief from sanctions application is something that can also be taken into account, but that is more appropriately dealt with under the third head of Denton. In considering the first stage of seriousness of breach, the reality is more important, and I have just identified it.

1. 1. With that in mind I turn to the first question of the seriousness and significance of the breach. The failure to make an application under 17.2 until 8 weeks after it ought to have been made was certainly significant. It cannot be dismissed as slight. The rule is there for a purpose, which is presumably to require prompt challenges to pre-service amendments so as not to hold up the proceedings and achieve clarity at an early stage. 8 weeks is a significant, and indeed fairly serious (if that label matters) delay.

1. 1. Turning to why the delay occurred, it would seem that G4S did not consider that an application had to be made within the time limit. It thought it had another way of dealing with the matter, which was thought to be rooted in Court of Appeal authority (Best Friends). Mr Onslow invited me to find that the failure to apply within the time limit was deliberate. I do not go that far. It is not credible that G4S’s advisers looked at 17.2, considered that they could use it but deliberately decided to do something else and then do it deliberately late. Whatever lack of candour there may be in Mr Bushell’s witness statement I do not consider it is covering up something like that. It would seem that initially, and in the 14 day period, G4S did not realise it had a right of challenge at all. It started to consider the point on about 8^th June and identified a case (Best Friend) where a challenge was made after 4 months and the amendment was said to be ineffective or had inevitably to be set aside. Attention was probably diverted away from 17.2 and/or the time limit within it. I do not consider that the failure to invoke 17.2, and to apply under 17.2, was in any relevant sense deliberate. Mr Onslow relied on Talos Capital Ltd v JCS Investment Holding XIV Ltd [2014] EWHC 3977 and Wyche v Careforce [2014] 1 Costs LR 1 as pointing up the great significance of deliberate breaches, and the difficulties that a deliberate breach would pose for the person in breach (see paragraphs 41 and 24 respectively), but those cases (and particularly Talos) were dealing with far more deliberate conduct that exists in the present case. Missing the two week deadline itself seems to have been accidental, in the sense that no challenge at all was being contemplated then.

1. 1. As to the second limb of Denton (why the default occurred), I have already substantially dealt with that. It seems that once the possibility of a challenge was appreciated and put in train, G4S proceeded down a different route, prompted by authority, while taking the same points (limitation) as it would have taken under an express 17.2 challenge. It was believed that no time limit was imposed by that route. On the supposition that an application under CPR 17.2 was required, this amounted to a mistake, not a deliberate act in defiance of the provisions of the rules. It is perhaps a slightly surprising mistake for an experienced legal team, but it is not a particularly weighty factor against relief.

1. 1. Under the third limb Mr Rabinowitz stressed the disproportionate effect of not allowing his application to be made. On the assumption (for these purposes) that his client has a good point then a failure to allow the application would mean that his clients would be deprived of a limitation point that they would otherwise be entitled to run. The practical significance of that appears above – limitation could effectively bar the bulk of the claims made. That would be an excessive effect to attribute to a failure to make an application for 8 weeks or so. No significant prejudice had been suffered by the claimants, and any disruption to the proceedings from the late application, and the manner in which it was taken (as averred by the claimants) was over-stated. He also relied on what he said was the “obscurity” of the rules and the absence of authority on the effect of 17.2.

1. 1. Mr Onslow started by setting out what he said was important background to this part of the case. He took me to correspondence which took place between the issue of the claim form in 2019 and its eventual service, and showed me how the claimants were seeking to engage with the G4S with a view to settling the claim, and G4S seemed to be interested in that process and sought information and clarification. I must say I fail to see how that went to the point in issue on the relief from sanctions application. Then he pressed the prejudice said to arise from the late application and the late taking of the 17.2 point. His clients had been proceeding first on the assumption that there would be no challenge, once the 14 days was passed, and then on the footing of the original challenge which was not mounted under CPR 17.2. Work was done to advance the case – for example, work to identify personnel at Invesco (one of the major claimant groups), work done to identify documents which needed to be preserved for disclosure purposes and work done to identify the status of various claimants once a status point was taken. Work was also done in this application on points that would not have arisen had the 17.2 point been taken in time. The litigation process has been disrupted by the addition of a considerable period of time devoted to the relief from sanctions application, and court resources have been unnecessarily extended. His own side had devoted resources to dealing with the question of whether CPR 17 applied at all on the application as mounted and the extra time taken in court has meant that junior counsel was not available on one day. It was important that the rules be observed and it was unattractive for the defendant to seek to avoid the technical and substantive requirements of 17.2 while taking a number of technical points itself and indulging in “inflammatory” statements about the conduct of the claimants’ solicitors, querying whether they had instructions or not and questioning the veracity of statements of truth. The original application, when made, was unheralded by any form of contact indicating or investigating the points that were to be taken and there was no attempt to see if matters could be shortened by discourse.

1. 1. Much of Mr Onslow’s case under this third head seems to me to be overstated. As far as I could see, the absence of his junior did not seem to have any effect on his presentation of his case. So far as extra work is concerned, unless it were to be suggested that the claimants would have more or less immediately caved in under a timeous challenge under 17.2 it is not easy to see, in reality, what work has been done now that would not have been done anyway. It is impossible to conclude that the claimants would have given way promptly or at all, both because that is implausible in this sort of litigation, and because they do not say they would. In those deemed circumstances the defendant would have made its application earlier, and it would have been based on, and met with, the same points as now. The same work would have been done on the application, by and large, and it is not easy to imagine why any of the other work would not have gone on behind the scenes as well. If extra work has been done, then I do not regard it as very serious, and it can be allowed for in costs if relevant. I do not regard the other points relied on by Mr Onslow as particularly significant individually (especially the point about competing reliance on technicalities – it is invidious for the court to engage in a comparison of which party is being more desirably technical than the other), but I do take on board the need to comply with the rules. The case has been disrupted by the application for relief from sanctions, especially its being injected where it was, but overall I do not think that the situation is very different from what it would have been had the application been made alongside the substantive relief when G4S’s application was first launched. It is, of course, important for the rules to be observed, but the whole relief from sanctions jurisdiction exists to cater for the situation where they are not.

1. 1. I consider the most significant factor to be the proportionality point. G4S has a strong point when it says that the effect of not allowing it to make its 17.2 challenge late would be to deprive it of the benefits of the Limitation Act which it clearly seeks to invoke and has clearly sought to invoke since the application was made. I consider that a weighty matter. Of course, the claimants would be entitled to say that they would be deprived of the benefit of a rule which, if it works as they say it should, would rescue them from the clutches of the Limitation Act on the facts as they have turned out to be in this case, but I do not consider that factor to be as strong. In that context I bear in mind that the whole problem has arisen because of the obvious last minute rush to issue proceedings and gather in claimants, in the face of an obvious potential limitation date, and an apparent failure to get all the claimant’s ducks in pen, let alone in a row, when that could have been done some time before. That does not attract a lot of sympathy.

1. 1. Taking all the above matters into account, and the other matters urged on me in the evidence and in submissions, I have come to the conclusion that the defendant should have the benefit of relief from sanctions and be allowed to make its application to challenge the 17.1 additions late, so far as necessary. I consider the application to have been made not too late, the reasons for not making it not too serious (albeit hardly commendable) and the other factors (particularly the effect on the defendant of failing to grant relief) combine to lead me to that conclusion.