COURT OF APPEAL REFUSES RELIEF FROM SANCTIONS: “LIBERTY TO APPLY” DOES NOT GIVE A GENERAL RIGHT OF REVIEW

In Helios Oryx Ltd v Trustco Group Holdings Ltd [2022] EWCA Civ 236 the Court of Appeal dismissed an appellant’s application for relief from sanctions where there had been a failure to comply with a peremptory order given as a condition of permission to appeal. The court also rejected an argument that a “liberty to appy” term in a court order gave a party a general right to return to court to re-argue issues that had already been determined.

THE CASE

The defendant/appellant was granted permission to appeal subject to a condition that it pay certain moneys.  Following several applications for variation of the order a peremptory order was made, this included a the phrase “liberty to apply”.

The defendant did not comply with the order. It sought relief from sanctions. Alternatively it sought an order varying the original order, dispensing with the condition that it pay the money.

THE ORDERS SOUGHT

Lord Justice Warby set out the terms of the orders sought by the defendant.

1. 1. It is convenient to set out the terms of the orders sought:-

“1. Pursuant to CPR 3.9, an order relieving the Appellant from sanctions, namely the removal of its appeal from the List and the appeal’s standing dismissed, following its inability to comply with paragraph 1 of the order of Lord Justice Males dated 30 July 2021 (the “Order“), as confirmed by Lord Justice Males on 29 October 2021.

2. Pursuant to the liberty to apply contained in the Order, an order that:-

(a) paragraphs 1, 2, 3 and 4 of the Order be set aside; and

(b) the condition on the Appellant’s permission to appeal under paragraphs 2 and 3 of the order of Lord Justice Males dated 13 May 2021 be dispensed with.”

1. 1. In support of the application Trustco filed the Fifth Witness Statement of its solicitor Liesl Fichardt (“Fichardt 5”). In response Helios filed a witness statement of its solicitor Andrew Quick (“Quick 4”). The Court permitted Trustco to file a witness statement in reply from Ms Fichardt (“Fichardt 6”).

THE RELIEF FROM SANCTIONS APPLICATION

This case is unusual in that the Court of Appeal  was considering relief from sanctions afresh in relation to its own procedure, and not as a review subject to the usual restrictions on its powers on appeal.

THE JUDGMENT ON RELIEF FROM SANCTIONS

The Court had to determine the application on standard “Denton” grounds.

The relevant procedural framework

1. 1. Trustco says that we should start with its application for relief from sanctions and, having granted that, move on to the application to vary.

1. 1. On this approach the starting point is CPR 3.8(1), which provides that “where a party has failed to comply with a … court order, any sanction for failure to comply imposed by the … court order has effect unless the party in default applies for and obtains relief from the sanction.” In this case, as is common ground, that means that Trustco’s appeal has been dismissed. It also means that this will remain the position unless Trustco’s application for relief from sanctions is granted. CPR 3.9(1) lays down the approach to an application for relief from sanctions:

“… the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders.”

1. 1. In Denton v T H White Ltd [2014] EWCA Civ 906, [2014] 1 WLR 3926 [24]-[38] this Court provided guidance on how CPR 3.9(1) should be given effect. The court should approach the matter in three stages. The first stage is to assess the seriousness and significance of the failure to comply that triggered the sanction. The second stage is to consider why the default occurred. At the third stage, the court considers all the circumstances of the case, giving particular weight to the two factors highlighted in the rule, dubbed “factors (a) and (b)”. An application for relief will not fail automatically if there is a serious or significant breach for which there is no good reason. True, “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 … But it is always necessary to have regard to all the circumstances of the case.” These relevant circumstances include the promptness of the application and other past or current breaches.

1. 1. Procedural rules of relevance to the second limb of Trustco’s application include CPR 3.1(7) and CPR 52.18. Rule 3.1(7) sets out one of the court’s general case management powers. It provides that “A power of the court under these rules to make an order includes a power to vary or revoke the order.” I have already summarised rule 52.18, which contains a power to vary conditions on the grant of permission to appeal but sets a limit on that power.

A preliminary question

1. 1. It is not agreed that these are the only relevant procedural rules. Helios says that because the appeal has already been dismissed, the correct starting point is not the jurisdiction to grant relief from sanctions but the jurisdiction to re-open an appeal that has already been determined, so that the case is governed by CPR 52.30.

1. 1. That rule is headed “Reopening of final appeals”. Its purpose is to regulate the exercise of the power identified and explained in Taylor v Lawrence [2002] EWCA Civ 90, [2003] QB 528, where the Court of Appeal held that it has an implicit jurisdiction to reopen an appeal even after it has been finally determined. This is a truly exceptional jurisdiction. The substantive conditions for its exercise are stringent: see r 52.30(1) and the jurisprudence summarised in Ceredigion Recycling & Furniture Team v Pope [2022] EWCA Civ 22 [41]-[46]. The applicant must show a powerful probability of a significant injustice. To do so, it is necessary to show – for instance – that the court failed to grapple with the issues before it, or that the process has been “vitiated or corrupted” by some “obvious and egregious error”, or that the “integrity” of the proceedings has been “critically undermined”. The procedural conditions are also stringent: an application can only be brought with permission; it is dealt with “on paper” with no right to an oral hearing; and there is no right to any appeal or review: CPR 52.30(4) and (5).

1. 1. If Helios were right on this point, that would be the end of the matter: there has been no application for permission to seek an order re-opening the appeal, the time for doing so has expired, there is no application to extend time, and although Ms Hopkins QC bravely suggested in oral argument that the facts and circumstances on which Trustco relies to justify relief from sanctions meet the CPR 52.30 standard, that is plainly not the case even taking them at their highest.

1. 1. For my part, however, I do not find Helios’ procedural argument convincing. It is unsupported by authority, and hard to reconcile with such authority as exists. McWilliam v Norton Finance (UK) Ltd [2014] EWCA Civ 818 [10] and Michael Wilson & Partners, Ltd v Sinclair [2015] EWCA Civ 774, [2015] 4 Costs LR 707 [42] both suggest that CPR 52.30 applies where an appeal has been “determined” on its merits, but not where it has been dismissed by some other procedure. In such a case resort can be had to other, less demanding, procedural mechanisms. I do not find it easy to distinguish these cases. Their reasoning also seems to me consistent with the judgment in Taylor v Lawrence and the overall procedural regime. It is striking to reflect that if Helios were right CPR 3.9 could have no practical application to a case where an appeal was automatically dismissed for a failure to comply that was excusable and neither serious nor significant.

1. 1. But I do not think we need to reach any definitive conclusion on these issues, or explore them further, because Trustco fails even on the more favourable procedural analysis for which it contends.

Relief from sanctions

1. 1. Application of the familiar three-stage test to the facts and circumstances of this case leads me to the clear conclusion that relief should be refused. At all three stages, the burden of proof and persuasion lies on Trustco. In my view it has failed to discharge that burden. Trustco (1) concedes that the default which led to the dismissal of its appeal was both serious and significant; (2) has failed to show that it had any good or reasonable excuse for that default; and (3) has entirely failed to persuade me that in all the circumstances of the case it would be just or appropriate to grant relief.

1. 1. The central issue, on which both Counsel rightly focused their attention, is whether Trustco has made out its case that non-compliance was due to an “inability” to comply with the PTA Condition.

1. 1. Trustco accepts, indeed asserts, that it has ample resources. Its argument has the following main steps: (1) all its liquid assets are in Namibia; (2) compliance with the PTA Condition required exchange control approval from the Bank; (3) the prescribed method for obtaining such approval is a recommendation from an authorised dealer; (4) although Trustco has made efforts to obtain approval by this means; (a) an essential pre-requisite, in the circumstances of this case, is an order of the Namibian courts recognising the relevant English judgment and order; (b) Helios has not applied for recognition, and Trustco has no right to do so; (c) “accordingly [the authorised dealer] was not able to recommend to the Bank” that exchange control approval be granted; and (d) “therefore, it was impossible for Trustco to obtain exchange control approval in order to make payment in compliance with the PTA Condition”; and (5) maintaining the sanction would therefore stifle an appeal for which permission has been granted. (The quoted wording comes from Trustco’s skeleton argument).

1. 1. Steps (1) to (3) of this argument are common ground, or sufficiently established by uncontradicted evidence. It is clear, also, that Trustco appointed an authorised dealer, Bank Windhoek. There is no suggestion that any steps have been taken by anyone to obtain recognition of the English judgments and orders from the Namibian courts. But every other element of Trustco’s case is contentious.

1. 1. The evidence adduced by Trustco has a number of shortcomings. One of these is that it includes only extracts, one might say snippets, from the regulatory Manual for Authorised Dealers (“Manual”) that is said to be critical to Trustco’s case. There is no satisfactory explanation for the decision to produce only extracts, and the explanation we have been given of the parts that have been produced is neither authoritative nor persuasive. Another deficiency is that there is no direct evidence of what passed between Bank Windhoek and the Bank, which is clearly critical. The explanation for this omission (namely that Trustco has no access to those communications) is unsatisfactory, given that Bank Windhoek appear to have been acting as Trustco’s agents. A third, unexplained gap in the evidence is the absence of any minute or detailed record of an apparently important three-way meeting between the authorised dealer, the Bank and Trustco that plainly did take place on 21 September 2021….

1. 1. Trustco has failed to show that it was unable to satisfy the PTA Condition. The overall picture is that the exchange control approval process failed because Trustco first delayed, then failed to make any or any proper application. Instead, it threw obstacles in the way of an application or its approval. It brought about the withdrawal of its nominated authorised dealer, failed to appoint a substitute, and made an application itself which it should have known was bound to fail. Trustco has failed to show that the absence of a Namibian court order recognising the English orders in this case had any causal role.

1. 1. These conclusions inevitably carry weight when it comes to the third stage of the Denton analysis. At this stage, the question is whether in all the circumstances it would be just to allow Trustco to seek a variation of the July Order which would, in substance, amount to discharging the PTA Condition. There are two related issues. The first is the narrow question of whether it would be just to permit such an application at all. The bigger question concerns the merits of such an application. As Ms Hopkins accepted, relief from sanctions would be pointless unless Trustco would have at least a realistic prospect of obtaining a variation.

1. 1. I bear in mind that a decision to refuse relief means that Trustco’s appeal will not be heard, and the order of Sir Michael Burton can be enforced. But as Males LJ pointed out when giving judgment on 15 July 2021, the court has not found the hearing below was unfair; it has gone no further than to say that is arguable. Conditional permission to appeal on that ground was granted on the basis of a finding that there was a compelling need for security in this jurisdiction, and an express understanding that Trustco could provide it. Trustco has failed to show that it was unable to do so, so that enforcement of the PTA Condition amounts to stifling its appeal. Trustco’s only alternative is to force Helios back on the Namibian Mortgage which the court has assessed as inadequate security.

1. 1. The balance of prejudice was assessed in July 2021. Trustco then behaved unreasonably, in the ways I have outlined above. It allowed the unless order to come into effect without making any application. Its present application has been much delayed and comes on for hearing the month before the appeal is listed for hearing. It is not necessary to decide whether granting the application would imperil the hearing date, or impose other substantial uncompensatable harm to Helios, though that does appear to be a real possibility. Trustco has wholly failed to show that matters have changed since 15 July 2021 in such a way that it might be just to strike a different balance now.

1. 1. That is the basis on which I would decide this application. But I add that I consider that we would have lacked jurisdiction to entertain the application to vary. As this is not a ground of decision, I shall state my reasons shortly.

THE APPLICATION TO VARY

There was no real point in granting relief from sanctions if the Court were not to grant an application to vary the original order. The Court indicated that it would not do so.

The application to vary: jurisdiction

1. 1. Trustco has already had two opportunities to contest in this Court the issue of what if any security it should provide: first at the original “paper” stage, when it was seeking permission to appeal; and secondly on its own application to vary, heard and determined by Males LJ on 15 July 2021. At the first stage, Trustco led Males LJ to believe that it could provide security in this jurisdiction. At the second stage, Trustco sought to persuade him that this was difficult, and should not be required. It lost that argument but gained a variation of the original order. Ms Reffin submits that, Trustco having attended the oral hearing, CPR 52.18(3) applies; Trustco’s rights to seek a variation in this Court are exhausted; the remedy, if there were one, would be an appeal to the Supreme Court with the permission of this Court or the Supreme Court itself. This appears to be the view taken by Trustco at the time of its letter of 28 October 2021. Trustco now advances a different argument, but I think Ms Reffin is right.

1. 1. It is true that the hearing on 15 July 2021 was not a hearing “at which permission was given”. But Ms Hopkins’ submission that this takes the case outside the scope of rule 52.18(3) is unduly literalist. As I see it, that rule is an expression of the fundamental principle of finality. Generally, it is not possible to challenge a final decision otherwise than by appeal. In interlocutory matters, there is a greater degree of flexibility. But it is not permissible endlessly to re-argue an interlocutory issue. The ostensibly broad power to revisit an order conferred by CPR 3.1(7) is normally exercisable only where the circumstances have materially changed, or in certain other limited kinds of case: Tibbles v SIG plc [2012] EWCA Civ 518, [2012] 1 WLR 2591. Otherwise, an attempt to rake over an interlocutory matter will be regarded as an abuse of process: see Thevarajah v Riordan [2015] UKSC 78, [2016] 1 WLR 76, esp [24].

1. 1. Rule 52.18(3) seems to me to narrow the scope for revisiting an interlocutory decision still further. On an ordinary reading, it appears to eliminate the scope for revisiting a condition on permission to appeal, once there has been a hearing of some kind. An interpretation of the rule that confined it to cases where permission was granted at an oral hearing would deprive it of most of its force, now that the norm is for such decisions to be made (as here) on paper, with a decision on any condition made at the same time. I would treat the words “hearing at which permission was given” as covering a hearing, such as the one that took place on 15 July 2021, where a decision is made as to the conditions to be imposed on permission. No subsequent application is allowed.

1. Trustco has sought to anticipate this problem by relying on the liberty to apply recorded in paragraph 7 of the July Order. Trustco treats this as allowing it to seek a variation in the event of a material change of circumstances. There are two reasons why I do not think this works. First, I think it turns on an over-broad interpretation of the July Order. Read in the context of Males LJ’s judgment, and in particular paragraph [40] which I have quoted above, I think paragraph 7 has a much narrower ambit. It is essentially concerned with an application for an extension of time to comply. At best it might extend to the working out of the fine detail of matters such as the guarantee provided for by the PTA Condition as varied. (I should add that I have come to this view on the basis of the record, before and independently of any discussion of the issue with Males LJ himself). The second reason why I do not think Trustco can avail itself of the liberty to apply is that, for the reasons already given, Trustco has failed to demonstrate a material change of circumstances.