CLAIMANT’S APPLICATION FOR RELIEF FROM SANCTIONS REFUSED – IN CATEGORICAL TERMS

In  889 Trading Ltd v Clydesdale Bank Plc & Ors [2023] EWHC 215 (Ch) HHJ Hodge KC, sitting as a judge of the High Court, refused the claimant’s application for relief. That refusal was in very categorical terms.  The claimant was seeking relief from a deliberate breach of an order made four years earlier.

 

All of those factors, and, in particular, the delay in mounting the application and the failure to combine it with earlier applications all decisively militate against the grant of relief from sanctions in the claimant’s favour. For all of those reasons, I am satisfied that this is a wholly inappropriate case to grant relief from sanctions. Everything militates against the grant of such relief. This application for relief from sanctions is totally without merit and the application will be dismissed; and the court’s order will record the fact that the application was totally without merit.”

THE CASE

The claimant issued proceedings against the defendant bank in 2018.  After a defence was filed the court ordered the parties to file a directions questionnaire. The claimant failed to do so and an order was made on the 23rd August 2018 that the claimant should lodge the requisite directions questionnaire, or pre-trial checklist, by the 14th September 2018 or the action would be struck out.

The reference to pre-trial checklist was an error by the Court.  Consequently a second order was made on the 20th September 2018  referring only to the directions questionnaire.  This was to be filed by the 17th October or the action would be struck out.

Subsequently

On 17 October 2018, at 4pm, the claimant produced a document described as ‘Response to threat by DJ Khan to retrospectively strike out claim E30MA245 and “enter judgment” in favour of “the defendant” unless by 4pm on Wednesday 17 October 2018. The claimant, 889 Trading Limited, represented by Taylor Price Solicitors and heard by counsel lodges “the requisite directions questionnaire”‘. That document made reference to a document stamped 4 October 2018. It was clearly not a directions questionnaire. During the course of today’s hearing, Mr Taylor has at least twice accepted that it was a mistake on his part not to file the directions questionnaire. No directions questionnaire was in fact filed by the claimant until 6 April 2021″

The matter became more complex.

    1. On 18 October 2018, the court drew up an order in the name of DJ Khan, which was sealed on 22 October. Paragraph 1 reads: “If the claimant does not comply with the order of 20 September 2018, the claim is struck out.” Paragraph two reads: “If the claimant does comply, then the file will be considered and if appropriate, a costs and case management conference will be listed.” It is that order that has given rise to a number of subsequent applications, including the present.

 

 

  1. It is, I think, common ground that both parties proceeded after October 2018 on the footing that the claim had been struck out. It is clear from Mr Taylor’s most recent witness statement – see paragraphs 8 and 9 – that it was confirmed to him by the court staff, both before and on 20 November 2018, that the claim had been struck out. It is also clear from that witness statement that the claimant, through Mr Taylor, understood that the defendant had “admitted” the claimant’s allegations of fraud to Greater Manchester Police on 20 November 2017, and that this had been confirmed by a detective constable in his investigation summary dated 16 August 2018.

EVENTS SUBSEQUENT TO THE STRIKING OUT ORDER

On the basis that the action had been struck out the claimant applied for pre-action disclosure against the first defendant, which application was dismissed. Thereafter the claimant issued another claim (“the third claim”) which included the first defendant. That action was struck out as an abuse of process.

After a draft judgment in the third claim the claimant alleged that the effect of the order made on 18th October in the first action was to extend indefinitely the time for filing a directions questionnaire.

At paragraph 28, HHJ Cawson QC noted that in emails sent following the circulation of a draft of his judgment, Mr Taylor had contended that the effect of the order made on 18 October 2018 was effectively to extend the time for the claimant to lodge a directions questionnaire indefinitely, and to nullify the effect of the order made on 20 September, striking out the claim if a direction questionnaire was not filed by 4pm on the 17th. HHJ Cawson QC made it clear that he did not read the order made on 18 October 2018 as having that effect, and he did not consider that that was what DJ Khan could have intended. HHJ Cawson QC noted that no directions questionnaire was subsequently filed, at least until what purported to be such a document was attached to an email dated 6 April, sent in response to the draft judgment. HHJ Cawson QC also recorded that, for the reasons he detailed later in his judgment, the reason why the claimant had not complied with the order made on 20 September, or had otherwise filed a directions questionnaire, was because it had decided to pursue other courses of action.”

After the third action was struck out the claimant attempted to appeal, arguing that the first action had never, in fact, been struck out.

BACK TO THE FIRST ACTION

After the unsuccessful appeal the claimant issued applications in the first action, arguing that this action had never, in fact, been struck out.  The claimant’s application was unsuccessful as was the appeal against that issue.

THE CLAIMANT’S APPLICATION FOR RELIEF FROM SANCTIONS AGAINST STRIKING OUT IN THE FIRST ACTION

Given that there was a finding that the first action was struck out the claimant then applied for relief from sanctions.

    1. As HHJ Cawson QC said, the only escape route from the conclusion that the claim has been struck out is an application for relief from sanctions. That application, as HHJ Cawson QC explained, has to be determined in accordance with the Denton guidelines. The court must first identify and assess the seriousness and significance of the failure to comply with DJ Khan’s order of 20 September. Second, the court must consider why the default occurred. And, thirdly, all the circumstances of the case must be evaluated so as to enable the court to deal justly with the application. Particular consideration has to be given to the need for litigation to be conducted efficiently, and at proportionate cost; and to enforce compliance with court orders, rules and practice directions. The court is also required to have regard to the other constituent elements of the overriding objective in CPR 1.1 (2).
    1. The reality is that neither in his witness statement, nor in his skeleton argument, nor in his oral submissions before the court today, has Mr Taylor, on behalf of the claimant, sought to engage with the requirements of Denton v White. Mr Taylor refers to the three-part test in Denton v White at paragraph 7 of his witness statement; but the bulk of the remainder of his witness statement is supportive of Mr Taylor’s submission that HHJ Cawson QC’s decision on the interrelationship between the two orders made by DJ Khan was wrong in law. As I say, that is a point that is not open to the claimant.
    1. At paragraph 29 of his witness statement, Mr Taylor makes the point that claim E30MA245 is predicated upon a fraud and that “fraud unravels everything”. He says that the court is obliged to assist in the unravelling in accordance with the overriding objective. It is also obliged to correct its own administrative error by not serving the order of 18 October 2018.
    1. At paragraph 31, Mr Taylor agrees that the breach, and the time elapsed, are significant; but the extenuating circumstances, and the “comedy” of the court’s own errors are said to have impeded the claimant’s progress. He refers to the defendant having allegedly admitted the fraud to the claimant and to Greater Manchester Police. Therefore, in accordance with the overriding objective, and the court’s own negligence in this matter, Mr Taylor asks the court of its own motion to grant relief from sanctions to save any further appeals.
    1. In his witness statement in answer to the application, Mr Ibrahim sets out various reasons why relief against sanctions should not be granted at paragraphs 54 to 58. Mr Taylor’s supplementary skeleton in response to that witness statement does not really address those matters. Again, at paragraph 72 to 79, Mr Taylor challenges the fact that the claim has been struck out. At paragraph 80, he says that relief from sanctions is sought due to the fundamental mistake in the claimant not having been served with the 18 October order, and the fact that, had it been served, the claimant would have been able to comply
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    1. The first defendant disputes that the order was never served on the claimant. However, taking the claimant’s evidence and case at face value, the fact that the order was not served cannot give the claimant any good reason for not having complied with the earlier order, which had been served upon it. It is that earlier order of which the claimant clearly knew – and which it blatantly disregarded – in relation to which the application for relief from sanctions has to be made. The claimant had deliberately elected not to comply with that order. There is no good reason offered for that, beyond the fact that the claimant had elected not to pursue the litigation but rather to proceed through the offices of the police and the Financial Conduct Authority. That is no good reason for the failure to comply with the order. The consequences of non-compliance are serious. As a result, case management directions which would otherwise have been made in the Autumn of 2018 have still not been made, over four years later. This is all in relation to an alleged case of fraud dating back a decade or more before 2018.
    1. In his oral submissions, Mr Taylor relied heavily upon the case of fraud which the claimant advances against the first defendant, and its alleged deliberate concealment of that fraud and suppression of known adverse documents. However, the substantive claim is itself founded upon that fraud, and that fraud has nothing to do with the non-compliance with the court order that has led to the strike out of the claim. This is not a case where a judgment has been obtained by fraud; rather, a claim has been struck out by the claimant’s deliberate non-compliance with a peremptory court order.
    1. Mr Taylor addressed me at length on the conduct and state of mind required to establish a case of fraud on the part of the first defendant, and he emphasised its allegedly deliberate concealment of known adverse documents. At the end of his initial oral submissions, I gave Mr Taylor an adjournment of 30 minutes to allow him to consider Mr Wilson’s skeleton argument, which, although he had received it, Mr Taylor told me he had not had adequate opportunity to address.
    1. When he returned, Mr Taylor emphasised that that skeleton argument made no reference to fraud, and contained no rebuttal of what the first defendant’s relevant employee, Mr Kelly, had said or done. He described Mr Wilson’s skeleton as a ‘moot’ point. The ‘elephant in the room’ was said to have been that Mr Kelly had made false representations as to the Lamb & Swift valuation report. The first defendant had deliberately concealed evidence from the claimant; and Mr Wilson’s skeleton argument had contained no rebuttal of the claimant’s allegations of fraud. He said that the matter could not be ruled on until after the claimant had fully disclosed unredacted documents to prove its own wrongdoing through its employee, Mr Kelly. He reiterated the effect of the Supreme Court’s decision in Takhar v Gracefields that ‘fraud unravels all’. He invited the court to order disclosure, and to adjourn this hearing until that disclosure had been made. He said that it would be irrelevant for Mr Wilson to stand up and go through his skeleton because the case – whether the claim had been struck out or not – was a matter for another day, and the main issue was that of fraud.
    1. I cannot accept that. This is an application for relief from sanctions in relation to an order of 20 September 2018, striking out the case for failure to serve a directions questionnaire. As I have said, that breach was serious and significant. There is no adequate explanation for the default beyond the fact that the claimant had, at that stage, decided to pursue its claims through agencies other than the court, namely the police and the Financial Conduct Authority.
    1. Mr Taylor’s focus upon the order of 18 October 2018 cannot provide any explanation as to why the claimant had not filed the directions questionnaire, as required initially by the Civil Procedure Rules, and later the notice of allocation to the multitrack and the orders of 23 August and 20 September 2018. It also provides no explanation for the claimant’s failure to make an application for relief from sanctions soon after the failure to comply with the 20 September order. The claimant’s asserted ignorance of the later order of 18 October makes that failure even more inexplicable and inexcusable.
    1. It is clear that, by the very latest, Ms Bagnell’s email from the court of 20 November (referenced at paragraph 9 of Mr Taylor’s latest witness statement) that by 20 November 2018, the claimant knew that its claim had been struck out. Despite that knowledge, it did nothing by way of application for relief from sanctions until 21 April 2022, having failed to serve its directions questionnaire until a little over a year earlier on 6 April 2021.
    1. Turning to the third of the Denton v White criteria – all the circumstances of the case – this is clearly a case where relief from sanctions should not be granted, for the reasons explained by Mr Wilson at paragraph 44 of his skeleton argument. First, the breach of the 20 September 2018 order had followed the earlier breach of the 23 August order, and the earlier requirement to file a directions questionnaire under the Civil Procedure Rules, and in response to the notice dated 13 June 2018 of proposed allocation to the multitrack. Therefore, the claimant failed to file a directions questionnaire on three occasions, and delayed doing so from October 2018 until April 2021.
    1. Second, the failure to file the directions questionnaire meant that the court lacked an important case management document required to enable the making of effective and efficient directions to trial. Over four years on, in January 2023, the court has not made the directions that would otherwise have been made to enable the progression of a fraud claim to trial in October 2018. Third, the claimant was aware of the application of both the sanction of striking out the first proceedings, and the need to apply for relief from that sanction, from no later than November 2018; yet the claimant took the deliberate decision not pursue those proceedings but to adopt a different course. Fourth, the breach, and the failure to correct it, were deliberate. Fifth, some three-and-a-half years elapsed since the failure to comply with the 20 September order before any application for relief was made. It cannot on any conceivable view be said that this application for relief was made promptly, in the sense of it being made as soon as it had become apparent that it was necessary or desirable to make it. The time between the sanction and the application for relief in this case was the very opposite of prompt.
    1. Sixth, instead of properly making an application for relief, the claimant embarked upon an abusive course of parallel litigation, which included the application for pre-action disclosure, and then the issue of the third set of proceedings under claim number BL-2020-MAN-000120, which were struck out by HHJ Cawson QC. At paragraph 44.6, Mr Wilson sets out a catalogue of other proceedings as well, which are amplified at paragraphs 44.7 and 44.8.
    1. Seventh, the claimant’s conduct has resulted in four costs orders being made against the claimant in favour of the first defendant. These are referenced at paragraph 53 of Mr Ibrahim’s witness statement and total over £135,750. All of those remain unsatisfied. Even if the court had been minded to grant relief from sanctions, it would have been on condition that those costs orders should be satisfied within a relatively short timescale. Eighth, the present application for relief from sanctions appears only to have been initiated after the failure of the previous alternative courses of litigation taken on behalf of the claimant by Mr Taylor.
    1. Finally, the claimant has continued to dispute the application of the sanction and to deny that it has acted in breach of DJ Khan’s order of 20 September. It has sought to relitigate matters that have already been determined by HHJ Cawson QC and which have been said to be not realistically arguable by Arnold LJ. Mr Wilson notes that the only circumstance, apart from the serious nature of the fraud on which the substantive claim is founded, upon which Mr Taylor relies to seek to balance the other factors is the claimant’s alleged non-receipt of the 18 October 2018 order. But even if one assumes in the claimant’s favour that it was not received – and the defendant’s position is that it was – that non-receipt could never overcome the many circumstances militating against the grant of relief.
    1. By at least 20 November 2018, and almost certainly before, Mr Taylor was aware that the directions questionnaire which was required had not been filed, and he was proceeding in the understanding that the first proceedings had, as a result, been struck out. Even after becoming aware of the existence of DJ Khan’s later order of 18 October in April 2021, Mr Taylor persisted for a further year in the claimant’s approach of issuing further claims and applications, rather than applying for relief from sanctions. That has led to significant additional costs, and has been wasteful of court time and resources.
    1. All of those factors, and, in particular, the delay in mounting the application and the failure to combine it with earlier applications all decisively militate against the grant of relief from sanctions in the claimant’s favour. For all of those reasons, I am satisfied that this is a wholly inappropriate case to grant relief from sanctions. Everything militates against the grant of such relief. This application for relief from sanctions is totally without merit and the application will be dismissed; and the court’s order will record the fact that the application was totally without merit. That concludes this extemporary judgment.