COURT OF APPEAL FIND THAT JUDGE SHOULD NOT HAVE GRANTED RELIEF FROM SANCTION FOLLOWING LATE SERVICE OF THE PARTICULARS OF CLAIM

In the judgment today in Bangs v FM Conway Ltd [2024] EWCA Civ 1461 the Court of Appeal overturned a decision where the claimant had been given relief from sanctions against one defendant following late service of the Particulars of Claim. There are several lessons here :(i) serve the Particulars of Claim properly and promptly; (ii) the courts will rarely reivew the overall merits of a case when considering relief from sanctions – if the court is to be asked to review the merits then the applicant must give clear notice of this and give the respondent an opportunity to respond.

“… a party responding to a procedural application, including an application for relief from sanctions, will not generally be required or expected to deploy its case on the merits of the underlying claim, a party who wishes to contend that the merits of its case satisfy the summary judgment test must give clear notice of that contention sufficiently in advance of the hearing to enable the other party to decide what evidence on the merits it wishes to deploy. In this regard notice given only a few days before the hearing, or in a skeleton argument, is likely to be too late. Judges who are invited to take account of the merits of the claim when making this kind of case management decision should investigate whether such notice has been given and, if it has not, should firmly decline the invitation.”

THE CASE

The claimant issued proceedings against two defendants.  Proceedings were issued and served.   However no Particulars of Claim were served. It was issued in the Commercial Court and the Court rules required that Particulars be served within 14 days of the filing of an acknowledgement of service.  The defendant applied to strike out the care. An order was made, without a hearing,  striking out the action.

The claimant then applied to set aside the order striking out the action.

THE APPLICATION AT FIRST INSTANCE

There were two applications before the judge at first instance.  The application to set aside the order striking out the application and an application for an extension of time to serve the Particulars of Claim.

The judge found that there had been a serious breach of the rules for which there was no good reason.   However in relation to “all the circumstances of the case” he found that the defendant had made an admission and that the merits of the case merited relief from sanctions being granted and an extension allowed in relation to one defendant.

THE DEFENDANT’S SUCCESSFUL APPEAL TO THE COURT OF APPEAL

The defendant appealed successfully to the Court of Appeal. The Court held that the judge had erred in taking into account the merits of the case.  The rules, as they stood at the time, allowed the defendant to withdraw from the admission it had made.  The judge had explored the merits of the case when making the decision without the defendant being on notice that such merits were likely to play a part in the exercise of the court’s discretion.

WAS THERE A SANCTION

The first issue for the Court of Appeal was whether there was a sanction. The Court found that there was.

1. 1. Because neither CPR 7.4 nor CPR 58.5 provides a sanction for failure to serve Particulars of Claim within the time required, the court raised with the parties whether the basis on which the case had been argued below, i.e. that it was necessary for Ms Bangs to obtain relief from sanctions under CPR 3.9, was correct. In response, counsel were agreed that it was. They pointed out that the case falls within the third category identified in FXF v English Karate Federation Ltd [2023] EWCA Civ 891, [2024] 1 WLR 1097. These categories were explained by Sir Geoffrey Vos MR:

’59. I hope that I have now dealt with all the truly relevant authorities. I have done so at some length, because they show a difference of approach that requires resolution by this court. As Birss LJ explained in argument, there are really three categories of case: (i) cases where the rule or order expressly provides for the sanction that will apply on non-compliance (e.g. failure to file witness statements on time), (ii) cases where the rule does not expressly state the sanction which applies for non-compliance, but permission of the court is needed to proceed (e.g. failure to file a notice of appeal on time), and (iii) cases where a further step is taken in consequence of the non-compliance, such as the entry of a default judgment (as in this case) or the striking out of a claim for non-attendance at trial.’

1. Here there was non-compliance with CPR 58.5, in consequence of which the claim was struck out. Thus the striking out was a sanction for the non-compliance and Ms Bangs needed to obtain relief.

OVERTURNING THE DECISION TO GRANT RELIEF FROM SANCTIONS

The Court of Appeal then overturned the decision granting relief from sanctions.

1. 1. Ms Boon for the appellant made three submissions. First, she submitted that the judge had applied the wrong test to his assessment of the merits of Ms Bangs’ claim, (a) because he had wrongly taken account of the admission of liability which had been withdrawn, and (b) because the test which he had applied was whether the claim was very strong and not whether it met the summary judgment test. Second, she submitted that it was unjust for the judge to have considered the merits at all, because the argument advanced on behalf of Ms Bangs in the court below had been that FM Conway was not entitled to withdraw the admission, with no suggestion that the merits of her claim met the summary judgment test or were very strong. Third, she submitted that in any event the judge had balanced the various factors unfairly and ought to have refused to grant relief from sanction.

Ground 2 – Injustice

1. 1. I propose to deal first with the second of these arguments.

1. 1. The courts have consistently insisted that when dealing with case management decisions, of which relief from sanctions is an example, it is not appropriate to investigate the merits of the claim in any depth. If the position were otherwise, there is a risk that every procedural application would turn into an expensive and laborious minitrial. The position was explained clearly by the Supreme Court in Global Torch Ltd v Apex Global Management Ltd (No. 2) [2014] UKSC 64, [2014] 1 WLR 4495 (also known as HRH Prince Abdulaziz Bin Mishal Bin Abdulaziz Al Saud v Apex Global Management Ltd). Lord Neuberger said:

’29. In my view, the strength of a party’s case on the ultimate merits of the proceedings is generally irrelevant when it comes to case management issues of the sort which were the subject matter of the decisions of Vos J, Norris J and Mann J in these proceedings. The one possible exception could be where a party has a case whose strength would entitle him to summary judgment. Both the general rule and the exception appeared to be common ground between the parties, although Mr Fenwick seemed to be inclined at one stage to suggest that the exception might be a little wider. In my view, the general rule is justifiable on both principled and practical grounds.

30. A trial involves directions and case management decisions, and it is hard to see why the strength of either party’s case should, at least normally, affect the nature or the enforcement of those directions and decisions. While it may be a different way of making the same point, it is also hard to identify quite how a court, when giving directions or imposing a sanction, could satisfactorily take into account the ultimate prospects of success in a principled way. Further, it would be thoroughly undesirable if, every time the court was considering the imposition or enforcement of a sanction, it could be faced with the exercise of assessing the strength of the parties’ respective cases: it would lead to such applications costing much more and taking up much more court time than they already do. It would thus be inherently undesirable and contrary to the aim of the Woolf and Jackson reforms.

31. In principle, where a person has a strong enough case to obtain summary judgment, he is not normally susceptible to the argument that he must face a trial. And, in practical terms, the risk involved in considering the ultimate merits would be much reduced: the merits would be relevant in relatively few cases, and, in those cases, unless the court could be quickly persuaded that the outcome was clear, it would refuse to consider the merits. Accordingly, there is force in the argument that a party who has a strong enough case to obtain summary judgment should, as an exception to the general rule, be entitled to rely on that fact in relation to case management decisions. For present purposes, I am prepared to assume in the Prince’s favour that that is indeed correct.

32. I should add that I do not think that it would be enough for a party to show that, while his arguments were not strong enough to justify summary judgment, his arguments were strong enough to justify the other party being required to bring the disputed sum into court if he was to be entitled to proceed with his case. For present purposes, as with an outright order for summary judgment, a claim or defence is either unanswerable or it is not. A conditional order, typically requiring a party to provide security if it wishes to proceed with its claim or defence, is granted in rather nuanced and case specific circumstances. Neither as a matter of principle nor as a matter of practicality would it be appropriate to extend the exception to such a case.’

1. 1. The point was developed by Lord Justice Moore-Bick in R (Hysaj) v Secretary of State for the Home Department [2014] EWCA Civ 1633, [2015] 1 WLR 2472:

’46. If applications for extensions of time are allowed to develop into disputes about the merits of the substantive appeal, they will occupy a great deal of time and lead to the parties’ incurring substantial costs. In most cases the merits of the appeal will have little to do with whether it is appropriate to grant an extension of time. Only in those cases where the court can see without much investigation that the grounds of appeal are either very strong or very weak will the merits have a significant part to play when it comes to balancing the various factors that have to be considered at stage three of the process. In most cases the court should decline to embark on an investigation of the merits and firmly discourage argument directed to them. Here too a robust exercise of the jurisdiction in relation to costs is appropriate in order to discourage those who would otherwise seek to impress the court with the strength of their cases.

47. Support for that conclusion can be found in the recent decision of the Supreme Court in HRH Prince Abdulaziz Bin Mishal Bin Abdulaziz Al Saud v Apex Global Management Ltd [2014] UKSC 64, in which the court had to consider the extent to which the merits of a claim or defence were relevant to granting relief from the sanction of striking out in default of compliance with an “unless” order. Lord Neuberger, with whom Lord Sumption, Lord Hughes and Lord Hodge agreed, held that, even in a case of striking out, the merits of the claim or defence were relevant only when they were so strong that there was no real answer to them, in other words, in cases where an application for summary judgment could be expected to succeed. In Lord Neuberger’s view (paragraph 30):

” . . . it would be thoroughly undesirable if, every time the court was considering the imposition or enforcement of a sanction, it could be faced with the exercise of assessing the strength of the parties’ respective cases: it would lead to such applications costing much more and taking up much more court time than they already do. It would thus be inherently undesirable and contrary to the aim of the Woolf and Jackson reforms.”

48. In my view exactly the same considerations apply to applications for extensions of time for permission to appeal.’

1. 1. Basic fairness requires that if a party is going to contend that the merits of the underlying claim are so strong (or so weak) that they should be taken into account for case management purposes, notice of this contention should be given in advance of the hearing so that the other party can consider what evidence it needs to deploy. As Lord Neuberger put it in Global Torch:

’34. … If, at an interlocutory hearing which is not a summary judgment hearing, a party wishes to rely on the contention that he has an unanswerable claim or defence, it seems to me that he should spell out that contention very clearly in advance, as otherwise the raising of the contention at the hearing could wreak obvious unfairness on the other party.’

1. 1. In the light of these authorities, I would summarise the position as follows.

1. 1. First, although the court will want to know what the case is about (the nature of the claim and any defences), the general rule is that the merits of the underlying claim are irrelevant when the court has to make a case management decision such as whether to grant relief from sanction. It follows that it is unnecessary for the parties to deploy extensive evidence designed to show that they have a strong case on the merits and they should not seek to do so. Such evidence is likely to be a distraction from what the court needs to decide and is positively unhelpful.

1. 1. Second, there is an exception to this general rule if a party wishes to contend that its case is so strong that it would be able to obtain summary judgment in its favour. It is clear that in Hysaj, when Lord Justice Moore-Bick spoke of the grounds of appeal being very strong, he did not intend a less demanding test than would apply on an application for summary judgment. This is the only exception to the general rule which has so far been recognised. While I would not rule out the possibility that there may be others, if they do exist they will be genuinely exceptional.

1. 1. Third, even when a party does wish to contend that it would be able to obtain summary judgment, the merits of the underlying claim should only be taken into account when this can be readily demonstrated, without detailed investigation. It is significant that Lord Justice Moore-Bick confined the exception to cases where ‘the court can see without much investigation that the grounds of appeal are either very strong or very weak’ (my emphasis).

1. 1. Fourth, because a party responding to a procedural application, including an application for relief from sanctions, will not generally be required or expected to deploy its case on the merits of the underlying claim, a party who wishes to contend that the merits of its case satisfy the summary judgment test must give clear notice of that contention sufficiently in advance of the hearing to enable the other party to decide what evidence on the merits it wishes to deploy. In this regard notice given only a few days before the hearing, or in a skeleton argument, is likely to be too late. Judges who are invited to take account of the merits of the claim when making this kind of case management decision should investigate whether such notice has been given and, if it has not, should firmly decline the invitation.

1. 1. Fifth, even when such notice is given, the other party will not be expected to deploy evidence to the full extent that it would do at trial. It may be, for example, that the issue arises at a stage before detailed factual evidence has been obtained or before experts have reported – or as in this case, before the time for service of a Defence. All that the other party is required to do is to show that there are sufficient matters in dispute that summary judgment is likely to be inappropriate. Hence Lord Justice Moore-Bick’s reference in Hysaj to ‘cases where an application for summary judgment could be expected to succeed’.

1. 1. In the present case Ms Bangs’ solicitors did not give any notice in advance of the hearing that it would be contended on her behalf that the merits of her claim were so strong that it was a suitable case for summary judgment. Nor did they suggest, if different (though in my view it is not), that she had a ‘very strong’ case on the merits, or that this was relevant to the application for relief from sanction. Nor was there any such suggestion in the witness statement from Ms Bangs’ solicitor or the skeleton argument from counsel then appearing for Ms Bangs (not Ms Caitlin Corrigan, who represented her on this appeal). Instead, the only submission as to the merits made in counsel’s skeleton argument was that:

‘As D1 has admitted liability for the claim and has not applied to withdraw it, the outstanding matters in relation to D1 is the quantification of damage. If the strikeout is to be maintained, D1 obtains a significant windfall against a claim [sc.for] which it has admitted liability.’

1. 1. As a result the submissions concerning the merits before the judge were confined to the issue whether FM Conway had been entitled to withdraw the admission. Counsel for Ms Bangs submitted that it remained an extant admission on which Ms Bangs was entitled to rely. However, as the judge recorded, Ms Boon for FM Conway was able to demonstrate that, under the rules as they stood at the relevant time, it had been entitled to withdraw the admission without obtaining the agreement of Ms Bangs or the permission of the court.

1. 1. Because it had not been suggested on behalf of Ms Bangs that the merits were relevant to the issue of relief against sanction, Ms Boon did not go on to address the merits of the claim. Nor did she submit that it would be unjust for the overall merits of the claim to be taken into account in circumstances where no notice of this point had been given. I have no doubt that such a submission would have been recorded and dealt with in the judgment, if it had been made. The fact that it was not is understandable in circumstances where counsel for Ms Bangs had not made any submission that the merits were relevant to the grant of relief again sanction going beyond the narrow and mistaken point made in her skeleton argument. The result, however, is that the judge was not alive to the potential injustice of forming a view about the merits of the claim.

1. 1. In these circumstances, I consider that for the judge to go on, as he did, to consider the merits of the underlying claim, did unwittingly cause an injustice to FM Conway. It is, perhaps, understandable that he did so, but the result was that FM Conway did not have a fair opportunity to deploy its case, or to seek to show that the claim was not suitable for summary judgment. As it is, the case has moved on since the judge’s decision. FM Conway has now pleaded a Defence and Ms Corrigan does not submit that it would now be possible for Ms Bangs to obtain summary judgment on liability.

1. 1. As the judge’s view that Ms Bangs had a very strong case on liability was decisive in his decision to grant relief from sanction, the appeal must be allowed. This means that it is unnecessary to consider grounds 1 and 3, but as they were both fully argued I will deal with them briefly.

Ground 1 – Merits

1. 1. I have no doubt that if fair warning of the point had been given, and if the evidence had remained as it was in the court below, the judge’s conclusion that Ms Bangs had a very strong claim on liability which met the requirement for summary judgment could not be faulted. If unanswered, the matters on which the judge relied, which I have summarised above, pointed firmly to that conclusion. Equally, however, I am sure that if fair warning had been given, the evidence would not have remained as it was. FM Conway would have been able to adduce at least some evidence sufficient to show that the court could not conclude, at any rate without more extensive investigation than would be appropriate on an application for relief from sanctions, that Ms Bangs was entitled to summary judgment.

Ground 3 – Discretion

1. 1. Ms Boon submitted that in any event the judge balanced the various factors unfairly and ought to have refused to grant relief from sanction. I would unhesitatingly reject that submission. If proper notice of the point had been given, and if the evidence had remained as it was, the judge identified the relevant factors and the weight to be given to each of them was a matter for him. This court would not interfere unless the judge’s decision was plainly wrong, which it was not.

Disposal

1. For the reasons explained above in relation to ground 2, I would allow the appeal, set aside the order of Mr Justice Jacobs granting relief from sanction and restore the order of Mr Justice Bright striking out the claim against FM Conway.