Court of Appeal overturns order granting "second bite at the cherry"

The Court of Appeal has overturned an order granting a second application for relief from sanctions for failure to comply with an unless order, with the result that the defendant is debarred from defending the claim: Thevarajah v Riordan [2014] EWCA Civ 14.

This decision continues the court's tough line on compliance with rules and court orders, as established in the widely publicised Mitchell decision (see post) and subsequently applied in Durrant (see post). It shows in particular that where a party has been denied relief from sanctions, it will be very difficult to persuade the court to grant a second bite at the cherry. Where the second application for relief entails setting aside provisions of a previous order refusing relief (as will usually be the case), the court will not normally grant such an application unless there has been a material change of circumstances since the order was made, or the original decision was based on misstated facts, or there was a manifest mistake in formulating the order and, in any case, the application was made promptly. The decision also suggests that belated compliance with the rule or order breached will not ordinarily amount to a material change of circumstances for these purposes.

Background

The background is set out in more detail in our blog post on the first instance decision. Briefly, the defendants were in breach of an “unless” order which required them to provide certain information pursuant to a worldwide freezing order and associated disclosure order by 4 pm on 1 July 2013, failing which they would be debarred from defending the claim. On 9 August Hildyard J refused relief from sanctions and ordered that the defendants were debarred from defending the claim.

There was no appeal against that order. Instead, the defendants instructed new solicitors and made a fresh application for relief from sanctions on 1 October, two days before trial was due to begin. They said (amongst other things) that the breach of the unless order had been remedied, they had made considerable efforts to comply, the failings were at least in part due to their former solicitors, and to refuse the application would lead to an unjust result as these were substantial claims involving allegations of dishonesty which turned on witness evidence and the court could not assess the merits based on the documentation alone.

The court (Mr Andrew Sutcliffe QC sitting as a Deputy Judge) granted the application for relief from sanctions and reinstated the defence. The claimant appealed.

Decision

The Court of Appeal allowed the appeal, finding that the defendants' second application for relief from sanctions was in substance an application under CPR 3.1(7) to vary or set aside the provisions of Hildyard J's order of 9 August refusing relief from sanctions. It therefore had to satisfy the criteria laid down in Tibbles v SIG Plc [2012] EWCA Civ 518 for exercising the court's discretion under that rule. These were summarised in Mitchell as follows:

"The court held that considerations of finality, the undesirability of allowing litigants to have two bites at the cherry and the need to avoid undermining the concept of appeal all required a principled curtailment of an otherwise apparently open discretion. The discretion might be appropriately exercised normally only (i) where there had been a material change of circumstances since the order was made; (ii) where the facts on which the original decision was made had been misstated; or (iii) where there had been a manifest mistake on the part of the judge in formulating the order. Moreover, as the court emphasised, the application must be made promptly."

Those criteria applied where a party sought to set aside the provisions of a previous order refusing relief from sanctions under CPR 3.9 by way of a second application for relief.

Here, the court found, the application manifestly failed to satisfy those criteria. The defendants' only argument was that there had been a material change of circumstances in that they had, as of 1 October, given the full disclosure that the unless order required to be given by 1 July 2013. In the court's judgment, the Deputy Judge was wrong to find that this amounted to a material change of circumstances:

"Even if the required disclosure had been made at last, some three months after the date for compliance under the unless order itself and almost two months after the date of Hildyard J's refusal of relief from sanction for non-compliance, it could not in our view amount to a material change of circumstances for the purposes of an application under CPR 3.1(7). It could not alter the fact of non-compliance with the unless order or amount to a good reason for that non-compliance, nor would it undermine the reasoning that led Hildyard J to refuse relief from sanction. There was nothing here by way of material change of circumstances, and there was no other basis for an application under CPR 3.1(7) to vary or revoke Hildyard J's order."

The Court of Appeal expressed concern about a number of other aspects of the Deputy Judge's approach, though it did not base its decision on them.

1. The Deputy Judge's general approach to the application of CPR 3.9 was wrong in principle, in that it lacked the robustness called for by the guidance subsequently given in Mitchell and gave insufficient consideration to the need (a) for litigation to be conducted efficiently and at proportionate cost, and (b) to enforce compliance with rules, practice directions and orders. It also failed to take as its starting point that the sanction in the unless order, which had not itself been the subject of appeal or an application under CPR 3.1(7) for variation or revocation, had been properly imposed and complied with the overriding objective.
2. He paid insufficient attention to the fact that the second application had not been made promptly but came almost two months after Hildyard J had refused relief and just two days before the trial was due to start. This was all the more surprising given that a speedy trial had previously been ordered.
3. He allowed the hearing of the application for relief from sanction to take up a disproportionate amount of court time, with the result that the trial date would have been lost even if the application had been refused.
4. The Court of Appeal was "troubled" by the Deputy Judge's observation that even if the respondents remained debarred from defending the claim they would be "entitled at trial to require the Claimant to prove his claim, to cross-examine and make submissions". The cases to which the Deputy Judge referred in that connection did not appear necessarily to support so sweeping a proposition but, the court said, that issue would be a matter for decision by the judge who heard the trial.

Note: This decision was upheld on appeal. See our post on the Supreme Court decision here.