High Court takes unforgiving stance on request for relief from sanctions (North Midland Construction Plc v Geo Networks Limited)

18 Aug 2015 | 8 min read
urgentThe Technology and Construction Court (TCC) has granted an application to strike out a claim where the Particulars of Claim (POC) had still not been served six weeks after the deadline for doing so. The claimant had not sought to agree an extension of time until the day before the deadline. As such, there was no time for an application to court where, as here, the defendant refused consent. This demonstrated a ‘cavalier attitude’ to the rules and was ‘wholly unacceptable’. The subsequent delay following the deadline in neither applying for an extension (for six weeks) nor serving the POC was a serious non-compliance for which there was no good reason. However, the Court did grant relief from sanctions under Rule 3.9(1) of the CPR in a concurrent claim between the same parties where the POC had been served by the time of the application for an extension.

Practical implications arising from this judgment

In the immediate wake of the so-called Jackson Reforms to the Civil Procedure Rules implemented in April 2013, the case of Mitchell was used to emphasise a new era of intolerance to unnecessary and avoidable procedural breaches. Although this was tempered to some extent by the case of Denton (see below) to ensure the right balance with achieving justice, the practical position remains that sanctions are now a very real threat to non-compliant parties.If a claim has to be issued urgently, for example if there is a limitation point looming (as was suspected in this case), practitioners should be prepared well in advance of the 4-month deadline for service of the POC to negotiate an extension by consent or apply to court. The same goes for the expiry of any agreed further deadline. To leave it until the day before is likely to look disorganised at best to the court which will then start from an unsympathetic position in considering any necessary relief if breach occurs.A court will never strike out a case lightly or without all due consideration. However, if it does, there can be huge costs consequences (and possible claims by the client against the solicitor), as well as potential substantive losses if the litigation cannot be recommenced (for limitation or other reasons).

The claimant’s applications for relief from sanctions

The claimant issued two claims, known as the Project Yellow claim and the Fibrespeed claim, following its installation of cabling around the UK under a contract with the defendant:

  • the claim form in the Project Yellow claim was issued on 17 July 2014 and time for service of the POC had been extended by agreement to 30 June 2015
  • the claim form in the Fibrespeed claim was issued on 2 February 2015 (without any pre-action protocol letter preceding it) with the latest date for service of the POC being 2 June 2015 in the absence of any agreement to extend

The defendant’s solicitors had signed a consent order on 31 March 2015 for extending time in the Project Yellow claim. The claimant’s solicitors sent this to the court twice, the second time with the claim number changed to be that of the Fibrespeed claim. On this basis, the claimant said that the defendant had also agreed to an extension of time to serve to 30 June 2015 in the Fibrespeed claim.

The defendant argued that it had no knowledge of the Fibrespeed claim as it had not been served and it had never agreed to, nor signed, a consent order in respect of that claim. It only became aware of it in correspondence relating to a claim number it did not recognise at the end of April 2015.

By 30 June, no POC in either claim had been served. On 14 July, the defendant applied for both claims to be struck out for failure to serve the POC by the required date. The claimant applied at the same time for extensions of time for service, or more properly for relief from sanctions (as it was ‘out of time’ on both claims). On 17 July, the claimant served POC in the Project Yellow claim.

Was there an agreed extension of time in the Fibrespeed claim?

Mr Justice Edwards-Stuart was in ‘no doubt’ that the defendant’s solicitors had absolutely no idea that a further consent order with their signature had been sent to the court in respect of the Fibrespeed claim. The apparent confusion of the claimant’s solicitors in sending the order a second time with a different claim number was inexplicable and the account given by them in respect of it was ‘wholly unacceptable’.

As such, there had been no consent given by the defendant to an extension of time for service of POC in the Fibrespeed claim, which had been due on 2 June 2015. There was therefore a default of six weeks by the time of the claimant’s application and they had still not been served by the date of the hearing on 21 July 2015.

The application of the Denton principles

In approaching the applications for relief from sanctions, Edwards-Stuart J followed the three-stage approach set out by the Court of Appeal in Denton:

  • was the breach giving rise to the sanction serious or significant?
  • was there a good reason for the breach?
  • has the court considered all the circumstances of the case to enable it to deal with it justly?

Notably, in Denton it was said:

'At the first stage, the court should concentrate on an assessment of the seriousness and significance of the very breach in respect of which relief from sanctions is sought… The defaulter’s previous conduct [is better considered] at the third stage.'

The third stage also requires consideration of CPR 3.9(1) relating to efficient conduct of litigation at proportionate cost and the need for compliance with the rules governing it.

Project Yellow claim

Edwards-Stuart J granted relief from sanctions in respect of this claim.

On the facts, he found that the breach was serious and significant for which there was no good reason. However, in considering the Denton ‘third stage’ and CPR 3.9(1) there were some mitigating factors:

  • the period of delay was just over two weeks (not six weeks) from 30 June to 17 July
  • the POC had now been served
  • the consent order was not an ‘unless order’ whereas a failure to serve within the 4-month period effectively stays the claim which in practical terms equates to striking out since to start a new claim would be an abuse of process

Notwithstanding factors also going against the claimant, such as its cavalier attitude in not seeking an extension until the day before the deadline expired, the court was reluctant to move to a strike-out. Even if this had been ordered or was pending in the light of non-compliance, if the default has been remedied strike out would be too strong a step

LexisPSL Dispute Resolution subscribers can see our analysis of the Michael Wilson v Sinclair decision within: Court of Appeal overturns decision based on Mitchell by applying Denton principles (Michael Wilson v Sinclair)). Click here for a free trial.

To strike out this claim would be a draconian remedy with no sufficient justification.

Fibrespeed claim

There were no corresponding mitigating factors with this claim and the court refused to grant relief from sanctions. Instead, it granted the defendant’s application for the claim to be struck out.

The breach in failing to serve POC on time was serious. The 4-month time period allowed under CPR PD 7A was not ‘ungenerous’ and a further six-week delay could not be characterised as insignificant. In AEI a 20-day delay was not considered as trivial (although this pre-dated the Denton principles, it is unlikely the decision would have changed).

For our analysis of that decision, LexisPSL Dispute Resolution subscribers can see: Service of particulars: relief from sanctions denied (Associated Electrical Industries v Alstom)Click here for a free trial.

In addition, no evidence had been shown as to any good reason for such a delay. In fact, where the claimant relied on argument it believed it had an extension until 30 June, the explanation was ‘thoroughly unsatisfactory’.

In respect of the third Denton principle and the rules of CPR 3.9(1), the manner in which the claimant’s solicitors sought to obtain a consent order (by changing the claim number on the Project Yellow one) was ‘at best gross carelessness and at worst sharp practice’. This should be taken into account when considering ‘all the circumstances’. In addition, the claimant’s failure to seek an extension until the day before the expiry was again ‘cavalier’.

If there was a limitation point, the defendant was entitled to ask the court for strike out which would effectively deal a fatal blow to the claim forever. It was not appropriate for the court to concern itself with the merits of any limitation arguments in reaching the conclusion to strike out.

Court details

Court: Queen’s Bench Division, Technology and Construction Court

Judge: Mr Justice Edwards-Stuart

Date of judgment: 7 August 2015

Area of Interest