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||Neutral Citation Number:  EWHC 275 (Comm)
||Case No: 2011-357
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
||Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL
B e f o r e :
MR JUSTICE HAMBLEN
|| Lakatamia Shipping Co Ltd
||- and -
(1) Nobu Su
(2) TMT Company Limited
(3) TMT Asia Limited
(4) Taiwan Maritime Transportation Company Limited
(5) TMT Company Limited (Panama) SA
(6) TMT Company Limited, Liberia
(7) Iron Monger I Limited
Stephen Cogley QC and Josephine Davies (instructed by Cooke Young and Keidan) for the Defendants/Applicants
N.G. Casey (instructed by Hill Dickinson LLP) for the Claimant/Respondent
Hearing dates: 10 February 2014
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr Justice Hamblen:
- The Defendants apply pursuant to CPR 3.9 for relief against the sanction imposed by order of Cooke J dated 13 December 2013 that their defence and counterclaim be struck out "unless standard disclosure is provided on or by 17 January 2014" ("the Order").
- The Claimant's claim is for US$45,854,200.24 allegedly due from the First to Sixth Defendants under a contract for a series of FFAs made on or about 6 July 2008 and from the Seventh Defendant as guarantor.
- The CMC in the case was heard in July 2013 and an order was made on 17 July 2013 which included directions leading up to a 6 day trial, which has been set down for 20 October 2014. The order provided that standard disclosure was to be made by 30 August 2013. The Defendants were unable to comply with this deadline. Eventually, the parties agreed to extend the date for the provision of disclosure to 6 December 2013. That agreed extension was recorded in a consent order made by Andrew Smith Jon 18 November 2013.
- On 5 December 2013, the day before that revised deadline, the Defendants sought another extension. The Claimant refused to agree the extension sought. The Defendants applied to the court for an extension of the deadline to 17 January 2014. Cooke J granted the application, but made the requested order in "unless" terms. Paragraph 1 of the Order reads:
"Paragraph (5) of the Order of Andrew Smith J dated 18 November 2013 ... is hereby varied to provide that unless standard disclosure is provided on or by 17 January 2014 the Defendants' defence and counterclaim shall be struck out..."
- Under the CPR orders imposing a time limit for doing any act must include the time of day by which the act must be done – CPR 2.9(1) (b) and PD40B 8.1.
- The Order did not specify a time of day by which the order was to be complied with. However, the Commercial Court Guide provides at D19.2 that absent specific provision in an order, the latest time for compliance is 4:30 pm on the day in question. Although, not expressly set out in the Order, against the background of D19.2, the Commercial Court Order made by Cooke J is therefore reasonably to be understood as requiring compliance by 4:30 pm on 17 January 2014.
- In the light of the importance of compliance and the "robust" approach to relief from sanctions exemplified by the Court of Appeal decision in Mitchell v News Group Newspapers Ltd  EWCA Civ 1537 it may be preferable for Commercial Court orders to specify the time of day by which an order is to be complied with, notwithstanding D19.2 of the Guide. The present case illustrates the desirability of doing so.
- The evidence is that the Defendants' solicitors were working on the basis that the deadline was 5:00 pm rather than 4:30 pm. They were working on disclosure up to the assumed deadline because of further documents provided to them by the Defendants that day. This meant that the list was not ready until about 4:40 pm.
- The Defendants' solicitors offered exchange of lists by email at 4:45 pm on 17 January 2014. At 4:54 pm the Claimant's solicitors wrote, "There is an argument that this is out of time. We are considering and will revert soonest."
- Nothing having been heard, at 5:16 pm (46 minutes after 4:30 pm), the Defendants' solicitors provided standard disclosure by list in any event and asked the Claimant to do likewise. At 5:29 pm the Claimant's solicitors wrote "We will revert on Monday. We are waiting to speak to Counsel." No list of documents was provided by the Claimant by 4:30 pm on 17 January 2014 or at all.
- In the evening of Sunday 19 January 2014, the Defendants' solicitors notified the Claimant of their intention to apply for relief from sanctions. No response was received and, on Monday (20 January), the Defendants' application for relief from sanctions was issued and sent to the Claimant at 1:39 pm. The application is supported by the 12th and 13th Witness Statements of Mr Gerald Cooke of the Defendants' solicitors. The Claimant has filed the 8th Witness Statement of its solicitor, Mr Russell Gardner, in response to the application, which is opposed.
- Following inspection, the next step in the proceedings is exchange of witness statements which is due to take place on 10 March 2014. The start date for the trial is 20 October 2014.
- CPR 3.9(1) provides that:
"On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, 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."
- In a case in which I gave judgment last week, Newland Shipping & Forwarding Ltd v Toba Trading FZC  EWHC 210 (Comm), I sought to summarise the approach to be adopted in the light of the Mitchell case as follows:
"39. The leading authority is the Mitchell case. This requires a "robust" approach to be taken. As explained at , "the need to comply with rules, practice directions and court orders is essential if litigation is to be conducted in an efficient manner. If departures are tolerated, then the relaxed approach to civil litigation which the Jackson reforms were intended to change will continue".
40. Under CPR 3.9 the "paramount" considerations are now "the need (i) for litigation to be conducted efficiently and at proportionate cost and (ii) to enforce compliance with rules, practice directions and court orders" .
41. Whilst "regard should be had to all the circumstances of the case…the other circumstances should be given less weight" than the two "paramount" considerations .
42. The "starting point" is that "the sanction has been properly imposed and complies with the overriding objective" . "An application for relief from a sanction presupposes that the sanction has in principle been properly imposed. If a party wishes to contend that it was not appropriate to make the order, that should be by way of appeal or, exceptionally, by asking the court which imposed the order to vary or revoke it under CPR 3.1(7)" .
43. In considering whether relief should be granted, "it will usually be appropriate to start by considering the nature of the non-compliance with the relevant rule, practice direction or court order. If this can properly be regarded as trivial, the court will usually grant relief provided that an application is made promptly." .
44. "If the non-compliance cannot be characterised as trivial, then the burden is on the defaulting party to persuade the court to grant relief. The court will want to consider why the default occurred. If there is a good reason for it, the court will be likely to decide that relief should be granted." . "Good reasons are likely to arise from circumstances outside the control of the party in default" .
45. In summary, the importance of the "paramount" considerations means that as a general rule relief will not be granted unless (i) the non-compliance was trivial or (ii) there was good reason for the default. Although all the circumstances of the case are relevant, they are of less weight than the "paramount" considerations. Compelling circumstances are therefore likely to be required if relief is to be granted for a non-trivial default for which there is no good reason".
- I would add that, conversely, if the applicant can show that the non-compliance is trivial and/or that there was good reason for the default, relief will "usually" be granted. In such a case compelling circumstances are therefore generally likely to be required if relief is to be refused.
(1) The nature of the non-compliance and whether it can be characterised as trivial
- The Defendants' disclosure was 46 minutes late although it could have been made only around 15 minutes late if the Claimant had agreed to exchange. It is a delay measured in minutes not hours. It can be said that the Defendants "narrowly missed the deadline" – a circumstance which the Court of Appeal in Mitchell expressly contemplated as being de minimis and usually deserving of relief from sanctions at :
"…the court will usually grant relief if there has been no more than an insignificant failure to comply with an order: for example…where the party has narrowly missed the deadline imposed, but has otherwise complied with the order"
- That the non-compliance is also trivial is also borne out by its effect. It has caused no prejudice to the Claimant, and none is suggested.
- The Claimant submits that the non-compliance cannot be characterised as trivial in the light of the history of earlier defaults by the Defendants. However, what matters is whether the non-compliance which resulted in the sanction is trivial and in my judgment that involves a consideration of the default in question, not other defaults at other times. The history of default may be a relevant general circumstance to take into account but it does not affect the characterisation of the relevant non-compliance or metamorphose a trivial default into a serious default.
- The Claimant further submits that the disclosure provided is seriously deficient, that this means that the order has not been complied with, and that that is a serious rather than a trivial default.
- The Defendants submit that the disclosure given by the Defendants was proper and in real compliance with the requirements of the Order. While (without prejudice to the effect of the Order) eight further documents were disclosed on 23 January 2014 it does not detract from the real compliance made on 17 January 2014.
- In this connection I was referred to Dinsdale Moorland Services Ltd v Evans  EWHC 2 (Ch) at  to  in which it was stated by HHJ Behrens as follows:
130. I was referred to two authorities – Realkredit Danmark v York Montagu reported in Westlaw at  WL 104421 and Re Atrium  EWHC 2882.
131. Realkredit involved the dismissal of a claim for failure to comply with an "unless order" for discovery. A list was provided within the relevant time but it was alleged to be deficient. At first instance it was held that the list was woefully inadequate. There was no evidence that satisfied the judge that it had been undertaken in careful fashion and large gaps remained. Accordingly he held there was a failure to comply with the "unless order" and struck the case out. The Court of Appeal allowed the appeal. A number of passages from the judgment of Toulson LJ show the basis of the decision:
"There was nothing unclear about the order made in this case, in that it required service of a list of documents. But a list was served so, prima facie, the order was complied with". Interestingly there is no reported case of an action being struck out as a result of a list being incomplete. But there is in the much litigated field of Further and Better Particulars where, in Reiss v Woolf  2 QB 557, at pages 559–560, the Court of Appeal approved a passage from the judgment of Devlin J who said:
"So construed, 'default' refers to default in the delivery of a document within the specified time. I do not, of course, mean that any document with writing on it will do. It must be a document made in good faith and which can fairly be entitled 'particulars'. It must not be illusory; … That is the test, in my judgment, and not as the plaintiff contends, whether each demand for particulars has been substantially met."
…In the present case the court was only concerned with whether the unless order had been complied with. The lenders had conceded that the valuers' affidavits would have justified the making of an order for specific discovery. But no such order was sought or made. Had the judge been asked to make such an order he would have had to consider in relation to each category of documents identified in the application the arguments about relevance and necessity which are deployed at length in the skeleton arguments for this appeal and were deployed before the judge.…
Applying the language of Reiss v Woolf, I think the lenders' list could fairly be described as a list. It was not illusory. It would still be a list even if a subsequent application for specific discovery had elicited further documents. So I think the judge was persuaded to adopt the wrong approach and applied the wrong test to the valuers' application to dismiss the claim and therefore his decision cannot stand. This was not simply an exercise of the judge's discretion. In my judgment if he had approached the question he had to decide in the way I think he should have done he would have decided that the lenders had complied with the unless order.
I do not think that the conclusion I have reached will mean that unless orders for discovery are worthless. In many cases where they are made no list is served at all. Both counsel conceded, rightly in my judgment, that a court could infer lack of good faith where it was obvious from patent deficiencies in the list that it had been prepared in apparent but not real compliance with the obligation to give discovery."
132. Re Atrium involved an unless order in relation to an unless order requiring the liquidators to conduct a search for documents falling within CPR 31.6 by a specified date. In the course of his judgment Birss J referred to a classification of the authorities by Counsel which he did not, in the end find helpful. In paragraph 30 he referred to the decision in Realkredit and pointed out it had been followed in two subsequent Court of Appeal cases. In paragraph 31 he explained Realkredit thus:
"There the Court held that since a list had been served, prima facie the relevant order had been complied with. The remedy, if a party is dissatisfied with a list already provided, was an application for further disclosure. The question of compliance with the court order was not simply an exercise of the court's discretion. In the case before the court the list provided could not be called illusory."
- The Court of Appeal decision in the Realkredit case indicates that an order to provide disclosure is complied with for the purposes of an unless order as long as a list is provided and that list is not "illusory". It will be "illusory" if the court can infer "lack of good faith where it is obvious from patent deficiencies in the list that it had been prepared in apparent but not real compliance with the obligation to give discovery".
- It is not contended that the list was "illusory" in this sense, nor do I find it so to be.
- The Claimant stresses that at the time that the list was provided it was stated that there may be some further documents to be disclosed and that a supplementary list was served on 23 January 2014. That contained eight further emails. By contrast, the earlier list had run to 42 pages. Although the Claimant submits that those further emails are significant, even if that be the case it does not mean that the earlier list did not involve "real" compliance. Further, the Claimant admits that it has not yet examined the disclosure provided.
- In my judgment the non-compliance was trivial and the application for relief was made promptly. It follows that this is the type of case in which relief will "usually" be granted.
(2) Whether there is a good reason why the default occurred
- The default would appear to have occurred for two reasons. The mistake made by the Defendants' solicitors in thinking that the time for service was 5:00 pm not 4:30 pm and the late provision of documents by the Defendants which meant that the list was not ready by 4:40 pm. Whilst the late provision of documents made the Defendants' solicitors task more difficult, I find that a list in "real" compliance would have been offered for exchange by 4:30 pm had it been appreciated that that was the deadline. It was this misunderstanding which was the operative and the main reason for the default. A further ½ hour from 4:45 pm was then spent seeing if the Claimant was ready to exchange, although there was no requirement for exchange and the list could simply be served, as it ultimately was.
- The Defendants' solicitors' error is at least understandable given the silence of the Order on this point. Further, from the exchanges at the time referring to the need to check the position with counsel, it appears that the Claimant's solicitors were also not clear about the deadline. Moreover, they did not serve the Claimant's list by 4:30 pm either.
- The Claimant was therefore itself in breach and appears to have taken the view that it was entitled to wait and see what happened.
- It cannot be said that the delay was due to circumstances outside the control of the party in default. It was due to a mistake rather than extraneous circumstances. In accordance with the guidance offered in the Mitchell case I accept that no good reason for the default has been made out, although there is an understandable explanation for it.
- The Claimant relies on the circumstances set out in the previous version of CPR 3.9(1) and submits that they point against the grant of relief even if the non-compliance is trivial. The previous rule provided that:
"On an application for relief from any sanction imposed for failure to comply with any rule, practice direction or court order the court will consider all the circumstances including—
(a) the interests of the administration of justice;
(b) whether the application for relief has been made promptly;
(c) whether the failure to comply was intentional;
(d) whether there is a good explanation for the failure;
(e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol;
(f) whether the failure to comply was caused by the party or his legal representatives;
(g) whether the trial date or the likely trial date can still be met if relief is granted;
(h) the effect which the failure to comply had on each party; and
(i) the effect which the granting of relief would have on each party."
- As I stated in the Newland case at :
"87. Given the change in the wording of the Rule I doubt that it is generally appropriate to go through the exercise of considering the previous list of potentially relevant circumstances. No doubt if there is a particular identified circumstance that tells in favour of or against relief then it may be relied upon, but the most relevant circumstances are likely to be the two identified in Mitchell, namely the nature of the non-compliance and the reason for it."
- In so far as it is appropriate to consider the previous list of circumstances, my findings under each sub-paragraph of the previous rule are as follows:
(a) The interests of the administration of justice are served by insisting on compliance with court orders, as Mitchell makes clear. However, this is a general point which can be made in all cases. There is no specific further consequence for the administration of justice which arises in this case, as might be so, for example, if the trial or other hearing dates were affected.
(b) The application was made promptly.
(c) The failure to comply was not intentional.
(d) There is an understandable explanation for the failure, although it is not a good reason in the light of the guidance provided in the Mitchell case.
(e) There has been prior non-compliance.
(f) The failure to comply was caused by the Defendants' solicitors' mistake.
(g) The trial date can still be met if relief is granted.
(h) The failure to comply has not caused any prejudice to either party.
(i) The granting of relief would not cause prejudice to the Claimant. It would enable the Defendants to defend the substantial claims made on their merits.
- Most of the listed circumstances therefore favour the grant of relief.
- The main point made by the Claimant related to prior non-compliance. It submits that it has been apparent throughout this litigation that Mr Su (and hence the companies that he controls) only complies with court orders when he has no other choice; and even then he is cavalier with the truth. It contends that on at least one occasion he has deliberately flouted a freezing injunction against one of his companies.
- It submits that the Defendants have filed inaccurate affidavits, ignored disclosure obligations, dissipated assets in the teeth of a freezing injunction and failed to pay costs orders.
- Whilst the Defendants accept that there has been non-compliance in the past they dispute the detail of a number of the matters sought to be relied upon by the Claimant. They point out that nearly all the matters complained of related to the freezing order relief obtained by the Claimant rather than the substantive proceedings. In that connection they point out that the allegations now relied upon are something which the Claimant chose not to take further having abandoned its application for committal after the service of Mr Su's seventh affidavit. In relation to the alleged breach of the freezing order, this refers to the sale of me "Ducky Spirit". In his affidavit on 3 April 2013 Mr Su apologised for the omission, volunteered the information about the vessel and explained the basis for the sale which he did not consider to be a breach.
- In relation to the substantive proceedings the only non-compliance other than that relating to disclosure is late service of an amended defence and counterclaim. The Defendants accept that there is an outstanding costs order of £10,000 relating to the freezing order.
- It is not necessary to go through the detailed procedural history of the case. I accept that there has been prior non-compliance and that this is a relevant circumstance. However, to a significant extent it has already been taken into account in the imposition of an "unless" order with the severe sanction of striking out the defence and counterclaim.
- Even if I accept all the complaints made by the Claimant about prior non-compliance I would not regard them as comprising a sufficiently compelling circumstance for relief to be refused notwithstanding the trivial nature of the default in issue.
- Further, there are a number of other circumstances which favour relief as set out in paragraph 31 above. Of particular importance is the fact that the non-compliance has had no effect on the Claimant or other court users. Further, the Claimant was itself in breach of the Order and, had it provided a list or sought to exchange lists prior to the deadline it is likely that the Defendants would have done likewise. Instead it chose to wait and see. Moreover, it appears that it too was uncertain about the precise deadline for compliance.
- In my judgment the non-compliance in this case was trivial. A deadline was just missed for reasons which were explicable, if not excusable. It is the type of case in which relief will "usually" be granted in accordance with the guidance provided in the Mitchell case. Having regard to all the circumstances and in the exercise of my discretion I am satisfied that this is a case in which relief should be granted.
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