Supreme Court agrees that applicants must demonstrate a "material change of circumstances" in order for relief from sanctions to be granted following a previous refusal of relief.
In a rare judgment by the Supreme Court on when courts are entitled to refuse second applications for relief from court sanctions, it clarified that applicants must demonstrate that there has been a material change of circumstances (such as inheritance/liquidation) following the first refusal of relief, in order to succeed on the second application. Merely complying with an unless order, (non-compliance with which led to the first application for relief), is not sufficient to amount to such a material change in circumstances.
The appellants, Mr John Riordan & Others entered into a contract with the respondent businessman Mr Thavatheva Thevarajah, who issued proceedings seeking specific performance of the contract. He obtained a freezing order which required Riordan & Ors to provide disclosure relating to their assets, They failed to comply and the judge made an "unless" order, providing that they would be debarred from defending the claim if they did not provide disclosure by a specified date. They did not do so and the judge debarred them from defending the claim and dismissed their application for relief from sanctions. Some two months later, Riordan & Ors made a second application for relief from sanctions, the day before the trial was due to start. Their application was accompanied by a lengthy affidavit, purporting to provide full disclosure. The deputy judge discharged the debarring order. However, the Court of Appeal restored the debarring order, holding that because the first application had already been refused, rule 3.1(7) of the Civil Procedure Rules applied and the deputy judge therefore could not accede to the second application unless there had been "a material change of circumstances", which there had not been.
Agreeing with the Court of Appeal and dismissing the appeal, the Supreme Court held that CPR r.3.1(7) applied to the second application for relief from sanctions, requiring Riordan & Ors to show that there had been a material change of circumstances since the first relief application. The deputy judge had been effectively asked to "vary or revoke" the debarring order. Even if r.3.1(7) did not apply, as a matter of ordinary principle it was not normally open to a party to ask for relief which effectively required an interlocutory order to be varied or rescinded unless there had been a material change of circumstances.
Where a party was subject to a debarring order for failing to comply with an unless order and relief from sanctions was refused at a time when he was still in default, the mere fact that he belatedly complied with the unless order could not amount to a material change of circumstances entitling him to make a second application for relief from sanctions.
The Supreme Court noted that that did not mean that late compliance could never give rise to a successful second application. The Supreme Court gave the following examples: "if the late payment was explained by the individual having inherited a sum of money subsequent to the hearing of the first application which enabled him to pay; or if the company had gone into liquidation since the hearing of the first application and, unlike the directors, the liquidator was now able to raise money. These are merely possible examples, and I am far from saying that such events would always constitute a material change of circumstances, or, even if they did, that they would justify a second application for relief from sanctions."
Here, the Supreme Court found that the subsequent compliance with the unless order was not accompanied by any explanation which could possibly have justified a court concluding that there had been a material change of circumstances since the first hearing. There was also force in the Court of Appeal's view that Riordan & Ors had difficulty succeeding on their second relief application because of their delay in making it and the lack of any satisfactory explanation for that delay.