The recent Court of Appeal case of Clearway Drainage Systems Ltd v Miles Smith Ltd (8/11/2016) is a reminder for both solicitors and their professional indemnity (PI) insurers that failure to comply with case management directions will be dealt with severely.

In Clearway, the claimant brought an action for negligence against the defendant, its former insurance broker, in relation to a rejected claim under its motor fleet policy. The court ordered signed witness statements to be exchanged by 8 April 2016, but the claimant’s solicitor failed to meet this deadline and the defendant applied to strike out the claim. The claimant’s solicitor applied for relief from sanctions in relation to his failure to serve the witness statements, pursuant to Civil Procedure Rule (CPR) 3.9(1). The solicitor then served the statement two months late, on 13 June, in an encrypted form which could not be read. The claimant also wished to rely on the witness summary of a further witness, which had also not been exchanged. This prompted the claimant’s solicitor to make a second application for relief from sanctions.

At first instance, Her Honour Judge (HHJ) Moulder refused the two applications. The court followed the three-stage test which had been laid out in the earlier case of Denton v TH White1 to determine whether relief from sanctions should be granted when a rule, direction or court order has been breached. The first stage of this test is to ascertain whether the breach was serious and significant. The second stage is to determine why the default occurred. The third is to consider all of the individual circumstances of the case. The solicitor’s default had not prevented the trial proceeding on the date originally scheduled. The breach had, however, interfered with case management as it caused three pre-trial reviews to be necessary, rather than one. On these facts, HHJ Moulder applied the Denton test rigorously and refused the solicitor’s two applications for relief, even though this effectively ended the case for the (blameless) claimant. The solicitor contended that his workload had been very heavy, but the court did not sympathise with this argument. The case was appealed, but the Court of Appeal upheld HHJ Moulder’s judgment, commending it as “conscientious and impeccable”. The Court of Appeal remarked that it would only intervene in matters such as this if the first instance decision was wholly wrong.

This decision serves as a reminder that breaches of case management directions and the Civil Procedure Rules will be dealt with rigorously and confirms that the test applied in Denton is good law. Previously, such breaches were typically penalised by costs orders, but this no longer appears to be the case. It suggests particularly that lower courts will be less likely to grant relief from sanctions. Those in the business of PI insurance should therefore take note that this decision has potential to increase the number of claims that will be made against solicitors’ firms, if it can be shown that the solicitor was at fault for breaching a direction. It also has broader implications for any insurers dealing with claims and suggests that anyone dealing with litigation could potentially face such sanctions and that ignoring court directions can have very serious ramifications indeed.