Motley & Others v Shadwell Park Ltd (2017) CA (Civ Div)

The facts

This is another interesting case in respect of the application of the three stage test under Denton v TH White Ltd in respect of relief from sanctions.

Although the claim was in respect of forfeiture of a commercial lease the same principles in relation to relief from sanctions and the factors taken into account by the courts will apply to casualty claims.

In this case, the claimant had granted the defendant a long lease of a quarry with development potential. The defendant had a poor record in respect of rent repayments which led to forfeiture of the lease but it continued to occupy the land as a trespasser and sought relief from forfeiture.

The defendant was permitted re-entry on the condition that it paid the rent arrears by a specified dated. The defendant paid this sum six days after the date that had been specified in the court order and the court held that it was not entitled to resume possession of the lease.

The defendant appealed against this decision but the appeal was struck out on the basis that it had failed to comply with an unless order that had required it to lodge documents at court by a specified date. As a result of this breach the appeal date had been lost.

The defendant applied for relief from sanctions and the judge at first instance permitted the application on the basis that the loss of an appeal date might not be as significant as losing the trial date.

The claimant appealed the decision submitting that the breach had been serious and significant and there was no good reason or other relevant factors to have entitled the judge to permit the application for relief from sanctions.

Decision

The Court of Appeal held that the judge had correctly considered the three stage test in Denton. It was concluded that the judge had considered the seriousness of the breach, whether there was a good reason for it and the surrounding circumstances.

It was noted that the breach had been serious because the defendant had failed to comply with the unless order. Also, there was no good reason for the breach and an appeal hearing date had been lost. It was stated that the circumstance of this case meant that very significant factors were required to tip the scales in favour of permitting an application for relief from sanctions.

The Court of Appeal held that even if the loss of an appeal hearing date may not be as serious as the loss of a trial date, it still was serious and had a significant impact on other court users.

It was held that the judge had failed to properly consider the claimant’s reasonable expectation that the case would be dealt with efficiently and at proportionate cost in accordance with the overriding objective. Also, it was held that the judge had been wrong to have concluded that any prejudice to the defendant would have outweighed the prejudice caused to the claimant when considering the application for relief and whether or not it should be permitted.

The Court of Appeal concluded that there were no significant factors for the scales to have been tipped in favour of permitting the defendant’s application for relief. It was noted that any loss to the defendant was derived from the general law of forfeiture and the loss of business opportunity had already occurred.

As a result, the appeal remained struck out.

What this means for you

In this case, the breach was serious and significant as the defendant had failed to comply with previous court orders, to include an unless order. Also, the breach had led to the loss of the appeal hearing date and the defendant had provided no good reason for the breach.

It is not surprising that significant factors were required for the Court of Appeal to tip the scales in favour of the defendant. The defendant’s breach had resulted in loss of court time and increased costs, which went against the overriding objective of dealing with cases justly and at proportionate cost. As a result, the defendant was always on the back foot in respect of their application being permitted.

This is another case which shows that the courts are continuing to apply the three stage test set out in Denton v TH White Ltd. It also shows the importance of complying with unless orders, which provide for the automatic strike out of the claim unless there is compliance.

Compliance with unless orders is particularly critical as non-compliance leads to automatic strike out and the party in breach will face an uphill struggle when arguing that an application for relief from sanctions should be permitted. It can be seen that normal factors that may justify permission for relief in some circumstances may not be sufficient in cases where there had been a breach of an unless order.

In Christie v Magnet Ltd [2016] EWCA Civ 906, Lord Justice Gross stated that an “…unless order means what it says. If a party does not comply with it, the sanctions automatically follow. Even if the consequences in the individual litigation are not immense, the consequences for the system are.”

It can be seen that an unless order is made as a last resort normally due to one or both of the parties failing to comply with a previous order, rule or practice direction. Also, unless orders are frequently made in cases where one of the parties makes an application to the court for their opponent to comply with a previous court order or direction.

An urgent application should be made for relief from sanctions if there is a breach of an unless order but there is a real risk that the court will reject the application unless there is a particularly good reason for it, such as if the circumstances were outside the party’s control.