The Court of Appeal (Jackson, King and Lindblom LJJ) has today delivered judgment in Oak Cash & Carry v British Gas Trading Ltd  EWCA Civ 153 in which it provides further guidance as to the circumstances in which relief from sanctions may be granted pursuant to Civil Procedure Rule 3.9. In particular, the Court addresses two issues arising from its earlier decision in Denton v TH White Ltd  1 WLR 3926:
i) whether, in assessing the seriousness of non-compliance with an “unless” order, the court should have regard to the original breach which gave rise to the “unless” order;
ii) the effect of delay in applying for relief.
The underlying dispute related to a claim seeking approximately £200,000 for the supply of electricity. The defendant disputed liability on a number of grounds, and a two day trial was fixed for late April 2014. In early November 2013 the court ordered the parties to file pre-trial checklists by 3rd February 2014. The defendant failed to do so. On 10th February 2014 the court made an “unless” order directing that the defence be struck out if the defendant failed to serve the checklist by 19th February. The defendant failed to serve its checklist until 21st February. As a consequence of that default the defendant’s defence was automatically struck out. The claimant (British Gas Trading Ltd) applied for and obtained judgment in default of defence.
It was only after default judgment had been entered in the claimant’s favour that the defendant applied for relief from sanction pursuant to CPR 3.9. In the Oxford County Court, the Circuit Judge granted relief from sanction and set aside the default judgment. The claimant appealed to the High Court, where McGowan J allowed the appeal and reinstated the default judgment. The Court of Appeal, having earlier granted permission for a second appeal on the basis that the case concerned an important point of practice, concluded that McGowan J was correct and dismissed the appeal.
Applying the three-stage test set out in Denton, Jackson LJ (with whom King and Lindblom LJJ agreed) concluded that the breach was a serious and significant one for which there was no good reason and that in all the circumstances it was inappropriate to grant relief.
At the first stage of the assessment, the Court explained that the direction in Denton to focus on the seriousness of “the very breach in respect of which relief from sanctions is sought” in the context of a breach of an “unless” order requires consideration of the failure to carry out the obligation which was (a) imposed by the original order or rule and (b) extended by the “unless” order. The Court went on to explain that while not every breach of an unless order will be serious or significant, the very fact that a party has failed to comply with an unless order (as opposed to an ‘ordinary’ order) is “undoubtedly a pointer towards seriousness and significance” as that party is in breach of two successive obligations to do the same thing in circumstances where the court has underlined the importance of doing that thing by specifying an automatic sanction in default.
At the second stage, the Court concluded that while it would not be appropriate for the court to produce an encyclopaedia of good and bad reasons, McGowan J was correct to find that in the circumstances of this case it was not open to the Circuit Judge to find that there was good reason for the defendant’s default.
At the third stage, the Court observed that, despite the fact that the breach was a serious one for which there was no good reason, had an application for relief from sanctions been made at the same time as the belated filing of the checklist (or very soon after), it would have been appropriate for relief to have been granted. In this regard, the Court observed that “To debar a party from defending a £200,000 claim because it was somewhat late in filing a PTC is not in my view required by rule 3.9, even as interpreted by the majority in Denton”. However, the Court considered that the defendant’s lack of promptness in applying for relief was the critical factor as the consequence of the delay was the loss of the fixed trial date. The consequence was that there was there is “really only one answer to the question which arises at stage 3”, that “the court must refuse the application for relief”.
The judgment appears here.
Malcolm Birdling appeared for the Respondent (British Gas Trading Ltd) instructed by Moon Beever