Thevarajah v Riodan & Ors (2013)

It was appropriate for the court to grant relief from sanctions under CPR r.3.9 where the defendants had complied with the terms of an unless order. The fact that the disclosure obligations were significant and wide-ranging, and there was no evidence that they had wilfully not complied, amounted to a material change in circumstances.

The applicants (R) applied for relief from sanctions under CPR r.3.9 in relation to non-compliance with disclosure obligations they owed the respondent businessman (T) under an unless order.

T had previously applied for relief from sanctions which had been refused (Thevarajah v Riordan ). T had contracted to purchase indirectly a public house. The deal was negotiated orally, and partly performed. T alleged that he paid over £1.5m in cash to R as part payment and became a 50 per cent shareholder in the third applicant company (P). T claimed that he subsequently discovered that the first and second applicants had reappointed themselves as directors of P, and were refusing to complete the sale. T commenced substantive proceedings, and following several applications for injunctive relief, and the grant of a worldwide freezing order against R and R's failure to comply with disclosure obligations, a further disclosure order was obtained in the form of an unless order. The court refused to grant R relief from sanctions and struck out their defence.

R submitted that they had now complied with the disclosure requirements, the breach of the unless order had been remedied and that failings in disclosure were partly due to their former solicitors. T submitted that the second relief application was an abuse of process as it sought to litigate issues that had already been determined.

Held

(1) R had brought the application under the new r.3.9. The matters in the old r.3.9 remained relevant with regard to relief from sanctions, and did not mean that relief would be refused if disproportionate. The new rules had been brought in to counter the culture of deliberate delay, but the principle was justice between the parties, and minor errors could not be exploited for tactical gain, Rayyan Al Iraq Co Ltd v Trans Victory Marine Inc considered. T's application to strike out had been predicated on an overly bleak picture of R's conduct. R had complied with the unless order, albeit belatedly. The court had to consider all the circumstances, Oystertec Plc v Davidson (No.1) [2004] EWHC 627 (Ch) followed, Hytec Information Systems Ltd v Coventry City Council [1997] 1 W.L.R. 1666 applied. In the circumstances, R had been justified in relying on their former solicitors. There had been significant email exchanges that showed that they had wrongly informed R that they had complied with the unless order. The instant omissions did not amount to a breach of the unless order and even they it did, that breach was de minimis. It was appropriate to grant R relief from sanctions; the fact that R had now complied where disclosure obligations were significant and wide-ranging and where there was no evidence that they had wilfully not complied amounted to a material change in circumstances. They were therefore entitled to make a second application under r.3.9, Woodhouse v Consignia Plc [2002] EWCA Civ 275, [2002] 1 W.L.R. 2558 followed, Tarn Insurance Services Ltd v Kirby [2009] EWCA Civ 19, [2009] C.P. Rep. 22 distinguished. The order was to be varied pursuant to CPR r.3.1(7), Collier v Williams [2006] EWCA Civ 20, [2006] 1 W.L.R. 1945 followed. (2) The striking out of a defence did not prevent R from participating at trial. There was a difference between striking out and entering judgment, Culla Park Ltd v Richards [2007] EWHC 1687 (QB) applied. T still had to prove his case. The fact that T did not get judgment in default suggested that R was entitled to assist the judge within certain parameters, taking into account that they had been debarred from defending. T also had to give disclosure in order to ensure a fair process.

Application granted

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