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Keoghs Insight

We keep you up-to-date on emerging market issues and their impact on the insurance sector, through a variety of publications, events and our leading market initiatives.

Author

Steve Gowland

Jackson v The Sugababes? Don’t delay… push the button!

Blogs||12/05/2017

Keoghs have reported regularly on updates following the Jackson reforms in 2013 and the high profile cases of Mitchell and Denton. Here, we examine recent case law and highlight the importance of keeping up to speed with directions and other deadlines. The courts remain vigilant and lapses in case management can have serious consequences.

John Michael, Pauline Wendy Michael and Havering Radio Cars UK Ltd v Gary Anthony Phillips, A1 Group (UK) Ltd and Lynn Phillips [2017] EWCH 142 (QB)

The defendants breached an unless order requiring them to disclose documents. After issuing proceedings, the claimants were granted an injunction requiring the defendants to disclose documents and preserve relevant electronic files and accounting records. The defendants failed to give proper disclosure, arguing they had had to destroy their computer hardware after their systems were infected by a cyber-attack. They consented to the making of an order requiring them to give specific disclosure which stated unless those steps were taken the defence and counterclaim would be struck out and they would be debarred from defending the claim.
The defendants admitted non-compliance with the order and accepted the failure was a serious and significant one. Nevertheless, the defendants argued they should be granted relief from sanctions because the failure had caused the claimants no significant prejudice and had not adversely affected their ability to prepare for trial. The claim was of a high value and to prohibit them from defending it would be unjust and disproportionate. The court followed the test established in Denton when considering an application for relief from sanctions:

  1. Identify and assess the seriousness and significance of the failure to comply with any rule, practice, direction or court order - if the breach was neither serious nor significant the court was unlikely to need to spend much time on the second and third stages;
  2. Consider why the failure or default occurred;
  3. Evaluate all the circumstances of the case in order to enable it to deal justly with the application.

The court found the defendants' explanations for their failure to provide disclosure and preserve computer hardware unsatisfactory. The infection had been light, impairing only a small number of the defendants' computers. They had destroyed their computer system due to a desire to update the system, not the infection, in the knowledge they had breached the order requiring them to preserve their electronic records. The defendants had also failed to disclose cheques, invoices, bank statements and accounting documents which were material and clearly fell within the scope of the unless order. Their non-disclosure amounted to another serious breach of the order.

The court found the failures significantly and unfairly prejudiced the claimants' ability to prepare for trial. The case would turn on the forensic analysis of underlying data and a great deal of the important documentation had been withheld from the claimants. The defendants had entered into the unless order by consent and voluntarily accepted the proportionality of the sanction for non-compliance. They could not now complain the sanction they had consented to was disproportionate. The defence and counterclaim were struck out and they were debarred from defending the claim and the application for relief from sanctions under CPR 3.9 was refused.

Clearway Drainage Systems Ltd v Miles Smith Ltd [2016] EWCA Civ 1258 CA

The appellant company appealed against a decision dismissing its application for relief from sanctions concerning the failure to serve witness statements and a witness summary. The company had brought a claim against the respondent, its former insurance broker, for breach of contract and breach of duty of care. The parties had been ordered to exchange witness statements on 8 April 2016. The company stated on 8 April the statements should not be served until issues surrounding disclosure were resolved. The broker responded by letter notifying the company it was in breach of the order and at a pre-trial review on 26 May applied to strike out the claim.

The hearing was adjourned to 14 June and on 9 June, the company applied for relief from sanctions. It served the witness statements on 13 June. At the 14 June hearing it transpired the statements were in a password-protected format, which meant the respondent could not read them. It also became apparent the company intended to rely on a witness summary of a fourth witness but had not served a copy of the summary. The matter was adjourned again.

On 16 June 2016 the company unsuccessfully applied for relief from sanctions, the judge ruling there was no good reason for the witness statements and summary being submitted more than two months' late and one month before trial. The statements had been provided in an inaccessible form, the application for relief had not been made promptly and an application for an extension of time could have been made if the company was not ready to exchange statements in light of the disclosure issue it identified.

On Appeal, the court found the judge's judgment ‘impeccable’. Emphasis was placed on the fact the judge at first instance referred to the lack of promptness of the company's application for relief. There was no excuse for the two-month delay, regardless of the desire to resolve the disclosure issue between the parties before evidence was filed or served. The judge could not be criticised for the way she had addressed the unresolved issue concerning the witness summary. The judge had taken into account the proportionality of the effect of the sanction on the breach. In relation to the need to discourage unnecessary satellite litigation, the judge recognised refusing relief from sanctions would end the company's case and the appeal was dismissed.

Buchanan v Metamorphosis Management Ltd & Ors [2016] EWCR 3386 (CH)

The claimant was a singer-songwriter and claimed damages for negligence against the defendants in relation to her participation in and departure from the British girl group, The Sugababes.

The fourth defendant provided management services to artists in the music industry. Around the time the defence was due to be served, the fourth defendant's director had instructed insolvency practitioners to assist in placing the company in creditor's voluntary liquidation.

The fourth defendant did file a defence, although it was served 15 days late.

The claimant requested judgment in default of a defence against the fourth defendant. The company, via its liquidators, applied for an extension of time to serve its defence two days after the request for judgment was made and the matter was listed for an application hearing by the court.

The defendant argued it should be granted an extension of time to file its defence and the proceedings should be stayed because it would be bound by any decision against the other defendants. There were no assets in the company to fund the litigation and the liquidator was prepared to undertake to provide discovery and be bound by any findings of fact.

The court held the right approach was to allow an application for an extension of time for the defence. Late service of a defence was serious as there was a fundamental obligation to serve pleadings on time, but there were grades of seriousness. A defence had been served, albeit 15 days late, which was at the lower end of the scale and was something to be taken into account when looking at the overall circumstances. Further, there was an explanation for the lateness. The fourth defendant had been going through turmoil when the creditor's voluntary liquidation had been proposed. An extension of time was granted and judgment in default of defence was refused.

Keoghs comment

These cases remind litigants, practitioners and insurers of the importance of adhering to court deadlines. Court dates impact cases both pre and post issue and if dates are missed, applications for relief from sanctions must be promptly served with evidence illustrating what has been done to attempt to rectify the problem.

The wealth of case law still emanating from the court surrounding the key cases of Mitchell and Denton illustrates that the issue of sanctions and the courts powers are far from old news. Practitioners, defendants and insurers need to keep a close eye on court dates and compliance from the outset of a claim. Our advice would be to:

If you have any questions surrounding the issues raised please contact:

Steve Gowland
Associate
T: 01204 672325
E: sgowland@keoghs.co.uk

Robert Smith
Partner
T: 01204 678768
E: rsmith@keoghs.co.uk