This case (Adva and Other v Optron and Others [2017] EWHC 1813 (TCC)) is a worked example of how the Business and Property Courts treat a party who breaches rules and flouts deadlines.
It’s also an object lesson that companies caught up in complex litigation can benefit from co-operating rather than burying their heads in the sand.
The outcome is not what you might expect.
Background
ADVA supplied electrical cables to BT. BT alleged the cabling was faulty and ADVA settled BT’s claim out of court.
The subsequent claims in this case concerned ADVA’s attempts to pass the costs of settling BT’s claim along its supply chain. Two of the other companies involved co-operated and came to an agreement with ADVA to pause the claim, presumably while all parties attempted to resolve the matter.
The last link in the chain was A One. They were being sued by Rotronic (the third company in the supply chain) on the basis that even if Rotronic were found liable in the ADVA claim, A One should pick up the bill.
A One did not respond to Rotronic’s claim at all until the day of the first Court hearing (a case management conference or ‘CMC’). By that time, it had already missed a number of deadlines set by the Court.
The application for ‘relief’
At the second CMC, A One asked for what lawyers call ‘relief from sanctions’ – asking the Court to extend time for them to file a Defence and also asking the Court not to impose a default judgment against them due to their failure to respond to the claim in the time required.
A One’s evidence was distinctly unimpressive. Through their solicitor, they informed the Court that:
A One did not understand the meaning and effect of the documents with which they had been served and that they could be “forgiven for assuming that something further was to happen before it was required to respond to the Particulars”.
Unsurprisingly, the Court did not buy into this narrative. The Judge described A One’s conduct as “very poor” (at § 19). They had previously been ordered to pay the costs of one of the suppliers in the chain (Rotronic).
Against that backdrop, A One’s application faced an uphill struggle.
Image: pixabay.com
The legal principles
The Court cited a number of well-established themes from the case law on relief from sanctions:
- Where a party has missed a litigation deadline and is asking the Court for more time, the Court will apply the same principles as an application for ‘relief from sanctions’ (see for example R (Hysaj) v Secretary of State for the Home Department [2015] 1 WLR 2472 at §§ 24 and 36);
- The leading case of Denton and Others v T H White Limited [2014] 1 WLR 3926 lays down a three stage test for applications for relief from sanctions:
- Identify and assess the seriousness and significance of the failure to comply with any rule;
- Consider why the default occurred;
- Evaluate all the circumstances of the case, so as to enable the court to deal justly with the application, including the factors in sub-paragraphs (a) and (b) of the Civil Procedure Rules at r.3.9(1).
- The subsequent Court of Appeal case of Salford Estates (No.2) Limited v Altomart Limited [2015] 1 WLR 1825 (at §§ 22 and 23) was particularly relevant here and serves as a reminder that even where the breach is ‘serious’, relief may be granted if any delay has had little if any effect on the litigation.
The outcome
The Court granted relief and extended time for A One to provide a Defence.
It decided that the delay caused by A One’s conduct had not had any real effect on the litigation as a whole, which was at an early stage (pre-disclosure). Apart from the wasted CMC, for which A One was ordered to pay Rotronic’s costs, A One’s defaults had not significantly impacted on Court resources or the other parties’ legal costs.
A further factor in A One’s favour was that Rotronic were only suing A One in case Rotronic’s defence against ADVA’s claim failed. As such, it would not be appropriate to make a default judgment against A One because Rotronic’s claim against them was contingent on events in the ADVA claim. If default judgment were granted, Rotronic would have no incentive to resolve the ADVA claim in its favour as it could simply dis-engage and pass on the eventual cost to A One.
Conclusion
While the case unfolded on unusual facts, it re-iterates the well-established themes that Courts have been applying with varying degrees of clarity post- Denton.
This was, however, one of the “relatively rare” cases in which a serious breach with no good reason was forgiven in the circumstances.
It’s best not to be at the mercy of the Court. If your business becomes involved in litigation, seek legal advice immediately at the earliest possible stage.
