Civil litigation brief

'Unless' orders have a long history which can be traced back to the 19th century. The civil justice system has long recognised that the courts have to have the power to manage proceedings.

That includes the power to impose sanctions on litigants in default, with the ultimate sanction being to dismiss the claim or strike out the defaulting party's statement of case. This history, and the effect of pre-emptory orders, was considered by the Court of Appeal in Marcan Shipping (London) Limited v Kefalas and Candida Corporation [2007] EWCA Civ 463.

Facts in Marcan

The claimant was seeking damages for termination of an agency agreement. Proceedings were issued in May 2004.

The claimant failed to give full disclosure in its list of documents.

On the 23 June 2006 the court ordered that unless the claimant gave disclosure and provided security for costs by the 26 July 2006: 'the claimant's claim shall be dismissed and it is ordered and adjudged that the claimant pay the defendant's costs on an indemnity basis, such costs to be assessed if not agree.'

The claimant served a further list of documents which, it was accepted, was defective and did not contain crucial documents.

As a result the defendants made an application for an order that the claim be dismissed and the claimant pay their costs on an indemnity basis.

Initial hearing

By the time the defendants' application was heard the claimant had obtained the various documents that had not been disclosed and provided copies to the defendants.

However:

• There was no evidence before the court to explain why the claimant had failed to comply with the court order.
• There was no evidence of the steps the claimant had taken to enable it to comply.
• The claimant had not made an application for relief from the sanction imposed by the order under Section 3.8.

The claimant had attempted to persuade the judge that the order had not been breached, or alternatively that the breaches were not sufficiently serious to strike the action out.

The judge was clearly less than impressed. The claimant had to be 'pushed and bullied' into complying with the rules and a number of judges had made a large number of unless orders to force it to do so.

There was a clear breach of the order and an absence of any explanation of attempts to comply with it.

The judge considered that it was just and proportionate for the claim to be struck out and for the order to be 'activated'.

Grounds of appeal

The primary ground of appeal was that the striking out of a claim for failure to comply with an order of the court cannot be justified unless the breach is so serious as to prevent there being a fair trial.

Further it was argued that the judge was wrong to take into account the claimant's conduct earlier in the litigation.

Court of Appeal decision

The Court of Appeal reviewed the history of 'unless' orders in detail. Lord Justice Moore-Bick observed that there was no significant difference between the approach to default of 'unless' orders adopted under the former rules of the Supreme Court and those in the civil procedure rules (CPR).

Lord Justice Moore-Bick made the following observations:

• A failure to comply with an 'unless' order caused the sanction to become effective without the need for any further order.
• There was jurisdiction to grant relief by extending time for compliance; and
• The onus was on the party against whom the sanction was imposed to seek relief.

The Court considered the CPR relating to sanctions and relief in detail, together with several authorities where the CPR were considered.

Firstly paragraph 1.9 of the practice direction supplementing part 3 states:

'where a rule, practice direction or orders states 'shall be struck out or dismissed' this means that the striking out or dismissal will be automatic and that no further order of the court is required'.

Sayers v Clarke Walker

In Sayers v Clarke Walker (Practice Note) [2002] 1 WLR 3095 Lord Justice Brooke observed:

'The philosophy underpinning CPR Pt 2 is that rules, court orders and practice directions are there to be obeyed.If a sanction is imposed in the event of non-compliance, the defaulting party has to seek relief from the sanction on an application made under CPR 3.9, and in that event the court will consider all the matters listed in CPR 3.9, so far as relevant.'

There is a clear distinction between the operation of the sanction and court's discretion to grant relief.

Some misunderstandings had arisen became of CPR 3.5(5) which states that a party must make an application under Part 23 if he wishes to obtain judgment. The Court of Appeal made it clear that:

'If it is thought that the party seeking to take advantage of the default must apply to the court in order to render the sanction effective, in my view that is wrong.'

The sanction takes effect without further order and the statement of case is struck out. It is unnecessary to make an application for a further order.

If, however, a party seeking to take advantage of the order wishes to obtain judgment in his favour then he must, except in cases covered by CPR 3.(5)(2) make an application to court to enable it to determine whether he is entitled to judgment as a result, and if so, in what form.

However even in these cases the operation of the sanction does not lie in the discretion of the court. The court should consider whether it is just to make an order granting relief from the breach only if the defaulting party has made an application for relief under CPR 3.8.

Consequences of sanction

The fact that the sanction takes effect without the need for any further order has three consequences:

It is unnecessary, and inappropriate, for a party who seeks to rely on non-compliance to make an application to the court for the sanction to be 'activated'. The sanction takes effect automatically as a result of the failure to comply with its terms. An application for judgment under CPR 3.5(5) leads to the court deciding what order should properly be made to reflect the sanction which has already taken effect. The question whether the sanction should apply does not arise unless the party in default has made an application for relief from sanction under CPR 3.9.

The party in default must apply for relief from sanction under CPR 3.8 if he wishes to escape its consequences. It is possible for the court to act of its own motion, however it is under no duty to do so '.. . the party in default cannot complain if he fails to take appropriate steps to protect his own interests.'

The third consequence is that before making 'unless orders' the judge should carefully consider whether the sanction being imposed is appropriate in all the circumstances of the case. The 'unless order' is one of the most powerful weapons in the court's case management armoury and should not be deployed unless its consequences can be justified.

Present case

The 'unless' order made in the current case was that the claimant's case stood dismissed and the claimant liable to pay the defendants' costs if the order was not complied with. As a result:

• It was necessary for the defendants to make an application under CPR 3.5(5).
• There was a dispute about whether the claimant had failed to comply with the order, it was therefore necessary for the application to be supported by evidence setting out in sufficient detail the nature and extent of the default. (This had been done).
• The only matters before the judge at first instance was whether the evidence was sufficient to establish a breach of the 'unless' order and, if so, whether the order sought by the defendants properly reflected the effect of the sanction which that court had contained.

Outcome

The claimant made strenuous efforts to introduce new evidence and argue that it was open to him to argue points relating to the order. However this was rejected by the Court of Appeal and the action remained dismissed.