Not having funds not 'good reason' for breaching security for costs order

Not having funds not 'good reason' for breaching security for costs order

8705469_xlIn Pittville v Habanos, the Chancery Division has allowed an appeal against (1) an order granting relief from sanctions following the claimant’s failure to comply with an unless order requiring the provision of security for costs and (2) an order varying that unless order.

In doing so, it found (among other things) the Deputy Master had been wrong in (1) finding MasterCigars (the original claimant and assignor of the claim) had a good reason for failing to comply with the unless order, (2) failing to take into account the factors at Rule 3.9(1)(a) and (b) of the CPR, finding there had been a material change in circumstance and/or that there were exceptional circumstances warranting the variation of the order.

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What are the practical implications of this decision?

Practical implications arising from this judgment include:

  • where you consider there is a risk of non-compliance, take appropriate steps promptly rather than wait until you think you may be in a position to be able to comply and only then apply for relief from sanctions. Appropriate steps at the time could include appealing and/or seeking to vary the order setting out the obligation
  • a later ability to comply with an order does not amount to a change in circumstances for the purposes of any application to vary that order
  • when seeking relief from sanctions, ensure you are in a position to be able to persuade the court you are now in a position to be able to comply with the order in question
  • ensure all available evidence is deployed at the appropriate time
  • save for a few limited situations (for example applications for summary judgment) the merits of the claim should be irrelevant for the purposes of making case management decisions

What was this decision about?

The defendants sought to appeal:

  • the decision under which relief from sanctions had been granted following the original claimant's (MasterCigars) non-compliance with an order requiring them to provide security for costs by way of cash or a bank guarantee, and
  • an order varying the unless order so as to give the assignee of the case (Pittville) three months in which to obtain an after the event (ATE) insurance policy to provide security for the costs of the claim

What did the court decide?

Although the Chancery Division acknowledged the Deputy Master's decision to grant relief from sanctions and vary the unless order were 'discretionary case management decisions' with which it ought not to interfere 'unless satisfied the lower court has erred in law, erred in fact or reached a conclusion which falls outside the generous ambit within which reasonable disagreement is possible', it considered the Deputy Master had 'plainly erred in his approach to the application for relief from sanctions and for the variation of the unless order'. More particularly, the Deputy Master:

  • was 'plainly wrong' to accept the claimant's proposition that its 'lack of available funds was a 'good reason' for its failure to comply with the security order and the unless order' (para [33])
  • had 'failed to give any, or any appropriate, weight to the very powerful arguments against the grant of relief from sanctions and against the variation of the unless order'
  • was 'plainly wrong' on both counts of (1) considering there had been a material change in circumstances since the order was made or (2) that the backdrop of the case was 'well out of the ordinary' (para [45])
  • had taken account of a witness statement which was available but not deployed at the appropriate time
  • had not been 'entitled to have regard to his own views of the merits of the claim'

Further guidance

For further guidance on:

  1. relief from sanctions, see Compliance and relief from sanctions—overview which, in turn, links through to detailed Practice Notes and Precedents, including Practice Notes on: Relief from sanctions—when (and when not) to use, Relief from sanctions—the courts’ approach and Compliance and relief from sanctions—key decisions
  2. varying an order, see Practice Note: Varying or revoking orders—court's general power and the slip rule
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About the author:

Virginia specialises in general domestic and international commercial litigation, arbitration and alternative dispute resolution.

Virginia trained, qualified and practiced with Pinsent Masons before moving to Marriott Harrison where she continued in practice for a further seven years.

In practice, Virginia acted in a variety of general commercial disputes covering areas including  intellectual property, fraud, defamation, misrepresentation, breach of contract, debt recovery, breach of restrictive covenants and company and shareholders’ disputes.

Virginia is Head of Dispute Resolution at Lexis®PSL and, when not focused on the strategic development and operational requirements of the Dispute Resolution module, her content work focuses on case management and evidence in civil litigation. She also regularly contributes to the LexisNexis Dispute Resolution Blog.