Service of particulars: Relief from sanctions denied (Associated Electrical Industries v Alstom)

The Commercial Court has refused to grant an extension of time for service of particulars of claim even though it considered it would have been just and fair to grant it (Associated Electrical Industries v Alstom UK [2014] EWHC 430 (Comm), [2014] All ER (D) 222 (Feb).

In doing so, the court considered the decision in Mitchell, even though it had not been given at the time of the events in question, and refused the application on the basis that the emphasis of the decision was to encourage procedural discipline by practitioners.

The defendants were then successful in their application to strike out the claimant’s claim. Whether the claimants would be able to reissue within the limitation period was considered along side older authorities.

Practical implications

Service

An application for an extension of time is analogous to an application for relief from sanctions (as seen in recent decisions Price, Boyle and Raayan). It is therefore subject to the same considerations that apply for CPR 3.9 as considered by the Court of Appeal in Mitchell.

When an extension of time is required to ensure compliance with a CPR provision, it is imperative that an application for an extension of time is made prior to the expiry of the time available to ensure compliance. A failure to do so will require an application to be made for a retrospective extension of time and there will be a need to make this application promptly, show that the breach was trivial and that there was good reason for the breach.

With decisions by the Court of Appeal in Mitchell and Thevarajah criticising the decision in Raayan al Iraq where retrospective permission was given after only a two-day delay, practitioners can see the need to act prior to the expiry of the deadline. It is also important to be aware that the fundamental issue the court will consider is not the length of the delay in terms of days, but the nature of the delay. A failure to seek an extension of time prior to the expiry of the deadline can have disastrous consequences if the application was for something pivotal to the proceedings, as in this case where the application was to extend time for service of the particulars.

What is not clear in this case is what happens if the other side issues an application, e.g. the day after your default, which would, in effect, determine the consequences of your non-compliance with the CPR provisions? The court saw no need for cross-applications, which would, in effect, determine the same point. However, this is one judge's view and in light of the different approaches being taken by the courts and the strict requirement for compliance with the CPR, the best practice is to ensure you make your own application for relief from sanctions.

Specialist courts

When dealing with a matter in a specialist court, you need to determine whether there are any specific CPR provisions relevant to that court, eg the provisions in CPR 58 deal exclusively with the Commercial Court and apply different provisions to those that govern matters in other courts. A prime example being the length of time for service of the particulars of claim.

Key issue—failure to comply with time limits

This issue arose in both the defendant's application for a strike out under CPR 3.4(2)(c), ie failure to comply with CPR provisions (issued on 13 November 2013) and the claimant's application to retrospectively extend time for service of the particulars of claim (issued on 30 January 2014).

The application for relief

The claimant acknowledged that a retrospective application for service is equivalent to an application for relief from sanctions, but disputed that the guidance set out in paras 40 and 41 in Mitchell should be applied inflexibly to an application for an extension, in particular the guidance that in the case of a trivial failure the courts would usually grant relief if the application is made promptly. The claimant considered that flexibility should be provided by the fact that, as part of the defendant's application, the court would decide the consequences of the non-compliance by the claimant, there was therefore no need for cross applications.

The judge saw 'considerable force' in this argument. He acknowledged it was indeed common for cross applications to be made where there was an issue in relation to extensions of time although he did not see what practical purpose was served by having the two applications. This was a moot point though, as the claimant should have made the extension of time application either prior to expiry of the deadline on 29 October or, if retrospectively, well before the defendant's application on 13 November. While the judge recognised the claimant's point that this was a low-value case and it was concerned about increasing costs through applications, the correct position for it to have pursued was to make an application for an extension of time prior to the deadline.

Was the non-compliance trivial?

In determining that the non-compliance was not trivial, the court considered the following issues, which provide an insight for practitioners as to the issues the court will consider:

  • non-compliance was not intentional—while this was accepted, the solicitors knew the deadline and did not serve the particulars of claim within the time stipulated in CPR 58. An extension of time could be sought the day before the deadline from the other party and if that is not forthcoming an application can be made om the day of the deadline. Such an application would be determined without the need for a hearing and so there would no issue in relation to hearing dates. In this case, it would most probably have been made if supported by an adequate explanation for the delay, ie non-notification by the Commercial Court. Leaving an application until after the deadline has expired requires the parties to set out a good reason for the delay. In this case, no explanation was given as to why the application was made so late
  • automatic sanction—there is no automatic sanction in the CPR for breach of this CPR provision. The CPR distinguishes between cases were a rule specifies the consequences of the failure to comply with other cases CPR 2.11 and CPR 3.8(3)
  • no impact on other court users or court resources—this was not disputed. While resources had clearly been spent on this hearing, it would be a circular argument and unfair to take this into account if, on the basis of all other aspects, the application is allowed
  • no prejudice to other parties—this was accepted
  • delay of 20 days—in this case, the court found there was a delay of 20 days for service. The approach the Court of Appeal has taken in relation to what is to be regarded as trivial would not regard 20 days as trivial as clearly seen in Mitchell, where it did not consider that filing the costs budget 5 days late was to be regarded as trivial. It also criticised the decision in Raayan al Iraq, in which the court granted a retrospective extension time for service of particulars of claim which had been served 2 days late. This was reiterated by the Court of Appeal in Thavarajah. The fundamental issue for the court to consider is not the length of the delay in terms of days, but the nature of the delay. The failure to apply for an extension of time prior to the deadline for service or even to ask for an extension from the other side means this is not trivial non-compliance

Good reason for non-compliance

Where the non-compliance is not trivial the party in default will need to show a good reason for the default. In this case, the claimant relied on the following:

  • failure by the court to advise of the acknowledgement of service
  • work day lost due to St Jude's storm
  • complications due to the age of documents and information associated with the claim
  • While the court accepted that this was not a straight forward case, none of these reasons provided a good reason for non-compliance. If anything, they highlighted the need for the claimant to make a request for an extension of time to enable it to deal with the issues it had to contend with. Issues highlighted:
  • investigations had been carried out since 2012 as to the claim
  • the particulars of claim when served did not appear to reflect further investigation of the key issue, which had already been identified in correspondence between the parties
  • particulars of claim addressed 1989 contracts, which they already had in 2012 (as seen in interparty correspondence)
  • the particulars were only five pages long and the court was no convinced that the information could not have been verified as required by the statement of truth between 8 October and 29 October being the deadline for service

Relevance of any new proceedings

The claimant had stated in correspondence that if the proceedings were struck out it would simply issue a new claim. The issue for the court to consider was whether a new claim would be time barred and whether the prospect of a new set of proceedings was relevant to determining whether to grant the retrospective extension of time sought or the grant the strike out application. The defendant had argued that it would have a time bar defence but was reluctant to develop that in the applications before the court. The court was therefore unable to reach any decision as to whether a new claim would in fact be time barred.

When considering the relevance of new proceedings to the application before the court the judge considered the House of Lords decision in Birkett, which stated that if there was no 'contumelious conduct by the claimant' then proceedings should not be dismissed before the limitation period had expired; to do so would simply result in the claimant bringing new proceedings with the costs and delay that went with that. However, the position has since changed. The House of Lords was focussing on who disputes between parties could be fairly resolved. The courts now adopt a different approach, one that could be seen even before the implementation of the Jackson Reforms. The Court of Appeal in Securum Finance took the following position. The introduction of the CPR had resulted in a culture change such that if a party has a claim struck out and for delay and then starts new proceedings the court when considering whether to strike out the second action must look at the overriding objective of the CPR and balance whether the claimant should be allowed to 'a second bite of the cherry' against the need to allot limited court resources to other cases. The Court of Appeal considered that the guidance provided on this in Arbuthnot Lathan should be followed which provides:

The question whether a fresh action can be commenced will then be a matter for the discretion of the court when considering any application to strike out that action, and any excuse given for the misconduct of the previous action: …. The position is the same as it is under the first limb of Birkett v James. In exercising its discretion as to whether to strike out the second action, that court should start with the assumption that if a party has had one action struck out for abuse of process some special reason has to be identified to justify a second action being allowed to proceed.

The relevant considerations in this case for the court were:

  • the claimant might be changed and it would be more difficult to strikeout a case by a different claimant
  • when considering whether to strike out a second claim the court must balance the need to allot limited court resources to other cases but in this case the claimant had taken insignificant court time
  • in seeking to strike out a second claim as an abuse of process the court would need to consider not only whether the claimant would use a disproportionate amount of court time but also the justice and fairness to the parties applying Wahab. In that case the claimant's second claim was not struck out on the basis it had only used three short interim hearings and the claim had been struck out on a technicality. For an insight into the issues discussed in this judgment, see When is a second claim abuse meriting its striking out? (News, 27 April 2011)
  • if second proceedings were brought, this would result in less straight forward litigation than the current action (due to the facts of the case in issue) and could result in more time and costs than the first action would take

Once again the court had to have regard to the Court of Appeal decision in Mitchell where it criticised the decision in Ian Wyche:

We share the judge's desire to discourage satellite litigation, but that is not a good reason for adopting a more relaxed approach to the enforcement of compliance with rules, practice directions and orders. In our view, once it is well understood that the courts will adopt a firm line on enforcement, litigation will be conducted in a more disciplined way and there should be fewer applications under CPR 3.9. In other words, once the new culture becomes accepted, there should be less satellite litigation, not more.

However, the court noted that it did not consider understand 'Mitchell to decide that this concern is never a relevant circumstances and must always be entirely disregard'.

Proper balance

The court considered that it would allow the retrospective extension of time and disallowed the strike out application if his decision depended only on what was fair and just. However, that was not the test to be applied, the test being what is the proper balance between the parties. In understanding how this is to be applied, the Court of Appeal in Mitchell referred to the 18 Implementation lecture on the Jackson Reforms, which provided the following advice:

The revisions to the overriding objective and to rule 3.9, and particularly the fact that rule 3.9 now expressly refers back to the revised overriding objective, are intended to make clear that the relationship between justice and procedure has changed. It has changed not by transforming rules and rule compliance into trip wires. Nor has it changed it by turning the rules and rule compliance into the mistress rather than the handmaid of justice. If that were the case then we would have, quite impermissibly, rendered compliance an end in itself and one superior to doing justice in any case. It has changed because doing justice is not something distinct from, and superior to, the overriding objective. Doing justice in each set of proceedings is to ensure that proceedings are dealt with justly and at proportionate cost. Justice in the individual case is now only achievable through the proper application of the CPR consistently with the overriding objective.

Taking this into account, the judge held the court must seek to give effect to the overriding objective, including those aspects in CPR 3.9. This includes the need to consider the issue of (1) proportionate cost and (2) compliance with the rules. In this case proportionate cost was not an issue given how little time the current matter had been before the court. However, the judge had much more difficulty with the issue of compliance. While he considered that striking out the claim was a disproportionate response and that refusing an extension of time was unjust he felt bound by the Court of Appeal in Mitchell and its general proposition that the courts on adopting a firm line on enforcement of the rules will result in practitioners being more disciplined with the result of fewer applications under CPR 3.9. With that conclusion, he struck out the claim form.

Court details

Court: Commercial Court, Queen's Bench Division

Judge: Mr Justice Andrew Smith

Date of judgment: 24 February 2014

This article was first published on Lexis®PSL Dispute Resolution on 3 March 2014. Click here for a free one week trial of Lexis®PSL.

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