17 December 2015Print This Post

Supreme Court: no “material change” means no second application for relief from sanctions

Lord Neuberger

Lord Neuberger: no explanation which justified second application

Litigants are not entitled to make a second application for relief from sanctions unless there has been a “material change in circumstances”, the Supreme Court has ruled.

It also did not seek to revisit the guidance on relief set down by the Court of Appeal in Mitchell and Denton.

Upholding an earlier ruling by the Court of Appeal, the Supreme Court ruled that under CPR 3.7, a deputy High Court judge “simply had no grounds to justify his entertaining the second relief application on its merits”.

Giving the judgment of the court, Lord Neuberger said late compliance with an ‘unless order’ could, in certain circumstances, give rise to a successful second application for relief.

“If, say, the unless order required a person or company to pay a sum of money, and the court subsequently refused relief from sanctions when the money remained unpaid, the payment of the money thereafter might be capable of constituting a material change of circumstances, provided that it was accompanied by other facts.

“For instance, if the late payment was explained by the individual having inherited a sum of money subsequent to the hearing of the first application which enabled him to pay, or if the company had gone into liquidation since the hearing of the first application and, unlike the directors, the liquidator was now able to raise money.”

However, in the case before him, Lord Neuberger said compliance with the unless order “was not accompanied by any explanation which could possibly have justified a court concluding” that there had been a material change of circumstances.

The Supreme Court heard in Theravajah v Riordan and others [2015] UKSC 78, that Mr Theravajah entered into an agreement with John Riordan and Eugene and Barrington Burke to buy the shares they owned in a property company.

Having paid £1.57m to the appellants, Mr Theravajah sought specific performance of the agreement and obtained a freezing order in May 2013 which required them to provide disclosure.

The appellants failed to comply in full and the following month Mr Theravajah obtained an unless order from the High Court, which warned the appellants that they would be debarred from defending the claim unless they complied.

After the appellants failed to comply, Mr Justice Hildyard made the debarring order later that summer and rejected the first application for relief from sanctions.

The day before the trial on 3 October 2015, the applicants provided what they considered to be full disclosure and made a second application for relief from sanctions.

Andrew Sutcliffe QC, sitting as a deputy High Court, granted relief from the debarring order. However, Mr Theravajah appealed successfully to the Court of Appeal.

Lord Neuberger said he agreed with the ruling of Lord Justice Richards in that court, and although the original trial judge, Mr Justice Hildyard, gave his decision before the judgments in Mitchell and Denton, his reasoning and decision reflected the guidance and approach set out in them.

“Quite rightly, there has been no suggestion that we should reconsider what was said in those decisions,” Lord Neuberger said. He dismissed the appeal.

By Nick Hilborne

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