Sealand Housing Corporation & Ors v Great Future International Ltd & Ors

For a late expert report, the prima facie proportionate sanction is that the defaulting party cannot rely on the report. Debarring a party from defending an inquiry is ordinarily disproportionate where it is tied only to late expert evidence. Late pleading or disclosure may differ where the default threatens a fair hearing. The Civil Procedure Rules 1998, rule 3.9 considerations must be addressed individually where relief against sanctions is in issue.

Sealand Housing Corporation & Ors v Great Future International Ltd & Ors appealed a case-management order made by Lightman J in the High Court, Chancery Division, on 10 May 2002. Following defaults under an earlier timetable, the order required three expert reports on share valuation, property valuation and Chinese law by 27 May 2002. It provided that failure would debar the appellants from defending an inquiry as to damages.

The appellants had previously been found guilty of fraud, perjury, forgery and deliberate delay. On appeal, counsel offered a workable timetable for serving the reports while preserving the July trial window. The central issue was whether the sanction was proportionate and what directions should replace it.

The appeal was allowed unanimously. Rix LJ gave the leading judgment, with Arden LJ and Douglas Brown J agreeing.

1. Proportionality of sanction. The prima facie proportionate sanction for failing to serve an expert report on time is that the defaulting party may not rely on that report. A sanction debarring the party from defending the damages inquiry, although understandable in light of the history of delay and misconduct, was disproportionate because it was tied to the failure to provide expert evidence.
2. Nature of the default. A late expert report may be distinguished from late pleading, late disclosure or similar defaults where those defaults can prevent a fair hearing altogether. The sanction must reflect the nature and consequences of the particular default.
3. Relief against sanctions. The court observed that, if the matter were treated as an application for relief against sanctions, the judge would have been bound to consider the considerations under rule 3.9 of the Civil Procedure Rules 1998 individually. In the event, the new timetable made it unnecessary to decide the point further.
4. Replacement directions. The sanction was set aside and replaced by staged deadlines. The Chinese law report was to be served in final form by 27 May. The share and property valuation reports were to be served as completely as possible by 31 May, with final reports or amendments by 6 June. Non-compliance would prevent reliance on the relevant report to the extent of the default. Further directions governed the respondents’ Reply, responsive expert evidence, disclosure, witness statements and expert meetings, with the trial window beginning on 8 July preserved.

Arden LJ added that the order did not determine whether a subordinate or Shanghai-based valuer could assist, or the precise form of expert meetings. Those matters remained for the trial judge, and meetings could take place electronically or by telephone if appropriate.

1. Court of Appeal (Civil Division): On 24 May 2002, the court allowed the appeal and substituted a new timetable, setting aside the sanction debarring the appellants from defending the damages inquiry: [2002] EWCA Civ 1184.
2. High Court (Chancery Division): Lightman J’s case-management order of 10 May 2002 required the expert reports by 27 May and imposed the sanction of debarring the appellants from defending the inquiry in default.