Bournemouth And Boscombe Athletic Football Club Ltd v Lloyds TSB Bank Plc

For relief from procedural default under rule 3.9 of the Civil Procedure Rules 1998, deliberate non-compliance is materially more serious than a mistaken understanding of the rules and carries considerably greater weight. An ineffective contractual demand is not itself a breach of contract. It has no contractual effect and may be ignored. A claim based only on such a demand, without a pleaded breach or sustainable loss, is bound to fail. The appeal was therefore dismissed.

The Club claimed substantial damages for breach of a refinancing agreement after the Bank demanded repayment, alleging that the Club was not then in default. The Particulars of Claim were served 11 days late. The Bank applied to strike out the action, while the Club sought an extension of time under the Civil Procedure Rules 1998. Peter Smith J refused relief, finding deliberate non-compliance, and struck out the action on the further ground that the claim was bound to fail. The Club appealed. The central issues were whether relief should be granted and whether the ineffective demand could found a contractual claim.

1. The appeal was dismissed. Lord Justice Jonathan Parker gave the substantive judgment, and Lord Justice Thorpe agreed.

2. The judge’s exercise of discretion under rule 3.9 of the Civil Procedure Rules 1998 could not stand. There was no satisfactory basis for finding that the 11-day delay resulted from a deliberate decision not to comply. The Club’s explanation that it misunderstood the time limit appeared genuine. Intentional non-compliance is a factor of very considerable weight and may be decisive, depending on the circumstances. A mistaken understanding of the rules, even if having little or no excuse, is less serious and carries correspondingly less weight. The appellate court would ordinarily exercise the discretion afresh.

3. The Court considered it arguable that, if the Club was insolvent on the drawdown date and the Bank knew that, the Bank may have impliedly waived its right to rely on the continuing insolvency as an event of default under clause 14(i). The point was not decided.

4. Assuming that the Club was not in default and that the demand did not trigger an obligation of immediate repayment, the demand was contractually ineffective. Applying Lord Hobhouse’s reasoning in Borealis AB v Stargas Ltd [2002] 2 AC 205, an ineffective demand had no contractual effect and was not itself a breach. The Club could ignore it. A claim might arise from some separate breach caused by the mistaken demand, but no such breach was pleaded.

5. Even if the ineffective demand were treated as a breach, the Particulars of Claim disclosed no sustainable basis for loss caused by it. The agreement required the Bank to provide the specified facility, which it had done; it did not require continuing financial support. The claim was therefore bound to fail and was properly struck out. No issue concerning an extension of time remained.

The appellant was ordered to pay £40,000 costs. The application for Mr Pack personally to pay the costs was adjourned with liberty to restore. Permission to appeal to the House of Lords was refused.

1. Court of Appeal (Civil Division) — Appeal dismissed. The Court held that the claim was bound to fail, notwithstanding its criticism of the first-instance finding that the procedural default was deliberate.
2. High Court (Chancery Division) — Peter Smith J refused an extension of time on 16 April 2003 and struck out the action.
3. Permission to appeal — Permission was refused by the first-instance judge but granted by Carnwath LJ on 26 June 2003.