Marcan Shipping (London) Ltd v Kefalas & Anor

Where a traditional “unless” order prescribes dismissal or striking out, any material non-compliance automatically produces the stated sanction. No further order is required, and the court does not reconsider whether the sanction is proportionate or whether a fair trial remains possible.

The defaulting party must apply for relief under the Civil Procedure Rules. Although the court may exceptionally act on its own initiative, it has no duty to do so. An application made by the opposing party to obtain judgment concerns the existence of the breach and the form of judgment reflecting the sanction already incurred.

Before making an unless order carrying dismissal or striking out, the judge should ensure that its terms are precise and its sanction justified.

Marcan Shipping (London) Ltd v Kefalas & Anor concerned a shipbroker’s claim for damages arising from the alleged wrongful termination of an oral general agency agreement and alleged misrepresentations. Following delay in the proceedings, the claimant was ordered to provide specified disclosure and security for costs. Morison J subsequently ordered that the claim would be dismissed unless the claimant complied by a fixed deadline.

The claimant served a materially defective list of documents. Morison J found a clear breach and made an order dismissing the claim and awarding the respondents their costs on the indemnity basis. The claimant had neither applied for relief from the sanction nor provided evidence explaining its default.

The central issue on appeal was whether the judge had to decide afresh whether dismissal was justified, including whether the breach threatened the fairness of the trial, or whether the sanction had already taken effect automatically under the Civil Procedure Rules.

1. Appeal dismissed. Per Moore-Bick LJ, with whom Keene LJ and Pill LJ agreed, the order dismissing the claim was correct. The claimant’s three applications to adduce further evidence were also dismissed.

2. A sanction contained in a traditional “unless” order takes effect automatically when the party concerned fails to comply in any material respect. Rules 3.1(3)(b) and 3.8(1) of the Civil Procedure Rules, together with paragraph 1.9 of the relevant Practice Direction, preserve a clear distinction between the operation of the sanction and the subsequent exercise of the power to grant relief. The opposing party need not apply to have the sanction imposed or “activated”.

3. Where an application for judgment is required under rule 3.5(5), the court decides whether the alleged breach is established and what judgment properly reflects the sanction which has already taken effect. It does not exercise a fresh discretion about whether the sanction should apply. A challenge to the appropriateness of the original unless order should ordinarily be made by appeal against that order.

4. The defaulting party bears the responsibility for applying under rule 3.8 for relief. Such an application must be supported by evidence and must address the circumstances identified in rule 3.9. The court retains jurisdiction under rules 3.1(2)(a) and 3.3(1) to act on its own initiative, but that jurisdiction will be exercised only rarely and for exceptional reasons. The court has no duty to exercise it.

5. The fair-trial reasoning in Logicrose Ltd v Southend Football Club Ltd [1988] 1 W.L.R. 1256 and related authorities concerned general applications to strike out or abuse of process. Those cases did not govern the automatic consequences of a conditional order. Raja v Van Hoogstraten [2004] EWCA Civ 968 was explained as an exceptional instance in which the court effectively granted relief on its own initiative.

6. The claimant’s material breach was unchallenged, and no application for relief had been made. The proposed further evidence addressed whether dismissal was an appropriate discretionary response, not whether the breach occurred. It was therefore irrelevant to the appeal and could not be used to introduce a rule 3.8 application for the first time in the Court of Appeal.

7. Before making a conditional order carrying dismissal or striking out, a judge should consider carefully whether that sanction is appropriate. Such an order is a powerful case-management measure and should not be used merely for administrative convenience.

1. Court of Appeal (Civil Division): In [2007] EWCA Civ 463, the court dismissed the claimant’s appeal and its applications to adduce further evidence. The dismissal and costs order remained effective.
2. High Court, Queen’s Bench Division (Commercial Court): On 5 September 2006, Morison J found a clear breach of the unless order made on 21 July 2006 and ordered that the claim be dismissed, with the respondents’ costs to be assessed on the indemnity basis.