Vernon v Spoudeas & Anor

An important application for relief from sanctions should not ordinarily be disposed of on paper without considering whether a hearing is appropriate. An order cannot be treated as a reasoned merits decision where it gives no reasons and does not show that the Civil Procedure Rules rule 3.9 criteria were considered. A party may appeal such an order, although an application under Part 3 to vary or set it aside may be preferable. Where a disputed issue of fact is central to relief, the appellate court should remit the application for oral evidence and cross-examination rather than decide it from written material alone.

Mr Vernon brought claims against Dr Spoudeas and Dr Rosenthal concerning architectural fees and specially made kitchen cabinetry. The respondents defended the claims and brought a counterclaim. An unless order required Mr Vernon to pay costs by a specified deadline, failing which his claim would be struck out. He said that he had posted a cheque before the deadline, but it was received two days late.

His application for relief from sanctions was dealt with without a hearing and was recorded as struck out without reasons. HHJ Birtles dismissed appeals against that order and a later costs order. The central issues before the Court of Appeal were whether the application had been properly determined and whether the court could decide relief itself despite the factual dispute about posting and receipt.

By a majority, Ward LJ and Richards LJ allowed the appeal. Jackson LJ dissented. The order of District Judge Manners could not stand because it gave no reasons and did not establish that the application for relief from sanctions had been considered on its merits by reference to Rule 3.9 of the Civil Procedure Rules.

1. The appellant had a technical right of appeal under Part 52. Although an application under Part 3 to vary or set aside an order made without a hearing might have been the better course, that did not remove the right of appeal.
2. Following Collier v Williams [2006] 1 WLR 1945; [2006] EWCA Civ 20, the court should consider carefully whether an important application should be disposed of on paper. An order made without a hearing should also record the right to apply to vary, discharge or reply. The omission of reasons and that procedural safeguard made the order defective.
3. All the Rule 3.9 factors remained in play. They included the administration of justice, promptness, intentionality, explanation, compliance with other orders, responsibility for default, trial timing, and the effects of non-compliance and relief on both parties. The majority assessed the position as it stood when the default occurred and did not treat later costs matters as enlarging the relevant assessment.
4. The key issues were whether the failure was intentional and whether there was a good explanation. The appellant’s account and the respondents’ evidence created a serious factual dispute that could not fairly be resolved from witness statements and documents alone. Oral evidence, cross-examination and any further relevant evidence were required. The application was therefore remitted to the county court for a hearing and determination without limiting the issues to those disputed facts.
5. If relief were granted, District Judge Sterlini’s consequential order was to be set aside. If relief were refused, that order would stand and the appeal against it would be dismissed.

Dissenting judgment

Jackson LJ would have decided the application immediately and refused relief. He regarded the unless order as a matter of utmost gravity and found the failure intentional, unexplained and part of repeated non-compliance. He considered the litigation futile and disproportionate, with the Rule 3.9 factors clearly favouring finality.

• Court of Appeal (Civil Division): On 6 May 2010, by a majority, allowed the appeal against District Judge Manners’s order and remitted the application for relief from sanctions to the county court. The effect on District Judge Sterlini’s order was made conditional on the outcome of the rehearing.
• Clerkenwell and Shoreditch County Court: On 23 July 2009, HHJ Birtles dismissed Mr Vernon’s appeals against District Judge Manners’s order of 23 January 2009 and District Judge Sterlini’s order of 4 February 2009.