Phaestos Ltd & Anor v Ho

An unless order takes effect automatically when there is a material breach, subject to the court’s discretion to grant relief. Compliance is assessed by interpreting the order in its context. A disclosure order requiring provision of a list and inspection requires both, and a party cannot unilaterally impose new confidentiality conditions without agreement or an application to the court. Materiality depends on the particular order and circumstances, including the significance and nature of the default. Relief from sanctions requires a discretionary assessment of all relevant circumstances under CPR rule 3.9. The factors are not a mechanical checklist. Even serious and intentional defaults may justify relief where the trial can proceed and prejudice can be addressed by conditions and costs.

These conjoined proceedings concerned the Claimants’ compliance with extensive orders for electronic and hard-copy disclosure. On 13 July 2012 the court made a final unless order requiring disclosure by list and inspection by 4 pm on 3 August, with claims and defences to counterclaims to be struck out automatically if the order was not complied with by 4 pm on 10 August.

The Claimants made numerous disclosures shortly before the deadline but the Defendants alleged material non-compliance concerning disclosure statements, model alfas, surveillance documents, financial-performance documents, a blog, redactions and home drives. The Claimants sought relief from sanctions. The central issues were whether the unless order had been materially breached and, if so, whether relief should be granted.

1. The court held that the unless order had to be interpreted as a matter of construction. If, properly interpreted, the order clearly required a particular act and that act had not been performed, there was non-compliance. If the order was so imprecise that no breach could be established, the sanction could not operate. Any honest misunderstanding arising from ambiguity was relevant to relief, not to construction. The court declined to treat the authorities as establishing a separate burden or heightened standard of proof beyond the need for the court to be clear and confident that a material breach had occurred (paras [10]-[14]).

2. In a disclosure case, the relevant question was whether the list and inspection required by the order had been provided in good faith and were not illusory. The order required both a list and inspection. The Claimants were in breach by serving disclosure statements late, failing to provide inspection of the model alfas, failing to disclose surveillance material, restricting financial-performance disclosure to 2008, and failing to disclose the blog. No breach was established concerning the Ambrosiadou documents, the disputed form of the wiki material apart from the blog, redactions, home drives, or dividends declared by the Felix and Hestia Trusts (paras [22]-[47]).

3. The Claimants could not rely on a general provision allowing measures to protect confidentiality to impose a new inspection regime at the deadline. They should have sought agreement or applied to the court in advance. Inspection of the model alfas therefore remained due under the order (paras [28]-[34]).

4. CPR rule 3.9 required an assessment of all the circumstances, including the administration of justice, promptness, intention, explanation, compliance with other orders, responsibility for the default, the trial date, and prejudice. The assessment was not a tick-box exercise. The defaults were serious and, save possibly for the blog, intentional in the sense that they resulted from conscious decisions rather than accident. Nevertheless, relief was granted because the trial date could still be met and the Defendants’ prejudice could be addressed by conditions and costs (paras [48]-[57]).

5. Relief was granted on conditions requiring fresh disclosure statements signed by appropriate officers, inspection of the model alfas subject to undertakings and restrictions on copying, an affidavit from Ms Ambrosiadou explaining the absence of further surveillance documents, disclosure and inspection of relevant financial-performance documents through 2010, disclosure and inspection of the blog, and an affidavit from a partner involved in the search exercise (paras [57]-[61]).