Summit Navigation Ltd & Anor v Generali Romania Asigurare Reasigurare SA Ardaf SA & Anor

A stay imposed for failure to provide security for costs is a sanction under CPR 3.8 and 3.9, but not every sanction attracts the same approach. A temporary stay is materially different from a permanent strike-out or other sanction intended to bring proceedings to an end. Relief should therefore be considered in light of the purpose and seriousness of the sanction. A short, non-material delay in providing security, causing no disruption to the litigation, will ordinarily justify lifting the stay, particularly where the delay resulted from circumstances outside the claimant’s control. The court should not allow procedural compliance to become an end in itself. A further stay under CPR 58.14 requires a proper protective purpose and is not justified merely by alleged shortcomings in disclosure where the underwriters can seek targeted disclosure orders.

The claimants brought a marine insurance claim concerning damage to a vessel. By consent, they were ordered to provide further security for costs by 4pm on 5 December 2013, failing which the action would be stayed. The security was ready for exchange on the following day, but the defendants refused to accept it unless the stay was first lifted.

The claimants applied for an order lifting the stay, alternatively for relief from sanctions. The defendants opposed the application and sought a further stay under CPR 58.14 because of alleged failures concerning disclosure of ship’s papers. The issues were whether an application to lift the stay was necessary, whether the stay was a sanction, how CPR 3.9 applied, and whether the alleged disclosure failures justified continuing the stay.

1. The stay and relief from sanctions. The consent order did not provide that the stay would end automatically when security was later provided. An application to lift the stay was therefore necessary. The stay was a sanction within CPR 3.8 and 3.9 because it was an adverse consequence of non-compliance and prevented the claimants from pursuing their claim. CPR 3.8(1) meant that the stay remained effective unless the claimants obtained relief.
2. Nature of the sanction. A temporary stay pending provision of security is different from a permanent sanction, such as striking out a claim under an unless order. The guidance in Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537 was not directed to this special type of order. The need to enforce compliance and conduct litigation efficiently remained relevant, but those considerations did not carry the same weight in an application to lift a non-permanent stay.
3. Application of CPR 3.9. The one-day delay was not material. The bond had been signed and was ready for exchange the next morning, and the delay had no effect on the conduct of the proceedings. The defendants could not rely on their own refusal to accept the bond as evidence of continuing default. The alleged defects in execution were also legally unsound and, in any event, would have been defects of form rather than substance. The delay was alternatively supported by a good reason, since the underwriter’s signature had not been obtained in time and the relevant difficulty was attributable to a third party.
4. Even if the default were neither immaterial nor supported by good reason, the court would grant relief after considering all the circumstances. Refusing relief would turn compliance into a procedural trap where the objective of efficient and proportionate litigation had not been impaired. The claimants’ application was granted.
5. Disclosure of ship’s papers. CPR 58.14 permits a stay where necessary to protect marine underwriters who cannot properly prepare their case without the ship’s papers. That purpose was not established here. The defendants already possessed copies of relevant documents and could apply, after the stay was lifted, for further searches or information. Their application for a continuing stay was dismissed.
6. The defendants were ordered to pay the claimants’ costs of both applications, except for the costs caused by the claimants’ own default, reflecting the defendants’ unreasonable opposition and the disruption caused by it.