McTear & Anor v Englehard & Ors

Relief from sanctions depends on the nature of the default, the reason for it and all the circumstances, with particular weight given to efficient litigation at proportionate cost and compliance with rules and orders. A default which appears trivial in isolation may be serious when viewed with connected defaults, prejudice, the proximity of trial and the disruption caused to other court users. Retrospective extensions of time are treated as applications for relief from sanctions. Late disclosure, late witness statements, unauthorised expert evidence and a last-minute attempt to introduce a new defence may properly be refused where they result from deliberate or unjustified procedural conduct and would require an adjournment. Striking out an existing pleaded defence may nevertheless be disproportionate where the procedural defaults can be addressed by excluding evidence or refusing amendments.

The claimants, former administrators and supervisors of a company voluntary arrangement, brought claims concerning payments made by the company to a related holding company and alleged breaches of duty by associated directors.

Shortly before trial, the defendants served witness statements late, disclosed documents after the disclosure deadline, sought to rely on unauthorised expert evidence and attempted to re-amend their defence to plead set-off and a different account balance. The claimants applied for declarations of breach and strike-out. The defendants sought extensions of time and relief from sanctions. The central issues were whether relief should be granted, whether the new evidence and amendments should be admitted, and whether the existing defence should be struck out.

1. Relief from sanctions. The court adopted the principles summarised from Mitchell v News Group Newspapers Ltd and Summit Navigation Ltd v General Romania Asigurare Reasigurare. The court should consider the nature of the default, why it occurred and all the circumstances, giving particular weight to efficient litigation at proportionate cost and enforcement of compliance. A retrospective extension of time is treated as an application for relief from sanctions.
2. The defendants’ defaults were not trivial when considered cumulatively. The documents were found long after the disclosure deadline, no satisfactory explanation was given for the earlier searches or the delay after discovery, the witness statements were served late, and the applications were made on the eve of trial. The conduct deprived the claimants of a fair opportunity to prepare and disrupted the trial. Relief under Civil Procedure Rules 1998 was refused.
3. The court refused permission to rely on the newly disclosed documents and refused permission to call the defendants’ witnesses under CPR 32.10. Mr Needham’s evidence was expert evidence in substance, including his schedules and analysis. It could not be adduced without permission under CPR 35.4(1), and his lack of independence provided an additional concern.
4. Permission to re-amend the defence was refused. The proposed set-off pleas involved unresolved factual and legal issues, including mutuality under Rule 4.90 of the Insolvency Rules 1986. The proposed alternative account balance was a new issue supported by the excluded evidence. Applying the approach in Swain-Mason v Mills & Reeve, the defendants had not discharged the heavy onus applicable to a very late amendment.
5. The claimants established breaches of the relevant orders and the attempt to adduce unauthorised expert evidence. However, striking out the Amended Defence under CPR 3.4(2)(c) was disproportionate. The defence had been pleaded before the recent defaults, and the evidential and amendment orders sufficiently addressed the procedural misconduct. Costs and the form of order were reserved.