Michael Wilson & Partners Ltd v Sinclair & Ors

An application for relief from sanctions requires three stages: assess the seriousness or significance of the breach, determine whether there was a good reason, and consider all the circumstances. Efficient and proportionate litigation and compliance with court orders carry particular weight, but are not determinative.

A temporary stay differs fundamentally from strike-out. Where the default has been remedied, strike-out remains a last resort and its proportionality must be considered separately. An appellate order may exceptionally be revoked under CPR rule 3.1(7) where a prompt application follows a material restatement of principle which shows that the earlier decision was plainly wrong and disproportionate.

The appellant appealed from Teare J’s order, [2012] EWHC 2560 (Comm), striking out substantial parts of its commercial claims as an abuse of process. Rix LJ subsequently ordered payments totalling £339,000, with the appeal to be stayed upon default. He expressly declined to order that default would result in strike-out.

The appellant paid approximately 16 weeks late. Lewison LJ refused to lift the resulting stay and struck out the appeal. At an oral reconsideration, he treated the compliance factors identified in Mitchell as paramount and again refused relief.

After Denton restated the approach to relief from sanctions, the appellant applied under CPR rule 3.1(7) to revoke Lewison LJ’s order. The issues were whether the Denton restatement justified reopening that order and whether relief from the stay should then be granted.

1. The application was granted. Lewison LJ’s order of 9 December 2013 was revoked under CPR rule 3.1(7). The court granted relief from the sanction imposed by Rix LJ, lifted the stay and permitted the appeal to proceed, subject to terms as to costs.

2. The default was significant or serious and there was no good reason for it. It lasted approximately 16 weeks, disrupted the appeal and was properly inferred to have been deliberate. The need for efficient and proportionate litigation and the need to enforce compliance therefore carried particular weight.

3. Those considerations were not paramount or determinative. Denton required the court at the third stage to consider all the circumstances. Lewison LJ’s narrower understanding of Mitchell caused him to give insufficient weight to the nature of Rix LJ’s order, the subsequent compliance and the proportionality of permanently terminating the appeal.

4. A stay imposed pending payment is ordinarily non-permanent and differs materially from an unless order providing for strike-out. Rix LJ had expressly refused to impose a strike-out sanction. Since the appellant had remedied its default before the formal strike-out application, moving directly from the stay to strike-out was an exceptionally strong step outside the contemplation of the original order.

5. Strike-out is a sanction of last resort. Its proportionality required separate consideration because refusal of relief from the stay was being used to terminate the appeal automatically. The requirement in CPR rule 52.9(2) for a compelling reason to strike out an appeal notice also had to be considered at the third stage.

6. Rule 3.1(7) must be exercised cautiously because finality, the avoidance of a second bite and the integrity of appellate processes are important. Nevertheless, the rapid restatement in Denton, the manifest difference it made to the proper analysis, the plainly wrong and disproportionate earlier result, and the appellant’s prompt application after Denton formed a truly exceptional combination. Christopher Clarke LJ agreed with Richards LJ’s reasoning and order.

1. Court of Appeal (Civil Division): By [2015] EWCA Civ 774, revoked Lewison LJ’s order of 9 December 2013, granted relief from sanction and lifted the stay so that the appeal could proceed.
2. Court of Appeal, Lewison LJ: On 17 July 2013 refused to lift the stay and struck out the appeal. On 9 December 2013 he dismissed the appellant’s application for oral reconsideration.
3. Court of Appeal, Rix LJ: On 16 January 2013 refused to set aside permission to appeal, ordered payments totalling £339,000 and provided that the appeal would be stayed upon non-payment. He declined to impose strike-out as the immediate sanction.
4. High Court, Commercial Court: Teare J, in [2012] EWHC 2560 (Comm), struck out substantial parts of the appellant’s claims as an abuse of process, ordered payments on account of costs and granted permission to appeal.