Sinclair & Anor v Dorsey & Whitney (Europe) LLP & Ors

Relief from sanctions following breach of an unless order requiring security for costs is assessed under the three-stage approach in Denton v TH White Ltd, but the nature of the sanction remains important. A failure to comply with an unless order imposing strike-out will ordinarily be serious or significant. The court must consider whether there was good reason for the breach and then all the circumstances, giving particular weight to efficient and proportionate litigation and compliance with court orders.

Because the unless order already embodies a judicial assessment that strike-out is proportionate, relief will be comparatively rare absent a material change of circumstances. The fact that the claim may have substantial merits or that strike-out causes severe prejudice does not, without more, justify relief.

The claimants brought professional negligence claims against two solicitors’ firms and a former solicitor. The claims concerned, among other matters, advice relating to a freezing order and alleged losses on shares.

Flaux J ordered the claimants to provide security for costs and made an unless order extending time for compliance. The claimants failed to provide security in a reasonably satisfactory form by the final deadline. The claims were consequently struck out and judgment was entered for the defendants.

The claimants applied for relief from sanctions under CPR 3.9. The central issues were the seriousness of the breach, whether there was good reason for it, and how the circumstances of the case should be evaluated where the sanction was strike-out under an unless order.

1. Application dismissed. The claimants’ failure to comply with the unless order was very serious. An unless order had already determined that strike-out was a proportionate consequence of failure to provide the required security.
2. The court applied the three-stage approach in Denton v TH White Ltd. First, the breach was serious or significant. Breach of an unless order will almost always have that character, particularly where security for costs is important and there are justified concerns about the claimants’ ability or willingness to satisfy a costs order.
3. Second, there was no good reason for the breach. The evidence did not explain the delay in procuring an acceptable ATE policy. The claimants had also failed to provide frank evidence about their assets or to show why cash security could not have been provided.
4. Third, the court considered all the circumstances, giving particular weight to the need for litigation to proceed efficiently and at proportionate cost and to the enforcement of compliance with rules, practice directions and orders under CPR 3.9. The proceedings had already been delayed by repeated failures, including the absence of a CMC and the unresolved security applications.
5. The distinction between an order staying proceedings for late provision of security and an unless order providing for permanent strike-out was material. Relief from an already imposed strike-out sanction proceeds on the basis that the sanction was properly imposed. It is therefore comparatively rare for relief to be granted absent a material change of circumstances. The potential loss of a claim worth more than £30 million did not outweigh the procedural history and the public interest in enforcing unless orders.

The application for relief from sanctions was dismissed.