Thevarajah v Riordan and others

A party whose first application for relief from a sanction has been refused cannot normally make a second application which effectively varies or rescinds that order unless there has been a material change of circumstances, the original facts were misstated, or the order contains a manifest formulation mistake. This restriction applies under Civil Procedure Rules 1998 r 3.1(7) and, independently, as a principle governing interlocutory orders.

Where relief from a debarring sanction was refused while the party remained in default, mere later compliance with the unless order is not a material change. Later compliance may contribute to a material change only when accompanied by genuinely new explanatory facts. A later judge cannot revisit the same issues on essentially the same facts and reach a different conclusion.

In Thevarajah v Riordan and others, the respondent paid £1.572m under an agreement to acquire the appellants’ shares in a company and subsequently sought specific performance. The appellants failed to provide asset disclosure required by a freezing order and an unless order. Hildyard J therefore made a debarring order and refused their first application for relief from sanctions under Civil Procedure Rules 1998 r 3.9: [2013] EWHC 3464 (Ch).

Shortly before trial, the appellants made a second application based principally on alleged subsequent compliance. A Deputy High Court Judge granted relief and discharged the debarring order: [2013] EWHC 3179 (Ch). The Court of Appeal allowed the respondent’s appeal and restored the debarring order: [2014] EWCA Civ 14; [2014] CP Rep 19.

The central issues were whether the second application required a material change of circumstances under r 3.1(7), and whether subsequent compliance with the unless order constituted such a change.

Appeal dismissed unanimously. Lord Neuberger delivered the judgment, with which Lord Mance, Lord Clarke, Lord Sumption and Lord Hodge agreed.

1. The Court of Appeal correctly restored the debarring order. The approach to relief from sanctions under Civil Procedure Rules 1998 r 3.9 had been authoritatively addressed in Mitchell v News Group Newspapers Ltd (Practice Note) [2014] 1 WLR 795 and Denton v TH White Ltd (De Laval Ltd, Part 20 defendant) [2014] 1 WLR 3926. The first judge’s reasoning reflected that guidance, and his refusal of relief had not been appealed.

2. Rule 3.1(7) applied because the second application effectively asked the Deputy Judge to vary or revoke the earlier refusal of relief and set aside the resulting debarring order. In a normal case, such an order should be revisited only where circumstances have materially changed, the facts underlying the original decision were misstated, or the judge made a manifest mistake in formulating the order. Even if r 3.1(7) did not apply, ordinary interlocutory principle imposed the same material-change hurdle. Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 WLR 485 established that a party cannot fight the same interlocutory battle again without a significant change or newly discovered facts.

3. Mere compliance after the refusal of a first relief application, where the applicant remained in default at the time of refusal, cannot itself constitute a material change. The earlier refusal necessarily meant that compliance had come too late to secure relief. Treating that same late compliance as sufficient on a second application would contradict the first decision. Subsequent compliance could potentially contribute to a material change if accompanied by genuinely new explanatory facts, although neither a material change nor further relief would follow automatically. No such facts existed here.

4. The Deputy Judge was also not entitled to reverse Hildyard J’s conclusions about the missing bank statements or describe the breach as de minimis on essentially the same facts. The evidence did not justify attributing the default to the appellants’ former solicitors. The unexplained eight-week delay and the filing of the second application one day before trial also presented substantial difficulty. The second application should not have been entertained on its merits, and the appeal was dismissed.

1. United Kingdom Supreme Court: Dismissed the appellants’ appeal unanimously and upheld restoration of the debarring order: [2015] UKSC 78.
2. Court of Appeal: Allowed the respondent’s appeal from the Deputy Judge and restored the debarring order: [2014] EWCA Civ 14; [2014] CP Rep 19.
3. High Court, Deputy Judge: Granted the second application for relief from sanctions, discharged the debarring order and adjourned the trial: [2013] EWHC 3179 (Ch).
4. High Court, Hildyard J: Found material non-compliance, made the debarring order and refused the first application for relief from sanctions. No appeal was brought: [2013] EWHC 3464 (Ch).
5. High Court, Henderson J: Found the appellants’ disclosure seriously inadequate and made the unless order: [2013] EWHC 3356 (Ch).

Separately, the substantive trial decision at [2014] EWHC 725 (Ch) was reversed by the Court of Appeal at [2015] EWCA Civ 41.