Rubin & Anor v Parsons & Ors

Where an unless order debars a respondent from defending, the sanction takes effect automatically upon material non-compliance. That does not necessarily entitle the claimant to immediate judgment for a monetary sum. The court must examine the nature and extent of the relief sought, including any derivative claims, cross-claims and proprietary consequences. Where the claim goes beyond the forms of relief covered by CPR 3.5(2), the claimant must apply for judgment and may still have to prove the case. A directions hearing should not be converted into an imposed settlement, particularly where the court has been influenced by an improperly disclosed without-prejudice offer or an unreliable valuation.

The Rubins brought an unfair prejudice petition concerning an insolvent limited liability partnership against the Parsons and related companies. The Registrar made an unless order requiring production of information. Following non-compliance, the Registrar debarred the relevant respondents from defending and ordered payment of £54,000, together with costs, without determining the derivative claims, counterclaim, beneficial ownership or the precise effect of the payment.

The respondents appealed. The central issues were whether the Fourth Respondent could be affected by the unless order, whether the Registrar could enter immediate monetary judgment, and whether the order was procedurally fair.

1. Appeal allowed. The Registrar’s order for payment of £54,000 could not stand.
2. Material non-compliance with an unless order ordinarily causes the specified sanction to take effect automatically. The respondents were therefore debarred from defending the petition, and there was no error in the Registrar’s conclusion on that issue. The Fourth Respondent, however, was not subject to the relevant production obligations and could not properly be affected by the sanction imposed for another party’s breach.
3. The automatic operation of a debarring sanction did not determine the form of final relief. Marcan Shipping (London) Ltd v Kefalas & Anr [2007] 1WLR 1864 concerned striking out a claimant’s statement of case. A respondent debarred from defending a complex petition may still require the petitioner to prove entitlement to the relief sought.
4. CPR 3.5(2) permitted judgment by filing a request only for the specified categories of claim identified there. This petition involved more than a simple monetary claim. The court had to consider the petitioners’ beneficial interests, derivative claims brought for the LLP, the relief sought against the Fourth Respondent and the respondents’ counterclaim. Those matters could affect any monetary award, set-off, ownership or transfer of interests.
5. Following Masood & Ors v Zahoor [2008] EWCH 1034 (Ch), where the relief sought extends beyond a simple debt or damages claim, the claimant must ordinarily have an opportunity to prove its case, even though the opposing party is debarred from defending.
6. The Registrar’s use of a discussion-only accountant’s valuation and the disclosure of a without-prejudice offer materially distorted the decision. His desire to conclude the proceedings quickly did not justify treating the hearing as a settlement or awarding precisely the figure disclosed in confidence.
7. The application for relief from sanctions was remitted to the Registrar. If relief was refused, directions were to be given for the effect of the debarring order; if relief was granted, directions were to be given for the petition and counterclaim.

• High Court (Chancery Division): appeal from the Registrar’s order of 10 July 2015 allowed. The application for relief from sanctions was remitted to the Registrar.
• Registrar Baister: ordered the relevant respondents to pay £54,000 and the petitioners’ costs after non-compliance with an unless order.