Pittville Ltd v Hunters & Frankau Ltd & Anor

Financial inability to provide security for costs will not ordinarily constitute a good reason for failing to comply with an unless order requiring that security. The order was made because there was reason to believe that the claimant could not pay the defendants’ costs. The court must also give proper weight to efficient and proportionate litigation and to enforcing compliance with court orders. A party cannot normally obtain variation of an unappealed unless order merely because it later believes that funding may become available. Merits will generally be irrelevant to case-management decisions unless the case is suitable for summary judgment. The power to vary an order under CPR 3.1(7) is subject to the interests of finality and is normally exercised only for a material change of circumstances or a material misstatement of fact.

The defendants appealed against two decisions of Deputy Master Cousins. The first granted MasterCigars relief from sanctions and set aside judgment entered after its failure to comply with an unless order requiring security for costs. The second substituted Pittville, which had acquired MasterCigars’ rights of action, as claimant, varied the unless order to permit security by an after-the-event insurance policy, and allowed further time for compliance.

The Deputy Master considered that lack of funds was a good reason for the original default and that the history of the underlying commercial dispute, later funding efforts and evidence from a former employee justified relief and variation. The central issues were whether the Denton approach had been correctly applied and whether CPR 3.1(7) permitted the unless order to be varied.

1. Appeal allowed. The order of Deputy Master Cousins dated 7 October 2015 was set aside, and the judgment and order of Deputy Master Nurse dated 26 August 2011 in favour of the defendants were restored.

2. The failure to comply with the unless order was serious and significant. Under the three-stage approach in Denton v TH White [2014] 1 WLR 3296, the Deputy Master was plainly wrong to treat lack of funds as a good reason. The security order had been made because there was reason to believe that the claimant would be unable to pay an adverse costs order. The inability to provide security was therefore inherent in the circumstances giving rise to the order and could not also justify non-compliance.

3. The Deputy Master failed at the third stage of the Denton analysis to give appropriate weight to CPR 3.9(1), including the need for litigation to proceed efficiently and at proportionate cost and the need to enforce compliance with orders. The claim had been dormant for over three years, security remained unavailable, and substantial further costs would inevitably be incurred in reviving the litigation.

4. When considering relief, the court should ask whether the applicant is actually able to comply with the order. The evidence showed no realistic prospect of cash or a bank guarantee, and the proposed ATE funding depended upon obtaining relief first, creating circularity.

5. Under CPR 3.1(7), variation of an order is normally justified only by a material change of circumstances or a material misstatement of fact. The later assignment of the claim, unsuccessful funding efforts and subjective optimism that funding might become available did not amount to a material change. Matters that were available when the original order was made could not be used to reargue it, and the apparent merits of the claim were irrelevant to this case-management decision.

• High Court (Chancery Division): Allowed the appeal against the decisions of Deputy Master Cousins dated 14 July and 29 September 2015, set aside the order of 7 October 2015, and restored the judgment and order of Deputy Master Nurse dated 26 August 2011.
• Deputy Master Cousins: Granted relief from sanctions, set aside judgment against MasterCigars, substituted Pittville as claimant, and varied the unless order to permit ATE insurance or other security.
• Deputy Master Nurse: Entered judgment for the defendants after MasterCigars failed to comply with the unless order.