Patterson v Spencer

This appeal concerned an application for relief from sanctions under CPR rule 3.9 to reinstate an appellant's strike-out of her appeal for failure to comply with an "unless" order requiring the filing of a transcript of the judgment under appeal. The Court of Appeal held that the deputy High Court judge had misapplied the earlier Mitchell guidance and had not applied the structured three-stage test set out in Denton. Applying Denton, the court found that (1) the failure to file the transcript was a serious breach because the transcript was essential to determination of permission to appeal; (2) the appellant had a good reason for the default, namely that the unless order was not received in time because court correspondence had been delivered to a neighbour and only reached her on 19 April 2014; and (3) considering all the circumstances, including the infancy of the appeal and limited prejudice to the trustee, justice required granting relief. The appeal was therefore allowed and relief from sanctions ordered, so that the appellant's appeal could proceed to seek permission to appeal in the Chancery Division.

Background and nature of the application

The Trustee in bankruptcy applied in the county court for declarations and orders under the Insolvency Act 1986 (including sections 423 and 339) that transfers of a property were void as defrauding creditors and/or at an undervalue; District Judge Clarke ultimately granted the Trustee the relief sought and debarred several defendants from defending. The sixth defendant, Beverley Spencer (the appellant), pursued an appeal to the High Court. Arnold J directed that a full appeal bundle be filed, specifically requiring a transcript of the judgment dated 29 October 2013. When the appellant failed to file the transcript the High Court made an "unless" order that her appeal would be struck out unless the transcript was filed by 21 March 2014. The appeal was struck out automatically. The appellant then applied under CPR rule 3.9 for relief from sanctions to reinstate the appeal and allow her to pursue permission to appeal.

Procedural history to this court

• The Trustee's underlying proceedings ran in the county court and involved debarment orders and an order for sale of the property dated 29 October 2013.
• The appellant's set-aside application was dismissed by District Judge Hart on 28 November 2013; she then appealed to the High Court where Arnold J made the procedural directions and the "unless" order of 4 March 2014. The automatic strike-out followed.
• An application for relief from sanctions was dismissed by a deputy High Court judge (Henry Carr QC) ([2014] EWHC 1878 (Ch)). Permission to appeal to the Court of Appeal was granted by Briggs LJ on 9 December 2014 ([2014] EWCA Civ 1732). This judgment is the Court of Appeal's determination of that appeal.

Issues framed by the Court

• Whether the deputy judge erred in his approach to CPR rule 3.9 by relying on Mitchell rather than applying the three-stage Denton test.
• Whether the appellant had a good reason for the default (non-receipt of the unless order) and whether, applying Denton stage three, relief should be granted in all the circumstances.

Reasoning

• The court explained the correct approach under Denton: (i) assess seriousness/significance of the breach; (ii) consider why the default occurred; (iii) evaluate all circumstances including need for efficient litigation and enforcement of orders.
• The Court of Appeal held the deputy judge erred by treating the two rule 3.9 factors as of paramount importance, by failing to apply the three-stage Denton analysis and by discounting as inadequate evidence the appellant's verified account in Part C of her application notice that court mail had been delivered to a neighbour and only reached her on 19 April 2014.
• Viewed in isolation the breach (failure to file transcript) was serious because the transcript was necessary to determine permission to appeal. However, the appellant had a credible and good reason for non-compliance (she had not received the unless order in time). On stage three, the court concluded that, given the infancy of the appeal, the relatively short delay and the limited prejudice to the Trustee, justice required relief from sanctions and reinstatement of the appeal to seek permission to appeal in the Chancery Division.

Relief sought: restoration of the appellant's strike-out and permission to proceed to seek permission to appeal (relief from sanctions under CPR rule 3.9).

This Court allowed the appeal. The deputy judge had erred by misapplying Mitchell and not following the three-stage test in Denton. Applying Denton afresh, the Court concluded that although the breach (failure to file the judgment transcript) was serious in isolation, the appellant had a credible and good reason for default (non-receipt of the unless order) and, considering all the circumstances, relief from sanctions should be granted so that the appellant's appeal could proceed to seek permission to appeal in the usual way.

Underlying proceedings began in the Central London County Court (application by the Trustee) and were determined by District Judge Clarke on 29 October 2013 (order for possession and sale; debarment orders). A set-aside/application under the Insolvency Act was dismissed by District Judge Hart on 28 November 2013. The appellant appealed to the High Court (Chancery Division); Arnold J made directions on 9 January 2014 and an "unless" order on 4 March 2014 which led to automatic strike-out when the transcript was not filed by the deadline. An application for relief from sanctions was dismissed by Henry Carr QC (Deputy High Court Judge) ([2014] EWHC 1878 (Ch)). Permission to appeal to the Court of Appeal was granted by Briggs LJ on 9 December 2014 ([2014] EWCA Civ 1732). This Court delivered judgment allowing the appeal ([2017] EWCA Civ 140).