Catalyst Managerial Services v Libya Africa Investment

An unless order imposing an automatic strike-out sanction will ordinarily stand where the default occurred in circumstances already considered when the order was made. A later ability to comply does not itself amount to a material change relevant to the sanction. Relief from sanctions requires a material change affecting the appropriateness of applying the sanction, not merely the occurrence of the anticipated default. The court should consider the seriousness and consequences of the breach, the reasons for it, and the wider circumstances, including prejudice, delay, merits and procedural compliance.

The claimant brought a substantial contractual claim for unpaid management development services fees. The defendant obtained an order requiring security for costs, followed by an unless order providing that the claim would be struck out unless security was provided by a specified date. The claimant failed to provide satisfactory security, and the claim was automatically struck out.

The claimant applied to set aside the original security order, obtain relief from sanctions and restore the claim for trial. The defendant applied for release of funds held in court and discharge of interim third-party debt orders obtained during enforcement of an earlier summary judgment which had subsequently been set aside. The central issues were whether there had been a material change or material misstatement justifying reconsideration, whether the claim had been stifled, and whether relief from sanctions was appropriate.

1. Claimant’s application dismissed. The evidence did not establish that the claimant’s funding circumstances had materially changed after the security order. Nor did any alleged misstatement justify setting the order aside. The relevant funding position had been considered at the later hearings, and the claimant had accepted that the claim would be struck out if satisfactory security was not provided.
2. The fact that the claimant later obtained, or asserted that it had obtained, funding did not constitute a material change affecting the appropriateness of applying the sanction. It was merely an ability to provide security after the deadline. The Commercial Court’s approach is to consider sanctions carefully when default occurs, but once an unless order has been made after that consideration, the anticipated default is not itself a relevant change of circumstance.
3. The court considered the principles in Tibbles v SIG PLC 2012 EWCA Civ 518, including the possibility that a material misstatement may justify reconsideration under CPR 3.1. That possibility did not assist the claimant on the evidence.
4. Applying the approach in Denton v TH White Ltd [2014] 1 WLR 3926, the breach was serious, there was no good reason for non-compliance, and the consequences included substantial delay, continuing uncertainty and unsecured costs. Although the claim was not shown to be so weak that its merits had no weight, the balance did not justify relief. The court did not revert to the stricter approach associated with Mitchell v Newsgroup Newspapers Ltd [2014] 1 WLR 795.
5. The defendant’s application was allowed in principle. The funds held in court were to be released and the interim third-party debt orders discharged, subject to any issue concerning a possible appeal.

First-instance decision. The judgment refers to an earlier summary judgment by Master Kay QC, which was ultimately set aside by consent, and to subsequent orders made by Mr Justice Teare concerning security for costs.