Melars Group Ltd v East-West Logistics LLP

Relief from sanctions may be granted where a serious and significant default resulted from a compliance period that was, in practice, unrealistically short. The court must apply the three-stage test in Denton v TH White: assess the breach, identify why it occurred, and evaluate all the circumstances. Efforts to comply and prompt steps to remedy the default are relevant at the later stages, but do not reduce the seriousness of the breach at stage one. The court should focus on the circumstances immediately relevant to the default and should not use the application as an opportunity to determine which party is generally more deserving.

Melars Group Ltd appealed against a winding-up order made by Deputy ICC Judge Baister. As a condition of pursuing the appeal, Roth J ordered the company to pay £30,000 into court by 4pm on 3 December 2020. The order provided that the appeal would be dismissed automatically if the payment was not made.

The company paid the costs component of the order but did not pay the security into court by the deadline. The funds had been transferred to its solicitors before the deadline, but payment into court was delayed by banking and Court Funds Office difficulties. The central issue was whether relief from the resulting sanction should be granted.

1. Relief granted. The application for relief from sanction was allowed and the appeal was permitted to continue.
2. Applying the three-stage approach in Denton v TH White, the breach was serious and significant. Payment was made nearly two weeks late, the order required payment into court rather than substitute security, and the automatic dismissal had disrupted the appeal.
3. The reasons for default included delay in transferring funds to the solicitors, the late issue of the invoice, and the Court Funds Office’s delay in providing BACS details. The principal consideration was that the 14-day compliance period was probably incapable of practical compliance because the Court Funds Office response time was substantially longer than expected.
4. The company had made satisfactory and continuing efforts to comply. It instructed payment before the deadline, held the funds ready, gave an undertaking shortly after default, and applied promptly for relief. The circumstances were analogous to the observation in Mitchell v News Group Newspapers Ltd that later developments may show that an initially reasonable compliance period was in fact unreasonable.
5. The court should assess the circumstances immediately relevant to the default. It was inappropriate to refuse relief by making a broad assessment that the company or those behind it were generally unmeritorious, particularly where the appeal raised an arguable issue and the consequences of refusal would be effectively terminal.
6. Counsel were directed to draw up an order reflecting the grant of relief.

1. High Court (Chancery Division): On appeal from an order of Deputy ICC Judge Baister, the court granted relief from sanction and restored the company’s ability to pursue its appeal.