Sunil Gupta & Anor v Olgun Halil Shah & Ors

A debarring order is a sanction of last resort. The court must assess each party’s defaults separately and consider the seriousness of the breach, whether it is excusable, whether it was deliberate, its consequences for a fair trial, and whether the proposed sanction is just and proportionate under the overriding objective.

Serious non-compliance does not automatically justify striking out a defence. An unless order may be proportionate where deficiencies can still be remedied. Debarring is appropriate where substantial, deliberate and unexplained failures make proper disclosure and evidence essential to a fair trial, and lesser measures would be inadequate.

The claimants pursued continuing proprietary, knowing receipt, dishonest assistance, misrepresentation and conspiracy claims arising from money transferred to Lex Foundation Limited and subsequently received or dealt with by the defendants.

Earlier summary judgment had determined the claims against Mr Shah and Lex and upheld proprietary claims against Mrs Shah and the children, while leaving further claims outstanding. The claimants applied to debar the defendants from defending those claims because of alleged failures to comply with disclosure, witness statement and payment orders.

The court also dealt with an application to set aside an adjournment order and deferred a reverse summary judgment application. The central issues were whether the hearing should proceed in the absence of some defendants and whether the defaults justified debarring each individual defendant.

1. The court set aside the adjournment order and proceeded with the debarring application. Although CPR rule 39.3 did not strictly apply, the court applied its underlying safeguard. An absent defendant should be able to seek to set aside an adverse order where the defendant acted promptly, had a good reason for absence and had a reasonable prospect of success.
2. An adjournment based on inability to attend requires evidence satisfying the court that the inability is genuine. The court must consider the whole context, including remote attendance, the importance of the party’s participation, the interests of the other parties, the overriding objective and any threat to the trial timetable. Mr Shah’s medical evidence established that he could not physically attend in England, but did not establish that he could not participate remotely or that his attendance was material.
3. The court must assess defaults separately for each defendant and by reference to the defence that would actually be affected. A debarring order had no meaningful operation against Mr Shah and Lex because no continuing defence remained to be debarred.
4. Following Byers, the court treated debarring as a sanction of last resort. The relevant factors were the seriousness of the breach, the extent to which it was excusable, whether it was deliberate, the consequences of the breach and whether a lesser sanction would suffice. The overriding criterion was whether the sanction was just and proportionate.
5. The application failed against Kadir, Kerem and Meltem. Their breaches were serious but were not shown to be deliberate, were to some extent understandable in context, and could be addressed by unless orders without jeopardising the trial timetable. The application was therefore dismissed against them, subject to unless orders.
6. The application succeeded against Mrs Shah. Her failures to comply with substantial costs, disclosure and witness statement orders were very serious, deliberate and substantially unexplained. Given her involvement with the funds and Lex, proper disclosure and evidence were vital, and an unless order would not be proportionate. She was debarred from continuing her defence, subject to an application to set aside on terms analogous to CPR rule 39.5. Her participation in the deferred reverse summary judgment application was preserved.
7. The reverse summary judgment application and the application to strike it out as an abuse of process were adjourned for a later hearing. Consequential directions, timetabling and costs were left for further consideration.