A practical guide to applications for relief from sanctions

The Court of Appeal has recently reviewed the jurisdiction to grant relief from sanctions in FXF v English Karate Association. It confirmed that the Denton three-stage test applies pretty well across the board wherever there has been non-compliance with a rule or order. This includes applications to set aside default judgments under CPR 13.3.

The Denton test brought general discretion to the fore, enabling judges to grant or refuse relief under CPR 3.9 at the discretion stage (stage 3), whatever the outcome at stage 1 (seriousness of the default) and stage 2 (reason for the default).

This can make it difficult for litigants and their lawyers to know whether their own application for relief from sanctions will succeed and also to know when to oppose an application for relief made by the other side. In many cases relief is granted at stage 3, even though the breach of the rules was serious and there was no good reason for it. Recent examples include Holterman v Electrium Sales Ltd (particulars of claim 14 days late) and K/S Mountain Invest v Ducat Maritime Ltd (costs budget 14 days late).

The parties can of course agree to extend time except where the court’s permission is required by the rules (see our briefing Buying time – when can parties agree to delay?). Where agreement is not possible or forthcoming, an application for relief from sanctions becomes necessary.

What is clear from the case law is that certain factors are likely to influence the outcome of an application for relief. Paying attention to these points will increase your chances of a successful application even where you cannot get through stages 1 and 2 unscathed or enable you to save costs by opposing an application only when the court is likely to refuse relief.

Tips for the applicant

• Act quickly: Once it is clear that the other side is not going to agree to extend time, make the application as soon as you can. An application is made when it is filed with the court and not when it is date stamped or when the application is heard (CPR 23.5). If you make the application before the relevant deadline, you are applying for an extension of time under CPR 3.1(2)(a) and not relief from sanctions and that is likely help you (Hallam Estates Ltd v Baker and James Fisher Everard Ltd v European Diesel Services). The same approach applies to an unless order (Everwarm Ltd v BN Rendering Ltd).
• Don’t relax after issuing the application: It’s important to file and serve the relevant document as soon as you can so as to minimise prejudice to the other side and to show the court that you deserve relief (Gill v Anami Holdings Ltd).
• Come clean and apologise: Don’t take technical points on timing or interpretation of the rules unless you are definitely right. Explain fully what has gone wrong and why (see Henderson and Jones Ltd v Stargunter Ltd for an excellent example of the detail required). Wasting time arguing with the other side and then wasting court time at the hearing can lead to a failed application for relief even where the breach wasn’t serious (see Lakhani v Mahmud where relief was refused even though the costs budget was only one day late).
• Access to justice: If the applicant is a litigant in person, this shouldn’t help them (Barton v Wright Hassall and Irvine v Slade) but in practice judges will be more sympathetic to an individual without a solicitor. In Hadi v Park the Court of Appeal upheld a decision to allow the claimant acting in person to make an informal oral application for relief at the hearing.
• Costs: If you fail to follow the tips above, you may still get relief but your conduct could result in an adverse costs order, possibly on the indemnity basis (see the late budget cases Intellimedia Systems Ltd v Richards and K/S Mountain Invest v Ducat Maritime Ltd).

Tips for the goody two-shoes

• Make sure your own house is in order: Any suggestion that delay has been caused by you helps the applicant. It is also best to attempt to co-operate with the other side before the application is heard, for example over agreeing budgets, to avoid the suggestion that you are seeking to benefit from the other side’s default. 
• Don’t use the rules as a trip wire: Avoid tetchy correspondence that could give rise to a suggestion that you are seeking to take advantage of the applicant’s position by being excessively technical about the rules (McTear v Engelhard).
• Don’t actively oppose the application in the absence of prejudice: Opposing the application without a real prospect of persuading the judge to refuse relief can result in an adverse costs order (Freeborn v Marcal).
• Focus on loss of court time or hearing date: This is the vital factor in many of the cases. The judge has to consider the consequences of the breach for the court administration as a whole and not just for the parties (Falmouth House Ltd v Abou-Hamdan). Where the breach has had no effect on the timetable nor caused prejudice, relief may be granted even where the breach is serious (Mott v Long ).

Tips for both sides

There is a serious shortage of judges. Court time is at a premium and parties who waste it cannot expect a sympathetic response from the judge. The range of acceptable outcomes in an application for relief from sanctions is much wider than you think and an appeal is almost certain to fail. It is therefore critical to get the judge on your side from the outset by setting out your case carefully in correspondence as soon as an extension of time is sought or the breach occurs, whether or not the breach is yours.

Anything that smacks of aggressive posturing on either side will be counterproductive whereas tenacious courtesy pays dividends. Being slow to issue an application and less than candid about the reason for the default, particularly if your story changes, is the road to failure, or at least to a disadvantageous costs outcome.