Adva Optical Networking Ltd & Anor v Optron Holding Ltd

INTRODUCTION

These proceedings are concerned with allegedly defective in-line socket electrical cables which were ultimately supplied by the principal claimant, ADVA, to BT. BT’s claim against ADVA has been settled, and ADVA seek to pass on the sums paid in consequence of that settlement, on Biggin v Permanite principles, down the supply chain to Optron. Optron in turn pass on the claim to their supplier, Rotronic. There has been a reasonable amount of cooperation between ADVA, Optron and Rotronic, but the last alleged link in the supply chain, A One, have not been so accommodating. That explains why, amongst other things, there are two sets of proceedings.

Rotronic served their Particulars of Claim on A One on 10 March 2017. In consequence, an Acknowledgement of Service or a Defence should have been filed by A One not later than 24 March 2017. Neither eventuated: in the end, it was only by a letter from their solicitors, dated 16 June 2017, that A One even acknowledged the existence of the proceedings, and the claim that had been brought against them.

Although default judgment has not been entered in favour of Rotronic, A One require relief from sanctions, in accordance with r.3.9, if they are to prevent such judgment being entered. I heard A One’s application for relief from sanctions during the case management conference in the two actions (which had already been adjourned for four weeks, because of A One’s late acknowledgement of the claim against them), and promised to provide my ruling no later than 21 July 2017.

OUTLINE CHRONOLOGY

The main proceedings, commenced by ADVA, have been the subject of at least one Standstill Agreement. Pleadings have been exchanged and there have recently been some amendments and consequential amendments, all dealt with by consent. No other steps in the main proceedings have yet been taken. At the CMC, I made directions for disclosure, witness statements and experts’ reports, leading up to a trial fixed for 23 April 2018.

As noted above, Rotronic commenced separate proceedings against A One because they refused to be a party to the Standstill Agreement. Those proceedings were commenced in 2016. On 25 November 2016, an extension of time in respect of the service of the Particulars of Claim (up to 13 March 2017) was granted. The Particulars of Claim were served on 10 March 2017. A One did not respond.

Rotronic’s solicitors wrote to A One in connection with the proceedings on 11 April 2017 and again on 10 May 2017. The second letter strongly advised A One to obtain legal advice “as a matter of urgency”, advice they had first given almost a year earlier, on 18 July 2016. There was no response to either letter. Rotronic’s solicitors wrote again to A One on 25 May 2017, and again there was no response. It was only in June 2017 that A One gave any indication that they had even received the Particulars of Claim and other material from Rotronic and/or their solicitors.

The CMC in both actions was fixed before Carr J on 16 June 2017. On the day of the hearing, A One’s solicitors emailed a letter to Rotronic’s solicitors in which they said that they had only recently been instructed and that they were not yet in a position to deal with the detailed directions. Thus, the first CMC was largely aborted. Carr J ordered that, if A One wanted relief from sanctions, they had to issue their application no later than 23 June 2017. She ordered that any such application should be heard at the re-fixed CMC.

On the last day ordered by Carr J (namely 23 June 2017), A One made an application for an extension of time for service and/or relief from sanctions. It also sought an order setting aside default judgment although, as I have indicated, no such judgment has in fact been entered. A One’s application was supported by a witness statement from Mr Stuart Beatson, a solicitor with Taylors, A One’s solicitors. The statement exhibited, amongst other things, a draft defence. There was a statement in response from Mr John Lovatt, Rotronic’s solicitor.

By the afternoon of the day before the revised CMC (namely 13 July 2017), I had received skeleton arguments from ADVA, Optron and Rotronic, but nothing from A One. My clerk’s enquiries (which were hampered because Taylors had put the incorrect telephone number on their own application form) revealed that they were apparently unaware of the refixed CMC. Mr Ward was instructed and provided a helpful skeleton argument on the morning of the hearing. He did not seek a further adjournment.

THE APPLICABLE PRINCIPLES OF LAW

For present purposes, the relevant parts of the CPR are r.3.9 and r.13.3. They provide as follows:

“3.9

- Relief from sanctions

(1)

On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need—

(a)

for litigation to be conducted efficiently and at proportionate cost; and

(b)

to enforce compliance with rules, practice directions and orders.

(2)

An application for relief must be supported by evidence.

…

13.3

- Cases where the court may set aside or vary judgment entered under Part 12

13.3

(1) The court may set aside or vary a judgment entered under Part 12 if-

(a)

the defendant has a real prospect of successfully defending the claim…”

There was a suggestion in the letter of 16 June 2017, reiterated in Mr Beatson’s statement, that A One did not really require relief from sanctions at all, and that this was a relatively simple application for an extension of time to serve a defence. Mr Ward did not pursue that argument. In my view, he was right not to do so. The correct approach is that a retrospective application for an extension of time to serve or file a document should be dealt with on the same principles as a claim for relief from sanctions: see R (Hysaj) v Secretary of State for the Home Department [2015] 1 WLR 2472.

The leading case on relief from sanctions is, of course, Denton and Others v T H White Limited [2014] 1 WLR 3926. There, the Court of Appeal ruled that an application for relief from sanctions must be addressed in three stages:

There is a plethora of decisions post-Denton, but the vast majority of them turn on their own facts. The only two that I should identify here are Gentry v Miller [2016] 1 WLR 2696, in which the Court of Appeal made plain that the principles relating to relief from sanctions also apply to cases concerned with setting aside default judgment; and Salford Estates (No.2) Limited v Altomart Limited [2015] 1 WLR 1825, where the Court of Appeal allowed relief from sanctions on the basis that, although the delay in question was considerable, it had had little, if any, effect on the course of the proceedings. Paragraphs 22 and 23 of the judgment of Moore-Bick LJ in Salford Estates provide a timely corrective to those who maintain that relief from sanctions should never be granted in cases where there has been a non-trivial breach of the rules.

I should deal at once with the position under r.13.3 and the potential relevance of the test for setting aside judgment in default. In the present case, judgment in default could have been entered against A One. But on the facts, whether judgment had been entered or not is irrelevant because, having been provided with A One’s draft defence Mr Bell, on behalf of Rotronic, sensibly accepts that A One has a realistic prospect of successfully defending the claim. In that way, the test in r.13.3 has been met, and this application becomes a straightforward application of the three stages identified in Denton.

STAGE 1: SERIOUS DEFAULT

In my view, A One’s failure to comply with the rules was serious. Because A One had refused to be party to a Standstill Agreement, Rotronic had had to issue separate proceedings against them. A One then ignored those proceedings, and the Particulars of Claim with which they had been served. Instead of serving a defence at the end of March 2017, they did not provide their draft defence for another three months. I deal with the significance of A One’s default in Section 6 below, when I consider all the circumstances of the case.

STAGE 2: GOOD REASON

In my view, there was no good reason for this serious breach of the rules. In his witness statement (at paragraphs 12 and 14), Mr Beatson suggested that A One did not understand the meaning and effect of the documents with which they had been served and that they could be “forgiven for assuming that something further was to happen before it was required to respond to the Particulars”.

In my view, that was a thoroughly bad point. There was nothing complicated about the principal document which was provided to A One by Rotronic’s solicitors on 10 March 2017. The fact that it was called “Particulars of the Third Party’s Additional Claim Against the Fourth Party” could hardly have been a source of confusion, because Rotronic and A One were expressly named as the third and fourth parties respectively. The fact that A One were also provided with documents in the main proceedings, including Rotronic’s defence to Optron’s claim, was nothing to the point.

Further and in any event, A One’s decision in March 2017 to ignore the Rotronic Particulars of Claim was entirely consistent with their conduct both before and since. That conduct is summarised in paragraph 19 of Mr Lovatt’s statement. It is unnecessary to set out all the examples of A One’s refusal to engage properly or at all with the claim against them, but their defaults include:

STAGE 3: ALL THE CIRCUMSTANCES OF THE CASE

For the reasons set out above, A One’s overall conduct has been very poor. They have not complied with the relevant rules and they have prevented the efficient and proportionate conduct of the claim against them.

However, that negative assessment has to be balanced against two factors which I believe are firmly in A One’s favour and which, on analysis, have led me to conclude that I should, in this case, grant relief from sanctions.

The first point is similar to that which arose in Salford Estates. As I have indicated, the relevant period of delay here is three months. That is a significant amount of time. But as in Salford Estates, that delay has not in fact had any real effect on the course of these proceedings. In the claim brought by ADVA, various amendments were made to the pleadings, which therefore have only just closed. In the Rotronic action, if A One was allowed to defend the claim then, save for a potential reply from Rotronic, the pleadings are also closed. Beyond that, the actions are at a relatively early stage. Disclosure has not yet taken place; indeed, I made specific orders in relation to disclosure at the hearing on 14 July 2017. In addition, at the same hearing, I gave directions leading up to the trial in April 2018. I consolidated the two sets of proceedings and ordered that they should be case managed together.

Thus, if I grant A One relief from sanctions, their default, serious though it has been, will not have caused any delay to the proceedings as a whole. Aside from the costs of the aborted CMC, which I have ordered A One to pay, A One’s default has given rise to no additional costs, and a minimal waste of judicial and court resources. For these reasons, the significance of their default should be regarded as minor.

The second point is this. Mr Ward pointed out that Rotronic’s claim against A One was contingent, because Rotronic’s primary position, back up the supply chain, is a complete denial of liability. Many of the matters they raise, such as their reliance on their terms of business, arguments about the alleged cable failures, and the reasonableness of any settlement, are very similar to the matters raised by A One in their own draft defence. Thus, any judgment in default entered against A One (if relief from sanctions is not granted) would be a contingent judgment only, and would only become relevant if Rotronic’s defence was rejected.

Mr Ward argued that it would be very unsatisfactory in a case of this kind for there to be a contingent judgment in default. He also submitted that such a situation would represent a clear risk to A One going forward: with a judgment in default in their favour, Rotronic might decide not to engage further in the detail of the claim in the main action, knowing that, even if their primary case failed, because of the default judgment, it would be A One who would be picking up the bill.

I consider that this submission has real force. I am uncomfortable about a situation where A One are made the subject of a judgment which, as things presently stand, Rotronic do not need, and which is contrary to Rotronic’s primary case. Unlike the situation in John Page v Champion Financial Management Limited and Others [2014] EWHC 1778 (QB), this is not a situation in which a default judgment against defendant A might impact on the nature of the defence advanced by defendant B. This is a situation where, on Rotronic’s current case, the default judgment which they would obtain would be contrary to their primary position up the supply chain.

Furthermore, Mr Bell’s attempt to address this part of the application only served to persuade me that it would be unfair to hobble A One by not granting relief from sanctions now. He argued that, even if relief from sanctions was not granted and judgment in default was entered against A One, they could still take what points they wanted on quantum, including the argument that any settlement up the line was unreasonable. But I consider that, if A One are still going to be a party to these proceedings, able to argue at least some of the points in their draft defence, it would be artificial to restrict them to points of quantum, whilst preventing them from arguing, for example, that they did not supply the cables in the first place.

Accordingly, having considered all the circumstances of the case, I find that, although A One’s breach was serious, and although there was no good reason for it, the breach did not have a significant effect on the course of these proceedings as a whole. On the particular facts of this case, I am uneasy about allowing judgment in default on a contingent basis. I also conclude that, even if I refused relief, the issues which would continue to involve A One would be so similar to those which would arise if I granted relief, it would be artificial not to grant relief from sanctions. Thus, this is one of those (relatively rare) cases of serious default in which it is appropriate to grant relief from sanctions.

CONCLUSIONS

For the reasons set out above, I grant A One relief from sanctions. They have an extension of time for the service of their defence, in the form attached to Mr Beatson’s statement, up to 21 July 2017.

As already noted, at the hearing on 14 July 2017, there was a separate argument, involving all four parties, as to the costs orders that should be made against A One in consequence of their conduct. I concluded that A One should pay the costs of the first, abortive CMC. I summarily assessed those costs at the end of the hearing.