Inadequate Explanation, No Relief: A Reminder Of The Potential Tough Consequences Of Failing To Comply With A Court Order

The High Court has refused an application for relief from sanctions in relation to a failure to comply with an unless order for the payment of costs arising from a failed interlocutory application: Consult II SRO v Shire Warwick Lewis Capital Ltd [2019] EWHC 286 (Comm).

In refusing to provide relief from sanctions, the court has provided a timely reminder of the need for a party seeking relief to provide detailed and cogent evidence as to why the relevant failure has occurred. Where the breach is a failure to pay a costs order, and the applicant seeks to rely on an inability to pay, the court will expect full and frank disclosure of the applicant's financial position, including the prospects of raising the necessary funds.

It is worth noting in particular the court's comment that the standard of evidence required to explain a failure to comply, on an application for relief from sanctions, should be no lower than the standard expected when the court decides whether to impose a sanction in the first place.

Alex Sharples, a senior associate in our disputes team, outlines the decision below.

Background

Factual background

The claimants brought a claim against the defendants alleging, amongst other things, conspiracy to defraud and fraudulent misrepresentation. They sought damages of €4,448,416.24.

In April 2018, the court granted a freezing injunction against several of the defendants. In August 2018, the defendants applied to discharge or set aside the freezing injunction. The application was dismissed and the court awarded the claimants their costs of the failed application in the sum of £102,700 (payable within 21 days) (the "Costs Order").

No payment was made and on 26 October 2018 the court ordered (by consent) that, unless the defendants paid the claimants' costs of the failed application within 14 days, they would be debarred from defending the proceedings, any defence served prior to that date would be struck out, and the claimants would have permission to obtain judgment in default (the "Unless Order").

Again, no payment was made and the claimants subsequently filed a request for judgment in default pursuant to the Unless Order on 12 November 2018. On 16 November 2018 the claimants also successfully applied to vary the freezing injunction (in light of the defendants' failure to comply with the Unless Order). The effect of these variations was that if the defendants did not apply for relief from sanctions by 30 November 2018 (supported...