Thevarajah v Riordan & Ors [2015] UKSC 78

The appellants failed to comply with an 'unless' order requiring disclosure, leading to a debarring order. After their first application for relief from sanctions failed, they made a second application before another judge. The Supreme Court held that CPR 3.1(7) required a material change of circumstances, which was absent.

Facts

The respondent, Mr Thevarajah, entered into an agreement with the appellants to purchase shares in Prestige Property Develper UK Ltd, paying £1.572m. He sought specific performance and obtained a freezing order from Arnold J on 17 May 2013, which required the appellants to disclose information and documents relating to all their assets, including bank statements going back to 1 October 2010.

The appellants failed to comply with the disclosure requirements. On 21 June 2013, Henderson J made an ‘unless’ order, finding the appellants’ disclosure to be

in many respects seriously inadequate

and identifying the failure to disclose full bank statements as a

particularly glaring omission

. The order provided that, in default of compliance by 1 July 2013, the appellants would be debarred from defending.

The appellants did not fully comply. On 9 August 2013, Hildyard J refused the appellants’ first application for relief from sanctions under CPR 3.9 and made a debarring order. He held there had been

substantial failures to comply with the ‘unless’ order

and that the failure was not de minimis. No appeal was brought against this order.

On 2 October 2013, one day before trial, having instructed new solicitors, the appellants issued a second application for relief from sanctions, supported by an affidavit purporting to provide full disclosure. Mr Andrew Sutcliffe QC, sitting as a Deputy High Court Judge, granted relief, holding that any breach was de minimis and that compliance now constituted a sufficient change of circumstances. The Court of Appeal reversed his decision and restored the debarring order.

Issues

The Supreme Court considered: (i) whether CPR 3.1(7) applied to a second application for relief from sanctions following an earlier refusal, such that the appellants needed to establish a material change of circumstances; and (ii) if so, whether the appellants’ alleged subsequent compliance with the ‘unless’ order constituted such a material change.

Arguments

Appellants

Mr Letman contended the Court of Appeal erred (i) in holding the appellants needed to establish a material change of circumstances under CPR 3.1(7), and (ii) in the alternative, in holding that subsequent compliance with the ‘unless’ order was not a material change.

Respondent

The respondent contended the second relief application was an abuse of process, that CPR 3.1(7) applied, that there had been no material change of circumstances, and that the appellants remained in breach of the ‘unless’ order in any event.

Judgment

Lord Neuberger, giving the unanimous judgment, dismissed the appeal.

On the first issue, the Supreme Court held that CPR 3.1(7), which gives the court power to vary or revoke an order, applied to the second relief application. As a matter of ordinary language, the Deputy Judge was being asked to vary or revoke Hildyard J’s order. Following the guidance in Tibbles v SIG plc [2012] 1 WLR 2591 and endorsed in Mitchell v News Group Newspapers [2014] 1 WLR 795, such discretion is normally exercisable only where there has been a material change of circumstances, misstatement of facts, or manifest mistake.

Lord Neuberger held that, even if CPR 3.1(7) did not apply, the same hurdle would apply as a matter of ordinary principle, citing Buckley LJ in Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 WLR 485:

Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter.

On the second issue, the Court rejected the contention that subsequent compliance amounted to a material change. Where a party is subject to a debarring order for failing to comply with an ‘unless’ order within a specified period and relief is refused while the party is still in default, mere late compliance cannot constitute a material change of circumstances. To hold otherwise would be inconsistent with the reasoning of the court that refused the first relief application. Late compliance might suffice if accompanied by other facts (such as an inheritance enabling payment, or a liquidator’s intervention), but no such explanation was offered here.

Furthermore, the Deputy Judge was not entitled to find that any breach was de minimis or that the appellants’ former solicitors were partly to blame, as Hildyard J had already found otherwise on essentially the same facts, and the evidence regarding the former solicitors was very slight. The eight-week delay in making the second application, with no satisfactory explanation, was a further difficulty.

Implications

The decision affirms that a party who has unsuccessfully applied for relief from sanctions cannot make a fresh application before another judge simply because circumstances are reconsidered. CPR 3.1(7) requires a material change of circumstances, misstatement of facts, or manifest mistake before an earlier interlocutory order may be revisited.

Importantly, the judgment establishes that subsequent compliance with an ‘unless’ order, after relief from sanctions has been refused while the party was still in default, cannot by itself amount to a material change of circumstances. Otherwise, the second court’s reasoning would be necessarily inconsistent with the first court’s. The Supreme Court did, however, leave open the possibility that late compliance accompanied by other significant facts (such as a genuine subsequent change enabling compliance) might in principle qualify.

The decision reinforces the strict approach to enforcement of court orders following Mitchell and Denton v TH White [2014] 1 WLR 3926, and is significant for practitioners advising clients subject to debarring orders. It also emphasises the importance of obtaining approved transcripts of relevant judgments when making subsequent applications. The decision matters principally to litigants subject to ‘unless’ orders and debarring sanctions, confirming that finality attaches to refusals of relief from sanctions absent a genuine material change of circumstances.

Verdict: Appeal dismissed. The Supreme Court upheld the Court of Appeal’s decision to restore the debarring order made by Hildyard J, holding that the Deputy Judge had no proper basis to entertain the second application for relief from sanctions on its merits in the absence of a material change of circumstances.

Source: Thevarajah v Riordan & Ors [2015] UKSC 78