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Marcan Shipping (London) v Kefales & Another, Court of Appeal, 17 May 2007

31 May 2007
The issues

Unless Orders – failure to comply with Unless Order – whether any further order necessary.

The facts

Marcan Shipping began proceedings in 2004 against the Defendants seeking damages for the wrongful termination of a general agency agreement alleged to have been made orally in 1982. The claim was denied. The matter came before the Court for case management on 31st October 2005 when directions were given leading to a Trial commencing on a date to be fixed but not before 6th June 2006. It was subsequently fixed for the 3rd July 2006. Subsequently an order was made vacating that Trial date and directing that issues relating to liability only should be determined at a Trial on the 16th October 2006. The Judge making that order also ordered the parties to give further disclosure of documents relating to matters in issue. Marcan failed to comply with the order of the Judge and the matter came back before the Court on the 21st July 2006 when an Unless Order was made that unless disclosure was given by 26th July 2006, “the Claimant’s claim shall be dismissed and it is ordered and adjudged that the Claimant’s pay the Defendant’s costs on an indemnity basis such costs to be assessed if not agreed”. On the 26th July the Claimant served a List of Documents which was materially defective. On the 28th July the Defendant’s made an application to the Court for an order that the claim be dismissed and that the Appellant be adjudged liable to pay the Respondent’s costs on an indemnity basis. That application was supported by witness statement made by the solicitor acting. On the 5th September, the application came before the Judge who made the Order accordingly. The Claimant appealed.

The decision

CPR Rule 3.1 (3) (b) expressly gives the Court the power when making an order to specify the consequences of failure to comply with its rules. Rule 3.8(1) expressly provided that where a party had failed to comply with an order any sanction imposed by the order had effect unless the party in default applied for and obtained relief from the sanction. No further order was therefore required to render the sanction effective. The onus was on the defaulting party to take steps to obtain relief. Notwithstanding two previous decisions of the Court of Appeal, namely Carlco Ltd v Chief Constable of Dyfed Powys Police (which the Court doubted) and Keen Phillips v Field (which the Court distinguished) it should now be clearly recognised that the sanction embodied in an “Unless” Order in traditional form took effect without the need for any further order if the party to whom it was addressed failed to comply with it in any material respect. There was no requirement for the Order to be “activated” by a further Order. If an application to enter Judgment were made under Rule 3.5(5) the Court’s function was limited to deciding what order should properly be made to reflect that sanction which has already taken effect. Unless there was an application for relief by the defaulting party or unless the Court decided for some exceptional reason that it should act on its own initiative, the question whether the sanction ought to apply did not arise. If a defaulting party wished to escape the sanction it was obliged to apply for relief under Rule 3.8 and any such application must deal with the matters that the Court was required to consider under Rule 3.9.

In this case the Defendant argued that the sanction had taken effect when the Claimant failed materially to comply with the Order. They were therefore entitled to obtain Judgment in their favour but since the party in default had been the Claimant it was necessary for the Defendant to make an Application to the Court in order to do so – see Rule 3.5(5).

In so far as the Judge had approached this matter as if it were an application under Rule 3.4(2)(c) to strike out the claim for failure to comply with an Order from the Court, he had taken the wrong approach. However the Order made by the Judge was right in all the circumstances even though he should not have approached the matter in the way he had done so.

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