Park v Hadi & Anor

Factual and Procedural Background

The Plaintiff seeks damages for breach of contract relating to the sale of a public house business. The Defendants applied to strike out the claim. An initial application to strike out was adjourned with an "unless" order requiring the Plaintiff to take specified steps by a certain deadline. The adjourned hearing was held before a judge who granted the Plaintiff relief from sanctions for breach of the "unless" order and dismissed the Defendants' application. The Defendants appealed, but the appeal was dismissed with reasons reserved. This judgment explains the court's reasons.

In brief, the Plaintiff was the sole shareholder and director of two companies involved in the pub business and lease. The Plaintiff offered the business for sale at £179,000, with the companies in rent arrears. The Plaintiff contended that the Defendants agreed to buy the business for £170,000, with a deposit and payments towards arrears and balance on completion. The Defendants contended the agreed price was £40,000. There were conflicting accounts of meetings and correspondence regarding the terms, payments, and assignment of the lease. The Defendants made a payment to discharge rent arrears, but no other payments to the Plaintiff were made. The Plaintiff alleged the business was acquired for an undervalue, while the Defendants maintained the agreed price was lower and reduced by agreement.

Procedurally, the claim was issued on an unspecified date. The Plaintiff obtained a without notice injunction restraining one Defendant from interfering with his residence, which was later discharged by consent with costs awarded against the Plaintiff. The Plaintiff served Particulars of Claim; the Defendants filed a Defence and Counterclaim, but the Plaintiff did not serve a Defence to Counterclaim. The Defendants applied to strike out and/or summary judgment. At the hearing of that application, the Plaintiff appeared with limited assistance from a McKenzie friend. The court made an "unless" order requiring the Plaintiff to comply with detailed steps by a deadline or face dismissal and costs consequences.

The Plaintiff attempted to comply by email on the deadline day but with some defects including unsigned witness statements lacking proper statements of truth and missing certain bank statements. Technical issues delayed the court processing the documents. The Defendants contended service was defective and late, arguing the claim should be dismissed and costs awarded. At the resumed hearing, the Plaintiff had not formally applied for relief from sanctions nor provided an explanation for non-compliance. The judge considered the issues of dismissal, permission to amend, judgment on the counterclaim, and conditions related to costs and security for costs.

The judge granted relief from sanctions despite no formal application, finding substantial compliance and mitigation for defaults, applying the Denton test. The judge ordered re-issue of witness statements with proper verification and further bank statements. The judge dismissed the Defendants' strike out and summary judgment applications, found the Plaintiff's claim had a real prospect of success, and granted permission to amend. The judge declined to impose conditions requiring payment of outstanding costs or security for costs given the Plaintiff's financial position.

Legal Issues Presented

1. Whether the Plaintiff was entitled to relief from sanctions for breach of the "unless" order despite no formal application being made.
2. Whether the Plaintiff should be allowed to amend the claim form and Particulars of Claim.
3. Whether judgment should be entered against the Plaintiff on the counterclaim.
4. Whether the Plaintiff should be required to pay outstanding costs orders or provide security for costs as a condition of continuing the claim.

Arguments of the Parties

Appellants' Arguments

• The Plaintiff failed to comply with the "unless" order in multiple respects: late and defective application to amend, defective service of witness statements, unsigned statements without proper statements of truth, and failure to provide certain bank statements.
• The judge erred in granting relief from sanctions without a formal application and without supporting evidence.
• The judge misapplied the Denton test, wrongly finding "almost substantial compliance" despite multiple serious failures.
• The judge failed to properly consider the factors in CPR r3.9(1), including efficient litigation and enforcement of compliance.
• The judge should have required payment of outstanding costs or security for costs before allowing the claim to proceed, relying on principles from Michael Wilson and Partners Ltd v Sinclair.
• The Plaintiff provided no cogent evidence of inability to pay the costs orders despite the order requiring such evidence.

Respondent's Arguments

• The Defendants failed to show that the judge exceeded the broad discretion afforded to him in granting relief from sanctions.
• Relief from sanctions can be granted without a formal application and without strict evidential requirements; it is a matter of judicial discretion.
• The Plaintiff's defaults were minor and not deliberate; delays were short and caused no prejudice.
• Mitigating circumstances included language difficulties, pandemic-related working conditions, and technical issues with service.
• The judge was entitled to find the breaches were neither serious nor significant and to grant relief accordingly.
• The judge properly exercised discretion in refusing to require payment of costs or security, given the Plaintiff's evident impecuniosity.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the circumstances under the Civil Procedure Rules and relevant case law. It confirmed that while an application for relief from sanctions is usually made formally with evidence, the court has discretion to grant relief on informal application or of its own motion. Such discretion must be exercised sparingly and consistently with the overriding objective of just and proportionate litigation.

The court found that the Plaintiff had made an informal application for relief from sanctions at the hearing, and the Defendants were not prejudiced by the lack of formal application or evidence. The judge was entitled to consider the informal application on the evidence before him without adjournment for formal evidence.

Applying the Denton test, the judge was entitled to find the breaches of the "unless" order were neither serious nor significant, given the short delay, technical issues, and mitigating circumstances such as the Plaintiff's lack of legal representation and difficulties faced. The deficiencies in witness statements and missing bank statements were not wilful and could be remedied by further orders.

The judge properly balanced the need to enforce compliance and efficient litigation against the interests of justice and the Plaintiff's substantial compliance and mitigation. The judge was entitled to refuse to strike out the claim and to grant permission to amend, given the real prospect of success and the need for trial to resolve factual disputes.

Regarding costs orders, the judge exercised discretion not to require payment or security as a precondition to continuing the claim, based on the Plaintiff's financial evidence showing impecuniosity. The court found no error in this exercise of discretion.

Holding and Implications

The appeal was DISMISSED.

The court upheld the judge's decision granting relief from sanctions despite no formal application, allowing the Plaintiff to amend the claim and continue proceedings. The court confirmed the discretionary nature of relief from sanctions and the flexibility to consider informal applications where no prejudice arises. It also affirmed judicial discretion in refusing to require payment of outstanding costs or security where the claimant is impecunious.

The direct effect is that the Plaintiff's claim proceeds to trial. No new precedent was established; the decision applies established principles to the facts of this case.