Factual and Procedural Background
The Plaintiff resides in a basement flat with underground vaults in a London location. In early March 2020, the local highway authority appointed the Defendant, Company A, to conduct road resurfacing works in the area. A flyer was distributed to local residents, including the Plaintiff, warning that the basement vaults were the responsibility of the property owner and that neither the service provider nor the authority would be liable for water ingress damage.
The Plaintiff’s vault had been tanked in 2016 with a remaining warranty. Following receipt of the flyer, a representative visited the Plaintiff’s property and indicated the vault was adequately waterproofed. During the works, the Plaintiff alleged severe disturbance and discovered cracks forming in the vaults, followed shortly by water ingress after rainfall.
The Plaintiff made a claim against Company A. The Defendant’s insurer appointed a loss adjuster who admitted liability for accidental damage caused, effectively conceding negligence. However, as the claim amount increased substantially and the Plaintiff failed to provide adequate evidence, the insurer withdrew the admission of liability due to frustration with the Plaintiff’s conduct. It was accepted that Company A was entitled to withdraw the admission under the rules at the time.
The claim form was issued in May 2023 and served on the Defendant’s solicitors. The claim named two defendants, but the claim against the local authority was struck out and is not appealed. Due to the claim being issued in the Commercial Court, the Plaintiff was required to serve Particulars of Claim within 28 days of an acknowledgement of service. The Defendant filed an acknowledgement in June 2023, making the deadline early July 2023. Particulars of Claim were not served on time.
The Defendant’s solicitors notified the Plaintiff’s solicitors of the failure to serve Particulars, but no response was given. An application to strike out the claim was made and granted by a judge without a hearing in July 2023. The Plaintiff applied to set aside this order in August 2023 and eventually served the Particulars of Claim in September 2023.
The matter came before a judge who applied the Denton principles for relief from sanctions. The judge found the failure to serve Particulars was a serious breach with no good reason but granted relief from sanctions, setting aside the strike-out order and extending time for service. The judge placed weight on the previously withdrawn admission of liability and considered the Plaintiff’s case on liability to be very strong. The case was transferred to a different court, and the Plaintiff was ordered to pay the Defendant’s costs, which led to a stay of the claim pending payment.
Legal Issues Presented
- Whether the judge was entitled to conclude that the Plaintiff’s case appeared very strong on the material available, justifying relief from sanctions despite the failure to serve Particulars of Claim on time.
- Whether the merits of the underlying claim should be taken into account in assessing relief from sanctions.
- Whether the judge fairly balanced the factors for and against granting relief from sanctions.
Arguments of the Parties
Appellant's Arguments
- The judge applied the wrong test by relying on a withdrawn admission of liability and assessing whether the claim was "very strong" rather than whether it met the summary judgment test.
- It was unjust for the judge to consider the merits at all, as the Plaintiff did not argue that the merits met the summary judgment threshold or were very strong in the relief from sanctions application.
- The judge unfairly balanced the factors and should have refused relief from sanctions.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Denton v T.H. White Ltd [2014] EWCA Civ 906 |
Three-stage test for relief from sanctions (seriousness of breach, reason for breach, all circumstances). |
Applied to assess whether relief from sanctions should be granted for late service of Particulars of Claim. |
| FXF v English Karate Federation Ltd [2023] EWCA Civ 891 |
Categories of cases where relief from sanctions applies, including where striking out is a sanction for non-compliance. |
Confirmed that relief from sanctions was required because striking out resulted from failure to serve Particulars of Claim. |
| Global Torch Ltd v Apex Global Management Ltd (No. 2) [2014] UKSC 64 |
General rule that merits of underlying claim are irrelevant in case management decisions, except where summary judgment is clearly justified. |
Held that the merits should not have been considered without prior notice and that relief from sanctions should not turn on the merits unless summary judgment threshold is met. |
| R (Hysaj) v Secretary of State for the Home Department [2014] EWCA Civ 1633 |
Merits are relevant to relief from sanctions only if the case is very strong or very weak, i.e., summary judgment test. |
Supported the principle that merits should not be deeply investigated in relief from sanctions applications. |
| HRH Prince Abdulaziz Bin Mishal Bin Abdulaziz Al Saud v Apex Global Management Ltd [2014] UKSC 64 |
Reiterated that assessing merits in procedural applications is generally inappropriate except in summary judgment cases. |
Reinforced that detailed merits assessment in relief from sanctions is undesirable and inconsistent with procedural reforms. |
Court's Reasoning and Analysis
The court analysed the application of the Denton principles, agreeing with the lower judge that the failure to serve Particulars of Claim on time was a serious breach without good reason. However, the judge erred by considering the merits of the Plaintiff’s claim in detail without prior notice, relying heavily on a withdrawn admission of liability and concluding the claim was very strong on liability.
The court emphasised the established principle that merits are generally irrelevant in case management decisions such as relief from sanctions, except where a party clearly demonstrates a case strong enough to obtain summary judgment. The Plaintiff’s solicitors had not given prior notice that the merits would be relied upon in this way, nor had they advanced an argument that the claim met the summary judgment test during the relief from sanctions hearing.
Consequently, the Defendant was denied a fair opportunity to respond to the merits-based reasoning, causing injustice. Since the judge’s decision to grant relief from sanctions was decisively influenced by his view of the merits, the appellate court concluded that the relief was improperly granted.
The court noted that had proper notice been given, the Defendant could have adduced evidence to challenge the summary judgment threshold. The court also rejected the argument that the judge unfairly balanced the factors, stating that if proper procedure had been followed, the judge’s discretion was not to be interfered with.
Holding and Implications
The court ALLOWED THE APPEAL, set aside the order granting relief from sanctions, and restored the original strike-out order against Company A.
The direct effect is that the claim against Company A remains struck out due to failure to serve Particulars of Claim in time. No new precedent was established beyond reaffirming the established principles regarding the irrelevance of merits in relief from sanctions applications absent clear notice and the summary judgment exception.