Late Filing of Defence: ADVA Optical Networking Limited v Optron Holding Limited [2017] EWHC 1813 (TCC)

As promised in a prior case management conference, on 21 July 2017, Mr Justice Coulson handed down judgment in the case of ADVA Optical Networking Limited v Optron Holding Limited [2017] EWHC 1813 (TCC), in which a defendant was relieved from sanctions for failing to file a defence within 14 days of particulars being served on them, as prescribed by the CPR, and granted an extension of time for belated defence filing.

This action concerned the supply of allegedly defective cables to BT by ADVA, which resulted in financial settlement between the parties. Subsequent litigation followed, leading to the present case, whereby the settlement burden was passed along the supply chain, from AVDA to Optron, then to Rotronic and finally to A One Distribution.

Given that A One refused to be a party to a Standstill Agreement in July 2016, on 10 March 2017, Rotronic entered separate proceedings, serving their particulars of claim on A One. Acknowledgment of service or a defence should have been served by 24 March, a fortnight later, but the first correspondence, acknowledging the existence of the claim brought against them, arrived by way of a letter, on 16 June.

A One’s further omissions included:

‘... (b) Failing to respond to the invitation to agree to an extension of time for the service of the Particulars of Claim in October 2016, thereby forcing Rotronic to make an application;

(c) Failing to respond to the invitations to agree to consolidate the two sets of proceedings in February and March 2017, thereby forcing Rotronic to make a further application;

(d) Failing to respond to the letter of 11 May 2017, which amongst other things, notified A One that Master McCloud had ordered them to pay the costs of the unnecessary application to consolidate the proceedings;

(e) Ignoring the letters of 10 and 25 May 2017, noted at paragraph 6 above;

(f) Failing to take any part in the proceedings until Taylor’s letter of 16 June 2017’.

In order to prevent the consequences of a default judgment in favour of Rotronic, which had not yet been ordered, on 23 June, A One made an application for relief from sanctions, and/or an extension of time to serve their defence.

Coulson J reasoned, at paragraph 11, on the grounds of the application, that:

The correct approach is that a retrospective application for an extension of time to serve or file a document should be dealt with on the same principles as a claim for relief from sanctions: see R (Hysaj) v Secretary of State for the Home Department [2015] 1 WLR 2472’.

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As the claimant accepted that the defendant had a realistic prospect of successfully defending the claim, CPR 13.3(1)(a) was satisfied, so the application was only subject to the 3-stage test identified in Denton and Others v T H White Limited [2014] 1 WLR 3926.

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(1) SERIOUS AND SIGNIFICANT BREACH?

At paragraph 15, Coulson J stated:

‘In my view, A One’s failure to comply with the rules was serious. Because A One had refused to be party to a Standstill Agreement, Rotronic had had to issue separate proceedings against them. A One then ignored those proceedings, and the Particulars of Claim with which they had been served. Instead of serving a defence at the end of March 2017, they did not provide their draft defence for another three months’.

(2) GOOD REASON FOR BREACH?

In my view, there was no good reason for this serious breach of the rules’.

It was submitted that ‘A One did not understand the meaning and effect of the documents with which they had been served and that they could be “forgiven for assuming that something further was to happen before it was required to respond to the Particulars”?’, however, the judge came to the decision that this was ‘a thoroughly bad point’, at paragraph 17:

There was nothing complicated about the principal document which was provided to A One by Rotronic’s solicitors on 10 March 2017. The fact that it was called “Particulars of the Third Party’s Additional Claim Against the Fourth Party” could hardly have been a source of confusion, because Rotronic and A One were expressly named as the third and fourth parties respectively. The fact that A One were also provided with documents in the main proceedings, including Rotronic’s defence to Optron’s claim, was nothing to the point’.

(3) ALL THE CIRUMSTANCES SURROUNDING THE BREACH?

Although Mr Justice Coulson surmised that the overall conduct of A One had been ‘very poor’, after having balanced the negative assessment against 2 factors in A One’s favour, he decided to grant relief from sanctions.

Firstly, he applied the authority of Moore-Bick LJ in Altomart Limited v Salford Estates (No. 2) Limited) [2014] EWCA Civ 1408, which permitted relief from sanctions, since ‘non-trivial’ delay, despite being considerable in length, had ‘little, if any, effect on the course of the proceedings.

In ADVA, the relevant period of delay was a significant amount of time (three months). Nevertheless, at paragraphs 21 to 22, the judge explained that:

In the claim brought by ADVA, various amendments were made to the pleadings, which therefore have only just closed. In the Rotronic action, if A One was allowed to defend the claim then, save for a potential reply from Rotronic, the pleadings are also closed. Beyond that, the actions are at a relatively early stage. Disclosure has not yet taken place; indeed, I made specific orders in relation to disclosure at the hearing on 14 July 2017. In addition, at the same hearing, I gave directions leading up to the trial in April 2018. I consolidated the two sets of proceedings and ordered that they should be case managed together.

Thus, if I grant A One relief from sanctions, their default, serious though it has been, will not have caused any delay to the proceedings as a whole. Aside from the costs of the aborted CMC, which I have ordered A One to pay, A One’s default has given rise to no additional costs, and a minimal waste of judicial and court resources. For these reasons, the significance of their default should be regarded as minor.

Secondly, the defendant argued that it would be ‘very unsatisfactory in a case of this kind for there to be a contingent judgment in default’, because ‘the default judgment which they would obtain would be contrary to their primary position up the supply chain’.

At paragraph 23, the judge described Rotronic’s primary position as ‘a complete denial of liability’:

Thus, any judgment in default entered against A One (if relief from sanctions is not granted) would be a contingent judgment only, and would only become relevant if Rotronic’s defence was rejected’.

Held, at paragraph 27:

Accordingly, having considered all the circumstances of the case, I find that, although A One’s breach was serious, and although there was no good reason for it, the breach did not have a significant effect on the course of these proceedings as a whole. On the particular facts of this case, I am uneasy about allowing judgment in default on a contingent basis. I also conclude that, even if I refused relief, the issues which would continue to involve A One would be so similar to those which would arise if I granted relief, it would be artificial not to grant relief from sanctions. Thus, this is one of those (relatively rare) cases of serious default in which it is appropriate to grant relief from sanctions’.

The full judgment can be accessed here.