The Commercial Court has recently considered the costs consequences for parties who oppose applications for relief from sanctions where the underlying breach is found to be trivial and the application warranted.
Lakatamia Shipping Co Ltd (the “Claimant”) brought a claim for $45,854,200.24 against seven defendants, one of which was Nobu Su (the “Defendant”).
The Defendant failed to give disclosure pursuant to original directions made earlier in the proceedings. An Unless Order was made, requiring standard disclosure to be provided by the Defendant on or by 17 January 2014, failing which the Defendant’s Defence and counter-claim would be struck out. Although the Unless Order did not stipulate the time by which the Defendant had to provide disclosure, the Commercial Court Guide prescribes that, in the absence of a specific provision, in such circumstances the deadline shall be 4.30pm. The Defendant, however, understood the deadline to be 5pm and therefore provided standard disclosure to the Claimant at 4:45pm – 15 minutes late.
The Defendant applied for relief from sanctions, which the Claimant opposed, resulting in a half day hearing before the Commercial Court. In accordance with the Court of Appeal’s decision in Andrew Mitchell v News Group Newspapers Ltd  EWCA Civ 1537 (“Mitchell”), Hamblen J considered the Defendant’s breach of the Unless Order to be trivial and accordingly granted relief from sanctions.
Though unsuccessful, the Claimant submitted that the Defendant should pay all the costs of its application since the “need for those costs all flowed from its original default”. It was the Defendant’s contention, however, that the Claimant should pay the bulk of the costs because the Defendant succeeded in its application and the Claimant’s conduct in opposing the application was in all circumstances unreasonable.
Hamblen J considered the bulk of the costs incurred in relation to the Defendant’s application for relief from sanctions related to the hard fought half day hearing. For Hamblen J, the Defendant’s breach was a “clear case for relief in accordance with the guidance given in the Mitchell case” and therefore the contested hearing was unnecessary. Notably, the prior history of non-compliance by the Defendant was not deemed sufficient to justify the sanctions for such a trivial breach.
Hamblen J took the view that the Claimant’s opposition to the Defendant’s application was “unreasonable in all the circumstances”. Hamblen J was unequivocal in denouncing the Claimant’s conduct, noting that “when a party applies for relief from sanctions, the other party should not assume that it is going to get a free costs ride in opposing that application”. The Claimant was accordingly ordered to pay the bulk of the costs of the half-day hearing.
This decision serves as a warning to opportunistic litigants that there will be costs consequences for opposing an application for relief from sanctions where the underlying breach is trivial in accordance with Mitchell.
For further information, please contact Georgina Squire or the Partner with whom you usually deal.