This decision of the Chancery Division applies the recent relief from sanction clarification case of Denton v T.H. White Ltd  EWCA Civ 906 in the context of failure to serve an amended Notice of Funding.
The Claimant issued a claim for passing off and trade mark infringement on 24 March 2010. The trade mark issues were stayed, but the Claimant obtained judgment on liability in respect of the passing off claim on 1 March 2012. When the Claimant issued proceedings, they entered into a CFA with their solicitor, who in turn entered into a CFA with Counsel (the “First CFAs”). The Claimant served a Notice of the First CFAs and ATE policy in Form N251 in or around the time they first served the Claim. However, in the run up to trial, the Claimant entered into new CFAs with their solicitors and Counsel (the “New CFAs”). The New CFAs provided for, inter alia, 100% success fees. The Claimant’s solicitors did not notify, by Form N251 or otherwise, the Defendants of the New CFAs. However, they did warn the Defendants of an increase in the success fee in an earlier Part 36 offer. The Defendants argued that because notice of the New CFAs was not given and in fact superseded the First CFAs, then the Claimants were not entitled to recover the success fee. The Claimant applied for and was granted relief from sanction. The Defendant appealed.
Although the Claimant should have filed new Notices of Funding (as the information in the form originally served was out of date), the Court held that it was important to note that the only additional information the Defendants would have obtained would be the fact of the new CFAs and the dates they were entered into. There was no right for the Defendants to be notified of either the terms of the CFA or the level of success fee.
Applying the guidance given in Denton v T.H. White Ltd  EWCA Civ 906 the Chancery Division applied the three stage test to determine whether relief from sanction should be granted. It was held that the Claimant’s failure to provide notice of the New CFAs was neither serious nor significant as it did not imperil future hearing dates, or otherwise disrupt the conduct of the litigation. The breach did not make any difference to the Defendants’ position. They were aware CFAs had been entered into, but did not know and had no right to know of the level of success fee. This position would not have changed had the Claimant provided the correct Notice of Funding. The Court confirmed that just because the CPR provided an express sanction for failure to comply with a rule did not mean that to breach it was automatically serious and significant.
In relation to the reason for non-compliance, it was held that even if a slip, mistake or oversight was a bad reason, it did not automatically follow that relief should be refused. The Court confirmed that it should consider all the circumstances of the case to deal with the Application justly. Of significance here was the fact that the Claimant warned the Defendants that the success fee was to increase, even if it did not provide a formal Notice of Funding.
This matter applies Denton specifically to cases where a Claimant may have failed to provide new Notices of Funding when the terms of funding have changed. It emphasises that, where a breach of the rules may have occurred but compliance would not have placed the Defendant in a different position, then the breach is unlikely to be serious or significant. The decision confirms that the Courts are unlikely to look favourably on opportunistic Applications and are now looking to avoid satellite litigation. Relief from sanction Applications should be the exception rather than the norm.
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