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A windfall win – Denton’s warning

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19/06/2015

Where the stakes are high, a common quandary in litigation today arises where a party spots another’s procedural default. Should a litigator advise his or her client to take advantage of the opponent’s mistake?

Catch 22

On the one hand, could failure to take a procedural point amount to negligence on the part of the legal advisor? On the other, if the point is taken and fails, will the client suffer a penalty for which the advisor could be pursued?

The recent case of Viridor Waste Management Ltd v Veolia ES Ltd [1] clarifies the correct approach.

Case

The claimant (Viridor) and defendant (Veolia) had been parties to a commercial arrangement pursuant to which each paid to the other sums which included an element of tax. When queries as to the correct level of taxation arose, Viridor commenced these unjust enrichment proceedings against Veolia for the return of £27 million and Veolia commenced separate proceedings against Viridor for £32 million.

In these proceedings, following service of the claim form, the parties agreed to extend the time for service of particulars of claim by 28 days to 14 January 2015 to allow settlement negotiations. Then, intending to comply with the agreed, extended deadline, Viridor attempted to serve the particulars on time. An administrative error occurred and the particulars were sent by second class post (not a permitted method of service) and they arrived a day late. Seeking a windfall win, no doubt motivated by the significant sums at stake, Veolia refused to consent to Viridor’s application for an extension of time for service and applied for strike-out.

Correct Approach

Veolia argued that any delay was a significant and serious breach of a court order and the Civil Procedure Rules (CPR) on the basis that a generous extension of time for service of the particulars of claim had already been agreed; any further extension would be tantamount to extending limitation; and the particulars were a serious document. Veolia also maintained that service by second class post was ineffective.

Although one of the main aims of the Jackson Reforms was to encourage and prioritise compliance, Denton [2] clarified that it is inappropriate for litigants or lawyers to opportunistically take advantage of their opponents’ procedural mistakes in the hope that relief from sanctions will be denied and a windfall win will be achieved.

Popplewell J did not, therefore, condone Veolia’s approach. Instead, he clarified the correct approach, even going as far as penalising Veolia, as follows:

  • Denton provides a 3-step test for deciding whether relief from sanctions should be granted:
    • Is the breach serious and significant?
    • Why did the breach occur – was there good reason?
    • In all the circumstances of the case, is relief from sanctions appropriate?
  • What mattered in this case was only that the particulars were in Veolia’s solicitors’ hands by lunchtime on 15 January 2015 instead of on 14 January 2015.
  • Although a procedural rule as to method of service had been breached, ultimately the purpose of that rule was to bring the particulars to Veolia’s attention and that occurred only one day late.
  • The breach was immaterial.  Although the particulars are an important document and although there had already been an extension, a submission that any delay was always serious and significant was unrealistic and contrary to Denton.
  • The default did not cause any real impact on this litigation or other litigation or court users.  No delay or inefficiency had been caused.
  • Rather, Veolia’s tactics had disrupted the litigation.
  • Veolia’s attempt to achieve a windfall win had been opportunistic and would be penalised with a costs award for Viridor on the indemnity basis.

WM Comment

Anyone involved in civil litigation today has a careful line to walk between achieving the best overall outcome for their case or their client, and not falling foul of the compliance and relief from sanctions provisions in the CPR. The Denton case set out how parties should balance the post-Jackson emphasis on compliance with the need to avoid satellite litigation and wasted costs. Viridor v Veolia confirms that the court will not tolerate opportunistic attempts to capitalise on another’s trivial breach.

Solicitors and clients alike should remember that a legal advisor’s duty to his or her client does take account of the fact that all litigants are required to help the court to further the overriding objective, which is to deal with cases justly and at proportionate cost. If you take a bad point or attempt an opportunistic advantage, you may find that you are the party that made the real mistake.

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[1] (2015) QBD (Comm) Popplewell J 22/05/2015 (Lawtel)
[2] Denton v TH White Ltd [2014] EWCA Civ 906, see para. 41

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