Indemnity costs following unreasonable refusal to agree relief from sanctions
In Viridor Waste Management Ltd v Veolia ES Ltd (2015) QBD (Comm) (Popplewell J) 22/05/2015 The High Court has sent a stern message to parties who unreasonably resist applications for relief from sanction.
- Where Particulars of Claim are received by the Defendant a few hours after the deadline for service, the default is immaterial.
- Where a party unreasonably and opportunistically refuses to consent to relief from sanctions it is appropriate to award costs on the indemnity basis against that party.
The parties were providers of waste management services who had, for a fee, deposited waste on each other’s sites. The agreed fees had included an element for landfill tax. As a result of unrelated proceedings, the type of waste which was to be treated as a taxable disposal had been redefined. HMRC had invited tax payers to make repayment claims for landfill tax which had been unlawfully paid, which the parties had done; but HMRC had subsequently changed its position in relation to the repayments. Statutory Appeal and Judicial Review proceedings were ongoing in relation to the position adopted by HMRC.
The parties in the instant matter had issued proceedings founded in unjust enrichment against each other. The Claimant had sought £27m in relation to the non-taxable waste, and the Defendant had sought £32m in the same regard.
The Claimant issued its claim shortly before limitation expired and served its Claim Form four days prior to the expiry of the deadline for doing so. The parties agreed a deadline of 14 January 2015 for service of the Particulars of Claim.
Due to an administrative error, the Particulars of Claim were sent by second class post and arrived with the Defendant on 15 January 2015.
The Defendant asserted that service was ineffective as second class post was not a recognised form of service. The Claimant effected service by hand, email and first class post on 19 January 2015.
The Claimant applied for relief from sanctions, which the Defendant opposed.
Defendant’s grounds for resisting
The Defendant argued that:
- Any delay in serving the Particulars of Claim, be it hours or minutes was significant and serious as a generous period for service had been agreed.
- Any extension of time for service would be tantamount to extending the limitation period.
The Court concluded that it was not necessary to determine whether the Particulars of Claim were served on 15 January 2015 or 19 January 2015. What mattered was that the document had been in the hands of the Defendant’s solicitors by lunchtime on 15 January 2015, which was only a few hours after the time permitted for service ended.
The Court went on to hold that the default had not had any real impact on the course of litigation, other litigation or Court users; and the litigation would not have been impacted but for the application. The proceedings had already been stayed for several weeks to allow for negotiations and it was possible that a further stay would be agreed.
Notwithstanding the obvious importance of the Particulars of Claim, the Defendant’s suggestion that any delay was always serious was considered to be unrealistic and not in keeping with the Denton guidance. Moreover, the Court rejected the Defendant’s argument regarding the limitation period.
Relief was therefore granted.
Turning to the issue of costs, the Court concluded that the Defendant had attempted to take unreasonable advantage of the Claimant’s default in the hope of obtaining a windfall strike out. The Court held this was a case where it was obvious that relief was appropriate and the Defendant’s refusal to consent had impacted other Court users.
In the circumstances, the Claimant was awarded its costs of the application on the indemnity basis.
A very clear warning was given in Denton that “heavy costs sanctions should … be imposed on parties who … unreasonably oppose applications for relief from sanctions”. This represented quite a departure from the previous ‘rule of thumb’, which was that the party who was in default would be liable for the costs of the application for relief from sanction.
Viridor is the first reported case in which the Court has visited such sanctions on a party which behaved unreasonably.
It is difficult to view the Defendant’s argument as anything other than opportunistic. However, one would expect that the costs which the Defendant was ordered to pay in relation to the application – even on an indemnity basis – were significantly lower than the £27m claim pursued by the Claimant.
In high-value litigation such as this, it is often commercially appropriate for non-defaulting parties to take arguably weak points in resisting applications for relief because the potential windfall more than outweighs the costs of doing so.
However, it should not be assumed that the non-defaulting party is simply exposed to the costs of the application for relief. Denton makes provision for such circumstances: “if the offending party ultimately wins, the court may make a substantial reduction in its costs recovery on grounds of conduct”.
In Viridor the game was almost certainly worth the candle for the Defendant. However, other litigants who unsuccessfully and unreasonably attempt to resist applications for relief from sanctions may well see themselves facing a more severe punishment than an adverse costs order in relation to that particular application.