In a week when President Trump granted North Korea relief from sanctions, the BVI Court of Appeal followed suit, denying the Appellant in Emmerson International Corp v. Starlex and Sunglet declaratory relief and upholding the Respondents’ relief from sanction as granted by the Court below.
In underlying proceedings the Respondents, having been validly served with an ancillary claim, had failed to file an Acknowledgment of Service or a Defence within the requisite time frame due to a breakdown in communication between the Companies’ agents based in Belize and their officers based in London and Moscow. The Appellant sought declaratory relief to the effect that the Respondents had admitted its claim in full and the Respondents sought relief from such sanction on the basis that their failures had been due to an inadvertent break down of communications.
For relief from sanctions to be granted, all of the preconditions outlined in EC CPR 26.8(2) must be satisfied and the Applicant must show that: (i) the failure to comply was not intentional; (ii) there is a good explanation for the failure; and (iii) the applicant has generally complied with all other relevant rules, practice directions, orders and directions. The failure to satisfy any of these three pre-conditions would be fatal to such an application.
The Court of Appeal considered each of the constituent parts of Rule 26.82(2) in turn and agreed with the Court below that in this case these thresholds had been met. The bases for this decision were that (i) the Respondents’ procedural shortcomings could not have been intentional in circumstances where they did not know that the ancillary claim had been served until after the expiration of the time in which they were required to respond; (ii) the bar for a “good explanation” was relatively high but had been met in this case because a breakdown in communication was explainable where the claim had been served in Belize and the engines of the company were in London and Moscow; and (iii) there was no evidence before the Court of other procedural failures by the Respondents.
Whilst this Judgment will inevitably provide some comfort to those who find themselves facing sanctions having inadvertently failed to comply with a rule, practice direction or order; it is a timely reminder for us all that it is better to remain vigilant and compliant than to rely on the Court’s jurisdiction to grant a relief from sanction.