Introduction
The Court of Appeal’s decision in Taha Pharmaceuticals v Capsugel Belgium NV [2026] EWCA Civ 38 is a firm reminder that relief from sanctions remains an exceptional remedy where a party has failed to comply with a serious Unless Order.
The case arose from the claimant’s failure to provide security for costs in accordance with an Unless Order made in January 2025. When the claimant later sought to reinstate the claim and obtain relief from sanctions, that application was refused. Permission to appeal was then refused by the Court of Appeal, which held that the proposed appeal had no real prospect of success.
The decision is significant not simply because relief was refused, but because it shows how the courts will apply the Denton framework in a context where a party has already been given multiple opportunities to comply. It also illustrates the limits of relying on other relief from sanctions authorities, such as Michael v Lillitos [2019] Costs LR 1615, where the factual context is materially different. The case affirms that the existence of a bona fide claim will not, by itself, justify relief where procedural default has been serious and sustained.
Denton Test
The applicant relied on CPR 3.9, which governs applications for relief from sanctions however their efforts to show this were fruitless due to the evidence that was presented to the Court. Coulson LJ adroitly broke down why the applicant could not rely on the arguments submitted for the discretion of the court to review by taking on the three-stage approach in Denton & Others v TH White Limited [2014] 1 WLR 3926. Those stages are:
- First, the court assesses the seriousness and significance of the breach.
- Secondly, it considers why the default occurred.
- Thirdly, it evaluates all the circumstances of the case so as to deal justly with the application on whether or not the relief should be granted, including the factors set out in CPR 3.9(a) and (b).
Coulson LJ made clear that the first instance judge had expressly directed himself by reference to Denton and had addressed each of its three stages. Coulson LJ also found that, the first stage of Denton, the breach was serious and significant “of the highest degree” [23].
Secondly, he found that the default occurred because of a lack of diligence on the applicant’s part for which there was no reasonable justification. The applicant argued that the default was not really its fault, maintaining that Tunisian currency controls and the stance of the Central Bank or Ministry of Finance had made compliance impossible. The Court of Appeal rejected that analysis. Coulson LJ held that the first instance judge had been entitled to find that the problem was not impossibility, but lack of diligence. He pointed to the applicant’s casual and desultory approach to the security issue, its failure to keep the defendant and the court informed, and its unsatisfactory attempts to obtain the necessary authorisation. He also endorsed the judge’s criticism of the applicant’s conduct in describing the defendant to the Ministry as a fraudulent company, observing that this was not the conduct of a party genuinely trying to secure approval for the transfer of funds. [26-38]
It is at the third stage that the judgment is especially instructive. The applicant’s primary submission was that the judge had failed properly to evaluate “all the circumstances” and had effectively treated the stage two finding as determinative. The Court of Appeal firmly rejected that submission. Coulson LJ held that, read fairly and in context, the judge’s reasoning showed that he had the wider circumstances very much in mind. His statement that his assessment of the relevant circumstances was “provided above” was not an omission, but a reference back to the detailed factual and procedural history.
That history included repeated failures to comply with security obligations, long periods of delay, unpaid costs orders, inadequate communication with the court and the defendant, and an overall picture of a claimant seeking to pursue litigation without shouldering the financial burdens that the court had ordered it to bear. [29]
The Court of Appeal also made clear that Michael v Lillitos did not assist the applicant. In Michael, the breach was at the bottom of the range of seriousness, did not prevent the litigation from being conducted efficiently and at proportionate cost, and there was no underlying breach of a rule or previous court order. There was also a particular factual feature in the appellant’s favour, namely that a cheque for three months’ rent had already been held by the respondent’s solicitors for some time without any indication that it would be rejected. Taha was therefore a very different case. [22]
What Is an Unless Order?
An Unless Order is a conditional order which provides that, unless a party complies with a specified obligation by a stated date, a stated consequence follows automatically. In Taha, the judge required the claimant to provide further security for costs in the sum of £800,000 by 4 pm on 21 May 2025. If that did not happen, the claimant was required by the same deadline to provide £50,000 by way of interim security and make an application, supported by evidence, for an extension of time. If it failed to do that, the claim would be struck out. [7.1- 7.2]
The Court of Appeal emphasised that the making of the Unless Order, and the reasons for it, were of central importance. That was partly because, as a general rule, the court will not reconsider or reopen the proportionality of the Unless Order itself when dealing with an application for relief from sanctions [10]. Relying on the authority in The Commissioner of Police of the Metropolis v Abdulle [2015] EWCA 1260, Coulson LJ made clear that the applicant could not use CPR 3.9 as a backdoor route to challenge the proportionality of the order once the breach had occurred.
That point matters because the judge had already balanced the relevant considerations when making the Unless Order in January 2025. He expressly recognised that the court did not wish to stifle a genuine claim because of genuine difficulties in providing security. However, he found that this was not such a case. The evidence showed that the applicant had been slow to engage with the issue of security and slow to advance positive proposals. The Unless Order was therefore made in the knowledge that the claim might later be struck out if there was further non-compliance. [34]
What Is Security for Costs?
Security for costs is a mechanism that “requires a party to pay money into court or provide a bond or guarantee as security for their opponent’s costs” (CPR 25.26). This is particularly important as it is intended to protect individuals such as defendants who did not expect to incur such costs, whereas claimants are generally more prepared to enter litigation. It therefore acts as a safeguard against the risk that a defendant may successfully defend the claim, obtain a costs order, and still be unable to recover those costs from the claimant.
In Taha, this issue had already arisen before the Unless Order was made, as the claimant had previously been ordered to provide security and had failed to do so adequately. Although £200,000 was eventually provided, that sum was accepted to be insufficient. It was against that background that the court ordered further security in the sum of £800,000, while also giving the claimant the opportunity to provide £50,000 by way of interim security and apply for an extension of time. This showed that the court was not acting unfairly or precipitously but was instead giving the claimant a further opportunity to comply before the sanction of strike out took effect.
What Is Relief from Sanctions?
Relief from sanctions is the procedure by which a party asks the court to be released from the consequence of failing to comply with a rule, practice direction or court order. In practical terms, it is an attempt to avoid the sanction that would otherwise follow from procedural default. In Taha, this was the route by which the applicant sought to escape the consequences of breaching the Unless Order. That application failed because, for the reasons already considered under the Denton framework, the court was not persuaded that the breach should be excused.
What the Decision Tells Us
The decision shows that the court’s approach to litigation discipline remains exacting where a party breaches an Unless Order tied to security for costs. It also confirms that, although Denton requires a structured and fact-sensitive exercise, that structure will not assist a party whose default forms part of a wider pattern of delay and non-compliance. Taha is therefore not a case in which relief was refused simply because an Unless Order had been breached. Relief was refused because, once the court examined the seriousness of the breach, the explanation for it, and the wider procedural history, there was no persuasive basis for indulgence.
Practical Implications
For litigants, the decision is a reminder that an Unless Order is not merely a warning, but a procedural line in the sand. A party that cannot comply must engage with the problem early, communicate properly with the court and the opposing party, and, where appropriate, apply in time for an extension or variation supported by proper evidence. What Taha makes clear is that the court is unlikely to be sympathetic where the party has failed to use the procedural routes already built into the order itself. The decision also narrows the usefulness of comparisons with cases such as Michael v Lillitos. As Coulson LJ explained, Michael involved a breach near the bottom of the range of seriousness, no underlying breach of a prior rule or court order, and a factual feature that materially favoured the applicant. Taha sat at the opposite end of the spectrum.
What gives the decision its wider significance is that it preserves the practical force of the security for costs regime. If the existence of a bona fide claim were enough, on its own, to justify relief after breach of an Unless Order, the regime would be seriously weakened. Parties could resist compliance, prolong the litigation, and still argue that strike-out would be disproportionate simply because the underlying claim was arguable. Coulson LJ’s judgment rejects that logic. In doing so, it reinforces the point that CPR 3.9 is not a mechanism for avoiding the commercial and procedural consequences of deliberate or sustained default, but a discretionary remedy to be granted only where justice genuinely requires it.
