Today the Supreme Court has addressed the vexed question of post-Mitchell relief from sanction for the first time.

Perhaps surprisingly, Lord Neuberger said that “nothing in this judgment is intended to impinge on the decision or reasoning of the Court of Appeal in Mitchell v. News Group Newspapers Ltd [2013] EWCA Civ 1537, [2014] 1 WLR 795 or Denton v TH White Ltd [2014] EWCA Civ 906.

This may disappoint many who were looking for authoritative guidance, but the crucial point decided seems, whatever the majority may have said, to be something of a departure from the widely understood effect of the Court of Appeal decision in Denton.

Denton set out a three stage process, the final stage being to consider “all the circumstances of the case, which involved principally the efficiency of the Court process and enforcing compliance with court orders”. There appeared to be no place at that stage for a consideration of the merits. Indeed, the Denton appeal itself was allowed expressly because the Judge appeared to have allowed himself to be influenced by the merits of the case of the applicant for relief and many took the view that there was no place for a review of the merits at that stage.

The Supreme Court has now decided that merits can be taken into account but only in “exceptional cases” where the applicant for relief has a case sufficiently strong to justify summary judgment in its favour.

In making this decision, Lord Neuberger commented at paragraph 30 that “it would be thoroughly undesirable if, every time the court was considering the imposition or enforcement of the sanction, it could be faced with the exercise of assessing the strength of the parties’ respective cases: it would lead to such applications costing much more taking up much more court time than they already do… Unless the court could be quickly persuaded that the outcome was clear, it would refuse to consider the merits.”

Whilst it may indeed prove to be an exceptional case in which relief is granted on this basis it is anticipated that it will be a relatively unusual application for relief that does not seek to use this argument. Whilst it may prove to be a relatively rare case in which this successfully leads to relief from sanction, and it may be that courts will deal with the point swiftly, there must be a real risk that the preparation and review of evidence on the merits is likely to prove a very costly feature of such applications.

In Denton, the Court of Appeal set out a three-stage approach to be applied in applications for relief from sanctions under CPR r. 3.9.

Stage 1: Was the breach that gave rise to the sanction “serious or significant”.

Stage 2: Did the reason(s) for the breach suggest that the sanction ought not to be applied. It is notable that, in light of the facts before him, Lord Neuberger warned at paragraph 23 that “if the disobedience continues notwithstanding the imposition of a sanction, the enforcement of the sanction is almost inevitable.”

Stage 3: The court must then consider all of the circumstances of the case in order to deal with the application for relief “justly”. The rule specifies two factors: the need for litigation to be conducted efficiently and at proportionate cost; and the need to enforce compliance with rules, practice directions and orders.

The Supreme Court has now clarified that the merits of the applicant’s case can be taken into account, but only in in “exceptional cases” where the merits are strong enough to obtain summary judgment. Lord Neuberger stated;

Para. 29 - “In my view, the strength of a party’s case on the ultimate merits of the proceedings is generally irrelevant when it comes to case management issues… The one possible exception could be where a party has a case whose strength would entitle him to summary judgment... In my view, the general rule is justifiable on both principled and practical grounds.”

Para. 31 – “In principle, where a person has a strong enough case to obtain summary judgment, he is not normally susceptible to the argument that he must face a trial. And, in practical terms, the risk involved in considering the ultimate merits would be much reduced: the merits would be relevant in relatively few cases, and, in those cases, unless the court could be quickly persuaded that the outcome was clear, it would refuse to consider the merits. Accordingly, there is force in the argument that a party who has a strong enough case to obtain summary judgment should, as an exception to the general rule, be entitled to rely on that fact in relation to case management decisions.”

In this case, the Appellant did not do enough to satisfy the Supreme Court that the merits of his defence to the claim in respect of which judgment had been entered against him would have justified summary judgment in his favour and so, after considering the merits, the Supreme Court dismissed the appeal (Lord Clarke dissenting).

Those looking for authoritative guidance will be frustrated that at paragraph 39, Lord Neuberger said that he had expressed himself at paragraph 31 in “tentative terms” and did not specifically address the Denton judgment.

Notwithstanding that, however, the fact is that the Supreme Court did consider the merits of the claim put forward by the applicant for relief. It is likely to be a brave first instance Court that concludes that the merits have no place at Denton Stage 3.

Indeed, in a decision handed down last week, Flaux J in Talos Capital Ltd v JSC Investment Holdings XIV Ltd QBD (Comm) (2014) took the merits into account when refusing to allow a challenge to jurisdiction to be made out of time. This was analogous to a relief from sanction and, because the application was likely to fail, he refused the application.

Finally, there will also be those who will be disappointed that an application for relief from sanction was even considered by the Supreme Court. The powerful arguments that such matters ought to be dealt with finally by the Court of Appeal were given lukewarm support in the Supreme Court. Although Lord Neuberger took the view that “issues [of case management] are primarily for the Court of Appeal to resolve”, there was certainly no clear guidance to the effect that the Supreme Court should not be available on such matters. Once again, the decision is likely to encourage further applications and the fact that the opportunity to give clear guidance was not taken is likely to result in much cost and delay seeking the rather more Delphic clarification arising on refusal of permission to appeal to the Supreme Court.

HRH Prince Abdulaziz Bin Mishal Bin Abdulaziz Al Saud v (1) Apex Global Management Ltd and another [2014] UKSC 65