After seven months of madness, the Court of Appeal has now handed down a judgment “clarifying and amplifying” its decision in November 2013 (Mitchell v News Group Newspapers Ltd), which the court said has been “misunderstood and….misapplied”. 

In Mitchell, the Court of Appeal decided that breach of a court timetable or rule, unless it was either a trivial breach or there was a good reason for it, was inexcusable and relief from sanctions imposed as a result of the breach would very rarely be given. These principles were then applied in a number of subsequent cases without regard to the proportionality between the consequences of the breach and the nature of the sanction.  The judgment was intended to encourage compliance with court timetables and speed up litigation, but their Lordships had failed to appreciate that this would have completely the opposite effect.  The usual cooperation between opposing parties disappeared as the most insignificant breach of a timetable or the CPR might result in a windfall for the innocent party.  As a consequence, the courts were inundated with a deluge of contested applications where defaulting parties were seeking relief from sanctions.  

In Denton v TH White, the Court of Appeal heard three interlocutory appeals together and pointed out in its judgment that an element of Mitchell - that the court should also look at all of the circumstances of the case when deciding whetehr to grant relief from sanctions- had been overlooked in many of the later cases leading to decisions “which are manifestly unjust and disproportionate”.  Their Lordships maintained that the guidance given in Mitchell was substantially sound, but then went on to restate that guidance. Whether a breach is “trivial” is replaced by whether it is “serious or significant” and the consideration of all the circumstances of the case, the third stage of the Mitchell guidance, has been given far more prominence, with the two factors set out in CPR 3.9 (conducting litigation efficiently / at proportionate costs and complying with rules, practice directions and orders) being downgraded from being of “paramount importance” to only being of “particular importance”.

Background

Denton & Ors v TH White Ltd & Anor concerned three appeals in different cases (Denton, Decadent and Utilise) from decisions regarding applications for relief from sanctions pursuant to CPR rule 3.9. 

CPR rule 3.9 provides that, on an application for relief from any sanction imposed for failure to comply with any rule, practice direction or court order, the court will consider all of the circumstances of the case, so as to enable it to deal justly with the application, including (i) the need for litigation to be conducted efficiently and at proportionate cost and (ii) to enforce compliance with rules, practice directions and orders.  

In Denton, the parties had to serve all their witness statements for use by trial by 27 July 2012, however the claimant served six further statements in December 2013, one month before the date fixed for a 10 day trial.  The judge granted relief from sanctions and allowed the claimant’s additional witnesses to be called to give evidence.  The defendant appealed the decision.

In Decadent, the claimant failed to comply with an order that, unless it paid a court fee by a certain deadline, its claim would be struck-out.  The claimant only sent the cheque for the court fee on the day of the deadline and the cheque was lost either in the DX or at court.  The judge refused relief from sanctions and the claimant appealed. 

In Utilise, the claimant filed a cost budget 45 minutes late, the sanction for which is that the claimant is treated as having filed a budget for only the applicable court fees and therefore its recoverable costs of the case are limited to those fees (and not its actual costs of the litigation).  The claimant was also 13 days late in complying with an order to notify the court of the outcome of negotiations.  In both cases the judge declined to grant relief from sanctions and the claimant appealed.     

Judgment

The Court of Appeal allowed all three appeals.  In doing so, the court considered the principles in Mitchell, and whether they had been correctly applied.    Those principles had previously been interpreted by some judges as providing that, unless a default can be characterised as trivial or there is good reason for it, the court is bound to refuse relief from sanctions.

The Court of Appeal explained that such an approach was wrong.  Although the court explained that the decision in Mitchell was “substantially sound”, it determined that the following, more nuanced, three-stage approach, should be taken:

  1. The court should identify and assess the serious and/or significance of the failure to comply with any rule, practice direction or court order.  If the breach is not serious and/or significant, then relief from sanctions should usually be given.  The court recognised that what is serious and significant varies according to each particular case.  However, it explained that the focus should not be on whether the breach is trivial, as had been the practice following Mitchell.
  2. The court should then consider why the failure or default occurred, and whether there was good reason for it.  Where there is good reason for a serious and significant breach, relief is likely to be granted. 
  3. Finally, the court should consider all the circumstances of the case to enable it to deal justly with the application.  This requires the court to consider the first and second stages in the context of the case as a whole. In addition, the two factors expressly set out in CPR 3.9 should only be given particular importance when considering all the circumstances; they are no longer the paramount considerations. The effect of the breach will need to be considered as may the conduct of the defaulting party should it have committed other unrelated failures in the past.   The promptness of the application will also be a relevant consideration.

In light of the above, the court expressed its concern that some judges had been adopting an unreasonable, and too strict, approach.  The court explained that rules and rule compliance were not to be treated as trip wires but parties should nevertheless seek to comply with them.  The new rule 3.9 was intended to introduce a culture of compliance, not a regime of almost zero tolerance.

Applying the approach set out above, the court held that in Decadent and Utilise the relevant breaches were near the bottom of the range of seriousness.  Although there were no good reasons for the breaches, the breaches themselves did not threaten any future hearing date or the conduct of the litigation.  It was therefore reasonable in all the circumstances to grant relief from sanctions. 

In Denton, the court held that the judge was plainly wrong.  The late filing of the witness statements was a serious and significant breach, because it caused the trial date to be vacated and therefore disrupted the litigation.  There was no good reason for the breach and relief should not have been granted, in light of all the circumstances of the case. 

Finally, the court took the opportunity to discourage parties and their lawyers from taking advantage of mistakes made by opposing parties and acting unreasonably in opposing applications for relief from sanctions.  The court stated that the non-defaulting party should only contest an application for relief from sanctions in exceptional cases and that the court will be more ready in future to penalise opportunism.   The court explained that heavy costs sanctions should be imposed on parties who behave unreasonably in refusing to agree extensions of time or who unreasonably oppose applications from relief from sanctions.  Costs penalties would not be limited to paying for the costs of the application but could include a substantial reduction in costs at the end of the case.

Comment

This decision is most welcome and will help restore a sensible level of cooperation between opposing solicitors that had been seriously eroded by the Mitchell decision.  It is now clear that only serious or significant breaches warrant not granting relief from the imposition of sanctions and that, even then, the reason for the breach or the circumstances of the case may mean that it is unjust to penalise the offending party.  It is hoped that this decision will now pave the way for a consistent judicial approach and a degree of pragmatism, although this will be of little comfort to those litigants who were on the receiving end of a “manifestly unjust and disprortionate” decision in the past few months. 

Litigants should cooperate with reasonable requests, and not use the Mitchell case as a weapon to seek tactical advantage.  Parties that wrongly use Mitchell as that weapon may find that it backfires, and risk being punished by having to pay the defaulting party’s costs of the application or even being penalised on costs recovery at the end of the case. 

Further reading:

Click here to read the judgment in Denton & Ors v TH White Ltd & Anor [2014] EWCA Civ 906