Court of Appeal clarifies the Mitchell decision

This case concerns the appeals from three decisions on whether relief from sanctions should be granted, where  the CPR rule which was breached imposed a sanction. The Court of Appeal said that the Mitchell decision (see Weekly Update 43/13) had been “misunderstood” and “misapplied”, and hence wanted to clarify the position. It held as follows:

  1. If the breach is neither serious nor significant, relief will usually be granted (the “first stage”). Triviality is not part of the test. Nor will it always be useful to consider with a breach is material (i.e. whether the breach will imperil future hearing dates or disrupt the court timetable) – there are breaches which are incapable of affecting the efficient progress of litigation but which are nevertheless serious (eg a failure to pay court fees). When considering this issue, the courts should not take into account prior breaches (although these can be taken into account at the third stage (see (3) below)).
  2. The court should consider why the default occurred (with the examples being considered in the Mitchell case (e.g. debilitating illness of the solicitor) being “no more than examples”. This is the second stage.
  3. The court should then evaluate all the circumstances of the case (the third stage). It is not correct to say that if a breach is serious or significant, and there is no good reason for the breach, that the application for relief from sanctions will automatically fail. The two factors specifically mentioned in CPR r3.9 (ie the need for litigation to be conducted efficiently and at proportionate cost and the need to enforce compliance with the rules) “are of particular importance and should be given particular weight at the third stage when all the circumstances of the case are considered”. Jackson LJ (the author of the original reforms) dissented on this point and said that these two factors should not  be given greater weight than other considerations. He said that these two factors were set out in the new rule only because they were not previously included in CPR r3.9. However, the Court of Appeal unanimously held that “it is always necessary to have regard to all the circumstances of the case”.

The Court of Appeal also criticised the rise of satellite litigation: “We think we should make it plain that it is wholly inappropriate for litigants or their lawyers to take advantage of mistakes made by opposing parties in the hope that relief from sanctions will be denied  and that they will obtain a windfall strike out or other litigation advantage. In a case where (a) the failure can be seen to be neither serious nor significant, (b) where a good reason is demonstrated, or (c) where it is otherwise obvious that relief from sanctions is appropriate, parties should agree that relief from sanctions be granted without the need for further costs to be expended in satellite litigation. The parties should in any event be ready to agree limited but reasonable extensions of time up to 28 days as envisaged by the new rule 3.8(4)”.

Thus a contested application for relief from sanctions should be “very much the exceptional case” and “the court will be more ready in the future to penalise opportunism”. Penalties suggested in the judgment include an order for the “innocent” party who unreasonably opposes an application for relief (or refuses to agree an extension) to pay the costs of the application, but also possibly a substantial reduction in costs if that party goes on to win the case and even indemnity costs if it loses the case.

COMMENT: This decision addresses some, but not all, of   the criticisms levelled at the Mitchell decision. Although more cases are likely to fall within the non-serious category than under the old category of triviality, the difficulty of establishing a good reason remains. That said, the lack of a good reason will not necessarily be fatal to an application for relief. The “particular weight” accorded to the two  factors listed in CPR r3.9 replaces the prior stance that  these two factors were of “paramount” importance, and  that too should make it easier to obtain relief.

Accordingly, this case, coupled with the recent rule change allowing parties to agree extensions of up to 28 days, should mean that less satellite litigation will now take place. It should also be noted that even where the rule or court order does not specify a sanction, the Court of Appeal’s comments regarding opportunism and the avoidance of satellite litigation should apply and so parties should only refuse to agree time extensions in those situations in exceptional circumstances.