The Court of Appeal gives guidance

The months since the decision in Mitchell MP v News Group Newspapers Ltd in late 2013 have been characterised by paranoia and frantic activity amongst litigation lawyers, as a new regime of ruthlessly strict adherence to court deadlines has exploded chaotically onto the scene.

On 4 July 2014, the Court of Appeal handed down its judgment in relation to three linked appeal cases relating to arguments influenced by the Mitchell decision, and these show a slight U-turn from the courts and a marked relaxation of Mitchell austerity. Here are the very brief facts of  the three appeals in question:

Utilise TDS Ltd v Davies and Another – in this case, the litigating parties had been ordered to file costs budgets by 4pm on 11 October 2013. The claimant missed that deadline and sent its Precedent H form to the Court by fax at 4.41pm (41 minutes late). At first instance, the judge refused the claimant’s application for relief from sanctions because the claimant had given no reason for its non-compliance.

Decadent Vapours Ltd v Bevan and Others – in this case, the claimant had applied for relief from sanctions imposed for its failure to comply with an “Unless Order” requiring the filing of a pre-trial checklist and payment of the relevant Court fee. The claimant had submitted that the failure to comply with the Order was trivial and that, therefore, its claim should not be struck out. The claimant also argued that the trial would not have gone ahead in any event. At first instance, relief from sanctions was refused on the basis that two trivial breaches aggregate so as to become one significant breach.

Denton and Another v TH White Ltd and another – this was a case where the claimant had served six witness statements late, which had given rise to a procedurally difficult position where trial either (1) could not go ahead, or (2) was to end up being meaningless. With a view to avoiding what would have become an artificial trial, the first instance court granted the claimant’s application for relief from sanction and permitted the statements to be served late

These appeals followed an intervention by the Law Society, which called for clear guidance on costs sanctions and for clarification regarding the way that civil litigation should be conducted following the decision in Mitchell. The Court of Appeal, whilst acknowledging that the previous guidance arising from Mitchell was “substantially sound”, considered that judgment had been “misunderstood and misapplied” by some of the lower courts, leading to inconsistent and, in some cases, unduly harsh, outcomes.

The Master of the Rolls, Lord Dyson, upheld all three appeals and restated the law in more detail in an attempt to avoid further satellite litigation. Lord Dyson commented: “It seems that some judges have ignored the fact that it is necessary in every case to consider all the circumstances of the case.” The court was keen to emphasise that, although a culture of non-compliance will not be tolerated, relief from sanctions should not be automatically refused and all the circumstances of the case should be considered before the judge makes a decision.

In considering an application for relief from sanctions, the Court of Appeal held that the following three stage test should be applied:

  1. The court should concentrate on the seriousness and significance of the breach in respect of which relief from sanctions is sought. The court may, however, take into account previous conduct as one of the relevant circumstances. If it is held that the breach was not serious or significant, then relief from sanctions should normally be given
  2. Consideration should then be given by the court as to why the failure or default occurred (the equivalent of the “good reason” test established in Mitchell); and
  3. Irrespective of the conclusion reached from stages one and two, the court should then consider “all the circumstances of the case, so as to enable it to deal justly with the application” (CPR 3.9(1)). Factors include: (a) the need for efficient case management at a proportionate cost, and (b) the need to enforce compliance with rules, directions and court orders

RPC says...

The decision is beneficial for defaulting parties as the likelihood that a court faced with an application for relief from sanctions will refuse such relief has now been reduced. By contrast, it is the non-defaulting party who will now have to give greater consideration as to when it is appropriate to refuse to agree to an extension of time for compliance. If they do refuse, then it could well be the non-defaulting party that faces costs sanctions from the court. Parties should, therefore, give careful consideration as to how they approach and respond to such requests.

To some, the decisions are a missed opportunity for the Court of Appeal to draw a line in the sand and state that non-compliance will simply not be tolerated. Indeed, many will feel that this is a backwards step towards how litigation was conducted pre-Mitchell. It is, however, hoped that the courts will follow the guidance laid down by the Court of Appeal by applying the above test in a consistent manner. This should, we hope, provide much-needed certainty for litigants so that the subject matter of the dispute can be dealt with rather than just the procedural concerns.

Practical guidance

  • Parties should be discouraged from taking opportunistic points. Heavy costs penalties may apply
  • The Court of Appeal has outlined the expected standard of compliance and co-operation between litigants. As such, unreasonably contested applications for relief from sanctions are likely to be penalised
  • Try to agree realistic time frames with the other side from the outset
  • Be aware of the consequences of non-compliance, particularly where the CPR imposes automatic sanctions, when agreeing directions
  • As before, the requirement to make a prompt application for relief from sanctions is principle to any application’s success
  • Consider agreeing a “Buffer Order” with the other side (in advance and in writing). This will provide up to an additional 28 days for compliance with a time limit in the CPR or in a court order