The Court of Appeal on Friday afternoon, handed down judgment in a series of appeals arising out of applications for Relief from sanctions, Denton & Ors v TH White Ltd & Ors [2014] EWHC Civ 906, in which the Court has attempted to bring some clarity to Mitchell and the approach to applications for relief from sanctions.  In doing so, the Court of Appeal made some interesting comments on the interpretation of Mitchell, and have amplified, or arguably completely changed, the guidance given in the earlier Mitchell decision. 

What the Court had to say about Mitchell

“...we think that the judgment in Mitchell has been misunderstood and is being misapplied by some courts.  It is clear that it needs to be clarified and amplified in certain respects”.  In short, the Court of Appeal appear to allege that everyone had misunderstood Mitchell, from litigant to practitioner, from academic to appellate Judge. 

A New 3 stage test

The Court went on to outline a new 3 stage test when considering an application for relief from sanctions Under CPR 3.9.

Stage 1:

Identify and assess the seriousness and significance of the failure.  When considering stage 1, the court should not initially consider other unrelated failures that may have occurred in the past.  In other words, no cumulative totting up of non trivial, or insignificant breaches.

If the breach is not serious or significant, the court is unlikely to need to spend much time on stages 2 and 3 and the prospects of relief being granted should be greater.

It is noteworthy that the Court of Appeal have sought to move away from the use of the terms “trivial” and “non-trivial”, replacing them with the words “serious” and “significant”.

Stage 2:

Consider why the failure or default occurred?  Unhelpfully, the Court of Appeal have given no further guidance on this point, referring simply to the guidance in Mitchell as being not exhaustive.  Such guidance included pressure of work, or being unable to get to the office due to inclement weather, as not being a good reason.

Stage 3:

A reemphasise of the provisions of CPR 3.9. When considering the application the Court should consider “all the circumstances of the case, so as to enable it to deal justly with the application”, including:

  1. Whether the breach has prevented the court or the parties from conducting the litigation (or other litigation) efficiently and at proportionate cost; and
  2. The importance of complying with rules, practice directions and orders.

The above is verbatim, that which is written in CPR 3.9.

The Master of the Rolls, Lord Justice Dyson, and Lord Justice Vos were of the view that the third stage required the Court to give particular consideration to the all the circumstances of the case but with greater weight to be given to factors (a) and (b).  Lord Justice Jackson, on whose report the reforms are based, and who was part of the Court of Appeal who heard the Mitchell case, dissented slightly, stating that, “the rule does not require that factor (a) or factor (b) be given greater weight than other considerations.  What the rule requires is that the two factors be specifically considered in every case”.  In other words, regardless of any other factors, the court are compelled to consider (a) and (b).  However, Vos LJ and Dyson LJ disagreed, so the guidance now is to simply attach greater weight to those factors.

On either interpretation, there is greater emphasis on “all the circumstances” as oppose to simply concentrating on the specific factors referred to in the new 3.9.  This does rather suggest that relief will be granted post Denton in circumstances where postMitchell, the door was firmly shut.

Other points arising

The judgment contains some interesting language and salutary warnings about future conduct.

The Court warned 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 sanction will be denied and they will obtain a windfall strike out or other litigation advantage”.  In paragraph 43 of the  Judgment, the Court of Appeal make clear that draconian costs consequences may apply, such as being ordered to pay costs on an indemnity basis at the end of the action if the paying party unsuccessfully opposed an application for relief, or being deprived of a proportion of your costs if you are the successful party.

Also of interest is the fact that the Court of Appeal, in an almost throw away comment, have confirmed that an indemnity basis costs award would free the winning party from being bound by its costs budget.

Further, the Court of Appeal has stated that the Courts “must have regard to the realities of litigation in making orders in the first place”.  This statement was made in the context of setting directions and timetables but might there be scope to argue that this also applies to the way in which Courts set budgets? 

Conclusion

This decision sends a less than clear message from the Court of Appeal.  As draconian as Mitchell was, parties at least knew where they stood, comply with the rules or face the consequences.  However, the unforeseen side effect of that decision was rather than, as the new rules themselves had envisaged, parties worked together to progress matters, minor and technical challenges were raised, as parties sought to make hay out of “trivial” breaches of the rules.  Whilst the Denton decision should act as some comfort to those who fall foul, the picture seems less certain that it ever has been.

For a copy of the judgment, please click here.