The Court of Appeal recently handed down its judgment in three appeals arising from relief from sanctions applications and importantly set out a three stage test to be applied when considering relief from sanctions applications in the future.

Civil Procedure Rule 3.9 contains the criteria which must be considered by the Court when deciding an application for relief from sanctions.  CPR3.9 specifically mentions two criteria to be considered; (i) the need for cases to be dealt with efficiently and at proportionate cost and (ii) the need for compliance with Court orders and the Civil Procedure Rules.  The Court of Appeal considered CPR3.9 together with case law following last year’s Mitchelldecision in its judgment.

The Court of Appeal’s guidance: the three stage test

The Court of Appeal noted that there have been many applications following the Mitchell decision and considered the criticisms which had arisen in respect of that decision, including the excessive satellite litigation whichMitchell has caused.  In order to offer practical guidance to the Courts the Court of Appeal  proposed a three stage test which was to be applied when considering relief from sanctions applications:

  1. Identify the serious and significance of the breach
  2. Consider the reasons why the default occurred
  3. Evaluate all of the circumstances of the case and consider how to deal justly with the application

Stage 1: Seriousness and significance of the breach

The Court of Appeal indicated that it was not in favour of considering the triviality of the breach, but instead considers the test to apply is whether the breach is serious or significant.  Breaches should be considered initially in isolation, rather than also considering any other unrelated failings, although when considering the third limb of the test this is something the Court may wish to take into account.  If the breach is not deemed to be serious or significant then the application for relief should be granted by the Court.  If it is deemed to be serious or significant then the Court will move on to consider the second limb of the test.

Stage 2: Reasons why the breach occurred

The Court of Appeal did not give any guidance on this stage of the test, saying it did not want to “produce an encyclopaedia of good and bad reasons” and noted that the examples in the Mitchell judgment were just that, only examples.  The implication is that each case will need to be considered individually to decide whether the reason for the breach is a good reason or not. 

Stage 3: Evaluation of all of the circumstances of the case

The Court of Appeal highlighted in its decision that even where a breach is serious or significant and there is no good reason for it, the application for relief should not automatically fail as the circumstances of the case as a whole should also be considered.  There was some disagreement between the judges as to the correct construction of the third limb of the test.  The Master of the Rolls and Lord Justice Vos stressed that whilst the factors specifically stated in CPR3.9, namely the need for cases to be dealt with efficiently and at proportionate cost and the need for compliance with Court orders and the Civil Procedure Rules, are particularly important considerations, they were not to be considered to the exclusion of all other circumstances. The Court of Appeal commented that they considered some judges’ approach to relief from sanctions applications to be too draconian, which was causing manifestly unjust decisions.  However, the judgment did make it clear that in order to uphold the principles behind the Jackson reforms of encouraging compliance with orders and rules, the two factors mentioned in CPR3.9 must be given particular weight.  Lord Justice Jackson disagreed with this position and held that the factors specifically stated in CPR3.9 ought not to be given any particular weight, and that the Court should take into account all of the circumstances of the case and give weight to any particular factors as the Court sees fit.

Co-operation between parties

An additional point which the Court of Appeal dealt with in its judgment was co-operation between parties, and in particular between their lawyers.  The Court of Appeal was unequivocal that parties should not take advantage of their opponent’s mistakes and that where a breach is not serious or significant, or there is a good reason for it, parties should agree that relief from sanctions can be granted, which will prevent the need for further costs to be incurred in dealing with applications.  The Court of Appeal’s view is that contested applications for relief from sanctions should be exceptional, not only because compliance should be the norm but also because parties should co-operate to agree relief except for the most serious cases.  The Court of Appeal went further and stated that the Court should penalise parties who seek to take advantage of minor breaches through the imposition of costs orders.

In order to encourage compliance with orders the Court of Appeal stated that judges should make realistic and achievable directions timetables and have regard to the realities of litigation when doing so.

The decisions

Denton v TH White Limited and De Laval Limited

In this case, both parties had served their witness statements in July 2012, but in December 2013, one month before the trial had been listed to be heard, the Claimant served a further six witness statements as a result of a change in circumstances affecting the case which the Claimant said had only come to light in August 2013.  The Claimant made an application for relief from sanctions so that they could rely on oral evidence in relation to the new witness statements.  This application was initially granted and the trial was adjourned to give the Defendants time to respond to the new evidence. The Defendants appealed against the decision to grant relief.

The Court of Appeal held that the judge’s decision to grant relief was plainly wrong.  The Court of Appeal held that the breach was significant as it had caused the trial to be adjourned and also that there was no good reason for it, as the information relating to the change of circumstance had been known since 2012.  The Court of Appeal reiterated that the third limb of the test also needed to be considered; the first two were insufficient to refuse to grant relief.  However, in this case consideration of the third limb also supported the conclusion that relief should not be granted.  The Court of Appeal allowed the appeal of the Defendants against the order for relief from sanctions and ordered that the case be listed for trial as soon as possible. 

Decadent Vapours Limited v Bevan, Salter and Celtic Vapours Limited

In this case, both parties had failed to serve their pre-trial checklists by the required date and the Court ordered the Claimant to file their pre-trial checklist and pay the pre trial checklist and hearing fees by 19 December 2013 (the Defendants were also ordered to file their pre-trial checklist by this date).  A cheque for the fees was sent to the Court in the document exchange on the due date.  The cheque was lost, but the non-payment was not raised until the pre-trial review on 7 January 2014 where the judge automatically struck out the Claimant’s claim. The Claimant paid the fee again on 9 January 2014 and applied for relief from sanctions which was refused by the Court so the Claimant appealed against this decision.

The Court of Appeal held that failures to pay Court fees are serious, but that there is a scale of seriousness and this particular case fell towards the bottom of the scale.  As the Claimant’s solicitor knew the fee would not arrive on time, since it was only sent on the due date, there was no good reason for the breach.  However, in considering the third limb the Court of Appeal held that as the breach did not prevent the case being conducted efficiently and at proportionate cost and because the breach fell towards the bottom of the seriousness scale it was reasonable to grant relief from sanctions.  The Court of Appeal allowed the appeal and also commented that the Defendants should have agreed to the application for relief.

Utilise TDS Limited v Davies, Bolton Community College Corporation and Watertrain Limited

There were two breaches for the Court to consider in relation to this case; the first was that the Claimant served their costs budget 45 minutes late and the second was that the Claimant was 13 days late in complying with an order to inform the Court of the outcome of negotiations.  The Claimant applied for relief from sanctions and this was refused on the grounds that the second breach made the first breach a non-trivial breach, whereas without this second breach it would have been deemed trivial.  The Claimant appealed the decision and their first appeal was unsuccessful.  The Claimant then made a further appeal against the decision not to grant them relief from sanctions.

The Court of Appeal held that both previous decisions were wrong as neither of the Claimant’s breaches in filing the costs budget 45 minutes late and informing the Court of the outcome of negotiations 13 days late were serious or significant, nor did they prevent the case from being pursued efficiently and at proportionate cost.  The Court of Appeal also said in this case that the Defendants should have agreed to the Claimant’s application for relief from sanctions and they allowed the appeal.

Reaction to the decision

There is some professional disagreement as to whether the decision waters down or reinforces the principles in the Mitchell decision, but in general, the decision has been warmly received as clarifying the approach which Courts should take to relief from sanctions applications and for encouraging parties to co-operate with each other rather than seizing on any opportunity to get their opponents’ case struck out for even the most minor of breaches.