This article was first published for Practical Law's Construction Blog.
Much has been written about the court’s discretion to grant relief from sanctions pursuant to CPR 3.9 over recent years, due to the re-formulation of the rule in April 2013 and the landmark Court of Appeal decision in Mitchell v News Group Newspapers Ltd. The strictness of the approach in Mitchell led to an outcry from academics and practitioners, but that has now been allayed by the Court of Appeal in Denton v TH White Ltd.
Mott v Long is the TCC’s most recent approach to a relief from sanctions application.
Relief from sanctions
CPR 3.9 provides that, on an application for relief, the court must consider all the circumstances of the case, so as to enable it to deal justly with the application, including:
- The need for litigation to be conducted efficiently and at proportionate cost.
- To enforce compliance with rules, practice directions and orders.
In Denton, the Court of Appeal stipulated a three-stage approach to such an application:
- Evaluating whether the breach is serious or significant.
- Identifying the reason why the failure or default occurred.
- Evaluating all the circumstances of the case to enable it to deal with the application justly.
This guidance has been useful to practitioners in clarifying the approach to be taken to applications for relief. However, as Denton itself recognised:
“… the concepts of seriousness and significance are not hard-edged and… there are degrees of seriousness and significance.”
Moreover, there can obviously be a number of different reasons for a breach occurring and the material factors in each case will vary. The Court of Appeal hoped that:
“… assisted by the guidance given in [Denton] and its application in individual cases over time, courts will deal with these applications in a consistent manner.”
Therefore, while every case is fact specific, an analysis of those cases should assist practitioners in knowing how a court is likely to treat any application they are forced to make or respond to.
With that in mind, it is useful to see the TCC’s most recent approach to a relief from sanctions application, decided by HHJ Grant in the Birmingham TCC.
Mott v Long
In Mott, the defendants filed their costs budget ten days late and applied for relief from sanctions. The defendants’ solicitor believed that the budget had been served in time but, in fact, that was not the case and she accepted that it was likely that the documents were not saved correctly and/or not printed due to IT difficulties.
Was the breach serious or significant?
As to the first stage of the Denton test, the defendants submitted that the delay in service was minor because, although served ten days late, the budget was filed and served nine days ahead of the CMC hearing. The defendants submitted that for a breach properly to be considered serious and significant, it must have some impact on the smooth running of the litigation in question or litigation generally. They relied on the decisions of Wilfred Murray v BAE Systems plc and Azure East Midlands v Manchester Airport Group to contend that the minor delay in providing the budget had had no material effect on the proceedings, nor prejudiced the claimants in any material way.
By contrast, the claimants contended that:
- They had been prejudiced as a result of the breach because it meant there was only one working day to consider and discuss the second budget.
- The prejudice was even more acute in this particular case given the parties’ very different approaches to fundamental issues, such as the scope of expert evidence(including the number of experts required) and the estimated length of trial.
It was also submitted that the failure to serve a cost budget can have a material effect on the litigation if such failure sufficiently distracts from the cooperative process of entering into discussions about costs budgets. The claimants relied on the decision in Lakhani v Mahmud and others in support of that submission.
Having weighed up these submissions, the court concluded that:
- Filing a cost budget ten days late is not of the “same relatively modest order” as being a few hours or even one or two days late.
- The degree of lateness in every case is to be construed in the context of the particular circumstances of that case and “the circumstances in Lakhani illustrate the point very clearly”.
- Serving a cost budget late can prejudice the “process of co-operation in the costs budgeting process which the rules are designed to achieve”.
- The period of delay in this case “answers the description of being serious or significant, perhaps with particular emphasis on the latter word”.
Why did the failure or default occur?
As to the second stage of the Denton test, the court was not satisfied that the defendants had established a good reason for the default. That was not to say there may not have been such a reason, but the evidence was lacking in particularity as to the precise nature of the experienced “IT difficulties”. For example, it was unclear whether the failure was human or system error, and there was no evidence from anyone with the appropriate IT expertise.
Evaluating all the circumstances of the case
In relation to the third stage of the Denton test, the court set out the circumstances it considered material including that the defendants’:
- Solicitors had served a cost budget nine days before the CMC (albeit, due to other matters, this only allowed one working day for its consideration).
- Other conduct in failing to file a CMIS and a disclosure report, and a three-month delay in paying a £285 costs order.
However, the far more influential matter was the nature of the parties’ budgets and the significant disparity between them due to the different approaches to the case, in particular as to the nature of expert evidence required and its impact on the trial length.
The court acknowledged that while the “10 days could have been put to good use”, and the parties may have been able to agree some of the substantive matters in issue, they might not. In those circumstances, these issues would become the subject of oral submissions at the CMC and the court would rule on them. A party that filed a cost budget reflecting its own views was:
“… likely to be ordered to file and serve a revised cost budget which reflects the orders which the court has in fact made at the CMC, with a view to the parties discussing such revised budget, and in default of agreement a cost management hearing would be listed…”
Taking everything into account, the court came to the conclusion that, in light of the “substantive order for directions relating to expert opinion evidence and the estimated length of the forthcoming trial” that it had made at the CMC, and the need for the defendants to file and serve a revised cost budget reflecting that order, relief from sanction should be granted:
“The fact that the parties are now in precisely the same procedural position in which they would have been so far as the process of cost budgeting is concerned, had the defendants served their cost budget in time, is a highly significant circumstance in the case, and one to which the court should have proper regard.”
Lessons to be learned
There are a number of lessons to be learned from this case:
- Where there is a genuinely good reason for the breach, it pays to be as thorough as possible in setting that out and ensuring that evidence is provided from the right source.
- At least insofar as the breach relates to costs budgeting, the emphasis appears to be squarely on considering the just outcome in all the circumstances, since in this case the defendants failed on the first two stages of the Denton test, and yet relief was still granted because of the consideration of “all the circumstances” in stage three.
- It will not be unusual in construction cases, which typically involve a number of parties, potential preliminary issues and different approaches to expert evidence, for parties to be at odds on the correct case management. In Mott, the court does not appear to have undertaken any inquiry as to the likelihood of the parties reaching agreement on those issues in advance of the CMC but for the late filing of the budget. This was possibly because the parties appeared so far apart on the issues and had continued to maintain their respective stances at the CMC (heard immediately before the relief application). Therefore, where the innocent party considers that, but for the late filing of a budget, the parties would have reached sufficient agreement to put them in a different procedural position, it is suggested that they will have to provide very clear evidence as to why that would have been the case, which will, in turn, depend upon the extent of the issue between the parties.