The practical consequences of elements of the civil justice reforms have made the headlines once again. At the end of last week (4 July 2014), the Court of Appeal handed down its decision in Denton Decadent and Utilise which aims to clarify how both parties, and the courts, should deal with non-compliance. The decision reviews what has happened on the ground since Mitchell and offers further guidance on how applications for relief from sanctions should be approached. It’s not quite ‘all change’, the revolution is not yet upon us, but there are new guiding principles to apply and warnings of severe consequences for those who dare to engage in what might now be considered ‘sharp’ litigation practices. Paul Edwards explains.
How did we get here?
At the end of 2013, the Mitchell decision emphasised the need for parties to comply with court orders, rules and directions, or risk severe penalties. The aim of doing so was to cure what many saw as the lax approach to compliance which had developed since the Woolf reforms. The decision guided judges to consider whether an instance of non-compliance was trivial: if it was, relief would usually be granted so long as the application was made promptly; if the breach was not trivial, the court should move on to look at whether there had been a good reason for the breach. All the circumstances of the case could still be considered as part of the decision, but the factors specifically set out in CPR 3.9 would be given more weight. Courts were directed to consider the needs of court users generally in coming to their decision, not only the needs of those with an interest in the case in hand.
It is fair to say that since Mitchell was decided there has been concern about the new era of litigation practice that it appeared to have ushered in. The robust nature of the decision has led unhappily to less co-operation between the parties as many have sought to capitalise on their opponents’ breaches, even if minor, pressing for applications where previously they may have consented to effectively turn a blind eye. Further, the decision itself has been interpreted inconsistently by different judges with some, at lower level even, anecdotally, claiming not to have heard of it.
The Mitchell decision was, therefore, ripe for further judicial scrutiny and guidance. The Court of Appeal joint judgment in the cases of Denton, Decadent and Utilise seizes the opportunity to provide this.
Denton, Decadent and Utilise
These three cases are illustrative of the kind of decisions which have been made since Mitchell.
In Denton, witness statements had been served, in accordance with the court directions, in July 2012. However, in late November/early December 2013, only one month before a 10 day trial, the claimant served further evidence. It said that this was being served in response to a change of circumstances in August 2013. When it applied for relief from the automatic sanction of being unable to rely on the evidence, the first instance judge granted it, adjourning the trial.
The defendant and Part 20 defendant appealed, considering this an example of too lenient an approach being taken by the judge.
In Decadent, the claimant had failed to comply with an unless order that it pay court fees by a certain date, or have its claim struck out. It sent a cheque, by DX, on the day that the fee was due, but this went missing in either the DX or at the court. The missing fees came to the judge’s attention at the pre-trial review hearing a few weeks later and the claim was struck out. The claimant’s solicitor eventually paid the fee, by credit card, but its application for relief was refused. The claimant appealed.
Utilise considered the effect of two breaches by the claimant – it filed its costs budget 45 minutes late and was 13 days late notifying the court of the outcome of settlement discussions. The first instance judge refused relief on the basis that while the initial breach was trivial it had been rendered non-trivial by the second. A first appeal by the claimant was dismissed. The claimant appealed.
Decadent and Utilise were both examples of too harsh an approach being taken.
Before providing decisions in the individual cases, the Court of Appeal reviewed the position since Mitchell and set out the correct approach to apply in applications for relief. The leading judgment is provided by Lord Dyson, (the Master of the Rolls), and Lord Justice Vos. Lord Justice Jackson provides a short final judgment agreeing with the outcome, but dissenting on one point.
As early as paragraph three of the judgment, it is clear where it is heading: ‘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.’ Having reviewed a number of the subsequent authorities, the Master of the Rolls comes to the conclusion that while the guidance given in Mitchell remains ‘substantially sound’ in light of the way it has been interpreted the correct approach needs re-stating.
Three steps to success
The correct approach to an application for relief from sanction requires consideration of a three stage test:
- assess significance and seriousness of the default which engages CPR3.9;
- consider why the default occurred; and
- evaluate all the circumstances to enable the application to be dealt with justly.
While the concept of triviality, applied in Mitchell, is one which the Master of the Rolls considers useful as a guide, he points out that it is not actually part of the rule and that it has led to semantic difficulties of interpretation. As such, the ‘new’ stage one test requires consideration of the significance and seriousness of any breach. There is no hard and fast rule about what will be considered either significant or seriousness, but it is hoped that in time courts will apply that test in a consistent manner, guided by the Denton decision. At stage one only the breach for which relief is being sought should be considered. Surrounding circumstances may require consideration also but they should be looked at later.
If a court decides that a breach is neither significant nor serious, it will not need to spend much time on stages two and three – usually relief will be granted.
State your reasons
Stage two of the test requires consideration, as previously, of whether there is any good reason for the breach. The Master of the Rolls considers it inappropriate to set out an encyclopaedia of what might be a good or bad reason. The examples in Mitchell are just that: examples.
Remember the wording of CPR 3.9
The final stage of the assessment is where other circumstances can be taken into account. Looking back to where things have gone wrong since Mitchell, the Master of the Rolls explains that: ‘The important misunderstanding that has occurred is that, if (i) there is a non-trivial (now serious or significant) breach and (ii) there is no good reason for the breach, the application for relief from sanctions will automatically fail. This is not so and is not what the court said in Mitchell…’
This approach has led to unjust and disproportionate decisions.
The correct approach at the third stage is to consider all the circumstances of the case to allow the court to deal justly with the application, in line with CPR3.9 (1). In doing so, the rule requires consideration of two factors (a) the need for litigation to be conducted efficiently and at proportionate cost, and (b) the need to enforce compliance with rules, practice directions and orders. These factors are of particular importance. Factors such as the promptness of the application, and any other breaches are mentioned as relevant considerations. This is where Lord Justice Jackson differs. He considers that factors (a) and (b) are to be given equal weight to other factors rather than greater weight - they were only singled out in the rule because courts had overlooked them previously.
Satellite litigation - don’t try to take advantage!
Before moving on to consider the individual cases, the Master of the Rolls takes the opportunity to express the court’s views on the satellite litigation and non-cooperation since Mitchell. It is fair to say that it is not impressed!
Litigation cannot be conducted efficiently and at proportionate cost without compliance and co-operation. Parties not behaving in this way, or, in the Master of the Rolls’ words, those who ‘opportunistically and unreasonably oppose applications for relief from sanctions’ are acting inappropriately and should be penalised. Parties should agree reasonable extensions using the new buffer direction in CPR 3.8 and contested applications for relief should be very much the exception rather than the rule.
If parties do behave unreasonably in opposing applications for relief there should be heavy costs sanctions.
These can go further than just an order to pay the costs of the application itself. Opposition can be recorded as a conduct issue to be taken into account when costs are dealt with at the end of a case. If the offending party wins, it may have its costs reduced. If the offending party loses, it may be ordered to pay costs on the indemnity basis. An order in those terms would also allow a winning party to recover its costs in excess of its costs budget.
The sum total
Mitchell has not been overruled and its guidance has not been confined to history. However, that guidance has certainly been ‘tweaked’ and the case law which had developed since Mitchell, swept under the carpet. Denton is the new Mitchelland all those involved in civil litigation must take heed of its terms and conduct litigation accordingly as, indeed, must the district judges. Of course, the proof of the pudding will be in the eating and there will undoubtedly be a few brave (?) souls willing to push at the boundaries of this decision.
Judges have had their line set out in the sand with a warning that they must pay heed to the realities of litigation when setting directions and order only those which are realistic and achievable.
As for the cases themselves, all three appeals were allowed on application of the reasoning in this case. The new dawn begins… again. Hopefully, this time, with a little more co-operation and a little less satellite litigation.