Shine a light? Recent developments in relief from sanctions

Posted: 17/02/2014

Clarity in the law is always welcome. In Mitchell MP v News Group Newspapers Ltd [2013], the Court of Appeal could not have been clearer: court orders and directions exist to be complied with, and you fail to comply with them at your peril. This new, more robust approach should mean that relief from sanctions will be significantly harder to come by. However, the court stopped short of saying that relief from sanctions should never be granted. While this flexibility is undoubtedly reassuring for both parties and practitioners, the spotlight must now be trained on the circumstances under which the courts may grant relief from sanctions.

Background

Mitchell related to the legal costs associated with the ‘Plebgate’ affair. Mr Mitchell failed to file a costs budget on time. As a consequence, Master McCloud ruled that he was to be treated as having filed a costs budget comprising only the relevant court fees. Master McCloud subsequently refused Mr Mitchell relief from sanctions under CPR 3.9 but granted him permission to appeal. The appeal leapfrogged directly to the Court of Appeal.

The Court of Appeal

The Court of Appeal dismissed Mr Mitchell's appeal. It held that the new CPR 3.9 requires the court to consider all the circumstances of the case, so as to enable it to deal justly with the application. The word ‘justly’ refers back to the overriding objective, which also requires the court to ensure that parties are on an equal footing and that cases are dealt with expeditiously and fairly.

However, the Court of Appeal was clear that the two considerations included in the new CPR 3.9 should now be regarded as of paramount importance and given great weight. These are: the need for litigation to be conducted efficiently and at proportionate cost, and the need to enforce compliance with rules, practice directions and orders. It is, in the court's eyes, ‘significant that they are the only considerations which have been singled out for specific mention’ (para 36).

The Court of Appeal endorsed the Master of the Rolls’ 18th Implementation Lecture on the Jackson Reforms (delivered on 18 March 2013), which emphasised a change in focus from concentrating on justice in the individual case. The courts will no longer indulge parties if they fail to comply with their procedural obligations. Instead, the more robust approach to compliance and relief from sanctions is intended to ensure that justice can be done in the majority of cases. Procedural obligations have not been drafted simply to ensure that the parties conduct the litigation proportionately and keep their own costs within proportionate bounds; they are there to serve the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately.

Guidance

The Court of Appeal hoped it would be helpful to give some guidance as to how to apply the new approach in practice. The usual starting point is the nature of the non-compliance with the relevant rule, practice direction or order. If it can be properly regarded as ‘trivial’, and the application is made promptly, the court will usually grant relief. Trivial breaches would include a failure of form rather than substance, or where an order has been fully compliant in every respect other than narrowly missing the deadline (para 40).

If the default cannot be characterised as trivial, then the burden is on the defaulting party to persuade the court to grant relief. The court will require there to be ‘good reason’ for the default before it will grant relief from sanctions. Good reason will often be found where matters are outside the parties' control, such as a party or legal representative suffering from a debilitating illness or being involved in an accident. Later developments in the course of litigation might also be a good reason if they show that the deadline originally imposed was unreasonable. Simply forgetting a deadline or failing to meet it because of overwork is unlikely to constitute a good reason (para 41).

Into orbit?

The Court of Appeal's expectation is that lawyers will become more efficient and compliance with rules, practice directions and orders will simply become routine, making expensive and damaging satellite litigation a thing of the past. Few people would argue against this as a goal. However, might it be something of an own goal?

As the court itself acknowledged, there will almost certainly be litigation over the question of whether or not a default is trivial. Similarly, there are bound to be arguments as to what constitutes ‘good reason’. The court characterised this uncertainty as ‘unavoidable in a regime which does not impose rigid rules from which no departure, however minor, is permitted’ (para 40) (an alternative which, in fairness, is even less attractive). It also reiterated that the Court of Appeal ‘will not lightly interfere with a case management decision’ (para 52), presumably to discourage challenges of this kind arising.

No tolerance

With Mitchell still ringing in their ears, the courts have (in the main) been applying the new approach with some vigour, as is illustrated by Durrant v Chief Constable of Avon & Somerset Constabulary [2013]. 

The claimant appealed a decision (pre-Mitchell) to grant the defendants relief from sanction for non-compliance with an order that required service of witness statements by a certain date and provided that the defendant might not rely on any witness evidence unless it had been duly served. The consequence of granting the relief was the loss of the trial date.

The Court of Appeal acknowledged both that it should not lightly interfere with a case management decision, and that Birtles J did not have the benefit of the Mitchell guidance. However, it held that his decision was ‘plainly wrong’ (para 39),stating that (para 38):

'… if the message sent out by Mitchell is not to be undermined, it is vital that decisions under CPR 3.9 which fail to follow the robust approach laid down in that case should not be allowed to stand. Failure to follow that approach constitutes an error of principle entitling an appeal court to interfere with the discretionary decision of the first instance judge.'

The Mitchell approach has been applied for applications for relief relating to many different stages of the litigation process. It has even been applied where the relevant CPR provision does not have a specific sanction attached (Webb Resolutions Limited v E-Surv Ltd [2014], which involved an application to extend time to seek the oral renewal of an application to appeal under CPR 52.3(5)).

Trivial default

The question of whether or not a breach is a trivial one remains, perhaps unsurprisingly, open ended. SC DG Petrol Srl v Vitol Broking Ltd [2013] is authority that the examples given in Mitchell were not intended to be exhaustive but were illustrative of the principles which should guide the courts (para 30). In certain cases, a failure to comply will clearly be a serious breach (eg failure to provide security, or failure to give notice of funding  (Harrison v Black Horse Ltd [2013])).

Since Mitchell, the courts have also ‘taken a consistently robust approach to the late service of witness statements’ (para 21 MA Lloyd & Sons Ltd v PPC International Ltd [2014], citing Durrant and Karbhari v Ahmed [2013]). Although the courts may show some leniency where a party only just misses a deadline, the context of the whole case may escalate a trivial breach into a serious one (Durrant).

The courts do recognise that witness statements can be something of a moveable feast. In Karbhari Turner J suggested that parties should ask the court to make two orders relating to witness statements where it is ‘realistically possible’ that there may be evidential developments between the date for service and the date of trial (para 29). The first would cover the service of statements relating to matters which have already arisen; the second would give a backstop date for the service of supplementary statements covering matters which occurred, or were only reasonably discoverable after the first date.

Good reason

The cases so far suggest that the courts will take a somewhat sceptical approach to what constitutes good reason. In Karbhari, the defendant claimed his late amendments resulted from him trying to protect other people from facing money laundering charges. The court did not agree that this constituted good reason. In Harrison, the solicitors had drafted the notice of funding and put it in the post tray but could not prove it had been sent or delivered. The fact that the solicitors had intended to give notice of funding was not a good enough reason to grant relief from sanction.

Equally, in Durrant, the Court of Appeal dismissed reasons such as other professional and operational commitments, holiday season and bad weather out of hand. Even the impact on the careers and reputations of individuals and the police force if the witnesses were not able to give evidence, and the public interest in scrutinising the actions of police officers in the light of all the evidence, had a ‘limited role to play in granting relief from sanction’ (para 44). Instead, these were relevant to how much time should be allowed for service to start with, and what sanction would be appropriate if that deadline were missed. 

Promptness

The post-Mitchell cases also clearly illustrate the need for parties to apply for relief from sanctions promptly (Durrant, Thevarajah v Riordan [2014] (obiter)). In particular, the court in Harrison noted that had the application for relief been made promptly, it might well have been heard under the old rules (under which it would have been a borderline case).

In Mitchell the court also confirmed that applications for an extension of time will be looked upon more favourably before time has expired than applications for relief made after the event (para 43). Clearly, if it appears likely that you will miss a deadline, the most sensible thing to do is to apply to court for an extension as soon as possible and in any event before the expiry of the relevant deadline (para 11, Lloyd). Honesty is always likely to be the best policy, and waiting to see if the other side ‘blinks first’ may prove costly.

Broader picture

Early indications are that the courts are not just going to pay lip service to the importance of the court having regard to the needs and interests of all court users when case managing an individual case. In Khabari, Turner J noted that (para 30):

'Court time is a scarce and valuable commodity which should be fairly distributed between all litigants and extra tranches of which ought not readily to be dispensed to those in serious default whose very failures have wasted such reasonable time as has already been allocated to them.'

It should however be noted that Mitchell did not put an enhanced tactical weapon into the hands of non-defaulting parties to the litigation (para 29, Vitol Broking). There are limits to the contribution that a party can make in respect of the broader picture which the court is now required to consider.  This is a matter for the judge. 

Low tolerance

There have been several cases post Mitchell which illustrate the courts exercising their ‘undoubted discretion’ to grant relief (para 33, Aldington v ELS International Lawyers LLP [2013]).

Forstater v Python (Monty) Pictures Ltd shows the court granting partial relief from sanction. The second claimant had inadvertently failed to provide information on its funding arrangement on Form N251 and was therefore unable to recover the uplift from the defendant under CPR 44.3B. However, on 19 July 2012, the defendants were informed in a letter of the existence of the CFA.

Norris J observed that this was a failure to comply with a general rule, rather than a conscious failure to comply with a specific order made within the action. The policy aim of CPR 44.3B had been fulfilled, even if not in the right form, and the substance of the rule had been met. The second claimant should therefore be able to recover the uplift as if Form N251 had been served on 19 July 2012, otherwise the defendant would receive a windfall simply for receiving ‘the relevant information on the wrong piece of paper’ (para 46).

In Aldington, the court held that defects in service relating to 7 out of 134 claimants were trivial. The particulars of claim had been produced before the deadline and were only served very shortly after the deadline because of the need for signatures. This was a failure of form rather than substance. Moreover, the claimants had applied for relief promptly, and had they applied for an extension before the deadline, the court would ‘almost certainly’ have granted it (para 33). Oliver-Jones J took the pragmatic view that you cannot divorce the nature of the non-compliance from its consequences; it is the consequences which help determine whether or not a breach is significant.

In John Holt & Co (Liverpool) Ltd and another v Caterpillar (Ni) Ltd, Cooke J granted the claimants extra time in which to comply with an order for security for  costs, noting that “all first instance judges are likely to feel a tension between the two elements of justice to which reference is made, namely the need for justice between the individual parties and the visiting of a proportionate sanction for the breach in question as compared with the interests of other litigants and the requirement in the general public interest for the purposes of justice, that court orders should be seen to be enforced” (para 2). 

Conclusion

Depending on your view, Mitchell either casts a long shadow over litigation in England and Wales, or shines a light onto a culture the judiciary perceive as erring on the side of laxity and complacence. The courts are determined to achieve the change in culture embodied in the Jackson Reforms. Delays and missed deadlines are and will remain an inevitable part of litigation; what must change is how parties and their representatives deal with them. Parties should negotiate hard for a realistic timetable, and raise any potential delays with the court at the earliest possible opportunity, preferably well in advance of any looming deadline. Above all, parties and their representatives should be aware that litigants who treat an order of the court ‘as if compliance were an optional indulgence’ (para 1, Lloyd) will not meet with a warm reception.

This article was published in Commercial Litigation Journal in February 2014.

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