The Court of Appeal has tried to clarify what happens when a party to Civil Litigation is late in complying with a court order. The decision in Denton on 4 July was eagerly awaited because lawyers, litigants (and the courts) have been in a quandary since last November’s landmark decision by the Court of Appeal in the case of Mitchell. That upheld deliberately sweeping sanctions, enforcing the “Jackson Reforms” of April 2013.
In Mitchell, the former Chief Whip was suing a media group for defamation, arising out of the “Plebgate” saga. However, his lawyers were 5 days late in lodging at court a new detailed costs budget in “Form H” predicting costs for the entire case. Under “Jackson”, great importance is attached to this form, to be finalised by all sides, as soon as a Defence is filed.
Because Form H was late, the court treated Mr Mitchell as having failed to serve any estimate. Consequently, his budget was restricted to court fees alone rather than the approximate £400,000 his solicitors estimated in the form. The other side estimated their costs in a similar range. As a result, even if Mr Mitchell won his claim he would have been unlikely to recover more than a fraction of his expected costs approaching £1/2M. Since that decision, courts and lawyers have been dealing with a perceived “zero tolerance” of failures to meet court deadlines. That is even though often the courts may be late in sending out forms and orders.
The upshot has been that the courts have been inundated with applications for “relief from sanctions”, usually well in advance of a deadline, because the message has been that delays, however short, may result in the case (or defence) being struck out. There have been contradictory decisions, some of which have been criticised as unduly harsh, and disregarding the justice of the individual case.
In an effort to stem the resulting tide of “satellite litigation” the Court of Appeal has argued in Denton that whilst Mitchell was correctly decided, it has been misunderstood and misapplied. There were 3 conjoined cases in Denton;
Denton v TH White Ltd
This claim was against the installers of a milking parlour. Statements and expert reports were exchanged on time, but additional evidence was served in December 2013, just five weeks before the trial. At the pre-trial review the claimants obtained permission to rely on the statements and the court vacated the trial date. The defendant appealed to the Court of Appeal on the ground that the judge failed to apply, or misapplied, Mitchell and erred in the exercise of his case management discretion.
Decadent Vapours Ltd v Bevan
The claimant failed to comply with an order that “unless” they file a pre-trial checklist and pay the court fee by 4pm on 19 December 2013, the claim would be struck out. The checklist was filed by email on the afternoon of 19 December. Unfortunately the cheque for the fee was only sent that day and it was not cashed. It is not known when the cheque went missing, but it may have been lost at court. The failure to pay the fee wasn’t discovered until a hearing on 7 January, where the claimant’s failure to comply with the “unless” order meant that the claim was struck out. The fee was paid on 9 January 2014, shortly after it was learned that the cheque had been lost. The court rejected the claimant’s application for “relief from sanctions” to reinstate the claim.
Utilise TDS Ltd v Davies
The claimant failed to comply with an order that “unless” they file costs budgets by 4pm on 11 October 2013, they could only claim court fees by way of costs if they were successful. The claimant missed the deadline by 45 minutes. The order also granted a stay until 8 November and required the claimant to inform the court of the outcome of negotiations by 4pm on 15 November. However the claimant was 13 days late in reporting. The District Judge refused the claimant’s application for “relief from sanction”, and their appeal to the High Court was also dismissed.
The issues before the Court of Appeal
The new Civil Procedure Rule 3.9, for applications made after 1 April 2013, dispensed with the previous nine factors for consideration (see below) and replaces them with two:
(1) the need for litigation to be conducted efficiently and at proportionate cost and (2) the need to enforce compliance with rules, practice directions and orders. As with the old rule 3.9, the court must also consider “all the circumstances”.
The three conjoined appeals were heard as a test case by the Master of the Rolls Lord Dyson, Jackson LJ, and Vos LJ. The Law Society and the Bar Council were allowed to make submissions as Intervenors regarding wide ranging issues in practice.
The Court of Appeal decision in Denton
The Court of Appeal has and directed that this decision takes primacy and should be the only case to be considered from now regarding relief from sanctions. Mitchell, and the subsequent decisions, need not be referred to. The appeals were allowed in each of the three cases.
“…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”.
The court differed as to the correct approach however. Lord Dyson MR and Vos LJ set out a three stage approach. Jackson LJ, agreed with the outcome in each appeal, but favoured a more direct approach at stage 3, and for the court to simply “deal justly with the application” and considering all of the relevant factors, but without regressing to excessive lenience with any breach being overcome by a costs penalty. That was the approach of the judge in Denton. Jackson LJ insisted that the judge was mistaken in not taking in to account the wider impact on litigants and the court when considering the justice of the case. Lord Dyson MR and Vos LJ criticised the treatment of Mitchell rather than Mitchell itself. On deciding an application for relief from sanctions Under CPR 3.9 ther three stage approach is:
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 notable that the Court of Appeal has distanced itself from the terms “trivial” and “non-trivial”, preferring the words “serious” and “significant”.
Consider why the failure or default occurred? Unfortunately, the Court of Appeal gave no further guidance on this point, merely saying the guidance in Mitchell is not exhaustive. This spelt out that “pressure of work”, or being unable to get to the office due to inclement weather were not good reasons.
A re-emphasis 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”,
- Whether the breach has prevented the court or the parties from conducting the litigation (or other litigation) efficiently and at proportionate cost; and
- The importance of complying with rules, practice directions and orders.
Dyson MR, and Vos LJ said the third stage required the Court to give particular consideration to all the circumstances of the case but with greater weight to be given to factors (a) and (b). Jackson LJ, whose report is the foundation of the reforms (and who was part of the Court of Appeal hearing 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”. I.e., irrespective of any other factors, the court must consider (a) and (b). As the majority, Vos LJ and Dyson LJ disagreed, the guidance now is to simply attach greater weight to those factors.
In any event, “all the circumstances” must be considered, rather than merely concentrating on the specific factors in the new CPR 3.9. This suggests that following Denton, relief from sanctions in similar circumstances is now more likely to be granted than applied post Mitchell, where there would be short shrift.
Relief from sanctions applications were previously governed by CPR 3.9 with consideration of nine factors as follows:
“(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order the court will consider all the circumstances including –
- (a) the interests of the administration of justice;
- (b) whether the application for relief has been made promptly;
- (c) whether the failure to comply was intentional;
- (d) whether there is a good explanation for the failure;
- (e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant preaction protocol;
- (f) whether the failure to comply was caused by the party or his legal representative;
- (g) whether the trial date or the likely trial date can still be met if relief is granted;
- (h) the effect which the failure to comply had on each party; and
- (i) the effect which the granting of relief would have on each party.”
From 1 April 2013 this changed to a newly worded CPR 3.9:
“On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need—
- (a) for litigation to be conducted efficiently and at proportionate cost; and
- (b) to enforce compliance with rules, practice directions and orders.”
Punishment to fit the crime?
The shift of emphasis in Denton is to be welcomed, perhaps heralding a return to “proportionality” and the principle previously endorsed as “the punishment should fit the crime” (Beeforth). It is likely that this re-balancing in Denton following recent confusion will not see a reversion to courts failing to uphold sanctions without good reason.
The Court of Appeal wanted more co-operation between parties (which had prevailed pre-Mitchell). Opportunistic attempts to take advantage of technical or trivial breaches will be met with heavy costs sanctions.
However, there is no guidance on what remedies if any there may be for litigants, their solicitors and insurers where a claim or defence has been struck out due to a misinterpretation of Mitchell.
Cases referred to
Denton v TH White Ltd and another, Decadent Vapours Ltd v Bevan and others and Utilise TDS Ltd v Davies and others  EWCA Civ 906
Beeforth v- Beeforth. Court of Appeal  EWCA Civ 1151; The Times [17.9.1998]