By Richard Borrett
Introduction
The background to the 4/7/2014 court of appeal decision
(available here http://www.judiciary.gov.uk/judgments/denton-v-th-white-ltd-de-laval-ltd-decadent-vapours-ltd-v-bevan-salter-celtic-vapours-ltd-utilise-tds-ltd-v-davies-bolton-community-college-corp-watertrain-ltd/)
needs no introduction to those engaged in civil litigation in recent months.
Suffice it to say that the Mitchell
decision has caused considerable confusion and contradiction as to the correct
approach to applications under CPR 3.9.
What follows is a brief analysis of the judgment and where
it leaves the issue of relief from sanctions.
Mitchell & the cases which follow
Interestingly and helpfully the Court of Appeal lists ([13]
– [20]) those cases which are, in its view, the ‘most important’ cases decided
since Mitchell:
Newland Shipping http://www.bailii.org/ew/cases/EWHC/Comm/2014/210.html,
Summit Navigation http://www.bailii.org/ew/cases/EWHC/Comm/2014/398.html,
Chartwell Estate Agents http://www.bailii.org/ew/cases/EWCA/Civ/2014/506.html.
Given that the court of appeal (in its view at least) is
merely ‘restating’ the decision in Mitchell, those cases are still in theory
relevant to applications for relief.
Having considered those the court said that “The guidance given at paragraphs 40 and 41
of Mitchell remains substantially
sound. However in view of the way it has been interpreted, we propose to
restate the approach that should be applied in a little more detail.” Whether
what follows is really a restatement is a matter for debate.
The Three-Stage Guidance
The court sets out (at [24]) a three stage process for the
assessment of applications under CPR r3.9:
The first stage is to identify and assess the seriousness and
significance of the “failure to comply with any rule, practice direction or
court order” which engages rule 3.9(1). If the breach is neither serious nor
significant, the court is unlikely to need to spend much time on the second and
third stages. The second stage is to consider why the default occurred. The
third stage is to evaluate “all the circumstances of the case, so as to enable
[the court] to deal justly with the application including [factors (a) and
(b)]”.
Further detail is given on the application of each stage of
the test.
Stage 1
The judgment goes some way to assisting with the meaning of
‘triviality’ which caused considerable inconsistency in decision-making.
The court says (at [26]) that “it would be preferable if in future the focus of the enquiry at the
first stage should not be on whether the breach has been trivial. Rather, it
should be on whether the breach has been serious or significant”.
It goes on to consider the test of ‘materiality’ proposed by
the Bar Council and Law Society (who intervened in the appeal):
It was submitted on behalf of the Law Society and Bar Council that the
test of triviality should be replaced by the test of immateriality and that an
immaterial breach should be defined as one which “neither imperils future
hearing dates nor otherwise disrupts the conduct of the litigation”. Provided
that this is understood as including the effect on litigation generally (and
not only on the litigation in which the application is made), there are many
circumstances in which materiality in this sense will be the most useful
measure of whether a breach has been serious or significant. But it leaves out
of account those breaches which are incapable of affecting the efficient
progress of the litigation, although they are serious…
We therefore prefer simply to say
that, in evaluating a breach, judges should assess its seriousness and
significance.
Therefore the new question is whether a breach is serious or
significant. Whether a breach disrupts the conduct of litigation will in many
cases (but not always) answer that question but there are breaches which do not
so disrupt, but which could still be serious.
Finally, the court reiterated that where a breach is not
‘serious or significant’ (or trivial as was), then relief will usually be
granted ([28]).
The Second Stage
The second stage is, simply, to consider what (if any) the
reason for the breach is. Considering why the default occurred will be
important at the third stage.
The Third Stage
The court quite accurately recognised that the main
difficulty which has arisen has been the ‘paramount importance’ given to
factors (a) and (b) in rule 3.9.
Importantly the court appeared to row back from this a
little and said (at [32]) that those two factors
“may not be of paramount importance, [but] we reassert that they are of particular importance and should be
given particular weight at the third stage when all the circumstances of the
case are considered”.
In considering applications, the correct approach is that
the court should ([35]):
…give particular weight to these two important factors. In doing so, it
will take account of the seriousness and
significance of the breach (which has been assessed at the first stage) and any explanation (which has been
considered at the second stage). The
more serious or significant the breach the less likely it is that relief will
be granted unless there is a good reason for it. Where there is a good reason for a serious or significant breach,
relief is likely to be granted. Where the
breach is not serious or significant, relief is also likely to be granted.
The court noted the following which in the authors view is
one of the most important passages in the judgment ([38], emphasis added):
…some judges are approaching applications for relief on the basis that,
unless a default can be characterised as trivial or there is a good reason for
it, they are bound to refuse relief. This is leading to decisions which are
manifestly unjust and disproportionate. It
is not the correct approach and is not mandated by what the court said in
Mitchell: see in particular para 37. A
more nuanced approach is required as we have explained. But the two factors stated in the rule must
always be given particular weight. Anything less will inevitably lead to
the court slipping back to the old culture of non-compliance which the Jackson
reforms were designed to eliminate.
Non-Co-operation
Equally important as the three-stage test, the court went
out of its way to criticise the ‘non-cooperation’ between lawyers since
Mitchell. The most important passages are these:
[41] …it is wholly inappropriate for litigants or their lawyers to take
advantage of mistakes made by opposing parties in the hope that relief from
sanctions will be denied and that they will obtain a windfall strike out or
other litigation advantage. In a case where (a) the failure can be seen to be
neither serious nor significant, (b) where a good reason is demonstrated, or
(c) where it is otherwise obvious that relief from sanctions is appropriate, parties should agree that relief from
sanctions be granted without the need for further costs to be expended in
satellite litigation. The parties should in any event be ready to agree limited
but reasonable extensions of time up to 28 days as envisaged by the new rule
3.8(4).
[42] It should be very much the exceptional
case where a contested application for relief from sanctions is necessary.
[43] The court will be more ready in the future to penalise
opportunism. The duty of care owed by a legal representative to his client
takes account of the fact that litigants are required to help the court to
further the overriding objective […] It is as unacceptable for a party to try
to take advantage of a minor inadvertent error, as it is for rules, orders and
practice directions to be breached in the first place. Heavy costs sanctions should, therefore, be imposed on parties who
behave unreasonably in refusing to agree extensions of time or unreasonably
oppose applications for relief from sanctions. An order to pay the costs of
the application under rule 3.9 may not always be sufficient. The court can, in
an appropriate case, also record in its order that the opposition to the relief
application was unreasonable conduct to be taken into account under CPR rule
44.11 when costs are dealt with at the end of the case
That is as strong an indication as could be given by the
Court of Appeal as to the behaviour which is expected of parties and the
consequences of unreasonableness
Conclusions
The three stage guidance set out gives further assistance in
the making of r3.9 applications. It should diminish the weight currently being
given to factors (a) and (b), and give greater weight to the rest of r1.1.
There is, however, no return to pre-Mitchell days and there
is no room for laxity.
Equally importantly, respondents (to applications under
r3.9) will now have to think very carefully before opposing any application for
relief or for an extension of time (including under the newly amended rule 3.8).
Problems
A number of issues remain following this decision.
The effect of rule 32.10
The Court of Appeal in Chartwell
indicated that, any application to rely upon a late witness statement was in
effect an application under rule 3.9: the sanction had ‘bitten’.
However no argument was in fact heard on that point and the
indication (however strong, and even though from the Court of Appeal) is obiter.
In another case decided on the same day as Chartwell, Paul Dean Davies (http://www.bailii.org/ew/cases/EWHC/Admin/2014/2034.html),
the High Court decided the exact opposite.
This post is not the place for a full analysis of the issue,
but it is one which remains unhappily unresolved, and on which there are now
directly contradictory decisions from the courts.
Serious breaches not
affecting hearing dates
Though the issue of ‘triviality’ is somewhat clearer
following Denton, there will remain cases which do not imperil hearing dates or
affect the conduct of litigation, but which, in the court’s view, are serious.
Assessing which of those breaches (like paying court fees on
time) are serious may present some difficulty. The important points are (i) that
the starting point should be the effect on the conduct of litigation generally,
and (ii) that ‘seriousness’ is not the end of the matter, and though a failure may
be sufficiently serious to pass through stage 1, it has to then be considered
in ‘all of the circumstances’ at stage three.
