Wednesday, 9 July 2014

Denton, Decadent and Utilise: Restating Mitchell?

By Richard Borrett

The background to the 4/7/2014 court of appeal decision (available here 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:
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.

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

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).

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 (, 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.  

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