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England and Wales Court of Appeal (Civil Division) Decisions >>
Denton & Ors v TH White Ltd & Ors [2014] EWCA Civ 906 (04 July 2014)
URL: https://www.bailii.org/ew/cases/EWCA/Civ/2014/906.html
Cite as:
[2014] BLR 547,
[2014] EWCA Civ 906,
[2014] 4 Costs LR 752,
[2014] CP Rep 40,
[2015] 1 All ER 880,
[2014] WLR(D) 299,
[2014] 1 WLR 3926,
[2014] WLR 3926,
154 Con LR 1
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Neutral Citation Number: [2014] EWCA Civ 906 |
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Case Numbers: A2/2014/0126; A3/2014/0767; and A3/2014/0870 |
IN
THE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE
QUEEN'S BENCH DIVISION OF
THE
HIGH COURT
BRISTOL DISTRICT REGISTRY: HHJ DENYER QC: CLAIM No. 7BS90560
AND ON APPEAL FROM
THE
CHANCERY DIVISION OF
THE
HIGH COURT
CARDIFF DISTRICT REGISTRY: HHJ JARMAN QC: CLAIM No. 3CF30143
MANCHESTER DISTRICT REGISTRY: HHJ HODGE QC: CLAIM No. 3MA30330
|
|
Royal Courts of Justice Strand, London, WC2A 2LL |
|
|
4th July 2014 |
B e f o r e :
THE
MASTER OF
THE
ROLLS
LORD JUSTICE JACKSON
and
LORD JUSTICE
VOS
____________________
|
|
A2/2014/0126 (appeal from HHJ Denyer QC's order dated 23rd December 2013)
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|
BETWEEN:
|
|
|
Charles Graham Denton Mary Denton Roger Thomas Denton
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Claimants/Respondents
|
|
v
|
|
|
TH White Limited De Laval Limited
|
Defendants/Appellants Part 20 Defendants/Appellants
|
|
|
A3/2014/0767 (appeal from HHJ Jarman QC order dated 18th February 2014)
|
|
BETWEEN:
|
|
|
Decadent Vapours Limited
|
Claimant/Appellant
|
|
v
|
|
|
(1) Joseph Bevan (2) Jamie Salter (3) Celtic Vapours Limited
|
Defendants/Respondents
|
|
|
A3/2014/0870 (appeal from HHJ Hodge QC order dated 24th February 2014)
|
|
BETWEEN:
|
|
|
Utilise TDS Limited
|
Claimant/Appellant
|
|
v
|
|
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(1) Neil Cranstoun Davies (2) Bolton Community College Corporation (3) Watertrain Limited
|
Defendants/Respondents
|
____________________
(Transcript of
the
Handed Down Judgment of
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to
the
Court)
____________________
IN
DENTON
Mr Andrew P McLaughlin (instructed by BLM LLP) for
the
Defendant/Appellant
Mr Richard Stead (instructed by Burges Salmon LLP) for
the
Claimants/Respondents
IN DECADENT
Mr Gerard Clarke and Mr Mark
Vinall
(instructed by DWF LLP) for
the
Claimant/Appellant
Mr Ben Blakemore (instructed by Beor Wilson Lloyd) for
the
Defendants/Respondents
IN UTILISE
Mr
Vikram
Sachdeva and Mr Jack Anderson (instructed by Linder Myers LLP Solicitors) for
the
Claimant/Appellant
Mr David Mohyuddin and Mr Ian Tucker (instructed by Mills & Reeve LLP) for
the
2nd Defendant/2nd Respondent
INTERVENERS
Mr David Holland QC (instructed by Colemans-ctts LLP and
the
Law Society) for
the
Bar Council and Law Society
Hearing dates: 16 and 17 June 2014
____________________
HTML
VERSION
OF JUDGMENT
____________________
Crown Copyright ©
The
Master of
the
Rolls and Lord Justice
Vos:
This
is a joint judgement to which we have both contributed.
Introduction
These
are
three
appeals (which we shall refer to as "
Denton",
"Decadent" and "Utilise") in which one or other party has sought relief from sanctions pursuant to CPR rule 3.9.
This
rule provides:
"Relief from sanctions
(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 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.
(2) An application for relief must be supported by evidence."
We shall refer to
the
matters set out in sub-paragraphs (a) and (b) of rule 3.9(1), where convenient, as "factor (a)" and "factor (b)".
The
correct approach to
the
application of
this
rule has given rise to much litigation and debate among practitioners and academics. As is well known,
this
court gave some guidance in its decision in Mitchell
v.
News Group Newspapers Ltd [2013] EWCA Civ 1537, [2014] 1 WLR 795 which has been
the
subject of criticism. In
the
light of
this,
the
court invited
the
Bar Council and
the
Law Society to intervene in
these
appeals. We are grateful to
them
(as well as
the
representatives of
the
parties) for
their
submissions. For
the
reasons
that
we give later in
this
judgment, 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
history and purpose of
the
reforms
that
were proposed by Sir Rupert Jackson's Review of Civil Litigation Costs: Final Report, December 2009 (
the
"Jackson Report") are now also
very
well-known and have been rehearsed in a large number of cases.
The
relevant background is set out in Mitchell, and we do not propose to repeat it here.
The
three
appeals
Denton
is a case in which
the
parties had served all
their
witness statements for use at trial by 27 July 2012, yet
the
claimant served six further statements in December 2013 one month before
the
date fixed for a 10 day trial.
The
further statements were said to be in response to a change of circumstances
that
had occurred in August 2013.
The
judge granted
the
claimant relief from
the
automatic sanctions in CPR rule 32.10, which provides
that:
"[i]f a witness statement …for use at trial is not served … within
the
time specified by
the
court,
then
the
witness may not be called to give oral evidence unless
the
court gives permission". As a result
the
trial had to be adjourned.
The
defendant and Part 20 defendant appeal with permission from Jackson LJ.
- In Decadent,
the
claimant failed to comply with an order which provided
that,
unless it paid certain court fees by 4.00 pm on 19 December 2013, its claim would be struck out. A cheque for
the
full fees was sent to
the
court on
the
due date by document exchange, so
that
it could have been expected to arrive only one day late. In fact,
the
cheque was lost either in
the
DX or at court, and
the
non-payment only came to
the
attention of
the
parties when
the
judge mentioned it at a pre-trial review on 7 January 2014.
They
were paid on 9 January 2014.
The
judge refused relief from sanctions on 18 February 2014 and permission to appeal was granted by Davis LJ.
- Utilise is a slightly more complicated case in
that
two breaches were under consideration. First,
the
claimant filed a costs budget some 45 minutes late in breach of an order which specifically made reference to
the
automatic sanctions in CPR rule 3.14 which provides
that:
"[u]nless
the
court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only
the
applicable court fees". Secondly,
the
claimant was 13 days late in complying with an order requiring it to notify
the
court of
the
outcome of negotiations.
The
District Judge declined to grant relief from
the
sanctions in rule 3.14, holding
that
the
second breach rendered
the
first breach, which would otherwise have been trivial, a non-trivial one.
The
judge on
the
first appeal held
that,
despite
the
fact
that
the
District Judge had been wrong to
think
that
there
had been a previous default in filing a costs budget,
there
was no good reason for him to interfere with
the
exercise of her case management discretion. Accordingly,
the
judge dismissed
the
appeal. Lewison LJ granted permission for a second appeal to be brought.
Mitchell
- Since Mitchell was decided in November 2013,
there
have been many first instance and appellate decisions on questions concerned with relief from sanctions. Almost all
the
decisions to which we have been referred have purportedly applied
the
guidance given in Mitchell.
The
facts in Mitchell were
that
the
claimant served his costs budget six days late and one day before
the
case/costs management conference at which it was due to be considered.
The
consequence was
that
the
hearing had to be adjourned and another hearing arranged to deal with (a)
the
question of relief from sanctions and (b)
the
claimant's costs budget if relief were granted.
The
claimant's non-compliance caused substantial extra work and extra costs to be incurred by
the
defendant. It also disrupted
the
work of
the
court.
The
master had to
vacate
half a day which had been allocated to deal with asbestosis claims. She refused to grant relief from sanctions and
the
Court of Appeal upheld
that
decision.
The
master's decision was within
the
ambit of her case management discretion, so
there
was no proper basis upon which
the
Court of Appeal could set it aside.
- At para 36 of
the
judgment in Mitchell,
the
court said of factors (a) and (b):
"
These
considerations should now be regarded as of paramount importance and be given great weight. It is significant
that
they
are
the
only considerations which have been singled out for specific mention in
the
rule".
The
court continued at para 37:
"We recognise
that
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
reference to dealing with
the
application "justly" is a reference back to
the
definition of
the
"overriding objective".
This
definition includes ensuring
that
the
parties are on an equal footing and
that
a case is dealt with expeditiously and fairly as well as enforcing compliance with rules, practice directions and orders.
The
reference to "all
the
circumstances of
the
case" in CPR 3.9 might suggest
that
a broad approach should be adopted. We accept
that
regard should be had to all
the
circumstances of
the
case.
That
is what
the
rule says. But (subject to
the
guidance
that
we give below)
the
other circumstances should be given less weight
than
the
two considerations which are specifically mentioned."
- It
then
gave
the
following guidance:
"40. We hope
that
it may be useful to give some guidance as to how
the
new approach should be applied in practice. It will usually be appropriate to start by considering
the
nature of
the
non-compliance with
the
relevant rule, practice direction or court order. If
this
can properly be regarded as trivial,
the
court will usually grant relief provided
that
an application is made promptly.
The
principle "de minimis non curat lex" (
the
law is not concerned with trivial
things)
applies here as it applies in most areas of
the
law.
Thus,
the
court will usually grant relief if
there
has been no more
than
an insignificant failure to comply with an order: for example, where
there
has been a failure of form rather
than
substance; or where
the
party has narrowly missed
the
deadline imposed by
the
order, but has otherwise fully complied with its terms. We acknowledge
that
even
the
question of whether a default is insignificant may give rise to dispute and
therefore
to contested applications. But
that
possibility cannot be entirely excluded from any regime which does not impose rigid rules from which no departure, however minor, is permitted.
41. If
the
non-compliance cannot be characterised as trivial,
then
the
burden is on
the
defaulting party to persuade
the
court to grant relief.
The
court will want to consider why
the
default occurred. If
there
is a good reason for it,
the
court will be likely to decide
that
relief should be granted. For example, if
the
reason why a document was not filed with
the
court was
that
the
party or his solicitor suffered from a debilitating illness or was involved in an accident,
then,
depending on
the
circumstances,
that
may constitute a good reason. Later developments in
the
course of
the
litigation process are likely to be a good reason if
they
show
that
the
period for compliance originally imposed was unreasonable, although
the
period seemed to be reasonable at
the
time and could not realistically have been
the
subject of an appeal. But mere overlooking a deadline, whether on account of overwork or otherwise, is unlikely to be a good reason. We understand
that
solicitors may be under pressure and have too much work. It may be
that
this
is what occurred in
the
present case. But
that
will rarely be a good reason. Solicitors cannot take on too much work and expect to be able to persuade a court
that
this
is a good reason for
their
failure to meet deadlines.
They
should either delegate
the
work to others in
their
firm or, if
they
are unable to do
this,
they
should not take on
the
work at all.
This
may seem harsh especially at a time when some solicitors are facing serious financial pressures. But
the
need to comply with rules, practice directions and court orders is essential if litigation is to be conducted in an efficient manner. If departures are tolerated,
then
the
relaxed approach to civil litigation which
the
Jackson reforms were intended to change will continue. We should add
that
applications for an extension of time made before time has expired will be looked upon more favourably
than
applications for relief from sanction made after
the
event."
Subsequent authorities
- We shall make reference here only to
the
most important of
the
cases
that
followed Mitchell.
- In Adlington
v.
ELS International Lawyers LLP [2013] EWHC B29 (QB); [2014] 1 Costs LR 105
there
were 134 claimants in a group action.
The
claimants' solicitors served particulars of claim in all but seven cases by
the
due date specified in an unless order. In
those
seven cases
the
particulars of claim were ready in draft, but
the
clients were abroad on holiday and unable to sign
the
statements of truth. HH Judge Oliver-Jones QC granted relief from sanctions. He held
that
the
breach was one of form rather
than
substance and fell into
the
trivial category. At para 32,
the
judge said:-
"
the
'nature' of non-compliance cannot, in my judgment, be divorced from consideration of
the
'consequences' of non-compliance. Whether or not a failure to comply with an order is 'significant' or 'insignificant' must involve having regard to consequences. In
these
cases
there
were no adverse consequences at all, either to
the
Defendant or to
the
efficient conduct overall of
this
litigation; on a purely statistical basis
the
default affects only 6% of
the
claims faced by
the
Defendant and
the
granting of relief is unlikely, with robust future case management, to have any effect at all on progression of
the
action".
- In Durrant
v.
Chief Constable of Avon and Somerset Constabulary [2013] EWCA Civ 1624; [2014] 2 All ER 757,
the
defendant was in breach of successive orders for
the
service of its witness statements. On 19 November 2012, Lang J ordered
that
statements be exchanged by 21 January 2013. Following
the
defendant's failure to comply, Mitting J made an unless order on 26 February 2013 requiring statements to be served by 12 March 2013.
The
defendant again failed to comply. Eventually,
the
defendant served two statements one day late and other statements subsequently.
The
judge granted relief from sanctions, permitting
the
defendant to rely on all his late statements, and
then
adjourned
the
trial so
that
the
claimant would have time to deal with
the
new evidence.
The
Court of Appeal, applying
the
Mitchell guidance, reversed
that
decision. In relation to
the
two statements which were only one day late, Richards LJ delivering
the
judgment of
the
court said
this
at para 48:
"
The
position concerning
the
two witness statements
that
were served only just out of time is less clear-cut. … [
There
follows a quotation from Mitchell] … As we have said,
the
non-compliance in relation to
the
two statements, taken by itself, might be characterised as trivial, as an instance where "
the
party has narrowly missed
the
deadline imposed by
the
order".
The
non-compliance becomes more significant, however, when it is seen against
the
background of
the
failure to comply with Lang J's earlier order, and
the
fact
that
Mitting J, in extending
that
deadline, had seen fit to specify
the
sanction for non-compliance".
- In Newland Shipping & Forwarding Ltd
v.
Toba Trading FZC [2014] EWHC 210 (Comm); [2014] 2 Costs LR 279
the
defendant in action 1213 failed to serve witness statements because it had not paid its solicitors and
they
had ceased to act. Hamblen J refused to grant relief from sanctions.
The
breach was not trivial, because "provision of timely witness statements was a matter of obvious importance given
the
tight trial timetable". Also
there
was no good reason for
the
default.
- In Lakatamia Shipping Co Ltd
v.
Su [2014] EWHC 275 (Comm); [2014] 2 Costs LR 307,
the
defendant was 46 minutes late in giving disclosure. Hamblen J held
that
the
breach was trivial and granted relief from sanctions. He also said
that
the
defendant's previous defaults were a relevant general circumstance, but could not affect
the
characterisation of
the
breach in question.
They
could not convert a trivial default into a serious default.
- In Summit Navigation Ltd
v.
Generali Romania Asigurare Reasigurare SA [2014] EWHC 398 (Comm); [2014] 2 Costs LR 367,
the
claimant was one day late in tendering security for
the
defendant's costs. Leggatt J held
that
the
breach was trivial and granted
the
claimant's application for relief from sanctions. He criticised
the
defendant's conduct in opposing
the
application and ordered
the
defendant to pay
the
claimant's costs. At para 40 Leggatt J said:
"In my
view,
the
present case falls squarely within
the
category of case where
the
non-compliance with a court order can properly be regarded as "trivial". With
the
greatest respect to
the
Court of Appeal, I should prefer to use a different adjective, since
the
whole
thrust
of
the
new approach is to inculcate a culture of compliance with rules and orders and to dispel an attitude which trivialises even "minor" breaches. I would
therefore
prefer to say
that
the
default in
this
case was not material. But whatever label is used,
this
case fits exactly one of
the
examples given by
the
Court of Appeal in Mitchell at [40] – namely, "where
the
party has narrowly missed
the
deadline imposed by
the
order, but has otherwise fully complied with its terms"."
- In Chartwell Estate Agents Ltd
v.
Fergies Properties SA [2014] EWCA Civ 506; [2014] 3 Costs LR 588 both parties failed to serve
their
witness statements for several weeks after
the
due date.
The
judge held
that
the
breaches were not trivial and
there
was no good reason for
them.
Nevertheless he granted relief from sanctions and an extension of time to both parties, noting
that
both parties were ready to exchange and
the
trial date could still be maintained.
The
defendant appealed. It was much in
the
defendant's interests for
the
court to refuse relief to both parties,
thus
effectively bringing
the
action to an end.
The
Court of Appeal dismissed
the
appeal, holding
that,
even where
the
breach was not trivial and
there
was no good reason for it, factors (a) and (b) will not always prevail. It was, in
that
case, just to grant relief from sanctions:
the
claimant's breaches had not affected
the
trial date or generated any significant extra cost. To refuse relief from sanctions would have brought
the
claim to an end. It was also a factor in
the
claimant's favour
that
the
defendant had also failed to comply. Davis LJ (with whom Sullivan and Laws LJJ agreed) observed at para 62:-
"It is also to be emphasised
that
the
courts in considering applications under CPR 3.9 do not have and should not have as
their
sole objective a display of judicial musculature.
The
objective under CPR 3.9 is to achieve a just result, having regard not simply to
the
interests of
the
parties but also to
the
wider interests of justice. As has been said by
the
Master of
the
Rolls (in his 18
th
lecture), enforcing compliance is not an end in itself. In
the
well-known words of Lord Justice Bowen: "
The
courts do not exist for
the
sake of discipline". Such sentiments have not been entirely ousted by CPR 3.9, as to be interpreted and applied in
the
light of Mitchell."
- In Hallam Estates Ltd
v.
Baker [2014] EWCA Civ 661,
the
Court of Appeal held
that
the
Mitchell criteria do not apply to in-time applications for extensions of time.
The
court criticised
the
conduct of
the
respondent for refusing to grant a reasonable extension of time when requested to do so.
The
criticisms of
the
Mitchell guidance
The
principal criticisms may be summarised as follows. First,
the
"triviality" test amounts to an "exceptionality" test which was rejected by Sir Rupert Jackson in his report and is not reflected in
the
rule. It is unjustifiably narrow. Secondly,
the
description of factors (a) and (b) in rule 3.9(1) as "paramount considerations" gives too much weight to
these
factors and is inconsistent with rule 3.9 when read in accordance with rule 1.1.
They
should be given no more weight
than
all other relevant factors. It is said
that
the
Mitchell approach downplays
the
obligation to consider "all
the
circumstances of
the
case, so as to enable [
the
court] to deal justly with
the
application".
Thirdly,
it has led to
the
imposition of disproportionate penalties on parties for breaches which have little practical effect on
the
course of litigation.
The
result is
that
one party gets a windfall, while
the
other party is left to sue its own solicitors.
This
is unsatisfactory and adds to
the
cost of litigation
through
increases in insurance premiums. Fourthly,
the
consequences of
this
unduly strict approach have been to encourage (i) uncooperative behaviour by litigants; (ii) excessive and unreasonable satellite litigation; and (iii) inconsistent approaches by
the
courts.
Analysis and guidance
- Before we examine
the
criticisms of Mitchell, we
think
it is important to undertake an analysis of rule 3.9 itself.
Analysis of Rule 3.9(1)
- In understanding
the
correct approach to
the
grant of relief from sanctions, it is necessary to start with an examination of
the
text of rule 3.9(1) itself.
The
rule contains
three
elements (which are not to be confused with
the
three
stages in
the
guidance
that
we give below). First, it states when
the
rule is engaged by providing
that
it applies "[o]n an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order".
This
makes it clear
that
the
court's first task is to identify
the
"failure to comply with any rule, practice direction or court order", which has triggered
the
operation of
the
rule in
the
first place. Secondly, it provides
that,
in such a case, "
the
court will consider all
the
circumstances of
the
case, so as to enable it to deal justly with
the
application".
Thirdly,
it provides
that
the
exercise directed by
the
second element of
the
rule shall include a consideration of factors (a) and (b).
Guidance
- We consider
that
the
guidance given at paras 40 and 41 of Mitchell remains substantially sound. However, in
view
of
the
way in which it has been interpreted, we propose to restate
the
approach
that
should be applied in a little more detail. A judge should address an application for relief from sanctions in
three
stages.
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)]". We shall consider each of
these
stages in turn identifying how
they
should be applied in practice. We recognise
that
hard-pressed first instance judges need a clear exposition of how
the
provisions of rule 3.9(1) should be given effect. We hope
that
what follows will avoid
the
need in future to resort to
the
earlier authorities.
The
first stage
The
first stage is to identify and assess
the
seriousness or significance of
the
"failure to comply with any rule, practice direction or court order", which engages rule 3.9(1).
That
is what led
the
court in Mitchell to suggest
that,
in evaluating
the
nature of
the
non-compliance with
the
relevant rule, practice direction or court order, judges should start by asking whether
the
breach can properly be regarded as trivial.
- Triviality is not part of
the
test described in
the
rule. It is a useful concept in
the
context of
the
first stage because it requires
the
judge to focus on
the
question whether a breach is serious or significant. In Mitchell itself,
the
court also used
the
words "minor" (para 59) and "insignificant" (para 40). It seems
that
the
word "trivial" has given rise to some difficulty. For example, it has given rise to arguments as to whether a substantial delay in complying with
the
terms of a rule or order which has no effect on
the
efficient running of
the
litigation is or is not to be regarded as trivial. Such semantic disputes do not promote
the
conduct of litigation efficiently and at proportionate cost. In
these
circumstances, we
think
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 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.
The
most obvious example of such a breach is a failure to pay court fees. We
therefore
prefer simply to say
that,
in evaluating a breach, judges should assess its seriousness and significance. We recognise
that
the
concepts of seriousness and significance are not hard-edged and
that
there
are degrees of seriousness and significance, but we hope
that,
assisted by
the
guidance given in
this
decision and its application in individual cases over time, courts will deal with
these
applications in a consistent manner.
The
assessment of
the
seriousness or significance of
the
breach should not, initially at least, involve a consideration of other unrelated failures
that
may have occurred in
the
past. At
the
first stage,
the
court should concentrate on an assessment of
the
seriousness and significance of
the
very
breach in respect of which relief from sanctions is sought. We accept
that
the
court may wish to take into account, as one of
the
relevant circumstances of
the
case,
the
defaulter's previous conduct in
the
litigation (for example, if
the
breach is
the
latest in a series of failures to comply with orders concerning, say,
the
service of witness statements). We consider
that
this
is better done at
the
third
stage (see para 36 below) rather
than
as part of
the
assessment of seriousness or significance of
the
breach.
- If a judge concludes
that
a breach is not serious or significant,
then
relief from sanctions will usually be granted and it will usually be unnecessary to spend much time on
the
second or
third
stages. If, however,
the
court decides
that
the
breach is serious or significant,
then
the
second and
third
stages assume greater importance.
The
second stage
The
second stage cannot be derived from
the
express wording of rule 3.9(1), but it is nonetheless important particularly where
the
breach is serious or significant.
The
court should consider why
the
failure or default occurred:
this
is what
the
court said in Mitchell at para 41.
- It would be inappropriate to produce an encyclopaedia of good and bad reasons for a failure to comply with rules, practice directions or court orders. Para 41 of Mitchell gives some examples, but
they
are no more
than
examples.
The
third
stage
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.
That
is not so and is not what
the
court said in Mitchell: see para 37. Rule 3.9(1) requires
that,
in every case,
the
court will consider "all
the
circumstances of
the
case, so as to enable it to deal justly with
the
application". We regard
this
as
the
third
stage.
- We can see
that
the
use of
the
phrase "paramount importance" in para 36 of Mitchell has encouraged
the
idea
that
the
factors other
than
factors (a) and (b) are of little weight. On
the
other hand, at para 37
the
court merely said
that
the
other circumstances should be given "less weight"
than
the
two considerations specifically mentioned.
This
may have given rise to some confusion which we now seek to remove. Although
the
two factors may not be of paramount importance, 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.
That
is why
they
were singled out for mention in
the
rule. It is striking
that
factor (a) is in substance included in
the
definition of
the
overriding objective in rule 1.1(2) of enabling
the
court to deal with cases justly; and factor (b) is included in
the
definition of
the
overriding objective in identical language at rule 1.1(2)(f). If it had been intended
that
factors (a) and (b) were to be given no particular weight,
they
would not have been mentioned in rule 3.9(1). In our
view,
the
draftsman of rule 3.9(1) clearly intended to emphasise
the
particular importance of
these
two factors.
- Our
view
on
this
point is reinforced by
the
fact
that
Sir Rupert recommended at paragraph 6.7 of Chapter 39 of his report
that
rule 3.9 should read as follows, including a factor (b) referring specifically to
the
interests of justice in a particular case:-
"(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
requirements
that
litigation should be conducted efficiently and at proportionate cost; and
(b)
the
interests of justice in
the
particular case."
This
recommendation was rejected by
the
Civil Procedure Rule Committee in favour of
the
current
version.
In our opinion, it is legitimate to have regard to
this
significant fact in determining
the
proper construction of
the
rule. It follows
that,
unlike Jackson LJ, we cannot accept
the
submission of
the
Bar Council
that
factors (a) and (b) in
the
new rule should "have a seat at
the
table, not
the
top seats at
the
table", if by
that
is meant
that
the
specified factors are not to be given particular weight.
- Factor (a) makes it clear
that
the
court must consider
the
effect of
the
breach in every case. If
the
breach has prevented
the
court or
the
parties from conducting
the
litigation (or other litigation) efficiently and at proportionate cost,
that
will be a factor weighing in favour of refusing relief. Factor (b) emphasises
the
importance of complying with rules, practice directions and orders.
This
aspect received insufficient attention in
the
past.
The
court must always bear in mind
the
need for compliance with rules, practice directions and orders, because
the
old lax culture of non-compliance is no longer tolerated.
Thus,
the
court must, in considering all
the
circumstances of
the
case so as to enable it to deal with
the
application justly, 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.
- But it is always necessary to have regard to all
the
circumstances of
the
case.
The
factors
that
are relevant will
vary
from case to case. As has been pointed out in some of
the
authorities
that
have followed Mitchell,
the
promptness of
the
application will be a relevant circumstance to be weighed in
the
balance along with all
the
circumstances. Likewise, other past or current breaches of
the
rules, practice directions and court orders by
the
parties may also be taken into account as a relevant circumstance.
- We are concerned
that
some judges are adopting an unreasonable approach to rule 3.9(1). As we shall explain,
the
decisions reached by
the
courts below in each of
the
three
cases under appeal to
this
court illustrate
this
well. Two of
them
evidence an unduly draconian approach and
the
third
evidences an unduly relaxed approach to compliance which
the
Jackson reforms were intended to discourage. As regards
the
former, we repeat
the
passage from
the
18
th
Implementation Lecture on
the
Jackson reforms to which
the
court referred at para 38 of its judgment in Mitchell: "[i]t has changed not by transforming rules and rule compliance into trip wires. Nor has it changed it by turning
the
rules and rule compliance into
the
mistress rather
than
the
handmaid of justice. If
that
were
the
case
then
we would have, quite impermissibly, rendered compliance an end in itself and one superior to doing justice in any case".
- It seems
that
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.
Satellite litigation and non-cooperation
- Justifiable concern has been expressed by
the
legal profession about
the
satellite litigation and
the
non-cooperation between lawyers
that
Mitchell has generated. We believe
that
this
has been caused by a failure to apply Mitchell correctly and in
the
manner now more fully explained above.
- Litigation cannot be conducted efficiently and at proportionate cost without (a) fostering a culture of compliance with rules, practice directions and court orders, and (b) cooperation between
the
parties and
their
lawyers.
This
applies as much to litigation undertaken by litigants in person as it does to others.
This
was part of
the
foundation of
the
Jackson report. Nor should it be overlooked
that
CPR rule 1.3 provides
that
"
the
parties are required to help
the
court to further
the
overriding objective". Parties who opportunistically and unreasonably oppose applications for relief from sanctions take up court time and act in breach of
this
obligation.
- We
think
we should make it plain
that
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).
- It should be
very
much
the
exceptional case where a contested application for relief from sanctions is necessary.
This
is for two reasons: first because compliance should become
the
norm, rather
than
the
exception as it was in
the
past, and secondly, because
the
parties should work together to make sure
that,
in all but
the
most serious cases, satellite litigation is avoided even where a breach has occurred.
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. Representatives should bear
this
important obligation to
the
court in mind when considering whether to advise
their
clients to adopt an uncooperative attitude in unreasonably refusing to agree extensions of time and in unreasonably opposing applications for relief from sanctions. 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. If
the
offending party ultimately wins,
the
court may make a substantial reduction in its costs recovery on grounds of conduct under rule 44.11. If
the
offending party ultimately loses,
then
its conduct may be a good reason to order it to pay indemnity costs. Such an order would free
the
winning party from
the
operation of CPR rule 3.18 in relation to its costs budget.
- We should also make clear
that
the
culture of compliance
that
the
new rules are intended to promote requires
that
judges ensure
that
the
directions
that
they
give are realistic and achievable. It is no use imposing a tight timetable
that
can be seen at
the
outset to be unattainable.
The
court must have regard to
the
realities of litigation in making orders in
the
first place. Judges should also have in mind, when making directions, where
the
Rules provide for automatic sanctions in
the
case of default. Likewise,
the
parties should be aware of
these
consequences when
they
are agreeing directions. "Unless" orders should be reserved for situations in which
they
are truly required:
these
are usually so as to enable
the
litigation to proceed efficiently and at proportionate cost.
- We should say something about
the
submissions
that
have been addressed to
the
consequences of scarce public resources.
This
is now sadly a fact of life, as much in litigation and in
the
courts as elsewhere. No judicial pronouncement can improve
the
position. It does, however, make it all
the
more important
that
court time is not wasted and hearings, once fixed, are not adjourned.
Denton
- In
Denton,
the
proceedings were issued as long ago as 22 November 2005 alleging breaches of contract by
the
defendant in
the
design and construction of a milking parlour which it had installed at
the
claimants' farm.
The
defendant joined
the
manufacturer as a Part 20 defendant.
- On 11 October 2007
the
action was stayed on terms
that
the
defendant would pay £200,000 damages plus costs in respect of certain admitted defects, and
the
claimants would serve re-amended particulars of claim in respect of other disputed matters. After a
three
year period during which
the
defendant carried out certain remedial works,
the
stay was lifted and
the
litigation continued.
The
final formulation of
the
claimants' case appeared in
their
re-re-amended particulars of claim dated 29 October 2010.
- On 2 April 2012, Deputy District Judge Melville-Shrieve ordered
the
parties to file and exchange witness statements by 8 June 2012. He gave
the
parties permission to call expert witnesses in
three
fields, namely (a) milking parlour construction and operation, (b)
veterinary
science and (c) quantification of loss. He ordered
that
the
milking parlour expert reports be exchanged by 27 July 2012.
The
parties duly served
their
witness statements and
the
reports of
their
milking parlour experts pursuant to
that
order. Mr Williams,
the
claimants' milking parlour expert, included in his report criticisms of
the
dimensions inside
the
milking parlour. In his
view
these
provided inadequate space for
the
cows.
The
claimants had not pleaded
that
allegation and did not apply for permission to amend in order to plead it.
- On 6 February 2013 HH Judge Denyer QC ordered
that
the
joint statements of
the
milking parlour experts and
the
reports of
the
other experts should be served on
various
dates between March and June 2013. He gave directions for
the
preparation of a Scott Schedule to be completed by 29 July 2013. He directed
that
a 10 day trial be fixed to start on
the
first available date between 1 October 2013 and 28 February 2014, with a pre-trial review one to two months before trial.
The
court subsequently made minor adjustments to
the
dates for
the
expert evidence and
the
Scott Schedule. It fixed
the
10 day trial to start on 13 January 2014.
- During late November and early December 2013
the
claimants served six witness statements addressing a number of issues including
the
allegedly unsatisfactory spacings inside
the
milking parlour.
Their
justification for doing so at such a late stage was
that
in August 2013
they
had modified
the
spacings inside
the
parlour and
the
milk yield was now much improved.
- At
the
pre-trial review on 23 December 2013,
the
judge granted relief from
the
sanction contained in rule 32.10. He permitted
the
claimants to rely upon
the
six further witness statements. He adjourned
the
trial so
that
the
defendant could have a proper opportunity to answer
that
evidence. He directed
that
there
should be a case management conference in February 2014, in order
that
the
court could set a new timetable for
the
service of factual and expert evidence.
The
defendant now appeals against
that
order.
- In our
view
the
judge's order was plainly wrong and was an impermissible exercise of his case management powers.
The
judge's first task was to consider
the
seriousness and significance of
the
claimants' breach in filing new witness statements so long after
they
had been ordered to do so.
This
was a significant breach, because it caused
the
trial date to be
vacated
and
therefore
disrupted
the
conduct of
the
litigation.
The
next question was whether
there
was good reason for
the
breach.
There
was not, because
the
issue as to
the
spacings for
the
cattle had been known about since Mr Williams's first report in 2012.
The
effect of
the
modifications made in August 2013 was not a justification in itself; and even, if relevant,
there
was significant delay imperilling
the
trial caused by
the
claimants' failure to respond quickly to
that
development.
- In
the
light of
the
answers at
the
first and second stage of
the
inquiry, it was
very
likely
that
relief would be refused. But
that
did not mean
that
the
third
stage did not have to be undertaken. In addressing
the
third
stage,
the
judge ought to have considered all
the
circumstances of
the
case, but given particular weight to factors (a) and (b). Factor (a) militated heavily in favour of refusing relief from sanctions and holding
the
trial date. Factor (b) also militated strongly in favour of refusal, because
the
delay was a most serious or significant breach of
the
court's earlier orders for
the
exchange of witness statements, which impacted upon
the
orderly progress of
the
litigation.
There
was
very
little to weigh in
the
balance on
the
other side under
the
heading of "all
the
circumstances of
the
case" and
the
need to deal with
the
application justly.
The
claimants had had ample opportunity to serve
their
additional evidence long before December 2013. Moreover,
the
judge's idea
that
allowing
the
trial to go ahead would mean conducting it on an "artificial basis" was, in our
view,
incorrect. It was
the
claimants' own fault
that
they
had not chosen to serve such evidence earlier, and to admit such evidence at
that
late stage necessitated
the
adjournment of
the
10 day trial. Six experts and numerous factual witnesses were due to attend
the
trial. An adjournment would result in
the
protraction of proceedings which had already dragged on for far too long. It would cause a waste of court resources and generate substantial extra costs for
the
parties. It would cause inconvenience to a large number of busy people, who had carved out space in
their
diaries for
the
anticipated trial.
- Accordingly,
the
third
stage analysis ought to have weighed heavily in favour of refusing relief from sanctions.
The
judge's order of 23 December 2013 must,
therefore,
be set aside.
The
action must be listed for trial at
the
earliest practicable date in Bristol or Birmingham.
Decadent
- Decadent
Vapours
Limited produces and develops
vapours
for electronic cigarettes. In August 2013 it issued proceedings alleging
that
the
first defendant employee was developing, together with
the
second defendant, a product to compete with
the
claimant, using a corporate
vehicle
(
the
third
defendant) for
the
purpose.
The
court gave directions leading to a pre-trial review on 7 January 2014 and a trial starting on 11 February 2014.
There
were
various
slippages on both sides.
- On 12 December 2013
the
court ordered:
"
The
1st Claimant, 1st Defendant, 2nd Defendant and 3rd Defendant having failed to file completed pre-trial checklists by
the
date required.
1.
The
claim be struck out unless
the
claimant files a completed pre-trial checklist, pays
the
£1090.00 hearing fee and
the
£110.00 checklist fee with
the
court on or before 4:00pm 19
th
December 2013.
2.
The
defence be struck out unless
the
defendants file completed pre-trial checklists with
the
court on or before 4:00pm 19th December 2013."
The
claimant completed
the
pre-trial checklist in time, but did not make payment of
the
court fees by
the
appointed date.
The
explanation was
that
the
claimant's
then
solicitors put
their
cheque in
the
DX on 19th December 2013. In
the
ordinary course of events,
the
cheque would have arrived
the
next morning, but in fact it never reached its destination. It is not known whether it was lost in
the
DX or mislaid within
the
court building.
The
mishap came to light on 7 January 2014 during
the
pre-trial review before HH Judge Jarman QC, at which
the
parties presented agreed directions including
the
vacation
of
the
trial date.
The
judge pointed out
that
the
claimant had not complied with
the
unless order, so
that
the
claim was automatically struck out, leaving
the
claimant to apply for relief from
the
sanction, which it duly did. On 7 January 2014,
the
claimant's solicitor sent a second cheque for
the
hearing fee by recorded delivery.
That
cheque too was delayed in
the
post. Accordingly on 9 January 2014, a partner in
the
claimant's solicitors paid
the
hearing fee using his credit card.
The
judge heard
the
application for relief from sanctions on 18 February 2014. He held
that
the
claimant's failure was not trivial. After reviewing Mitchell and subsequent authorities, he rejected
the
claimant's application for relief.
The
action having come to an end,
the
judge ordered
the
claimant to pay
the
costs.
- In our
view,
the
judge fell into error. His first task was to consider
the
seriousness and significance of
the
claimant's failure to pay
the
fees.
The
gravamen of
the
claimant's conduct was (i) sending
the
cheque by DX on 19 December 2013, so
that
it would inevitably arrive one day late and (ii) running
the
small risk (which unfortunately materialised)
that
the
cheque would go astray. All failures to pay court fees are serious, because it is important
that
litigants pay court fees on time. But some failures to pay fees are more serious
than
others.
The
failure in
this
case was near
the
bottom of
the
range of seriousness.
- At
the
second stage,
the
judge ought to have considered whether
there
was good reason for
the
breach.
There
was not, since
the
solicitor knew in advance
that
his method of payment would inevitably give rise to a breach of
the
court order.
- At
the
third
stage, however,
the
judge should have concluded
that
factor (a) pointed in favour of relief, since
the
late payment of
the
fees did not prevent
the
litigation being conducted efficiently and at proportionate cost. Factor (b) also pointed in favour of
the
grant of relief since
the
breach was near
the
bottom of
the
range of seriousness:
there
was a delay of only one day in sending
the
cheque and
the
breach was promptly remedied when
the
loss of
the
cheque came to light. It only affected
the
orderly conduct of
the
litigation, because of
the
approach adopted by
the
defendants and
the
court.
- On a consideration of all
the
circumstances of
the
case,
the
only reasonable conclusion in
this
case was to grant relief. If relief were not granted,
the
whole proceedings would come to an end. It is true
that
the
claimant had breached earlier court orders (as indeed had
the
defendants). As discussed at paras 27 and 36 above, previous breaches of court orders may be taken into account at
the
third
stage. Nevertheless, even taking account of
the
history of breaches in
the
Decadent litigation,
this
was not a case where, in all
the
circumstances of
the
case, it was proportionate to strike out
the
entire claim. In our judgment,
the
defendants ought to have consented to relief being granted so
the
case could proceed without
the
need for satellite litigation and delay.
- We will
therefore
allow
the
claimant's appeal and set aside
the
judge's order of 18 February 2014.
Utilise
- On 11 June 2013,
the
claimant issued proceedings in
the
Chancery Division of
the
High Court at Manchester, claiming declaratory and other relief concerning its shareholding in a company called Watertrain Ltd, which was
the
third
defendant.
The
claimant asserted
that
the
first and second defendants as majority shareholders had wrongfully prevented
the
third
defendant company from allotting shares to
the
claimant, and had wrongfully excluded
the
claimant from
the
management of
the
third
defendant.
- On 9 August 2013
the
court sent
the
parties a notice of proposed allocation to
the
multi-track.
This
required
the
parties to complete directions questionnaires by 9 September 2013, which
they
duly did. On 2 October 2013, District Judge Matharu made an order ("
the
October order") which included
the
following:
"1.
The
claim is stayed until 8 November 2013 during which period
the
parties must attempt to settle
the
matter or to narrow
the
issues.
2. By 4.00pm on 15 November 2013
the
Claimant must notify
the
court, in writing, of
the
outcome of negotiations.
IT IS RECORDED
THAT
the
parties have fails [sic] to file Forms H [cost budgets] in accordance with CPR 3.13 …
the
parties are referred to CPR 26.3(6A)
4.
They
shall do so by 4:00pm on 11 October 2013, in default of which
the
provisions of CPR 3.14 shall apply."
- All parties filed
their
budgets by 11 October 2013, but in
the
claimant's case
the
budget arrived by fax at 4.45 pm which was 45 minutes late. On 18 October 2013, Mr Stephen Topping,
the
solicitor who was handling
the
matter on
the
claimant's behalf resigned. Mr Stephen Boyd took over
the
file, but did not spot
that
the
costs budget had been lodged 45 minutes late.
Thereafter,
discussions between
the
parties continued in accordance with
the
district judge's direction.
The
parties did not achieve a settlement, but
they
did agree to mediate.
The
claimant's solicitors notified
the
court of
this
fact on 28 November 2013, which was
thirteen
days beyond
the
date for such notification specified in paragraph 2 of
the
October order.
- On 11 November 2013,
the
district judge made an order (not formally drawn up until a week later)
that
the
claimant was in breach of paragraph 4 of
the
October order, with
the
result
that
rule 3.14 applied (so
that
the
claimant would be treated as having filed a budget containing only
the
applicable court fees).
- Mr Boyd received
that
order on 21 November 2013. He promptly issued an application for relief from sanctions on
the
ground
that
the
claimant had complied with paragraph 4 of
the
October order. On 28 November 2013, Mr Boyd spotted
that
the
costs budget had been filed 45 minutes late. He
thereupon
accepted
that
there
had been a breach of paragraph 4. In an email to
the
defendants' solicitors dated 28 November 2013 and in a witness statement dated 18 December 2013 Mr Boyd contended
that
the
claimant's breach was trivial.
- On 2 January 2014
the
district judge heard
the
claimant's application for relief from sanctions. She refused
that
application, noting
that
the
claimant was in default in
three
respects: first, it had failed to file a costs budget by 9 September 2013, as required by
the
rules (
the
district judge was wrong in saying
that
the
rules required
this);
secondly, it was 45 minutes late in complying with paragraph 4 of
the
October order;
thirdly,
it was in breach of paragraph 2 of
the
October order.
The
district judge held
that,
seen in context,
the
claimant's 45 minute delay in filing
the
costs budget was not trivial.
- On appeal, HH Judge Hodge QC accepted
that
the
district judge was wrong to hold
that
the
claimant should have filed its costs budget by 9 September 2013. Nevertheless he upheld
the
district judge's decision. He held
that,
viewed
in isolation,
the
45 minute delay was a trivial breach, but
the
court was entitled to have regard to other breaches: see Durrant supra at para 48. Since
the
claimant was in breach of paragraph 2 as well as paragraph 4 of
the
October order,
the
cumulative effect was
that
the
45 minute delay was not trivial.
There
was no good reason for
the
non-compliance.
The
claimant had not applied for relief promptly, since it did not put its application for relief on
the
proper basis until 18 December 2013.
- In our
view
both
the
district judge and HH Judge Hodge were wrong.
- At
the
first stage,
the
district judge ought to have considered
that
the
delay in filing
the
costs budget in breach of
the
October order was neither serious nor significant. On any
view,
the
45 minute delay was trivial.
The
breach did not imperil any future hearing date or otherwise disrupt
the
conduct of
this
or other litigation.
- Having regard to
this
assessment of
the
breach, we do not consider
that
the
district judge needed to spend much time on either of
the
second or
third
stages in
this
case.
There
was, however, no good reason demonstrated for
the
delay in filing a costs budget. As regards
the
third
stage, neither factor (a) nor factor (b) pointed towards a refusal of relief for
the
simple reason
that,
as we have said,
the
breach did not prevent
the
litigation from being conducted efficiently and at proportionate cost, and did not imperil any future hearing date or otherwise disrupt
the
conduct of
this
or any other litigation.
- At
the
third
stage,
the
district judge would also have considered
the
fact
that
Mr Boyd applied for relief as soon as he became aware of
the
position. Both she and
the
judge were wrong to castigate
the
claimant's solicitors for
the
failure of
the
new fee earner to realise
that
the
costs budget had been served 45 minutes late, when
this
was only apparent on a close inspection of
the
fax header details. It was also at
the
third
stage
that
the
district judge and
the
judge ought to have considered
the
effect of
the
additional breach –
the
failure to notify
the
court timeously of
the
outcome of negotiations. We
think
that
they
were wrong to
think
that
this
later breach of paragraph 2 of
the
October order, which was itself neither serious nor significant, turned what was neither a serious nor a significant breach into something worse.
- We consider
that
the
Defendants in Utilise ought to have consented to
the
grant of relief from sanctions. We will set aside
the
orders of
the
judge and
the
district judge, and make an order relieving
the
claimant from
the
sanction imposed by rule 3.14.
Conclusion
- For
the
reasons
that
we have given, all
three
appeals must be allowed. It is clear
that
the
guidance in Mitchell needs to be clarified and further explained. It seems
that
some judges have ignored
the
fact
that
it is necessary in every case to consider all
the
circumstances of
the
case (what we have characterised as
the
third
stage).
This
may be
the
reason for
the
decisions in Decadent and Utilise. But other judges have adopted what might be said to be
the
traditional approach of giving pre-eminence to
the
need to decide
the
claim on
the
merits.
That
approach should have disappeared following
the
Woolf reforms.
There
is certainly no room for it in
the
post-Jackson era. It seems, however,
that
this
approach must have been applied in
Denton.
- Useful amplification of
the
Mitchell guidance has already been given in some of
the
authorities to which we have referred at paras 14 to 20 above. But we hope, as we have said,
that
it will now be unnecessary to refer to earlier authorities in future and
that
the
guidance we have given will assist in reducing
the
need for satellite litigation and will be conducive to a reasonably consistent judicial approach to
the
application of rule 3.9.
Lord Justice Jackson:
- I am grateful to
the
Master of
the
Rolls and
Vos
LJ for setting out
the
facts of
the
three
cases under appeal. I am also grateful for
their
clear and accurate summary of Mitchell and
the
post-Mitchell decisions. I agree
that
all
three
appeals should be allowed.
- As
the
Master of
the
Rolls and
Vos
LJ state in
their
joint judgment, it is helpful to approach
the
application of rule 3.9 in
three
stages. I agree with what
they
say about
the
first and second stages.
- I take a somewhat different
view,
however, in relation to
the
third
stage. Rule 3.9 requires
the
court to consider all
the
circumstances of
the
case as well as factor (a) and factor (b).
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.
The
weight to be attached to
those
two factors is a matter for
the
court having regard to all
the
circumstances.
The
word "including" in rule 3.9 means
that
factors (a) and (b) are included amongst
the
matters to be considered. No more and no less. As
the
Bar Council put it in
their
submissions, factors (a) and (b) should "have a seat at
the
table, not
the
top seats at
the
table". Ultimately what rule 3.9 requires is
that
the
court should "deal justly with
the
application".
The
reason why
the
rule has been amended to require courts to give specific consideration to factors (a) and (b) is
that
previously courts were not doing so.
This
is a point which Professor Zuckerman makes in his article
The
revised CPR 3.9: a coded message demanding articulation (2013) 32 CJQ 123 at 134, although he criticises
the
wording of rule 3.9 as being anodyne and saying nothing
that
is not already in
the
rules.
- As
the
Master of
the
Rolls and
Vos
LJ demonstrate, it is legitimate to have regard to
the
Review of Civil Litigation Costs Final Report ("Final Report") as part of
the
background when construing
the
new
version
of rule 3.9.
- Chapter 39, paragraph 6.5 of
the
Final Report identifies
the
mischief at which
this
particular reform is directed:
"
The
conclusions to which I have come are as follows. First,
the
courts should set realistic timetables for cases and not impossibly tough timetables in order to give an impression of firmness. Secondly, courts at all levels have become too tolerant of delays and non-compliance with orders. In so doing
they
have lost sight of
the
damage which
the
culture of delay and non-compliance is inflicting upon
the
civil justice system.
The
balance
therefore
needs to be redressed."
The
paragraph
then
goes on to reject
the
"extreme course" of refusing relief save in exceptional circumstances.
Denton
is a good illustration of how courts used to operate under
the
former rule 3.9 (but should not operate under
the
new rule). In his concern to enable
the
claimants to deploy
their
full case
the
judge did not consider factor (a) or factor (b). If he had considered all
the
circumstances of
the
case as well as factor (a) and factor (b), he would have refused relief.
The
judge's order
that
the
claimants pay "
the
defendant's costs
thrown
away by
the
vacation
of
the
trial" does not begin to meet
the
justice of
the
case.
There
are many hidden costs flowing from adjournment of
the
trial: witness statements and reports need updating; fee earners handling
the
litigation may change with a need for newcomers to read into
the
case; both legal teams continue to work upon
the
litigation and so forth. In addition to
the
increased costs
there
is wastage of resources. Lawyers, experts, factual witnesses and other busy people who had cleared
their
diaries to attend
the
trial (probably cancelling other commitments) will have to clear
their
diaries yet again for another trial a year later.
There
is also
the
continuing strain on
the
parties to consider. What litigants need is finality, not procrastination. Quite apart from its impact on
the
immediate parties in
Denton,
the
judge's order has caused unnecessary delay for many other litigants awaiting
their
day in court.
The
parties in
Denton,
Decadent and Utilise are either small businesses or businessmen. Litigation is a massive drain on management time and an unwelcome diversion of resources for any business. It is important for
the
economy
that
the
courts provide swift and just resolution of disputes involving SMEs: see Preliminary Report chapter 29 and Final Report chapter 25. Hence
the
need to minimise delay and avoid adjournments or satellite litigation.
- Although adjournments pose a particular problem, as illustrated by
Denton,
they
are not
the
only
vice
inherent in a culture of delay and non-compliance. Depending upon
the
circumstances, a failure timeously to make disclosure or to serve evidence or to take some other step in
the
action might have a serious impact on
the
litigation or on opposing parties.
- As Mr Holland QC has reminded us, in its written submissions to
the
Civil Litigation Costs Review,
the
Law Society stated:
"
The
Law Society considers
that
the
overriding objective is not applied as rigorously or as consistently as it should be.
The
most infrequently applied rules are
those
that
are available to control
the
progress of a case. Lord Woolf introduced a number of ways in which
this
could be achieved (most notably CPR Parts 1.1, 1.4 and 3.1), but
the
experience of practitioners suggests
that
in practice
these
are not used fully or at all.
Therefore
we question whether further rules would bring any benefit unless
they
are applied fully. We suggest
there
needs to be a change in
the
attitudes of
the
judiciary and court users so
that
court rules are fully complied with and applied in practice."
- In
the
light of
this
and similar submissions,
the
first part of recommendation 86 of
the
Final Report stated:
"
The
courts should be less tolerant
than
hitherto of unjustified delays and breaches of orders.
This
change of emphasis should be signalled by amendment of CPR rule 3.9."
- Recommendation 86 needs to be understood in its proper context. It is part of a large package of interlocking reforms which were designed to promote access to justice at proportionate cost. Recommendation 86 was necessary for two reasons. First,
the
culture of delay and non-compliance was one of
the
(numerous) causes of high litigation costs.
This
cause needed to be tackled along with all
the
others. Secondly, as
the
Law Society pointed out in
the
passage quoted above,
the
(
then
anticipated) package of civil justice reforms would not bring any benefit unless
the
new rules were actually enforced.
The
new rule 3.9 will not play any part in promoting access to justice at proportionate cost if it continues to generate satellite litigation on
the
present scale or if it leads to results such as we have seen in each of
the
three
cases under appeal. I agree with
the
Master of
the
Rolls and
Vos
LJ
that
co-operation should be encouraged and satellite litigation should be discouraged by
the
means
that
they
propose.
- If rule 3.9 is construed as I propose above,
this
accords with
the
natural meaning of
the
language used and also gives proper effect to recommendation 86.
The
rule becomes an aid to doing justice.
The
new rule 3.9 is intended to introduce a culture of compliance, because
that
is necessary to promote access to justice at proportionate cost. It is not intended to introduce a harsh regime of almost zero tolerance, as some commentators have suggested.
- My approach to
the
construction of rule 3.9 leads to
the
same result in
the
three
cases under appeal as
that
reached by
the
Master of
the
Rolls and
Vos
LJ.
These
three
cases are all extreme examples of judges misapplying rule 3.9, albeit at opposite extremes.
There
will be other less clear cut cases where
the
difference of opinion between my colleagues and myself may matter.
That
is why I am delivering
this
separate judgment agreeing in
the
result, but dissenting on
the
issue of construction.
- Finally, for
the
avoidance of doubt, although I was not a member of
the
court which decided Mitchell, I am not criticising
the
actual decision in
that
case.
The
master made a
very
tough order in Mitchell, as demonstrated by Professor Sime in his article Sanctions after Mitchell (2014) 33 CJQ 133. Nevertheless
that
order was not outside
the
permissible range of her case management discretion, as
the
Master of
the
Rolls and
Vos
LJ explain in paragraph 9 of
their
judgment.
- For
the
reasons set out above I agree
that
all
three appeals must be allowed.
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URL: https://www.bailii.org/ew/cases/EWCA/Civ/2014/906.html