Without question, the most prevalent topic of discussion amongst litigators and costs practitioners in recent weeks has been that of relief from sanction. On 27/11/13, the Court of Appeal handed down judgment in the matter of Mitchell -v- News Group Newspapers Limited [2013] EWCA Civ 1537, the widely-publicised defamation proceedings brought by Mr. Andrew Mitchell MP in connection with what has colloquially been daubed Plebgate in which the Court set out its view on the post-Jackson landscape of litigation in respect of compliance with rules, practice directions and orders. The judgment in Mitchell has, to say the least, caused a storm of protest bordering on abhorrence in myriad blogs and the social media, attracting stinging criticism from highly respected commentators to the effect that the Court has held that justice comes second to procedural compliance. See, for an excellent example, the firm views of Kerry Underwood.
The Mitchell case provided the Court of Appeal with its first vehicle by which it might consider and provide guidance upon the issue of relief from sanctions following the implementation of various, and significant, rule changes effective from 01/04/13. Prior to 01/04/13, CPR 3.9(1) provided as follows:
“On an application for relief from any sanction imposed for 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 representatives; (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.”
With effect from 01/04/13, CPR 3.9(1) now reads:
“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.”
The amendment to the rule followed the recommendation of Sir Rupert Jackson in his Review of Civil Litigation Costs: Final Report . See Chapter 39:
“6.5 Enforcement of rules and directions generally. There is a wide spread of views about this issue, amongst both practitioners and distinguished academic commentators. 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. However, I do not advocate the extreme course which was canvassed as one possibility in Preliminary Report paragraph 43.4.21 or any approach of that nature.
“6.6 Comparison with overseas. The shift in balance which I am advocating for England and Wales has echoes elsewhere across the common law world. See, for example, the civil procedure reforms which are to be introduced in Ontario in January 2010; the massive procedural reforms introduced in Hong Kong on 2nd April 2009; and the strict approach to case management adopted by the Australian Federal Court in respect of those cases which can be tried within eight days. The decision of the High Court of Australia in Aon Risk Services Australia Ltd v Australia National University [2009] HCA 27 marks a much tougher attitude by that court to delays by parties. The decision also signals a clear shift in the balance which is struck between case management considerations and pure justice.”
The revised provision at CPR 3.9(1) recommended by Sir Rupert would (Chapter 39 paragraph 6.7):
“… not preclude the court taking into account all of the matters listed in the current paragraphs (a) to (i). However, it simplifies the rule and avoids the need for judges to embark upon a lengthy recitation of factors. It also signals the change of balance which I am advocating.”
In this respect, the Court of Appeal held in Mitchell, per the Master of the Rolls (paragraph 36):
“These considerations [i.e. the revised CPR 3.9(1)(a) and (b)] 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 acknowledged that the overriding objective of The Civil Procedure Rules and all the circumstances of any given case ought still be considered, but made clear that less weight should be given to the same than the matters expressly set out at CPR 3.9(1). As Sir Rupert advocated, there was to be a clear shift in the balance to be struck between case management and justice – of which the profession was forewarned by the Master of the Rolls in his 18th implementation lecture on the Jackson reforms given on 22/03/13:
“25. In order to achieve this, the Woolf reforms and now the Jackson reforms were and are not intended to render the overriding objective, or rule 3.9, subject to an overarching consideration of securing justice in the individual case. If that had been the intention, a tough application to compliance would have been difficult to justify and even more problematic to apply in practice. The fact that since 1999 the tough rules to which Lord Justice Brooke referred have not been applied with sufficient rigour is testament to a failure to understand that that was not the intention.
“26. The revisions to the overriding objective and to rule 3.9, and particularly the fact that rule 3.9 now expressly refers back to the revised overriding objective, are intended to make clear that the relationship between justice and procedure has changed. It 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 has changed because doing justice is not something distinct from, and superior to, the overriding objective. Doing justice in each set of proceedings is to ensure that proceedings are dealt with justly and at proportionate cost. Justice in the individual case is now only achievable through the proper application of the CPR consistently with the overriding objective.
“27. The tougher, more robust approach to rule-compliance and relief from sanctions is intended to ensure that justice can be done in the majority of cases. This requires an acknowledgement that the achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations. Those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds. But more importantly they serve the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the court enables them to do so.”
The Court of Appeal expressly approved this approach (paragraph 39) and went on to give guidance on how the new, more robust approach to relief from sanctions should be applied. The salient parts of such guidance follow, but it is perhaps prudent to start with what is sound advice somewhat hidden within the judgment (paragraph 41):
“…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.”
You have been warned.
A consideration of the nature of the failure will usually be the starting point on an application for relief from sanction. If such a failure is “trivial“, a “failure of form rather than substance” such as “where a party has narrowly missed the deadline imposed by the order, but has otherwise fully complied with its terms“, the court will usually grant relief from sanction “provided that an application is made promptly” (paragraph 40). If the failure is not characterised as trivial, then it is for the defaulting party to persuade the court to grant relief. If there is a “good reason” for the failure then the court “would be likely” (suggesting that even a good reason may not be determinative) to grant relief (paragraph 41).
So what might a good reason be? The court suggested (paragraph 41) that failure to file a document at court because of a party or his solicitor suffering from a “debilitating illness” or being involved in an accident may, depending on the circumstances, be considered to be good reason. Developments in the course of litigation which might render unreasonable a previously reasonable deadline for compliance may also constitute good reason. But merely overlooking deadlines, being very busy, having limited resources – or having a canine with a taste for work completed away from the office – will unlikely/rarely be a good reason. As the Master of the Rolls said (paragraph 43):
“In short, good reasons are likely to arise from circumstances outside the control of the party in default.”
So, in very simple terms, unless a failure is trivial or there is good reason for a failure, don’t expect any sympathy (paragraph 46):
“The new more robust approach that we have outlined above will mean that from now on relief from sanctions should be granted more sparingly than previously. There will be some lawyers who have conducted litigation in the belief that what Sir Rupert Jackson described as “the culture of delay and non-compliance” will continue despite the introduction of the Jackson reforms. But the Implementation Lectures given well before 1 April 2013 were widely publicised. No lawyer should have been in any doubt as to what was coming. We accept that changes in litigation culture will not occur overnight. But we believe that the wide publicity that is likely to be given to this judgment should ensure that the necessary changes will take place before long.”
The court implied that the new CPR 3.9 was perhaps being interpreted a little too ‘gently’ and anticipated that it’s robust approach would be “unattractive” to some judges. The case of Wyche -v- Careforce Group Plc [2013] EWHC 3282 (Comm) was chosen as an example of a perhaps ‘overly-gentle’ approach to relief from sanction – set against a (very briefly stated) background of considerable problems, delays and non-compliance with orders for disclosure, including an ‘unless’ order. In that matter, Walker J acceded to an application for relief from sanction for two failures which he described as “material in the sense that they were more than trivial” but were “unintentional and minor failings in the course of diligently seeking to comply with the order“. While citing dicta of Jackson LJ himself in Fred Perry (Holdings) Limited -v- The Brands Trading Plaza Limited [2012] EWCA Civ 224, to the effect that relief from sanction was being granted too readily amidst a “culture of delay and non-compliance“, Walker J said:
“The culture which the court seeks to foster is a culture in which both sides take a common sense and practical approach, minimising interlocutory disputes and working in an orderly and mutually efficient manner towards the date fixed for trial. It would be the antithesis of that culture if substantial amounts of time and money are wasted on preparation for and conduct of satellite litigation about the consequences of truly minor failings when diligently seeking to comply with an ‘unless’ order.”
A rather forgiving view of Careforce’s almost comical failings, one of which involved the disclosure of over 112,000 unnecessary documents – the equivalent of 300 lever arch files. The Master of the Rolls was less charitable (paragraph 48):
“… In line with the guidance we have already given, we consider that well-intentioned incompetence, for which there is no good reason, should not usually attract relief from a sanction unless the default is trivial. We share the judge’s desire to discourage satellite litigation, but that is not a good reason for adopting a more relaxed approach to the enforcement of compliance with rules, practice directions and orders. In our view, once it is well understood that the courts will adopt a firm line on enforcement, litigation will be conducted in a more disciplined way and there should be fewer applications under CPR 3.9. In other words, once the new culture becomes accepted, there should be less satellite litigation, not more.”
The case of Raayan Al Iraq Co Ltd -v- Trans Victory Marine Inc [2013] EWHC 2696 (Comm) also came in for mention, in which the issue concerned the service of particulars of claim two days late. Put simply, the deadline essentially slipped the claimant’s solicitor’s mind. As in Wyche, Smith J referred to the sentiments of Jackson LJ in Fred Perry (Holdings) Limited, and indeed those of Lewison LJ citing Sir Rupert’s Final Report in the same case, and acknowledged that the checklist of factors to be taken into account in the former version of CPR 3.9 had gone. Nevertheless, he proceeded “somewhat reluctantly” to apply the old checklist. The Master of the Rolls had the following to say about such an approach (paragraph 49):
“We accept that, depending on the facts of the case, it will be appropriate to consider some or even all of these factors as part of “all the circumstances of the case”. But, as we have already said, the most important factors are the need for litigation to be conducted efficiently and at proportionate cost and to enforce compliance with rules, practice directions and orders.”
In the court’s view (paragraph 51), Smith J had focused “exclusively on doing justice between the parties in the individual case and not applying the new approach which seeks to have regard to a wide range of interests“. Quite whether the Court of Appeal would have reached the same conclusion as Smith J in Raayan is not immediately obvious, but there is an express criticism of Smith J’s reasoning if not an implicit criticism of his decision – despite the claimant having only “narrowly missed the deadline“. Justice does therefore appear to play second fiddle to procedural compliance. Seemingly, the norm is now that no matter the strength of argument a party might present having regard to the former checklist, the need for litigation to be conducted efficiently and at proportionate cost and the need to enforce compliance with rules, practice directions and orders must be afforded most weight. Or as the court put it (paragraph 58):
“The expectation is that the sanction will usually apply unless (i) the breach is trivial or (ii) there is a good reason for it. It is true that the court has the power to grant relief, but the expectation is that, unless (i) or (ii) is satisfied, the two factors mentioned in the rule will usually trump other circumstances.”
Cue tactical positioning and satellite litigation aplenty, although the court appears to be more optimistic, at least beyond the short-term (paragraph 60):
“In the result, we hope that our decision will send out a clear message. If it does, we are confident that, in time, legal representatives will become more efficient and will routinely comply with rules, practice directions and orders. If this happens, then we would expect that satellite litigation of this kind, which is so expensive and damaging to the civil justice system, will become a thing of the past.”
So, a crystal clear message: the hitherto commonplace relaxed approach to compliance with rules, practice directions and orders will no longer be tolerated and successful applications for relief from sanction will be fewer and further between. Has that proved to be, in post-Mitchell decisions? Largely so, as can be seen below, including in the tribunals as well as the courts.
Forstater & Another -v- Python (Monty) Pictures Ltd & Another
The issue in this case concerned the 2nd claimant’s failure to serve a notice of funding in the required Form N251 and thus whether or not relief from sanction, imposed automatically by the former CPR 44.3B(1)(c) and expressly preserved, post-01/04/13, by PD 48 para 1.4(b), ought to be granted so as to enable the 2nd claimant (or, in reality, it’s lawyers – see paragraph 39) to recover a success fee from the losing defendants. The 1st claimant provided notice of funding but the 2nd claimant (a company represented by the same lawyers as the 1st claimant and which appears to be inextricably linked to the 1st claimant) did not by reason of a simple oversight. However, it was apparent that the 2nd claimant did give notice, of sorts, of having entered into a conditional fee agreement (‘CFA’) by means of a reference to being represented under a CFA within ‘without prejudice save as to costs’ correspondence sent to the defendants’ representatives on 19/07/12, during the currency of the litigation.
Norris J granted limited relief from sanction in that the 2nd claimant was permitted to recover a success fee as from the date of the aforementioned correspondence notwithstanding that such notification to the defendants of the 2nd claimant’s funding arrangement was not in the prescribed form:
“46. In considering whether to grant relief from sanction I must have regard to the need, so far as is practicable to enforce “rules, practice directions and orders”. This does not mean that each of them must in all circumstances be regarded in exactly the same way, and that the enforcement of each will require exactly the same measures to be taken. This was a failure (through human error) to comply with a rule of general application: it may be contrasted with a conscious failure to comply with a specific order made in the action itself. The policy embodied in CPR 44.3B had at 19 July 2012 been fulfilled (albeit not in a technically correct way) and the substance of the rule was then complied with. The conveying of the requisite information in a letter instead of on form N251 had no discernible impact on the conduct of the action. The failure to convey the information until 19 July 2012 probably had an impact on the conduct of the action (because until then PMP was not in possession of all of the information relevant to a disposal of the claim) and MFPL has not demonstrated that it did not. The consequence of refusing relief may be that MFPL is contractually liable to pay a success fee but would not recover it from PMP: as against that it would appear to have a strong defence to a claim for a success fee from its solicitors, and a claim over against its solicitors in respect of any claim by Counsel. Granting relief would deprive PMP of what may properly be regarded as a windfall (in that it received the relevant information on the wrong piece of paper).
47. In all the circumstances I would grant relief from sanctions to this extent: MFPL shall be entitled to recover such additional liability as would have been recoverable if form N251 had been served on 19 July 2012. This leaves open all of the issues normally considered in relation to CFAs (especially the appropriate level of success fee). I consider that a grant of such relief is not inconsistent with the objectives embodied in the current CPR 1.1(2). I have borne in mind this conclusion when making the costs order summarised in paragraph 34.”
It is to be noted that judgment in Forstater was handed down just two days after the Court of Appeal gave judgment in Mitchell, which prompted the following addition (paragraph 63):
“After I circulated this judgment in draft the Court of Appeal handed down its judgment in Mitchell v News Group [2013] EWCA Civ 1537. I have considered its terms but do not wish to revise my judgment which I consider proceeds upon correct principles.”
It is easy to think that that view is only right, to the extent that the defendants in Forstater had the most important information they were entitled to, such that the failing does appear to be trivial. However, the defendants did not know the date of the CFA, which would feature in the prescribed form and which can be, and frequently is, an important piece of information when considering tactics. Further, that view rather renders nugatory the additional requirement to serve notice of funding upon the issue of proceedings given that there existed (until 01/04/13, when the recoverability of additional liabilities between the parties was brought to an end) an essentially identical pre-issue requirement at Paragraph 9.3 of the Practice Direction – Pre Action Conduct. Indeed it is perhaps noteworthy that the judgment in Forstater is silent as to whether or not the 2nd claimant ever notified the Court of its funding arrangement, as required by the former CPD Section 19.2(2)(a) (a Form N251 was “never completed” so could not have been filed and the Court would not have received a copy of the ‘without prejudice save as to costs’ correspondence aforementioned), and whether or not a failure in that regard may, or may not, have had an effect on the efficient conduct of the litigation at proportionate cost (perhaps in the form of different directions for trial, the limiting of evidence to be relied upon and so on). Finally, while the judge expressly stated that he had taken Mitchell into account, it is far from clear whether or not the parties were permitted to make further submissions based on the Court of Appeal’s guidance. For those reasons, I would treat the decision in Forstsater with a degree of caution.
Norseman Holdings Ltd -v- Warwick Court (Harold Hill) Management Company Ltd
This case concerned a very modest claim for arrears of service charges and while it didn’t involve an application for relief from sanction (nor an application under CPR 3.1(7) – although it ought to have), it is nevertheless an interesting example of the courts’ view generally in respect of procedural matters and costs. Coulson J began his judgment with this:
“Certain aspects of [the claimant’s] conduct of the litigation generally, and this appeal in particular, can only be described as extraordinary. It provides a salutary lesson for those who continue to complain about the changes to the Civil Procedure Rules brought about by Sir Rupert Jackson’s Review of Costs and, in particular, the new emphasis on proportionate costs.”
And ended it with this:
“I should make two final points. Firstly, I note that NHL’s costs of the appeal are said to be at £27,217. In view of the fact that i) the undertaking was most unlikely ever to have been triggered (for the reasons I have given); ii) it related to a default costs order worth £4,449; iii) the underlying claim in this case is worth just over £3,000; to spend such an amount on the appeal is both ludicrous and deplorable. It confirms all my concerns about NHL and Charles Henry and their conduct of this case.
“Secondly, I have already quoted what Judge Davies said about the terrible waste of money represented by this case. This appeal epitomises that waste. It is precisely the sort of disproportionate incurring of costs that the Costs Review, and the subsequent changes to the CPR, were designed to address. The recent judgment of the Court of Appeal in Mitchell v Newsgroup [2013] EWCA Civ. 1537 makes plain that parties to civil litigation need to conduct their case in accordance with the rules of court, so that these expensive interlocutory skirmishes (which almost always have their roots in a failure to comply with the rules in the first place, or some other form of error) become a thing of the past. Here, the best course would have been for District Judge Valve’s order striking out the defence to be enforced, so that this litigation – benefiting no-one but the lawyers – would have come to an end over a year ago.”
Ouch. The decision in Norseman is of no precedent value but is of worthy note insofar as it is indicative of the judiciary’s attitude to procedural compliance post-Mitchell and indeed costs (one wonders how Coulson J may have interpreted the new proportionality test had it applied/arisen!).
SC DG Petrol SRL -v- Vitol Broking Ltd & Others
This case concerned an application for relief from sanctions in the context of failures to comply with orders for security for costs in the Commercial Court and was heard ten days after the Court of Appeal had delivered its decision and guidance in Mitchell. The procedural history in this matter is a little convoluted such that the following ought to be considered against the full background set out in the judgment. For immediate purposes it ought to be appreciated that the claimant’s failures were numerous and that the claim ultimately stood struck out by reason of non-compliance with an ‘unless’ order. The claimant thereafter issued an application for relief from sanction and an application for an extension of time within which it might comply with previous orders.
Applying Sayers -v- Clarke Walker (A firm), Mr Robin Knowles CBE QC held that “it is equally appropriate to have regard to the check-list in CPR 3.9 … in a case of any complexity” when considering the claimant’s application for time under CPR 3.1(2), notwithstanding that Sayers was decided prior to the amendment of the CPR effective on 01/04/13 and thus concerned the former incarnation of CPR 3.9. The learned judge proceeded to refuse relief from sanction for various reasons of no wider implication, commenting that he would have made the same order had the application been heard before both Mitchell and 01/04/13. However, the judge usefully provided his own view on the state of play post-Mitchell (numbers in parenthesis refer to paragraphs of the Court of Appeal’s judgment in Mitchell and bold type is my emphasis):
“29. On an application under CPR 3.9(1) the Court will be engaged in looking more widely than at the case in hand, as well as at the case in hand; “the new approach … seeks to have regard to a wide range of interests”: see [51]. I respectfully offer the observation that there are limits to the contribution that a party, especially a non-defaulting party, can usefully make in evidence or argument in respect of circumstances extending beyond the case in hand – for example on what is needed “to enforce compliance with rules, practice directions and orders.” This is pre-eminently an area for the judge. In Mitchell the Court of Appeal was not putting an enhanced tactical weapon into the hands of non-defaulting parties to the litigation. This is clear from the nature of the factors specified at (a) and (b) of CPR 3.9(1). It is reinforced by the concern of the Court of Appeal to reduce satellite litigation: see [60].
“The second observation arises from the fact that when citing the Court of Appeal in Mitchell the parties referred me closely to the examples given by the Court of Appeal, with the Defendants (the non-defaulting parties) pressing me with the point that the case in hand was not within one or more examples. I respectfully doubt that is the right approach. The examples are there simply to illustrate the principles described by the Court of Appeal. The Court’s inquiry should be guided by the principles. My own view is that ideally the jurisdiction to extend time and grant relief from sanctions is one in which (as Lord Templeman urged in The Spiliada [1987] AC 456, HL in relation to service out of the jurisdiction) a judge would not be referred to other decisions on other facts.”
Aldington & 133 Others -v- ELS International Lawyers LLP (In Administration) [2013] EWHC B29 (QB)
In short, this case concerned a claim by 134 claimants for losses allegedly incurred in respect of failed investments in property in Spain. The issue giving rise to an application for relief from sanction was the claimants’ solicitors failure to comply with an unless order in respect of service of the particulars of claim of eight of the numerous claimants (there were eleven defaulting claimants all told but the defendant did not resist the granting of relief in respect of three of that total). In brief, it was argued that the relevant claimants were abroad or otherwise unavailable and so could not sign the documents (which had been prepared in advance of the deadline) in good time. The application for relief was heard some time before the decision in Mitchell but HHJ Oliver-Jones QC revised his draft judgment following further, written submissions permitted after the handing down in Mitchell. The evidence given as to the procedural history of the underlying claim (see paragraphs 11-20), paints a particularly chaotic picture replete with incompetence and hopeless optimism on the part of the claimants’ representative – although the judge also made clear his criticism of the defendant’s representative in certain (but much less extensive) respects – such that the reader of the judgment might be forgiven for expecting the judge to flatly refuse to exercise his discretion in favour of the defaulting claimants. However, please do read in particular the parties’ respective submissions (see paragraphs 26 and 27), from which the outcome of the application might be far less readily anticipated.
In the event, HHJ Oliver-Jones QC granted relief for the following reasons (paragraph 32):
“(a) the failure in these cases was, in my judgment, a failure of form rather than substance, and, as such, was an insignificant failure that, in the context of my order as a whole and the reasoning underlying the sanction, can properly be regarded as trivial. Particulars of Claim had, as a matter if fact, been produced before the time expired. They were, as a matter of fact, served very shortly thereafter and thus only “narrowly missed the deadline” because of the need for signatures. Application for relief was made promptly. In my judgment, had application been made before 4.00 pm on 1st July (or 15th July in the case of Mr. Morgan), it would almost certainly have been granted, and, I would venture to add, would probably not have been opposed. Consequently, on this issue I accept the Claimant’s submissions and reject those advanced on behalf of the Defendant;
“(b) the nature of the 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, particularly as it is unlikely that all 134 claims will proceed to trial together, as was submitted, in my view correctly, by Mr. Wignall. Further, it was part of my order that there would be a stay for a period of two months following service of the Particulars of Claim for Schedule 3 Claimants; this was to allow the Defendant the opportunity of considering all 134 Particulars of Claim before either admitting the claims or filing a defence. There were no ‘stragglers’ at the time the stay commenced and the ‘breaches’ had been remedied in terms of their substance;
“(c) given my conclusion that the default is trivial in these cases, then my criticisms of competence on the part of those handling these claims does not fall to be considered.”
The judge went on to say that even if he had concluded that the breach was not trivial, he would still have granted relief from sanction on the second limb of the Mitchell test i.e. was there a good reason for the default? At paragraph 33:
“The real reason for the failure to comply was was the fact that Mr. Cotter did not realise that a few of his clients would be simply unavailable to sign their Particulars of Claim when the time to do so arrived. The arrangements for holidays made by the eight relevant claimants were outside Mr. Cotter’s control. I am unable to conclude that his lack of knowledge of his clients’ holiday arrangements can be attributed to incompetence, even though, as I have said, there is evidence of some general lack of competence in the overall management of the claims. Moreover, I am satisfied that he had a genuine belief that it would be possible to move claimants from Schedule 2 to Schedule 3 if holidays interfered with signing, of which he was not positively disabused by the responses of the Defendant’s solicitors prior to the default. In my judgment the reason for failure which I identify is a ‘good reason’ having regard to all the circumstances of this case and, consequently, would justify the granting of relief sought. Again I accept and adopt the submissions made on behalf of the relevant Claimants and reject that made on behalf of the Defendant.”
I must confess a degree of respectful difficulty in agreeing with the ‘good reason’ set out above. The guidance in Mitchell (see paragraph 43) refers to “circumstances outside the control of the party” and not the party’s representative. Furthermore, it is apparent from paragraph 12 of the judgment in Aldington that the claimants’ solicitor did not advise the claimants of the nature of the relevant order, namely that it was an unless order and what the consequences of non-compliance would be, and that there was a considerable delay (relative to the time allowed for compliance) in notifying the claimants of what was required. Taking such matters into account, I cannot help but think that the claimants themselves might have ensured that they would have been able to sign and return the documents in good time had they been possessed of all the relevant information. Further still, there appears to be no mention of the use of the resources of the court so as to facilitate a (fiercely contested and likely lengthy it seems) hearing arising from a party’s default (albeit that such an issue, in isolation, will likely carry little weight). At all events, having regard to all the circumstances of the matter, as far as they are set out in the judgment, I rather think that the claimants’ solicitor breathed a very heavy sigh of relief indeed when the application was allowed.
Durrant -v- Chief Constable of Avon & Somerset Constabulary
This case afforded the Court of Appeal an early opportunity to apply its own guidance in Mitchell. In brief (brief indeed), the defendant made two applications for relief from sanction following his repeated failure to serve witness statements in time: there were various difficulties and delays encountered in taking statements from serving / operational police officers and former employees and the defendant’s solicitor made candid admissions of tardy conduct, underestimating the magnitude/logistics of the tasks faced and her professional commitments to other matters. The situation was made worse for the defendant in that, following a change of counsel, the second application for relief from sanction was made just five days before the scheduled trial and sought permission to introduce the evidence of two further officers/witnesses. Even the first such application had been made a little more than two months after the missed deadline.
The defendant’s applications were dealt with at the opening of the trial (in June 2013 and thus before the decision in Mitchell). HHJ Birtles set out the current incarnation of CPR 3.9 and noted that it was designed to follow the recommendations in Sir Rupert Jackson’s Final Report. The trial judge also referred to the judgment in Venulum Property Investments Ltd v Space Architecture Ltd & Others [2013] EWHC 1242, which provided that the nine factors set out in the former version of CPR 3.9 were not to be ignored but also that there had been a shift of emphasis so that the court was now required to take a “much stronger and less tolerant” approach in respect of adherence to rules and orders. The trial judge proceeded to run through the former CPR 3.9 checklist and, ultimately, granted relief:
“There is … a public interest in the Court scrutinising the actions of police officers when it has heard all of the evidence from both sides. It is that factor in particular which persuades me that in this case I should grant the relief from sanctions sought and permit the Defendant’s witnesses to give evidence in this case. This of course is subject to two matters: the first that the Defendant must pay the Claimant’s costs for this application, in any event, and, secondly, I must give the Claimant adequate time to prepare the case to deal with the Defendant’s witness evidence. I bear in mind of course that she is a litigant in person, albeit a very able one.”
Thereafter, the trial was adjourned at the claimant’s behest and the claimant subsequently appealed against the order of HHJ Birtles granting relief and permitting the defendant to rely on its various witness statements. The hearing in Durrant took place prior to judgment in Mitchell being handed down, but the court permitted further, written submissions in the light of it. Details of the parties’ respective oral and written submissions are to be found at paragraphs 30 to 37. One of the submissions made on behalf of the defendant was that there is a high threshold to be crossed before an appeal court will interfere with a case management decision and that threshold had not been changed by the Jackson reforms. The Court of Appeal had the following to say about that (Richards LJ giving the judgment of the Court):
“38. The judgment in Mitchell reiterated (at para 52) that this court will not lightly interfere with a case management decision. It quoted the observation of Lewison LJ in Mannion v Gray [2012] EWCA Civ 1667, para 18, that “it is vital for the Court of Appeal to uphold robust fair case management decisions by first instance judges”. Equally, however, if the message sent out by Mitchell is not to be undermined, it is vital that decisions under CPR 3.9 which fail to follow the robust approach laid down in that case should not be allowed to stand. Failure to follow that approach constitutes an error of principle entitling an appeal court to interfere with the discretionary decision of the first instance judge. It is likely also to lead to a decision that is plainly wrong, justifying intervention on that basis too. We do not share Mr Payne’s concern about this leading to an increase in appeals and thereby undermining the efficiency benefits of the Jackson reforms. As is stated at para 48 of the Mitchell judgment, “once it is well understood that the courts will adopt a firm line on enforcement, litigation will be conducted in a more disciplined way and there should be fewer applications under CPR 3.9. In other words, once the new culture becomes accepted, there should be less satellite litigation, not more”.
“39. We have already acknowledged that in the present case Judge Birtles did not have the benefit of the guidance in Mitchell. In the light of that guidance, however, we have no doubt that he erred in principle and reached a decision that was plainly wrong.”
The court went on to explain its view that the trial judge did not have sufficiently in mind the debarring order made earlier in the underlying proceedings with which the defendant had not complied and which provided for a sanction, in the event of default, that was proportionate and which complied with the overriding objective – which it must be taken to be of course absent an appeal against it (see Mitchell, paragraph 44). Accordingly (see Mitchell, paragraph 45), “the starting point should be that the sanction has been properly imposed and complies with the overriding objective“. Further, the Court held (paragraph 41):
“Secondly, although the judge purported to proceed on the basis that a “much stronger and less tolerant” approach was required under the new CPR 3.9 towards failures to comply with time limits, it is evident that he did not approach the exercise with the focus or degree of toughness called for by the guidance in Mitchell. He went through the old checklist of factors in the superseded version of CPR 3.9 before coming to the two considerations specifically mentioned in the new CPR 3.9 (the need for litigation to be conducted efficiently and at proportionate cost, and the need to enforce compliance with rules, practice directions and court orders) and then returning to consider further “all the circumstances of the case”. He did not appreciate that the two considerations specifically mentioned in the new rule are the most important considerations and should be given greater weight than other factors (see Mitchell paras 36-37 and 49). Nor did he appreciate how much less tolerant an approach towards non-compliance with rules, practice directions and orders is required by the new rule.”
The Court held that the trial judge’s granting of relief from sanction could not be justified on any proper application of CPR 3.9. It went on to hold that the defendant’s defaults were not trivial: the first default, in isolation, may possibly have been classified as trivial (see below) but the second default was simply not trivial in that a number of statements were served more than two months after the deadline and two further statements were served approximately three months late and just days before trial. Further, the defendant’s two applications for relief (paragraph 42):
“…were so late that they had to be heard on the first day of the trial, making it very likely that the trial would have to be adjourned if the applications were granted; and in the event an adjournment was ordered as a result of the grant of relief. Even if on this occasion, as Mr Payne told us, it was possible to fill the vacated trial slot with other business, the adjournment of a lengthy trial and the need to relist it for another date is detrimental to the efficient conduct of litigation.”
The explanations advanced for the defendant’s non-compliance did not get near ‘good reason’ and, in fact “rang very hollow indeed”. The court was particularly unimpressed (paragraph 43):
“As long ago as March 2012 the defendant had identified that he was likely to call eight witnesses and had invited the court to make a direction for exchange of witness statements in May 2012 (see para 12 above), all of which makes the subsequent delays very difficult to understand. The timetable then set by Lang J on 19 November 2012 (para 13 above) was fixed after the defendant’s solicitor had been consulted (see para 19). The excuses that the solicitor subsequently proffered to Mitting J for failing to meet the date fixed by Lang J (para 16 above) – other professional commitments, holiday season, bad weather, operational commitments of the witnesses – were such that Mitting J’s decision to extend the time for service of witness statements could be considered generous. But in granting the extension, Mitting J made clear by the terms of his order that this was the defendant’s final opportunity. The failure to meet the final deadline was not the result of any unforeseeable event. It was due to incompetence, as Judge Birtles found, and was simply inexcusable.”
It will be recalled that the trial judge was particularly concerned with issues relating to the public interest in scrutinising the actions of, and also the reputations of, the defendant police force and it’s serving officers. The Court of Appeal had the following to say about such issues (paragraph 44):
“In reaching his decision, Judge Birtles placed particular weight on the potential effect on the careers and reputations of individuals and the police force if the officers concerned were unable to give evidence, and on the public interest in scrutinising the actions of police officers in the light of all of the evidence from both sides. In our judgment, however, considerations of that kind have only a limited role to play in the context of relief from sanction. They may be relevant to the question of how much time should be allowed for service of witness statements in the first place, and even to the question of what sanction should be imposed for failure to meet the deadline; but once the court has determined both the deadline and the sanction applicable for failure to comply, we do not think that such considerations can properly carry much weight in determining whether to grant relief from the sanction for non-compliance.”
Particularly useful guidance, in my humble view.
The aforementioned first default of the defendant was trivial at first blush , in that two of its witness statements were dispatched to the claimant by way of service on the due date – by post but also by email which the claimant averred she did not receive until the following day. However, again usefully in respect of guidance as to what might constitute a trivial breach, the court had the following to say (paragraph 48):
“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.”
Accordingly, even missing a deadline narrowly will not necessarily be regarded as trivial if that default follows previous non-compliance (and not necessarily non-compliance in respect of the same issue, I venture to suggest). But even if a party is able to persuade a court that a breach is properly classified as trivial, a delayed application for relief is likely to scupper its chances of being successful in such an application (paragraph 49):
“Moreover, even in relation to trivial non-compliance, the judgment in Mitchell states that “the court will usually grant relief provided that an application is made promptly” (emphasis added). [see Mitchell, paragraph 40] The application in this case was not made promptly; far from it. Nothing was done about the non-compliance for over two months, until the application for relief dated 15 May, which covered the two statements served in March as well as the four additional statements then sought to be relied on. By that time the trial, fixed for 10 June, was imminent. Unless and until relief from sanction was obtained, the claimant could not be expected to prepare to deal with the evidence of witnesses whose statements had been served out of time. She was entitled to proceed on the basis that, as provided in Mitting J’s order, the defendant could not rely on the evidence of any witness whose statement had not been served by the deadline. It is, moreover, of considerable significance that she had protested loudly that the statements were late. There can be no question of the defendant having been lulled into a false sense of security; and it was immediately obvious that an application for relief against sanctions would have to be made. This makes the delay all the more inexcusable.”
And paragraph 51:
“Taking everything into account, and placing particular weight on the failure to make a prompt application for relief from sanction, we have come to the conclusion that the application for relief should be refused even in relation to the evidence of those two witnesses.” (my emphasis)
This case concerned the claimants’ allegation that in numerous transactions taking place over a period of nearly eighteen months they paid to the defendant millions of pounds in cash/cheques under an agreement that the defendant would repay the monies after a fixed period together with a guaranteed return. A typical transaction would apparently involve the payment of a sum of tens of thousands of pounds to be repaid in eighteen months together with an uplift of 100% and such dealings were apparently linked to property transactions in Dubai. All very odd, as Turner J himself thought when (paragraph 38) voicing concerns that the parties’ dealings may have involved money laundering and/or tax evasion: he stayed execution of judgment pending investigation by the police and HM Revenue and Customs and even requested the attendance of a detective officer of the Economic Crime Unit at court when judgment was handed down.
The claim was listed for trial over seven days beginning on 12/12/13. However, on the morning of the first day of trial, counsel for the defendant informed the court that he had received an email from his client on the evening before and that the contents thereof would necessitate an application to amend the defence and to adduce a supplementary witness statement. In fact, the defendant wished to adduce two further witness statements obtained on the eve of trial – some seven months after the date by which witness statements were ordered to be exchanged. The claimants opposed the defendant’s application and urged the court to strike out the defence in its entirety.
Drawing on the decision in Boyle v The Commissioner of Police of the Metropolis [2013] EWCA Civ 1477, the judge held that there was no difference between a failure to serve an expert’s report and a failure to serve a witness statement, such that where the court has ordered witness statements to be served by a certain date and they have not been served by that date then, to obtain the court’s permission under CPR 32.10 to call a witness to give oral evidence, the party in default must persuade the court to grant relief under CPR 3.9.
Inevitably, the judge held that the breach / delay of seven months was far from trivial. Additional problems for the defendant were the delay in making the application, the timing of the application (i.e. on the first day of trial) and the fact that the defendant’s statement was not supplementary in the literal sense but sought to introduce entirely new material and material inconsistent with the case as originally presented. The original defence and statement of the defendant were essentially a full denial of having entered into any of the alleged transactions, whereas the defendant’s amended defence and supplementary witness statement admitted that he did receive cheques for onward transmission/investment. Such discrepancies, the defendant sought to explain, were based on his concern that had he “told the full story” he may have implicated third parties in connection with money laundering. The judge remarked (paragraph 26):
“As to the issue of “good reason”, I am entirely satisfied that no good reason has been made out. Money laundering is a serious criminal offence. Omitting until the very last moment large volumes of evidence in order to protect those guilty of this offence on the unwarranted assumption that the case might not come to trial is a thoroughly bad reason.”
Accordingly, the defendant was refused permission to serve his supplementary witness statement out of time. Completing the picture, the defence was struck out under CPR 3.4(2) by reason of the defendant’s previous and false statements verified by a statement of truth and his professed motivation of covering up for the money laundering activities of others amounting to a flagrant abuse of the process of the court. The judgment of Turner J contains two further useful passages:
Paragraph 29:
“There will be other cases in which there are evidential developments which postdate the time at which earlier witness statements have been served. It is, by way of example only, by no means unusual in personal injury cases for updated witness statements to be served in order to cover a claimant’s progress over the period since the original witness statements were served. This situation falls within the approach of the Court of Appeal in Mitchell at paragraph 41 which I repeat for ease of reference:
“In cases in which there is a realistic possibility that there will be evidential developments between the date upon which witness statements are to be served and the trial date this ought to be anticipated in the orders of the court. In such cases, the wisest course would be to seek to persuade the court to make two orders relating to the service of witness statements. The first would provide for a date which would give a realistic opportunity for all sides to comply with respect to matters which have arisen beforehand. A later backstop date could be ordered for the service of supplementary statements limited in content to matters which occurred, or were reasonably discoverable, only after the first date. This would have the advantage of obviating the need for further applications to the court and of giving the court the opportunity to exercise proportionate case management discipline in advance. In this way, in the vast majority of cases the unanticipated last minute service of witness statements should become a thing of the past. I would expect the same to apply to expert reports.”
Wise words indeed and, done properly, could lead to not insignificant savings in terms of costs and indeed court time. Which leads nicely on to (paragraph 30):
“My refusal to give permission to the defendant to serve his supplementary witness statement out of time does not, however, ameliorate the impact which the defendant’s defaults has already made upon the deployment of the court’s resources. No substantive work was achieved on the first day of trial which was devoted to the defendant’s application to adjourn to allow time to draft the Amended Defence and supplementary witness statement. Arguments were presented by the parties’ advocates on the morning of the second day but, doubtless as a result of the speed with which the procedural developments had overtaken events, they were able to provide me with but limited assistance upon the proper legal approach to the issues arising, particularly against the background of the new regime. This judgment is, therefore, handed down on the fourth day of the seven days listed for trial and there is no realistic prospect that the trial could be accommodated within the time remaining. Court time is a scarce and valuable commodity which should be fairly distributed between all litigants and extra tranches of which ought not readily to be dispensed to those in serious default whose very failures have wasted such reasonable time as has already been allocated to them.”
Such a waste of the court’s time was a factor to feature in the decision of Master McCloud, as to Mr. Mitchell’s application for relief from sanction, at first instance (reported at [2013] EWHC 2355 (QB)):
“28. It is a helpful illustration in this case to consider that, in order to find time in my diary to list this application for relief within any reasonable time, there being objections from Mr Mitchell’s side to a long wait, I needed to vacate a half day in my list which had been pre-allocated to deal with claims by persons affected by asbestos related diseases. There is an expedited list for such claims because life expectancies are often very short. The impact, therefore, of the admitted breaches in this case, was that the claims of those litigants which could have been listed in my diary were not listed, and in their place we have an argument about non-compliance with rules in this defamation claim.
“29. I am sure all claims are important to the parties, but the issue here is not the relative importance of the claims (ie this defamation claim versus the mesothelioma claims which were not listed), rather it is the right of other litigants to have a ‘fair crack of the whip’ where judicial and court resources are very limited, and the right not to be delayed while the courts dispose of matters which ought not to arise in the first place if rules are complied with. I mention this as a concrete example of the impact which breaches in one claim can have on other claims in the system: I do not wish to be misunderstood as saying that evidence of specific detriment to other litigants is necessary in any given case. Breach of rules may I think be assumed to risk impact upon other claims, and the above illustrates one mechanism as to how that occurs where an application for relief is required due to a breach.”
The underlying judicial review proceedings concerned various decisions made by the 1st and 2nd defendants concerning the interested party, a Mr Saker, whose immigration status was uncertain. He had been treated in one of the claimant’s acute bed wards and had not been discharged because of the difficulties of finding alternative accommodation for him. On 13/10/13, the claimant was granted permission to bring judicial review proceedings against the second defendant but was refused permission against the first defendant. The judgment principally concerned the claimant’s application for its costs of the proceedings to be paid by both defendants but it is in respect of the issue of costs as between the two defendants that the judgment is of relevance to this article. Judge Thornton dealt with the issue as follows:
“7. First defendant. Permission is refused against the first defendant. The first defendant is entitled [to] its costs of preparing the Acknowledgement of Service which are summarily assessed in the sum of £2,000 plus VAT (if chargeable). These costs should be paid by the second defendant whose failure in breach of duty to address the urgent need to provide section 21 assistance on first being notified of the interested party’s situation irrespective of his immigration status has caused such costs to be incurred. The second defendant need play no further part in this judicial review…
Costs of First Defendant
If the claimant does not seek a reconsideration, the first defendant’s costs of preparing the Acknowledgement of Service are to be paid by the second defendant to the first defendant, in the sum of £2,000 plus VAT unless within 14 days the second defendant notifies the court and the claimant and the first defendant, in writing, that it objects to paying costs, or as to the amount to be paid, in either case giving reasons. If it does so, the claimant and the first defendant has a further 14 days to respond to both the court and the second defendant, and the second defendant has the right to reply with a further 7 days, after which the claim for costs is to be put before a judge to be determined on the papers. Where the claimant seeks reconsideration, costs are to be dealt with on that occasion.”
The second defendant did not give notice of objection to paying costs (in principle or amount) within the 14 days specified by the judge and it was not until 11/12/13 that the second defendant issued an application for relief from sanction. Coulson J. having set out the relevant test at paragraphs 41 and 45 of Mitchell, rejected argument advanced on behalf of the second defendant that it was, essentially, reasonable and convenient to wait, as it did, to the hearing of the claimant’s application for costs against the defendants so as to deal with its application for relief and challenge to the order of Judge Thornton. Of particular interest is Coulson J’s view on the second defendant’s assertion that there had been no prejudice arising out of its delay (paragraph 25):
“Miss Scolding’s other point was that there was no prejudice as a result of the six week delay in making the application. As I am sure Miss Scolding was keenly aware, even as she made that submission, under the new terms of CPR 3.9, the question of prejudice is no longer a reason for allowing or disallowing relief from sanctions: see Murray and Stokes v Neil Dowlman Architecture Ltd [2013] EWHC 872, at paragraph 19. The emphasis now is on the need to comply with the CPR, not arguing about the impact or otherwise of a failure to comply. In any event, it seems to me that there have been various kinds of prejudice arising from the delay, including the fact that the first defendant has had to attend today to deal with this part of the argument.”
Harrison & Harrison -v- Black Horse Ltd [2013] EWHC B28 (Costs)
The underlying case concerned the claimants’ allegation of being mis-sold PPI by the defendant bank and even found its way up to the Supreme Court, although shortly after permission to appeal was granted by the Supreme Court, the claim was compromised upon the defendant agreeing to pay to the claimants the sum of £33,099.08. Imagine the defendant’s surprise when the claimants’ claim for costs arrived in an eye-watering sum exceeding £2.5 million! The issues in respect of which applications for relief from sanction were made concerned the claimants’ failure to provide the defendant with notices of funding in respect of two (of four) CFAs. Adopting the same terminology of Master Gordon-Saker, the CFAs in question related to the claimants’ “first appeal” (i.e. to the High Court) and “second appeal” (i.e. to the Court of Appeal).
The claimants’ replies (dated 30/04/13) to the defendant’s points of dispute (dated 21/02/13) omitted to deal with the issue of notice of funding in respect of the first appeal but in respect of the second appeal, the claimants asserted that a notice of funding was sent to the defendant via the document exchange (“DX”) on 24/12/10. Before service of those replies, at the hearing of the claimants’ application for a payment on account of costs (on 07/03/13), the Master, rather kindly, mentioned that if notices of funding had not been served then the claimants might wish to pursue an application for relief from sanctions. In the event, the claimants were slow to heed such good (and free) advice and no application for relief from sanction was issued until 10/07/13 – and even then it related only to the second appeal (it was in fact an application for a declaration that notice of funding had been served in December 2010, with an application for relief in the alternative). At a directions hearing on 31/07/13, it was pointed out that no application for relief had been made by the claimants in respect of the first appeal such that the Master directed that any such application should be made by 30/08/13 so that the two applications could be heard together. The claimants’ application for relief from sanction in respect of the first appeal was received by the SCCO on 30/08/13 and was issued on 18/09/13. The claimants’ application in respect of the first appeal was subsequently withdrawn however, putting paid to the claimants’s success fee in that aspect of the litigation, leaving only the application in respect of the second appeal to be heard on 29/11/13.
As aforementioned, it was the claimants’ primary case that notice of funding had been sent to the defendant by letter via the DX on 24/12/10. It was not in issue that the claimants’ solicitors’ file contained a copy letter to the defendant’s solicitors dated 24/12/10 which refers to a notice of funding being enclosed, that the claimants’ solicitors prepared a notice of funding dated 24/10/10 (that date being explained as a simple typographical error – the CFA was not entered into until 02/12/10) and that the claimants’ solicitors successfully sent a copy of the notice of funding by facsimile to the Civil Appeals Office on 24/12/10. But the defendant’s solicitors did not receive the claimants’ solicitors’ letter dated 24/12/10. The conducting fee-earner within the claimants’ firm of solicitors gave evidence as to her recollection of events on 24/12/10 and how the letter of that date to the defendant’s solicitors came to be prepared but such evidence stopped at the point in time when the letter left her hand: she did not recall placing the letter in the post tray, she could not recall whether or not she put the letter in an envelope (although that was her standard practice, she conceded that her secretary colleague may have done it) and she conceded that she did not take anything to the DX box. The Master therefore held that as there was no evidence of the letter having entered the DX system and no evidence of the defendant having received the letter that he could not find that the claimants had served the letter, and the required notice of funding, on the defendant.
CPR 44.3B (which survives the 01/04/13 amendments of the CPR by reason of PD 1.4(b) CPR 48) provides for a sanction as follows:
“(1) Unless the court orders otherwise, a party may not recover as an additional liability— ….. (c) any additional liability for any period during which that party failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order”
The Master did not expressly state that “on an application for relief from a sanction … the starting point should be that the sanction has been properly imposed and complies with the overriding objective” (see Mitchell, paragraph 45) but he did refer to the sanction being “automatic” (at paragraph 32). Thereafter he went on to consider the parties’ contrasting submissions/evidence – including the defendant’s solicitor’s evidence (“phrased quite carefully“) that “had notice been given of the CFA in relation to the second appeal, the Defendant’s approach to that appeal might have been different and [the solicitor’s] advice in relation to settlement would have been different” (at paragraph 40), which the Master held was evidence of prejudice as such evidence was not challenged via cross-examination by the claimants. Taking that and various other issues into account, the Master opined that under the former incarnation of CPR 3.9 this would have been a borderline case. He went on to say that all such matters are still relevant under the new form of CPR 3.9, because the Court must have regard to all the circumstances of the case, but that “they now play second fiddle to the factors specifically listed in the new rule” (at paragraph 44).
Referring to the guidance at paragraphs 40 and 41 in Mitchell, the Master held that the claimants’ failure was not trivial: “the rules required the Claimants to give notice of the change in funding arrangements and they did not do so in any form.” (paragraph 46). Turning to the possibility of there being good reason for the failure, the Master accepted that the claimants’ solicitors intended to provide notice of funding but they had failed to provide evidence of the reason why the letter and notice did not reach the defendant’s solicitors or evidence to show that, whatever the reason, it was outside of their control (e.g. a possible error of the DX service). Accordingly, relief from sanction was refused (reportedly involving a success fee as high as £750,000, subject to assessment). The Master perhaps had little sympathy for the claimants’ solicitors (remembering his view that this would have been a borderline case under the previous version of CPR 3.9):
“49. This may seem harsh, particularly given my view that the failure was not intentional. But the Claimants’ solicitors should have known of the change that was coming. The amendment of CPR 3.9 was recommended by Lord Justice Jackson in his final report published in December 2009. The change of approach and the “Singapore experience” were emphasised by him in the 5th implementation lecture on 22nd November 2011. The new, tougher approach to relief from sanctions was again emphasised by the Master of the Rolls in the 18th implementation lecture on 22nd March 2013.
“50. The Defendant had served its points of dispute in February. There is no reason why the Claimants could not have issued their application for relief well before 1st April 2013. The application might have been heard before then. It would certainly have been heard before the decision in Mitchell was handed down.”
A very expensive lesson learned.
This case concerned the respondents’ business of building and selling retirement accommodation and their claim to deduct input tax incurred on the furnishing of communal areas within the properties. HMRC decided that the input tax was not deductible but the respondents’ appeal to the First-tier Tribunal (‘FTT’) was successful. On 08/02/13 (following a successful application by HMRC to the FTT for an extension of time), HMRC applied to the FTT for permission to appeal to the Upper Tribunal (‘UT’) against part of the FTT’s decision, relating to accounting periods after 01/04/89 which were subject to changes introduced by the Finance Act 1989. By a decision notice released on 04/04/13, the FTT granted HMRC permission to appeal and both HMRC and the respondent’s representatives were notified of the decision by email on the same date. Rule 23(2)(a) of the Tribunal Procedure (Upper Tribunal) Rules 2008 (‘UTR’) provides that an appellant must provide a notice of appeal to the UT so that it is received within one month after the date on which the FTT sent the decision notice granting permission to the appellant. That period of one month, allowing for it ending on a non-business day, expired on 06/05/13. In the event, HMRC provided their notice of appeal to the UT on 01/07/13 – some 56 days late. UTR 23(5) of the UT Rules provides:
“If the appellant provides the notice of appeal to the Upper Tribunal later than the time required by paragraph (2) or by an extension of time allowed under rule 5(3)(a) (power to extend time)
(a) the notice of appeal must include a request for an extension of time and the reason why the notice was not provided in time; and
(b) unless the Upper Tribunal extends time for the notice of appeal under rule 5(3)(a) (power to extend time) the Upper Tribunal must not admit the notice of appeal.”
HMRC also filed, with its notice of appeal, an application for an extension of time under UTR 5(3)(a) , in response to which the respondents served a ‘Notice of Opposition’. HMRC’s application was heard by Judge Sinfield on 17/12/13, who considered both versions of CPR 3.9 and specifically, the decisions of the Court of Appeal in Mitchell and Durrant. Submissions for HMRC included the fact that while the email of the FTT dated 04/04/13 was forwarded on to HMRC’s conducting solicitor on 05/04/13, it subsequently “slipped through the cracks” until 28/06/13. Judge Sinfield observed that no further explanation was proffered. It was further submitted that the UT must seek to give effect to the overriding objective of the UT Rules (at UTR 2(1)), which is to enable the UT to deal with cases fairly and justly and ‘fairly and justly’, as set out at UTR 2(2), includes inter alia:
“(b) avoiding unnecessary formality and seeking flexibility in the proceedings;
(c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings; and
(e) avoiding delay, so far as compatible with proper consideration of the issues.”
It was argued on behalf of HMRC that it would be unfair and unjust to prevent it from pursuing its appeal because of a relatively short delay, of just under two months, arising from an unintentional error. In aid of the assertion that the delay was short, the decision of the Court of Appeal in Smith -v- Brough [2005] EWCA Civ 261 was cited, wherein the court considered a delay of one or two months to be short (per Arden LJ at paragraph 36 and Brooke LJ at 55). Judge Sinfield did not accept that the comments in Smith laid down any rule or ‘tariff’ in respect of the length of any delay and moreover, observed that the decision was made long before the changes introduced on 01/04/13 and indeed the Court of Appeal’s guidance in Mitchell. It was further submitted on behalf of HMRC that it would be fair and just to grant its application in circumstances where the FTT had granted permission to appeal, the respondents knew that permission had been granted and at no time did HMRC give any indication to the respondents that the appeal had been abandoned. As to the perceived unfairness in being prevented from pursuing the appeal, the Judge held, having cited paragraph 45 of Mitchell (paragraph 41):
“HMRC cannot complain that the sanction provided by the UT Rules does not comply with the overriding objective or that the consequences of it are such that it must be fair and just to grant relief from it. HMRC must find reasons in the circumstances of the case, rather than in the nature or effect of the sanction, why it would be fair and just to grant the application. I do not consider that the fact that HMRC had been granted permission to appeal by the FTT is relevant to the question of whether it would be fair and just to grant HMRC’s application. The grant of permission to appeal is what started time running and it has nothing to say about why the time limit was not met. The fact that McCarthy & Stone knew that HMRC had been granted permission to appeal is equally irrelevant to the issue for the same reason. Finally, the fact that HMRC gave no indication that they had abandoned the appeal is also not relevant to the issue of why the time limit was not met and whether fairness and justice require the default to be relieved from the sanction in the UT Rules.”
Counsel for HMRC sought to argue that the Jackson reforms, CPR 3.9 and therefore the guidance in Mitchell do not apply to tribunals, pointing out that the overriding objectives of the CPR and UTR are different. For the respondents, it was submitted that the courts and tribunals should not apply different standards to matters such as their attitude to the grant of an extension of time. The judge was obliged to agree that the CPR do not apply to tribunals but could not accept that the differences in the wording of the two overriding objectives meant that the UT should adopt a more relaxed approach to compliance with rules, practice directions and orders. The judge also stated that while the overriding objective of the UTR requires the UT to avoid unnecessary formality and seek flexibility in proceedings, it did not mean that the UT was required to treat the time limits set out in the UTR as flexible (paragraph 45):
“I can see no reason why time limits in the UT Rules should be enforced any less rigidly than time limits in the CPR. In my view, the reasons given by the Court of Appeal in Mitchell for a stricter approach to time limits are as applicable to proceedings in the UT as to proceedings in courts subject to the CPR. I consider that the comments of the Court of Appeal in Mitchell on how the courts should apply the new approach to CPR 3.9 in practice are also useful guidance when deciding whether to grant an extension of time to a party who has failed to comply with a time limit in the UT Rules.”
The judge went on to consider all the circumstances of the case and indeed the factors in both versions of CPR 3.9, correctly giving less weight to all such circumstances and factors other than the two remaining factors in the revised CPR 3.9. He held that HMRC’s failure to provide the notice of appeal for a period of 56 days after the time limit for doing so had expired was neither minor nor trivial and, with reference to the ‘slipping through the cracks’ aforementioned, equated the same with the “well-intentioned incompetence” mentioned in Mitchell. Accordingly, the judge refused to admit HMRCs’ notice of appeal. Beyond his decision in the instant case, the judge helpfully went on to provide more general guidance, specifically that the guidance of Morgan J in the matter of Data Select -v- HMRC [2012] UKUT 187 (TCC), as to the approach to be taken in respect of applications to extend time, involving a trawl through the former checklist at CPR 3.9 and a number of questions such as “what is the purpose of the time limit?“, can no longer be regarded as correct in the light of the guidance given by the Court of Appeal in Mitchell. While regard may still be had to the former checklist, as part of all the circumstances of any case, Mitchell, principles are to be applied in tribunal matters.
Long -v- Value Properties Limited & Another (Unreported SCCO 13/01/14)
This case concerned the claimant’s failure, upon commencing detailed assessment proceedings, to serve a statement of reasons for the level of success fees (solicitor and counsel) she sought to recover from the defendants. Such a statement of reasons must, in respect of pre-commencement funding arrangements (defined by CPR 48.2(2)) and pursuant to the former Section 32.5(1) of the Costs Practice Direction (“CPD”), be served with the Form N252 Notice of Commencement of Detailed Assessment Proceedings. Failure to serve such a statement is provided for at the former (i.e. in force prior to 01/04/13 but remaining in force by reason of PD 1.4(b) CPR 48) CPR 44.3B:
(1) Unless the court orders otherwise, a party may not recover as an additional liability – (d) any percentage increase where that party has failed to comply with – (i) a requirement in the Costs Practice Direction; or (ii) a court order, to disclose in any assessment proceedings the reasons for setting the percentage increase at the level stated in the conditional fee agreement
The claimant’s solicitors, upon receiving the defendants’ points of dispute (served some 28 days after the Form N252, it will be noted, as the claimant’s solicitors agreed an extension of time) and reading the defendants’ challenge, appreciated their omission and sent the CFA and other documents to the defendants’ representatives just six days later (thus just 34 days after the Form N252) with the suggestion that amended points of dispute be served, if necessary, “rather than … take up the court’s time with an application … for relief from sanctions“. In response to that suggestion, the first defendant stated that it would await sight of the claimant’s replies before deciding on whether to serve amended points of dispute. Replies were served a week later and the claimant’s application for relief from sanction was issued on the following day (thus 14 days after the points of dispute). All in all, a short period of time and a prompt application for relief.
Submissions made on behalf of the claimant included:
> The defendants’ costs lawyers said nothing of the statement of reasons during ‘pre-N252′ discussions; the point was first taken in the defendants’ points of dispute.
> The defendants suffered no prejudice.
> The claimant’s barrister would be affected if relief were not granted.
> The claimant’s solicitors constructive and conciliatory approach to the detailed assessment proceedings in agreeing an extension of time for serving points of dispute*, providing documents promptly and proposing dealing with any amendments required to the points of dispute in a costs-effective manner.
* Tangent: Paul Hughes of Kings Chambers, Manchester raises an intriguing point in respect of parties agreeing to extend time for service of points of dispute in an article on his blog, which has recently been updated to include consideration of the judgment in M A Lloyd & Sons Limited discussed below).
> By contrast to the claimant’s solicitor’s approach, the defendants took an opportunistic approach to the claimant’s solicitor’s oversight and chose to remain silent in respect of the missing documentation, despite that they must have known it existed, until the point was taken in points of dispute.
> Relief from sanction perhaps wasn’t necessary in that the relevant rules did not specify that the statement of reasons must be served with the Form N252 and bill of costs and thus could be served at a later point in the detailed assessment proceedings. In this specific regard, counsel for the claimant referred to the matter of Middleton -v- Vosper Thornecroft (UK) Ltd & Others (Unreported). Notwithstanding that in Middleton it was held that the statement of reasons must be served with the Form N252, the judgment was not binding on the Master such that it was open to him to take a contrary view and so support the claimant’s position. In support of taking a view contrary to that taken in Middleton, it was argued that the rule should be construed narrowly in light of the draconian sanction that would result from a breach; that there was a lack of prejudice to the defendants – “or at least none that could not have been cured by the Defendants’ own actions of asking for the missing information“; and that the granting of relief would not cause the defendants’ position to deteriorate from that set out in their points of dispute (the defendants having not amended their points of dispute once they had been provided with the statement of reasons).
> In the event that the Master was against the claimant on the ‘Middleton point’, the approach in Forstater, rather than Mitchell should be taken. The failure arose out of human error and there was no prejudice to the defendants: to deny relief would be to deprive the claimant’s solicitors of significant sums and to provide the defendants with a windfall whereas if relief were granted the defendants would suffer no prejudice.
> The approach in Ian Wyche v Careforce Group Plc [2013] EWHC 3282 (Comm) would be a “more just” approach (although there does not appear to have been much store placed behind such a submission).
> Finally, counsel for the claimant submitted that he believed that the decision in Mitchell was to be the subject of an appeal to the Supreme Court, such that if the Master were to be against the claimant on Mitchell-principles, his decision should be deferred pending determination of that appeal.
On behalf of the defendants, it was contended that:
> Mitchell is clear in that greater weight must be given to the two factors now featuring in CPR 3.9, the breach was not trivial (as conceded on behalf of the claimant), no good reason for the breach had been given and the starting point is that the sanction has been properly imposed and complies with the overriding objective.
> There had been prejudice to the defendants in that their lawyers had been unable to properly advise the defendants as to an appropriate offer of settlement without the relevant information (albeit, further to questioning by the Master, it was conceded that such prejudice was relatively short-lived, amounting to just 2-3 weeks).
> The rules/practice direction were quite clear in that the time for providing the statement of reasons was upon commencing detailed assessment proceedings, as was held in Middleton.
> It was not for the defendants to ‘pick up the ‘phone’ to request missing information / documentation nor was it for them to show their opponents how to do things properly.
> There was nothing in the fact that the defendants had not amended their points of dispute – the same had not been amended simply because the application for relief from sanction had been issued promptly and the defendants chose to await the outcome of that application before considering whether or not any amendments were necessary.
> The changes brought about in April 2013 were well-publicised such that the non-compliance in this case was set against a backdrop of a changing culture.
The Master expressed having been troubled by the apparent “one strike and you’re out” nature of the aforementioned rule and practice direction relating to the timing of providing a statement of reasons. As was submitted on behalf of the claimant, parties are able to amend their statements of case and yet if the defendants were correct on their case, the claimant was irretrievably in default and subject to sanction the moment the letter not enclosing a statement of reasons left her solicitors’ offices. Referring to Mitchell (paragraphs 34 and 35) and Sir Rupert Jackson’s Final Report, the Master observed that the “extreme“, or Singaporean, approach of non-compliance always suffering a sanction save in exceptional circumstances was not to be followed and yet, if the defendants were correct in their submissions, that would be the case. The Master also compared the rules in respect of providing a statement of reasons with those in respect of providing notice of funding: in respect of the latter, the sanction was more proportionate in that, absent relief, it would be disallowance of an additional liability for the period of delay in providing notice and not wholesale disallowance. In the Master’s view that was surprising as the absence of knowledge of the existence of a CFA “always seems to cause more prejudice than a failure to serve information regarding a CFA whose existence was already known“.
The Master considered that the claimant’s failing was potentially a trivial one (any prejudice was short-lived, the defendants could have minimised that prejudice by asking for the statement of reasons, the error was quickly rectified and the application for relief was made extremely quickly) but ultimately it was not on Mitchell principles. Moreover, he considered that the claimant’s concession on this point was a “telling indication of the parties’ views as to whether the lack of provision of this information could be considered trivial“. In the result, the Master correctly went on to consider the second limb of the Mitchell test and held that the claimant’s solicitors’ oversight, or human error, in failing to serve the statement of reasons, could not be a good reason. Accordingly, the Master refused relief from sanction.
Rehill -v- Rider Holdings Limited [2014] EWCA Civ 42
This case concerned an action for damages for personal injury arising out of a road traffic accident. The judgment is crucial reading for a number of reasons, including:
i) the marking of disapproval of a litigant’s dishonesty/exaggeration of his claim, be that at the stage of deciding the incidence of costs (Fairclough Homes Limited v Summers [2012] UKSC 26) or at the stage of assessing costs and taking into account misconduct (CPR 44.11 (or CPR 44.14 as it was prior to 01/04/13) / Ultraframe UK Limited v Fielding [2006] EWCA Civ 1660); and
ii) costs consequences in the event of failing to beat a withdrawn offer of settlement (Trustees of Stokes Pension Fund v Western Power Distribution South West PLC [2005] EWCA Civ 854).
However, in the context of this article the concluding paragraph (30) of Lewison LJ’s judgment is particularly instructive:
“I add the following postscript. The appeal was heard, and judgment delivered, in the course of a single day. That accorded with the time estimate. In those circumstances, under PD 44 para 13 the general rule is that the court will assess costs summarily; and in order to enable the court to do that the parties must file schedules of costs not less than 24 hours before the hearing. Neither party complied with the practice direction. The consequence was that the court was unable to assess the costs of the appeal which we ordered Mr Rehill to pay to the bus company. As is well known the court had become more insistent in recent months about compliance with orders and practice directions since that is now part of the overriding objective. In order to mark our disapproval of the bus company’s failure to comply with the practice direction we ordered it to pay the costs of any detailed assessment in any event.”
Since 01/04/13, the (identical) practice direction dealing with when a summary assessment should be carried out is at PD 44 para 9 and so the above citation is a minor (trivial?!) error in the judgment of the court. It is not difficult to envisage such prospective orders for costs, which are expressly provided for at PD 44 para 9.6, as they were at the former PD 44 para 13.6, being common place in these post-Mitchell days. That said, there is anecdotal evidence of far harsher results arising from a failure to file and serve a schedule of costs 24 hours before a hearing, where applicable, such as that reported by Cost Advocates here.
Thevarajah -v- Riordan & Others [2014] EWCA Civ 14
The underlying litigation concerned the terms of an agreement for the claimant’s purchase of substantial assets, or assets of substantial value, from the defendants. However, this judgment saw the Court of Appeal again troubled with an appeal by the claimant against a decision of the judge below to grant relief from sanction following non-compliance with an ‘unless’ order (relating to disclosure – see paragraphs 2 to 5 for greater detail). Rather unusually, the order subject to appeal, of Mr Andrew Sutcliffe QC sitting as a deputy High Court Judge in the Chancery Division (“the deputy judge”), concerned the very same relief sought from and previously refused by Hildyard J. Accordingly, there was the added factor of whether or not the judge was right to entertain the defendants’ second application at all.
The defendants’ first application for relief from sanction was heard by Hildyard LJ on 09/08/13, thus well before Mitchell. Drawing on Tarn Insurance Services Limited -v- Kirby & Others [2009] EWCA Civ 19, the judge said that the court “when asked to give relief from sanctions in the context of an unless order and, in particular, in an unless order which has been made to enforce and police compliance with the provisions of a freezing order, should adopt a rigorous approach“. Adopting such a rigorous approach in making an order debarring the defendants from defending the claimant’s case and striking out their defence and counterclaim, the judge said:
“When I add all this in the mix and test it against the prescription which CPR 3.9, in its newest form, conveys, namely that the court must be very cautious before granting what, in effect, is a dispensation from an order previously made, and when I take into account the factual context more generally, which includes the fact that the unless order was made after five previous applications, and where I also take into account the somewhat remarkable instances where the defendants have not provided the evidence that one would have expected, to explain themselves, I feel constrained to refuse any relief from the sanctions.”
Not an order made on Mitchell principles but undoubtedly an order made in the spirit of Mitchell principles. Notably, the defendants did not subsequently appeal the order of Hildyard LJ. The litigation thereafter proceeded towards a trial listed to start on 03/10/13. On 01/10/13 however, the defendants filed a second application for relief from sanction and the trial before the deputy judge was subsequently re-listed to start on 07/10/13 with the application for relief to be heard on the first day of trial. Surprisingly, the deputy judge allowed more than four of the five days allotted to the trial to be spent on merely the application for relief.
Various submissions were made on behalf of the defendants (including ‘we’ve complied now‘, the order was onerous, there were difficulties in securing litigation funding which added to the delay and the defendants’ previous solicitors were at least in part to blame) whereas the claimant’s opposition was quite simple – the second application for relief from sanction was an abuse of process, the order of Hildyard J having not been appealed and absent the application of CPR 3.1(7), and ought to be dismissed for that reason alone. In the alternative, it was argued that the sanctions were wholly appropriate and the defendants had still not in fact complied with the unless order.
The deputy judge referred to the decisions in Rayyan and Wyche (both frowned upon in Mitchell of course) in deriving the following principles concerning CPR 3.9:
“First, the matters contained in the old checklist in CPR 3.9 remain of relevance to an application for relief from sanction. Second, the change in CPR 3.9 did not mean that relief should be refused where that would be a disproportionate response and would give the opposing party an unjustified windfall. Third, that the court should not apply the new rules unthinkingly and should make allowance for human error. Fourth, that the amended Rules should not be permitted to encourage parties to exploit minor errors for tactical gain. These decisions show in my judgment that the court in each case while accepting that the purpose of the amended Rule is to counter a culture of deliberate delay still had principal regard to the requirement to do justice between the parties.”
Dealing with the claimant’s contention in respect of the status of Hildyard J’s order, the deputy judge said:
“The Defendants do not seek here to challenge the orders that have gone before. However, they submit – and I accept – that it is appropriate in the circumstances of this case in considering the application for relief and the extent of the previous compliance with those orders for the court to have regard to the following matters. First the burden imposed on the Defendants in complying with these orders and particularly the fact that the disclosure required of the Defendants went beyond that ordinarily required as ancillary to a freezing injunction. Second, the fact that that the orders required cooperation from third parties not within the Defendants’ control. Third, the fact that the Defendants relied on their solicitors to advise them in relation to whether or not they had complied with the court’s orders.”
The deputy judge went on to hold that the defendants had complied, belatedly, with the unless order and that they were entitled to rely on their then solicitors’ erroneous advice that they had complied with the orders of the court. The deputy judge even referred to the claimant’s own non-compliance with earlier directions in respect of disclosure and inspection. Referring to Woodhouse v Consignia Plc [2002] EWCA Civ 275 as authority that a second application for relief from sanctions is permissible, and distinguishing the decision in Tarn Insurance Services Limited as relied on by Hildyard J, the deputy judge also rejected the claimant’s primary submission to the contrary.
The deputy judge, having expressly referred to Fred Perry Holdings Ltd, the first instance decision in Mitchell and the Master of the Rolls’ 18th Jackson Implementation Lecture, arrived at the following conclusions on the application for relief from sanction:
“Of course I have full regard to these dicta but I am quite satisfied that in the circumstances of this case it is entirely appropriate to grant relief from sanction under CPR 3.9. The Claimant seeks to rely on the Defendants’ delay of some 7 weeks between the order of Mr Justice Hildyard dated 9th August 2013 and the issue of the present application on 1st October 2013. However I do not regard this delay as significant, in particular in the context of the fact that this case only began in March this year, was the subject of a speedy trial in May, and is now before the court for trial in October. Although an adjournment of the trial is required to enable outstanding directions to be complied with and the case got ready for trial, that adjournment need not be for an excessively long period.”
Finally, the deputy judge disposed of the claimant’s contention that the defendants were obliged to make an application under CPR 3.1(7), rather than CPR 3.9. Referring to Collier -v- Williams [2006] EWCA Civ 20 and to Tibbles -v- SIG Plc [2012] EWCA Civ 518, the deputy judge concluded on the issue thus:
“Having given full consideration to both those Court of Appeal authorities, I am firmly of the view that the appropriate rule of court to consider on this application is CPR 3.9. To the extent that Mr Justice Hildyard’s order of 9th August needs to be varied or revoked pursuant to CPR 3.1(7), I consider that the matters set out in this judgment fully justify such a variation or revocation and that in the circumstances it is appropriate to grant the Defendants’ application.”
Accordingly, the defendants’ application was granted, the trial window was vacated and a new trial window was set commencing on 27/01/14. The claimant appealed against the deputy judge’s order and the appeal was heard on 12/12/13.
The Court of Appeal was, I think it fair to say, less than impressed by the decision and approach of the learned deputy judge. The “troubling features” of the deputy judge’s approach to the defendants’ application included (Richards LJ giving the judgment of the court):
“The deputy judge evidently considered that a second application for relief from sanction could be made under CPR 3.9 without needing to rely on CPR 3.1(7), and that CPR 3.1(7) had no more than a secondary role in relation to any necessary variation or revocation of the earlier order refusing relief from sanction. In our judgment, however, this put matters the wrong way round.” (Paragraph 23)
“We are satisfied that the judgment in Woodhouse is not to be read as displacing the normal operation of CPR 3.1(7) in a case involving CPR 3.9; and in so far as the deputy judge proceeded on the basis that the judgment in Woodhouse permitted the course adopted by him in the present case, he was wrong to do so. The respondents’ “second bite” application was in substance an application under CPR 3.1(7) for the setting aside of the provisions of Hildyard J’s order refusing relief under CPR 3.9, and as such it had first to satisfy the criteria in Tibbles.” (Paragraph 30)
“Even if the required disclosure had been made at last, some three months after the date for compliance under the unless order itself and almost two months after the date of Hildyard J’s refusal of relief from sanction for non-compliance, it could not in our view amount to a material change of circumstances for the purposes of an application under CPR 3.1(7). It could not alter the fact of non-compliance with the unless order or amount to a good reason for that non-compliance, nor would it undermine the reasoning that led Hildyard J to refuse relief from sanction. There was nothing here by way of material change of circumstances, and there was no other basis for an application under CPR 3.1(7) to vary or revoke Hildyard J’s order.” (Paragraph 31)
Of particular significance:
“First, we think it plain that, even if he had been entitled to give fresh consideration to the question of relief from sanction, his general approach to the application of CPR 3.9 in its present form was wrong in principle. It lacked the robustness called for by the guidance subsequently given by this court in Mitchell and gave insufficient consideration to the need (a) for litigation to be conducted efficiently and at proportionate cost, and (b) to enforce compliance with rules, practice directions and orders, considerations which “should now be regarded as of paramount importance and be given great weight” (Mitchell para 36). It also failed to take as its starting point that the sanction in the unless order, which had not itself been the subject of appeal or an application under CPR 3.1(7) for variation or revocation, had been properly imposed and complied with the overriding objective (Mitchell para 45). Whilst referring to the first instance judgment which was upheld in Mitchell and to the observations of the Master of the Rolls in the 18th Jackson Implementation Lecture which were endorsed in Mitchell, the deputy judge does not appear to have been guided by them. Instead, he appears to have placed weight on principles derived from Rayyan al Iraq Co Ltd v Trans Victory Marine Inc and Ian Wyche v Care Force Group Plc (see para 13 above), first instance decisions which were subject to critical comment at paras 47-51 of Mitchell. There is more generally a striking contrast between the deputy judge’s approach and that of Hildyard J in his judgment of 9 August. The approach of Hildyard J sits well with the guidance in Mitchell.” (paragraph 35)
“Secondly, the deputy judge paid insufficient attention to the fact that the second application had not been made promptly but came almost two months after Hildyard J had refused relief and just two days before the trial was due to start. The importance of promptness in relation to applications under CPR 3.1(7) was underlined in Tibbles (see para 26 above). It was emphasised in Mitchell in relation to applications under CPR 3.9 (see, for example, paras 40 and 46 of the Mitchell judgment); and the judgment of this court in Durrant v Chief Constable of Avon & Somerset Constabulary [2013] EWCA Civ 1624, at paras 49-51, placed particular weight on the failure to make a prompt application under CPR 3.9 in concluding that relief from sanction should be refused. The deputy judge was wrong to regard the respondents’ delay in making the second application as of no significance (see para 18 above). Further, his approach was all the more surprising given that a speedy trial had previously been ordered.” (paragraph 36)
“Thirdly, the deputy judge allowed the hearing of the application for relief from sanction to take up a disproportionate amount of court time (see para 10 above), with the result that the trial date would have been lost even if the application had been refused. We are sceptical of the view he expressed that the case was not ready for trial by reason of the appellant’s own failure to comply with earlier directions; but even if that view was correct, it did not justify the taking up of so much time on an application (let alone a second application) for relief from sanction.” (paragraph 37)
The claimant’s appeal against the order of the deputy judge was therefore allowed, thus effectively restoring the ‘Mitchell-friendly’ decision of Hildyard J, and again the Court of Appeal emphasised the “robustness” now required when dealing with applications for relief from sanction.
This case concerned a claim in respect of alleged breaches of a confidentiality agreement and passing off, but for present purposes is perhaps better described by the rather animated opening paragraph of the judgment of Turner J (who also heard Karbhari above and Webb below):
“This case provides yet another example of a litigant treating an order of the court as if compliance were an optional indulgence.”
One can almost picture counsel for the claimant sinking in his seat. In the course of the litigation, the claimant raised the issue of the defendant company’s right to litigate in this jurisdiction and asserted that it was legally extinct. It was in connection with the claimant’s application relating to those issues that the non-compliance arose. At the hearing of the claimant’s application on 11/10/13, which, remarkably, the claimant failed to attend, directions were given which required the claimant to file and serve its witness statement(s) and skeleton argument by no later than 25/10/13. The order also provided for the defendant to file and serve its statement(s) and skeleton argument in response by 29/11/13. The claimant failed to file and serve its statement(s) and skeleton argument (although there was served a “very curious document” which, for a moment at least, counsel for the claimant sought to argue complied with the order). The defendant, itself out of time for complying with the order of 11/10/13, but perhaps forgivably so given that its statement and skeleton were to be in response to those of the claimant (a point not lost on Turner J – see paragraph 29), issued an application for an extension of time on 09/12/13. It was that application with which Turner J was dealing at a hearing on 16/01/14.
Even more remarkably, again the claimant did not attend the hearing on 16/01/14. It’s solicitors, earlier that day, emailed the defendant’s solicitors with a proposed consent order setting out revised timetable but the same was not agreed and it was subsequently argued that attendance at the hearing would have been too costly and that the claimant had assumed that the court would make some order that did not “stray too adventurously from the path upon which the parties were in broad consensus“. The hearing went ahead in the claimant’s absence and judgment was reserved to the following day, although the claimant’s solicitors and counsel did attend before the judge on the morning of 17/01/14, before judgment was handed down. In that particular respect, the judge said (paragraph 14):
“Of course, the court has power under CPR 23.11 to re-list an application where it has previously proceeded in the absence of one of the parties but this is a power which is likely to be exercised sparingly in the light of the specific regard which the court must now have for the need, where reasonably practicable, to allot to any given case an appropriate share of the court’s resources. This case provides a working example of the consequences of a party choosing not to attend a hearing and hoping for the best. As a result of the claimant’s decision not to attend on 16 January 2014, the judgment which was to be handed down on the following day had to be re-drafted and handed down on 19 January 2014 to take into account the fresh submissions raised by counsel for the claimant. I had to hear argument over two days rather than one. Thus an amount of court time which is disproportionate to that which would reasonably have been required has already been taken up. A party cannot simply assume that, where outstanding issues have not been conclusively resolved in advance of a hearing, it can absent itself confident in the assumption that if the court were to make an order to which it takes subsequent objection then CPR 23.11 will afford a comfortable fall back position. Absence in these circumstances may very well turn out to be a false economy.”
Criticism of the claimant was not to end there. By reason of its non-compliance with the order of 11/10/13, CPR 32.10 operated to prevent the claimant from calling at trial any intended witness or witnesses in respect of the issues aforementioned (although, at paragraph 17, Turner J gave rise to a possible argument that the wording of the rule might be interpreted to mean that a party in default may not be permitted to call a witness to give oral evidence on any matter unless the court gives permission, even if the statement not served in time relates only to a distinct part of the evidence relied upon and his other evidence is contained within in other statements which have been served in time – an argument for another day). Thus, CPR 3.9 was engaged and counsel for the claimant signalled the claimant’s intention to issue an application for relief from sanctions (to be heard at a case management conference listed for 30/01/14).
Saving the claimant the expense of such an application, the judge stated that he was “entirely satisfied on the evidence before me that there is no realistic prospect that such relief would ever be granted” (paragraph 20). Citing Mitchell, Durrant, and his own decision in Karbhari, the judge referred to the courts’ “consistently robust approach to the late service of witness statements” (paragraph 21). The judge considered the delay of almost three months to be serious and therefore not trivial (realistically conceded by the claimant) and that there was no evidence before him of good reason for the delay: “It was not open to the claimant to allow weeks and weeks to pass without taking positive steps to comply with the order on the basis that further disclosure, for which no formal application had been made, was awaited.” Turning to the aforementioned draft consent order sent by the claimant’s solicitors to their counterparts on the day of the hearing, the judge, referring to CPR 3.8, the judge said (paragraph 27):
“CPR 32.10 specifies the consequences of failure to serve a witness statement. It follows that even if the parties had purported to reach a concluded agreement on an extension of time this would not have been effective unless the court were to be persuaded formally to endorse it*. This court is under a duty under CPR 1.4 not simply to adjudicate passively upon the applications of the parties or to rubber stamp their reciprocal procedural indulgences but actively to manage cases. To this end, the court has power under CPR 3.3 to make orders of its own initiative.”
* A point which has potential to cause litigators all manner of problems: while the rule has seemingly been in place since the advent of The Civil Procedure Rules, this ‘highlighting’ by the High Court may give rise to it being commonly used tactically. A useful suggestion/workaround for this particular problem was recently made by Hardwicke Chambers’ Charles Bagot (via Twitter): “Put provision in Order permitting parties to agree 14 day extensions without an application; QB Master approved it“.
In conclusion, Turner J described the defendant’s approach of issuing an application for time and, as he put it, “the court’s indulgence in respect of what it perceived to be its own default“, as “unduly timid“. At paragraph 31, he said:
“However, for the reasons given above I decline to take the course which the defendant has advocated. The deadline by which the claimant ought to have filed and served a compliant witness statement has long since passed. The breach is not trivial and the reason given is not a good one. Accordingly, I take the view that, in the circumstances of this case, the proper approach of the court is to make an order of its own initiative debarring the claimant from raising any issue at trial relating either to the existence of the defendant company or its entitlement to litigate in this jurisdiction as defined in the order of Walker J.”
Webb Resolutions Limited -v- E-Surv Limited [2014] EWHC 49 (QB)
The underlying litigation concerned a claim for losses stemming from an allegedly negligent property valuation, although, as Turner J began his judgment, it is another case “about the consequences of failing to comply with the rules of court against the background of the Jackson reforms“. Such non-compliance concerned the failure of the defendant to renew its application for permission to appeal, from an unfavourable decision in the detailed assessment of the claimant’s costs of the compromised litigation, within the prescribed time limit.
In short, Master O’Hare refused permission to appeal against his assessment of the claimant’s costs and the defendant sought permission from a High Court judge. That application was refused, on the papers, by Haddon-Cave J on 29/07/13. The defendant’s solicitors, a firm specialising in costs, asserted that they did not receive the order of 29/07/13 until 10/10/13 and on 22/11/13 they issued an application for an extension of time within which to seek an oral hearing of their application for permission. On 27/11/13, Blair J, upon hearing representations from an advocate acting for the defendant, extended time and also granted permission permission to appeal Master O’Hare’s assessment.
The claimant sought to set aside the order of 27/11/13 pursuant to CPR 23.11(2), having not been represented at the hearing before Blair J. Given that the hearing on 27/11/13 concerned an application for an extension of time and for permission to appeal, Turner J had sympathy with the claimant not being represented at the same in light of the Court of Appeal’s guidance in Jolly -v- Jay [2002] EWCA Civ 277 as to a respondent’s limited involvement in the preliminary stages of the appeal process. However, the judge also observed that the judgment in Jolly also emphasised that a court would be very slow to revisit a single judge’s decision on such an application and further, cited his own judgment in M A Lloyd (above) in respect of the power of the court, under CPR 23.11, being exercised sparingly so as to ensure that the court’s resources are appropriately allotted to any given case. Nevertheless, the judge was entirely satisfied that it was appropriate in this case to revisit the order of Blair J on the basis that certain, and highly relevant, information was not brought to the attention of the court on 27/11/13.
Blair J’s judgment of 27/11/13 expressly referred to the delay between the paper refusal (29/07/13) and the date on which notice of that refusal was received by the defendant’s solicitors (10/10/13) and went on to express that the defendant’s delay in making the renewed application for permission to appeal was therefore understandable. However, as Turner J observed, CPR 52.3(5) obliges a party to file its application to renew an application for permission to appeal within seven days “after service of the notice that permission has been refused“. Accordingly, the correct period of delay that Blair J should have considered was that between the defendant’s solicitors’ receipt of the order of 29/07/13 (10/10/13) and the defendant’s application for an extension of time (22/11/13) – a period of 43 days as compared to the prescribed limit of seven days – and not the delay in the service of the order of 29/07/13, which was irrelevant. Turner J explained how the error arose (paragraph 16):
“However, the case was presented as if the need for the application arose from the delay which had occurred before notice of the refusal had been received and not after. Having had an opportunity to read the transcript of the representations made to him I can well understand how Blair J. came to approach the case as he did. The representations made to him were phrased in such a way as to camouflage the real period of delay upon which his mind ought to have been focussed. By way of example only, the defendant’s advocate said at one stage: “My firm received the order declining permission to appeal some two and a half months late, hence we are out of time in requesting an oral application for permission to appeal.” This was simply wrong. There was no causal connection between the delay in receiving notice and the fact that the defendant was in default of CPR 52.3(5). I absolve the defendant’s advocate from any suggestion that he deliberately misled the court but, on an objective analysis, the unintended impact of his representations was such as to mislead the court in a material respect.”
It will be noted that Blair J heard the defendant’s application on the day on which the Court of Appeal handed down its judgment in Mitchell (paragraph 18):
“Towards the end of his submissions before Blair J. the defendant’s solicitor referred to the existence of the case of Andrew Mitchell MP v News Group Newspapers Limited [2013] EWCA Civ 153. Neither he nor the court had read the judgment in that case because it had only just been handed down earlier that same day. Clearly, the defendant’s solicitor on a preliminary glance considered that the decision would help his clients because he intended to deploy it to demonstrate the substantive merits of the proposed appeal against the decision of the Master. However, Blair J. declined to reserve judgment to afford him an opportunity to read the Mitchell decision, doubtless because considered that he had already heard enough about the substantive merits of the appeal to render it unnecessary to be further satisfied. What neither the court nor the defendant’s solicitor appreciated was that Mitchell was of indeed central relevance not as a decision in support of the application but as one which was strongly adverse to it.”
While CPR 52.3(5) does not specify a sanction in the event of default, such that it might be argued that CPR 3.9 is not therefore engaged, interestingly (in that at least two such considerations may be applied to various other mandatory provisions of the CPR which do not specify a sanction in the event of non-compliance) Turner J was satisfied that it was appropriate to deal with the issue arising as if it were an application for relief from sanction and thus, to apply ‘Mitchell principles’ (paragraph 21):
“I take this approach because:
i) The wording of CPR 52.3(5) is unequivocally expressed in mandatory terms;
ii) The time limit of 7 days is deliberately short thereby emphasising the need for very prompt action; and
iii) There is a clear and compelling priority for there to be an end to litigation and for the parties to be in a position to know when that end has been reached.”
The judge went on to hold that the defendant’s default was not trivial as it “delayed for a period of about three times in excess of that permitted by the rules“. Further, there was no good reason for the delay in the view of the judge. Indeed, he described as “thoroughly bad” the following reasons advanced by the defendant’s advocate:
“It is respectfully submitted that the time allowance of seven days is not a sufficient timescale for the Appellant to consider the impact of the decision, advise the client of the decision, advise as to the merits of possible actions and to make the application.
E-Surv Limited are not legally trained and cannot be considered to be a legally sophisticated client. They are a firm of Chartered Surveyors and cannot be expected to be able to consider the ramifications of a refusal to allow an appeal.
When liaising with E-Surv it is necessary to speak initially with the case handler, in this case a Lisa Jarrett, who in turn liaises with the Finance Director of E-Surv Limited. Instructions are then fed back “down” the chain to Just Costs. Once instructions are received to proceed, an advice is provided to E-Surv who in turn consider the same and advise accordingly.
Instructions to proceed with an Oral Hearing were received outside of the seven day time limit.”
There can surely be no sensible disagreement with the judge’s view of such reasons and his conclusion that they “came nowhere near to satisfying the test” set out in Mitchell. But even if there were, he went on (paragraph 26):
“For the avoidance of doubt, I would say in any event that the default in this case was so blatant and avoidable that I would have exercised my discretion in the same way even applying the less robust approach which would have been appropriate under the old regime.”
The claimant’s application was therefore successful: the order of Blair J was set aside, the defendant’s appeal was out of time and permission to extend time was refused.
The above cases demonstrate the seismic shift in the approach of the courts (and tribunals) to litigants’/lawyers’ compliance with rules, practice directions and orders. While there are whispers of some judges not taking the hard line the Court of Appeal has decreed they should, and while there are those who believe that there are other decisions of the Court of Appeal which may be (and reportedly have been) used to persuade a judge to depart from ‘Mitchell principles’ (see, again, the views of the omniscient Kerry Underwood), it would be a fool who believes that obtaining relief from sanction is going to be anything but unlikely. I very much suspect that many a professional indemnity insurance policy will be called upon in the coming months although, longer term, I rather think that the furore will fade away as lawyers become more accustomed to doing things… err… properly.
