The Court of Appeal has shown signs of departing from the hard line approach it had previously taken in Andrew Mitchell v News Group Newspapers Ltd  EWCA Civ 1537 (“Mitchell”).
Chartwell Estate Agents Limited (“Chartwell”), the Claimant in these proceedings, was at all material times an estate agency based in Mayfair. On 8 May 2013, Chartwell issued proceedings against Fergies Properties SA (“Fergies”) and Mr Hyam Lehrer (“Mr Lehrer”) claiming commission allegedly due upon the sale of a property owned by Fergies.
Fergies, at all relevant times, was the registered owner of a property situated in Knightsbridge (the “Property”). Through its agent, Messila Residential Limited, Fergies notified Chartwell that it wished to sell the Property and invited Chartwell to find a buyer.
Chartwell, with the assistance of a sub-agent known as Solid Foundations, located Mr Radovan Vitek as a prospective purchaser. A provisional agreement for the sale of the Property for the sum of £27.5 million was reached. On 11 May 2012, Chartwell sent to Fergies its Agency Agreement which stipulated a fee of 1.5% pus VAT. The Agency Agreement was returned to Chartwell on 14 May 2012, having been dated and signed by Mr Lehrer who was ‘duly authorised’ on behalf of Fergies. Before exchange of contracts, however, Mr Vitek withdrew from the deal.
The Property remained on the market for a period of time during which Mr Vitek decided to make a further offer to Fergies of £25 million. This offer was accepted and Mr Vitek purchased the Property on 22 April 2013.
Chartwell claimed entitlement to commission in the sum of £450,000 including VAT on the sale of the Property to Mr Vitek, relying upon the terms of the earlier Agency Agreement entered into with Fergies. Chartwell further claimed that Mr Lehrer was jointly and severally liable by reason of the terms of business forming part of the Agency Agreement, which he had signed. Fergies and Mr Lehrer (the “Defendants”) disputed liability.
On 17 October 2013, the parties attended a Case Management Conference before Master Leslie, pursuant to which each party was ordered to serve witness evidence simultaneously by no later than 4pm on 22 November 2013. The case was subsequently fixed for trial in a window commencing 29 Aril 2014.
A dispute had arisen between parties concerning disclosure, with Chartwell claiming that the Defendants were withholding certain documentation without which Chartwell could not finalise its witness evidence. Two days before the exchange deadline, SGH Martineau LLP (“SGHM”), acting for the Defendants sent an email to Blake Lapthorn (“BL”), Chartwell’s representatives, querying whether Chartwell intended to seek an extension of time for service of witness evidence.
The exchange deadline of 22 November 2013, however, passed without either party seeking an extension from the Court. By letter dated 16 January 2014, BL wrote to SGHM stating “…. applying the Mitchell principles we don’t see that there are any grounds for permission to be given”. SGHM subsequently sent a draft consent order extending time for service to BL, to which SGHM responded saying “[w]e would have been ready to exchange witness statements on 22 November 2013…. however, we did not finalise our statements at that time because you stated that you would not be in a position to exchange witness evidence by that date”.
On 27 January 2014, Chartwell applied to Court for an extension of time to exchange witness evidence and asked that relief be given to both sides from sanction under CPR 3.9 for failure to exchange witness statements by 22 November 2013 and alternatively that all parties be given permission under CPR 32.10 to rely upon the witness evidence served by 10 February 2014.
The Defendants opposed relief from sanctions being granted to Chartwell.
On hearing the application, Globe J found that whilst the breach could not be considered trivial, in the circumstances the trial date could remain and both parties were in a position to exchange witness statements almost immediately. Globe J noted that a refusal to give relief on a robust application of the new CPR 3.9 would mean the end of the action and considered this to be “too severe a consequence and would be an unjust result when considered against the background history”. Accordingly, an extension of time and relief from sanctions was granted to both sides.
The Defendants challenged the decision on grounds that the judge had failed to adopt an appropriately robust approach to the two considerations set out in CPR 3.9 and failed to give proper effect to the decision in Mitchell
Davis LJ found that each side showed a “lack of real understanding” of the requirements of the new CPR regime and that there was no good explanation for the breach. He considered the failure of both sides to apply to Court until 27 January 2014 to have been “tantamount to reverting to the old, and long exploded, notion of parties setting their own timetable for the conduct of the Court process”.
Davis LJ did, however, recognise that parties had attempted to sort out matters consensually, noting that this was something to be encouraged under the new regime. It was also recognised by Davis LJ that Globe J was required by the provisions of the new CPR 3.9 to consider “all the circumstances of the case” so as to deal with the application justly, including the fact that the trial date would not be lost, that no extra cost would be occasioned if relief were granted and that a refusal to grant relief from the sanction under CPR 32.10 would effectively mean the end of the claim.
For Davis LJ, the fact that the Court of Appeal in Mitchell did not say that the two factors specified in CPR 3.9 will always prevail over any other circumstance in a case where the default is not trivial and where there is no good justification, allowed him to find that this was “one of those cases in which, notwithstanding the paramount importance and the great weight to be given to the two matters specified in CPR 3.9, those two matters could reasonably be assessed as outweighed by all the other circumstances.”
Accordingly, the Defendants’ appeal was dismissed.
In something of a departure from its earlier decision in Mitchell, the Court of Appeal found relief from sanctions to be warranted despite the seriousness of the parties’ breach and despite the absence of a good explanation for the default. However, as Law LJ noted in his supporting decision, the facts of this case were particularly unusual. It is unlikely that relief from sanctions will be more readily available to parties who flout Court orders as a consequence of this decision. Davis LJ was himself keen to emphasise that laxity in compliance by the parties and laxity in enforcement by the Courts will not be acceptable. Parties who ignore the fundamental shift in the attitude of the judiciary towards strict enforcement of court rules and directions will therefore continue to do so at their peril.
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