In three combined appeals (Denton v TH White Limited and Others; Decadent Vapers Limited v Bevan and Others; Utilise TDS Limited v Davies and Others  EWCA Civ 906) the Court of Appeal considered whether or not to allow relief from sanctions under CPR 3.9, and in doing so has provided guidance as to the application of the recent Mitchell decision. The Court of Appeal has confirmed that Mitchell has been misunderstood and is being misapplied by some Courts and has reemphasised the importance of parties cooperating and conducting litigation at proportionate cost.
The Appeal concerned the following three cases:
(1) Denton v TH White Limited and Others – a case where the Claimant served 6 additional Witness Statements one month before the date fixed for a 10 day trial. The Court of first instance granted relief from sanctions, even though the trial had to be adjourned. The Defendant appealed.
(2) Decadent Vapers Limited and Others – a case concerning the Claimant’s failure to comply with an Order that unless it paid Court fees by a certain deadline its claim would be struck out. The Claimant appealed the Court’s refusal to grant relief.
(3) Utilise TDS Limited v Davies & Othersa case where the Court refused to grant relief from sanctions for failure to file a costs budget on time and failure to inform the Court of the outcome of settlement negotiations.
The Decision and Guidance
In allowing all three appeals, the Court of Appeal explained that an application for relief from sanctions should be looked at in three stages. First, the Court should identify and assess the seriousness of the failure to comply with any rule, practice direction or Court order. Secondly, the Court should consider why the failure or default has occurred and thirdly, the Court should consider all the circumstances of the case.
In relation to the first stage, the Court has confirmed that triviality is not the correct test. Instead, the Court should focus on whether the breach has been serious or significant. If a Judge concludes that a breach is not serious or significant, then relief from sanctions will usually be granted and it will usually be unnecessary to consider the second and third stage.
Under the second stage, the Court should consider why the failure or default occurred, but held that it would be inappropriate to “produce an encyclopaedia of good and bad reasons for a failure or default”.
All the circumstances
Under the third stage, the Court held that it should consider “all the circumstances of the case, so as to enable it to deal justly with the application”. In considering all the circumstances, the Court confirmed that the objectives of needing to conduct litigation efficiently and at proportionate cost and ensuring compliance are still of particular importance, but describing them as of “paramount importance” had given the impression that all other factors carried little weight.
Throughout the judgment, the Court of Appeal noted that there has been an unduly draconian approach to compliance, which has resulted in increased satellite litigation. It noted that some Judges were approaching applications for relief on the basis that, unless a default can be characterised as trivial or there is good reason for it, they were bound to refuse relief. This in turn, the Court held, was leading to “decisions which are manifestly unjust and disproportionate”. The Court of Appeal confirmed that this was not the correct approach and a more nuanced approach is required.
The Court of Appeal also confirmed that it is wholly inappropriate for litigants or their lawyers to take advantage of mistakes made by opposing parties in the hope that relief from sanctions will be denied and they will obtain a windfall strikeout or other litigation advantage. The Court confirmed that it will be more ready to penalise opportunism in the future by the use of heavy costs sanctions and that a contested application for relief from sanctions should be the “exceptional case”.
Finally, the Court also confirmed that the culture of compliance that the new rules are intended to promote requires that Judges ensure that the directions they give are realistic and achievable, having regard to the realities of litigation.
This decision is to be welcomed by litigants. Although still keen to emphasise the importance of rule compliance and by no means a complete departure from Mitchell, the Court of Appeal has clarified that its current application has been too draconian and has resulted in increased satellite litigation, contrary to the objectives of the Jackson reforms. The Court of Appeal has now made it clear that parties should cooperate with each other as far as possible and should not use the Mitchell Judgment to opportunistic effect. Any litigant who attempts to do so is at risk of heavy costs sanctions.
For further information, please contact Georgina Squire or the Partner with whom you usually deal.