MITCHELL REVISITED: SUPEROMNISHAMBLES IN COURT OF APPEAL
What I tell you three times is true
Lewis Carroll – The Hunting of the Snark
The Story So far
The Master of the Rolls, not Lord Justice Dyson, sets up a judicial enquiry into the civil justice system that has nothing seriously wrong with it.
Lord Justice Jackson spends a year of judicial time preparing the report. His relatively modest proposal on relief from sanctions is wholly changed by an unelected Rules Committee. That Committee removes the rather important draft rule that the court must take in to account “the interests of justice in the particular case.”
So at a stroke of an unelected pen 800 years of English and Welsh principles are cast aside.
The Master of the Rolls makes a speech supporting the proposal that Lord Justice Jackson never made.
The Master of the Rolls gives judgment in the Mitchell case supporting his own speech supporting the rule that was never meant to be.
The storm breaks .
June 2014: Parliament overturns much of the effect of the Mitchell decision.
In July 2014 the Master of the Rolls – he gets around a bit –hears three appeals against his own decision in Mitchell and fundamentally alters that decision while denying that he is doing so, continually referring to the delivery of his implementation speech and himself as the judge in Mitchell in the third person.
In that same decision Lord Justice Jackson, to his great credit, gives a powerful dissenting judgment which could be encapsulated in T S Eliot’s line from The Love Song of J Alfred Prufrock.
“That is not what I meant at all.
That is not it, at all. ”
The Court of Appeal in its July 2014 judgment makes just the barest mention of new rule 3.8(4), allowing all parties to agree a 28 day extension in all matters, subject to conditions, without the court being allowed to have any involvement at all. It does not mention that Parliament, not the Rules Committee, made this change.
Jackson LJ giving a dissenting judgment on his own report is one of many ironies in this case. Another is that the original decision in Mitchell was upheld largely because court time – half a day – had been wasted by the solicitor’s failure to file its budget on time. The clearly wrong original Court of Appeal decision in Mitchell has probably wasted more judicial time than any other decision in history, leading to tens of thousands of unnecessary relief from sanctions applications.
Yet there has been no apology from the Court of Appeal. Rather it was the fault of all of the following for misunderstanding the decision:
- all other judges;
- all other lawyers;
- all journalists;
- all academics;
This view of the Master of the Rolls is expressed neatly in Paragraph 39 of the Denton cases.
“Justifiable concern has been expressed by the legal profession about the satellite litigation and the non-cooperation between lawyers that Mitchell has generated. We believe that this has been caused by a failure to apply Mitchell correctly………..”.
As in all the best fairy tales everyone is now supposed to live happily ever after and, curiously, a whole host of lawyers have tripped over themselves to say how wonderful this decision is by the very man who caused all of the problems in the first place.
I think not. The more thoughtful commentators, Gordon Exall and Simon Gibbs for example, have a different view. So do I.
As to the detail of this SuperOmnishambles here goes.
the Mitchell Take Two case – rather than recognize that the Mitchell decision was wrong – in full or in part – the Court of Appeal, while accepting that it had “been the subject of criticism” took the view that the fault was everyone else’s and that the decision had “been misunderstood and is being misapplied by some courts”.
The Court of Appeal accurately summarized the main criticism of the Mitchell decision at paragraph 21 of its decision.
“21. The principal criticisms may be summarized as follows. First, the “triviality” test amounts to an “exceptionality” test which was rejected by Sir Rupert Jackson in his report and is not reflected in the rule. It is unjustifiably narrow. Secondly, the description of factors (a) and (b) in rule 3.9(1) as “paramount considerations” gives too much weight to those factors and is inconsistent with rule 3.9 when read in accordance with rule 1.1. They should be given no more weight than all other relevant factors. It is said that the Mitchell approach downplays the obligation to consider “all the circumstances of the case, so as to enable [the court] to deal justly with the applications. Thirdly, it has led to the imposition of disproportionate penalties on parties for breaches which have little practical effect on the course of litigation. The result is that one party gets a windfall, while the other party is left to sue its own solicitors. This is unsatisfactory and adds to the cost of litigation through increases in insurance premiums. Fourthly, the consequences of this unduly strict approach has been to encourage (i) uncooperative behaviour by litigants; (ii) excessive and unreasonable satellite litigation; and (iii) inconsistent approaches by the courts”.
In an already notorious statement the Court of Appeal said “we consider that the guidance given at paras 40 and 41 of Mitchell remains substantially sound”.
The Court of Appeal then states that courts should address an application for relief from sanctions in three stages:
- …………“Identify and assess the seriousness and significance of the “failure to comply with any rule, practice direction or court order” which engages rule 3.9(1). If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages”.
- Consider why the default occurred;
- …….Evaluate “all the circumstances of the case, so as to enable [the court] to deal justly with the application including [factors (a) and (b)]”.
Thus the breach must now be serious or significant, rather than not trivial, for relief potentially to be refused.
Paragraphs 26 and 27 are waffle. They do not help to define “serious or significant” any more than “trivial” was defined. I, for one, am none the wiser.
Paragraph 28 reads:
“28. If a judge concludes that a breach is not serious or significant, then relief from sanctions will usually be granted and it will usually be unnecessary to spend much time on the second or third stages”.
Thus “usually” is used twice in a few words, clearly leaving open the possibility that there will be non serious non-significant breaches where relief will not be granted.
What on earth does the statement “it will usually be unnecessary to spend much time on the second and third stages” mean? If the breach is not serious or significant why should any time be spent? If time needs to be spent then surely it should be sufficient time to deal with the issue properly.
This guidance is really:
“If the breach is not serious or significant, which we have not attempted to define, then pay lip service to stages 2 and 3 but don’t really bother about them”.
The second stage
Here is the full and verbatim guidance in relation to the second stage.
“29. The second stage cannot be derived from the express wording of rule 3.9(1), but it is nonetheless important particularly where the breach is serious or significant. The court should consider why the failure or default occurred: this is what the court said in Mitchell at para 41.
30. It would be inappropriate to produce an encyclopaedia of good and bad reasons for a failure to comply with rules, practice directions or court orders. Para 41 of Mitchell gives some examples, but they are no more than examples”.
So judges now have to consider whether the breach is serious or significant. If it is then Stage 2 is engaged. If it is not then it appears that Stage 2 is still engaged but the judge should not really take it seriously.
If it is to be taken seriously, because the breach was serious or significant, then the judge has to consider why the default occurred but is given no guidance of any kind whatsoever as to what are, or are not, acceptable reasons.
So there is a serious or significant breach (no guidance given as to what is serious or significant), there is a bad reason for the breach (no guidance given as to good or bad reasons) and thus Stage 3 is engaged.
The third stage
“31. The important misunderstanding that has occurred is that, if (i) there is a non-trivial (now serious or significant) breach and (ii) there is no good reason for the breach, the application for relief from sanctions will automatically fail. That is not so and is not what the court said in Mitchell: see para 37. Rule 3.9(1) requires that, in every case, the court will consider “all the circumstances of the case so as to enable it to deal justly with the application”. We regard this as the third stage”.
How does that square with
“Parties can no longer expect indulgence if they fail to comply with their procedural obligations.”
(Dyson LJ, MR, paragraph 27 of the 18th lecture implementing the Jackson reforms,approved in Mitchell with the lead judgment given by Dyson LJ, MR, now apparently disagreed with in Denton by Dyson, LJ, MR).
How stupid of all of us – how could we possibly have misinterpreted the following passage from Paragraph 58 of Mitchell:
“58. The expectation is that the sanction will usually apply unless
- the breach is trivial or
- 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”.
How could we possibly have failed to spot that there must be a Stage (iii)? Possibly because there is only a two stage test in Mitchell.
Paragraphs 32-35 of Denton then say at great length and with little guidance that “all the circumstances” must be considered.
The Court of Appeal grudgingly acknowledges that it could “see that the use of the phrase “paramount importance” in para 36 of Mitchell has encouraged the idea that the factors other than factors (a) and (b) are of little weight”.
That is unsurprising when you consider the entry in the Oxford Thesaurus of English for paramount:
“most important, of greatest importance, of prime importance, of supreme importance; uppermost, supreme, chief, overriding, predominant, cardinal, foremost, first and foremost, prime, primary, principal, pre-eminent, highest, utmost, main, key central, leading, major, top, topmost, dominant”.
Now paramount is to be replaced by particular:
“Although the two factors may not be of paramount importance, we reassert that they are of particular importance”. (Paragraph 32).
The truth is that no-one misunderstood anything. Everyone correctly understood the meaning of paramount although very many judges refused to apply Mitchell. Paragraph 31 is simply not correct. The fact is that the Court of Appeal got it very badly wrong in Mitchell and the Court of Appeal will not recognize the fact, making this decision itself deeply flawed.
One judge who did look at all of the circumstances and then granted relief was Mr Justice Andrew Smith in Raayan Al Iraq Co Ltd v Trans Victory Marine Inc  EWHC 2696.
For applying the law, correctly as we now know, he was roundly criticized by the Master of the Rolls Lord Justice Richards and Lord Justice Elias in Paragraphs 49-51 of Mitchell, a decision which apparently is still right even though it criticized a Judge for being wrong when in fact he was right. I must have missed the apology to Mr Justice Andrew Smith in the Denton judgment.
In any event it is now particular not paramount.
The Oxford Thesaurus has this in relation to “an issue of particular importance”
“special, extra special, especial, exceptional, unusual, marked, singular, uncommon, notable, noteworthy, remarkable, outstanding, unique”.
No doubt someone will enlighten me as to the substantial and significant, not trivial, difference and whether there is a good reason for the change and I will then consider all of the circumstances.
Paragraph 36 does give a little guidance…… “the promptness of the application will be a relevant circumstance to be weighed in the balance along with all the circumstances. Likewise, other past or current breaches of the rules, practice directions and court orders by the parties may also be taken into account as a relevant circumstance”.
Er – was not that basically the pre-rule change rule?
So clear was the Mitchell guidance that the Court of Appeal allowed all three appeals here – the facts are irrelevant – but ……….“Two of them evidence an unduly draconian approach and the third evidences an unduly relaxed approach to compliance which the Jackson reforms were intended to discourage”.
This makes relief from sanctions the judicial equivalent of the Golden Shot – “up a little, down a little”.
At Paragraph 38 the court says:
“38. It seems that some judges are approaching applications for relief on the basis that, unless a default can be characterised as trivial or there is a good reason for it, they are bound to refuse relief. This is leading to decisions which are manifestly unjust and disproportionate. It is not the correct approach and is not mandated by what the court said in Mitchell…….”.
Really? In its conclusion in Mitchell, at Paragraph 59 the Court of Appeal said:
“The defaults by the claimant’s solicitors were not minor or trivial and there was no good excuse for them”.
There is no consideration of “all the circumstances” except to dismiss the very obvious problems that the claimant firm had – “a small firm; two of their trainees were on maternity leave; the senior associate who was used to dealing with costs budgeting had recently left the firm; and the firm was engaged on work on other heavy litigation”.
In each case the Judge delivering the words was Lord Justice Dyson. For all intents and purposes he was hearing an appeal against his own decision and giving the lead judgment supporting his own speech, the notorious 18th implementation lecture of 22 March 2013.
Lord Justice Dyson distances himself from himself in bizarre language. This is the opening of Paragraph 38 in Mitchell:
“38. In the 18th implementation lecture on the Jackson reforms delivered on 22 March 2013, the Master of the Rolls said in relation to CPR 3.9 that there was now to be a shift away from exclusively focusing on doing justice in the individual case. He said:……..”.
He was of course quoting his own speech! In Denton when Dyson LJ refers to paragraphs 40 and 41 being “substantially sound” he is referring to his own findings in that case.
That is disturbing. It is also unusual. Judges often refer to other cases in which they have given judgments. That is bound to happen but they never talk about themselves in the third person.
In Paragraph 38 of the current case the omnipresent Master of the Rolls says that although a more nuanced approach is required “the two factors stated in the rule must always be given particular weight. Anything less will inevitably lead to the court slipping back to the old culture of non-compliance which the Jackson reforms were designed to eliminate”.
The richest irony of all is that in this very case Lord Justice Jackson gives a dissenting judgment.
At Paragraph 44 the Court of Appeal states that judges should ensure that the directions that they give are “realistic and achievable”, which is what Lord Justice Jackson said in his report:
“First, the courts should set realistic timetables for cases and not impossibly tough timetables in order to given an impression of firmness”.
Here the Court of Appeal goes on to say:
“It is no use imposing a tight timetable that can be seen at the outset to be unattainable. The court must have regard to the realities of litigation in making orders in the first place. Judges should also have in mind, when making directions, where the Rules provide for automatic sanctions in the case of default. Likewise, the parties should be aware of these consequences when they are agreeing directions. “Unless” orders should be reserved for situations in which they are truly required: these are usually so as to enable the litigation to proceed efficiently and at proportionate cost”.
So it is all the fault of courts and lawyers. I think not. Courts generally take in to account the needs of the case, which is why so many were including the 28 days buffer direction before it became compulsory.
It is quite something for the Court of Appeal to deliver the above paragraph without mentioning that Parliament, just one month before its judgment, has made it largely meaningless, due to the statutory 28 day extension without reference to the court.
At Paragraphs 40 and 41 the Court of Appeal states that parties should once again cooperate. It is breathtaking in its complete failure to see that the only reason that parties “opportunistically and unreasonably oppose application for relief from sanctions” is because Mitchell virtually forced them to.
My firm had a whole batch of such applications in June and July 2013 in relations to cases we had taken over from a firm in administration. Every one was agreed. Post-Mitchell none would have been agreed.
The problems set out by Lord Justice Dyson, Master of the Rolls, in paragraphs 40 and 41 were caused by just one person, that is Lord Justice Dyson, Master of the Rolls, in Mitchell.
The following paragraphs 40 and 41 are from Denton. Confusingly the key paragraphs in Mitchell were also 40 and 41!
Here are paragraphs 40 and 41 in full:
“40. Litigation cannot be conducted efficiently and at proportionate cost without (a) fostering a culture of compliance with rules, practice directions and court orders, and (b) cooperation between the parties and their lawyers. This applies as much to litigation undertaken by litigants in person as it does to others. This was part of the foundation of the Jackson report. Nor should it be overlooked that CPR rule 1.3 provides that “the parties are required to help the court to further the overriding objective”. Parties who opportunistically and unreasonably oppose applications for relief from sanctions take up court time and act in breach of this obligation.
41. We think we should make it plain that it is wholly inappropriate for litigants or their lawyers to take advantage of mistakes made by opposing parties in the hope that relief from sanctions will be denied and that they will obtain a windfall strike out or other litigation advantage. In a case where (a) the failure can be seen to be neither serious nor significant, (b) where a good reason is demonstrated, or (c) where it is otherwise obvious that relief from sanctions is appropriate, parties should agree that relief from sanctions be granted without the need for further costs to be expended in satellite litigation. The parties should in any event be ready to agree limited but reasonable extensions of time up to 28 days as envisaged by the new rule 3.8(4)”.
At Paragraph 42 the court says:
“42. It should be very much the exceptional case where a contested application for relief from sanctions is necessary. This is for two reasons: first because compliance should become the norm, rather than the exception as it was in the past, and secondly, because the parties should work together to make sure that, in all but the most serious cases, satellite litigation is avoided even where a breach has occurred”.
The timebomb, the nuclear option, Mitchell on steroids is contained in paragraph 43, one of the most extraordinary statements ever to appear in a decision of a superior court in this country’s history:
“43. The court will be more ready in the future to penalise opportunism. The duty of care owed by a legal representative to his client takes account of the fact that litigants are required to help the court to further the overriding objective. Representatives should bear this important obligation to the court in mind when considering whether to advise their clients to adopt an uncooperative attitude in unreasonably refusing to agree extensions of time and in unreasonably opposing applications for relief from sanctions. It is as unacceptable for a party to try to take advantage of a minor inadvertent error, as it is for rules, orders and practice directions to be breached in the first place. Heavy costs sanctions should, therefore, be imposed on parties who behave unreasonably in refusing to agree extensions of time or unreasonably oppose applications for relief from sanctions. An order to pay the costs of the application under rule 3.9 may not always be sufficient. The court can, in an appropriate case, also record in its order that the opposition to the relief application was unreasonable conduct to be taken into account under CPR rule 44.11 when costs are dealt with at the end of the case. If the offending party ultimately wins, the court may make a substantial reduction in its costs recovery on grounds of conduct under rule 44.11. If the offending party ultimately loses, then its conduct may be a good reason to order it to pay indemnity costs. Such an order would free the winning party from the operation of CPR rule 3.18 in relation to its costs budget”.
In summary a party resisting an application by a party in default, a default that may be serious and significant and for which there is no good reason, may be deprived of its costs if it wins the case and ordered to pay indemnity costs if it loses.
That is wholly disproportionate, irrational and almost certainly a breach of Article 6 of the European Convention on Human Rights.
It turns Mitchell on its head. A party can now treat the rules as largely irrelevant: you need to be pretty rich to oppose an application for relief.
This is punishing the victim rather than the offender.
“We are now in a world where a party, not in default, can end up paying the costs of an application by the party in default and, thereafter, be heavily penalized in costs for taking the point”.
Gordon isolates out the key points of Paragraph 43:
- Heavy costs sanctions “should” (almost mandatory) be imposed on parties who behave unreasonably in refusing to agree extensions of time or unreasonably oppose applications for relief from sanctions.
- An order that the party, unreasonably opposing should pay the costs of 3.9 application may not be sufficient.
- The court can record in its order that the opposition to the relief application was unreasonable conduct to be taken into account under CPR r.44.11 when costs are dealt with at the end of the case.
- If the offending party wins it may suffer a “substantial reduction” in its costs recovery on grounds of conduct under rule 44.11.
- If the offending party loses then its conduct may be a good reason to order it to pay indemnity costs.
- Such an order would free the wining party from the operation of CPR3.18 in relation to its costs budget.
Gordon speculates as to whether this renders CPR3.9 “a dead duck”. “A defaulting party still has to apply for relief from sanctions. However it has to be a brave litigator who opposes. In essence the party opposing the application may have much more to lose. It is only in the clearest cut of cases that applications will be opposed”.
The situation now is very different…..Now it is respondents to applications that face major risk. In any event any decision to oppose an application for relief from sanctions has to be fully thought out and the risks considered in detail”.
“What Denton has done is to take difficult decisions about sanctions hearings away from the judiciary and into the lap of the “innocent party”.
“If a litigant is proposing to oppose an application for relief from sanctions then they have to be confident (if not extremely confident) that the application will be refused. The consequence of unsuccessfully opposing an application for relief from sanctions could be dire”.
Thus this is effectively a criminal sanction, a substantial fine, possibly hundreds of thousands of pounds, entirely unrelated to the “costs of and occasioned by” in the time-honoured phrase, of the application.
So a successful party conducts its righteous winning case impeccably at all times save that it exercises its legal right to object to a serially defaulting party to treat the Civil Procedure Rules with contempt and that wholly innocent party gets hit hard on the costs of the whole action which it has won and the losing, defaulting party gets a massive windfall.
That is outrageous, unconstitutional and in my opinion illegal.
There will inevitably be a flood of appeals against any such first instance decisions which will no doubt be heard by the Master of the Rolls.
In Johnson v Bourne Leisure 21 July 2014
Mr Justice King granted relief from sanctions and allowed an appeal from a Circuit Judge who had refused relief.
Mr Justice King, for reasons best known to himself, held that in resisting the appeal against the decision of the Circuit Judge, that is in seeking to rely on the Circuit Judge’s decision, the defendant/respondent was acting unreasonably and thus was ordered to pay costs.
It beggars belief that one is acting “unreasonably” by seeking to hold on to a decision in one’s favour given by a Circuit Judge.
That is a far cry from unreasonably refusing a request to extend time or whatever.
This is the shape of things to come; chaos and unfairness stalk the legal land.
Now I just wonder who in the Court of Appeal might hear the appeal in this case and what his decision will be?
Contrast this with the almost universal practice to date of the successful applicant for relief being ordered to pay costs as it had caused the problem by its default in the first place. What has happened here is that the Court of Appeal has caused the entire problem in the first place. Lawyers follow that decision and resist applications for relief. That is not opportunism. It is not wrong. It is following the law as set out by the Court of Appeal in Mitchell.
Now, suddenly, you are treated like a criminal and fined.
Supposing Mr Mitchell now appeals to the Supreme Court out of time and that court follows Denton. Rather than Mr Mitchell being deprived of £500,000 costs would he get them all back with News Group Newspapers being fined £500,000 for opposing the application? This is literally a £1 million question.
The application for permission to appeal out of time must be made under CPR 3.9. Oh, the irony of it all! Gordon Exall again:
Simon Gibbs [http://www.gwslaw.co.uk/blog/] is not a huge fan of the decision either.
“They were not prepared to state the Mitchell test was wrong but neither were they willing to confirm it was correct. Apparently, the fault lies with other judges being silly enough to believe that the Mitchell test meant what it said”.
“We now have a different test. The Court of Appeal optimistically hopes the new test will reduce the amount of satellite litigation generated by Mitchell. It appears the Court has forgotten what was said in Mitchell:
“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.”
“It now appears the courts are meant to take a less firm line. Quite how this will lead to less satellite litigation remains a mystery, particularly given the new test creates far more uncertainty as to which way a court may go on an application for relief”.
“There is clearly a range of significance in terms of non-compliance with rules, practice directions or court orders. At one end of the spectrum are “trivial”/“insignificant” ones. At the other are “serious or significant” ones. “Trivial”/“insignificant” ones might occupy the bottom 10-20% of the spectrum in terms of significance. “Serious or significant” ones might occupy the top 10-20%. There is therefore a world of difference between the Mitchell test where 10-20% of breaches might be saved by the first stage test (being categorised as “trivial” – everything at the bottom of the spectrum) and the Denton test which saves 80-90% of breaches which do not fall into the top 10-20% of the spectrum”.
“A 14 year old at their school debating society would not try to argue “trivial” and “not serious or significant” are the same thing”.
“It is therefore laughable that the Court of Appeal stated the guidance given in Mitchell “remains substantially sound”.
“If a solicitor drafted a legal document and used the word “trivial” when they meant “not serious or significant” they would leave themselves wide open to a professional negligence claim. As Kerry Underwood recently commented: “When courts go wrong why do parties, rather than the state, have to pay the legal costs? If fees reflect full cost we should get full value.”
“Fortunately the Court of Appeal is never bound by their own decisions and can overturn themselves whenever they feel like it. If it were otherwise we would now, for the first stage of the test, have two conflicting decisions of the same weight. Then we would be in a right mess”.
“The Denton judgment has been widely welcomed by many in the legal profession. I suspect this is largely a result of relief from lawyers that they no longer face the same risk of professional negligence claims and spiralling professional indemnity insurance. In terms of judicial thinking the judgment is a dog’s dinner”.
Simon also deals with what now appears to be a complete vacuum as to the importance of promptness in making a relief from sanctions application.
“The Court of Appeal advises that the guidance given in Mitchell “remains substantially sound”.
In Mitchell the Court stated:
“If [the breach] can properly be regarded as trivial, the court will usually grant relief provided [emphasis added] that an application is made promptly”
It was therefore implicit that even where the breach was trivial, relief would probably not be granted where a prompt application was not made.
“Elsewhere in the judgment it was stated:
“Moreover, as the court emphasised, the application must [emphasis added] be made promptly. This reasoning has equal validity in the context of an application under CPR 3.9.”
Again, absolutely clear an application needs to be prompt.
The Court of Appeal has now “clarified and amplified” its earlier guidance in Denton.
“Trivial” has been redefined:
“we think it would be preferable if in future the focus of the enquiry at the first stage should not be on whether the breach has been trivial. Rather, it should be on whether the breach has been serious or significant.”
The first stage of the new is now:
“If a judge concludes that a breach is not serious or significant, then relief from sanctions will usually be granted and it will usually be unnecessary to spend much time on the second or third stages. If, however, the court decides that the breach is serious or significant, then the second and third stages assume greater importance.”
The guidance was silent at this stage as to whether there is need to make an application promptly if the breach is not serious or significant, unlike in Mitchell.
“Promptness is given brief consideration in the Denton judgment when considering “all the circumstances”:
“As has been pointed out in some of the authorities that have followed Mitchell, the promptness of the application will be a relevant circumstance to be weighed in the balance along with all the circumstances.”
The new guidance fails to explain whether the issue of promptness is to be given little weight if the breach was not “serious or significant”.
This is unfortunate.
“The Court gives a strong warning to parties:
“We think we should make it plain that it is wholly inappropriate for litigants or their lawyers to take advantage of mistakes made by opposing parties in the hope that relief from sanctions will be denied and that they will obtain a windfall strike out or other litigation advantage. In a case where (a) the failure can be seen to be neither serious nor significant, (b) where a good reason is demonstrated, or (c) where it is otherwise obvious that relief from sanctions is appropriate, parties should agree that relief from sanctions be granted without the need for further costs to be expended in satellite litigation. … Heavy costs sanctions should, therefore, be imposed on parties who behave unreasonably in refusing to agree extensions of time or unreasonably oppose applications for relief from sanctions. An order to pay the costs of the application under rule 3.9 may not always be sufficient. The court can, in an appropriate case, also record in its order that the opposition to the relief application was unreasonable conduct to be taken into account under CPR rule 44.11 when costs are dealt with at the end of the case. If the offending party ultimately wins, the court may make a substantial reduction in its costs recovery on grounds of conduct under rule 44.11. If the offending party ultimately loses, then its conduct may be a good reason to order it to pay indemnity costs. Such an order would free the winning party from the operation of CPR rule 3.18 in relation to its costs budget.”
“How is the non-defaulting party meant to deal with a breach that is not “serious or significant” if there has not been a prompt application? Gordon Exall’s Civil Litigation Brief recently explored the problems the non-defaulting party now faces where there is a breach. This is an acute problem in this situation. At what stage should the innocent (ie non-defaulting) party concede relief should be granted? If the promptness of the application is still important, the innocent party can presumably sit back and wait for the formal application to be made. The later it is, the less likely relief will be granted”.
“It is not uncommon for parties at fault to advise they will make an application for relief and ask the innocent party whether they consent to the same. Can the innocent party sit back and await a formal application and consent to the same if the application is made promptly, in the expectation the defaulting party will have to pay the costs? Will a failure to consent to relief being granted pre-application be treated as unreasonable behaviour even in the absence of a formal application, meaning the innocent party has to pay the costs of the application if, and when, it is made?”
“Given the Court of Appeal advised that the guidance given in Mitchell “remains substantially sound” surely this means the need for a prompt application still remains. Even if we pretend (as the Court of Appeal did) that they have the power to overturn their own decisions on a whim, surely they would have needed to expressly state the need for a prompt application for breaches which are not “serious or significant” is no longer good law”.
One ray of sunshine, well more a golden shaft, is the lucid and sensible dissenting judgment of Lord Justice Jackson who may turn out to be a much maligned man, mainly by me.
Here is Lord Justice Jackson’s dissenting judgment in full:
“Lord Justice Jackson:
83. I am grateful to the Master of the Rolls and Vos LJ for setting out the facts of the three cases under appeal. I am also grateful for their clear and accurate summary of Mitchell and the post-Mitchell decisions. I agree that all three appeals should be allowed.
84. As the Master of the Rolls and Vos LJ state in their joint judgment, it is helpful to approach the application of rule 3.9 in three stages. I agree with what they say about the first and second stages.
85. I take a somewhat different view, however, in relation to the third stage. Rule 3.9 requires the court to consider all the circumstances of the case as well as factor (a) and factor (b). The rule does not require that factor (a) or factor (b) be given greater weight than other considerations. What the rule requires is that the two factors be specifically considered in every case. The weight to be attached to those two factors is a matter for the court having regard to all the circumstances. The word “including” in rule 3.9 means that factors (a) and (b) are included amongst the matters to be considered. No more and no less. As the Bar Council put it in their submissions, factors (a) and (b) should “have a seat at the table, not the top seats at the table”. Ultimately what rule 3.9 requires is that the court should “deal justly with the application”.
86. The reason why the rule has been amended to require courts to give specific consideration to factors (a) and (b) is that previously courts were not doing so. This is a point which Professor Zuckerman makes in his article The revised CPR 3.9: a coded message demanding articulation (2013) 32 CJQ 123 at 134, although he criticises the wording of rule 3.9 as being anodyne and saying nothing that is not already in the rules.
87. As the Master of the Rolls and Vos LJ demonstrate, it is legitimate to have regard to the Review of Civil Litigation Costs Final Report (“Final Report”) as part of the background when construing the new version of rule 3.9.
88. Chapter 39, paragraph 6.5 of the Final Report identifies the mischief at which this particular reform is directed: “The conclusions to which I have come are as follows. First, the courts should set realistic timetables for cases and not impossibly tough timetables in order to give an impression of firmness. Secondly, courts at all levels have become too tolerant of delays and non-compliance with orders. In so doing they have lost sight of the damage which the culture of delay and noncompliance is inflicting upon the civil justice system. The balance therefore needs to be redressed.” The paragraph then goes on to reject the “extreme course” of refusing relief save in exceptional circumstances.
89. Denton is a good illustration of how courts used to operate under the former rule 3.9 (but should not operate under the new rule). In his concern to enable the claimants to deploy their full case the judge did not consider factor (a) or factor (b). If he had considered all the circumstances of the case as well as factor (a) and factor (b), he would have refused relief. The judge’s order that the claimants pay “the defendant’s costs thrown away by the vacation of the trial” does not begin to meet the justice of the case. There are many hidden costs flowing from adjournment of the trial: witness statements and reports need updating; fee earners handling the litigation may change with a need for newcomers to read into the case; both legal teams continue to work upon the litigation and so forth. In addition to the increased costs there is wastage of resources. Lawyers, experts, factual witnesses and other busy people who had cleared their diaries to attend the trial (probably cancelling other commitments) will have to clear their diaries yet again for another trial a year later. There is also the continuing strain on the parties to consider. What litigants need is finality, not procrastination. Quite apart from its impact on the immediate parties in Denton, the judge’s order has caused unnecessary delay for many other litigants awaiting their day in court.
90. The parties in Denton, Decadent and Utilise are either small businesses or businessmen. Litigation is a massive drain on management time and an unwelcome diversion of resources for any business. It is important for the economy that the courts provide swift and just resolution of disputes involving SMEs: see Preliminary Report chapter 29 and Final Report chapter 25. Hence the need to minimise delay and avoid adjournments or satellite litigation.
91. Although adjournments pose a particular problem, as illustrated by Denton, they are not the only vice inherent in a culture of delay and non-compliance. Depending upon the circumstances, a failure timeously to make disclosure or to serve evidence or to take some other step in the action might have a serious impact on the litigation or on opposing parties.
92. As Mr Holland QC has reminded us, in its written submissions to the Civil Litigation Costs Review, the Law Society stated:
“The Law Society considers that the overriding objective is not applied as rigorously or as consistently as it should be. The most infrequently applied rules are those that are available to control the progress of a case. Lord Woolf introduced a number of ways in which this could be achieved (most notably CPR Parts 1.1, 1.4 and 3.1), but the experience of practitioners suggests that in practice these are not used fully or at all. Therefore we question whether further rules would bring any benefit unless they are applied fully. We suggest there needs to be a change in the attitudes of the judiciary and court users so that court rules are fully complied with and applied in practice.”
93. In the light of this and similar submissions, the first part of recommendation 86 of the Final Report stated: “The courts should be less tolerant than hitherto of unjustified delays and breaches of orders. This change of emphasis should be signalled by amendment of CPR rule 3.9.”
94. Recommendation 86 needs to be understood in its proper context. It is part of a large package of interlocking reforms which were designed to promote access to justice at proportionate cost. Recommendation 86 was necessary for two reasons. First, the culture of delay and non-compliance was one of the (numerous) causes of high litigation costs. This cause needed to be tackled along with all the others. Secondly, as the Law Society pointed out in the passage quoted above, the (then anticipated) package of civil justice reforms would not bring any benefit unless the new rules were actually enforced.
95. The new rule 3.9 will not play any part in promoting access to justice at proportionate cost if it continues to generate satellite litigation on the present scale or if it leads to results such as we have seen in each of the three cases under appeal. I agree with the Master of the Rolls and Vos LJ that co-operation should be encouraged and satellite litigation should be discouraged by the means that they propose.
96. If rule 3.9 is construed as I propose above, this accords with the natural meaning of the language used and also gives proper effect to recommendation 86. The rule becomes an aid to doing justice. The new rule 3.9 is intended to introduce a culture of compliance, because that is necessary to promote access to justice at proportionate cost. It is not intended to introduce a harsh regime of almost zero tolerance, as some commentators have suggested.
97. My approach to the construction of rule 3.9 leads to the same result in the three cases under appeal as that reached by the Master of the Rolls and Vos LJ. These three cases are all extreme examples of judges misapplying rule 3.9, albeit at opposite extremes. There will be other less clear cut cases where the difference of opinion between my colleagues and myself may matter. That is why I am delivering this separate judgment agreeing in the result, but dissenting on the issue of construction.
98. Finally, for the avoidance of doubt, although I was not a member of the court which decided Mitchell, I am not criticising the actual decision in that case. The master made a very tough order in Mitchell, as demonstrated by Professor Sime in his article Sanctions after Mitchell (2014) 33 CJQ 133. Nevertheless that order was not outside the permissible range of her case management discretion, as the Master of the Rolls and Vos LJ explain in paragraph 9 of their judgment.
99. For the reasons set out above I agree that all three appeals must be allowed”.
Paragraph 85 is, in my view, an entirely correct statement of the law and rejects the concept of factors (a) and (b) being paramount or particular or anything else. They are factors – just that.
My only criticism of this dissenting judgment is that Lord Justice Jackson goes along with the proposal to punish severely those whose only crime is to oppose an application by the defaulting party.
Denton is a fictional town in “A Touch of Frost”. The Denton judgment is a work of fiction.
[i] In his Final Report Lord Justice Jackson proposed that CPR 3.9 be amended (6.7, Page 397).
“Proposed rule change.
I recommend that sub-paragraphs (a) to (i) of CPR rule 3.9 be repealed and replaced by:
“(a) the requirement that litigation should be conducted efficiently and at proportionate cost; and
(b) the interests of justice in the particular case”.
This form of words does 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”.
The Rules Committee, which seems to think that it is Parliament, did not adopt that wording. It replaced the old CPR 3.9 and its list of factors, which as far as I am aware no-one ever had any problem about, with the following, current rule.
(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need –
(a) for litigation to be conducted efficiently and at proportionate cost; and
(b) to enforce compliance with rules, practice directions and orders”.
How about this wording
“On an application for relief from sanctions judges are relied upon to use their common sense”.
© Reproduced by kind permission of LexisNexis. This material appears in Butterworth’s Personal Injury Litigation Service