Court of Appeal
14 July 2014
[2014] EWCA Civ 906
Subject: Procedure – Relief from Sanction – Approach to be adopted
Summary:
The Court of Appeal gave further guidance about the proper approach to be adopted upon an application for the grant of relief from sanction under CPR 3.9, and considered its earlier decision in Mitchellv Mirror Group Newspapers.
Abstract:
The three cases under appeal were relief from sanction cases raising no particularly novel points on their facts. However the Court of Appeal had become aware of a strong tide of opinion about Mitchell stemming from the way it has been interpreted and applied in subsequent first instance and Court of Appeal decisions. The criticisms, summarised at paragraph 21 of the judgment, essentially concerned the perceived undue harshness of Mitchell, the narrowness of the ‘triviality’ concept, and the disproportionate penalties imposed on litigants as a result.
Accordingly the court gave further guidance on the application of Mitchell; though whether the decision merely reinterprets or rather overhauls the approach will be a matter of debate. The Mitchell approach is of course to consider whether the breach was trivial, and if so to grant relief, and if not, to consider whether there was a good reason for the breach. Occasionally (as in Chartwell) Judges would also go on to consider whether relief should be granted ‘in all the circumstances’ even where the first two stages were not met.
The Court confirmed that Judges must take a three stage approach to considering applications for relief from sanction.
On the first stage, there had been undue focus in the lower courts on the ‘triviality’ concept, overlooking that in Mitchell itself the expressions ‘minor’ and ‘insignificant’ were used. The heart of the question was (or should be) whether the breach was “serious or significant”. If it was neither, it would usually be unnecessary to spend much time on the other stages. If the breach is serious or significant, the second and third stages assume greater importance.The focus should no longer be on whether the breach was trivial.
As to the meaning of these two concepts, the Court recognised they “are not hard edged and that there are degrees of seriousness and significance”.
The Court endorsed the Law Society and Bar Council’s submission that it helped to think of whether the breach was material or immaterial, in the sense of whether it imperilled hearing dates, and disrupted the litigation, including litigation generally. Nevertheless a breach could be serious without imperilling the instant litigation – the example given by the Court was non-payment of court fees.
On the second stage Judges should consider the ‘good reason’ test. Evidently the Court was content with the manner in which that part of the Mitchell test has been applied, as it declined to give further guidance on it.
The third stage received considerable attention, with the Court noting that many decisions had simply ignored its existence. The third stage is, as per the wording of CPR 3.9(1) to consider “all the circumstances of the case, so as to enable it to deal justly with the application”.
Factors (a) and (b) of CPR 3.9(1) (the need for efficiency and proportionate cost, and the need to enforce compliance with the rules) had been described in Mitchell as of “paramount importance”. The majority (and this is where the majority and the minority of Jackson LJ differed) moved away from that strict view by finding simply that those considerations should be of “particular importance” when considering all the circumstances.
Thus the factors in CPR 3.9 (1) (a) and (b) give rise to the first and second stages, but they also come back in the third stage as features of particular importance.
While that sounds somewhat abstract, the Court gave some guidance on how it is intended to work. The third stage is where features such us the promptness of the application for relief and the previous history of compliance can be taken into account. This is an important clarification as some courts (including the Court of Appeal in Durrant) treated other breaches as affecting the triviality of the breach in question, making an otherwise trivial breach a serious one. The Court in Denton rejected that approach; seriousness and significance are to be judged against the particular breach at stage 1. The question of other breaches arises only under stage 3 – and only if one gets there.
The Court’s intention is that the new focus on stage 3 will give rise to a “more nuanced” approach than Judges had been adopting.
Jackson LJ’s dissenting judgment took the view that the factors in 3.9 (1) (a) and (b) are not to be regarded of “particular” significance when considering all the circumstances of the case. His Lordship differed from the majority on the construction of CPR 3.9 to that extent, considering that the reason for their express and exclusive inclusion was to ensure they were considered (and not forgotten) rather than to show they should be given particular weight. That difference in approach made no difference on the facts of the three cases before the Court however, so it remains to be seen whether it will make any difference in practice.
Finally the Court also gave guidance to the opposing party in relief applications. It was strongly critical of the sorts of tactical traps set, and positions taken by parties seeking to take advantage of breaches to give a windfall in the case. The opposing party is now encouraged to make a realistic assessment of the application of the three stage test, and if it is met, to consent to relief without the need for any further court hearing. The courts should be more ready to “penalise opportunism” and ready to award indemnity costs in appropriate cases – including where the opposing party refuses to agree reasonable extensions of time.
The judgment is of huge significance. The ramifications can be summarised as follows.
Parties and Judges must, in effect, abandon triviality as a touchstone of relief from sanction, to be replaced by seriousness and significance. It goes without saying that these are much woollier and less restrictive concepts, and little guidance has been given other than that significance is intended to import some enquiry into the consequences of the breach. It arguably therefore moves much close to the old Biguzzi approach of considering whether the breach caused prejudice to the opposing party.
There is also a shift of emphasis; from the party in breach having to show that its breach was trivial, to the opposing party having to show that it was serious and significant. The nature of the language used subtly therefore moves the goal posts in favour of the party in breach.
There is likely to be a degree of satellite litigation as Judges wrestle with the new concepts. No doubt the CA in Denton would say these concepts have been around since Mitchell, but practice at the coal face, and the reported judgments, all point to the sole focus at the first stage being triviality.
Persistent minor offenders will fare better. Other breaches cannot make a minor breach serious. If the breach is not serious, the court should not spend much time on stages 2 and 3, so relief is granted. Arguably however where there is serious, persistent offending the Court will be more willing to refuse relief under the third stage.
Opposing parties will be far more nervous about resisting applications for relief, particularly in cases with no obvious detrimental consequences flowing from the breach. However given the novelty of Mitchell – let alone its reinterpretation in Denton, there are likely to be many borderline cases giving rise to difficult decisions.
In difficult cases both parties will appeal to the third stage as assisting them, permitting, as it does, a much more open textured analysis of ‘all of the circumstances’. No doubt parties in breach will rely on Jackson LJ’s approach, though that is a minority view and not binding. This creates some risk of parties making a return to the old CPR 3.9 approach, with wide ranging evidence dealing with matters all and sundry – precisely what the Jackson Reforms hoped to avoid.
In conclusion, it appears that a party in breach stands a greater chance of obtaining relief under the reinvented Denton test than he did under the approach developed after Mitchell.The degree of the certainty which has developed will however be lost. Many a case has settled after a breach of a rule or deadline because the party’s advisers took the view that there was little or no prospect of obtaining relief. While the change of tack from the Court of Appeal will give those parties new cause for optimism, it will plainly encourage more satellite litigate in the short term. And while the Court of Appeal hopes to discourage that by threats of indemnity costs, where the lower courts have had such difficulty interpreting the test, they lawyers may not do much better.
After seven months of experience under Mitchell the need for a change of approach has been accepted by the Court of Appeal. The decision in Denton shows that litigants can be assured that the higher courts remain very alive to court users’ opinions on these matters. It now falls to practitioners to grapple with this new guidance.
Shail Patel
4 New Square