The Court of Appeal has today handed down judgment in a triple-header appeal. Giving judgment for the majority, Dyson LJ said that Mitchell had been “misunderstood” and “misapplied by some courts” in a way that had led to some “manifestly unjust and disproportionate” decisions.
Whilst maintaining that the guidance provided in Mitchell had been “substantially sound”, Dyson LJ recognised that more detail would prove helpful to “hard-pressed first instance judges”. Setting out the three-stage approach to relief from sanctions, Dyson LJ held that first, the court must “identify and assess the seriousness and significance” of the breach. Where a breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to ask why the default occurred. The third and final stage is to evaluate “all the circumstances of the case, so as to enable the court to deal justly” with the application for relief.
Rejecting the focus on the meaning of the word “trivial” as a “semantic dispute”, Dyson LJ held that it would be preferable to focus on “whether the breach has been serious or significant”. Although recognising that the concepts of seriousness and significance are “not hard-edged and that there are degrees of seriousness and significance”, Dyson LJ expressed hope that “over time, courts will deal with these applications in a consistent manner”. Where 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.
At stage 2, courts should consider why the failure or default occurred. Understandably, Dyson LJ considered it “inappropriate to produce an encyclopaedia of good and bad reasons” for breach, although that will be of little comfort to parties involved in litigation.
Even where the party seeking relief has committed a serious breach, without good reason, the court must go on to consider “all the circumstances of the case, so as to enable it to deal justly with the application”. At this stage, the court will consider stages 1 and 2, but it must also take a more nuanced approach. “The factors that are relevant will vary from case to case”, some examples of which have been the promptness of the application for relief, or other past or current breaches by the parties involved.
The Court of Appeal was “concerned that some judges are adopting an unreasonable approach to rule 3.9(1), and considered that “each of the three cases under appeal to this court illustrate this well”. Some judges were, the court said, 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: an approach which could lead to decisions which are “manifestly unjust and disproportionate”.
In the wake of such unjust decisions, some parties had been adopting an opportunistic and uncooperative approach to litigation. The court would, said Dyson LJ, “be more ready in the future to penalise opportunism” and “heavy costs sanctions should … be imposed on parties who behave unreasonably in refusing to agree extensions of time or unreasonably oppose applications for relief from sanctions”.
The first appeal, Denton, concerned an unreported decision to grant relief from sanctions where a party had served six witness statements late. Both parties had initially served all their witness statements for use at trial by July 2012, but the claimant had subsequently served six further statements in December 2013, one month before the date fixed for a 10 day trial.
The Court of Appeal overturned the decision in Denton as the breach had been significant, causing the trial date to be vacated and disrupting the conduct of the litigation; there had been no good reason for the delay, as the claimant had known about the issue from an early stage; and “there was very little to weigh in the balance on the other side under the heading of ‘all the circumstances of the case’”.
Decadent, also unreported, was a decision where the claimant had failed to comply with an unless order for payment of court fees by 19 December 2013. A cheque for the fees had been sent to the court on the due date, and was expected to arrive one day late, but was lost in transit. They were eventually paid on 9 January 2014, but the judge refused relief from sanctions.
Again, the judge had got it wrong. The failure in this case was “near the bottom of the range of seriousness”. Although there was not a good reason for the breach, the judge should have concluded at the third stage that factor that as the late payment of the fees did not prevent the litigation being conducted efficiently, and the breach was near the bottom of the range of seriousness, the only reasonable conclusion was to grant relief.
Utilise involved two separate breaches. First, the claimant filed a costs budget some 45 minutes late; and secondly, the claimant was 13 days late in complying with an order requiring it to notify the court of the outcome of negotiations. The District Judge declined to grant relief from sanctions on the basis that the second breach rendered the first breach, which would otherwise have been trivial, a non-trivial one and this decision was upheld on a first appeal.
For the third time, it was held that the decision below was wrong. On any view, the 45 minute delay was insignificant and did not imperil any future hearing date or otherwise disrupt the conduct of any litigation. Having regard to this assessment of the breach, the Court of Appeal did not consider that any more time needed to be spent on either of the second or third stages in. Further, the failure to notify the court promptly of the outcome of negotiations, which was itself neither serious nor significant, did not turn what was “neither a serious nor a significant breach” into something worse.
The Court of Appeal’s judgment in Mitchell was followed by a great deal of confusion as to the newstatus quo. In this trio of appeals, the court has reminded judges of the importance of equity in the application of the test for relief. It has done this by emphasising the third stage of the test, in which judges must look to all of the circumstances, and reach a decision which is just and proportionate.
The judgment can be read in full here:
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