Mitchell, Denton and Relief: What Next?

The Court of Appeal’s decision in Mitchell v. News Group Newspapers Ltd [2013] EWCA Civ 1537, [2014] 1 WLR 795 on relief from sanctions is probably the most discussed, indeed controversial, Court decision on procedure in the last 12 months.

Now, in a combined Judgment on three cases, Denton & Ors v TH White Ltd & Ors, Decadent Vapours Limited v Bevan & Ors and Utilise TDS Limited v Davies & Ors [2014] EWCA Civ 906 (referred to below as “Denton”), the Court of Appeal has revisited Mitchell to give guidance as to how the Courts and parties should make sense of it.

John Denis-Smith, barrister at 39 Essex Street, considers Mitchell, Denton and Relief from Sanctions and asks "what next"?

What are the key points – and problems – going forward?

First, one should recall what is the focus of concern. CPR 3.9 deals with relief from sanctions and provides:

(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.

(2) An application for relief must be supported by evidence.

Mitchell was a strong case. The party in default had not woken up to its default until the Court prompted it. The sanction in the rules for non-compliance was explicitly stated. Moreover, that sanction was draconian: failure to file and serve a costs budget led to recovery only of costs fees (see CPR 3.13 and 3.14). The situation in other cases was less clear. The result has been a number of contrasting decisions, the tone of which differed sharply. Denton was intended to resolve matters by setting a uniform, three stage test (at [23] per Dyson MR and Vos LJ):

  • The first stage is to identify and assess the seriousness or significance of the "failure to comply with any rule, practice direction or court order", which engages rule 3.9(1).
  • The second stage is to consider why the default occurred, whether for a good or bad reason.
  • The third stage is to consider all the circumstances of the case, so as to enable the Court to deal justly with the application, giving particular weight to the factors set out in CPR 3.9(1).

So, is everything clear now? Unfortunately not. Here are some of the issues which remain sources of uncertainty.

1. Disagreement in the Court of Appeal

There was a striking difference between the view of the majority and that of Jackson LJ, dissenting, as to the importance in the third stage of the two factors in CPR 3.9(1). Jackson LJ considered that the only requirement is to consider those factors but they have no more importance than any of the circumstances of the case (see [85]). The majority, quoting back to him passages from his own report which had led to the adoption of the new CPR 3.9, took the view that those two factors must be given particular weight (see [33]). One might think this an academic debate but Jackson LJ specifically contemplated that the difference of opinion might lead to different results (see [97]). It is troubling that there should be such a division between the individual who authored the report on civil litigation reform and those claiming to be giving effect to his own words. The scope for lower courts being held on appeal to have given insufficient weight to the two factors in future is clearly higher than it might otherwise have been. Yet such satellite litigation is precisely what the Court of Appeal hopes to avoid.

2. Is prejudice relevant and how relevant is it?

Prior to Denton, there were very different decisions on the issue of how important is the question of prejudice to a Defendant. A key issue will be the impact on granting relief on the Respondent and, put another way, how important is compliance even in the absence of prejudice to the Respondent? In Denton, the Court of Appeal indicated that it is relevant whether the relevant breach imperils any future hearing date or otherwise disrupts the conduct of this or any other litigation (see [76]). However, the question of prejudice was not explicitly addressed. Presumably, the point was considered to be subsumed into the question of how “serious” the breach was or, going forward, on the third stage, whether prejudice would be caused to the other party. Jackson LJ referred critically (at [91]) to the fact that non-compliance may have a “serious impact” on opposing parties. However, that does leave the weight to be given to prejudice unclear. Does non-compliance have to have a “serious impact” before amounting to a “serious breach”? For a party seeking to oppose the grant of relief, presumably there will be emphasis on the second limb of CPR 3.9(1)(a), i.e. it will be said that the Respondent will have to spend more time and this will mean it is being forced to conduct litigation inefficiently and at disproportionate cost. However, does this mean that relief should be granted on terms that the Court quantifies and orders the applicant to pay those extra costs? One feels this is not what the Court of Appeal has in mind.

3. What is the approach in relation to applications for an extension of time?

Of course, no party wants to be in the position of having to seek relief from sanctions. The obvious step is to apply, within the period set for compliance, for an extension of time under CPR 3.1(2)(a), which provides that:

(2) Except where these Rules provide otherwise, the court may –

(a) extend or shorten the time for compliance with any rule, practice direction or court order (even if an application for extension is made after the time for compliance has expired

Mitchell dealt with CRP 3.9: there was no application for an extension of time. So too, none of the three appeals in Denton applied for an extension. The Court of Appeal in Denton simply referred to a Court of Appeal judgment handed down on 19 May 2014, in Hallam Estates Ltd v. Baker [2014] EWCA Civ 661, the Court of Appeal held that the Mitchell criteria do not apply to in-time applications for extensions of time. The Court held that the approach to be taken remains as set out in the Court of Appeal decision in Robert v Momentum Services Ltd [2003] EWCA Civ 299, CA; [2003] 1 W.L.R. 1577; [2003] 2 All E.R. 74. That case however did not purport to set out complete guidance as to the correct approach: the Court of Appeal instead took a more limited approach, rejecting two reasons given by the judge below for setting aside a district judge’s decision and thus restoring that decision. In Hallam Estates however, Jackson LJ, who gave the leading judgment, referred to the overriding objective – which CPR 1.2 mandates must be considered whenever the Courts powers are applied. Further he commented that

“The claimants made a reasonable application for an extension of time, which did not imperil any future hearing dates or otherwise disrupt the proceedings”.

Is that any different from the criterion applicable in Denton? If Jackson LJ had had his way, the answer may well be no. On his view of the three stage test, compliance with rules would not have greater standing than the other criteria. However, on the approach of Dyson MR and Vos LJ, the answer may well be that there is a significant difference between the approach of the Court to the party in default than the one which made its application in time. It is disappointing that the Court of Appeal in Denton did not take the opportunity to consider this point. Perhaps the reason it did not is that the Court could not reach a consensus on the correct approach.

Conclusion

It is of course possible to argue about almost anything. The Court of Appeal has sought to head off the prospect by warning that Respondents who oppose the grant of relief unreasonably risk awards of indemnity costs against them (see Dyson MR and Vos LJ at [39]-[45] and, in particular, at [43]). However, costs issues are already a source of satellite litigation. It may be that further guidance will be required in due course.

You might also be interested in: 6 things we need to consider about buffer agreements after Mitchell/Denton

Relevant Articles
Area of Interest