New guidance on applications for relief from sanctions

10 July 2014

The Court of Appeal has given further guidance, in the conjoined appeals in Denton v TH White Ltd and other cases, on how relief from sanctions applications under Civil Procedure Rule (CPR) 3.9 should be dealt with following that previously given in the Mitchell decision.

The Court of Appeal, consisting of the Master of Rolls, Vos LJ and Jackson LJ, held that an application for relief should be addressed in three stages. Judges should:

  1. Identify and assess the seriousness and significance of the "failure to comply with any rule, practice direction or court order" which engages CPR 3.9(1).
  2. Consider why the default occurred.
  3. Evaluate "all the circumstances of the case to enable the court to deal justly with the application including the need (a) for litigation to be conducted efficiently and at proportionate cost (CPR 3.9(1)(a)); and (b) to enforce compliance with rules, practice directions and orders (CPR 3.9(1)(b)).

First stage

Seriousness and significance of the failure to comply.

The focus is no longer on whether the breach is trivial but whether it is serious or significant. No test as to serious or significant was given with the court saying these concepts were not "hard edged" and that there were "degrees of seriousness and significance".

A useful though not exclusive benchmark is whether the breach imperils a future hearing date or otherwise disrupts the conduct of the litigation (and litigation generally). If it does not, the implication is that the breach is neither serious nor significant. The considerations at this stage should not involve other unrelated failures that occurred in the past, just the particular breach at hand. Consideration of earlier breaches will come in at the third stage.

If the judge considers the breach is not serious or significant, relief will usually be granted without spending too much time on the second and third stages.

Second stage

Consider why the default occurred.

The court declined to give an encyclopaedia of good and bad reasons for failure to comply and referred back to the examples given in Mitchell, confirming that they were no more than examples. Where there is good reason for a serious or significant breach, relief is likely to be granted

Third stage

All the circumstances of the case.

Even if the breach is serious or significant and there is no good reason for it, the application will not automatically fail. The court has to consider all the circumstances of the case to enable it to deal justly with the application. This was the element of CPR 3.9 that many of the decisions post Mitchell seemed to have simply ignored.

The court's decision was not unanimous on this point. Dyson LJ and Vos LJ held that the two factors set out in CPR 3.9(1)(a) (efficiency and proportionate costs) and (b) (enforcing compliance) were not to be seen as of paramount importance - as had been the case following Mitchell.

However, as they had been singled out for mention in the rule, they were still of "particular importance" and should be given "particular weight" when all the circumstances of the case are considered. If the breach prevented the court or the parties from conducting the litigation (or other litigation) efficiently and at proportionate costs, that was a factor weighing in favour of refusing relief.

The relevant factors will vary from case to case. The promptness of the application for relief is relevant as are other current or previous breaches of the rules, practice directions or court orders. The court reiterated that the approach should not be unduly draconian - the rules and rule compliance have not been transformed into trip wires. That is not the correct approach. A more nuanced approach, giving particular weight to the two factors referred to above, is required.

Jackson LJ dissented on the construction of CPR 3.9. He held that it did not require the two factors in CPR 3.9(1) (a) and (b) to be given greater weight than any other considerations, just that they 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. They should be included among the matters to be considered, no more and no less.

Non co-operation and costs penalties

The court made it very clear 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. Parties are required to help the court to further the overriding objective. Parties who opportunistically try to take advantage of a minor inadvertent breach and unreasonably oppose applications for relief act in breach of this obligation.

If the failure is neither serious nor significant, where good reason is demonstrated or where it is otherwise obvious that relief from sanction is appropriate, the parties should agree that relief be granted without the need for further costs to be expended on satellite litigation. It should be the exceptional case where a contested application for relief is necessary.

The courts will be more ready to penalise opportunism in the future. Heavy costs sanctions - including indemnity costs - will be imposed on a party that fails to make a realistic assessment and unreasonably refuses to agree an extension or unreasonably opposes an application for relief.

Comment

The key message from the judgment is that although a culture of non-compliance will not be tolerated, relief should not be automatically denied where there has been a serious or significant breach without good reason; all the circumstances of the case should be considered.

The test of "triviality" has gone, but as little guidance was given as to what "serious and significant" means, further satellite litigation is likely to follow, certainly in the short term, in borderline cases as parties and the judges grapple with those concepts. Those guilty of minor breaches should however now fare better and it will be a brave opponent who takes the point where there is no obvious detriment to the opponent or to the conduct of the litigation.

Action points:

  • Aim to comply with all deadlines and diarise accordingly.
  • Use the new(ish) buffer order set out in CPR 3.8(3) to agree extensions of time, where appropriate, of up to 28 days before the deadline expires.
  • If you do need to apply for relief from sanction, apply promptly, especially where a hearing date may be affected.
  • Act reasonably and think carefully about attempting to make mileage out of an opponent's breach. Consider the potential costs consequences of refusing to agree to an application for relief where the breach is not serious or significant or where the circumstances justify relief being given.
  • Ensure when agreeing directions that the time limits suggested are achievable.

A copy of the full judgment can be accessed here.


NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.

Related   Dispute Resolution