Legal Update England and Wales: Relief from Sanctions for Non-Compliance with Procedural Directions Union Internationale des Avocats 58 th Congress - Florence 31st October 2014 Gregor Kleinknecht LLM MCIArb Partner Hunters Solicitors

Jackson Reforms Broad, sweeping reforms to costs, funding, case management, disclosure and other areas of civil litigation introduced from April 2013 in response to a review by Lord Justice Jackson. Objective of making civil litigation more efficient; reducing cost and delays; and combating “relaxed” attitudes to court directions and timetables. New era of low tolerance for delays and breaches of court orders and time limits. Numerous changes to the Civil Procedure Rules (CPR).

Relief from Sanctions Civil Procedure Rules (CPR) 3.9 (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.

Relief from Sanctions “We accept that, depending on the facts of the case, it will be appropriate to consider some or even all of these factors as part of “all the circumstances of the case”. But, as we have already said, the most important factors are the need for litigation to be conducted efficiently and at proportionate cost and to enforce compliance with rules, practice directions and orders.” Mitchell MP v News Groups Newspapers Ltd [2013] EWCA Civ 1526

Mitchell Case – a strict approach to procedural compliance Claimant’s costs budget of £506,425 filed one day before hearing (in breach of requirement of 7 days). Claimant’s solicitors blamed the “pressure of litigation elsewhere in the firm on other cases”. Hearing was adjourned and rearranged to deal with the question of relief from sanction and the costs budget. No relief was granted. The court treated the claimant as having filed a costs budget comprising only the applicable court fees in accordance with CPR 3.14: “Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees.” The Master gave leave to appeal, appreciating the significance of the point. Decision upheld on appeal.

Guidance given in Mitchell If breach is trivial, the court will usually grant relief provided that an application is made promptly. If non-compliance not trivial, court should consider why it occurred and will still be likely to grant relief if there is good reason to do so (e.g. debilitating illness/accident/later developments in the litigation process outside of parties’ control). The burden is on the defaulting party to persuade the court to grant relief/show that the period for compliance originally imposed was unreasonable. Mere overlooking of a deadline is unlikely to be a good reason. Solicitors being under pressure and over-worked will rarely be a good reason. Applications for an extension of time made before time has expired will be looked upon more favourably than applications for relief from sanctions made after the event. “The merit of the rule is that it sets out a stark and simple default sanction” that applies unless the breach is trivial or for good reason.

Did it Work? No – the new regime seemed draconian and disproportionate. Rigid approach to non-compliance led to decisions which were manifestly unjust and disproportionate. The courts became clogged up with satellite litigation as parties sought to exploit the new regime to their advantage – increasing costs and delay. Antagonistic and non-cooperative approach took hold between litigation lawyers. Judiciary realised that Mitchell was too extreme and some balance between compliance and common sense needed to be brought back.

Cases following Mitchell Adlington v. ELS International Lawyers LLP [2013] EWHC B29 (QB) Durrant v. Chief Constable of Avon and Somerset Constabulary [2013] EWCA Civ 1624 Newland Shipping & Forwarding Ltd v. Toba Trading FZC [2014] EWHC 210 (Comm) Lakatamia Shipping Co Ltd v. Su [2014] EWHC 275 (Comm) Summit Navigation Ltd v. Generali Romania Asigurare Reasigurare SA [2014] EWHC 398 (Comm) Chartwell Estate Agents Ltd v. Fergies Properties SA [2014] EWCA Civ 506 Hallam Estates Ltd v Baker [2014] EWCA Civ 661

Hallam Estates Ltd v Baker Court of Appeal overturned decision refusing relief from sanctions: “An application for an extension of the time allowed to take any particular step in litigation is not an application for relief from sanctions, provided that the applicant files his application notice before expiry of the permitted time period. This is the case even if the court deals with that application after the expiry of the relevant period.”

Amendment to CPR 3.8 – 5 th June 2014 (1) Where a party has failed to comply with a rule, practice direction or court order, any sanction for failure to comply imposed by the rule, practice direction or court order has effect unless the party in default applies for and obtains relief from the sanction… (2) Where the sanction is the payment of costs, the party in default may only obtain relief by appealing against the order for costs. (3) Where a rule, practice direction or court order – (a) requires a party to do something within a specified time, and (b) specifies the consequence of failure to comply, the time for doing the act in question may not be extended by agreement between the parties except as provided in paragraph (4). (4) In the circumstances referred to in paragraph (3) and unless the court orders otherwise, the time for doing the act in question may be extended by prior written agreement of the parties for up to a maximum of 28 days, provided always that any such extension does not put at risk any hearing date.

Denton v White Ltd; Decadent Vapours Ltd v Bevan; Utilise TDS Ltd v Davies [2014] EWCA Civ 906 “We think that the judgment in Mitchell has been misunderstood and is being misapplied by some courts. It is clear that it needs to be clarified and amplified in certain respects.” Recent decisions in the Court of Appeal, clarifying Mitchell:

New CPR 3.9(1) guidance: Three stages: 1. Was the breach serious or significant (no longer: trivial)? If not, relief will usually be granted. 2. Why did the failure or default occur? 3. Consideration of all of the circumstances of the case, including the need for compliance with rules, the effect on the litigation itself, so as to enable the court to deal with the application justly. Note: the burden is now no longer on the non-compliant party to show that a breach was trivial enough not to attract sanctions but is now on compliant party to show that breach is sufficiently serious for the courts to intervene. Recent decisions in the Court of Appeal, clarifying Mitchell:

Dissent by Lord Justice Jackson on one significant point While Master of the Rolls Lord Dyson and Lord Justice Vos agreed that the third step should involve giving particular regard to the two factors specifically referred to in rule 3.9: efficient conduct of litigation at proportionate cost; and compliance with rules Lord Justice Jackson viewed the two factors as ones to be considered in every case but not given more or less weight than all the other circumstances of the case. Uncertainty remains…

Further comments by the Court of Appeal Warning against taking advantage of procedural errors: “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).”

Where does this leave us? Guidance given in Mitchell “remains substantially sound”. Emphasis on substantiality, more certainty of application. Court will be allowed greater discretion and flexibility. Impact of default on trial date will be significant factor. Application before time limit has expired is paramount. Greater readiness in future to penalise opportunism and tactical use of Mitchell: “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 instance”. More nuanced approach likely to reduce strict compliance with court rules at the expense of natural justice. Satellite litigation unlikely to cease overnight – appeals against orders where relief was not granted will increase.

Thank you!