Relief from Sanctions Applications: As Easy As 1, 2, 3 21 Jul 2014

On the 4th July 2014, the Court of Appeal gave judgment on three significant cases examining relief from sanctions under CPR 3.9. The court also examined the effect of Mitchell and concluded amongst other things that the judgment in that case has not only been misapplied by the courts but also misunderstood.

Three appeals were considered by the Court of Appeal together, these were Decadent Vapours v Bevan, Denton v White and Utilise Ltd v Davies. The Court allowed all three of the appeals.

The Court criticised the Mitchell judgment stating that the ruling was an unduly strict approach which had led to disproportionate penalties for breaches which have little practical effect on the litigation itself. They also commented that it had encouraged uncooperative behaviour, inconsistent approaches by the Courts and unreasonable satellite litigation. The concept of triviality which was considered in Mitchell is no longer part of the approach prescribed by the courts.

The Court stated that the guidance given in Mitchell is still appropriate and in order to provide clarification they provided new guidance in dealing with applications for relief from sanctions in the form of a three stage test.

Stage 1
The court must identify and then assess the seriousness and significance of the failure to comply with any rule, practice direction or court order. This should only be the very breach in respect of which relief from sanctions has been sought. If the breach is not serious or not significant then the court is likely to grant relief and may not need to spend time examining the second and third stages.

Stage 2
The court needs to consider why the failure to comply with any rule, practice direction or court order occurred. The Court failed to provide examples of what would constitute good reasons for a failure but did refer to the examples already given in Mitchell. It is likely that the more serious and significant the failure is, the less likely that relief will be granted unless there is a good reason. However, the Court clarified that if no good reason is provided for a breach a Judge is not prevented from granting relief from sanctions as part of their consideration of stage 3 below.

Stage 3
The court should evaluate all of the circumstances of the case so as to enable it to deal justly with the application for relief including specifically (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders. The court here must look at all of the circumstances in the case; including but not limited to: the serious and significance of the breach, whether there is a good reason for the breach, previous or ongoing breaches of the rules, practice directions and court orders by any of the parties and whether the breach has prevented the court or the parties from conducting the litigation or other litigation in an efficient manner and at proportionate cost.

The Court considered that a) and b) may not be of “paramount importance” but they should be given particular weight at the third stage when all the circumstances of the case are considered.

The Court also restated that cooperation between parties and compliance with rules, practice directions and orders is very important and litigation could not be conducted efficiently otherwise. They unequivocally condemned any practice by which litigants seek to take advantage of mistakes made by their opposition. The Court said this was to avoid situations whereby “one party gets a windfall, while the other party is left to sue its own solicitors.” Therefore in a case where the failure is neither serious or significant, where a good reason is demonstrated and where it is obvious that relief from sanctions is appropriate, parties should agree that relief be granted in order to avoid satellite litigation and the related legal costs.

The Court also provided advice for the judiciary, stating that judges should ensure that directions that they give are realistic and achievable. They warned that it is of no use imposing a tight timetable that is likely to be unattainable.

Finally, and perhaps most importantly for solicitors, the Court also stated that opportunism by litigants would be penalised in future including the warning that ‘heavy costs sanctions’ should be imposed on parties refusing to agree extensions of time or unreasonably opposing applications for relief. They also gave examples of penalties that could be appropriate in those circumstances and indicated that this would not just be limited to payment of the costs of the application for relief itself but could extend much further including orders for indemnity costs where a party loses and reductions in the costs recovered for successful parties.

Shilpa Mathuradas, Partner in the Property Litigation Department commented:

“This decision is likely to be welcomed by practitioners. The Mitchell judgment caused uproar amongst litigators and has simply promoted uncooperative attitudes between parties. This has resulted in unnecessary applications clogging up the courts’ time as well as unnecessary costs.”

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