In a recent decision the Commercial Court penalised the defendants in costs for seeking to rely on Mitchell to turn to their tactical advantage the claimants’ short delay in providing security for costs which in itself had no material impact on the efficient conduct of the litigation: Summit Navigation Ltd v Generali Romania Asigurare Reasigurare SA  EWHC 298 (Comm).
Since the Court of Appeal’s “game changing” decision in the Mitchell case last November (outlined here) the lower courts have been applying the tough new approach to compliance set down in that case, though with varying degrees of enthusiasm. The more extreme examples that we have seen or heard of include striking out a claim for late filing of trial bundles, and effectively disallowing a party’s costs budget where a party misinterpreted the rules and sought to file a day late. As many commentators have noted, this has led to a situation where parties may be less inclined to cooperate in agreeing reasonable extensions of time, in the hope that the opponent will miss a deadline and suffer some severe sanction as a result – potentially even having its claim or defence struck out, in the “jackpot” scenario.
There are however recent indications that the courts are seeking to mitigate some of the difficulties caused by Mitchell by discouraging its tactical use. The result is that parties may be penalised not only where they breach the rules, but also in some circumstances where they seek to take advantage of an opponent’s breach.
On 1 April 2013 the Civil Procedure Rules (CPR) were amended in two respects to introduce an increased focus on compliance as a result of the Jackson reforms (see here for more information):
- An amendment to CPR 3.9 which replaces the previous list of nine factors the court had to consider on an application for relief from sanctions with a statement that the court must 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”; and
- An amendment to the “overriding objective” at CPR 1.1 to add a new sub-paragraph (f) which makes it clear that dealing with cases justly includes “enforcing compliance with rules, practice directions and orders”.
In its November decision in the high-profile Mitchell case, the Court of Appeal gave the following guidance on the approach the courts should follow where a party applies for relief from sanction following a breach:
- Where non-compliance is “trivial” and an application for relief from sanctions is made promptly, the court will usually grant relief.
- Otherwise the defaulting party must persuade the court that there was good reason for the default.
- An application for relief from a sanction presupposes that the sanction was properly imposed in the first place. If a party wishes to contend otherwise, the proper route is an appeal or, exceptionally, an application to vary or revoke the order.
In the present case, the relevant order provided that if security was not provided by 4 pm on 5 December 2013 the action would be stayed. The claimants failed to comply due to difficulties getting the underwriter’s signature on the deed in time. The signature was obtained and the bond was ready for delivery by 10.01 the next morning. However, the defendants’ solicitor refused to accept delivery saying the action had been stayed on the terms of the order.
The court granted the claimants’ application to lift the stay. Leggatt J said there is a significant difference between an order that proceedings be stayed if security is not provided and an order that the claim be struck out if security is not provided. In the former case, the sanction is intended to be temporary; in the latter case permanent. Mitchell dealt with an application for relief from a sanction that was intended to be permanent (being treated as having filed a budget limited to court fees). In the judge’s view, a different approach is called for where the sanction is not intended to be permanent. In such situations, he said, the two factors identified at CPR 3.9 (the need for litigation to be conducted efficiently and at proportionate cost and the need to enforce compliance) do not carry the same weight. In the circumstances of the present case, where security for costs was tendered on the day after the stay came into effect, neither of those factors provided a good reason for refusing to lift the stay.
If he was wrong in his analysis and the Mitchell guidance applied, Leggatt J would still have granted relief on the basis that the non-compliance was “trivial”, or in the judge’s preferred terminology “not material”, as the default had no impact on any other aspect of the litigation.
Alternatively, if the failure could not properly be characterised as trivial, the judge’s view was that there was sufficiently good reason for the default, as the brokers were unable to get the underwriters’ signature in time. It was not due to overlooking a deadline, or any inefficiency by the claimants or their solicitors.
Interestingly, the judge commented that even if he had not concluded that the default was trivial or there was sufficiently good reason for it, he would still have considered it just to grant the relief sought, saying:
“… as the Master of the Rolls emphasised in his lecture on the Jackson reforms in words approved by the Court of Appeal in Mitchell at , it is not the aim of the reforms to turn rules and rule compliance into ‘trip wires’, nor into ‘the mistress rather than the handmaid of justice’, nor to render compliance ‘an end in itself’. It seems to me that this would be precisely the result of refusing relief in a situation where, as here, there has been non-compliance with a rule or order but the objective which the insistence on compliance seeks to serve of ensuring that litigation is conducted efficiently and at proportionate cost has not been impaired.”
Unlike in Mitchell, where the claimant’s failure to file a costs budget caused an adjournment and an abortive hearing, here the default itself had no such consequence. What had resulted in disruption and delay had been the defendants’ failure to adopt a constructive approach and their unreasonable refusal to agree to lift the stay. The defendants were therefore ordered to pay the claimants’ costs of the application.
As noted above, this decision highlights the risks for parties who seek to gain tactical advantage from an opponent’s procedural failure, refusing to consent to an application in circumstances where the court considers the refusal to be unreasonable. Such conduct may lead to judicial criticism as well as the risk of being ordered to pay the costs of the opponent’s application. As ever, the difficulty will be judging where the boundaries lie between justified attempts to hold an opponent to strict compliance with rules and court orders, as the Mitchell line of authority requires, and an unreasonable or uncooperative stance that may attract the court’s disapproval.
The decision is also of interest for the judge’s comment that even if the guidance in Mitchell applied, and the default could neither be categorised as trivial nor excused by good reason, he would still have considered it just to grant the relief sought because the default itself had no impact on the efficient conduct of the litigation. These obiter remarks are likely to be welcomed by many litigators concerned at instances of what appear to be minor procedural errors resulting in disproportionately harsh sanctions. It is not however clear whether such a position can be reconciled with the guidance in Mitchell.