The High Court has penalised a claimant in costs for requiring the defendant to apply for relief from sanctions, where the defendant had relied on a letter from the court which (arguably) set out the wrong date for filing costs budgets: Freeborn v Marcal  EWHC 3046 (TCC).
The court emphasised that, following the court’s tougher approach to granting relief from sanctions established in Mitchell and Denton (as outlined here), it is extremely important for parties to ensure that they comply with the CPR. However, parties should not abuse this tougher approach. Parties need to consider whether it is proportionate and appropriate to require their opponent to make an application for relief from sanctions, or to oppose that application, in all the circumstances of the case.
This judgment is consistent with the warning in Denton that the courts are willing to penalise parties who try to hold their opponents to what the court sees as an overly strict approach to compliance with rules and court orders, and illustrates the fine balance litigating parties need to strike.
Laura Askew, an associate in our disputes team, outlines the decision below. Continue reading
Recent months have seen a number of decisions in which the English courts, both at first instance and on appeal, have re-emphasised the message that those who fail to comply with procedural rules should expect little sympathy, at least where they fail to take prompt steps to put matters right.
Over the past few years the courts have backed off from the excessively draconian approach seen immediately following the high-profile Mitchell decision in November 2013. This more measured approach was prompted in particular by the Court of Appeal's decision in Denton in July 2014 (considered here) which "clarified" the Mitchell guidelines.
However, since Denton we have continued to see cases which illustrate that the courts remain willing to take tough decisions against those who flout the rules. The decisions outlined below are consistent with that trend, and arguably mark an uptick in the frequency with which such decisions are being made in a wide variety of contexts. The obvious overall messages for litigating parties are:
- ensure compliance with rules and orders so far as possible;
- make an early application for more time where it appears a deadline cannot be met; and
- apply promptly for relief from any applicable sanction where things have gone wrong.
A CJC working group has been set up to consider and review a series of discrete topics relating to civil litigation, which will ultimately feed into the Ministry of Justice’s Post‐Implementation Review of the Jackson reforms, which is due in early 2018. The group is chaired by Rachael Mulheron of Queen Mary University of London and the deputy chair is Maura McIntosh of Herbert Smith Freehills.
The first topic being considered by the group is the procedure of concurrent expert evidence, also known as hot‐tubbing. This was introduced as part of the reforms as an optional procedure to be adopted at the direction of the judge. It involves hearing evidence concurrently from the experts in a particular discipline, with the judge leading the questioning and discussion, rather than having each expert give evidence and be cross-examined separately. The working group has issued a survey to judges, experts and legal representatives aimed at eliciting experience and views of the technique. Please click here to complete the survey for legal representatives. Responses are due by Tuesday 31 May.
Other areas will be considered by the group on a rolling basis, with the other proposed initial topics being: the role which BTE (before-the-event) insurance might play in improving access to justice; and QOCS (qualified one-way costs shifting) and private nuisance claims.
In case we were all in danger of thinking the courts' approach to breaches of rules and court orders had relaxed nearly to pre-Jackson levels of tolerance, two very recent Court of Appeal decisions act as a bit of a wake-up call. As these decisions show, there is clearly continuing scope for tough decisions against those who fail to comply, particularly where they do not make a prompt application for relief from sanction. The lesson for litigating parties is obvious.
In British Gas Trading Ltd v Oak Cash & Carry Ltd  EWCA Civ 153, the court dismissed a defendant's appeal against the strike-out of its defence resulting from a two-day delay in filing a listing questionnaire pursuant to an unless order. That means a default judgment entered against the defendant for some £200,000 will stand.
Significantly, Lord Justice Jackson (who gave the leading judgment) suggested that a prompt application for relief from sanctions would have been granted; however, the delay in applying for relief had led to substantial disruption in the progress of the action, in particular the loss of the trial date, and so it was not appropriate to grant relief.
In Gentry v Miller  EWCA Civ 141, the Court of Appeal held that the lower courts should have refused to set aside default judgment, where the defendant had delayed in making the application, despite evidence that the claim may have been fraudulent. This decision also highlights the fact that the Denton test for relief from sanctions (outlined here) applies equally to an application to set aside default judgment for failure to file an acknowledgement of service or defence.
The two decisions are considered in more detail below.
The Supreme Court has upheld the Court of Appeal’s decision overturning the grant of a second application for relief from sanctions for failure to comply with an unless order: Thevarajah v Riordan  UKSC 78 (and see our blog post on the Court of Appeal’s decision).
The second application for relief was, in substance, an application under CPR 3.1(7) to vary or set aside the previous order refusing relief. Therefore, applying established principles, it should not have been granted unless there had been a material change of circumstance since the previous order was made.
Interestingly, the Supreme Court commented that, even if CPR 3.1(7) did not apply, it would not normally be open to a party to ask for relief from sanction which required a previous interlocutory order to be varied or set aside unless there had been a material change of circumstance since the order was made. The impact of the Supreme Court’s decision may therefore extend more widely than to second applications for relief from sanctions.
In terms of what might amount to a material change of circumstance, the decision confirms that the mere fact an order has been complied with, albeit late, will not ordinarily be sufficient. However, the court did not rule out the possibility, particularly where late compliance is accompanied by an explanation as to why the party could only comply belatedly.
The government has today announced that the insolvency exception to the Jackson reforms will come to an end in April next year. This means that CFA success fees and ATE insurance premiums will no longer be recoverable in proceedings brought by liquidators, administrators, trustees in bankruptcy, and companies in liquidation or administration. The change will bring insolvency proceedings into line with other types of claim, where recoverability was abolished from April 2013.
When the Jackson reforms were implemented in April 2013, the government announced that there would be a two year delay for insolvency litigation. This was to give insolvency practitioners and other interested parties time to prepare for and adapt to the changes. The exception was due to end in April this year, but in February the government announced it would continue “for the time being” and the government would set out further details later in the year (see post). In October, Lord Justice Jackson delivered a lecture arguing that the exception should come to an end (see post).
The government’s announcement does not give reasons for the change, simply saying that after further consideration the government has decided the reforms should be applied to insolvency proceedings.
The Court of Appeal has dismissed an appeal against a High Court decision refusing to strike out a claim for procedural failures even though, in the judge's position, it would have struck a different balance between the competing factors: The Commissioner of Police for the Metropolis v Abdulle & Ors  EWCA Civ1260.
The decision emphasises that the court will not lightly interfere with a case management decision, whether that is to grant or refuse relief from sanctions or to grant or refuse an application to strike out a claim.
In a lecture delivered on 16 October, Lord Justice Jackson has argued the case in favour of bringing insolvency litigation into line with other types of civil litigation, where CFA success fees and ATE insurance premiums are no longer recoverable from losing opponents: see the 2015 Mustill lecture “The Civil Justice Reforms and Whether Insolvency Litigation Should Be Exempt”.
When the Jackson reforms were implemented in April 2013, the government announced that there would be a two year delay for insolvency litigation, which meant that the pre-Jackson regime of recoverable success fees and ATE premiums would continue for proceedings brought by liquidators, administrators, trustees in bankruptcy, and companies in liquidation or administration. The exception was due to end in April 2015, and that was reported to be the government’s intention as recently as September 2014 (see post).
However, in February this year, following lobbying by the Association of Business Recovery Professionals concerned at the impending end to the insolvency exception, the government announced that the exception would continue “for the time being” (see post). The announcement stated that the government would consider the appropriate way forward and set out further details later in the year. To date, we have seen no further indication of government policy on the issue.
The Civil Justice Council has today issued its report and recommendations following its review of the regulations governing DBAs. The review was prompted by a request from the Ministry of Justice last November (see post). The working group was chaired by Professor Rachael Mulheron of Queen Mary University London and included Maura McIntosh of Herbert Smith Freehills. Continue reading
In recent months we have seen a number of decisions which show a greater willingness to grant relief from sanctions for breaches of rules and court orders, compared to the more draconian judgments of the immediate post-Mitchell era, and which illustrate the risks for those who seek to hold their opponents to strict compliance – though there clearly remain risks for those who flout the rules as well. It seems there is also a continuing lack of certainty as to when relief from sanctions is in fact required.
In Michael Wilson & Partners Limited v Sinclair and others  EWCA Civ 774 the Court of Appeal set aside its previous order refusing to lift a stay imposed for failure to provide security for costs and striking out the appeal. The court concluded that in making the previous order, the single lord justice had taken an overly draconian approach, based on his understanding of the principles laid down in Mitchell. It was not until the Court of Appeal’s restatement of the Mitchell guidance in Denton (see post) that it became clear that approach was mistaken.
In Viridor Waste Management v Veolia Environmental Services  EWHC 2321 (Comm), following Denton, the Commercial Court not only granted relief from sanctions to a claimant who had served particulars of claim late as a result of an administrative error, in circumstances where a new claim would have been time barred, but penalised the defendant in indemnity costs for contesting the point. This contrasts sharply with a previous Commercial Court decision to strike out a claim for late service of particulars following the guidance in Mitchell (in Associated Electrical Industries Limited v Alstom UK  EWHC 430 (Comm) – see post).
In Solland International Limited v Clifford Harris & Co  EWHC 2018 (Ch) a Chancery Master held that relief from sanction was not required where claimants were 31 months late in filing their allocation questionnaire (now a directions questionnaire). There was no automatic sanction for the failure – the rules gave the court a complete discretion as to what, if any, sanction to apply – nor was there an implied sanction (as, for example, where a party fails to file a notice of appeal in time and therefore cannot pursue the appeal absent an extension). However, the claim was struck out as an abuse of process.
Each of these decisions is considered further below.