The Court of Appeal has unanimously agreed that all three ‘Mitchell appeals’ should be allowed.
In doing so, it found that, although the Mitchell decision ought not to be criticised, it had led to some confusion and criticism. As such, some clarification and amplification on the interpretation and application of Rule 3.9 was required.
It was hoped this judgment would increase compliance and reduce the need for satellite litigation on the issue of relief from sanctions. The judgment introduces a three-stage test to be applied by courts determining RFS applications and suggests, among other things, ‘heavy costs’ penalties for respondents who unreasonably object to an application for relief.
Denton v White & others; Decadent Vapours Limited v Bevan & others; Utilise TDS Limited v Cranstoun Davies & others  All ER (D) 53 (July);  EWCA Civ 906
In allowing each of the appeals, the appeal judges found the first instance judges had incorrectly applied the principles set out in CPR 3.9 and/or the Court of Appeal’s decision in Mitchell.
The Court of Appeal held it would be useful for courts, in determining relief applications, to apply a ‘three-stage’ test, namely:
- identify and assess the seriousness and significance of the ‘failure to comply with any rule, practice direction or court order’ which engages rule 3.9(1)
- this is instead of the ‘triviality’ criteria introduced by Mitchell
- in considering this factor the court could look at whether the breach imperils future hearing dates or otherwise disrupts the conduct of litigation. Note: the disruption factor is not to be considered by reference to the instant proceedings alone but by reference to litigation generally
- If the breach is determined to be neither serious nor significant, relief is likely to be granted and the court is unlikely to need to spend much time on the second and third stages. However, if the breach is determined as being serous or significant then the second and third tests below ‘assume greater importance’ [para 28]
- consider why the failure or default occurred (and, by implication, whether these are ‘good’ or ‘bad’ reasons). Note: the Court of Appeal was keen to stress the examples given in para 41 of Mitchell were no more than examples
- evaluate all the circumstances of the case, so as to enable it to deal justly with the application including CPR 3.9(1)(a) and (b)
- issues that could be taken into account at this third stage could include the promptness of the application; other past or current breaches; etc [para 36]
- there appears to be some difference of opinion between the Lords Justices as to the weight to be given to factors (a) and (b) ie is it a case that those factors should be given particular weight (majority view) or is it a case that they are simply factors to be taken into account every time as part of ‘all the circumstances of the case’ ie although ‘factors (a) and (b) should “have a seat at the table, not the top seats at the table”. Ultimately what rule 3.9 requires is that the court should “deal justly with the application”’ (Jackson LJ’s view at para 85)
Other principles and practical implications seemingly arising from this decision include:
- ‘it should be very much the exceptional case where a contested application for relief from sanctions is necessary. This is for two reasons: first because compliance should become the norm, rather than the exception as it was in the past, and secondly, because the parties should work together to make sure that, in all but the most serious cases, satellite litigation is avoided even where a breach has occurred’ [para 42]
- parties should not seek to use the stricter compliance regime as trip-wires in litigation and courts will be ready to penalise any such opportunism [para 43]
- respondents who unreasonably oppose relief applications should face ‘heavy’ costs consequences [para 43]
- the court must appreciate the realities of litigation so as to set realistic and achievable directions and should reserve ‘unless orders’ for situations in which they are truly required. They should also be aware of automatic sanctions applicable to certain types of default [para 44]
- there are many hidden costs to adjourning a trial, some of which are set out at para 89
- litigants need finality and SMEs in particular need swift and just resolution of their commercial disputes
- sadly this may not yet herald the end of satellite litigation on compliance and relief because, as Jackson LJ observed: ‘these three cases are all extreme examples of judges misapplying rule 3.9, albeit at opposite extremes. There will be other less clear cut cases where the difference of opinion between my colleagues and myself may matter’ [para 97]
For the Court of Appeal’s findings in relation to each of the appeals, see:
- Denton: paras 53-57. Here, the Court of Appeal said ‘In our view the judge’s order was plainly wrong and was an impermissible exercise of his case management powers’ [para 53]. Further, this ‘… is a good illustration of how courts used to operate under the former rule 3.9 (but should not operate under the new rule)’ [para 89]
- Decadent: paras 62-66. Here the Court of Appeal said ‘On a consideration of all the circumstances of the case, the only reasonable conclusion in this case was to grant relief… even taking account of the history of breaches in the litigation, this was not a case where, in all the circumstances of the case, it was proportionate to strike out the entire claim. In our judgment, the defendants ought to have consented to relief being granted so the case could proceed without the need for satellite litigation and delay’ [para 65]
- Utilise: paras 75-80 where they also considered the defendants ought to have consented to the relief being granted
Court: Court of Appeal, Civil Division
Judges: Master of the Rolls, Lord Justice Jackson and Lord Justice Vos
Date of judgment: 4 July 2014