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FREE BOOK CHAPTER from 'A Practical Guide to Relief from Sanctions Post-Mitchell and Denton' by Peter Causton

08/11/18. Chapter Two - Background History: From Woolf to Jackson To Dyson.

Prior to the implementation of the Jackson reforms, it was considered that the courts had become too tolerant of parties’ non-compliance with orders, rules and practice directions and the delays this non-compliance caused.

It was originally Lord Woolf who started the whole process of reform in his Access to Justice Report which heralded the introduction of the Civil Procedure rules. His report was revolutionary in scope and he shook up the litigation system which until then had trundled along slowly for many decades. I distinctly remember in pupillage attending the Master to argue that cases which had been issued years before should be struck out for “want of prosecution” as nothing had been done and litigants would routinely extend time limits for all steps in litigation. Something had to change.

Lord Woolf envisaged a New Landscape for the Civil justice which included the following features:

  • Litigation will be avoided wherever possible

  • Litigation will be less adversarial and more co-operative.

  • Litigation will be less complex.

  • The timescale of litigation will be shorter and more certain.

  • The cost of litigation will be more affordable, more predictable, and more proportionate to the value and complexity of individual cases.

  • Parties of limited financial means will be able to conduct litigation on a more equal footing

  • There will be clear lines of judicial and administrative responsibility for the civil justice system.

  • Judges will be deployed effectively so that they can manage litigation in accordance with the new rules and protocols

  • The civil justice system will be responsive to the needs of litigants.

He considered that “the introduction of judicial case management is crucial to the changes which are necessary in our civil justice system. Ultimate responsibility for the control of litigation must move from the litigants and their legal advisers to the court…Experience in developing case management in other jurisdictions has indicated that not all cases require the same hands-on management but that a differential approach is needed. Research on existing systems has also shown the efficacy of timetabling. These developments show the way forward.

There are those who have misgivings about the need for my proposals and their ability to effect beneficial change. Concern has been expressed that my proposals for case management will undermine the adversarial nature of our civil justice system. The concerns are not justified. The responsibility of the parties and the legal profession for handling cases will remain. The legal profession will, however, be performing its traditional adversarial role in a managed environment governed by the courts and by the rules which will focus effort on the key issues rather than allowing every issue to be pursued regardless of expense and time, as at present.

It has also been suggested that judges are not well equipped to be managers. I do not see the active management of litigation as being outside a judge's function. It is an essential means of furthering what must be the objective of any procedural system, which is to deal with cases justly. Case management includes identifying the issues in the case; summarily disposing of some issues and deciding in which order other issues are to be resolved; fixing timetables for the parties to take particular steps in the case; and limiting disclosure and expert evidence. These are all judicial functions. They are extensions backwards in time of the role of the trial judge”

Lord Woolf recommended that sanctions be applied for failure to comply with orders and directions. He reported that:

There are certain key management stages, or 'milestones', in a case which should be established at the outset and which it should not be possible to move except with the permission of the court. These stages would be the case management conference, the pre-trial review and the trial date. But apart from these key stages the parties would be able to agree changes to the timetable subject to the overriding power of the court to intervene if appropriate. Any such agreement to vary a timetable, and the reasons for it, must be sent to the court (and to the client). Any extension must be for a specific period and the parties should file a new timetable.

Where one party seeks an extension of time to which the other does not agree, he may apply prospectively for an extension of time. If that time has passed he would have to apply to the court for relief from the sanction which would be imposed in the event of his non-compliance with the time limit. He would have to satisfy the court that he had complied with other directions and that there was a good reason why he was unable to comply with the direction in question. Save in exceptional circumstances he would also have to pay the other side's costs of the application immediately.”

His concept is worthwhile repeating:

There must of course be some limited right to apply for relief from a sanction. In my view the onus should be on the party in default to seek relief, not on the other party to apply to enforce the sanction. The application should be made before the date of expiry of the specific requirement. It is important that the conditions for relief should be set out clearly in the rules. I recommend, broadly following the test in Rastin v British Steel [1994] 1 WLR 732, that relief should not be granted unless the court is satisfied that the breach was not intentional, that there has been substantial compliance with other directions and that there is a good explanation. The court will need to consider whether the failure was due to the default of the client, whether the default had been or could be remedied within a reasonable period, whether the trial date, or next milestone date, could still be met if relief were granted, and whether granting relief would cause more prejudice to the respondent than refusal would to the applicant. The normal order in these cases will be for the costs of the application, as assessed by the court, to be paid immediately by the party at fault. In many cases the applicant's solicitor would have to pay the respondent's costs and would not be entitled to recover them from his client. Where relief is not applied for until after the relevant time has expired it will only be allowed in exceptional circumstances and the applicant would normally bear the costs. In considering whether there is prejudice the courts must be prepared to acknowledge that delay in itself is prejudicial to a party who is seeking a decision. The client should personally be sent any costs order made against him and be made aware of his right to apply for a wasted costs order against his solicitor. He should also be sent a copy of any order breach of which will lead to striking out, so he knows the directions of the court and the effect of non-compliance.

To a large extent the effectiveness of sanctions will revolve around judicial attitudes. There is no doubt that some judges at first instance, especially Masters and district judges, will need to develop a more robust approach to the task of managing cases and ensuring that their orders are not flouted. They must, in particular, be resistant to applications to extend a set timetable, save in exceptional circumstances. But these judges must also be supported both by the trial judge and by courts hearing appeals. Many people who commented also stressed the need for consistency between the trial judge and the judge who had imposed sanctions for earlier procedural breaches. If the fast track, in particular, is to work it will be necessary for the rules to make it clear that it will not normally be acceptable to overturn earlier procedural decisions unless there has been a material and unforeseeable change of circumstances and it would not be possible to deal with the case fairly without doing so. So far as appeals are concerned, procedural decisions must not be overturned lightly but only when judges have misdirected themselves as to the facts or the law or made errors of principle. This is not simply a matter of limiting appeals. It goes to a change of culture, in which judges can make orders confident that parties will not feel that they can ignore orders or that they can escape unscathed by appealing.”

So, the relief from sanction rule was born.

He set the sanctions ball rolling. He said that in the new climate he was envisaging, sanctions should play their proper role, which is “prevention rather than punishment” Where a sanction had to be applied he recommended that it should be “fair, relevant and simple to administer and must not create additional costs or delay for the party not at fault”.

His recommendations for the new rule were as follows:

  1. As part of a case-managed system, sanctions should be designed to prevent, rather than punish, non-compliance with rules and timetables.

  2. The rules themselves should specify what will happen where there has been a breach. All directions orders should include an automatic sanction for non-compliance.

  3. The court should intervene and impose sanctions on parties who conduct litigation in an unreasonable or oppressive manner even if they have not breached specific rules, orders or directions.

  4. The courts should make more use of their power to tax or assess the costs of an application and order them to be paid immediately.

  5. The onus should be on the party in default to seek relief from a sanction, not on the other party to apply to enforce the sanction.

  6. The power to make wasted costs orders should continue, but they should be reserved for clear cases and not allowed to develop into satellite litigation.

  1. The client should personally be sent any costs order made against him and be made aware of his right to apply for a wasted costs order against his solicitor. He should also be sent a copy of any order, breach of which will lead to striking out, so that he knows the directions of the court and the effect of non-compliance.”

Generally speaking, these were the recommendations which were implemented, although orders are not always sent to the client, much as clients do not always, or often, attend case management hearings as was envisaged.

The inquiry by Woolf published its final report in 1996 and thereafter the proposals resulted in the Civil Procedure Act 1997 and the Civil Procedure Rules 1998 for the County court and High Court, supplemented by new practice directions and pre-action protocols.

Following on from Woolf, it was considered that complacency had set in again and costs were still disproportionate. Jackson’s solution lay in more case and costs management by the judiciary. He said that:

One of the points that was impressed upon me during the Costs Review was that judges should take a more robust approach to case management, to ensure that (realistic) timetables are observed and that costs are kept proportionate. Case management can and should be an effective tool for costs control.

The courts, like the National Health Service, are a public service. Their function is to adjudicate disputes with available resources. Court users are only entitled to their fair share of court resources. At the moment judges, following the precept of CPR rules 3.8, 3.9 and 3.10 are far too indulgent to litigants in default. This causes not only delay but also unproductive waste of court resources in dealing with the effects of litigant failure to meet deadlines. It is only in truly extreme circumstances that the courts will strike out a party which is in default”

Lord Justice Jackson was concerned with the “damage this culture of delay and non-compliance [was] inflicting upon the civil justice system,” and considered it needed to be addressed. The objective was to reduce costs through active case management by the Courts, which would no longer be inactive bystanders. This coincided with the economic problems in 2008, which ushered in an age of austerity. Even though parties pay for the privilege of litigating, the Court Service was increasingly seen as equivalent to the NHS, with abuse of its resources by users, no more so than by clinical negligence lawyers who were seen as a drain on the Courts’ finances and increases in road traffic and other personal injury claims resulting in higher insurance premiums. One way of reducing cost was to push cases through a streamlined low cost Portal and strike them out for any serious breach of the Court timetable.

Jackson recommended redressing the balance between the Courts and litigants by emphasising the importance of complying with directions and by active case management, to include District Judges contacting parties directly to follow up orders, surely any litigant’s worst nightmare.

Securing compliance with case management directions is preferable to punishing non-compliance” he said. “I therefore recommend that, if and in so far as time allows, judges or clerks on their behalf should contact parties at appropriate stages in order to enquire what progress has been made in complying with orders and directions. I am told by practitioners who have litigated in the USA that nothing galvanises lawyers into action more effectively than an enquiry from the judge as to how they are getting on.” Of course, that seldom happens as the Court resources do not allow it, and District judges do not have “clerks” but this illustrates Jackson’s radical approach to reform.

Jackson reported in 2009. Consequently, the Jackson reforms came in on 1 April 2013 and brought with it changes to the rules relating to applications for relief, with the new test requiring Judges to consider all the circumstances, so as to enable them to deal justly with applications.

The rule before the Reforms came into force set out the circumstances that the court must take into consideration on any such application, as follows:

(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 including -

(a) the interests of the administration of justice;

(b) whether the application for relief has been made promptly;

(c) whether the failure to comply was intentional;

(d) whether there is a good explanation for the failure;

(e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol;

(f) whether the failure to comply was caused by the party or his legal representative;

(g) whether the trial date or the likely trial date can still be met if relief is granted;

(h) the effect which the failure to comply had on each party; and

(i) the effect which the granting of relief would have on each party.”

These 9 factors were removed by The Civil Procedure (Amendment) Rules 2013 and CPR 3.9 with effect from 1 April 2013 became:

(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 costs; and

(b) to enforce compliance with rules, practice directions and orders.”

It was widely considered that the new rule’s removal of the old rule’s checklist would mean that parties would no longer be able to take advantage of the list of extenuating circumstances to assist them in an application for relief from sanctions.

Jackson also recommended that the Court of Appeal should be loathe to interfere with robust case management decisions by the lower Courts. He said that:

It is a well-established principle that the Court of Appeal will be reluctant to interfere with case management decisions made by a first instance judge who has applied the correct principles, unless the decision is “so plainly wrong that it must be regarded as outside the generous ambit of discretion entrusted to the judge”. Concern has recently been expressed that, despite this principle, the Court of Appeal is on occasions too ready to substitute its own views on case management issues. It would not be right for me to comment on the merits of individual decisions. Nevertheless, going forward, I do regard it as vital that the Court of Appeal supports first instance judges who make robust but fair case management decisions. If the costs of litigation generally are driven up by the Court of Appeal’s efforts to protect a party against the consequences of his lawyers’ mistakes in an individual case, many other litigants will be denied access to justice altogether. Furthermore, whenever permission is granted to appeal against a case management decision, the timetable for the litigation in question is thrown into disarray.”

It was hoped that with the new more stringent test, and Lord Justice Jackson’s final report in their minds, judges at all levels would take heed of the consequences non-compliance was having on the court system and take a far less tolerant approach to parties who departed from the rules. Until Denton, this was the message delivered to judges at Judicial Training courses, delivered to deputy district judges. We were told in no uncertain terms that we were to follow the direction of travel which was to be less tolerant of delay and breaches of the rules.


Post April 2013 and Mitchell

Unfortunately, immediately post 1 April 2013, what we actually saw was a very inconsistent application of the new test. Accordingly, when the first case relating to an application for relief from sanctions, Mitchell MP v New Group Newspapers Limited [2013] EWCA Civ 1537, came before it in November 2013 the Court of Appeal took the opportunity to lay down a no-nonsense approach when it came to relief from sanction.

Essentially, Mr Mitchell failed to serve a costs budget on time and the sanction was for all of his costs to be disallowed. He was limited to recovery of Court fees only. This seemed very unfair given that he had only been late in filing a costs budget. The punishment did not seem to fit the crime.

Costs budgeting had increasingly been seen as the answer to the problem of excessive costs, forcing solicitors to set out their likely costs in painstaking detail in advance of a costs and case management hearing, so that they could be gone through with a fine-tooth comb by the judge and approved or disallowed. The problem was that many judges had no interest or training in this exercise and so the costs budgeting exercise was unpredictable. Nonetheless the Mitchell case was designed to send a strong signal to lawyers that costs budgets were very important and must be filed on time.

The proceedings fell within the scope of the pre-Jackson defamation costs management pilot scheme. Mr Mitchell’s solicitors breached the terms of the Practice Direction by failing to file and exchange a budget no later than seven days before the first costs management conference; and failing to engage in attempts to discuss budgets and budgetary assumptions.

Due to the breaches of Mr Mitchell’s solicitors, the Master imposed the sanction under the costs management scheme by limiting Mr Mitchell’s budget to Court fees only. As the Practice Direction provided that, when assessing costs on the standard basis, there is to be no departure from the last approved budget without good reason, this sanction effectively meant that Mr Mitchell would be unable to recover any legal costs from the Defendant in the event his claim was successful.

An application for relief from sanctions was therefore made on Mr Mitchell’s behalf. The Master refused the Claimant’s Application for relief and gave the following reasons:

The explanations put forward by the claimant’s solicitors are not unusual ones. Pressure of work, a small firm, unexpected delays with counsel and so on. These things happen, and I have no doubt they happened here. However, even before the advent of the new rules, the failure of solicitors was generally not treated as in itself a good excuse and I am afraid that however much I sympathise with the claimant’s solicitors, such explanations carry even less weight in the post-Jackson environment.”

What made the decision surprising is the fact that the Claimant’s solicitor received notice of the CMC only four days before the costs budget was due. Although conceding that this was a point which “troubled” her, the learned Judge nevertheless continued:

The parties were well aware that this was a case for which budgeting would be required from the start and that the mere fact that a date is set for a CMC is not supposed to be the starting gun for proper consideration of budgeting.”

The Court of Appeal determined that the sanction imposed by the Master was appropriate and that she had been entitled to use the new CPR 3.14 costs budgeting rule as guidance in this regard.

It was necessary for Mr Mitchell to apply for relief from sanctions.

The Court of Appeal considered that the breach was neither minor nor trivial and that no good reason had been provided to excuse the breach. In the circumstances, the Master could not be said to have misdirected herself.

It was submitted on Mr Mitchell’s behalf that a more proportionate sanction would have been to allow 50% of his budget. It was accepted that such a sanction could be imposed but it was concluded that such a sanction would not often be appropriate as:

The merit of the rule is that it set out a simple default sanction. The expectation is that the sanction will usually apply unless (i) the breach is trivial or (ii) there is a good reason for it. It is true that the court has the power to grant relief, but the expectation is that, unless (i) or (ii) is satisfied, the two factors mentioned in the rule will usually trump other circumstances. If partial relief were to be encouraged, that would give rise to uncertainty and complexity and stimulate satellite litigation.

The effect is that Mr Mitchell’s appeal was dismissed on all grounds. His costs budget remained as including Court fees only, and this was the limit of the costs which he was likely to be able to recover if his claim was successful. In the event he lost his case, so the decision was hypothetical in any event! He was found to have called the policemen “plebs.”

The Court’s overriding conclusion was that “relief from sanctions should be granted more sparingly than previously.” Even though the requirement for ‘promptness’ had been removed from CPR 3.9 when it was redrafted, the Court of Appeal concluded that applications for relief should be made promptly.

The Mitchell case sent shock waves through the profession and resulted in an increase in professional indemnity insurance premiums. If a breach was non-trivial, it was incumbent on the defaulting party to provide a good reason for the default which would ordinarily be founded in circumstances outside of its control. Failure to comply with a deadline due to an oversight or due to pressure of work would not constitute a good reason.

Compliance with rules and practice directions was now seen as an end in itself and the use of valuable Court time became an important consideration.

This stringent approach attracted much negative comment as it was felt that the pendulum had swung too far the opposite way, penalising parties severely for minor breaches.

Over the past few years the courts have retreated from the excessively draconian approach seen immediately following the Mitchell decision and the sanction for filing a Costs budget late were altered This more measured approach was prompted in particular by the Court of Appeal's decision in Denton in July 2014 which "clarified" the Mitchell guidelines.


Denton Three-Stage Test

So through the following cases of Denton v TH White Ltd & Another, Decadent Vapours Ltd v Bevan & Others and Utilise TDS Ltd v Davies and Another [2014] EWCA Civ 906 the Court of Appeal laid down more detailed guidance to assist lower courts when giving judgement on applications for relief. It also watered down the main rule to allow parties a “get out of jail card” – This guidance consisted of a three-stage test:

  1. The court should identify and assess the seriousness or significance of the ‘failure to comply with any rule, practice direction, or court order’ which engages CPR 3.9(1);

  2. The court should consider why the default occurred; - whether there was a “good reason”; and

  3. The court should “evaluate all the circumstances of the case, so as to enable it to deal justly with the application including factors in CPR3.9(1)(a) and (b)” (which are set out above).

Parties were also not meant to try to take a tactical advantage from a breach of the rules. The profession breathed a collective sigh of relief, although the new interpretation of the rule still meant that there were high stakes to play for at any relief from sanction hearing. The Denton decision effectively brought back the list of extenuating circumstances which had been removed from the rule.

This case concerned the late service of witness statements in proceedings arising from the defendant’s supply and installation of the claimants’ milking parlour. Following exchanges of witness and expert evidence in 2012, a CMC took place in February 2013 and directions were given for the exchange of further expert evidence together with schedules of loss. The trial date was fixed for 13 January 2014. At the pre-trial review on 2 December 2013, the claimants/respondents served five witness statements. The hearing was adjourned. The claimants served another statement on 6 December and made an application for permission to rely on all six statements.

At the re-listed pre-trial review on 23 December 2013, the Judge gave the claimants permission to rely on the statements and vacated the trial date. The defendant appealed to the Court of Appeal on the ground that the judge failed to apply, or misapplied, Mitchell and erred in the exercise of his case management discretion.

In the case of Decadent Vapours Ltd v Bevan the claimant/appellant failed to comply with an unless order to file a pre-trial checklist and pay the required court fee by 4pm on 19 December 2013. The checklist was filed by email on the afternoon of 19 December but the cheque for the fee was only sent that day. It was never cashed but this did not come to light until the pre-trial review on 7 January 2014. The result of the claimant’s failure to comply with the unless order meant that the claim stood as struck out. The fee was paid on 9 January 2014, almost immediately after the lost cheque was discovered.

The judge refused to grant the claimant relief from sanctions. He concluded that the claimant’s solicitor made a conscious decision not to take steps to ensure that the fee was paid on time and knowing that the cheque would not arrive until at least the day after it was due.

In Utilise TDS Ltd v Davies the claimant/appellant failed to comply with an unless order requiring the parties to file costs budgets by 4pm on 11 October 2013, in default of which they could only claim court fees by way of costs if they were successful, as in Mitchell. The claimant missed the deadline by 45 minutes. The order also imposed a stay until 8 November and required the claimant to notify the court of the outcome of negotiations by 4pm on 15 November, but it was 13 days late in doing so. The District Judge dismissed the claimant’s application for relief from the sanction for breaching the costs budget deadline, noting the lack of a good reason for the late filing and taking into account the claimant’s failure to comply with the other deadline in the order. The claimant appealed.

The three appeals were heard by a panel consisting of the Master of the Rolls, who led the panel in Mitchell, Jackson LJ, whose recommendations led to the reforms and also Vos LJ.

The issues that were raised included:

  • The loss of co-operation between parties to litigation. With the rise of “windfall” strike outs the approach following Mitchell meant it was no longer in the interest of litigators to ignore what are otherwise minimal breaches by the other side.

  • The impact of the rule was too harsh: the failure by lower courts to look for any link between the breach and the nature of the sanction. All orders and timescales were being seen as unless orders, even those obligations in the CPR for which there was no sanction. The striking out actions or the debarring of evidence, which is often effectively the same thing, had become the only sanction being imposed, whether a breach is serious or minor.

  • Given that the aim of the regime was to help with the efficiency of the administration of justice, there had been a massive growth in satellite litigation with huge costs being incurred in making relatively unnecessary applications.

  • There was an inconsistency between courts such that lawyers were unable to give any clear advice about how to approach a failure to comply with the rules by their client, or the other side.

As a member of the Law Society’s Civil Justice Committee, we had been involved in the implementation of the Jackson reforms and we assisted with the Law Society’s intervention, as there was a lot of disquiet in the legal profession about the choking and straightjacketing effect of Mitchell on practitioners.

The Court of Appeal reviewed Rule 3.9 and made it clear that this decision should be all that any litigator needs to consider when trying to apply the rules. Mitchell, and the subsequent decisions, need not be referred to.

Lord Dyson MR and Vos LJ advocated a three-stage approach as follows:

The test of whether a breach is trivial became a test of whether a breach is serious or significant, recognising that the test can encompass the effect on other litigation. Although the fact of prior breaches will be relevant, they will be relevant only at stage 3.

The court should then consider whether there was good reason for the breach. If there is good reason, that will tend to justify granting relief from sanctions.

Only at this stage does the court need to consider the factors in Rule 3.9. Rule 3.9(1)(a) and (b) need to be considered and have a higher overall status than other reasons but the court must have regard to all the circumstances of the case. Previous breaches may therefore be a relevant factor, but only at this stage.

So, following Denton, it is clearer as to what practitioners need to do to pass the relief from sanctions test, which has been watered down to some extent, but is still not easy to do. The subsequent chapters will focus on cases that followed Denton and in which the test was applied in particular circumstances (as the Mitchell lines of authority are no longer strictly relevant) and then provide guidance as to how best to succeed in an application or defeat it.

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