Denton and the clarification of Mitchell

by Jim Hester

Denton v White & others; Decadent Vapours Limited v Bevan & others; Utilise TDS Limited v Cranstoun Davies & others [2014] All ER (D) 53 (July);  [2014] EWCA Civ 906

For those avid readers of Chambers’ newsletters, you will have recognized that I wrote an article concerning relief from sanction, following the seminal Mitchell judgment in November.

Well, like a recalcitrant teenager, the Court of Appeal in Denton has found that Mitchell is not wrong, but it has been “misunderstood”.  By almost everyone.  For instance each of the three QC Circuit Judges in Denton misunderstood and misapplied Mitchell.  The Court of Appeal, however, did admit that the original judgment needed to be ‘clarified and amplified’.

I should say that Denton is another must-read for anyone engaged in civil litigation.  However, this brief case analysis will, I hope, set out the ‘new’ guidance for interpretation of the new CPR r3.9 – relief from sanctions.

CPR 3.9 States:

(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 cost; and

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

The three cases before the Court of Appeal (The Master of the Rolls, Jackson LJ, and Vos LJ) involved appeals where it was argued that one decision was too lenient, and 2 were too strict.

In Denton, the Claimant served six witness statements one month before the date fixed for the 10-day trial.  The statements were purported to be in response to a change of circumstance.  The Judge granted relief from the automatic sanction under CPR r32.10.  The resultant trial had to be vacated.

In Decadent the Claimant failed to comply with an unless order for payment of court fees.  If it failed to comply, the case would be struck out.  The cheque for payment was sent on the final day for payment by DX.  It was, therefore, expected to arrive the day after the deadline.  In fact, the cheque was lost either by the DX or by the court (if you can believe that).  The failure to pay was not noticed until a pre-trial review, upon which the fee was paid within 2 days.  The Judge refused the relief from sanction application and the case remained struck out.

In Utilise there were 2 breaches.  The first was a costs budget which was filed some 45 minutes late.  The second was that the Claimant was 13 days late in informing the court of the outcome of negotiations.  The District Judge held that the second breach prevented the first breach being trivial (which it would otherwise have been).  An initial appeal to a Circuit Judge was unsuccessful.

After considering the case-law that has developed since Mitchell, the court gave further guidance.  It confirms that Mitchell remains ‘substantially good’.  However, the court’s new guidance replaces what was generally seen as a 2-stage process under Mitchell (Was this a trivial breach?  Was there a good reason?) with a new 3-stage process.

Stage 1 – the Judge is to consider whether the breach is ‘serious or significant’. If the breach is neither serious nor significant, the court is unlikely to spend much time on stage 2 or 3. 

Stage 2 – the Judge is to consider why the breach has occurred.

Stage 3 – the Judge is to consider ‘all the circumstances of the case’ so as to deal with the case justly.

Stage 1:

The Judge is to consider whether the breach is serious or significant. So ‘trivial’ has gone, to be replaced on what appears to give a little more room for those who seek the relief.  The Law Society and Bar Council (Interveners in the case) submitted that a meaning along the lines of ‘neither imperils future hearing dates nor otherwise disrupts the conduct of the litigation’ should be adopted.  The court accepted that this will in many cases be the most useful measure of whether a breach was serious or trivial, although so long as it was understood that ‘the litigation’ related not only to the case in hand, but other cases of litigation (a reference it must mean to court time/ resources).  However, there might be other serious/ significant breaches – for example a failure to pay court fees.  Other than that indication the court simply leaves it to the individual judge to consider whether the breach was serious/ significant.

If it is considered not to be a serious/ significant breach, then the court will not usually consider stage 2 and 3, although if it is the last in a long line of breaches, the court could consider stage 2 and 3.  However, the fact of the cumulative effect of the breaches is a matter for stage 3 – all the circumstances of the case.

Stage 2:

If there was a good reason for the breach.  The court does not give a list, but merely refers back to Mitchell for an indication of what may/ may not be.

Stage 3:

The court states that the 2 factors specifically mentioned in CPR 3.9 are not (per Mitchell) of paramount importance, but they are of particular importance.  However, the court is also to consider at the third stage, all the circumstances of the case. 

It should be said that Jackson LJ dissented to a degree in this area, agreeing with the Law Society/ Bar Council, that the 2 listed factors should have ‘a seat at the table, not the top seats at the table’. 

The court is to consider the ‘effect’ of the breach in every case.  The court, using language which Sir Humphrey Appleby would have been proud, carefully avoids stating that the Judge is to consider the prejudice to the parties.  However, if the breach ‘has prevented the court or the parties from conducting the litigation (or other litigation) efficiently and at proportionate cost that will be a factor weighing in favour of refusing relief’.  So it seems that if the parties are prejudiced, or if there is a burden on the court, then that weighs against relief.  It confirms though, that the ‘old lax culture of non-compliance is no longer tolerated’.

The promptness of the application will be a relevant factor.  Likewise, other past or current breaches of the rules, practice directions and court orders may also be taken into account. 

The Court warns against an ‘unduly draconian approach’, repeating that the rules have not been turned into ‘tripwires’.  A more nuanced approach is to be taken rather than the apparent 2-stage process of Mitchell.

The court also warned against opportunism and unreasonableness in refusing relief from sanction by the non-fault party, in the hope that relief would not be granted and so receive a windfall.  Such conduct is ‘wholly inappropriate’ and where relief from sanctions, under Denton seems likely, parties should agree to the relief sought.  Extensions up to 28 days should be readily agreed.

The court should be ready to penalize opportunism, not just by an award for costs at the application hearing, but potentially at the conclusion of the case. Possibly it could allow a party’s costs on the indemnity basis (throwing off the shackles of cost budgeting), or reduce a party’s own costs, as appropriate.

The Court allowed the appeals in each of the individual cases before it.  The court reiterated the 3-stage approach, to include all the circumstances of the case.  However, it did not endorse the ‘traditional approach of giving pre-eminence to the need to decide the case on the merits’.

It should also be noted that the court hoped that the Denton judgment would avoid the need to resort to earlier authorities (since Mitchell).

On any reading, this gives the party in default greater leeway than under Mitchell.  A party can now not only argue that the breach is not serious/ significant (which seems to be a higher bar than the breach having to be trivial), but also it can have a further bite of the relief-cherry by considering all the circumstances of the case.  Prejudice (the consideration which must not be named) might even find itself a seat at the table.