This article was originally published in the 2014 edition of MASS magazine
The recent Court of Appeal decision in Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1526, was without doubt one of the most important judgments of 2013.
The judgment, on the issue of relief from sanctions for failing to serve a costs budget within the prescribed period, has far wider-reaching effects than the issues it dealt with. The decision considers the core principles that Jackson set out as being the pillars of his reforms and, as such, Jackson’s message stood or fell on the outcome of this appeal.
Also known as ‘plebgate’ (referencing allegations made by police officers against Andrew Mitchell MP), the proceedings involve a libel case against the Sun newspaper. The relevant part of the case for the purpose of the appeal was the failure by the claimant’s solicitor to file a budget seven days prior to the case management conference, pursuant to the costs management pilot scheme, the precursor for the introduction of the costs budgeting rules under CPR 3.12-3.18.
The appeal focused on whether or not the claimant would be granted relief from sanctions under the new CPR 3.9 for failure to serve their budget. The claimant’s grounds for the appeal were that CPR 3.14 should not have been applied, on the basis that it had not come in force and therefore to apply it by analogy was incorrect. In the alternative, if it was correct to apply CPR 3.14 by analogy, it was incorrect to hold the claimant to CPR 3.13 and treat it the same way as a complete failure to serve a budget.
Lastly, the decision imposed a sanction that was disproportionate and contrary to the overriding objective. As such, it was the claimant’s stance that they should not be restricted to court fees alone, which is the effect of CPR 3.14.
The claimant’s appeal was dismissed. The Court of Appeal found that they were able to apply CPR 3.14 by analogy, also that the parties would be aware of a risk of a sanction for failure to serve the budget in time and that CPR 3.14 cannot be intended only to relate to situations where no budget was served. Therefore, the Court of Appeal upheld the Master’s decision and found that the claimant’s costs be limited to court fees only.
The decision in Mitchell was more than just a decision on the interpretation of the costs budgeting rules – it was also a decision on how tough the courts were going to be about failure to comply with the rules.
The court made it clear that “the defaults by the claimant’s solicitors were not minor or trivial and there was no good excuse for them [...] Although it seems harsh in the individual case of Mr Mitchell’s claim, if we were to overturn the decision to refuse relief, it is inevitable that the attempt to achieve a change in culture would receive a major setback”.
Given the tough stance the Court of Appeal has set down, here are five key tips to survive post-Mitchell:
1. ANTICIPATE THE BREACH – BEING PROACTIVE IS KEY Mr Mitchell’s solicitors found themselves in a situation where they needed to comply with an order in a short period of time. However, they knew that at some point in the proceedings, they would be required to provide a costs budget to the court.
The key message here is to be proactive. No longer can litigators be reactive, knowing now that the court may place tough sanctions upon them if they fail to comply. As such, anticipating the filing of documents and compliance with any order or direction is vital to avoid being subject to any relief from sanction application. This should also feature in agreeing directions with any opponent.
2. IF YOU THINK YOU ARE GOING TO BREACH, ACT BEFORE THE BREACH NOT AFTER The nature of litigation means that certain deadlines may not be achievable through a change in circumstances of a case. This is obviously balanced with the court’s duty to ensure that rules and orders are complied with.
As a result, if it appears that an order or a rule cannot be complied with, the court made clear that “we should add that applications for an extension of time made before time has expired will be looked upon more favourably than applications for relief from sanction made after the event.” Whilst this does not provide a guarantee that the court will allow an extension, it does indicate that any application before any breach will be looked on more favourably by the court, and increases the chances of avoiding a sanction.
3. A TRIVIAL BREACH MAY BE PERMISSABLE – WHAT IS ‘TRIVIAL’? The court has made an exception to the breach of a rule where that breach is ‘trivial’.
“It will usually be appropriate to start by considering the nature of the non-compliance with the relevant rule, practice direction or court order. If this can properly be regarded as trivial, the court will usually grant relief provided that an application is made promptly.”
Clearly, avoidance of any breach is of utmost importance. However, where a breach is unavoidable, the court will consider the degree of the breach when considering whether to grant relief. Therefore, reacting quickly to a breach in order to remedy the situation should be the priority.
Whilst the court has not given any real guidance as to what ‘trivial’ means (admitting themselves that this may cause satellite litigation as a result), this does give any party who has breached an ability to avoid a sanction, so long as they can demonstrate they have acted promptly and within the limited direction provided.
4. ‘COMPLIANCE’ AND ‘COSTS’ ARE THE MAIN CONSIDERATIONS IN ANY APPLICATION When considering the application of CPR 3.9, the court no longer has a long list of factors to consider, as was the case with the old rule. Whilst consideration of all the factors of the case is still relevant, the Court of Appeal’s guidance is that:
“The reference to ‘all the circumstances of the case’ in CPR 3.9 might suggest that a broad approach should be adopted. We accept that regard should be had to all the circumstances of the case. That is what the rule says. But (subject to the guidance that we give below) the other circumstances should be given less weight than the two considerations which are specifically mentioned.”
Therefore, knowing that the court will be placing more emphasis on the two limbs of CPR 3.9, any application seeking relief should specifically deal with “(a) litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders.”
Whilst it may be difficult to convince the court to grant relief in the present climate, these submissions should feature heavily in any application.
5. PROVIDE ‘GOOD REASON’ FOR ANY BREACH If a defaulting party cannot demonstrate that their breach was not ‘trivial’, they will need to establish that there was a ‘good reason’ for the breach. It was made clear that overlooking a deadline is not considered as a ‘good reason’.
However, the fact that there has been a material change in the litigation and that deadlines originally set, which were reasonable at the time, have become unreasonable, may be regarded as ‘good reason’.
This should nevertheless be considered together with the comments above about anticipating the breach. Whilst there may be reasons for the breach, if a ‘good reason’ cannot be illustrated, it is unlikely the court will grant relief.
POST-MITCHELL
Since Mitchell, there has been a flurry of cases that have toed the line and followed the tough message the Court of Appeal set down late last year.
Starting with Harrison v Black Horse Ltd [2013], the Senior Courts Costs Office (SCCO) considered the failure to comply with the notice provisions under a conditional fee agreement. There was an intention to provide notice, however, the notice had never been sent and as such, on hearing the application for relief from sanctions, the court found that the additional liabilities were not recoverable on the basis that no ‘good reason’ had been provided for the default.
The second decision of Durrant v Chief Constable of Avon & Somerset [2013] considered whether the defendant would be granted relief for failure to serve witness evidence. The Court of Appeal overturned the lower court’s decision, finding “the message sent out by Mitchell is not to be undermined, it is vital that decisions under CPR 3.9 which fail to follow the robust approach laid down in that case should not be allowed to stand.”
Moving on to Karbhari and another v Ahmed [2013], the defendant, on the morning of a seven-day trial, sought to amend their defence and adduce a further witness statement. Turner J, in his judgment, found that where a statement was filed out of time, an application for relief from sanction was required.
Exercising his discretion, the judge found that relief would not be granted, finding not only that there was no ‘good reason’ but, in addition, that “time is a scarce and valuable commodity which should be fairly distributed between all litigants and extra tranches of which ought not readily to be dispensed to those in serious default whose very failures have wasted such reasonable time as has already been allocated to them.”
Ultimately, post-Mitchell, the wider effect of this decision is that the courts are going to provide far less indulgence to defaulting parties. As such, whilst adjustments can be made, compliance is the key message to be conveyed going forward.
IAN CURTIS
COSTS MANAGER/MERUIT COSTS, ASSOCIATE/LYONS DAVIDSON
Tel: 0117 9046000
Email: icurtis@lyonsdavidson.co.uk
