Relief from Sanctions: The background
Following the implementation of the Civil Procedure Rules it was widely considered that the courts were being too indulgent in their attitude towards parties that failed to comply with deadlines imposed by rules, practice directions and court orders. This general perception led to the publication of the Review of Civil Litigation Costs Final Report of December 2009, in which Sir Rupert Jackson noted that:
“…courts at all levels have become too tolerant and delays and non-compliance with orders. In so doing they have lost sight of the damage which the culture of delay and non-compliance is inflicting upon the civil justice system. The balance therefore needs to be redressed.”
On 1 April 2013 a revised version of CPR 3.9 was introduced, intended to redress the balance referred to above by altering the factors to which the courts should have regard in determining whether to grant relief from sanctions.
Not long after the reformulated CPR 3.9 was introduced, the Court of Appeal sought to offer guidance as to how that provision should be interpreted in the now well-publicised case of Mitchell v News Group Newspapers. There, the Court of Appeal appeared to note that, in general, relief from sanctions would only be granted under CPR 3.9 if:
- The default was trivial and relief was sought promptly; or
- There was a “good reason” for the default in question.
As the Court of Appeal made clear, whilst debilitating illness or an accident might constitute a good reason, merely overlooking a deadline or overwork would invariably not. In justifying this more robust approach to applications for relief from sanctions, the court expressly supported the view that henceforth it would be appropriate to shift the focus of the courts’ attention from doing justice as between the parties to the application itself, towards whether or not the default in question precluded or had the capacity to preclude other prospective litigants from gaining access to the courts.
Mitchell constituted an important landmark in civil procedure not only because it suggested that relief would be granted in limited circumstances, but also because the principles set out therein were subsequently held to apply in a wide range of circumstances. Most recently, for instance, it was held that the Mitchell principles applied in a case concerning an application to set aside default judgment: Samara v MBI & Partners.
Issues following Mitchell
However, following handing down of judgment in Mitchell, three particular issues arose with respect to the Court of Appeal’s guidance. First, it was deemed to have provided for relief from sanctions in an unjustifiably narrow range of circumstances. Second, it was deemed to have placed undue emphasis upon the factors set out in CPR 3.9(1)(a) and (b). (Those are: (a) the need for litigation to be conducted efficiently and at proportionate cost; and (b) the need to enforce compliance with rules, practice directions and orders.) Third, that it proved to be subject to a wide variety of interpretations when considered by the courts.
Taken together, these issues led to two further problems. First, defaulting parties were often unsure which principles would be applied when the a court came to consider applications for relief from sanctions. Second, non-defaulting parties began to utilise the Mitchell principles in an opportunistic manner. By forcing defaulting parties into making applications for relief from sanctions, in which those defaulting parties were often unlikely to succeed, non-defaulting parties were often able to, at the very least, hamstring a defaulting party’s ability to bring its claim to trial without suffering from some distinct procedural or evidential disadvantage.
Denton: the new test
Both of those problems were deemed to be sufficiently serious that the Court of Appeal recently reconvened to address the issue of how CPR 3.9 ought to be applied. In Denton v White; Decadent Vapours v Bevan; and Utilise TDS v Davies (Denton), the court, comprising the Master of the Rolls, Jackson LJ and Vos LJ, heard three appeals each relating to relief from sanctions. Reflecting the importance of remedying key issues arising from Mitchell, the Court of Appeal invited both the Bar Council and the Law Society to intervene in those appeals.
It is instantly apparent from the judgment that:
- The Mitchell guidance, while still regarded by the court as “substantially sound” has now been recast in such a way as to address at least some of the issues referred to above.
- The various interpretations put upon the Mitchell guidance as offered by the courts since Mitchell are unlikely to be of general application in future cases. In this regard, the Master of the Rolls and Vos LJ expressly noted their hope that it would be “unnecessary to refer to earlier authorities in the future”.
- The Court of Appeal has now provided the judiciary and parties to litigation with guidance in relief from sanctions applications, in the form of a test that breaks down into three distinct stages.
At the first stage of that new test, the court will now have to “identify and assess the seriousness or significance” of the default in respect of which the relevant sanction has been imposed. In determining whether the default is serious or significant, the Mitchell test of “triviality” will provide useful context, but more often the first stage will be determined by reference to whether the default in question can be categorised as “immaterial”.
In Denton, the Court of Appeal accepted the submission made on behalf of the Law Society and the Bar Council that a default would often be immaterial if it “neither imperils future hearing dates nor otherwise disrupts the conduct of… litigation”, either in the litigation in which the application is made or in other litigation. However, note that even if a default is not likely to affect the efficient progress of the litigation, it may nonetheless be serious by its very nature, such as where court fees are not paid.
If the court concludes that the default in question is not serious or significant, it will ordinarily not proceed to the second and third stages of the Denton guidance, but will instead grant relief from sanctions. If, instead, it concludes that the default was serious or significant, it will progress to the second stage, which involves a return to the guidance provided in Mitchell. In effect, the court will be required to consider why the default occurred and to decide whether there was a “good reason” for that default. On the issue of what constitutes a “good reason” that would justify the granting of relief from sanctions, the Court of Appeal in Denton held that the examples provided in Mitchell were “no more than examples”.
All three members of the Court of Appeal held that a third stage was necessary. That is, an application for relief from sanctions would not automatically fail even if there was no good reason for a serious or significant default. However, the Master of the Rolls and Vos LJ departed company with Jackson LJ as to how the third stage of the relevant test should be formulated. The Master of the Rolls and Vos LJ held that the factors set out at CPR 3.9(1)(a) and (b) ought to be given particular weight when considering all the circumstances of the case (including the promptness with which the application was made). By contrast, Jackson LJ held that the weight to be attributed to those two factors was a matter for the court, such that those factors should be described as having “a seat at the table, not the top seats at the table”.
The Court of Appeal also gave guidance on the circumstances in which it would be appropriate for a defaulting party to be forced to make an application for relief from sanctions at all. Crucially, the court expressly held that non-defaulting parties “opportunistically and unreasonably” opposing applications for relief from sanctions would be perceived to be in breach of their obligation to help the court to further the overriding objective. Indeed, the court went further and noted that “it should be very much the exceptional case where a contested application for relief from sanctions is necessary”, not least 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”.
This means, first, that a non-defaulting party’s failure to agree that relief from sanctions should be granted may well leave it exposed to pay the costs of the defaulting party’s application under CPR 3.9. Second, as the court expressly noted in Denton, a non-defaulting party that fails to agree to relief from sanctions could also be subject to “heavy costs sanctions” at the end of the case, pursuant to CPR 44.11.
Broadly speaking, for defaulting parties the decision in Denton is distinctly beneficial in that, compared to Mitchell, it reduces the likelihood that a court faced with an application for relief from sanctions will refuse such relief. By contrast, for non-defaulting parties, the decision warrants careful consideration of the limited circumstances in which it will be appropriate to refuse to agree to the extension of time for compliance with rules, practice directions and court orders. Absent such consideration, a non-defaulting party could find that it becomes subject to heavy costs sanctions of its own.
As a matter of general policy, there will undoubtedly be continuing debate about whether Denton should be perceived as a welcome retreat from the sharp-edged principles set down by Mitchell, or as a retrograde step that grants defaulting parties undue indulgence to engage in the litigation process without due regard for deadlines. From whichever perspective Denton is viewed, it is to be hoped that the courts will heed the Court of Appeal’s advice by applying and developing the law on relief from sanctions in a “reasonably consistent” manner, allowing parties to litigation to redirect their attention towards the resolution of their underlying disputes.