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Mitchell guidance clarified: an end to the roller coaster ride?
Practical Law UK Articles 1-574-9846 (Approx. 4 pages)
Mitchell guidance clarified: an end to the roller coaster ride?
by James Farrell and Maura McIntosh, Herbert Smith Freehills LLP
| Published on 23 Jul 2014 • United Kingdom |
In a recent decision, the Court of Appeal has replaced the Mitchell guidance with a new three-stage test. This new test signals a more flexible approach, moving away from the narrow test of triviality and placing greater emphasis on all the circumstances of the case. In this way, the court hopes to put an end to the satellite litigation and lack of co-operation that Mitchell had generated.
In a decision handed down on 4 July 2014 in a trio of appeals, the Court of Appeal has replaced the Mitchell guidance with a new three-stage test (Denton v TH White Ltd, Decadent Vapours Ltd v Bevan, Utilise TDS Ltd v Davies [2014] EWCA Civ 906).
The court said that, while the guidance derived from Mitchell remained substantially sound, it had been misunderstood and was being misapplied by some courts (Andrew Mitchell MP v News Group Newspapers Ltd [2013] EWCA Civ 1537; see News brief “Mitchell and its aftermath: getting tough on compliance”). In particular, some judges had taken the view that they were bound to refuse relief unless a default was trivial or there was good reason for it. That, the court said, was not the approach laid down in Mitchell (see box “The Mitchell guidance”).
The new test
The court held that, in considering an application for relief from sanctions under Civil Procedure Rule (CPR) 3.9, the court must:
- Identify and assess the seriousness and significance of the breach. This is intended to give a more flexible approach than the test of “triviality” derived from Mitchell. If the breach is not serious or significant, relief will usually be granted and the court is unlikely to need to spend much time on the other stages.
- Consider why the breach occurred. The court resisted any attempt to produce an encyclopaedia of good and bad reasons. It referred to the examples given in Mitchell (such as where a party or his solicitor suffered from a debilitating illness or was involved in an accident) but emphasised that these were no more than examples.
- Evaluate all the circumstances of the case to enable the court to deal justly with the application, including the two factors set out in CPR 3.9: the need for litigation to be conducted efficiently and at proportionate cost; and the need to enforce compliance with rules, practice directions and orders. The relevant factors will vary from case to case but might include the promptness of an application for relief and other past or current breaches.
The third stage of the test is key; even if a breach is serious and there is no good reason for it, the court still has to consider all the circumstances so as to deal justly with the application.
As the court in Denton took pains to point out, this is not entirely new. In Mitchell, the Court of Appeal had accepted that regard should be had to all the circumstances. However, that was arguably undermined by the statement that the two factors set out in CPR 3.9 (conducting litigation efficiently and enforcing compliance) were of paramount importance. Understandably, the use of that phrase had encouraged the belief that other factors were of little weight.
Lord Justice Jackson dissents
In light of this difficulty, the court has now moved away from the idea that these two factors are of paramount importance. However, in the judgment of Lord Dyson MR (who gave the court’s judgment in Mitchell) and Lord Justice Vos, these two factors are of particular importance and should be given particular weight. In their view, anything less would inevitably lead to the court slipping back to the old culture of non-compliance, which the Jackson reforms were designed to eliminate.
In contrast, Lord Justice Jackson thought that these factors were among the matters to be considered in every case: no more, no less. He was not, however, in the majority.
Heavy costs sanctions
The judges in Denton unanimously agreed that the courts should penalise those who try to take advantage of their opponents’ mistakes by unreasonably refusing to agree extensions of time or opposing applications for relief from sanctions. This conduct could attract heavy costs sanctions, which could go beyond an order to pay the costs of the application for relief and affect how costs are dealt with at the end of the case. In this way, the court hopes to put an end to the satellite litigation and lack of co-operation that Mitchell had generated.
Practical implications
The judgment in Denton signals a more flexible approach, moving away from the narrow test of triviality and placing greater emphasis on all the circumstances of the case. However, the two CPR 3.9 factors must be given particular weight, as the court will not allow a return to the old culture of non-compliance. Therefore it remains essential for parties to ensure that procedural deadlines are realistic and to monitor progress against those deadlines, to avoid nasty surprises at the last minute.
If more time is needed, parties should try to agree an extension with the opponent. That should be easier than it was, given the court’s message in Denton and the new “buffer rule” in CPR 3.8(4) that allows parties to agree extensions in wider circumstances than previously.
If agreement cannot be reached, parties should apply to court for an extension of time as soon as possible and, in any event, before the deadline expires, so that the Mitchell guidance will not apply (as confirmed in Hallam Estates Ltd v Baker [2014] EWCA Civ 661; www.practicallaw.com/3-572-0050).
One point that Denton has not clarified is precisely when an application for relief from sanctions is needed. In some cases, it is obvious that a sanction applies; for example, on breach of an “unless order” or where there is a clear sanction specified in the CPR. In other cases it is less obvious. Where there is any doubt, it would be prudent to assume that relief is needed.
Where a deadline is missed, parties will need to seek relief promptly. Denton encourages parties to agree that relief should be granted and states that contested applications should be rare. It is not, however, clear whether relief can be obtained without a court order. Pending clarification, the safe course would be to apply for an order by consent.
Non-defaulting parties will need to think carefully before seeking to make mileage out of an opponent’s breach. This conduct, if unreasonable, could backfire in the form of heavy costs sanctions.
James Farrell is a partner, and Maura McIntosh is a professional support consultant, in the dispute resolution team at Herbert Smith Freehills LLP.
The Mitchell guidance
In its high-profile decision in the Mitchell “plebgate” case, the Court of Appeal sent out a clear message: the courts would adopt a firm line on enforcement and would no longer tolerate non-compliance with rules and court orders (Andrew Mitchell MP v News Group Newspapers Ltd [2013] EWCA Civ 1537).
This followed the implementation of the Jackson reforms in April 2013, which required a tougher and less forgiving approach (see feature article “Jackson reforms: what commercial parties need to know”). That approach had been implemented in the new version of Civil Procedure Rule (CPR) 3.9, which governs applications for relief from sanctions for breach of a rule or order. In Mitchell, the court said that once this new culture was accepted, litigation would be conducted in a more disciplined way and there would be fewer applications under CPR 3.9.
As predictions go, that fell wide of the mark. Mitchell produced a flood of satellite litigation, with the number of published decisions citing the case approaching triple figures. Litigants suffered severe sanctions, in some cases having their claims or defences struck out for what might be seen as relatively minor failings. Parties commonly refused to co-operate in the hope that they might “win the jackpot” with an easy victory if their opponent fell foul of the court’s new tough approach. It was clear that something needed to be done.