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Relief From Sanctions Post Mitchell

July 15, 2014

The Court of Appeal has provided Mitchell guidance on relief from sanctions in Denton & Ors v TH White Ltd & Ors [2014] EWCA Civ 906 (04 July 2014). Three Appeal cases in the Court of Appeal before Master of the Rolls, Lord Dyson who gave the judgment in the Mitchell case, Lord Justice Jackson whose report led to the implementation of new provisions on relief from sanctions and Lord Justice Vos. The cases have been joined for judgment.

Decadent Vapours Limited v Joseph Bevan (1) Jamie Salter (2) Celtic Vapours Limited (3).

Decadent Vapours Limited produces vapours for electronic cigarettes. They lodged a claim in the High Court against the lst and 2nd Defendants that they were together producing a rivalling product in competition with the Claimant. The lst Defendant was an employee and they used a vehicle from the 3rd Defendant Company to assist them with the product.

Directions given by the court resulted in a pre-trial review on the 7th January 2014 and the trial which commenced 11th February 2014.

Each side made errors in complying with the directions of the court and on the 12th December 2013 an order was made that the lst Claimant, the 1st, 2nd and 3rd Defendant’s having all failed to lodge pre-trial checklists in the time allocated, that the Claim be struck out unless (a) the Claimant lodges at court the pre-trial checklist with a hearing fee of £1090.00 and the document fee of £110 at the court before 4pm, 19th December 2013.

The Claimant’s Solicitors did complete the pre-trial checklist within time limits but did not make the payment to the court in respect of the fees payable. They did in fact put the cheque into the DX post on the 19th December 2013, whereas, usually this would arrive the next day, but in this instant it was lost either in the postal system or within the court system. This was revealed on the 7th January 2014 at the pre-trial review with HH Judge Jarman QC where the parties agreed directions and vacation of the date for the hearing. The Judge then struck out the claim as the Claimant had not complied with the order of the court which left them in the position of making an application for relief from the sanction imposed by the court.

The Claimant’s Solicitors sent another cheque to the court on the 7th January 2014, this time by recorded delivery, but this cheque was also delayed within the postal system. Following this on the 9th January, one of the partners at the Solicitors used his credit card to pay the hearing fees.

The Judge, on the 18th February 2014 heard the application for relief from sanctions and ruled that the Claimant’s failure was not trivial and on referring to re Mitchell he rejected the application. As the proceedings had then finished, the Judge made an order for the Claimant to pay the costs.

The Court of Appeal on looking at the proceedings believed that the Judge was mistaken. He was required, firstly, to look at the Claimants failure to pay the fees and ask the question, was there an explanation for the breach?

In these two incidents the Solicitors had only sent the cheque by DX on 19th December 2013 by which date the cheque should have been paid into Court. It arrived late and, at the same time, by sending the cheque so late in the day they were already at risk of the cheque not arriving the next day but getting lost in the post, which it did.

As it is imperative that court fees are paid within time to facilitate the smooth running of the court system, it is viewed with disdain if they are not paid on time. However, in this matter, the breach was not considered by the court to be of great importance.
The second stage was to look at whether there was good reason for the breach.

The Solicitor would have been well aware of the penalties for his failure to pay the court fees in time under the court order and therefore, there could be no explanation for the breach.

The Court of Appeal Judges, however, as an overview believed that the Judge should have further considered aspects of his decision in that, although the fees were paid a few days later than the condition in the court order, this did not prevent the proceedings from continuing and running smoothly.

Also the late payment of the court fees was not in this instance of the greatest importance as the subsequent payment was made and therefore resolved the matter. The proceedings were only affected thereafter by the reactions of the Defendants and from within the court itself. Therefore, both of these aspects should have been considered as favourable to relief being granted by the Judge.

On looking at the case as a whole, the Appeal Court Judges came to the opinion that the outcome should be to grant relief from sanctions. The Claimant had breached court orders but so had the Defendants. However, taking into account all the breaches, the Appeal Court Judges decided, in this matter, that there were not enough adverse circumstances to strike out the Claimant’s claim. The Defendants should have agreed to the relief being given so as to avoid delay and avoid the matter being dealt with by various other Courts.

The Appeal Court Judges allowed the Claimant’s appeal and set aside the order made on the 18th February 2014.

Utilise TDS Limited v Neil Cranstoun Davies (1) Bolton Community College Corporation (2) Watertrain Limited (3).

The two Defendants were majority shareholders in the Third Defendant company. The Claimant issued proceedings for declaratory and other relief in respect of its shareholding in the Third Defendant, Watertrain Limited, claiming that the First and Second defendant’s had unfairly blocked the Third Defendant from issuing shares to it and unfairly stopped the Claimant from the being part of the management of the Third Defendant company.

The court sent all parties notice of proposed allocation to the multi-track on the 9th August 2013 which required them to complete the directions questionnaires before the 9th September 2013. All parties complied and on the 2nd October 2013 District Judge Matharu issued an order that the claim be stayed until 8th November 2013 with the parties during that time trying to settle or determine what the main issues were to narrow the differences between them.

The parties had to file their costs budgets under CPR 3.13 by the 11th October 2013 before 4pm that day. If they failed to do the conditions in CPR 3.13 would apply.

The costs budgets were all filed but the Claimant’s costs budget, which had been sent by fax, did not arrive until 4.45 pm which was 45 minutes past the 4pm deadline. The Solicitor acting for the Claimant resigned on the 18th October and the Solicitor who took over the case failed to see that the costs budget was 45 minutes over the court deadline.

The parties during the time period allowed by the court to try and settle differences in the matter did agree to mediation. The Solicitor acting for the Claimant informed the court about this on the 28th November 2013, 13 days after the notification date given in the court order of 2nd October.

The District Judge on the 11th November made an order that the Claimant, because they were now in breach of the court order, that rule 13.14 was now applicable which meant that the Claimant’s cost budget now only covered the court fees relating to the case.

When the Claimant’s Solicitor received that order on the 21st November he made an application for relief from sanctions on the basis that he had complied with paragraph 4 of the order dated 2nd October. He had only seen on the 28th November 2013 that the costs budget had been originally filed 45 minutes past the court order deadline and conceded that he had been in breach of paragraph 4 of that Order. In his email to the Solicitors acting for the Defendant, which he sent on the 28th November 2013 and further in a witness statement of the 18th December 2013, he argued that the breach was trivial.

The District Judge heard the relief from sanctions application and observed that the Claimant was in default on three occasions:-

(a) Not filing costs budget by 9th September 2013 (the district Judge added as required by the rules)
(b) The 45 minutes after the Court order deadline of 4 pm under paragraph 4 of the order
(c) The breach of paragraph 2 in the 2nd October order.

The district judge ruled that the 45 minutes over the court order deadline for filing the costs budget was not trivial.

The Claimant’s Solicitors appealed and HH Judge Hodge QC said the district judge was incorrect in ruling that the costs budget should have been lodged at court by the 9th September, however, he did endorse the district judges conclusion and held that the 45 minutes over the court order deadline was a trivial breach as the Claimant was not only in breach of paragraph 4 of the Order but also in breach of paragraph 2 and that overall the 45 minute delay was not trivial. Also the Claimant’s Solicitor had not provided a good enough explanation for the breaches. Further he had not made an immediate application to the Court for the relief, only on the 18th December 2013.

The Court of Appeal Judges found that the district Judge and HH Judge Hodge were wrong as follows:

The first stage was the delay in lodging the costs budget under the 2nd October court order which the Judges said was neither serious nor of any significance and therefore, in their opinion, the 45 minute delay was trivial as it had no effect on the future hearing or the running of the proceedings. In light of this, the Appeal Court Judges did not think the District Judge needed to look at the other breaches, the second and third stages of the action.

There was no clear explanation given by the Claimants Solicitor for the breach of filing the costs budget but as the breach did not have any effect on the running of the proceedings or add to the costs of the matter or throw future proceedings or dates in disarray then the district judge should have made allowance to the Claimant’s Solicitor for making an application to the Court for relief, as soon as he was aware of the situation.

The Appeal Court Judges found that the District Judge and HH Judge Hodge were in error to rebuke the Claimant’s Solicitor, who had only recently taken over from the previous Solicitor who had resigned from the case, on him overlooking the fact that the costs budget had been filed 45 minutes past the court order deadline, which he would only have seen by studying the heading on the fax.

The District Judge and Judge Hodge should have also, in the Appeal Court Judges opinion, looked further at the other breach of paragraph 2 of the Court Order and assessed any effect it might have had on the overall proceedings. The Judges found the breach to be neither serious nor of any significance and believed that the district judge and Judge Hodge turned the breach into something more than it was.

The Appeal Court Judges believed that the Defendants should have given their consent to the relief from sanctions and accordingly, they set aside both the District Judge and Judge Hodge’s orders so as to relieve the Claimant from the sanction under rule 3.14.

(1) Charles Graham Denton, (2) Mary Denton and (3) Roger Thomas Denton v TH White Limited, De Laval Limited and others

These proceedings had been issued as long ago as 22nd November 2005.

The Claimants were farmers and the proceedings brought by them concerned alleged breaches of contract by the Defendant in the design and construction of a milking parlour at the Claimants farm.

The proceedings were stayed on the 11th October 2007 on condition that the Defendant pay £200,000 damages and costs in respect of those defects admitted by them and thereafter the Claimant would serve re-amended particulars of claim in relation to those matters remaining in dispute.

After three years, during which the Defendant put in hand works to improve the defects in the milking parlour, the stay was lifted and the court case proceeded. The Claimants re-submitted re-re-amended particulars of claim which were dated 29th October 2010.

On 2nd April 2012 Deputy District Judge Melville-Shrieve made an order for witness statements to be exchanged by the 8th June 2012. Each party was given permission to call expert witnesses from three different areas, firstly, in milking parlour construction and operation, secondly, veterinary science and thirdly, quantification of loss. In the order he specified that the milking parlour expert witness’s report should be exchanged by 27th July 2012.

Witness statements were served and the milking parlour expert’s report in accordance with the order. The milking parlour expert, in his report, criticised the dimensions and added that they did not provide enough room for the cows. This allegation had not been pleaded by the Claimants in their particulars of claim and they had not applied to the Court to plead this.

On the 6th February 2013 HH Judge Denyer QC made an order that the joint statements of the milking parlour expert and the other witness statements should be served between March and June 2013. He gave directions for a Scott Schedule to be prepared and completed by 29th July 2013 and for a 10 days trial to commence on a date to be given by the court between 1st October 2013 and 28th February 2014, a pre-trial review at court did make small amendments to the dates for the Scott schedule and experts statements. The 10 day trial was fixed for the 13th January 2014.

At the end of November and early December 2013 the Claimants served six witness statements which as well as addressing the issues also included the allegation made by the milking parlour expert as to insufficient room for the cows. The Claimants reasons for including this at this last minute was that in August 2013 they had made improvements to the milking parlour thus giving more room for the cows and improving their milk production.

On the 23rd December 2013 at the pre-trial review, the judge granted relief form sanction in rule 32.10. He allowed the Claimants to rely on the six further statements from the witnesses and adjourned the trial to then allow the Defendant the chance to respond to that evidence which had been produced later. He ordered a case management conference (CMC) for a date in February 2014 so that a new timetable for the service of factual and expert evidence could be produced. The Defendant appealed against that order.

The Appeal Court Judges found the Judge’s order was in error and a misuse of his case management powers.

The Judges said that the first duty the judge had was to do was look at the seriousness and significance of the Claimants breach i.e. the filing of the new witness statements long after the order. This breach had caused the vacation of the trial date thereby putting into disarray the smooth running of the proceedings and was, therefore, a significant breach.

The next consideration was, was there a good explanation for the breach, the answer being no. The matter raised by the milking parlour expert as to room for the cows was known from his earlier statement of 2012. The improvements made in August 2013 by the Claimants to the cow spaces did not justify the beach as the delay caused the trial to be affected thus interfering with the court process.

Looking at the first and second stages and the responses it looked like relief would be refused but the Appeal Court Judges said the judge should also have looked at the third stage, all the aspects of the case. As the first and second stages veered strongly against relief all that was left was to look at the case as a whole so as to deal with the application for relief justly. The Claimants had plenty of time to serve their further evidence before December 2013 and the Judge’s thinking that if he allowed the trial to proceed it would be heard on an “artificial basis” was in Appeal Court Judges opinion, wrong.

The Claimants were the ones at fault, they had not served the evidence at an earlier date and by serving at a later date caused the adjournment of the trial which had been listed for 10 days and where six experts and many other witnesses were lined up to appear in court. The adjournment as a consequence disrupt the court causing drawn out proceedings for a trial which had already taken too much time, wasting court time and bumping up costs in the matter as well as disrupting the schedules of the many witnesses appearing in court.

The Appeal Court Judges said this should have been the main consideration of the Judge in refusing relief from sanctions. The Judges order of the 23rd December 2013 was set aside and the case is to be relisted for trial at the earliest date in Bristol or Birmingham.

In all three of the above Court of Appeal cases the Judges have given their reasons and explanations why all three Appeals must be allowed. They have said it is clear that re Mitchell needs further explanation as some of the judiciary are not looking at all the circumstances of the case, which is what the Appeal Court Judges have referred to as the third stage.

The first stage is to identify and assess the seriousness and significance of the failure to comply with any rule, practice direction or court order (thereby dealing with triviality);

The second stage is to consider why the failure or fault occurred (thereby dealing with good reason);

The third stage is to evaluate all the circumstances of the case, giving paramount consideration to CPR 3.9(1)(a) and (b).