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Court of Appeal Warning to Parties who Fail to Comply with Rules and Order: Expect No Mercy




by:
Dentons Canada LLP - Toronto Office

 
November 29, 2013

Previously published on November 28, 2013

In Mitchell v. News Group Newspapers Ltd [2013] EWCA Civ 1526, the Court of Appeal has given robust guidance on the recent court rule changes affecting parties to civil litigation who fail to comply with rules, practice directions or orders. Sanctions will be applied - and upheld - in all but the most trivial instances of default unless there is a good reason for the non-compliance, likely to be due to causes outside the defaulting party's control. The upshot will be that parties who fail to abide by procedural requirements should expect potentially draconian orders to be made against them.

Plebgate - the civil proceedings

The case arose from the now notorious Plebgate saga. Andrew Mitchell sued News Group Newspapers for defamation over its papers' coverage of the affair.

Under the rules then applying to defamation claims, the parties had to file costs budgets and to try to agree them. Similar rules have, since 1 April 2013, applied more widely in many of the civil courts.

Mr Mitchell's budget should have been filed by 11 June, ahead of a case management and costs budget hearing on 18 June. NGN filed its budget on time. Mr Mitchell's solicitors filed his budget during the afternoon of 17 June, and then only after prompting by the court itself. This breach of the relevant court order was compounded by Mr Mitchell's solicitors failing to respond to NGN's approaches to discuss and try to agree budgets. The result was the court had to adjourn the original hearing.

The master's decision - a fair cop?

The master considered the new rules introduced by the Jackson reforms from 1 April 2013. In particular, the overriding objective now specifically requires courts to enforce compliance with rules, practice directions and orders. The master decided in those circumstances that Mr Mitchell should be sanctioned for the late filing of his costs budget and the impact this had caused. She limited the costs he could recover (if successful) under his budget to any court fees incurred. The estimated costs in the budget itself were over £500,000.

Mr Mitchell applied for relief against that sanction. The rules in this area also changed in April 2013. There used to be a lengthy list of factors in CPR 3.9 that the court would consider on such an application. These included the impact of the non-compliance on each party to the proceedings and the effect the granting of relief would have on each of them. In practice, the usual result was that the court would grant relief provided it could deal with any prejudice to the "innocent" party by a costs order. In contrast, the court now has to consider all the circumstances of the case, but the only specific factors it has to take into account are the need:

  • for litigation to be conducted efficiently and at proportionate cost; and

  • to enforce compliance with rules, practice directions and orders.

The master, in dealing with the application for relief, referred to the effect of the non-compliance on other court users. (The need to re-fix the CMC had led to the vacating of a hearing in proceedings brought by various asbestosis victims. It was unfortunate for Mr Mitchell that, as the master pointed out, the delay would increase the risk of some of these claimants having died before their claims could be resolved. But in any circumstances such as these there will be other court users affected by the default and its knock-on effect). The master was also unimpressed by the "justification" given by Mr Mitchell's solicitors for the default. Having originally pointed to a difficulty in getting an estimate for Counsels' fees, they later admitted the lapse stemmed from, in effect, too many cases and too few staff.

The court decided that, applying the new stricter approach under CPR 3.9, Mr Mitchell was not entitled to relief from sanction. Mr Mitchell appealed. The matter was "leap-frogged" to the Court of Appeal in light of the importance of the issue.

The Court of Appeal's approach

The Court of Appeal dismissed the appeal. Looking first at the original sanction, it held that this was not disproportionate, even though Mr Mitchell's solicitors had "only" filed the costs budget late rather than not at all. Though the master's decision was robust, it was well within the court's discretion, given the emphasis now placed in the overriding objective on enforcing compliance with rules, practice directions and orders.

Turning to the question of relief from sanction, the Court of Appeal noted the deliberate shift in the emphasis of CPR 3.9. Though the court does have to consider all the circumstances of the case, the two specific factors mentioned in the rule are paramount. All other factors now carry less weight. This means it is indeed legitimate to look beyond the effect of the default on the parties themselves and to consider the impact on other court users.

The Court of Appeal stressed that a new culture is now prevailing. This is true of applications for relief generally, not just in relation to costs budgets. The Court of Appeal noted that, since the rule changes in April, there has been some disparity between the approaches of different first instance decisions. Some judges have adopted a more lenient attitude, often because they have continued to give full weight to the old CPR 3.9 factors and, in particular, the lack of any substantive prejudice to the "innocent" party caused by the default. The Court of Appeal has clarified that such an approach is wrong, and parties should now expect relief from sanction to be granted more sparingly.

Practical lessons

The essential message from the Mitchell case is clear. Parties who fail to comply with rules, practice directions or orders can expect significant sanctions. As well as the power to restrict a party's costs budget, as in this case, the court can also apply other sanctions. For example, depending on the default, this might include disbarring a party from relying on particular evidence or striking out the claim/defence.

Applications for relief also stand much less chance of success. In considering such an application, the key points are:

  • the nature of the default: non-compliance that is trivial is more likely to be excused;

  • the reason for the default: this is likely to have to be outside the control of the defaulting party to gain much or any traction. What the Court of Appeal described as "well-intentioned incompetence" is unlikely to garner any sympathy.

Against this background, those involved in handling litigation should consider the following practical steps:

  • (Obviously) avoiding defaults in the first place. Anticipate the future steps that you will need to take under the rules, especially where these are likely to require considerable expenditure of time and resources. In Mitchell, the court brushed aside the argument that there had been little time under the court's order to prepare the costs budget. The solicitors should have known this would be necessary from the start of proceedings and prepared accordingly, not waited till the order was made.

  • Where problems do arise, act quickly. The Court of Appeal made clear that applications for extensions made before time expires are likely to be looked upon more favourably than applications for relief made after the event.

  • If a sanction is imposed, consider whether to appeal against it (though bear in mind that case management decisions are notoriously difficult to have set aside or varied). But if you simply apply for relief you will, as the Court of Appeal affirmed, implicitly be accepting that the sanction order was, in principle, properly imposed.

  • When applying for relief from sanction, concentrate in particular on the factors that are most likely to persuade the court. First, can you show the non-compliance was of a trivial nature? Be aware the court's assessment of what is an insignificant default may be less than generous. The Court of Appeal mentioned a failure of form rather than substance or a deadline that is only narrowly missed (though in some cases the expression "a miss is as good as a mile" will surely apply). Second, if you can show the non-compliance arose from matters beyond your control, the evidence should highlight this. By all means refer to the "old" CPR 3.9 factors but be aware of their potential limits in the new cultural landscape.

  • But every cloud has a silver lining. Parties who comply fully and on time with rules and orders will be in a good position to exploit any more than trivial failings of their opponent.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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