Today, 27th November 2013, the Court of Appeal handed down judgment in what is now the leading case on the application of the new rule 3.9, in force post 1st April 2013, namely Andrew Mitchell MP.v.News Group Newspapers Limited [2013] EWCA Civ 1526.
This keenly awaited decision, marks a further endorsement at the highest level of one the key tenets of Sir Rupert Jackson’s reforms, a new tough and uncompromising approach to relief from sanctions. The judgment is far more significant in its scope than the implementation lecture given by Lord Dyson, extra-judicially, in March 2013 to the Association of District Judges as it is a binding judgment of the appellate court and must be applied by judges at first instance.
The facts of the case are well known. The substantive litigation concerns a defamation action by the MP and former Cabinet minister Andrew Mitchell against the publishers of the Sun, involving their reporting of the so called Plebgate affair.
The proceedings were subject to CPR51D, the Defamation Proceedings Costs Management Scheme. This provided In paragraph 4.1 that there should be discussions between the parties about their budgets, and the parties must lodge their budgets, 7 days before the date of the hearing for which the costs budgets are required.
The court issued an Order on 5th June 2013, requiring the parties to attend a case management and costs budgeting hearing on 10th June 2013. The court (presumably because it realised it had made an Order that was impossible to comply with) then relisted the hearing for the 18th June 2013. On 11th June 2013 the Defendant filed a costs budget: seeking costs of £589,558. After a chasing email from the court, the Claimant’s budget was filed on 17th June 2013.
The hearing was before Master McCloud. Noting the non compliance with the requirement to lodge a costs budget timeously, she decided to impose a sanction: there was no sanction provided by the relevant paragraphs of the Costs Practice Direction, but she limited the Claimant’s budget to court fees. In so doing it should be noted she effectively disallowed the costs budget of £506,425. She based herself, by way of analogy, on the new rule 3.14, which would have had the same sanction, had it applied directly.
On 25th July 2013, the Master heard the Claimant’s application for relief from sanction. She refused relief from sanction. The results for the further progression of the claim, can only be seen to be catastrophic.
An appeal was lodged, the matter was “leapfrogged” to the Court of Appeal.
The Court of Appeal
The new wording of rule 3.9 provides as follows:
“On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need—
(a) for litigation to be conducted efficiently and at proportionate cost; and
(b) to enforce compliance with rules, practice directions and orders.”
The overriding objective has also been amended to read as follows:
“(a) ensuring that the parties are on an equal footing;
(b) saving expense;
…..
(d) ensuring that it is dealt with expeditiously and fairly;
(e) allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases; and
(f) enforcing compliance with rules, practice directions and orders”
The Court of Appeal proceeded to discuss the new rules, and to provide commentary on guidance, on the proper approach that the courts should take under the new regime. The first question, was of course the proportionality of the sanction that the Master had decided to apply: it should be noted, that in effect the Claimant’s had had potentially £500,000 + of costs disallowed, by a point taken by the court of its own motion, for an infraction which was breach of a practice direction, not a rule, and certainly not an “unless” order. In short, did the punishment fit the crime ? The difficulty for the Claimant was that the Master had based herself on an analogous provision, which provided for precisely that sanction, for that default, albeit as for a breach of a rule not a practice direction.
30. The second question is whether the Master was wrong to construe CPR 3.14 as referring to a failure to file a budget within the time prescribed by CPR 3.13 (in the present case, seven days). Mr Browne says that it is significant that the words “within the time prescribed by CPR 3.13” are absent from CPR 3.14 and that CPR 3.14 is directed to the case of a party who does not file a budget at all. In our judgment, this is not a sensible interpretation and it cannot have been intended. If it were right, it would mean that CPR 3.14 would not apply to a party who filed a budget just before the hearing of the first case management conference, but would apply to a party who had filed the budget immediately after the conclusion of the hearing. The mischief at which CPR 3.13 and 3.14 are directed is the last-minute filing of cost budgets. As CPR 3.12(2) makes clear, the purpose of costs management (including costs budgets) is to enable the court to manage the litigation and the costs to be incurred so as to further the overriding objective. This cannot be achieved unless costs budgets are filed in good time before the first case management conference. No less important is the requirement that parties should discuss with each other the assumptions and timetable on which their respective costs budgets are based. This is to enable the hearing for which the costs budgets are required to be conducted efficiently and in accordance with the overriding objective. The history of what happened in the present case shows how important it was to comply with both of the obligations in PD 51D. As a result of the defaults of the claimant’s solicitors, no costs budgeting or case management was possible on 18 June 2013. Having imposed the CPR 3.14 sanction, the Master was unable to do anything other than adjourn.
31. The third question is whether the Master’s decision to impose the CPR 3.14 sanction by analogy was in accordance with the overriding objective. Mr Browne says that it did not give effect to the overriding objective, because it was not a proportionate decision. That is because (i) it did not reflect the fact that the breach of PD 51D was easily remedied; (ii) the breaches caused no prejudice to the defendant; (iii) they had no lasting effect on the conduct of the litigation; (iv) the breaches were minor; (v) the claimant had no history of default; and (vi) the order caused prejudice to the claimant.
32. As we have said, the costs management hearing of 18 June proved to be abortive. The claimant was not in a position to invoke the saving provision in CPR 3.14 (“unless the court otherwise orders”) and ask the Master to make an order relieving him from the sanction imposed by the rule itself. That is because his solicitors had not produced evidence which might have persuaded the court to adopt that course. We should add that in our view the considerations to which the court should have regard when deciding whether it should “otherwise order” are likely to be the same as those which are relevant to a decision whether to grant relief under CPR 3.9. In each case, in deciding whether to “otherwise order”, the court must give effect to the overriding objective: see rule 1.2(a).
33. We have concluded that the Master was entitled to make the order that she made on 18 June. She did so in the knowledge that the claimant would have the opportunity to apply for relief at the adjourned hearing and that she would then be able to decide what response the court should give to the claimant’s defaults so as to give effect to the overriding objective.
Having dismissed the appeal against that part of the decision, the actual imposition of the sanction, the Court of Appeal went on to comment in more general terms, on the New Order, that applies in civil litigation these days.
34. Much has been said about the Jackson reforms and in particular on the question whether the court is now required to adopt a more “robust” approach to granting relief to defaulting parties from the consequences of their defaults. The amendment to CPR 3.9 followed the recommendations made in Sir Rupert Jackson’s Final Report Ch 39. At para 6.5, he said:
“First, the courts should set realistic timetables for cases and not impossibly tough timetables in order to give an impression of firmness. Secondly, courts at all levels have become too tolerant of delays and non-compliance with orders. In doing so, 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. However, I do not advocate the extreme course which was canvassed as one possibility in [the Preliminary Report] paragraph 43.4.21 or any approach of that nature”.
35. The “extreme course” to which he was referring was that non-compliance would no longer be tolerated, save in “exceptional circumstances”. Instead, he recommended that sub-paragraphs (a) to (i) of CPR 3.9 be repealed and replaced by the wording that is to be found in the current version of the rule. He said that the new form of words “does not preclude the court taking into account all of the matters listed in the current paragraphs (a) to (i). However, it simplifies the rule and avoids the need for judges to embark upon a lengthy recitation of factors. It also signals the change of balance which I am advocating.”
36. As Sir Rupert made clear, the explicit mention in his recommendation for the version of CPR 3.9 of the obligation to consider the need (i) for litigation to be conducted efficiently and at proportionate cost and (ii) to enforce compliance with rules, practice directions and court orders reflected a deliberate shift of emphasis. These considerations should now be regarded as of paramount importance and be given great weight. It is significant that they are the only considerations which have been singled out for specific mention in the rule.
37. We recognise that CPR 3.9 requires the court to consider “all the circumstances of the case, so as to enable it to deal justly with the application”. The reference to dealing with the application “justly” is a reference back to the definition of the “overriding objective”. This definition includes ensuring that the parties are on an equal footing and that a case is dealt with expeditiously and fairly as well as enforcing compliance with rules, practice directions and orders. 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.
38. In the 18th implementation lecture on the Jackson reforms delivered on 22 March 2013, the Master of the Rolls said in relation to CPR 3.9 that there was now to be a shift away from exclusively focusing on doing justice in the individual case. He said:
“25. In order to achieve this, the Woolf reforms and now the Jackson reforms were and are not intended to render the overriding objective, or rule 3.9, subject to an overarching consideration of securing justice in the individual case. If that had been the intention, a tough application to compliance would have been difficult to justify and even more problematic to apply in practice. The fact that since 1999 the tough rules to which Lord Justice Brooke referred have not been applied with sufficient rigour is testament to a failure to understand that that was not the intention.
26. The revisions to the overriding objective and to rule 3.9 and particularly the fact that rule 3.9 now expressly refers back to the revised overriding objective, are intended to make clear that the relationship between justice and procedure has changed. It has changed not by transforming rules and rule compliance into trip wires. Nor has it changed it by turning the rules and rule compliance into the mistress rather than the handmaid of justice. If that were the case then we would have, quite impermissibly, rendered compliance an end in itself and one superior to doing justice in any case. It has changed because doing justice is not something distinct from, and superior to, the overriding objective. Doing justice in each set of proceedings is to ensure that proceedings are dealt with justly and at proportionate cost. Justice in the application of the CPR consistently with the overriding objective.
27. The tougher, more robust approach to rule-compliance and relief from sanctions is intended to ensure that justice can be done in the majority of cases. This requires an acknowledgement that the achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations. Those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds. But more importantly they serve the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the court enables them to do so.”
39. We endorse this approach. The importance of the court having regard to the needs and interests of all court users when case managing in an individual case is well illustrated by what occurred in the present case. If the claimant had complied with para 4 of PD 51D, the Master would have given case management and costs budgeting directions on 18 June and the case would have proceeded in accordance with those directions. Instead, an adjournment was necessary and the hearing was abortive. In order to accommodate the adjourned hearing within a reasonable time, the Master vacated a half day appointment which had been allocated to deal with claims by persons who had been affected by asbestos-related diseases.
The Court of Appeal, then went on expressly, to set out what it termed guidance as to how the new approach was to be applied in practice. These paragraphs are essential reading, and will form the core arguments of many an application from now on.
40. We hope that it may be useful to give some guidance as to how the new approach should be applied in practice. 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. The principle “de minimis non curat lex” (the law is not concerned with trivial things) applies here as it applies in most areas of the law. Thus, the court will usually grant relief if there has been no more than an insignificant failure to comply with an order: for example, where there has been a failure of form rather than substance; or where the party has narrowly missed the deadline imposed by the order, but has otherwise fully complied with its terms. We acknowledge that even the question of whether a default is insignificant may give rise to dispute and therefore to contested applications. But that possibility cannot be entirely excluded from any regime which does not impose rigid rules from which no departure, however minor, is permitted.
41. If the non-compliance cannot be characterised as trivial, then the burden is on the defaulting party to persuade the court to grant relief. The court will want to consider why the default occurred. If there is a good reason for it, the court will be likely to decide that relief should be granted. For example, if the reason why a document was not filed with the court was that the party or his solicitor suffered from a debilitating illness or was involved in an accident, then, depending on the circumstances, that may constitute a good reason. Later developments in the course of the litigation process are likely to be a good reason if they show that the period for compliance originally imposed was unreasonable, although the period seemed to be reasonable at the time and could not realistically have been the subject of an appeal. But mere overlooking a deadline, whether on account of overwork or otherwise, is unlikely to be a good reason. We understand that solicitors may be under pressure and have too much work. It may be that this is what occurred in the present case. But that will rarely be a good reason. Solicitors cannot take on too much work and expect to be able to persuade a court that this is a good reason for their failure to meet deadlines. They should either delegate the work to others in their firm or, if they are unable to do this, they should not take on the work at all. This may seem harsh especially at a time when some solicitors are facing serious financial pressures. But the need to comply with rules, practice directions and court orders is essential if litigation is to be conducted in an efficient manner. If departures are tolerated, then the relaxed approach to civil litigation which the Jackson reforms were intended to change will continue. 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 madeafter the event.
42. A similar approach to that which we have just described has been adopted in relation to applications for an extension to the period of validity of a claim form under CPR 7.6. In Hashtroodi v Hancock [2004] EWCA Civ 652, [2004] 1 WLR 3206, this court said that (i) the discretion to extend time should be exercised in accordance with the overriding objective and (ii) the reason for the failure to serve the claim form in time is highly material. At para 19, the court said:
“If there is a very good reason for the failure to serve the claim form within the specified period, then an extension of time will usually be granted….The weaker the reason, the more likely the court will be to refuse to grant the extension.”
43. This approach should also be adopted in relation to CPR 3.9. In short, good reasons are likely to arise from circumstances outside the control of the party in default: see the useful discussion in Blackstone’s Guide to The Civil Justice Reforms 2013 (Stuart Syme and Derek French, OUP 2013) at paras 5.85 to 5.91 and the article by Professor Zuckerman “The revised CPR 3.9: a coded message demanding articulation” in Civil Justice Quarterly 2013 at pp 9 to 11.
Although this position is clear, the seasoned observer, will note that by reason of this approach, it is now easier to lift a time bar imposed by statute, pursuant to section 33 of the Limitation Act 1980, than it is to gain relief from sanction. That seems an extra-ordinary situation.
Secondly, it should be noted that a solicitor who is actually off work sick, and suffering from stress and depression caused by overwork from trying to comply with court timetables, is oddly in a better position than one who remains at work and tries to struggle through.
Thirdly, that in every application now, it will be argued that default is trivial, and the door is set firmly open for further litigation, as the realms of what is and is not trivial are explored at length.
The Court of Appeal continued:
44. Mr Browne sought to rely on certain factors which, he contended, showed that the sanction should not have been imposed by the Master in the first place. That was in our view a misguided submission. An application for relief from a sanction presupposes that the sanction has in principle been properly imposed. If a party wishes to contend that it was not appropriate to make the order, that should be by way of appeal or, exceptionally, by asking the court which imposed the order to vary or revoke it under CPR 3.1(7). The circumstances in which the latter discretion can be exercised were considered by this court in Tibbles v SIG Plc (trading as Asphaltic Roofing Supplies) [2012] EWCA Civ 518, [2012] 1 WLR 2591. The court held that considerations of finality, the undesirability of allowing litigants to have two bites at the cherry and the need to avoid undermining the concept of appeal all required a principled curtailment of an otherwise apparently open discretion. The discretion might be appropriately exercised normally only (i) where there had been a material change of circumstances since the order was made; (ii) where the facts on which the original decision was made had been misstated; or (iii) where there had been a manifest mistake on the part of the judge in formulating the order. Moreover, as the court emphasised, the application must be made promptly. This reasoning has equal validity in the context of an application under CPR 3.9.
45. On an application for relief from a sanction, therefore, the starting point should be that the sanction has been properly imposed and complies with the overriding objective. If the application for relief is combined with an application to vary or revoke under CPR 3.1(7), then that should be considered first and the Tibbles criteria applied. But if no application is made, it is not open to him to complain that the order should not have been made, whether on the grounds that it did not comply with the overriding objective or for any other reason. In the present case, the sanction is stated in CPR 3.14 itself: unless the court otherwise orders, the defaulting party will be treated as having filed a budget comprising only the applicable court fees. It is not open to that party to complain that the sanction does not comply with the overriding objective or is otherwise unfair. The words “unless the court otherwise orders” are intended to ensure that the sanction is imposed to give effect to the overriding objective. As we have said, the principles by which the court should decide whether to order “otherwise” are likely to be the same as the principles by which an application under CPR 3.9 is determined. In most cases, the question whether to relieve a party who has failed to file a costs budget in accordance with CPR 3.13 from the CPR 3.14 sanction will therefore be dealt with under CPR 3.14. That did not happen in the present case. That is why the question of relief from sanctions was dealt with under CPR 3.9.
46. The new more robust approach that we have outlined above will mean that from now on relief from sanctions should be granted more sparingly than previously. There will be some lawyers who have conducted litigation in the belief that what Sir Rupert Jackson described as “the culture of delay and non-compliance” will continue despite the introduction of the Jackson reforms. But the Implementation Lectures given well before 1 April 2013 were widely publicised. No lawyer should have been in any doubt as to what was coming. We accept that changes in litigation culture will not occur overnight. But we believe that the wide publicity that is likely to be given to this judgment should ensure that the necessary changes will take place before long.
In a coded warning to any judges out there, who may still believe that they are meant primarily to achieve justice between the parties, rather than to husband the court’s scarce and precious resources, the Court of Appeal proceeded to obliquely criticise two recent decisions.
47. We recognise that there are those who will find this new approach unattractive. There may be signs that it is not being applied by some judges. In Ian Wyche v Careforce Group Plc [2013] EWHC 3282, the defendant had failed to comply in all respects with an “unless” order. Walker J acceded to an application for relief under CPR 3.9 for two failures which he described as “material in the sense that they were more than trivial”. But he said that they were “unintentional and minor failings in the course of diligently seeking to comply with the order”. At para 61 of his judgment, Walker J said:
“The culture which the court seeks to foster is a culture in which both sides take a common sense and practical approach, minimising interlocutory disputes and working in an orderly and mutually efficient manner towards the date fixed for trial. It would be the antithesis of that culture if substantial amounts of time and money are wasted on preparation for and conduct of satellite litigation about the consequences of truly minor failings when diligently seeking to comply with an ‘unless’ order.”
48. We have earlier said that the court should usually grant relief for trivial breaches. We are not sure in what sense the judge was using the word “unintentional”. In line with the guidance we have already given, we consider that well-intentioned incompetence, for which there is no good reason, should not usually attract relief from a sanction unless the default is trivial. We share the judge’s desire to discourage satellite litigation, but that is not a good reason for adopting a more relaxed approach to the enforcement of compliance with rules, practice directions and orders. In our view, once it is well understood that the courts will adopt a firm line on enforcement, litigation will be conducted in a more disciplined way and there should be fewer applications under CPR 3.9. In other words, once the new culture becomes accepted, there should be less satellite litigation, not more.
It depends what of course, is meant by satellite litigation. If professional negligence claims against solicitors, who have allowed cases to be struck out constitutes satellite litigation, then an upsurge in satellite litigation can be expected for years to come. If second sets of proceedings have to be issued, because a first set of proceedings has been struck out within a limitation period, constitutes satellite litigation, then there will be more satellite litigation for years to come, with additionally the interesting interlocutory argument as to whether the second set of proceedings per se, is an abuse of process.
49. The other decision to which we wish to refer is that of Andrew Smith J in Raayan Al Iraq Co Ltd v Trans Victory Marine Inc [2013] EWHC 2696 (Comm). The claimant applied for an extension of two days for the service of its particulars of claim. In substance, the application was for relief from sanctions under CPR 3.9. The judge acknowledged that the list of circumstances that was itemised in the earlier version of the rule had gone. Nevertheless, he proceeded “somewhat reluctantly” to apply the old checklist of factors. We accept that, depending on the facts of the case, it will be appropriate to consider some or even all of these factors as part of “all the circumstances of the case”. But, as we have already said, the most important factors are the need for litigation to be conducted efficiently and at proportionate cost and to enforce compliance with rules, practice directions and orders.
50. Having examined the case by reference to the old checklist of factors, Andrew Smith J concluded at para 18 that the “overriding objective demands that relief be granted and I grant it”. But it seems to us that he may not have recognised the particular importance of the two elements of the overriding objective that are mentioned in the revised version of CPR 3.9. It is true that at para 15 the judge referred to the culture of delay and non-compliance and what Sir Rupert Jackson had said about that in his Final Report. As to the effect of the revision to CPR 3.9, he said:
“Nor do I accept that the change in the Rule or a change in the attitude or approach of the courts to applications of this kind means that relief from sanctions will be refused even where injustice would result.”
51. It seems to us that, in making this observation, the judge was focusing exclusively on doing justice between the parties in the individual case and not applying the new approach which seeks to have regard to a wide range of interests.
The Court of Appeal went onto dismiss the balance of the appeal noting the following:
56. In our view, even if there is some force in all three of these criticisms, they do not go to the heart of the Master’s reasoning. Her main finding was that the claimant’s solicitors had been in breach of two provisions of PD 51D and that, in the light of the new approach mandated by the Jackson reforms, the case for granting relief from the CPR 3.14 sanction was not established.
57. Finally, Mr Browne submits that the decision to refuse relief did not give effect to the overriding objective. His main points are the same as those summarised at para 31 above. It is not suggested that the Master failed to have regard to any of these points in her comprehensive judgment. They would have carried considerable weight if the application had been considered under the earlier version of CPR 3.9. The Master was right to recognise that the emphasis has now changed. In these circumstances, we consider that there is no proper basis for interfering with her decision. On the question of prejudice, we wish to highlight the fact that there was no evidence to show what prejudice (if any) the claimant would suffer as a result of a refusal to grant relief.
One would have thought that the prejudice was obvious: but plainly any evidence in support of such an application in the future, must spell this out, in chapter and verse, particularly if it is dependent on the Claimant being under a continuing liability for costs.
58. A central feature of Mr Browne’s submission was that, whenever a sanction is imposed, the court must have regard to considerations of proportionality. In this case, he says that a more proportionate response would have been to grant partial relief from the sanction, for example, by making an order that the costs budget should be 50% of the actual estimated figure or should not include the costs connected with the budget itself. We accept that the Master had the power to make such an order. But we do not consider that the grant of partial relief from CPR 3.14 will often be appropriate. The merit of the rule is that it sets out a stark and simple default sanction. The expectation is that the sanction will usually apply unless (i) the breach is trivial or (ii) there is a good reason for it. It is true that the court has the power to grant relief, but the expectation is that, unless (i) or (ii) is satisfied, the two factors mentioned in the rule will usually trump other circumstances. If partial relief were to be encouraged, that would give rise to uncertainty and complexity and stimulate satellite litigation.
In ominous tones, the Court of Appeal made it plain that the interests of the Claimant were being sacrified pour encourager les autres who would be interested in watching what happened in this particular case.
59. We therefore dismiss the appeals against both orders. The Master did not misdirect herself in any material respect or reach a conclusion which was not open to her. We acknowledge that it was a robust decision. She was, however, right to focus on the essential elements of the post-Jackson regime. The defaults by the claimant’s solicitors were not minor or trivial and there was no good excuse for them. They resulted in an abortive costs budgeting hearing and an adjournment which had serious consequences for other litigants. 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.
60. In the result, we hope that our decision will send out a clear message. If it does, we are confident that, in time, legal representatives will become more efficient and will routinely comply with rules, practice directions and orders. If this happens, then we would expect that satellite litigation of this kind, which is so expensive and damaging to the civil justice system, will become a thing of the past.