The tide of sanctions recedes from Mitchell v News Group Newspapers
On 23 July 2015 the Court of Appeal handed down judgment in Michael Wilson & Partners Ltd v Sinclair  EWCA Civ 774 , overturning the previous decision of Lewison LJ to sanction Michael Wilson & Partners’ (MWP) by striking out its pending appeal for delay in complying with a costs order; a decision which had been driven by the hard-line approach to compliance presented in Mitchell v News Group Newspapers Ltd  EWCA Civ 1537. Many civil practitioners will welcome this decision which further normalises the less draconian stance taken by the Court of Appeal in Denton v TH White Ltd  EWCA Civ 906
The Jackson Reforms thundered into force on 1 April 2013. Alongside the more widely publicised reforms to costs budgeting, Jackson LJ also sought to promote a more robust judicial approach toward the enforcement of compliance with rules, practice directions and court orders. Prior to these reforms, non-compliance would often be excused where any prejudice suffered by the opposing party as a result of the non-compliance could be remedied, usually through the award of costs. The changes under the Jackson reforms manifested themselves in a reformulation of rule 3.9(1) of the Civil Procedure Rules, set out below: 3.9 (1) 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 previous iteration of the rule required the court to consider all relevant circumstances when deciding an application for relief, but listed nine circumstances that the court should have particular regard to. This approach had come to be perceived by some as too generous. The reformulation was therefore designed to address concerns that litigants who disregarded court rules and orders were being too readily indulged. Mitchell Following the introduction of these reforms, a slew of cases gained notoriety for the harsh sanctions being meted out by the courts, however none more so than the case of Mitchell. In that case Mr Mitchell, he of Plebgate, filed his costs budget the afternoon before the hearing rather than 7 days prior, as required by the rules. Master McCloud decided that this transgression should be deemed to be the filing of a costs budget comprising of court fees only, meaning Mr Mitchell would be incapable of recovering his legal fees in the case. Mr Mitchell applied for relief from this sanction, which Master McCloud subsequently rejected in accordance with the new approach under Rule 3.9. In upholding the Master’s decision the Court of Appeal laid down new guidelines, which discussed the shift in emphasis under the new rule 3.9(1) to focus on the considerations outlined above and to toughen the regime surrounding compliance with orders.
It also set out a two-stage approach to apply in practice for applications under rule 3.9(1): 1) Was the failure to comply trivial or insignificant; and 2) If non-trivial, was there a good reason for non-compliance? This guidance become the yardstick against which applications for relief were measured, and came to be perceived in some quarters as fundamentally changing the relationship between justice and procedure; the achievement of justice was henceforth to be assessed, perhaps even qualified, against the need for the civil justice system to operate efficiently.
Denton The decision in Mitchell was controversial amongst civil practitioners. Some saw the decision as making compliance with rules and orders an end in itself, in competition with or perhaps even elevated over the need to do justice between the parties. As a result of this perception, the Mitchell guidance was developed by Lord Dyson in the cases of Denton v TH White Ltd; v Cranstoun Davies; Decadent Vapours Ltd v Bevan  EWCA Civ 906. In his judgment, Dyson LJ set out a three-stage test for consideration of applications for relief under rule 3.9(1): (i) Identify and assess the seriousness and significance of the failure to comply with any rule, practice direction or court order; (ii) Consider why non-compliance occurred; and (iii) Evaluate all the circumstances of the case, to enable the court to deal justly with the application, including the factors in rule 3.9(1)(a) and (b).The emphasis was shifted away from triviality to seriousness, signalling a change of approach to interpretation of rule 3.9(1).
In addition, the court was keen to ensure that parties could not opportunistically and unreasonably oppose applications for relief, since those too could take up court time and prevent the court from acting to further the overriding objective. Furthermore, the two factors under the rule had to be considered along with the circumstances, not above them. Michael Wilson & Partners In Michael Wilson & Partners, MWP had been sanctioned for missing costs deadlines ‘by a very large margin’ without providing any good reason for the breach, a decision maintained by Lewison LJ who upheld the sanction striking out of MWP’s pending appeal. The Court of Appeal first had to consider whether it had the power to revisit Lewison LJ’s decision refusing to lift a stay and striking out MWP’s appeal. Deciding that it could, it then highlighted the unusual circumstances, in which Lewison LJ’s refusal was made after Mitchell, but before Denton. As a result, it was considered that Lewison LJ had given greater weight to the two factors under Rule 3.9, rather than consider them alongside all of the other relevant factors of the case. In particular, the sanction for non-compliance envisaged by Rix LJ at an earlier hearing in the matter was, after consideration, limited to stay of the appeal, not a strikeout. As such, taking into account this important detail, the Court of Appeal in this case revisited the ruling and lifted the stay, allowing MWPs appeal to proceed.
The development of the law in Denton and Michael Wilson & Partners signifies a return to what many consider to be common sense. The draconian approach to sanctions advocated by Mitchell at the very least risked emphasising compliance over justice, which if left unaltered would have doubtlessly undermined confidence in the English court system and its decisions. The guidance in Denton rebalanced the emphasis back to a consideration of the seriousness of a party’s breach, ensuring that parties could not thereby take undue advantage of another’s failure to comply with orders or rules, and restoring a sense of real fairness to the court’s decisions. Indeed, the decisions in Denton and Michael Wilson & Partners are perhaps best viewed as protecting the overriding objective by ensuring that cases are dealt with in a proportionate manner, not least by the courts themselves.
Richard Clayman is an Associate in the Commercial Litigation, Civil Fraud and Asset Recovery Department and can be contacted at email@example.com and +44 (0)20 7822 7743.
Michael Wilson & Partners Ltd v Sinclair & Ors  EWCA Civ 774 (23 July 2015) Mitchell MP v News Group Newspapers Ltd  EWCA Civ 1537 (27 November 2013)  Denton & Ors v TH White Ltd& Ors  EWCA Civ 906 (04 July 2014)