Sanctions: any relief?

The Jackson reforms, effective from 1 April 2013, brought about a number of significant changes to the Civil Procedure Rules (CPR), perhaps the most fundamental of which was the amendment of the overriding objective at CPR 1.1(1). Prior to amendment, Rule 1.1(1) stated that the CPR were designed to enable the court to deal with cases justly. By Rule 1.2 the court was required to effectuate the overriding objective when applying and interpreting the CPR. The new overriding objective requires the courts to deal with cases ‘justly and at proportionate cost’. Alongside this is a new sub-clause at Rule 1.1(2)(f) specifying that dealing with a case justly and at proportionate cost includes, so far as is practicable, ‘enforcing compliance with rules, practice directions and orders’. The effect of CPR 1.2 (above) is that this latter consideration now permeates and influences every case management decision taken under the CPR.

It also forms the backdrop to a further significant change in the rules – the recasting of CPR 3.9. CPR 3.8 empowers the court to grant to a litigant that has failed to comply with a rule or court order relief against any sanction imposed by the rules or by the court in respect of their default. CPR 3.9 lists the factors to which the court must have regard in applying CPR 3.8. Prior to the reforms, CPR 3.9 contained a non-exhaustive list of nine such factors. Since 1 April 2013 Rule 3.9 reads as follows:

‘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.’

When the amended Rule 3.9(1) is read in conjunction with the simultaneous amendments made to the overriding objective, it is clear that the intention is to encourage courts to be more stringent in approaching the question of relief against sanctions for procedural defaults.

In the landmark decision in Mitchell v News Group Newspapers Ltd [2013], the Court of Appeal considered the application of Rule 3.9(1) and the question of how strictly the courts should now enforce compliance with rules, practice directions and court orders. The court stated that the revised form of the rule reflected a deliberate shift of emphasis from previous practice. The two considerations specifically identified as part of all the circumstances which the court was to take into account, at Rule 3.9(1)(a) and (b), should be regarded as of paramount importance and given great weight. It was emphasised that the overriding objective and Rule 3.9(1) were not intended to be subject to the overarching consideration of securing justice in the individual case.

Giving guidance as to how the new approach was to be applied, the Court of Appeal suggested that, if a breach is trivial, the court will usually grant relief, provided that an application is made promptly. If the non-compliance cannot be characterised as trivial, then the burden is on the defaulting party to persuade the court to grant relief. If there is a good reason for the default, the court will be likely to decide that relief should be granted. The court stated that the:

‘… new more robust approach… will mean that from now on relief from sanctions should be granted more sparingly than previously’.

The court referred to the previous relief from sanction case of Wyche v Careforce Group plc [2013], in which Walker J, granting relief in relation to errors made as to disclosure, had stated that the culture of common sense and efficiency which the courts sought to foster would not be assisted by the expenditure of substantial time and money on the conduct of satellite litigation about the consequences of minor failings. The Court of Appeal did not expressly disagree with these conclusions, but stated that the desire to avoid satellite litigation was not a good reason for adopting a more relaxed approach to the enforcement of compliance with rules, practice directions and orders. The Court of Appeal said that 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 Rule 3.9.

The court in Mitchell was concerned with the rules requiring a litigant to prepare a costs budget in time for the first case management conference. The sanction for non-compliance with these rules is that the defaulting party will be unable to recover any substantial costs, even if successful at trial. More recently the guidelines laid down in Mitchell have been considered and applied in the context of late service of witness statements.

In this context, CPR 32.10 makes specific provision for the consequences of failure to comply with a court order:

‘If a witness statement or a witness summary for use at trial is not served in respect of an intended witness within the time specified by the court, then the witness may not be called to give oral evidence unless the court gives permission.’

In Chartwell Estate Agents Ltd v Fergies Properties SA [2014], the claimant applied for an extension of time to serve its witness statements in its claim against the defendants for commission owed following the sale of a property. The claimant had made repeated requests of the defendants, stating that it would seek an order for specific discovery if disclosure was not provided to enable it to complete its witness statements. The defendants refused those requests, disputing the relevance of the documents sought. The claimant informed the defendants that it was not going to be ready to exchange statements on the relevant date, and exchange did not take place.

The defendants stated that although they would have been ready to exchange, they had not finalised their own statements because of the claimant’s stated position. The claimant never made an application for specific discovery. The defendants later offered disclosure, without conceding the relevance of the documents, but refused to consent to an extension of time to serve witness statements. The claimant sought permission under CPR 32.10 to serve the statements out of time, and relief from sanctions for failure to serve in the time specified.

Although the application in Chartwell was made, and dealt with, as one for relief from sanctions, the terms and effect of Rule 32.10 arguably leave some room for debate about whether this was necessarily correct. If the time specified for serving witness statements is missed, Rule 32.10 operates to prevent the defaulting party from adducing oral evidence without permission. In other words, the sanction is the requirement to seek permission. Why would it not be open to the defaulting party to make an application, in accordance with the sanction, for the necessary permission, rather than to make an application for relief from sanctions under Rule 3.9(1)?

This was the argument made, prior to the Jackson reforms, in Papa Johns (GB) Ltd v Elsada Doyley [2011]. The claimant applied after the commencement of a trial, while the matter was adjourned part-heard, to rely on the evidence of three additional witnesses whose statements had not been exchanged in accordance with the directions given. It was submitted that the application was not one to which Rule 3.9(1) applied: that relief from sanctions only arose where a party had failed to comply with a rule, practice direction or court order, that here the order for exchange of evidence had been complied with in respect of various witnesses, and that the application to call further witnesses was therefore one for permission only, not relief from sanctions.

This argument was rejected. The main reason given was the statement of Potter LJ in Primus Telecommunications v Pan European Ltd [2005] – by which the court was bound – that the wording of Rule 32.10 ‘amounted to a sanction’. In fact this does little more than beg the question.

It is unclear how far this question was addressed in Chartwell, which proceeded as an application for relief. In the Court of Appeal, the view of Davis LJ was that the phrase ‘unless the court gives permission’ as contained in CPR 32.10 could not be applied in a free-standing way, leaving the exercise of judicial discretion at large; and that, in deciding whether to give permission, the court had to have regard to and give effect to other relevant rules such as CPR 3.1 and CPR 3.9:

‘… because CPR 32.10 is demonstrably imposing a sanction in the event of failure to serve a witness statement within the time specified’.

Pre-Jackson, it is perhaps unlikely that the categorisation of the issue as application for permission, or for relief, would have made much difference: the applicable considerations are likely to have been largely the same in either case. Post-Jackson, and particularly post-Mitchell, that is unlikely to be so: a much stricter approach obtains if the question is characterised as one of relief against sanctions .

On the facts of Chartwell, Globe J at first instance granted the relief sought. He considered that the claimant’s non-compliance could not be regarded as trivial, so the burden lay on them to persuade the court to grant relief. He also rejected the argument that there was a good reason for the non-compliance. However, he considered that the default of the claimant could not be seen in isolation. There had been default on both sides. The overriding objective required that the case be dealt with justly and at proportionate cost. The trial date was not affected. A refusal to grant relief would effectively mean the end of the action – as the burden of proof was on the claimant to prove its case and it would have no evidence. In the circumstances, it was appropriate to grant relief from sanction.

The Court of Appeal upheld this decision. It found that the judge at first instance was justified in finding that the non-compliance on the part of the claimant was not trivial; and was also justified in finding that there was no good reason advanced to explain the non-compliance. Nevertheless, he was still required, by CPR 3.9(1), to consider ‘all the circumstances of the case’ so as to enable him to deal with the application justly. Those circumstances included the important fact that the trial date would not be lost if relief were granted and a fair trial could still be had; and that no significant extra cost would be occasioned if relief were granted. A further circumstance that the judge was justified in taking into account, and to which he was entitled to attribute importance, was that refusal to grant relief from the sanction stipulated in Rule 32.10 would effectively mean the end of the claim. This background entitled the judge to depart from the expectation which otherwise would arise. The Court of Appeal noted that Mitchell did not say that the two factors specified in Rule 3.9(1) would always prevail, as a matter of weight, over any other circumstances where the default is not trivial and where there is no good justification. Those two factors will usually trump other circumstances, but not always: because Rule 3.9(1) has required that all the circumstances are to be taken into account and has required that the application be dealt with justly. Given the various factors at play in Chartwell, the case was one of those in which, notwithstanding the paramount importance and great weight to be given to those two matters, they could reasonably be assessed as outweighed by all the other circumstances. There was accordingly no proper basis for interfering with the judge’s evaluation of the position and his exercise of discretion.

The decision in Chartwell is an indication – for many it will be, post-Mitchell, a welcome indication – that relief from sanctions remains available in the right circumstances. This is of particular importance where, as is the case with CPR 32.10, the sanction is built into the CPR: for although it has been said that the courts may be more cautious about imposing sanctions given the stringent test involved in granting relief (Porter Capital Corporation v Masters [2014]) this will not assist where the sanction is automatically applied. Litigants, and their representatives, will also welcome the observation by Davis LJ that the Court of Appeal will support robust and fair case management decisions not only where relief from sanctions has been refused, but also where it has been granted.

The Court of Appeal in Chartwell commented again on the effect of the new rules on satellite litigation, an issue that the same court in Mitchell had hoped would diminish as the firm line taken by the courts was maintained. Davis LJ observed that although one of the stated aims of the new culture evidenced in the new Rule 3.9(1) is the avoidance of satellite litigation:

‘… it is an unfortunate – although it is to be hoped temporary – by-product of the new rule that satellite litigation thus far seems not to have been avoided but if anything seems to have been promoted.’

The difficult truth – as Davis LJ went on to note – is that in the context of relief from sanctions, the consequences for both parties of the outcome of an application for relief are significant. This is particularly so where, without the ability to adduce oral evidence, a claim is likely to stand or fall with the grant or refusal of relief. As the court said:

‘With the possibilities afforded by the new CPR 3.9, and when the stakes can be so high, satellite litigation such as occurred here is therefore perhaps not wholly surprising: albeit most unfortunate.’

The counter-balance to Mitchell that Chartwell provides will perhaps serve, despite what was said in Mitchell, only to prolong the extent and amount of such litigation.