Relief from sanctions and case management – 2015 in review

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This article was first published on Lexis®PSL Dispute Resolution on 15 December 2015. Click for a free trial of Lexis®PSL

Dispute Resolution analysis: As part of our end of year review series on dispute resolution, Gwendoline Davies, partner at Walker Morris, takes a look at the area of relief from sanctions and case management.

What legal developments have had the biggest impact on your practice in 2015?

I would say that the ongoing effects of Lord Justice Jackson’s civil litigation reforms have had the biggest impact. The reforms were introduced in 2013 to overhaul the approach to case management and signal a new era of dealing with cases ‘justly and at proportionate cost’. The emphasis is very much on conducting litigation efficiently and cost-effectively. Enforcing compliance with the rules is a cornerstone of the new, robust, regime and the law in this area has continued to evolve at a considerable pace over the past year. Costs management, a key feature of case management, continues to be a hot topic. It is definitely here to stay!

It is also important to mention the radical, and highly controversial, court fee increases introduced by the Ministry of Justice in March, with the threat of further increases yet to come.

What were the biggest practical challenges in this area for you and your clients and how did you address them?

Due to the wide-ranging and fundamental nature of the Jackson reforms, affecting every aspect of the litigation process, their impact has been felt in practice on a daily basis. While the reforms came into effect over two years ago now, they are still in the process of settling down and it is not always clear how the court will apply them. We have addressed this challenge by continually familiarising ourselves (and, importantly, our clients) with the latest procedural changes, case law developments and trends, in order to adapt quickly, safeguard our clients’ interests and ensure compliance.

Being well organised and adopting a pro-active stance in the conduct of any litigation is paramount, and never more so than under the new regime. A good example is the preparation of a detailed costs budget covering every phase of the litigation. Costs budgets are now required in many court proceedings and failure to prepare them properly can mean that recovery of legal costs is restricted. Practically, this means engaging with, and gaining input from, our clients and third party suppliers at the very start of the litigation process and setting reasonable and realistic deadlines. This not only ensures our clients’ compliance with the relevant case and costs management rules-it also allows us to assess the strengths and weaknesses of a claim from an early stage, while helping clients to plan ahead and monitor their legal spend.

For claims worth £10,000 or more, the fee to commence court proceedings is now 5% of the value of the claim, capped at a maximum fee of £10,000. This dramatic shift significantly impacts higher value cases and has seriously affected our clients’ decisions to issue court proceedings. Access to justice for individuals, small and medium sized enterprises is a concern. There is also the wider question of how these increases might affect the English court’s standing on the international stage. We have helped our clients to manage the changes by looking strategically at ways to minimise the impact, including considering alternative methods of dispute resolution where appropriate.

What were the key cases and decisions this year on relief from sanctions and case management and why were they significant for practitioners?

There has been a steady stream of decisions in 2015 on case management and relief from sanctions (imposed for failure to comply with rules and court orders). These follow on from Denton v TH White Ltd; Decadent Vapours Ltd v Bevan; Utilise TDS Ltd v Davies [2014] EWCA Civ 906, [2015] 1 All ER 880, the key 2014 case where the Court of Appeal issued guidance on the application of the new civil procedure rule on relief from sanctions (CPR 3.9). Clarification was necessary because of the effects of the strict approach to compliance in Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537, [2014] 2 All ER 430, a previous Court of Appeal decision and the first to apply the new rule.

While the Mitchell decision itself remains sound (costs recovery limited to court fees only due to failure to file and serve a costs budget on time), the application and interpretation of the three-stage test set out in it resulted in a number of unduly severe, disproportionate or inconsistent decisions. Where the breach was not trivial, and there was no good reason for it, relief from sanctions was generally not granted in the absence of a compelling reason. There was a period of considerable confusion and uncertainty, with satellite litigation increasing costs and using up precious court time and resources. Parties also became increasingly adversarial and uncooperative in their approach, hoping to gain an advantage where their opponents may have committed only minor technical breaches of the rules (which could result in claims being struck out altogether). Of course, this all went against the spirit of the reforms themselves.

In Denton, the three-stage test was modified so that, after assessing whether the breach is serious or significant and the reason for it, the court goes on to consider ‘all the circumstances of the case’. This has led to the return of a more pragmatic and flexible approach. For example, in Michael Wilson & Partners Ltd v Sinclair [2015] EWCA Civ 774, [2015] 4 Costs LR 707, while the Court of Appeal agreed with the earlier finding (which was based on Mitchell) that a breach concerning failure to make payments in accordance with a court order was not trivial, and there was no good reason for it, it nevertheless went on to grant relief, having considered all the circumstances of the case. This third stage of the Denton test includes considering the factors in CPR 3.9(1) (the need for litigation to be conducted efficiently and at proportionate cost, and the need to enforce compliance with rules, practice directions and orders). While these factors are to be given particular weight, they will not necessarily determine whether or not relief is granted because there may be other relevant factors to take into account in the particular case. This was the position in Michael Wilson. In Caliendo and another company v Mishcon de Reya (a firm) and another [2015] EWCA Civ 1029, [2015] All ER (D) 99 (Oct), the Court of Appeal recently confirmed that when considering all the circumstances of the case, the approach to CPR 3.9(1) requires a focus on the effect of the breach itself, not the effect of granting relief (which is a subsidiary factor).

In Denton, the court explained that if the breach is not considered serious or significant, relief will usually be granted. This was the case in Viridor Waste Management Limited v Veolia [2015] EWHC 2321 (Comm), a decision which serves as a stark warning to practitioners not to seek to make use of the new regime for tactical gain. The Commercial Court granted relief from sanctions where particulars of claim were served late due to an administrative error. They were filed with the court in time, but did not arrive at the defendant’s solicitor’s office until the day after the service deadline. The defendant refused to agree to an extension of time and applied to strike out the claim. Having granted relief to the claimant, the court penalised the defendant by awarding indemnity costs against it-a reminder of the parties’ obligation to help the court to deal with cases justly and at proportionate cost.

It has not been possible to mention here all of the key decisions from the past year. Every case can be considered significant in its own right because it has contributed to practitioners’ understanding of how the court’s approach to case management and relief from sanctions is evolving over time and in relation to breaches of particular rules or types of order. I hope that this will lead to greater certainty for parties involved in the litigation process in the future. While the Denton decision clarified the position to some extent, and it is possible to see some general themes emerging, it is almost inevitable that the ‘circumstances of the case’ will be different every time. This makes it all the more difficult to assess the likely outcome in any one case. Parties may also be discouraged from advancing particular points for fear of having an adverse costs order made against them.

In a surprise move, the Supreme Court (which is not usually in the business of ruling on case management issues!) has recently heard the appeal in Thevarajah v Riordan and others (judgment not available at the time of going to press (appealed from [2014] EWCA Civ 14, [2014] 1 Costs LR 163)), considering the consequences of the defendant’s failure to comply with an unless order. It will certainly be interesting to hear what the highest court in the land has to say about non-compliance, and to see what effect its decision will have on the current body of post-Denton case law.

How is 2016 shaping up in terms of important cases and legislative developments?

One important development aimed at encouraging efficient and cost-effective case management is the drive towards electronic working in the courts. A new e-working system was piloted in the Technology and Construction Court earlier this year and this was recently extended to other courts in the Rolls Building in London, including the Commercial Court. The pilot scheme, which is voluntary, will run until November 2016. It will be interesting to see how it progresses during the course of the year and whether steps will be taken to introduce e-working more widely across England and Wales.

Major changes are also afoot in the area of costs management. A new set of litigation time recording codes (J-codes) is being introduced, together with a new form bill of costs for detailed assessment proceedings which adopts the J-codes. At the moment, there is no correlation between the processes of preparing a costs budget at the start of litigation, and a bill of costs at the end. The aim is to use available technology to harmonise (and modernise!) costs management procedures, making them more efficient and cost-effective. This includes using the time recording information to produce other costs documents required at different times during the course of the litigation. A voluntary pilot scheme was recently put in place and a mandatory scheme is due to commence in October 2016. Failure to use the new bill may expose a party to sanctions in costs.

The Shorter Trials and Flexible Trials pilot schemes were recently launched in the Rolls Building courts with the stated aim of achieving shorter and earlier trials for parties involved in commercial litigation, at a reasonable and proportionate cost. This includes dispensing with some aspects of the litigation process altogether, and introducing flexibility into case management procedures appropriate to the individual claim. The schemes will run for two years. While they will not be suitable for all cases, they are an intriguing proposition, and we will be monitoring how they evolve and how popular they become as an alternative to the full trial procedure.

Finally, we await with interest (and concern) the result of the recent government consultation proposing further court fee increases which could see, among other things, the £10,000 issue cap increased to at least £20,000 and a general 10% uplift on fees in civil proceedings.

How will these developments affect your cases and working life?

It is clear from the number of pilot schemes currently in place in the courts that the pace of change brought about by the Jackson reforms shows no signs of slowing down. We are working hard to adapt to the changes that continue to shape the conduct of litigation. On a practical level, the development most likely to affect our day-to-day practice is the implementation of the J-codes and ensuring that we have the systems in place to make that transition as seamless as possible. The case management developments I have mentioned may not immediately affect our cases, but they certainly have the potential to create opportunities for our clients and we will be keeping a close watch on them for that reason.

The prospect of further court fee increases obviously has the potential to impact on our clients’ current and future cases and decision-making processes. We will be monitoring those developments and working with our clients to navigate any changes as smoothly as possible.

What would you like to see in 2016?

I would like to see further clarification of the court’s approach to applications for relief from sanctions post-Denton, to assist with providing more certainty to parties (and practitioners!). I would also welcome judicial guidance at appeal court level on the application of the new, post-Jackson, concept of proportionality in relation to the assessment of litigation costs.

Interviewed by Alex Heshmaty.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor