HEAD TURNING, NAVIGATION AND MITCHELL PART 2: A CLOSER EXAMINATION OF SUMMIT NAVIGATION
I set out the main part of the judgment of Leggatt J in Summit Navigation Ltd –v- Generali Romani  EWHC (Comm) yesterday. Here I look at the salient parts of the judgment and highlight the very real dilemma that this case, and the “Mitchell” principles generally, create for litigators.
THE “MITCHELL DILEMMA”
I have noted before (although not directly on this blog) the dilemma that the Mitchell principles pose for both parties to litigation. What does a party faced with a breach do? If their opponent is in default and requires relief from sanctions then the Mitchell criteria is rigorous. Taking the point could bring the action to an end. What is more the court need barely concern itself with the merits of the action. The more at stake, and the weaker a parties’ case, the more incentive there is to take technical points.
THE RESOLUTION OF DISPUTES: THE THIRD WAY GET YOUR OPPONENT “MITCHELLED”.
There should be only two resolutions to proceedings
1. The parties settle.
2. There is a trial (and the matter is “settled” by the judge).
There is now, however, a third option. You can litigate in the hope that your opponent will be “Mitchelled”. A technical error, such as failure to have the trial bundle at court, can lead to the entire action struck out.
Clearly many litigants have benefited, and it is easy to see why some insurers, encouraged by a saving of costs and damages (and actually receiving their costs) will be keen on taking “Mitchell” points.
However before anyone is minded to take a “Mitchell” point in future it would be prudent, if not essential, to read the powerful judgment of Leggatt J.
THE SUMMIT JUDGMENT: LET US START AS WE MEAN TO GO ON
I will, without apology, set out again the opening three paragraphs of the judgment.
- The decision of the Court of Appeal in Mitchell v News Group Newspapers Ltd  EWCA Civ 1537,  6 Costs LR 1008, on the effect of the new CPR 3.9, has rightly been described as a “game changer”: see Michael Wilson & Partners Ltd v Sinclair  EWCA Civ 1732, per Lewison LJ. It is important for litigants to understand, however, how the rules of the game have been changed and how they have not. The defendants in this case have sought to rely on Mitchell to turn to their tactical advantage a short delay by the claimants in providing security for costs which in itself had no material impact on the efficient conduct of the litigation. They have argued that the consequence of the claimants’ default should be that the action remains permanently stayed.
- Unlike the claimants’ default itself, the defendants’ response to it has had a very serious impact on the litigation. The whole timetable for the proceedings has been derailed, significant costs have been incurred and court time has been wasted to the detriment of other court users. In other words, the reliance placed on Mitchell in this case has had the very consequences which the new approach enunciated by the Court of Appeal inMitchell is intended to avoid.
- In the hope of discouraging other litigants from making similar arguments to those made by the defendants in this case, with similar disruptive consequences, I said at the end of the hearing that I would put in writing my reasons for the orders which I then made. This judgment gives those reasons.
THE NATURE OF THE DEFAULT
The default in this case was simple. The claimant was ordered to provide security by way of bond by 4 pm on the 5th December 2013. Security was in fact provided at 10.01 an on the 6th December 2013. By return the defendant asserted the action was stayed and relief under Mitchell was required.
THE JUDGE’S FINDINGS
The judge found:
1. An application to lift the stay was necessary.
2. The application to lift the stay was an application for relief from sanctions.
ARE ALL SANCTIONS EQUAL?
This was considered carefully by the judge.
Do the Mitchell principles apply?
- It does not follow, however, from the fact that the stay of proceedings imposed in this case is a “sanction” that all sanctions are equal and are to be treated as equivalent to one another for the purposes of CPR 3.9. There is, in my view, a significant difference between an order which specifies the consequence that proceedings are to be stayed if security for costs is not provided by a specified date and an order that, unless security is provided by a specified date, the claim will be struck out. Such “unless” orders are of course commonly made when security of costs is not provided but not, at any rate in the Commercial Court, before the party ordered to provide the security has first failed to do so within a specified time.
He considered the distinction between the ordering of a stay for non-compliance and the making of an “unless order”. He concluded.
34. To apply the same approach to an application to lift a stay which takes effect when security is not provided on time as to an application for relief from the sanction of striking out the claim for failure to comply with an “unless” order would collapse the important distinction between those two different kinds of order, with the different gradations of seriousness which they are generally understood to signify. Mr Evans-Tovey disputed this, arguing that there is still a material difference between a stay of proceedings and an order that the claim be struck out, since a stay does not entitle the defendants to recover their costs of the action. For that purpose, a further order would be needed. I cannot accept, however, that this is the sole intended distinction between the two forms of order. The essential difference is that a stay of the proceedings if security is not provided is intended to be non-permanent, whereas an order that the claim be struck out is intended to bring the action permanently to an end absent any further order which avoids that result.
CAN CPR 3.9 ACCOMMODATE “MORE THAN ONE APPROACH TO APPLICATIONS FOR RELIEF FROM SANCTIONS” ?
Legatt J certainly thinks so:
“36. The broad language of CPR 3.9 is quite capable of accommodating more than one approach to applications for relief from sanctions taking account of the nature of the sanction and the nature of the relief sought. In giving guidance as to how the amended CPR 3.9 should be applied, the Court of Appeal in Mitchell was not concerned with the “rather special form of order” that is an order for security of costs, nor with the granting of relief from a sanction which was not intended to be permanent. The sanction imposed in the Mitchell case was an order made after the claimant had failed to file a costs budget on time applying by analogy CPR 3.14. This states:
“Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees.”
Absent a further order from the court, the specified consequence of failing to file a costs budget on time is clearly intended to be permanent. The same applies to other common forms of “unless” order: for example, an order debarring a party from relying on witness evidence unless it is served by a specified date or an order striking out a party’s claim or defence and allowing the other party to enter judgment unless a step in the litigation is taken within a specified time.
- In the present case where, by contrast, the application is for the lifting of a sanction not intended to be permanent, a different approach is called for. The terms of the new CPR 3.9 still require the court to consider the need (a) for litigation to be conducted efficiently and at proportionate cost, and (b) to enforce compliance with rules, practice directions and orders. But those considerations do not carry the same weight as reasons to refuse relief as they do in the kinds of case with which the Court of Appeal in Mitchell was concerned. Certainly, in the circumstances of the present case where the necessary security for costs was tendered on the day after the stay came into effect, neither of those factors provides a good reason for refusing to lift the stay.”
WHAT IF THE MITCHELL PRINCIPLES DID APPLY? SHOULD THE CLAIMANT OBTAIN RELIEF FROM SANCTIONS?
The judge went on to consider the correct approach if he was wrong and the Mitchell principles applied. The judgment set out the relevant principles and concluded:
1. THE NON-COMPLIANCE WAS “TRIVIAL”
“40. In my view, the present case falls squarely within the category of case where the non-compliance with a court order can properly be regarded as “trivial”. With the greatest respect to the Court of Appeal, I should prefer to use a different adjective, since the whole thrust of the new approach is to inculcate a culture of compliance with rules and orders and to dispel an attitude which trivialises even “minor” breaches. I would therefore prefer to say that the default in this case was not material. But whatever label is used, this case fits exactly one of the examples given by the Court of Appeal in Mitchell at  – namely, “where the party has narrowly missed the deadline imposed by the order, but has otherwise fully complied with its terms”.
41. The deadline imposed by the order for security for costs in this case expired at 4pm on 5 December 2013. The bond which the claimants had agreed to put up as security had been signed and was ready for exchange with the existing bond (being the form of delivery agreed between the solicitors) at 10.01am on 6 December 2013, the next day. It is not suggested that this delay had any impact on any other aspect of the conduct of the litigation. The default cannot on any reasonable view be regarded as material.”
The judge rejected three sustained arguments from the defendant arguing that the breach was not trivial.
2. THE NON-COMPLIANCE WAS EXCUSABLE
Reason for the non-compliance
- Even if (contrary to my view) the non-compliance in this case cannot properly be characterised as “trivial” or not material, so that it is relevant to consider why the default occurred, I consider that there was a sufficiently good reason for the default. The explanation given by Mr Dorman in his witness statement on the basis of information supplied to him by the insurance brokers is that the brokers were unable to obtain the underwriter’s signature on the bond on 5 December 2013. Although the defendants sought to question the truthfulness of that evidence, I see no reason to doubt it. It may be said that Mr Dorman could have done more to seek to ensure that the order was complied with – by drawing up the bond sooner and/or checking with the brokers on 5 December 2013 to find out what was happening. However, this is not a case where the claimant’s solicitor simply overlooked the deadline or let it pass without attempting to comply with the order. The principal reason why the deadline was not met was not the inefficiency of the claimants or their solicitors, but the absence of the underwriter or, possibly, the inefficiency of the brokers – who for these purposes should be regarded as third parties as, unlike the solicitors, they are not responsible for the conduct the litigation.
3. RELIEF FROM SANCTIONS PRODUCED A JUST RESULT
The following passages (and indeed the whole judgment) are required reading for every litigator.
“The just result
- Even if I had not concluded that the default can properly be characterised as “trivial” or due to a sufficiently good reason, I would still have considered it just to grant the relief sought in this case. The fact that the claimants missed the deadline for putting up security for costs by a day did not in itself have any impact on the efficient conduct of these proceedings, nor on the wider public interest of ensuring that litigants can obtain justice efficiently and proportionately. On the facts of this case, therefore, I am unable to conclude that the first consideration specifically mentioned in CPR 3.9 – that is, the need for litigation to be conducted efficiently and at proportionate cost –weighs against the grant of relief.
- There remains, of course, the further consideration of the need to enforce compliance with rules, practice directions and court orders which, even on its own, must clearly be given substantial weight. But, as the Master of the Rolls emphasised in his lecture on the Jackson reforms in words approved by the Court of Appeal in Mitchell at , it is not the aim of the reforms to turn rules and rule compliance into “trip wires”, nor into “the mistress rather than the handmaid of justice”, nor to render compliance “an end in itself”. It seems to me that this would be precisely the result of refusing relief in a situation where, as here, there has been non-compliance with a rule or order but the objective which the insistence on compliance seeks to serve of ensuring that litigation is conducted efficiently and at proportionate cost has not been impaired.
- It is notable that in the Mitchell case the claimant’s failure to file a costs budget caused an adjournment and an abortive hearing. To accommodate the adjourned hearing, a hearing in another case had to be vacated, to the detriment of other litigants. In making this point, the Court of Appeal emphasised the importance of the court having regard, when managing an individual case, to the needs and interests not only of the parties to that case but of all court users: see  and also .
- The default in the present case had no consequence of that kind.
- On behalf of the defendants, Mr Evans-Tovey submitted otherwise. He contended that the claimants’ non-compliance necessitated the hearing of their application for relief, to the detriment of other litigants, and also required the action to be re-timetabled.
- I do not accept that contention. What has resulted in an otherwise unnecessary hearing and required the action to be re-timetabled is not the claimants’ failure to provide security for costs on time. It is the defendants’ response to that default. If the defendants had accepted the new bond when it was tendered on 6 December 2013 and consented to the claimants’ application to lift the stay, the action could have continued without disruption. However, instead of adopting such a constructive approach, the defendants cited Mitchell and cried foul. They required the claimants to come to court for an order which was vigorously opposed. In consequence, several witness statements have been prepared, three large bundles of documents lodged, skeleton arguments totalling some 45 pages produced and a hearing of half a day required – all at considerable cost to the parties and to the detriment of other litigants with applications waiting to be heard. By the time of the hearing, the dates by which the court had ordered disclosure to be made (15 December 2013) and witness statements to be exchanged (24 January 2014) had come and gone, while the action remained stayed. The effect on the timetable and orderly management of the case has therefore been substantial.
- In my view, the defendants’ conduct in refusing to agree to lift the stay was unreasonable. The grounds relied on for arguing that the claimants’ default was material were without merit. The defendants’ stance disregarded the duty of the parties and their representatives to cooperate with each other in the conduct of proceedings and the need for litigation to be conducted efficiently and at proportionate cost. It stood Mitchell on its head.”
FINALLY THE ORDER FOR COSTS
Those who assume that they can oppose applications for relief from sanctions and have a “free ride” whereby they will recover their costs in any event, should read the final paragraph of the judgment.
- Save for the costs incurred by the claimants in issuing their application, which were necessitated by their default, I also ordered the defendants to pay the claimants’ costs of both applications. The defendants seem to have viewed their opposition to the stay being lifted as a potentially free ride whereby, if successful, they would obtain a fortuitous dismissal of the claim without a trial and, if unsuccessful, would still have their costs paid by the claimants as the defaulting party. It is important to discourage that approach. Quite apart from the fact that the claimants are the successful party, I think it right that the order for costs should reflect the defendants’ unreasonable conduct in refusing to agree to the stay being lifted and the waste of time and money which that entailed”
LET’S BLAME ALL THE LAWYERS
The lawyers are an easy target. However difficult decisions have to be made. In circumstances where a procedural error could lead to a substantive victory there is a clear and obvious temptation to take every point possible. There is a fine line between waiving a “trivial” error and an action in negligence for failing to take a point that would end the case. It is the severity of the Mitchell test that causes this problem. That test should only have been applied to breaches of peremptory orders. The fact that it is applied to all breaches, means that the civil litigation system could break down in the not to distant future. The system could cease being about the court adjudicating cases on their merits and become more about the policing of alleged breaches of the rules.
HOW ARE WE SUPPOSED TO KNOW WHAT “TRIVIAL” IS?
Look at for instance, the judgment of District Judge Lumb in Burt –v- Linford Christie
“1. Miss Crapper on behalf of the Defendant submits that filing the costs budget one or two days te obviously falls within the category of a trivial breach. I do not agree that the position is so straightforward.
2. Even before the Jackson revolution and a more robust approach there have been plenty of examples provided by the higher courts where even attempted compliance one day late has been unsuccessful. One such is the line of cases on late service of a claim form beginning in 2001 with Vinos v Marks & Spencer PLC where the Court of Appeal stated their often repeated mantra that anyone who leaves matters to the last minute and gets it wrong have only themselves to blame. That is exactly what has happened here.”
WHERE DOES THIS LEAVE US? COMPARE AND CONTRAST
I suspect we are all going to need a day or two to mull through the consequences of this.
For the past two weeks I have been bombarded with e-mails and tweets reporting that District Judge have been making “draconian” orders. This has contrasted with (five) recent reports of High Court judges granting relief from sanctions and, on occasion, being more than a little disparaging about the “Mitchell” points being taken.
- Mr Justice Hamblen in Lakatamia Shipping
- Mr Justice Stuart Smith in The Governor & Company of the Bank of Ireland
- Mr Justice Blair in S.E.T. Select Energy.
- Arnold J in Jones –v- Wealth Management
What is certain, beyond doubt, is that as matters stand, the Mitchell decision is not having the desired effect of saving judicial resources. At present (and for the foreseeable future) it may well be doing exactly the opposite. (In fact there is no doubt it is having the opposite effect).