SANCTIONS CASE TODAY: SUBMISSIONS AND DISCUSSIONS FROM THE LAW SOCIETY AND BAR COUNCIL

The Bar Council and the Law Society were invited to make submissions at the sanctions hearings in the Court of Appeal today. The discussions between the Bar and the Bench make fascinating reading.

(Mr Holland QC for both the Bar Council and Law Society began by handing up two documents to the bench

1. Crib Sheet

2. Document containing all the provisions with automatic sanctions in the CPR)

COUNSEL

I do not propose to address the facts of the cases, which have just been heard, or the authorities that have been mentioned.

However I do wish to emphasise that the law society view the Mitchell decision and its subsequent interpretation by the court with grave concern and the position as deeply regrettably. The Bar Council also describes the decision (as in written submissions) as having a corrosive effect.

The Mitchell case intended to set out guidance, but the lower courts have fastened onto certain passages. Lower courts are looking for certainty.

DYSON LJ  

Court guidance, and I have given guidance in a number of cases is, in principle a good thing to do, the lower courts do need assistance but guidance is only that. It cannot and should not supplant the rule particularly when that rule gives a broad discretion. CPR 3.9 has been tightened by the Jackson Reforms, the previous criteria has been removed and two criteria have been put in place. But the rule clearly still allows discretion and requires the court to consider all the circumstances of the case. The issue is what weight should be attached to factors (a) and (b).

COUNSEL

We do not say that you should not give guidance. In fact it has been expressly stated by Supreme Court that it is for the Court of Appeal to provide guidance. However the wording put forward in Mitchell is not what we have ended up with. As we see it you now get the different stages:

(1) Is it a CPR 3.9 case and has there been a sanction? For example if it is an in time application 3.9 does not apply and you go back to CPR 1.1.

(2) If it is a CPR 3.9 case then you go to the Mitchell Guidance. The court then considers if the breach is trivial.

We do have a problem with the word trivial, as it does not focus the mind of the court on the actual mischief of the breach. A non trivial breach can have no effect on the court timetable – for example if a party serves its witness statement weeks late, but well in advance of the trial, that breach would be classed as non-trivial but it has had no knock on effect to the conduct of the case.  But the way it has been interpreted by the lower courts is that if the breach is not classed as trivial then it is very difficult to obtain relief.

JACKSON LJ

Pausing there for a moment, if one party complies with the order and exchanges their witness statements but the other party does not, the first party may suffer detriment as the second party has read their statements and can modify their own before they are disclosed.

COUNSEL

In my experience that rarely happens.

The second part of the Mitchell guidance relates to a good reason for the breach. However the interpretation that it has been given means that it has now become a determinative factor.  A good reason has also been interpreted as meaning something that is out of the control of the parties and this is a very narrow band of circumstances.

VOS LJ

But that is not what Mitchell said

COUNSEL

No, but Mitchell did give examples and those are the examples.

VOS LJ

What it says is the court will want to know the reason for the default. It does not go on to say that if there is no reason a party will not get relief.  This appears to have been ignored and it is a non sequiter to say that, when looking at the rule, if there is no good reason a party should not get relief.

DYSON LJ

Clearly we have to do something about this, the danger of giving guidance, particularly guidance through steps, which can be very helpful, is that it has lead to a straight jacket.

On any fair reading of Mitchell that is not what it says, but if that is what is happening then it needs to be addressed.

COUNSEL

The lower courts seem to have focused on the tone of Mitchell and the changes to the new regime.

DYSON LJ

But the change in regime and emphasis was deliberate. Personally I do not want to go back to the position beforehand. The issue is the need to enforce a tough approach but balancing this with court discretion.

COUNSEL

Another issue is the use of promptness. Promptness was highlighted in Mitchell but its significance has been elevated to a level that it was not intended to have.

JACKSON LJ

But it all depends on interpretation in circumstances of the case, which is why I tested out the example that I did.

COUNSEL

That has to be made clear by the court and guidance should be focused on mischief in accordance with the wording of Lord Justice Jackson in the case of Hallam concerning the extension provision.

The two considerations, of efficiency and proportionate costs are main considerations. A breach as to proportionate effect on costs can be dealt with by way of costs order but breach in relation to the efficiency of proceedings has a knock on effect.

JACKSON LJ

So if it doesn’t affect the proceedings or effect others that is a good reason for the extension.

COUNSEL

Yes the effect is what the court should focus on, as there can be trivial breaches that in reality have little or no effect.

VOS LJ

The problem there is that there are other breaches which do not necessarily affect the court timetable but where more insidious problems arise than just meeting the trial date. Can you really be so prescriptive as saying that a breach, which imperils a certain date, should not attract relief; this is not what the rule says.  There is no bright line between serious or non serious breaches but the effect of Mitchell is that it has divided the issue into paths for example is if the breach is trivial – relief is likely to be granted if its is not serious – must consider the reason and never the two shall meet.

COUNSEL

I accept that and what has happened is that it has turned into a tick box exercise.

DYSON LJ

We need help from you as to how you say we should modify the guidance. I am not clear as to if you are saying that we should get rid of the Mitchell guidance or supplement it or what? It will be useful if you could address this after the adjournment.

JACKSON  LJ

I would also like to add you gain only limited assistance from paragraph 30 of the Hallam decision as that case addresses a different problem.

COUNSEL

I accept that I may have extracted more from the Hallam than should have been but it is just one consideration. Has it affected the trial date?

 

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We have been thinking over the adjournment about what you said, and in relation to that

1. If you start with the words of the rule you cannot go far wrong. CPR 3.9 states that the court should consider all the circumstances of the case. The problem for the lower courts, I suspect is paragraph 36 and 37 of Mitchell, which describes (a) and (b) as “paramount” and of great importance and that other considerations should have less weight.

DYSON LJ

Are they wrong?

COUNSEL

It is the wrong emphasis.

DYSON LJ

Well lets get rid of paramount, which just gives “of great importance and that other considerations should have less weight”

COUNSEL

I think the answer is to look back at the wording. The court must consider (a) and (b) but the rule does not say that they are of paramount importance. In every case the court should consider (a) and (b) but not to the exclusion of the other circumstances of the case.

DYSON LJ

Sorry to press you but if you were to take out paramount and say great weight on (a) and (b) and other factors should have less weight is better ? the reason I said that is that (a) and (b) would fall to be considered with dealing with the case justly in any event.

COUNSEL

Yes both (a) and (b) and factors to be taken into account when dealing with the case justly.

DYSON LJ

So what should I make of the express inclusion of (a) and (b) in CPR 3.9? Is it not a signal that they should have greater weight?

COUNSEL

You could say that the rule just flags up those considerations, as two that should be considered in a number of considerations.

DYSON  LJ

But that is not realistic taking into account the Jackson Report and the objective the rule was intended to achieve.

COUNSEL

I accept that it is intended to send a message and a signal that relief from sanctions will be less readily given.

DYSON LJ

But it goes further than that, why pick out those two considerations?

COUNSEL

The question is how to factor in those considerations but ensuring the courts do not also ignore other factors.

JACKSON LJ

One possible reading of the rule is that it sets out three things (1) The court must consider all the circumstances which will be particular to the case. (2) then look at factor (a) and then factor (b). In every case factor (a) and (b) should be considered but the court also must look at all the circumstances of the particular case.

The reason why attention is drawn to factors (a) and (b)          is that it is these two factors which are particularly pertinent to relief from sanctions applications as with a breach there is a real risk that the litigation is no longer being conducted efficiently and that costs are being disproportionately increased.  It draws attention to the new culture of compliance.

COUNSEL

Yes my Lord I accept that, and all the circumstances and (a) (b) should be considered but one then comes back to the need to deal with cases justly.

JACKSON  LJ

But dealing with cases justly doesn’t just mean reaching the right decision in the case.

COUNSEL

We would also say that whether the sanction has had an adverse prejudicial effect on the other party is a relevant consideration.

JACKSON LJ

But that takes you to factor (a), if there is a breach a party necessarily has extra work and the breach will necessarily affect costs.

COUNSEL

Yes but even if (a) and (b) fulfilled it should not mean relief is definitely not given.

JACKSON LJ

Yes, you have to look at the circumstances as well.

COUNSEL

Yes, this is what the court has to emphasize.

VOS  LJ

If you look at the substance of (a) and (b) they are going to be breached in every sanction case. I wonder if the two paragraphs are cautionary rather than the way in which they are being described. What is really being said is look at the circumstances but have in mind that when granting relief you are condoning something that was wrong and relief will be hard to get, which goes back to triviality and the nature of the breach.

COUNSEL

That maybe right that (a) and (b) will always be brought into apply. What troubles us is how you apply that and how the court decides whether to grant relief and what test to apply.

DYSON LJ

Surely it must be a relevant factor that the breach is trivial?

COUNSEL

I accept that it is relevant but Mitchell has turned it into the key test and a made triviality into a gateway leading down different paths. If (a) and (b) are to mean anything they are to direct the court to look at the effect of the breach.

JACKSON LJ

But (a) looks at the effect of the fact and (b) is really the fact of the fact.

COUNSEL LJ

Yes (b) may have purely punitive effect.

VOS LJ

You place reliance on materiality, but the rule actually relies on a failure to comply and materiality does not really go to gravity. My instinctive desire is to have something that addresses every situation. Materiality only addresses part. The beauty of using trivial is it is just a question of gravity. I am afraid materiality means to much and is even more open to misinterpretation.

You can take it as read that we accept trivial is not the be all and end all if it has been interpreted in that way but you need more on what a measure of gravity is not enough.

COUNSEL 

But how do you measure the gravity of a breach, it may be trivial but may still be grave.

VOS  LJ

We are getting into semantics now and trivial was not meant to have a semantic effect. It is all about context.

COUNSEL  

We accept that a court must assess the nature and gravity of the breach but how do you assess that? picture a poor District Judge, what sort of test is he going to want to apply?

DYSON  LJ

I agree we need a test and guidance, we rightly or wrongly tried to provide one in Mitchell but we rightly dealt with it as it has brought about this discussion, which in itself shows that guidance is needed.

COUNSEL

Yes, we would submit there is a range of breaches. The problem with the application of Mitchell is that not every breach is trivial.

DYSON  LJ

I think we are all in agreement something has to be done if Mitchell has been misinterpreted, but what has to be put in place?

JACKSON  LJ

But we still need to ensure compliance. Prior to the reforms there was a culture of non-compliance, a culture your client, the law society, lamented in the costs review (recommendation 86) and Rule 3.9 is focused on this specific problem.

DYSON LJ

I Support what Jackson says. If you leave it and say consider the circumstances without saying (a) and (b) are particularly important, there is a danger of reverting back to the previous culture of non-compliance. That is my real concern.

JACKSON LJ

I also share that concern. Given this particular is designed to address what guidance can we give to aid the courts approach but non allow non-compliance of which your client complained?

 COUNSEL

The problem is that the courts haven focused on, given the new strict regime, whether the breach has had a material effect looked at through the lenses of (a) and (b).

JACKSON  LJ

That supports what Lord Justice Voss was suggesting; that material comes in at a later stage:

(1) The court must look at whether it was trivial. If it was that is a shortcut to being able to provide relief.

(2) If not was there a good reason? What effect has it had etc.? So materiality may come in at a later stage.

COUNSEL

Provided triviality isn’t the be all and end all. The problem has also been how do you define trivial – a two week delay may be trivial in one case but not another.

If not trivial the court should look at the effect on the case timetable and costs etc. If there is no effect relief should be given. This court should also encourage a test where the court considers the circumstances of the case. The underlying assumption is that if it doesn’t affect the timetable it does not affect other litigants, which is why I drew attention to Hallam.

DYSON  LJ

On the facts of Mitchell itself we had that very problem. The breach had a knock on effect to hearing dates.

COUNSEL

But there will inevitably almost always be an extra hearing required because of a breach and relief from sanction application, so care needs to be taken.

The court also has the possibility of imposing conditions on the relief and a number of other sanctions, such as requiring the party to pay the costs of the hearing or other cost consequences.

JACKSON  LJ

But then what is the difference between relief from sanctions and an unless order.

COUNSEL

Again it would come down to costs sanctions.

DYSON LJ

I would also like your views on what we do about abusive innocent parties who unreasonably refuse extensions.

COUNSEL

I think the answer would be in costs consequences again

JACKSON LJ

So what is good for the goose is good for the gander.

COUNSEL

Yes there is a flexibility I remedies. There is nothing to stop the court saying it will assess the costs then and there. There is nothing more focusing for a party than costs.

JACKSON  LJ

But can only decide it then and there is done under wasted costs. The court cannot make an immediate order and will have to leave it to the end.

COUNSEL

I am not aware of anything that prevents the court making a summary assessment then and there and requiring a party to pay the costs forthwith.  It is a powerful sanction (the court was then referred to CPR 44.2) there is a range of flexible remedies available.

VOS  LJ

Is there not a more imaginative way to encourage parties to co-operate? Looking at some of the circumstances litigation had been utterly derailed due to satellite litigation.  This is inappropriate in 99% of cases. We need a message saying that parties should think hard before stopping proceedings for procedural points.

COUNSEL

The problem is that Mitchell is seen as an all or nothing test. The result is that some parties have had a free ride so decide that taking the point is worth it. But if the court makes it clear that 3.9 is more flexible it will discourage this behaviour and will stop the all of nothing nature of relief from sanctions.

DYSON  LJ

But will it? I don’t think it would. All it would do would be to increase the scope for arguing about balancing factors and given the prize, I don’t understand how opening more doors will stop people from opposing these applications.

COUNSEL

The only way to stop it is to have an all or nothing approach, either every breach is excused or no breach is excused. If the ambit is wider parties will be discouraged from taking a bad points.

DYSON  LJ

There is a duty on lawyers to co-operate.

COUNSEL

There is which is contained in CPR 1.1, 1.3 and 1.4  and there are misconduct rules, but I do not imagine that a failure to co-operate in breach of the CPR would be viewed lightly.  CPR 3.8. 4 hopefully will assist.

DYSON  LJ

But we are told that parties are not taking advantage of this and one cannot force someone to agree to an extension.

COUNSEL

But wasted costs orders are available if the court feels it is appropriate.

JACKSON  LJ

But wasted costs are a very different weapon. Lawyers who were subject to the orders often consulted me and there are a number of loopholes and hurdles.

DYSON  LJ

It is a severe sanction.

COUNSEL

Yes but, it is just one of the tools in the toolbox – but I would not underestimate cost sanctions.

VOS  LJ

But there are a small number of cases where costs are irrelevant. I am thinking of large commercial cases where the issues are so big costs are largely irrelevant.

JACKSON  LJ

But those cases are rare and in many cases costs are important. What has emerged from the debate is that costs orders could be used more e.g. making an order for costs on an indemnity basis, which would then also free the other party from their costs budget.

COUNSEL

But one would have to consider whether it could bind the court at the end of the case.

JACKSON  LJ

You could say that if you win in our view 10% of costs should not be recovered.

COUNSEL

Yes certainly, there are more flexible ways than just refusing to lift sanctions.

VOS  LJ

Could you just help with one aspect?  Paragraph 14.1 of Mitchell MR said that a number of things including that overwork is not a good reason for non-compliance. What do say should happen when a default is occasioned by a solicitor which will inevitably happen? Solicitors are only human. It is rather unfair on the client to strike the matter out and leave the client to sue the solicitor.

COUNSEL

Indeed and those points have been made in our submissions. Solicitors do not consciously take on too much work.

JACKSON  LJ

But they are not the masters of their own work.

COUNSEL

I can see why the Court of Appeal can have said inadvertence no good reason and should be looked at with less sympathy but we would urge court to manage litigation to help with this.

VOS LJ

I am just trying to get a sense of what you say should be added.  For example saying too much work is a good reason is not a good message to send out.

COUNSEL

In reality people are human, simply because a deadline has slipped due to inadvertence should not prevent the relief from sanctions on its own.

VOS  LJ

So if a breach is not trivial and there is no good reason, depending on effect of (a) and (b) a party should still be able to get relief. That’s not that much different from what was said in paragraph 41 of Mitchell.

 COUNSEL

Yes the problem is the interpretation, which it has been given. Emphasis maybe needs to be given to this but of course the court cannot give a list of complete examples. We are not asking the court to send out a message that parties can get away with missing deadlines. Although mistake is not a good reason it should not automatically prevent relief.

VOS  LJ

That’s your main point. If you add in to the guidance that just because a party does not have a good reason does not necessarily mean that relief cannot be granted and it is better to answer the breach in costs on the solicitor rather than striking it out.

JACKSON  LJ

But doesn’t the solicitors insurance company pay the wasted costs application?

COUNSEL

Yes, it may come within the excess but I am not sure.

VOS  LJ

What you are saying is there is a bigger armory for the court to take advantage of. But I do share the concern that anything we do pushes parties towards satellite litigation.

 COUNSEL

If the court gives clarification in line with CPR 3.8.4, para 12 of Hallam and para 54-63 of Summit that parties are expected to agree extensions and there may be cost consequences if they reasonably refuse to do so that may be the end of it.

The interpretation of Mitchell is too narrow so at present parties are duty bound to take these points.

 

I have also been pointed to section 50 (2) of the Solicitors Act, which provides for disciplinary sanction orders, but again I accept that this may be a blunt instrument but it is still there.

DYSON  LJ

Well, thank you we will take time to consider our decision and will hand them down as soon as possible.