RELIEF FROM SANCTIONS: COURT OF APPEAL ALLOWS APPEAL AND GRANTS RELIEF WHEN THE ORIGINAL ORDER WAS PRE-DENTON

It is surprising, perhaps embarrassing, that the Court of Appeal is still hearing appeals where the judge at first instance applied the pre-Denton approach to relief from sanctions. However a judgment today involved just that*.  In Patterson -v- Spencer [2017] EWCA Civ 140 the Court granted relief from sanctions in a case where the judge had applied the Mitchell principles.

“Lacking clairvoyance, the judge was understandably unable to forecast the revised guidance which this court would give in Denton, one month after the hearing before him.”

KEY POINTS

• A failure by an appellant to file a transcript in accordance with a court order was a serious and significant breach.
• There was a  good reason for the breach in that the appellant had not received the order.
• In all the circumsatnces of this case it was appropriate to grant relief from sanctions.

THE CASE

The defendants to an action brought by a trustee in bankruptcy. The defendant appealed an order made in her absence.  They were ordered to file a transcript of the judgment,  they failed to comply and a peremptory order was made.  The transcript was not filed in time.  The defendant applied for relief from sanctions on the grounds she had not received the peremptory order.  The judge hearing the application applied the Mitchell principles and refused relief from sanctions.  The Court of Appeal was hearing the appeal against the refusal to grant relief from sanctions.

THE JUDGMENT OF THE COURT OF APPEAL

“Relief from sanctions: the guiding principles

1. 1. CPR rule 3.9 provides:

“Relief from sanctions

(1) On an application for relief from any sanctions 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.

(2) An application for relief must be supported by evidence.”

1. 1. As is well known, the leading case on the principles which should guide the court on an application for relief from sanctions under CPR rule 3.9(1) is now Denton. In that case, the court, headed by Lord Dyson MR, modified in some important respects the guidance which had previously been given in Mitchell. The approach which is now to be applied is set out at [24]:

“A judge should address an application for relief from sanctions in three stages. The first stage is to identify and assess the seriousness and significance of the “failure to comply with any rule, practice direction or court order” which engages rule 3.9(1). If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to consider why the default occurred. The third stage is to evaluate “all the circumstances of the case, so as to enable [the court] to deal justly with the application including [factors (a) and (b)]”. We shall consider each of these stages in turn identifying how they should be applied in practice. We recognise that hard-pressed first instance judges need a clear exposition of how the provisions of rule 3.9(1) should be given effect. We hope that what follows will avoid the need in future to resort to the earlier authorities.”

1. 1. The court then discussed the first stage at [25] to [28], explaining that it is preferable to focus on the question whether a breach is serious or significant, rather than adopting the test of triviality referred to in Mitchell. The court pointed out at [27] that, at the first stage, “the court should concentrate on an assessment of the seriousness and significance of the very breach in respect of which relief from sanctions is sought”. An assessment of the defaulter’s previous conduct in the litigation, including previous breaches of court orders, should be left to the third stage.

   2. As to the second stage, the court said at [29] and [30] that the court should consider why the failure or default occurred, particularly where the breach is serious or significant. There is no “encyclopaedia of good and bad reasons” for a failure to comply, and the cases can do no more than provide examples.

   3. In its discussion of the third stage, at [31] to [38], the court was at pains to correct the misapprehension that an application for relief from sanctions will automatically fail if (i) there is a serious or significant breach, and (ii) there is no good reason for the breach. In every case, the court must consider “all the circumstances of the case, so as to enable it to deal justly with the application”. Nor is it right to say that the factors (a) and (b) in rule 3.9(1) are to be accorded “paramount importance”, as Mitchell at [36] had widely been thought to imply. Those factors are, nevertheless, “of particular importance and should be given particular weight at the third stage”: see [32]. The court also gave this guidance:

“35. … The more serious or significant the breach the less likely it is that relief will be granted unless there is a good reason for it. Where there is a good reason for a serious or significant breach, relief is likely to be granted. Where the breach is not serious or significant, relief is also likely to be granted.

36. But it is always necessary to have regard to all the circumstances of the case. The factors that are relevant will vary from case to case. As has been pointed out in some of the authorities that have followed the Mitchell case …, the promptness of the application will be a relevant circumstance to be weighed in the balance along with all the circumstances. Likewise, other past or current breaches of the rules, practice directions and court orders by the parties may also be taken into account as a relevant circumstance.”

Discussion

1. 1. Lacking clairvoyance, the judge was understandably unable to forecast the revised guidance which this court would give in Denton, one month after the hearing before him. It may therefore be said that his reliance on Mitchell led him into potential error in at least three ways. First, he wrongly regarded the two factors specified in rule 3.9(1) as being “of paramount importance”, although it would be difficult to quarrel with his statement that he “must give them great weight” read in isolation. Secondly, he said that the Appellant’s failure to comply with the Unless Order should not be viewed in isolation, when according to Denton he should have started at stage one by doing precisely that, reserving consideration of the Appellant’s previous course of conduct for the third stage. Thirdly, and more generally, he did not adopt the structured three stage approach which Denton enjoins.

   2. Also of concern is the fact that the judge twice referred to the absence of any witness statement from the Appellant, while nowhere recognising the undoubted evidential status of what she said in Part C of her application notice. When granting permission to appeal, Briggs LJ said it seemed to him at least arguable that the judge may have overlooked this evidence, and that his decision not to believe her explanation may therefore arguably have been unduly harsh. I respectfully agree. Furthermore, the judge’s statement that “no proper explanation” had been provided of why it took so many weeks for the letter from the court to be given to the Appellant is impossible to reconcile with her clear evidence that the letter was only delivered to her on 19 April 2014, having previously been delivered to a neighbour’s property. Without cross-examination, I find it difficult to see how the judge could properly have dismissed this evidence as incredible.

   3. Furthermore, although there was a gap of some two and a half weeks between 19 April 2014 and 6 May 2014, when the transcript of the judgment was eventually filed, it is clear that during this period the Appellant had communicated with the court, presumably seeking guidance in view of the fact that the date for compliance with the Unless Order had already expired before it came to her notice. This appears from a letter dated 2 May 2014 sent by the Chancery Appeals Office to the Appellant, which reads as follows:

“After referring your file to Mr Justice Arnold, he has noted that because you did not comply with his order dated 4 March 2014 this appeal has been struck out. If you wish to pursue your appeal you will need to file an application for relief from sanctions using the N244 form.”

The file would not have been referred to Arnold J in the absence of some communication from the Appellant, because the sanction for non-compliance took effect automatically and needed no further judicial intervention: see [21] above. It would seem, therefore, that the Appellant acted with reasonable expedition after (on her version of events) she first became aware of the Unless Order on 19 April 2014.

1. 1. In all the circumstances, it seems to me that the judge erred, albeit understandably, in his approach to the application, and we should consider it afresh with the benefit of the guidance in Denton.

   2. The first question is whether the breach, viewed in isolation, was serious or significant. Mr Macleod-James sought to persuade us that it was not. Viewed in context, it caused no more than a four week delay to an application for permission to appeal, and an extension of time for appealing, which was still at an early stage, the notice of appeal having been filed on 20 December 2013, and an appeal bundle (compliant apart from the missing judgment) having been filed by the Appellant, in time, on 14 February 2014.

   3. I would reject this argument. The failure to lodge a transcript of the judgment under appeal, within the period directed by the court, cannot be characterised as unserious or insignificant, because the application for permission to appeal could not be determined until the transcript was provided. Of all the documents needed for the appeal, it was probably the most important: hence the fact that it was singled out in the standard form direction given by Arnold J on 9 January 2014.

   4. The next question is why the default occurred. As to this, I respectfully think the judge was wrong to disbelieve the explanation given by the Appellant, and he was unduly influenced by the absence of a separate witness statement from her. It was entirely appropriate for her to give the evidence upon which she wished to rely in Part C of the application notice, and in the absence of any evidence in answer from the Trustee she did not need to elaborate the explanation which she had given, even if she would have been well advised to do so (for example, by procuring a supporting statement from her neighbour, and/or by exhibiting to a statement the documents which she apparently provided at the hearing).

   5. If the Appellant’s evidence was accepted at face value, she clearly had a good reason for failing to comply with the Unless Order before 21 March 2014, because she knew nothing about it. It is true that she remained in breach of Arnold J’s earlier order of 9 January, but as a litigant in person she may not have appreciated the importance of the distinction between the transcript of the proceedings, which she had supplied, and the judgment, which she had not. Furthermore, we do not know when the transcript of the judgment was sent to District Judge Clarke for approval, or when it was returned. The Appellant could no doubt have supplied this information had the deficiency in the bundle which she lodged been drawn to her attention; but there is no evidence that it was, and until she finally received the Unless Order, there was nothing to alert her to the problem.

   6. It is relevant to note, in this connection, that the Unless Order was made by Arnold J of his own initiative, without any application having been made by the Trustee. The papers were presumably referred back to him by the court staff, when they noted that the bundle lodged by the Appellant did not include a transcript of the judgment. Thus the Appellant had no way of knowing that a further, more stringent, order was likely to be made against her, and it is perfectly credible that the first she knew of the Unless Order was on 19 April 2014, nearly one month after the deadline for compliance with it had expired.

   7. In all the circumstances, I would conclude that the Appellant had a good reason for her failure to comply with the Unless Order.

   8. As to the third Denton stage, it is appropriate to begin with the court’s statement at [35] that “[w]here there is a good reason for a serious or significant breach, relief is likely to be granted”. In the present case, that conclusion is reinforced by the fact that the appeal proceedings were still in their infancy, and no prejudice can have been caused to the Trustee apart from the relatively short delay in filing the transcript of the judgment. As to the alleged earlier defaults by the Appellant, of which District Judge Clarke had taken such a dim view, it is worthy of note that the only order with which the Appellant had failed to comply was the July 2013 Order, and even then she might have had a respectable argument that she was not in breach of the timetable steps in paragraph (2) of that order, given the rather curious way in which it was framed, and that her only breach had been of the requirement in paragraph (3) to ensure that the timetable was met, and to notify the court promptly if it was not. Given the very serious ill health from which she suffered at the time, and in particular from September 2013 onwards, this breach was in my view at the lower end of the scale of seriousness, quite apart from the question whether it was ever appropriate to order the Appellant to ensure compliance with a timetable relating to the capacity of her father.

   9. In any event, despite the impression given by the District Judge’s judgment, Mr Groves very properly accepted before us that the Appellant had not been guilty of repeated breaches of court orders. The exasperation which District Judge Clarke clearly felt seems rather to have been the product of what she perceived to be a series of delaying tactics for which the Appellant was one of the persons responsible. There may well have been some truth in this perception, but whether it justified the draconian step of barring the Appellant from defending the Trustee’s underlying application is another matter. I do not share the judge’s confidence that the Appellant’s grounds of appeal are “not … at all persuasive”, and I certainly do not consider that her appeal is so obviously hopeless on the merits that, for that reason alone, it should not be allowed to proceed to consideration of the application for permission to appeal by a Chancery judge in the usual way.

   10. All in all, I am satisfied that a consideration of all the circumstances of the case, and of the need to deal justly with the application for relief from sanctions, leads to the conclusion that relief should be granted. If McFarlane LJ agrees, that is therefore the order which I would make.

*THE REASON FOR THE DELAY

The reason for the delay is explained in the final paragraphs of the judgment.

“Concluding observations

1. Before leaving this case, I should draw attention to the extraordinary delay of well over two years which occurred between the grant of permission to appeal by Briggs LJ on 9 December 2014, and the hearing before us on 16 February 2017. In his judgment, [2014] EWCA Civ 1732, Briggs LJ said at [10] that the appeal would have to be brought on “as quickly as possible”, because it concerned the case management of an appeal at first instance in circumstances where possession of the Property was sought by a trustee in bankruptcy. He warned the Appellant that her ill health would not be a satisfactory excuse for rescheduling any fixture for the hearing of the appeal. In the event, we were told that the appeal was originally scheduled to be heard in late 2015, but her health had by then deteriorated to such an extent that her life was in serious danger, and the appeal was relisted for 2016, although it could not then be heard until February 2017. Through her counsel, the Appellant expressed her gratitude to the court listing officers for the tolerance and understanding which they had displayed.

2. I appreciate that this may be scant comfort to the Trustee, who obtained an order for possession and sale of the Property as long ago as 29 October 2013. On the other hand, it is of some relevance to note that the bankruptcy is a most unusual one. We were informed by Mr Groves that the only creditor in the bankruptcy is a granddaughter of the Bankrupt, who obtained a judgment against him for £120,000 as a result of bitter family litigation. It is not therefore a case where there are substantial external, non-family, creditors waiting to be paid. Nevertheless, given the unfortunate history which I have related, it is clearly desirable that the appeal proceedings should now be prosecuted with the minimum of delay, and if permission to appeal is granted, the court will no doubt wish to consider whether an order for expedition should be made.”

RELATED POSTS

Many of the relief from sanctions cases are at the Sanctions: Case Watch section of this blog.