There appeal in the Mitchell case was heard in the Court of Appeal case earlier today.  Judgment was reserved.

I have a note of the arguments on behalf of the Claimant/Appellant.   The Defendant’s arguments will be posted later.

I must stress that this is a typed copy of handwritten notes taken in court today.  If anyone thinks they are not accurate in some respects please do not hesitate to contact me.  For the time being all that can done is to give a flavour of the discussions in court.  I do not suggest that these notes give anything more than a “flavour”.

(Remember grammar has been surrendered to speed in getting these notes out to you on the day of the hearing).

Counsel for the Claimant: Mr Simon Browne QC

Counsel for the Defendant : Mr Nicholas Bacon QC

Summary of Claimant’s submissions. Court of Appeal 7th November 2013.

Mr Browne QC

There are two orders subject to appeal:

1 The order made on the 18th June which imposed the sanction.

2. The order on the 25th July refusing relief from sanctions

The relevant starting point is the Practice Direction 51 relating to defamation proceedings cost management scheme which was running prior to the change in CPR. At paragraph 3.1 of that Practice Direction it states :

The Defamation Proceedings Costs Management Scheme provides for costs management based on the submission of detailed estimates of future base costs. The objective is to manage the litigation so that the costs of each party are proportionate to the value of the claim and the reputational issues at stake and so that the parties are on an equal footing. Solicitors are already required by paragraph 2.03 of the Solicitors Code of Conduct 2007 to provide costs budgets to their clients. Accordingly, it should not be necessary for solicitors to incur substantial additional costs in providing costs budgets to the court.

Master McCloud was high bound by two matters the automatic sanction in rule 3.14 and the new rule 1.1(f). She failed to consider other factors.

Precedent H is a much more detailed document. More detailed than the cost budget and information given to a client. There was a suggestion by the master that the CMC should not have been the ‘smoking gun’ for the Claimant  which started the cost budgeting process but it was the start of the process for the Defendant also.

Dyson LJ : Mr Browne QC  please can you flag up your main points

The Claimant’s main points are

1.If there is to be a court order, parties must have sufficient time to comply with that order;

2. The parties must be informed of the sanction to be imposed;

3. The court retains a discretion in relation to the sanction imposed and that discretion must be exercised properly;

4. The sanction imposed must be proportionate to the effect of the breach (making the point that it is not just the breach itself)

These are the various grounds of appeal in relation to both orders.

The provisions on which this case relates are 4.1 and 4.2 of PD 51

(The Defendant concedes that there is no issue with the costs up to the date of the cost budget)

Dyson LJ : Mr. Browne the effect of the order is obviously very serious but i do not think we are  concerned with costs relating to before the CMC.

If I could then move on to rule 3.12 onwards. The first matter is that In 3.12 itself after a,b,c it states this Practice Direction should apply to any other application so ordered. The position is that it must apply prospectively and not retrospectively. The second matter concerns the relationship between 3.13 and 13.4. 13.3 is concerned with filing of budgets and returning allocation questionnaires. If there is no date specified the position is 7 days before the CMC.

The Defendant argues that if a party breaches rule 3.14 or 3.13 that party has to apply for relief. However rule 3.14 reads “unless the court orders otherwise”

Dyson LJ : do you accept that rule 3.14 applies to late filing of costs budgets then and is not just confined to a total failure to file a costs budget?

I would say my position is the same as it was before Master McCloud.

Richards LJ : if it does refer to section 3.14 what  date does bite on ?

When the court orders the budget to be filed.

Dyson LJ : What does “unless the court orders otherwise” mean ?

It means the court has a discretion to do something inbetween, not just total limitation of costs.

Dyson LJ : there is no reference in the masters judgment to a possible partial sanction, was it argued? There is nothing to suggest it was explored?

Yes it was explored and the master was referred to Blackstones (extract of which is in bundle ) which suggests consideration should be given to disallowing all or part of the costs. There were also other penalties such as the costs of any adjournment or application for relief.

It was not that the Master was completely wrong -but she did not have recourse to the variety of matters discussed.

Under the scheme there doesn’t have to be costs management. If it is not managed then the cost budgets stand as they are but it will be analysed if they go over their budget and the matter goes to detailed assessment.

The parties agreed that the post 1st April 2013 3.9 applied. This mentions all the circumstances of the case including the need for litigation to be conducted efficiently and at proportionate cost and to enforce compliance with rules, practice directions and orders.

This reflects the new 1.1 f of the Overriding Objective and the need for compliance should be put in the balance and not just the sole criteria as Master McCloud seemed to conclude.


Parties must have sufficient time to comply with the rule or practice direction. The time provisions are that days mean a clear 1 day.

Dyson JL : you don’t need to labour this point- there were originally not enough days which is why it was rescheduled.

Master McCloud  drew the order up on the 21st May for hearing on the 10th June, if the time rule applies than the parties had to have the Costs budget filed on that Friday.

Dyson LJ : we all know the chronology, why are we looking at this ?

Master McCloud had evidence before her that the parties do need time to prepare a cost budget for the CMC, normally this type of hearing would take 2-3 weeks of preparation.

Dyson LJ  : I am concerned that we are not concentrating on the appeal and the realities of this case. It’s unclear as to the Claimant’s excuse.

Master McCloud did not allow relief. She said a busy practice was not a good reason. But that was unfair as the timescale was concertinaed.

Richards LJ: but it was no surprise that a costs budget should be prepared.

No, but a substantial defence was not given until the 7th May. This defence included a Reynolds defence. The parties were therefore not able, until this point, to assess the case needs and costs of the case for example witnesses.

So yes the need for a cost budget was known but both parties only started preparing the cost budget upon receiving notice from the email.

I raise this matter in that it is something to be considered but Master McCloud failed to do so.

Richards LJ: so it is important we focus on the evidence at the original order and the relief from sanction application?


Dyson LJ: so if we take it one step at a time and deal with the original decision to impose the sanction.


The proportion of the sanction on effect of the breach was far too high – it was disproportionate.

There are many items that can go into considerations of which sanctions to impose but Master McCloud felt high bound by the sanction in rule 3.14

Master McCloud had in mind that this was an automatic sanction. She did not have the words ‘unless court orders otherwise in mind’

Elias LJ : This was a proper argument put in before both orders were made ?

There was no evidence regarding the costs budget as the cost budget had been filed. The Defendant’s position was that it did not have enough time to consider the costs budget.

Master McCloud herself discussed simply adjourning the matter and a pre-Jackson solution or a striking out action totally. But when looking for a proportionate response went to rule 3.13 (as it was actually the pd51 that applied) and called this mandatory.

Dyson LJ : is it your point that Master McCloud did not have in mind there was a discretion ?


If I go onto the second hearing, although on the first occasion the claimant was not suggesting relief from sanctions but an alternative sanction. As regarding 3.14 as mandatory she fell into error describing it as the proportionate approach.

This is a mixing and matching of regimes. A court can order that the new rules apply to other cases, but in this case Master McCloud did not say that they applied directly. If she did she should have made this known.

DysonLJ : Master McCloud asserted she was applying new rules by analogy not mixing and matching. Rule 3.14 and 3.13 were an appropriate guide to the powers under PD 51.

She drew an analogy to the new regime that was not governing the system the parties were working under. If a sanction is to be imposed a party must be award of the possible sanction and what it is.

Where there is a self-contained rule and the parties are working to another part using an analogy is incorrect.

Mr. Browne  QC then referred then to the  authorities in the bundle. Specifically F & C Alternative Investment Holdings v Barthelemy and anor  (2012). He highlighted the fact that the court of appeal found drawing analogies with self-contained sections of CPR (in that case rule 36) was wrong. He referred them to paragraph 56

Dyson LJ:  when the judge applied the part 36 regime to a non part 36 offer the Court of Appeal said he was wrong ?

Yes the principle of the case can be found on page 47 (of authorities bundle) drawing an analogy with a self contained section of the CPR to another section including a discretion is wrong.  It is a departure from the established practice of sanctions to disallow all costs. There is no other similar provision within the CPR. Rule 3.14 is self contained.

The sanction is draconian.

Elias LJ : Your case is that this case came before this rule in 3.14. 3.14 does not directly apply to it and should not have applied.

Yes. The third matter is that reliance upon 3.14 and this sanction did not permit consideration of other relevant criteria for example that the parties are in equal footing. This is relevant here as it is an individual against a large corporation. The cost budget regime applies equal footing as does the overriding objective.

Dyson LJ : is it your point that Mr Mitchell is an individual battling before a corporation. Was this put on the 18th June? If the claimant says the order will render the parties on an unequal footing the claimant has to say why. Mr. Mitchell could be a millionaire. There is simply no evidence.

The evidence is that both cost budgets had been filed and involved sums over half a million pounds. The case was in its infancy, disallowing the claimant’s costs rendered then unequal.

Richards LJ: You’re saying it may lead to bad points being taken by the other side?

Yes. It could lead to the non-defaulting party taking bad points and lead to longer litigation as the other parties knows they will never have to pay the costs so can make numerous applications.

Richards LJ: but this is controlled by the court’s active case management

But then you don’t get your costs, as your budget says nil

Richards LJ : but there may always be costs awarded for inappropriate applications.

One of my main points is that a court has to look at the effect of the breach. In this case it could have been easily remedied. It was not the type of case where documents had been destroyed. The cost budget was filed before the hearing, albeit late. Whether the delay was one day or five days it had a temporary effect. It could have been dealt with on another day and did not lead to the trial being vacated. When the Master put the matter off it was into an open window. She said herself no asbestos case had been listed on the 18th June (although this window had been set aside in case there was such a case)

Elias LJ :  I don’t think the principle should depend on whether the court has the time.

Yes, but the temporary effect should be weighed in the balance. This was not a flagrant and continuing breach. The defendant had asked for further time to file the defence. There were no failures or other breaches on the part of the Claimant. It therefore can be distinguished from the Fred Perry case. There was no deliberate and continual flouting here.

These arguments also go to the relief from sanctions point.

Another matter is prejudice. The defendant suffered no prejudice. The Defendant’s solicitor even says this in his witness statement. This is relevant to two questions

  1. What is the effect of the breach ?
  2. What is the proportionate sanction for the breach ?

Master McCloud was seeking a proportionate sanction but we say she went straight to rule 3.14 and did not consider other matters including the administration of justice.

All dealings must be proportionate. It may be that in a case worth £5,000 there is a breach which requires a further hearing costing an additional £10,000. A court may say that is disproportionate. But this case was a large case. The court had a costs budget before it and it would be proportionate to not deny all costs but impose a lesser sanction.

Finally if we look at the period of default. It was from the Monday or Tuesday to the following Monday. Master McCloud may have fallen into the error of thinking her email started the cost budgeting process but the evidence was that the claimant had started work but it was taking more time than anticipated.

I accept that the stance taken by the advocate in the first hearing may have been in a different direction. But the same criteria should have been applied. The issue of compliance  should not have been applied to the exclusion of other matters.


It follows that many of the matters raised were in front of Master McCloud by way of submissions but by the second hearing she had evidence that the Claimant’s solicitors had never been in the position before and the defendant had not suffered any prejudice as a result.

(The court was then referred to  Master McCloud’s  judgment)

She makes notice of 4 days but says the date set for the CMC is not a starting gun for consideration of the cost budget. But PD 51 para 3.1.1 suggests it is CMC that is the date one has to aim for.

Dyson LJ : but doesn’t it also say that the parties, have to consider it in advance, but doesn’t say  that they have to start prep ?

But the practical difference is that a party can do a cost budget in May and there not be a CMC untill November and the whole cost budget has to be revisited. So effectively the CMC is the target date.

Dyson LJ: but the rule says seven days before the CMC and 4.1 of Pd 51 suggests it’s a continuing process so cannot be done last minute.

No but if you had weeks to prepare you can send estimates to the opposite number and include assumptions in the budget.

Dyson LJ :but the point in 4.2 is exchange by 7 days, so the parties have to start at some point before that. The Defendant managed to get it done in that time.

But the Defendant admits that it only started the cost budget after the emai,l and they were late also in the time given. So Master McCloud was wrong in her point of the starting gun. Master McCloud did accept that the parties had difficulties but said under the new Jackson regime it didn’t weigh as heavy.

It may have been in Master McCloud’s  mind that she prompted the cost  process to start but the evidence is that it was being prepared in any event. Under 3.9 that is something that can be taken into account. The effort to comply being made but the party falling short.

In her judgment Master McCloud actually deals with two breaches. Failure to engage and the failure to put the costs budget in on time.

But neither party discussed the budget.

Dyson LJ: but didn’t the Defendant send an e-mail offering to discuss ?

But the e-mail does not actually offer to discuss, it may be that I am overstating my case. The court then went through the emails contained in the bundle.

Master McCloud may gave had in mind of numerous breaches but neither party engaged in discussions.  Master McCloud was of the view that the defendant had complied wholesale and the claimant had not.

She says there was a failure to engage (para 34) she talks about silence from the claimant but the evidence does not justify those findings. Paragraph 38 goes in to look at the evidence and says the Defendant made use of external lawyers and sought to engage the claimant in discussion.

Dyson LJ: so you say the second bit is wrong ?


Richards LJ: but isnt it another point that directions from the court are important. Cost budgeting is highly relevant to this for example it suggests the amount of witnesses needed.

It is important and the Claimant did put forward draft directions going unto trial. The Defendant wanted to limit directions to an earlier point. The claimant’s and defendant’s assumptions were different and their draft directions dealt with different periods in any event.

We also submit that the master is not acknowledging and directing her mind to 1.1a and elevated 1.1.f

The court was then referred to the case law mentioned during judgments – these emphasis that all though the list of considerations under 3.9 have been removed they are still relevant under the new 3.9.

Dyson LJ: Usually the question of sanctions do not come into play when making an order. At that point you are not saying what will happen if you do not comply. What is being said is what must be done. When considering the sanction the overriding objective should be taken into account.  But it is  when considering relief from sanctions under the new Rule that the two specific factors outlined come into prominent position. Otherwise you are just having a re run of the issues (the considerations under the overriding objective) leading to the original order.

yes we would not disagree that compliance with orders has a prominent position in rule 3.9 but it does not exclude other considerations and the overriding objective is important in the relief from sanctions exercise. Although compliance with rules and court orders may come to prominence in part 3.9 the other criteria and all the circumstances do not simply disappear.

If I could refer you to the authority  of Raayan Al Iraq Co. Ltd –v- Trans Victory Machine Inc [2013] EWHC 2696 in summary this is a cargo claim which involved late service of the particulars.

At paragraph 15 he reiterates rule 3.9 and goes on to list the considerations that have gone, but states all are potentially relevant under the new rules

“16. I am unable to accept that it is no longer the case that the position is as was observed by Lord Justice Brooke in Price v Price [2003] EWCA Civ 888 Paragraph45 that while it is important that the court maintain a disciplinary framework, including compliance with the CPR, that does not mean that there should be “a disproportionate response” or that defendants should be given an “unjustified windfall” where the dictates of justice and the overriding objective indicate the contrary”

Dyson LJ : But then he goes on to then apply the old considerations and goes through the old rules. That is  rather remarkable.

The second case is the case of Kesabo –v- African Barrick Gold Plc. In this case the judge said :
“I doubt whether, in the usual case, the new words of CPR 3.9 require any further elaboration or refinement. However, some of the criteria in the old version of the rule may be relevant to the exercise of the Court’s discretion, although they should plainly not be applied in a formulaic way:”

Dyson LJ: Yes, thats a rather reserved and sensible way of saying it.

The point is that Master McCloud felt highbound and concentrated on the sanction in rule 3,.14 and the compliance with the rules element. The question really is are there other matters which should be considered and will these matters resilt in a lesser sanction.

There is also the case of Wyche -v- Careforce Group Ltd (2013) here it was said

33. In my view this comment, if it is intended to say that human error can never be a ground for relief, takes matters to an unacceptable extreme. I have no hesitation in accepting what is said by Jackson LJ in the Fred Perry case. He was concerned there to make it absolutely clear, and he did make it absolutely clear, that a culture of delay and non-compliance is unacceptable. He did not say that the Court will never make any allowance for human error.


34. I would add this. The court is not a martinet. It does not blindly insist that every “I” be dotted and every “t” be crossed. Thus it is that the court will not ordinarily punish immaterial breaches. Moreover, even where there is a material breach, the court’s role is not automatic. It does not apply the rules unthinkingly, nor does it expect that human beings, who must carry its orders into effect, will act as automatons.”

Three cases that have been heard since this appeal was lodged and all support the argument that other relevant matters should be considered not just compliance with court orders.Other matters inbclude the effect of the breach and the administration of justice.

Dyson LJ: But the administration of justice consideration opens up a much wider consideration. The wider you open the doorthe less tough you are the more satellite litigation. I note that neither party has referred the court to the numerous cases, some of which I was involved in, concerning whether an extension of time should be granted for serving the claim form. These cases include ones such Hodinott –v- Persimmon Homes [2008]. In those cases it was discussed whether reasons for delay were good enough and that human error will not always justify an extention. Surely there is a similarilty between that situation and here. Adopting a tough line caused alot of concern for the claimants in those cases but it did put pay to other satellite litigation.

Yes, and I think I should address why the claimant in this case should not be a ‘sacrificial lamb’ . We are in a culture now that if you are in breach of an order you will face a sanction. But that does not change the fact that the sanction must be proportionate to the breach. Although in this case the claimant had commited a serious breach, it did not have serious consequences.

Elias LJ: So if one put too much weight on 3.9 it could mean that relief was only granted in exceptional cases which is at odds with LJ Jackson’s thinking ?

Yes. The court was then referred to Lord Justice Dyson’s lecture as part of the Jackson Reform Lecture series

This goes back to the lecture. The relationship between justice and procedure has changed. The courts are to take a more robust approach. Proceedings must be managed and proportionate to the claims being made. But that should not impinge on justice.

There are a number of sanctions apart from the ultimate sanction under Rule 3.14 such as disallowing the costs of preparing the budget. Or a finding that you can get your costs at trial after a section 3.9 application but not for the period of default. It should be a sliding scale.

Dyson LJ : what order are you seeking?

Complete relief, but if that is not granted and one is right to adopt 3.14 the claimant should not have costs between the default and granting of relief. The Claimant cannot escape the fact that there will be a sanction.

Dyson LJ: should the claimant’s cost budget stand?

No, revised budgets were filed on the 25th July by both parties those budgets should stand (but they have not yet been approved or considered by the Master)


The Mitchell case (in the context of relief from sanctions) has been discussed:

Discussions of relief from sanction applications can be found at: