RELIEF FROM SANCTIONS AND SERVING NOTICE OF FUNDING: A TALE OF TWO CASES
Results of relief from sanctions applications are now being reported regularly. Here we look at two apparently contrasting applications in relation to relief from sanctions and the failure to give notice of funding. Both cases were reported today; both are decisions of High Court Masters; the results are different.
HARRISON –v- BLACK HORSE LTD  EWHC B28 (Costs)
This was an application for relief from sanctions heard by Master Gordon-Saker on the 20th December 2013. The action was a claim relating to allegedly mis-sold mortgage protection. The claimants lost at trial and at the Court of Appeal. However the action was compromised following permission to appeal being granted by the Supreme Court. The defendant agreeing to pay the claimants’ costs and a sum of £3,099.08 in return of premiums paid and interest.
The claimants claimed costs in excess of £2.5 million. The claimant served notice of funding in relation to the initial hearings but did not serve any notices in relation to the appeals to the High Court and Court of Appeal.
The claimants applied for relief from sanctions.
THE FINDINGS OF THE MASTER
The first finding was that there was no evidence that the notices of funding were sent or received. He also found that the defendant was prejudiced by the failure to give notice of the funding arrangements. If they had known that the appeals were being funded by a conditional fee agreement with an additional liability they may have compromised the claim earlier.
RELIEF FROM SANCTIONS
The Master considered the Mitchell criteria and refused relief from sanctions.
“46. In my judgment it cannot be said that the failure in this case was trivial. The rules required the Claimants to give notice of the change in funding arrangements and they did not do so in any form.
47. The burden is therefore on the Claimants to show a good reason for the failure to give notice. I have accepted that Miss Taylor intended to give notice and prepared the necessary documents. But for some reason that intention was not fulfilled. We do not know why the documents did not get to the Defendant’s solicitors. There may have been an error on the part of the Claimants’ solicitors, or an error on the part of the DX service provider, or possibly even an error on the part of the Defendant’s solicitors.
48. But the burden is on the Claimants. Their evidence stops at the point when the letter and notice of funding left Miss Taylor’s hand. They have failed to produce any evidence of the reason why the documents did not reach the Defendant’s solicitors or evidence to show that, whatever the reason, it was outside of their control.
49. This may seem harsh, particularly given my view that the failure was not intentional. But the Claimants’ solicitors should have known of the change that was coming. The amendment of CPR 3.9 was recommended by Lord Justice Jackson in his final report published in December 2009. The change of approach and the “Singapore experience” were emphasised by him in the 5th implementation lecture on 22nd November 2011. The new, tougher approach to relief from sanctions was again emphasised by the Master of the Rolls in the 18th implementation lecture on 22nd March 2013.
50. The Defendant had served its points of dispute in February. There is no reason why the Claimants could not have issued their application for relief well before 1st April 2013. The application might have been heard before then. It would certainly have been heard before the decision in Mitchell was handed down.
51. Following the hearing of this application but before this judgment was circulated in draft form, the decision of Mr Justice Norris in Forstater v Python (Monty) Pictures Ltd  EWHC 3759 (Ch) was handed down. I therefore gave counsel an opportunity to comment on it by written submissions.
52. In Forstater the first claimant had provided information about his conditional fee agreement but his company, the second claimant, had failed to serve an N251. The second claimant applied for relief from sanctions. Its solicitors had told the defendant in correspondence, 2 months after the second claimant had been joined as a party, that they were acting under a conditional fee agreement but they had not served notice in form N251. It was not suggested that the form in which the information was conveyed had caused any prejudice. However the court observed that the failure to convey the information until the letter:
“… probably had an impact on the conduct of the action (because until then [the first defendant] was not in possession of all of the information relevant to a disposal of the claim) and [the second claimant] has not demonstrated that it did not.”
53. The court granted relief from sanctions but only as from the date of the letter. The draft judgment in Forstater was circulated before the judgment in Mitchell was handed down but as Mr Justice Norris made clear in the last paragraph he saw no need to revise it.
54. One can well understand why. As from the date of the letter Forstater was a case of a trivial failure – giving the information by letter rather than by form N251 – and so a failure of form rather than substance. However the court did not grant relief for the period before the date of the letter because, as in the present case, the failure to give the information “probably had an impact on the conduct of the action (because until then the Defendant was not in possession of all of the information relevant to a disposal of the claim) and the Claimants have not demonstrated that it did not”.
55. Accordingly the application for relief from sanctions is refused.”
The object lesson here is that a new notice of funding needs to be served at the appeal stage.
COMPARE AND CONTRAST Burton v Cranfield Delta Whiskey Group
Compare this with the case of Burton –v- Cranfield Delta Whiskey Group a case reported by Shaman Kapoor at the Temple Garden Chambers website http://www.tgchambers.com/news/hot-off-the-press.aspx.
This concerned a decision of Master Rowley handed down on the 20th December 2013, after consideration of the Mitchell guidelines. Again there was a failure to serve a N251 and an issue over the success fee.
The summary provided states:
- Matter listed for detailed assessment in February 2014, for a case which resolved at trial on 29/09/12
- Human error essentially found to be the cause of a failure to file and serve the N251
- Claimant’s solicitor’s internal system indicated N251 filed and served in January 2012 (when Claimant changes solicitors)
- No issue taken with Notice of Funding until Points of Dispute filed in February 2013
- Claimant issued a precautionary application in October 2013, but first attempted to deal with the matter informally
- No real prejudice to the Defendant (given Claimant was on a CFA with previous solicitors, and Defendant’s conduct made it plain that the matter would be contested to trial in any event)
- The error was the legal representative’s, not the Claimant’s
- Once the Defendant made clear an application was required (October 2013), the Claimant acted promptly
- The fact that the ‘non-compliance’ occurred 15 months before “J-day” was a relevant factor
- Claimant’s position between February 2013 and October 2013 (that the N251 had been filed and served) was reasonable
- The application would have been better-issued as a preliminary issue to the Detailed Assessment
- No Order as to costs on the application.
ARE THE DIFFERENT DECISIONS EXPLICABLE?
In the Mitchell decision the Court of Appeal recognised that there were going to be discrepancies in relation to decisions. However that was going to be over the meaning of the word “trivial”. On the face of it these are not vastly different cases, however we appear to have different results.
Another case where the High Court gave relief from sanctions when a party failed to serve the appropriate notice of funding is discussed at http://civillitigationbrief.wordpress.com/2013/12/03/relief-from-sanctions-decision-of-the-high-court-the-letter-of-the-law/