“STANDING MITCHELL ON ITS HEAD”: YOU SHOULDN’T EVEN BE TAKING THE POINT SAYS HIGH COURT JUDGE: WHY LITIGATORS ARE LIVING WITH THE MITCHELL DILEMMA
Some of the (repeatable) epithets used to describe the consequence of the Mitchell judgment are “mayhem” “madness” and “mess”. In Summit Navigation Ltd-v- Generalia Romonia  EWHC 398 (Comm) Mr Justice Legatt was critical of a party who took a “Mitchell” point in relation to the late provision of security. A bond of security, due at 4.00 pm on the 5th December was not obtained until 10.00 am on the 6th December.
I will review the case in detail later. For the time being here are the “high points” of the judgment. My initial view is that it shows the dilemma that litigators are now in.
(1) If they fail to take a “Mitchell” point they may be negligent. Their client could be exposed to substantial damages and costs which could have been avoided if the procedural point had been taken.
(2) If they take a “Mitchell” point then they could become subject to the kind of criticism set out in the Summit case.
THE INTRODUCTION TO THE JUDGMENT SAYS A LOT
- 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 judge went on to consider whether the Mitchell principles applied when a party was applying to life a stay.
“Do the Mitchell principles apply?
31. 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.
32. In Radu v Houston  EWCA Civ 1575 at , Waller LJ said:
“The obtaining of an order for security for costs is a rather special form of order. It is intended, if it is right to make an order at all, to give a claimant a choice as to whether he puts up security and continues with his action or withdraws his claim. That choice is meant to be a proper choice. I actually find it somewhat strange that, whereas with most forms of interlocutory order it would be unlikely that a court would make an unless order as its first order, it seems to be quite common to make an unless order in relation to security for costs. I note from the Annual Practice that there seems to be a difference between the practice in the Masters’ corridor and in the Commercial Court as to the making of an unless order at all as a term of the first order for security [see CPR r.25.12]. The reason for that difference, I suspect, is the attitude in the Commercial Court that an order for very large sums should not be made subject to the “unless” sanction until a real opportunity has been given to the claimant to find the money. I would have thought that, even if an unless order is made as part of the first order, the period for complying should on any view be generous. The making of an order for security is not intended to be a weapon by which a defendant can obtain a speedy summary judgment without a trial.”
33. The normal approach in the Commercial Court is illustrated by the recent case of SC GD Petrol SRL v Vitol Broking  EWHC 3920 (Comm), which shows Eder J:
i) making an order on 7 June 2013 for security of costs to be provided within 28 days;
ii) then, when security had still not been provided by 4 September 2013, extending the time for providing the required security until 17 October 2013, with a stay of proceedings in the meantime; and
iii) ordering at the same time that, unless the security was provided or a further extension of time granted before 17 October 2013, the claim would be struck out on that date.
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.
35. In the present case the period between the date of the order for security (26 November 2012) and the date by which the security was ordered to be provided (5 December 2012) was only nine days. Neither the parties when they agreed the form of order, nor the court when making an order in the terms agreed, could reasonably have intended that the consequence of missing that deadline would be that the action would come permanently to an end. To the contrary, the only intention which can in my view reasonably be attributed to the parties and to the court is that a stay would be temporary only; and that if the requisite security was provided subsequently, the stay would be lifted on appropriate terms including as to costs. The reasonable expectation is that, to debar the claimants permanently from continuing with the action, a further order from the court would be needed thereby ensuring that the claimant has been given a proper choice between putting up the security and losing the right to pursue the claim for good.
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.
37. 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.
Applying the Mitchell principles
38. If I am wrong in this analysis and the approach outlined in Mitchell is indeed applicable in this case, I would still come to the clear conclusion that the claimants’ application for relief should be granted.
39. The principles established by the Court of Appeal in Mitchell can, I think, be fairly summarised as follows:
i) On an application for relief from a sanction under CPR 3.9, it is usually appropriate to start by considering the nature of the non-compliance. If the non-compliance can be regarded as trivial or insignificant, the court will usually grant relief provided that an application is made promptly .
ii) If the non-compliance cannot be so regarded, the court should consider why it occurred and will still be likely to grant relief if there is a good reason for it .
iii) Good reasons are likely to arise from circumstances outside the control of the party in default ; by contrast, inefficiency or incompetence of a party’s solicitors – for example, where a deadline is simply overlooked – is unlikely to amount to a good reason .
iv) Where the non-compliance is not trivial and there is no good reason for it, the court is still required by CPR 3.9 to consider “all the circumstances of the case, so as to enable it to deal justly with the application”  + . However, relief should not usually be granted in such cases because the circumstances which should generally be given greatest weight are the two factors specifically mentioned in the rules  + .
Nature of the non-compliance
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.
42. The defendants have nevertheless sought to argue that the non-compliance was not “trivial” on three grounds. First, Mr Evans-Tovey submitted that this is not a case where the evidence shows that the claimants’ solicitors were attending to and seeking to comply with the deadline at the time when it expired. That argument, however, is one which goes to the reason why the default occurred. Under the guidance given inMitchell, consideration of why the default occurred only becomes relevant if the non-compliance cannot be characterised as “trivial”. It therefore cannot be relied on at the prior stage of considering whether the non-compliance can be regarded as trivial or not.
43. Second, Mr Evans-Tovey submitted that the claimants did not deliver or even send a copy of the new bond to the defendants’ solicitors on 6 December 2013, or until after close of business on Tuesday, 10 December 2013, when a copy of the bond was included in the evidence served in support of the claimants’ application to lift the stay. However, the only reason why the bond was not delivered on 6 December 2013 was because the defendants’ solicitors refused to accept delivery of the bond on that day and made it clear that they would not do so unless and until the stay of proceedings had been lifted. The defendants cannot take advantage of their own refusal to permit compliance with the court order on or after 6 December 2013 as a basis for asserting that there was a continuing default after that date.
44. Third, the defendants took two points on the form of the bond. The first was to dispute that the bond was signed by the underwriter so as to be validly executed as a deed in circumstances where the underwriter appended his scratch rather than writing his name as a signature. That point, raised by Mr Stockler in his seventh witness statement dated 6 February 2014, was sensibly not mentioned by Mr Evans-Tovey in his oral argument. However, he did press a second point, also raised in Mr Stockler’s seventh witness statement, that the signature was not validly attested. That was said to be so because the witness in whose presence the bond was signed had written his name opposite the words “in the presence of” in capital letters. Mr Evans-Tovey submitted that this did not amount to a signature of the witness – as is required to constitute a valid attestation (see Wickham v Marquis of Bath (1855) 1 Eq 17, 24).
45. These points were made all the more unattractive by the fact that they were not even raised until 6 February 2014, nearly two months after the application to lift the stay was issued and a copy of the bond provided, but were nevertheless relied on as reasons for contending that the bond tendered on 6 December 2013 did not comply with the court order.
46. Neither point on the form of the instrument, in my opinion, has even the advantage of being correct in law. Section 1(4) of the Law of Property (Miscellaneous Provisions) Act 1989 provides that the word “sign” in this context “includes making one’s mark on the instrument and ‘signature’ is to be construed accordingly”. An underwriter’s scratch is clearly a mark made on the instrument and therefore a “signature” for this purpose. Nor do I see any reason why a handwritten inscription by the witness of his name in capital letters opposite the words “in the presence of” should not constitute a sufficient signature for the purpose of attestation. But in any event, even if either of these technical points was valid and meant that the bond as tendered did not comply with the order, this would have been a failure of form rather than substance – which is another example given in Mitchell at  of a case where the non-compliance can be regarded as “trivial” so that the court will usually grant relief.
Reason for the non-compliance
47. 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.
The just result
48. 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.
49. 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.
50. 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 .
51. The default in the present case had no consequence of that kind.
52. 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.
53. 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.
54. 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 Mitchellon its head.”
STANDING MITCHELL ON ITS HEAD: LETS BLAME ALL THE LAWYERS
Inevitably everything that goes wrong in litigation is blamed on the lawyers. However this kind of case is an inevitable result of the Mitchell judgment. How can parties co-operate when a technical argument could see one side relieved of all liability to pay?
This has to be contrasted with some reports of draconian (if not frankly ludicrous) decisions coming from the lower courts. It is clear that some defendants, and some insurance companies, have had some good results and now smell blood. Solicitors are being encouraged to look for Mitchell points and take them up actively. One thing that Mitchell may well have done effectively, is to doom, the principle of “co-operation” to the dustbin.