DENTON, RELIEF FROM SANCTIONS AND THE "LITIGATOR'S DILEMMA": LIFE IS NOW DANGEROUS FOR RESPONDENTS
I have written before about the “litigator’s dilemma” in relation to whether a point should be taken in relation to a breach, or an application for relief of sanctions opposed. The Denton decision makes this issue far more difficult for respondents.
I have now argued a “post-Denton” application for relief from sanctions. There are few matters I have noted:
- Respondents should give up referring to the word “trivial”. That term has been disowned. The test is whether the breach is serious and substantial.
- If there is no good reason for the breach (i.e. it was oversight) then applicant’s should say so. The absence of a good reason is not fatal to an application for relief. Judges appreciate honesty and it enables the court to concentrate on the “third stage” where a number of factors have to be taken into account.
However the biggest difference I have noted is costs.
COSTS AFTER AN APPLICATION FOR RELIEF FROM SANCTIONS
In the hearing I was involved in the court spent more time considering the principle of who should pay the costs than the substantive application itself. Eventually it was decided that the respondent to the application should pay one half of the applicant’s costs of the hearing (but not the whole application). The case (obviously) spanned the Mitchell/Denton timeline and judicial views were now quite different. (If the case had been wholly after Denton it is possible that the respondent would have been ordered to pay the entire costs of the hearing on an indemnity basis – although there were other factors in that particular case ).
THAT IS RIGHT THE RESPONDENT TO AN APPLICATION FOR RELIEF FROM SANCTIONS WAS ORDERED TO PAY THE COSTS OF THE HEARING
This was not unheard of prior to Mitchell. A similar order was made in the Lakatamia Shipping case. However such arguments would have been unthinkable seven short days ago in a case where the applicant admitted, candidly, that there was no good reason for the breach.
RESPONDENTS MUST READ PARAGRAPHS 40 – 43 OF DENTON
Before taking a technical point or opposing an application for relief from sanctions respondents must know, and advise their clients, of the risks involved. Paragraph 40 – 43 of Denton should be memorised, in particular the risks of an unreasonable respondent paying the costs of the application and the matter then having major costs consequences for the remainder of the action.
40. Litigation cannot be conducted efficiently and at proportionate cost without (a)
fostering a culture of compliance with rules, practice directions and court orders, and
(b) cooperation between the parties and their lawyers. This applies as much to
litigation undertaken by litigants in person as it does to others. This was part of the
foundation of the Jackson report. Nor should it be overlooked that CPR rule 1.3
provides that “the parties are required to help the court to further the overriding
objective”. Parties who opportunistically and unreasonably oppose applications for
relief from sanctions take up court time and act in breach of this obligation.
41. We think we should make it plain that it is wholly inappropriate for litigants or their
lawyers to take advantage of mistakes made by opposing parties in the hope that relief
from sanctions will be denied and that they will obtain a windfall strike out or other
litigation advantage. In a case where (a) the failure can be seen to be neither serious
nor significant, (b) where a good reason is demonstrated, or (c) where it is otherwise
obvious that relief from sanctions is appropriate, parties should agree that relief from
sanctions be granted without the need for further costs to be expended in satellite
litigation. The parties should in any event be ready to agree limited but reasonable
extensions of time up to 28 days as envisaged by the new rule 3.8(4).
42. It should be very much the exceptional case where a contested application for relief
from sanctions is necessary. This is for two reasons: first because compliance should
become the norm, rather than the exception as it was in the past, and secondly,
because the parties should work together to make sure that, in all but the most serious
cases, satellite litigation is avoided even where a breach has occurred.
43. The court will be more ready in the future to penalise opportunism. The duty of care
owed by a legal representative to his client takes account of the fact that litigants are
required to help the court to further the overriding objective. Representatives should
bear this important obligation to the court in mind when considering whether to
advise their clients to adopt an uncooperative attitude in unreasonably refusing to
agree extensions of time and in unreasonably opposing applications for relief from
sanctions. It is as unacceptable for a party to try to take advantage of a minor
inadvertent error, as it is for rules, orders and practice directions to be breached in the
first place. Heavy costs sanctions should, therefore, be imposed on parties who
behave unreasonably in refusing to agree extensions of time or unreasonably oppose
applications for relief from sanctions. An order to pay the costs of the application
under rule 3.9 may not always be sufficient. The court can, in an appropriate case,
also record in its order that the opposition to the relief application was unreasonable
conduct to be taken into account under CPR rule 44.11 when costs are dealt with at
the end of the case. If the offending party ultimately wins, the court may make a
substantial reduction in its costs recovery on grounds of conduct under rule 44.11. If
the offending party ultimately loses, then its conduct may be a good reason to order it
to pay indemnity costs. Such an order would free the winning party from the
operation of CPR rule 3.18 in relation to its costs budget.
WHAT DENTON HAS DONE IS TO TAKE DIFFICULT DECISIONS ABOUT SANCTIONS HEARINGS AWAY FROM THE JUDICIARY AND INTO THE LAP OF THE “INNOCENT PARTY”
There is, really, no other way of looking at this. If a litigant is proposing to oppose an application for relief from sanctions then they have to be confident (if not extremely confident) that the application will be refused. The consequences of unsuccessfully opposing an application for relief from sanctions could be dire. With an immediate order to pay the costs the application (or most of the application) and costs consequences for the remainder of the action.
DOES THIS RENDER CPR 3.9 A “DEAD DUCK”?
A defaulting party still has to apply for relief from sanctions. However it has to be a brave litigator who opposes. In essence the party opposing the application may have much more to lose. It is only in the clearest cut of cases that applications will be opposed.
WHAT A DIFFERENCE A WEEK MAKES!
The situation now is very different to seven days ago. Now it is respondents to applications that face major risks. In any event any decision to oppose an application for relief from sanctions has to be fully thought out and the risks considered in detail.