WHAT IS MEANT BY "SERIOUS AND SIGNIFICANT"? THE COURT CONCENTRATES MUCH MORE UPON THE EFFECT OF THE BREACH RATHER THAN THE BREACH ITSELF
In Denton -v- White; [2014] EWCA Civ 906. the Court of Appeal eschewed the use of the word “trivial” where a court is considering an application for relief from sanctions. Instead the Court stated that the focus should be on whether the breach is “serious or significant”. Here we take a closer look at those concepts. In particular it is clear that, in assessing “seriousness and significance” the Court is more concerned with the effect of the breach upon the efficient conduct of litigation than the nature of the breach itself.
THE DESCRIPTION OF “SERIOUS AND SIGNIFICANT” IN THE DENTON JUDGMENT
The test was set out at paragraph 24 of the Denton decision.
“In these circumstances, we think it would be preferable if in future
the focus of the enquiry at the first stage should not be on whether the breach has been
trivial. Rather, it should be on whether the breach has been serious or significant. It
was submitted on behalf of the Law Society and Bar Council that the test of triviality
should be replaced by the test of immateriality and that an immaterial breach should
be defined as one which “neither imperils future hearing dates nor otherwise disrupts
the conduct of the litigation”. Provided that this is understood as including the effect
on litigation generally (and not only on the litigation in which the application is
made), there are many circumstances in which materiality in this sense will be the
most useful measure of whether a breach has been serious or significant. But it leaves
out of account those breaches which are incapable of affecting the efficient progress
of the litigation, although they are serious. The most obvious example of such a
breach is a failure to pay court fees. We therefore prefer simply to say that, in
evaluating a breach, judges should assess its seriousness and significance. We
recognise that the concepts of seriousness and significance are not hard-edged and
that there are degrees of seriousness and significance, but we hope that, assisted by
the guidance given in this decision and its application in individual cases over time,
courts will deal with these applications in a consistent manner.”
HOW THEY WERE APPLIED IN THE INDIVIDUAL CASES
Decadent Vapours: court fees paid late
In Decadent Vapours the claimant breached a peremptory order that a fee be paid by the 19th December. The claimant’s solicitor actually put the cheque in the post on the 19th December knowing, at best, that it would arrive late (in fact it never arrived at all).
Was this a “serious and significant” breach?
62. In our view, the judge fell into error. His first task was to consider the seriousness
and significance of the claimant’s failure to pay the fees. The gravamen of the
claimant’s conduct was (i) sending the cheque by DX on 19 December 2013, so that it
would inevitably arrive one day late and (ii) running the small risk (which
unfortunately materialised) that the cheque would go astray. All failures to pay court
fees are serious, because it is important that litigants pay court fees on time. But some
failures to pay fees are more serious than others. The failure in this case was near the
bottom of the range of seriousness.”
The court should look at the seriousness and effect of the breach when considering whether to grant relief from sanctions
63. At the second stage, the judge ought to have considered whether there was good
reason for the breach. There was not, since the solicitor knew in advance that his
method of payment would inevitably give rise to a breach of the court order.
64. At the third stage, however, the judge should have concluded that factor (a) pointed in
favour of relief, since the late payment of the fees did not prevent the litigation being
conducted efficiently and at proportionate cost. Factor (b) also pointed in favour of
the grant of relief since the breach was near the bottom of the range of seriousness:
there was a delay of only one day in sending the cheque and the breach was promptly
remedied when the loss of the cheque came to light. It only affected the orderly
conduct of the litigation, because of the approach adopted by the defendants and the
court.
65. On a consideration of all the circumstances of the case, the only reasonable
conclusion in this case was to grant relief. If relief were not granted, the whole
proceedings would come to an end. It is true that the claimant had breached earlier
court orders (as indeed had the defendants). As discussed at paras 27 and 36 above,
previous breaches of court orders may be taken into account at the third stage.
Nevertheless, even taking account of the history of breaches in the Decadent
litigation, this was not a case where, in all the circumstances of the case, it was
proportionate to strike out the entire claim. In our judgment, the defendants ought to
have consented to relief being granted so the case could proceed without the need for
satellite litigation and delay.
SO A FAILURE TO PAY COURT FEES MAY BE SERIOUS BUT NOT SIGNIFICANT
There are a number of important points to take away from this:
1. There are degrees of “seriousness”.
2. The absence of a good reason is not, in itself, a reason to refuse relief from sanctions.
3. A respondent cannot argue that there has been an affect on the orderly conduct of litigation when it has chosen to take the point.
4. A respondent to an application may be under a duty to consent (remember that there are potentially major and serious cost penalties for parties who take an unreasonable stance).
Utilise: Costs budget 45 minutes late; other breaches taken into account
In the Utilise case the claimant was 45 minutes late in filing Form H. The judge held that this may have been a minor breach but it came on top of other breaches by the claimant. Relief from sanctions was refused by the Circuit Judge.
Was this a “serious and significant” breach?
The Court of Appeal had no difficulty in finding that it was not.
“76. At the first stage, the district judge ought to have considered that the delay in filing
the costs budget in breach of the October order was neither serious nor significant.
On any view, the 45 minute delay was trivial. The breach did not imperil any future
hearing date or otherwise disrupt the conduct of this or other litigation.”
Relief from sanctions should have been granted in any event
The Court went on to state that relief should have been granted. Given that this was not a serious or significant breach the court should not spend too much time on the second and third stages of the Denton test.
“There was, however, no good reason demonstrated for the delay in filing a costs
budget. As regards the third stage, neither factor (a) nor factor (b) pointed towards a
refusal of relief for the simple reason that, as we have said, the breach did not prevent
the litigation from being conducted efficiently and at proportionate cost, and did not
imperil any future hearing date or otherwise disrupt the conduct of this or any other
litigation.”
Did the earlier breach render the breach significant?
Earlier in the judgment the Court made it clear that in considering whether a breach is serious or significant the court will not normally look at earlier breaches.
“27. The assessment of the seriousness or significance of the breach should not, initially at
least, involve a consideration of other unrelated failures that may have occurred in the
past. 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. We accept that the court may wish to take into account, as one of
the relevant circumstances of the case, the defaulter’s previous conduct in the
litigation (for example, if the breach is the latest in a series of failures to comply with
orders concerning, say, the service of witness statements). We consider that this is
better done at the third stage (see para 36 below) rather than as part of the assessment
of seriousness or significance of the breach.
28. If a judge concludes that a breach is not serious or significant, then relief from
sanctions will usually be granted and it will usually be unnecessary to spend much
time on the second or third stages. If, however, the court decides that the breach is
serious or significant, then the second and third stages assume greater importance.”
The defendant should have consented in the Utilise case
“80. We consider that the Defendants in Utilise ought to have consented to the grant of
relief from sanctions. We will set aside the orders of the judge and the district judge,
and make an order relieving the claimant from the sanction imposed by rule 3.14.”
Denton: adjourning a long-standing trial date is both serious and significant
In the Denton case the action had been issued in 2005. The matter was set down for trial in January 2014. However in November and December 2013 the claimant served six witness statements (witness statements had been exchanged in June 2013). At a pre-trial review in December 2013 the judge gave the claimant relief from sanctions in relation to late service of the witness statements and adjourned the trial date.
Relief from sanctions should not have been granted
“The judge’s first task was to consider the seriousness and significance of the
claimants’ breach in filing new witness statements so long after they had been ordered
to do so. This was a significant breach, because it caused the trial date to be vacated
and therefore disrupted the conduct of the litigation.”
SO THE COURT IS LOOKING MUCH MORE AT THE EFFECT OF THE BREACH RATHER THAN THE BREACH ITSELF
The key point here is that the court is concerned much more with the effect of the breach of the breach rather than the nature of the breach itself. This is clear from the judgment in Utilise. The breach was not “serious or significant” because:-
“the breach did not prevent the litigation from being conducted efficiently and at proportionate cost, and did not
imperil any future hearing date or otherwise disrupt the conduct of this or any other
litigation.”
Further the fact that there has to be a disputed relief from sanctions hearing does not, in itself, indicate that litigation has been disrupted or not conducted efficiently, particularly when the need arises from an unreasonable stance by the defendant.