On 27 November 2013 the Court of Appeal considered how the courts should apply applications by parties for relief from sanctions imposed by the rules or by court orders in light of the Jackson reforms which came into force on 1 April 2013. The Jackson reforms are intended to reduce the cost of litigation and increase accessibility to justice. A very significant aim of the reforms is to make parties and practitioners more compliant with court rules and orders. The key question in the appeal was how strictly should the courts now enforce compliance with rules, practice directions and court orders in the light of those aims.

In this case the Court of Appeal came down firmly and unequivocally against Mr Mitchell, the defaulting party, confirming a draconian outcome imposed by the High Court in respect of his solicitors’ failure to file a cost budget within the period required by the rules. The effect of the order is that Mr Mitchell cannot now recover his legal costs (save for court fees) in his action against News Group Newspapers. The Court of Appeal unapologetically set out its stall that compliance is now a requirement rather than an option. The judgment expressly took the opportunity to confirm that the case had been used to give an example to parties and practitioners.

Mr Mitchell brought defamation proceedings against News Group Newspapers in respect of the Plebgate affair. The proceedings fell within the Defamation Proceedings Costs Management Scheme under Practice Direction 51D to CPR 51.  The scheme provided that the parties must exchange and lodge with the court their costs budgets not less than 7 days before the date of the hearing for which the costs budgets are required. The scheme did not provide a specific sanction for failure to comply. Mr Mitchell’s solicitors failed to file the costs budget within the time limit.

CPR 3.14 came into effect in April 2013, after Mr Mitchell’s case started, and it did not therefore apply automatically to Mr Mitchell’s case. CPR 3.14 provides:

“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.”

The Master taking the hearing at which the costs budget was required had to consider what sanction to apply under the Defamation Proceedings Costs Management Scheme under Practice Direction 51D.  She decided that there had been sufficient publicity surrounding the reforms such that Mr Mitchell’s solicitors ought to have realised that the sanction under CPR 3.14 might be the type of sanction that the court might apply under the scheme in the event of non-compliance. In the light of her consideration of the conflicting reasons for non-compliance given by Mr Mitchell’s solicitors before the hearing and given by his Counsel at the hearing, the Master decided to apply the sanction. Her reasoning was as follows:

“So what we have here is a position where a defendant has attempted to comply with the rules and has produced a budget and has engaged with the process and the claimant has not produced a budget and has not engaged until the very last minute in response to prompting from myself dealing with the costs management in the afternoon of the day before. On any basis that is a breach of the Practice Direction 51D and of the overriding objective in my judgment“

It followed that Mr Mitchell was restricted to recovering only his court fees in the event that he won the litigation and not his solicitors’ very substantial estimated costs bill of £506,425. His only hope was to apply to the Master under CPR 3.9 for relief from sanction. CPR 3.9 states:

“(1) On an application for relief for any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need:

(a) for litigation to be conducted efficiently and at proportionate cost; and 

(b) to enforce compliance with rules, practice directions and orders.”

The Master refused to grant relief. Mr Mitchell appealed, arguing that the sanction was disproportionate to the effect of the default and that News Group Newspapers, the Defendant, did not suffer any prejudice as a result of it. He also argued that if relief was refused, the Defendant would receive a windfall in the form of cost protection.

The Court of Appeal acknowledged the Master’s robust decision and accepted that she was entitled to apply the sanction under CPR 3.14. Simon Browne QC, for Mr Mitchell, argued that the Master’s approach was unfair as the case was being conducted under the Defamation Proceedings Costs Management Scheme under Practice Direction 51D to CPR 51 and Mr Mitchell was therefore not aware that he was at risk of the sanctions under CPR 3.14. This argument was rejected on the basis that there had sufficient amount of publicity surrounding the new reforms and that Mr Mitchell’s solicitor’s should have taken them into consideration.

The Master of the Rolls said, in his judgment:

“the new more robust approach will mean that from now on relief from sanctions should be granted more sparingly than previously……..changes in the litigation culture will not occur overnight. But we believe that the wide publicity that is likely to be given to this judgement should ensure that the necessary changes will take place before long.”

It was held that when a court was considering any applications for relief from sanctions, while it was important to consider all the circumstances, it was of paramount importance for the courts to consider the two factors under CPR 3.9. It was highlighted that a robust application of the rules should be used to achieve wider public justice, therefore judges must have regard to a wider range of interests rather than focusing exclusively on seeking to achieve justice in the individual cases.

The Master of the Rolls noted that relief from sanctions will usually be given if the breach can be properly regarded as trivial or de minimis and an application for relief was made promptly. It was noted that the de minimis rule should be applied strictly. Furthermore, relief may be granted where there is a good reason for failing to comply with a court order or the rules. However, the court said that “good reasons were likely to arise from circumstances outside the control of the party in default” and therefore would be difficult to argue where the default lay with the party’s own solicitors.

This case sends out a stark message to all litigants and their legal representatives that the courts will no longer tolerate non-compliance with the rules, practice directions and orders during court proceedings. Litigants and legal representatives must take extra care to ensure compliance with the rules, practice directions and orders in order to avoid oversights and errors and the subsequent draconian sanctions.

If you require further information, please speak to Julian Johnstone, Head of Druces LLP’s Commercial Litigation team.