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The Court of Appeal today rewrite the important Mitchell test

4 July 2014

Denton -v- TH White Ltd & De Laval Ltd
Decadent Vapours Ltd -v- Bevan, Salter & Celtic Vapours Ltd
Utilise TDS Ltd -v- Davies, Bolton Community College Corp & Watertrain Ltd
Court of Appeal
4 July 2014

We should already have learned that significant claims handling developments are not evenly spaced out. Today was also a big day on the important issue of how courts should deal with the issues raised by relief from sanctions applications. This type of application is of course required where a party to litigation has failed to comply with a court direction which carries a sanction in default, such as a direction for exchange of witness statements or of expert evidence.

This afternoon’s development was the giving of judgment by the Court of Appeal in three appeals (Denton v T H White; Decadent Vapours v Bevan; Utilise v Davies) in which that court’s earlier famous (or infamous) judgment in Mitchell v NGN was under the microscope. The judges included Lord Justice Jackson himself as well as the Master of the Rolls Lord Dyson. Surprisingly or not, there was one point upon which the two most important judges in the roll out of the Jackson reforms could not agree, as explained below.

Mitchell rewritten

The Court of Appeal was faced with two cases (Decadent and Utilise) which clearly would have fallen into its category of “unjust and disproportionate” judgments which needed to be corrected. The appeal court clearly wanted to end the practice of some judges taking an unreasonable approach to compliance issues, based, as they saw it, on Mitchell being sometimes misunderstood or being misapplied.

The Court of Appeal’s answer has been to entirely rewrite the Mitchell guidance. They say that they hope that the new guidance they are now issuing will avoid the need in the future to go back to previous cases, including Mitchell itself, when dealing with future cases.

The new 3 stage test

So what is the new test and how does it differ from the old one?

Stage 1

Firstly, the new exercise involves identifying the seriousness and significance of the failure to comply. The use of the “triviality” test seen in Mitchell has been consigned to history. If the breach is neither serious nor significant, while stages 2 and 3 still need to be addressed, relief is likely to be given. On the other hand, if the breach is serious or significant, then stages 2 and 3 become more important. The court looked at whether the test should be the “materiality” of the breach, but while they saw some advantage from the definition, did not expressly approve it.

In Decadent, the court fee was sent to the court to arrive 1 day late but did not arrive at the court, and was only in fact paid 3 weeks late. In Utilise, the filing of a costs budget was 45 minutes late. Neither breach was serious or significant.

Stage 2

At the second stage, the process involves looking into why the breach occurred, and whether it was for a good or bad reason. The court in fact referred back to the examples given in Mitchell of what might be a good reason.

Neither in Decadent nor in Utilise did the court accept there was a good reason as the solicitors concerned ought to have complied with the court’s orders, but that negative result in applying this limb of the test made no difference to the outcome on the appeals in those cases. So in fact the lack of a good reason, which may often be the case, could well make no difference to the outcome.

Stage 3

At this stage, the court must consider all the circumstances of the case in order to deal with the application justly, including the specific factors added to the rules last April, those being the need for litigation to be conducted efficiently and proportionately, and the need to enforce compliance with rules and orders.

Also relevant at this stage will be any history of previous breaches by either party, and whether the application has been made promptly.

In both Decadent and in Utilise, as at stage 1 it had been decided that neither breach was serious nor significant, the approach seems to have been that not much time was needed to consider stage 3 as the answer was already pointing in favour of the defaulting party. In fact, the appeal court saw that applying the requisite factors in the two cases at stage 3, they were pointing clearly towards relief being given.

A difference of judicial view

The difference between the appeal court judges arose at stage 3. All judges would have made the same decisions on the appeals, but the Dyson approach was still to see the efficient conduct of litigation/compliance points as of particular importance even though not of paramount importance, while that of Jackson LJ preferred a slightly softer approach, and he seemed to see all factors including the need to do justice as being of equal importance. The distinction between the judges will not be important in the majority of cases.

Dyson MR explained his approach by reference to the need to end the former lax culture of non-compliance by some lawyers and their clients, as we still encounter on the part of some claimant firms. As a case in point, the insurer’s appeal was allowed in Denton, where the Court of Appeal decided that the trial judge ought not to have allowed relief to the claimant who wanted to be able to rely on 6 extra statements served over a year late and 1 month before a 10 day trial. This was a significant breach, there was no good reason for it, and weighing the factors at stage 3 resulted in a decision that pointed clearly towards refusing relief.

All 3 stages

The Court of Appeal said that where the breach is neither serious nor significant, or where there is good reason for it, relief is likely to be given. 

Taking advantage?

The Court of Appeal also made clear that it was wholly inappropriate to try to take advantage of mistakes by an opponent, and that the parties to litigation should agree (presumably subject to court approval) applications for relief when it was clear that the new 3 stage test was satisfied.

Where that did not happen, tough costs sanctions should be imposed where a party unreasonably refused an extension of time, or unreasonably opposed a relief from sanctions application. Those sanctions would include imposing costs reductions on a successful litigant, or indemnity costs against an unsuccessful litigant.

Summary of effect of judgment

The effect of the changed test will we think be two-fold. Firstly, the need to show that a breach is neither serious nor significant should be an easier test to satisfy than proving a breach was not trivial, at least if you take account of the way that some courts were applying it.

And secondly, there is more evidence here of a change in the temperature. There are again clear indications that the Court of Appeal has thought twice about and reflected on the Mitchell experience. While it can speak in this judgment of “not criticising the actual decision in that case” – Jackson LJ, or of the Mitchell guidance “remaining substantially sound” – Dyson MR, the fact is that the Mitchell test has effectively been rewritten, and that it is a slightly softer test which will apply going forward, and one that defaulting parties will be able to satisfy somewhat more often than in the past.

Still a need to comply

The need for litigants and their lawyers to comply almost always with rules and orders remains. But if an otherwise well run case runs into an unexpected difficulty, there is now more flexibility, firstly by use of the new facility of buffer orders to agree an extension of time, and secondly by the fact that there should now be a somewhat greater opportunity of getting relief under the new test. It’s not yet clear what the new test will be called, but the lead appeal was the Denton v T H White case, so we may hear more of “the Denton test”.

Marie McMorrow and Tom Nener of DWF’s Intellectual Property team represented the successful appellant in Decadent (having been instructed in place of the original solicitors whose handling of the case was considered by the Court of Appeal).

Read the full judgment


For more information please contact Simon Denyer, Partner on +44 (0) 161 604 1551 or email simon.denyer@dwf.co.uk

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.