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Charles Samek QC and Adam Solomon in landmark Court of Appeal victory

The Court of Appeal has delivered an important judgment, applying Mitchell and Denton to an earlier decision of a Lord Justice of Appeal.

In Michael Wilson & Partners, Limited v Sinclair et al. [2015] EWCA Civ 774 (23.7.15), the Court of Appeal overturned an order of Lewison LJ in which he refused to review his own earlier decisions. In those decisions, Lewison LJ declined to lift a stay on the appeal of Michael Wilson & Partners, Limited (“MWP”) against a decision of Teare J, and struck out the appeal in consequence of not lifting the stay.

The decision is important as it:

confirms the unrestricted scope of the jurisdiction under CPR 3.1(7) for a court to revisit one of its earlier orders;
marks a further retreat from the Court’s previous landmark decision in Mitchell v News Group Newspapers Ltd [2014] 1 WLR 795;
underlines the distinction between imposing a sanction in the first place and granting relief from a sanction imposed;
emphasises the significance of the types of sanctions which may be imposed;
reinforces the proposition in the context of procedural default that striking out is a sanction of last resort.

Background

In 2012 the respondents applied to strike out large parts of MWP’s claim against them on the grounds that the foundation of the claim was a premise the falsity of which had been determined adversely to MWP in an arbitration between MWP and a third party (“Emmott”), and to which the respondents were not party.

In September 2012 Teare J ruled in the respondents’ favour but granted MWP permission to appeal to the Court of Appeal: see Michael Wilson & Partners, Limited v Sinclair et al. [2013] 1 All E.R. (Comm) 476.

In January 2013 Rix LJ ordered that MWP had to provide security for the costs of the appeal and also discharge the payment on account orders made by Teare J.

The sanction which he imposed for non-compliance was the stay of the appeal. He expressly declined to make an “unless” order with the sanction of strike out.

MWP was late in discharging the payment orders of Rix LJ. It paid over 3 ½ months late, by which time the appeal had become stayed.

MWP applied on paper to lift the stay and at the same time the respondents wrote to the Court of Appeal requesting that the appeal be struck out (and later the respondents made formal application to strike out).

Both applications came before Lewison LJ in July 2013 who, applying the new version of rule 3.9 refused to lift the stay and whereupon struck out the appeal as it served no further purpose.

MWP, as it was entitled to do, applied to the Court of Appeal for an oral hearing to review Lewison LJ’s decisions.

The review application came on before Lewison LJ again in December 2013. By the time of the hearing the Court of Appeal had delivered judgment in the Mitchell case. Lewison LJ describe that case as a “game-changer”. He held that MWP was in breach of Rix LJ’s order, that the breach was serious and that there was no good reason for the breach. He then made reference to what was described in Mitchell as the “paramount” considerations of the need to conduct litigation efficiently, at reasonable expense and enforcing compliance with rules and orders: see Michael Wilson & Partners, Limited v Sinclair et al. [2013] EWCA 1732.

Subsequent to that decision, the Court of Appeal delivered its judgment in Denton & Others v TH White Ltd [2014] 1 WLR 3926 in July 2014.

Promptly after the hand-down of the judgment in Denton, MWP applied again to the Court of Appeal under CPR 3.1(7) for the Court to set aside Lewison LJ’s December 2013 refusal, to conduct a fresh review of Lewison LJ’s July 2013 on-paper decisions and to reverse the strike-out and lift the stay on the appeal. The basis for the application was a material change in circumstances since Lewison LJ’s December 2013 decision, namely the Court of Appeal’s restatement in Denton of the principles applicable to the exercise of the court’s discretion to grant relief from sanctions. In Denton, the Court of Appeal had explained that the two considerations described as “paramount” above were in fact not “paramount” but were of particular importance to be taken into account with all other circumstances so as to arrive at a just result.

The decision

Richards LJ (one of the so-called “Jackson Five”, and part of the Court in Mitchell), with whom Christopher Clarke LJ agreed, held that Lewison LJ’s decision was “plainly wrong”. It was the case that MWP was in breach of Rix LJ’s order, that such breach was serious or significant and that there was no good reason for it. However, Richards LJ held that:

“The problem about Lewison LJ’s LJ’s approach, however, is that he went beyond attaching particular importance to those two factors. Basing himself understandably on the language of Mitchell, he treated them as paramount considerations which were effectively determinative against the grant of relief from sanction; and he did not do what Denton has since stressed must be done, namely have regard to all the circumstances of the case. This is a key point, since consideration of all the circumstances of the case casts a very different light on the matter.”

He drew attention to the fact that the sanction imposed by Rix LJ in the event of MWP failing to pay the money in time was a stay, not a strike-out, and that he expressly declined to make an unless order with a strike-out sanction. He also made clear that strike-out was “a sanction of last resort” echoing Lord Neuberger in Global Torch Ltd v Apex Global Management Ltd and Others (No.2) [2014] 1 WLR 4495 and cited Leggatt J’s recent judgment in Summit Navigation Ltd v Generali Romania Asigurare Reasigurare SA [2014] 1 WLR 3472. In that case Leggatt J held that there was 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.”

Richards LJ concluded that:

“Applying the restatement in Denton – recognising that this was a significant or serious breach and that there was no good reason for it, giving particular weight to the two factors specifically mentioned in rule 3.9(1) but having regard at the same time to all the other circumstances to which I have referred – I am left in no doubt that Lewison LJ’s decision was wrong.”

However, the next issue was whether it was appropriate to revisit Lewison LJ’s decision under CPR 3.1(7) and applying the principles in the Court of Appeal decision in Tibbles v SIG plc [2012] 1 WLR 2591.

Richards LJ held that view that the principles summarised by Rix LJ in Tibbles provided “appropriate guidance but that the situation is one where the power under rule 3.1(7) should be exercised with particular caution.” He held that changes in the law or in the understanding of the law would not generally provide a good reason for allowing earlier appellate decisions to be reopened.

However, he concluded that:

“The circumstances of this case do, however, strike me as truly exceptional. Mitchell, as the first decision of the Court of Appeal on the new wording of rule 3.9, gave important guidance on the approach of the courts towards application for relief from sanction. But as the court made clear in Denton, that guidance, or the way the guidance was widely understood, led to decisions that were manifestly unjust and disproportionate, to the extent that within a few months the court found it necessary in Denton to provide further guidance, restating the relevant principles. I have explained at length above that when this case is viewed through the lens of Denton rather than Mitchell, Lewison LJ can be seen to have approached the matter too narrowly and to have reached a decision that was plainly wrong. It seems to me that the restatement in Denton, and the very different light it casts upon this case, amounted to a sufficient change of circumstances, or to something sufficiently out of the ordinary, to justify exercising the discretion under rule 3.1(7) to revisit Lewison LJ’s order.”

Accordingly, it was appropriate to exercise the Court of Appeal’s discretion afresh and in view of his earlier conclusions as to the way in which Lewison LJ had exercised his discretion, it was appropriate to set aside Lewison LJ’s December 2013 order, overturn his July 2013 order, set aside the striking out of the appeal and to lift the stay so as to allow the appeal to proceed.

Christopher Clarke LJ concurred adding that he agreed that “whatever Draco might have thought, the circumstances of the case pointed overwhelmingly towards the grant of relief from the sanction of stay. Such an order is the way to deal justly with the application.”

Conclusion

The decision is a welcome one. First, because it achieved justice in the instant case. Lewison LJ’s decision was, as the Court of Appeal held, plainly wrong. Secondly, because it suggests that Atkin LJ’s dictum that procedure should be the handmaiden, not the mistress, of justice still has life-force. Thirdly, the underlying appeal will now be able to proceed; that appeal raises important questions about the interplay between litigation and arbitration, and specifically it raises the issue as to whether an arbitral decision as between A and B should bind A in subsequent litigation between A and C.

Charles Samek QC and Adam Solomon of Littleton Chambers together with David Holland QC of Landmark Chambers acted for the successful applicant, MWP.