Relief from sanctions two years after Denton: A practical view from the bar
James Bickford Smith discusses judicial approaches to procedural default two years after the Court of Appeal’s decision in Denton v White Ltd and another, Decadent Vapours Ltd v Bevan and others and Utilise TDS Ltd v Davies and others [2014] EWCA Civ 906, and considers the challenges still facing practitioners and judges in dealing with applications for relief from sanctions.
It is now two years since the Court of Appeal handed down judgment in Denton v White Ltd and another, Decadent Vapours Ltd v Bevan and others and Utilise TDS Ltd v Davies and others [2014] EWCA Civ 906 (see Legal update, Relief from sanctions: the new test). This column has, on the whole, tried not to deal with too many relief from sanctions decisions in the interim. This corner of civil procedure had been the subject of such attention that there was a risk of reader fatigue, and it was clear after Denton that there was going to be a bedding down period.
Two years of subsequent litigation nevertheless provide an ample evidential base on which to draw broader conclusions than those that may suggest themselves after consultation of a single recent decision. This column seeks to draw the relevant threads together.
The broad reach of relief from sanctions principles
The first point to make is that marshalling arguments for or against relief from sanctions applications is now part and parcel of every litigator’s repertoire. When I wrote my first column on the changes that might follow from the Jackson reforms, the issue of relief from sanctions was a niche issue. There was a general view that, absent serious and sustained non-compliance with court orders by other parties, it was forensically ill-advised to raise such issues with the court. That is no longer the case.
What has been seen over the ensuing three years is that the tougher approach to non-compliance with procedural orders heralded by Mitchell and then modified by Denton has become ingrained. Indeed, those principles have come to condition judicial views even in areas of the law not governed by the CPR. For example, in BPP Holdings v Revenue And Customs[2016] EWCA Civ 121, the Court of Appeal recently had to consider conflicting Upper Tribunal decisions on “whether the stricter approach to compliance with rules and directions made under the CPR as set out in Mitchell v News Group Newspapers Ltd [2014] 1 WLR 795 and Denton v TH White Ltd [2014] 1 WLR 3926 applies to cases in the tax tribunals.” The Senior President of Tribunals’ response was unambiguous: “for the reasons I shall explain, I am of the firm view that the stricter approach is the right approach” (BPP Holdings v Revenue And Customs [2016] EWCA Civ 121, at paragraph 16) (see Legal update, Court of Appeal confirms application of Mitchell and Denton in Tax Tribunals). Specialist courts and tribunals that have remained impervious to, or have chosen to ignore, these developments are now the exception rather than the rule.
The problem of uncertainty
From the outset of the proposed reforms, it was clear that there was a serious risk of confusion engendered by lack of uniformity in judicial approach. Numerous steps were taken to try and combat this, ranging from judicial training to the designation of specialist Court of Appeal judges to sit in particular cases. It is hard to gauge the success of these efforts, given that, such as it is, it inheres in what has not happened. What can be said confidently, however, is that this success has been incomplete at best. The reality is that, even at Court of Appeal level, decisions are being reached that can only be reconciled with each other by relying on very fine distinctions.
This can be illustrated by one recent pair of decisions. In The Prudential Assurance Company Limited v Commissioners for Her Majesty’s Revenue and Customs[2016] EWCA Civ 376 (see Legal update, Strong warning against pleading in general terms in GLO claim (Court of Appeal)), Lewison LJ gave a robust judgment focused on criticisms of lax pleading practice and slow conduct of litigation. He placed particular weight on the importance of the pleadings accurately disclosing all the issues that either party would seek to argue:
“It is for the parties (subject to the control of the court) to define the issues on which the court is invited to adjudicate. This function is the purpose of statements of case. The setting out of a party’s case in a statement of case enables the other party to know what points are in issue, what documents to disclose, what evidence to call and how to prepare for trial. It is inimical to a fair hearing that a party should be exposed to issues and arguments of which he has had no fair warning. If a party wishes to raise a new point, he should do so by amending a statement of case.”
(The Prudential Assurance Company, at paragraph 20.)
He continued:
“Although in days gone by the court would routinely allow late amendments to statements of case, in more recent time attitudes have changed. It is now the case that the court requires strong justification for a late amendment. This is not only in the interest of the opposing party but also consonant with the interests of other litigants in other cases before the court and the court’s duty to allocate a proportionate share of the court’s resources to any particular case. Where a new issue arises which is not foreshadowed in a statement of case, a party needs the court’s permission to advance it. The court is then faced with a discretionary case management decision, to be exercised in accordance with the overriding objective.
As Mr Ewart QC for HMRC opened the appeal to us it soon became clear that the lack of pleadings meant that the parties disagreed about what was the scope of the trial; what were the issues that the judge had to decide; whether points had or had not been raised; whether or not they could be raised on appeal; and even what the judge had decided. This is no way to conduct litigation involving millions of pounds. We were told that this unacceptably cavalier approach to pleadings was a common feature of this kind of litigation. It must stop.”
(The Prudential Assurance Company, at paragraphs 21 to 22.)
A very different approach to late amendment was taken in McTear and another v Engelhard and another[2016] EWCA Civ 487 (see Legal update, Court of Appeal overturns decision refusing relief from sanctions). This is a significant case that has been discussed in a previous column (see Article, Avoiding too narrow a focus on relief from sanctions: a practical view from the Bar). For present purposes, however, it is sufficient to note how Vos LJ approached an amendment application made in the trial window itself. The judge had taken “a very dim view” of the defendants having “waited until the trial to apply to re-amend the defence to plead new matters”. He had also, in a series of statements described by Vos LJ as “pejorative sub-paragraphs” been highly critical of the defendants’ approach to the litigation and court orders. In the course of overturning the judge’s orders, Vos LJ dealt with the amendments as follows:
“The arguments addressed by the parties to this aspect of the appeal concerned the substantive merits of the 3rd judgment, including the judge’s treatment of the alleged set-off. I would only say two things about set off; first, it is generally a matter of law, albeit a notoriously difficult one; and secondly that I was somewhat surprised by the view that set off had not already been pleaded when the amended defence alleged that, as a necessary consequence of the Credit, the cash balance in the amount of the Sum was ‘extinguished’.”
(McTear v Engelhard, at paragraph 52.)
In other words, as this amendment took a point that a highly experienced lawyer thought should have been pleaded all along, the fact that it had not been pleaded until the eleventh hour was not as serious a procedural default as the first instance judge had thought it to be. It is respectfully submitted that, whether right or wrong, that relaxed approach to amendment is very hard to reconcile with Lewison LJ’s judgment in The Prudential Assurance Company. Likewise, Vos LJ’s treatment of the service of evidence on the eve of trial cuts across the grain of many first instance decisions.
This does not, of course, mean that Vos LJ was “wrong”: reading the judgment in full, one can see why, on a broader view of the case, the sanctions and approach adopted by the first instance judge were open to being overturned. In fairness to that first instance judge, however, the approach that he had adopted was one entirely in keeping with the revised judicial approach to non-compliance with court orders generally believed to have been introduced by Mitchell.
In short, therefore, there remains a quandary between, on the one hand, the desire to take a more robust approach to procedural non-compliance and, on the other hand, a recognition that that robust approach may operate harshly against the incompetent party with a good case. Mitchell struck the balance firmly in favour of the former approach. Denton left matters in a likely fairer place, but one that was always likely to be productive of uncertainty. That is duly what has materialised. Accordingly, those who approve of Denton and say that it has “settled” the law (a phrase much seen in first instance judgments) need to accept that a corollary of it has been an increase in uncertainty regarding how specific applications will be disposed of.
The problem of a lack of judicial resources
It has been the misfortune of the Jackson reforms to be implemented at a time when there has been unprecedented pressure on judicial resources. The situation in too many court centres remains somewhere between the disappointing and the dire. Imprudent staffing cuts, court closures and the alienation of experienced judges (some of whom have consequently retired from office earlier than they were obliged to) have all contributed to a deterioration in the administration of civil justice, notably in the County Court. A two-tier judicial system now seems
entrenched: on the one hand, one sees innovative and intelligent developments in the Rolls Building, much of the High Court, and some specialist tribunals; on the other, one sees a breakdown in basic service levels elsewhere.
The ensuing question, which has not been addressed to date, is whether it is in fact any longer appropriate for there to be a single CPR. Given the proliferation and increased density of court guides, it might not be as radical a step as it seems for separate procedural codes to be adopted in and out of the High Court. More immediately, however, it is an increasingly difficult question as to whether a decision on relief from sanction reached in the context of long delays in the production of court orders or court responses to party applications can easily be read alongside decisions reached in, for example, the TCC. One reason for this is that there comes a point where, if a court is not responsive or active in case management, the parties have to chart their own route. While the ensuing confusions can be the subject of later judicial criticism, they are an inevitable by-product of resourcing problems. As such, it seems much harsher to penalise parties for them than would otherwise be the case.
At present, these problems have not been grappled with by rule makers or the Court of Appeal. At some stage that will have to happen.
The desirability of agreement
Particularly in the type of context sketched out above, the strong desirability of inter-party co-operation in amending directions so as to take matters to trial in a relatively orderly fashion should be obvious. It is, therefore, something of a puzzle why some developments in the rules, and some judicial dicta, seem directed at limiting the parties’ ability to vary directions or waive non-compliance. The result will, inevitably, be a proliferation of applications. Despite this, it remains much the best advice to try and reach agreement unless one has a high degree of confidence that the other side will come out of any application on the losing side. As Denton has reduced the degree of confidence one can have in how many applications will be determined, it remains a powerful argument for compromise on procedural matters.
Applications and how to win them
However advisable it is to try and reach a working compromise on directions with other parties, most readers will have encountered situations where this is impossible. That may be because other parties or their lawyers are dilatory or are actively seeking to avoid doing what they have been ordered to do. Or it may be because other parties or their lawyers are seeking to create a false sense of urgency and pressure by taking a very aggressive stance on procedural or other issues.
In either scenario, it is wise to proceed on the assumption that there will in due course be a contested application, rather than in the hope that “sanity will break out”. Given the uncertainty Denton has engendered as to how applications will be resolved, such applications should be viewed as non-trivial challenges. The best way of meeting them, and winning any contested hearing, is clear: spot the potential issue in advance and devise a strategy that will leave one looking as good as possible when the issue goes before the judge. This does not amount simply to advice to comply with directions. At times it becomes obvious that compliance will be impossible, or that the other side will never accept that one has complied with directions. The question in the former situation is how to deal with, explain and justify noncompliance significantly earlier than the proverbial email sent a few hours after a deadline has elapsed. Conversely, if one is the party seeking to ensure compliance with orders, or disrupted by an opponent’s dilatory approach, the question is how to prepare the ground for arguments that non-compliance has been serious and prejudicial.
Accordingly, while it is not hard to find commentary on the finer details of what specific procedural defaults have or have not been deemed serious, and what sanctions have or have not been imposed as a result, the best guide to how a particular application will be dealt with is simply that the party who has fallen into an application tends to come out in a significantly worse state than the party who was anticipating it. The prima facie surprising decisions on relief applications may simply reflect the twin facts that judges are human, and that with hard work there remains plenty
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