The Court of Appeal advises that the guidance given in Mitchell “remains substantially sound”.

In Mitchell the Court stated:

“If [the breach] can properly be regarded as trivial, the court will usually grant relief provided [emphasis added] that an application is made promptly”

It was therefore implicit that even where the breach was trivial, relief would probably not be granted where a prompt application was not made.

Elsewhere in the judgment it was stated:

“Moreover, as the court emphasised, the application must [emphasis added] be made promptly. This reasoning has equal validity in the context of an application under CPR 3.9.”

Again, absolutely clear an application needs to be prompt.

The Court of Appeal has now “clarified and amplified” its earlier guidance in Denton.

“Trivial” has been redefined:

“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.”

The first stage of the new is now:

“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 guidance was silent at this stage as to whether there is need to make an application promptly if the breach is not serious or significant, unlike in Mitchell.

Promptness is given brief consideration in the Denton judgment when considering “all the circumstances”:

“As has been pointed out in some of the authorities that have followed Mitchell, the promptness of the application will be a relevant circumstance to be weighed in the balance along with all the circumstances.”

The new guidance fails to explain whether the issue of promptness is to be given little weight if the breach was not “serious or significant”.

This is unfortunate.

The Court gives a strong warning to parties:

“We think we should make it plain that it is wholly inappropriate for litigants or their lawyers to take advantage of mistakes made by opposing parties in the hope that relief from sanctions will be denied and that they will obtain a windfall strike out or other litigation advantage. In a case where (a) the failure can be seen to be neither serious nor significant, (b) where a good reason is demonstrated, or (c) where it is otherwise obvious that relief from sanctions is appropriate, parties should agree that relief from sanctions be granted without the need for further costs to be expended in satellite litigation. … Heavy costs sanctions should, therefore, be imposed on parties who behave unreasonably in refusing to agree extensions of time or unreasonably oppose applications for relief from sanctions. An order to pay the costs of the application under rule 3.9 may not always be sufficient. The court can, in an appropriate case, also record in its order that the opposition to the relief application was unreasonable conduct to be taken into account under CPR rule 44.11 when costs are dealt with at the end of the case. If the offending party ultimately wins, the court may make a substantial reduction in its costs recovery on grounds of conduct under rule 44.11. If the offending party ultimately loses, then its conduct may be a good reason to order it to pay indemnity costs. Such an order would free the winning party from the operation of CPR rule 3.18 in relation to its costs budget.”

How is the non-defaulting party meant to deal with a breach that is not “serious or significant” if there has not been a prompt application? Gordon Exall’s Civil Litigation Brief recently explored the problems the non-defaulting party now faces where there is a breach. This is an acute problem in this situation. At what stage should the innocent (ie non-defaulting) party concede relief should be granted? If the promptness of the application is still important, the innocent party can presumably sit back and wait for the formal application to be made. The later it is, the less likely relief will be granted.

It is not uncommon for parties at fault to advise they will make an application for relief and ask the innocent party whether they consent to the same. Can the innocent party sit back and await a formal application and consent to the same if the application is made promptly, in the expectation the defaulting party will have to pay the costs? Will a failure to consent to relief being granted pre-application be treated as unreasonable behaviour even in the absence of a formal application, meaning the innocent party has to pay the costs of the application if, and when, it is made?

Given the Court of Appeal advised that the guidance given in Mitchell “remains substantially sound” surely this means the need for a prompt application still remains. Even if we pretend (as the Court of Appeal did) that they have the power to overturn their own decisions on a whim, surely they would have needed to expressly state the need for a prompt application for breaches which are not “serious or significant” is no longer good law.

The Denton judgment has been widely welcomed by many in the legal profession. I suspect this is largely a result of relief from lawyers that they no longer face the same risk of professional negligence claims and spiralling professional indemnity insurance. In terms of judicial thinking the judgment is a dog’s dinner.

I contacted the Senior Courts Costs Office to enquire whether they had received a request for assessment from the other side. (If not, application to swiftly follow.) They were unable to tell me because they have a backlog of claims such that any request for assessment received since April is probably not on the system yet, let alone having a date for provisional/detailed assessment.

The Practice Direction, perhaps optimistically, states:

“the court will use its best endeavours to undertake a provisional assessment within 6 weeks”

The SCCO is clearly currently struggling to even get the cases onto the system in that timescale.

Previously I was hearing those from the SCCO suggesting that the numbers of cases being brought before them for provisional assessment was much less than anticipated. This now seems to suggest that as parties are becoming familiar with the process, the numbers are increasing.

The guidance given by the Court of Appeal in Mitchell was that in relation to non-compliance with the relevant rule, practice direction or court order:

“If this can properly be regarded as trivial, the court will usually grant relief provided that an application is made promptly. … the court will usually grant relief if there has been no more than an insignificant failure to comply with an order”

The Court recognised:

“We acknowledge that even the question of whether a default is insignificant may give rise to dispute and therefore to contested applications. But that possibility cannot be entirely excluded from any regime which does not impose rigid rules from which no departure, however minor, is permitted.”

The Court of Appeal’s new guidance in Denton is that:

“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.”

The Court recognised that “seriousness and significance” is perhaps no more clear-cut than “trivial”:

“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.”

The new test to apply is:

“If a judge concludes that a breach is not serious or significant, then relief from sanctions will usually be granted”

There is clearly a range of significance in terms of non-compliance with rules, practice directions or court orders. At one end of the spectrum are “trivial”/”insignificant” ones. At the other are “serious or significant” ones. “Trivial”/”insignificant” ones might occupy the bottom 10-20% of the spectrum in terms of significance. “Serious or significant” ones might occupy the top 10-20%. There is therefore a world of difference between the Mitchell test where 10-20% of breaches might be saved by the first stage test (being categorised as “trivial” – everything at the bottom of the spectrum) and the Denton test which saves 80-90% of breaches which do not fall into the top 10-20% of the spectrum.

A 14 year old at their school debating society would not try to argue “trivial” and “not serious or significant” are the same thing.

It is therefore laughable that the Court of Appeal stated the guidance given in Mitchell “remains substantially sound”.

If a solicitor drafted a legal document and used the word “trivial” when they meant “not serious or significant” they would leave themselves wide open to a professional negligence claim. As Kerry Underwood recently commented: “When courts go wrong why do parties, rather than the state, have to pay the legal costs? If fees reflect full cost we should get full value.”

Fortunately the Court of Appeal is never bound by their own decisions and can overturn themselves whenever they feel like it. If it were otherwise we would now, for the first stage of the test, have two conflicting decisions of the same weight. Then we would be in a right mess.

Recent editions of Costs Law Reports have been so full of cases concerning applications for relief from sanctions they could have been renamed the Relief from Sanctions Law Reports. Sadly, all those trees have been cut down in vain. The Court of Appeal, giving their eagerly awaited post-Mitchell decision on the correct test to apply said:

“We hope that what follows will avoid the need in future to resort to the earlier authorities.”

The press has recently reported a decision of the first-tier tax tribunal as to whether Snowballs are cakes or confectionery, and therefore zero rated for VAT. As to whether the Court of Appeal’s new guidance is a cake or a confection, the answer is that it is a fudge. They were not prepared to state the Mitchell test was wrong but neither were they willing to confirm it was correct. Apparently, the fault lies with other judges being silly enough to believe that the Mitchell test meant what it said.

We now have a different test. The Court of Appeal optimistically hopes the new test will reduce the amount of satellite litigation generated by Mitchell. It appears the Court has forgotten what was said in Mitchell:

“We share the judge's desire to discourage satellite litigation, but that is not a good reason for adopting a more relaxed approach to the enforcement of compliance with rules, practice directions and orders. In our view, once it is well understood that the courts will adopt a firm line on enforcement, litigation will be conducted in a more disciplined way and there should be fewer applications under CPR 3.9. In other words, once the new culture becomes accepted, there should be less satellite litigation, not more.”

It now appears the courts are meant to take a less firm line. Quite how this will lead to less satellite litigation remains a mystery, particularly given the new test creates far more uncertainty as to which way a court may go on an application for relief.

Costs Law Reports will no doubt be full over the next year or two with new decisions attempting to interpret the new test.

Are you a true legal costs geek, just take a passing interest in the subject or fall firmly into the costs monkey category?

Take our quick test to find out:

Question 1 - Do you prefer to read:

A. Costs Law Reports

B. The cost law case summaries on Litigation Futures

C. OK! magazine

Question 2 - Do you think the indemnity principle is:

A. More important than life itself

B. Probably an outdated legal concept that has outlived its usefulness

C. Uh?

Question 3 - Do you dream of:

A. Becoming a costs judge

B. Retiring to the country and spending your spare time fishing

C. Moving to California and becoming a porn star

Question 4 - The impact of Jackson will be:

A. A surge of inevitable satellite litigation around costs. Happy days are here again.

B. Will bring some much needed proportionality back into civil costs but has some worrying implications for access to justice in some areas.

C. Bad, although there’s no denying Billie Jean is a dancefloor classic.

Question 5 - What is the best way to spend a Saturday morning:

A. Attending the panel session of the Association of Costs Lawyer’s Annual Conference.

B. Browsing around flea markets looking for a bargain.

C. Still drunk from the night before.

Question 6 - What do you think of the Costs Wars:

A. They were a necessary evil to provide the required case law on the interpretation of the Access to Justice Act 1999

B. They were an unwelcome distraction in the litigation process generating unnecessary satellite litigation

C. Did George Lucas direct that one?

Question 7 - At night do you like to:

A. Curl up in an armchair with a copy of Friston’s Civil Costs – Law and Practice

B. Curl up on the sofa and watch a scary movie

C. Curl up in bed with a hooker

How did you answer?

Mainly As – Congratulations. You are a true costs geek. Admittedly, you probably have no friends or social life, but never let it be said that anyone knows more than you about the indemnity principle.

Mainly Bs – You would probably pass in public for a relatively well adjusted and normal individual. But you read the Legal Costs Blog. You’re a bit weird really.

Mainly Cs – Oh dear. You are one of life’s costs muppets.

I’ve uploaded one of my rants on provisional assessment to the Costs Law Articles Archive, first published in the Solicitors Journal.

Has anyone had any initial decisions on the new proportionality test, either as part of a provisional/detailed assessment or as part of a costs management decision?

Susan Dunn of Harbour Funding writing in Costs Lawyer magazine:

“We have had varied experiences with Costs Lawyers, who are a great help on detailed assessments and bill challenges at the end of cases. However, the profession has more to do in perfecting its approach to estimating how much a case is going to cost.”

I thought we were all meant to be brilliant at costs budgeting.

I’ve just received Replies that seek to justify the time spent by the fee earner who prepared the Bill of Costs on the basis that they are a “Fellow of the Association of Costs Lawyers”. Since when did we start having those?

The Association of Costs Lawyers’ submissions to the Civil Justice Council on the impact of the Jackson reforms included:

“One court is dealing with case management on one day and then costs budgeting on a second day. This seems to be appreciated as it enables budgets to be adjusted to meet the case management decisions.”

It may be appreciated but it completely undermines the costs budgeting process. Case management and costs management are meant to go hand-in-hand. If the budgets appear disproportionate, the court adapts the case management decisions to reduce the work required and reduces the parties’ budgets accordingly. It should be clear from a properly drafted budget what impact reducing, for example, the number of expert witnesses will have. Or, at the very least, this information should be available at the case management/costs management hearing so the judge can make informed decisions. How can a judge make proportionate case management decisions if he does not know what size budgets these will produce?

Judges who are ordering split hearings are flying in the face of the judicial training on this.

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