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Life after Mitchell: The fightback begins

There has been much excitement following the Mitchell decision, and concerns from many that the Court of Appeal’s ruling on costs would lead to gamesmanship and unreasonable refusals of extensions of time by parties in the hope that they would gain a tactical advantage over their opponents at any subsequent hearing.

In Mitchell, the Court of Appeal gave guidance to the lower courts as to how to decide what sanctions, if any, should be applied to a party’s breach of the CPR or a court order. The guidance was basically a two-stage test which was as follows:

Two recent Commercial Court decisions have had to deal with this issue in the wake of Mitchell.

Summit Navigation

In Summit Navigation Ltd v Generali Romania Asigurare Reasigurare SA [2014] EWHC 298 (Comm), the Defendants failed to accept delivery of a bond for security of costs. The order for security of costs had stated that the security had to be provided by 4pm on 5 December 2013 or the action would be stayed. However, there were some delays obtaining a signature from the relevant underwriter and the bond was not delivered until the morning of 6 December 2014.

At the Commercial Court, Leggatt J granted the Claimant’s application to lift the stay. Leggatt J focused on the difference between a permanent and a temporary sanction. He stated that in Mitchell the Court of Appeal was dealing with a sanction that was permanent, i.e. the failure to file a costs budget meant that the party was permanently deprived of recovering their costs apart from court costs. In Summit Navigation the sanction was only temporary as a stay could be lifted at a later stage of the litigation.

Therefore, Leggatt J was of the view that Mitchell could be distinguished.

However, even if the Mitchell test did apply, then Leggatt J was of the view that that he would still have granted relief as non-compliance was not material, or trivial, as default had no impact on the litigation as a whole.

In the alternative, Leggatt J stated that even if he found that the default was not trivial, there was a good reason for the default which was beyond the control of the party and their solicitor. The reason the deadline had not been met was because of the failure of the underwriter to sign off the relevant documents in time. They had not merely overlooked the deadline, as had occurred in Mitchell.

Leggatt J did not stop there. Perhaps to warn off other litigants who wish to use Mitchell in shows of gamesmanship, Leggatt J reminded us that the Jackson reforms are not meant to act as a “trip wire”, nor to render compliance as “an end to itself”.

Leggatt J therefore granted relief and ordered the Defendant to pay the Claimant’s costs, pointing to the Defendant’s unconstructive approach to the litigation through its unreasonable refusal to agree to lift the stay.

Vivek Rattan

In Vivek Rattan v UBS AG, London Branch [2014] EWHC 665 (Comm), the Claimant applied for an order that the Defendant be refused to recover their costs except any court fees for failure to file a costs budget. The Claimant argued that the Defendant filed their costs budget six clear days before the CMC, and not seven.

The background to this was that on 7 February 2014 the Claimant’s solicitor sent a letter stating:

“We believe that the combined effect of the Order of Burton J and CPR Rule 3.13 is that in the absence of any equivalent agreed procedure, the parties to these proceedings are obliged to file costs budgets by 28 February 2014, which we currently intend to do. Please confirm by return that you will file your client’s budget on 28 February 2014, or alternatively provide your proposals as to any equivalent alternative procedure.”

By way of a letter dated 11 February 2014, the Defendant’s solicitor responded stating: “We agree costs budgets should be filed by 28 February 2014.”

The Claimant filed their costs budget on 27 February 2014 (seven clear days before the CMC), and the Defendant filed their costs budget on 28 February (six clear days before the CMC). The Claimant sought an order further to CPR 3.14 pursuant to the Defendant’s breach of CPR 3.13, despite warnings not to do so at the CMC.

The Claimant tried to argue in their application that:

"It is evident from the … exchange of correspondence that there was no attempt to agree any ‘equivalent alternative procedure’. The Claimant’s solicitors had merely referred to the relevant CPR and provided its interpretation of the rules. In so far as the Claimant’s solicitors asked for confirmation that the Defendant would file the budget on 28 February its interpretation was wrong. However, the Defendant’s solicitors responded by saying that they would by 28 February which they failed to do.

Accordingly, the timetable in CPR 3.13 applies as does the sanction in CPR 3.14.”

Males J sitting in the Commercial Court described the Claimant’s argument as “manifest nonsense”. Males J stated that it was clear that the exchange of correspondence was an agreement to exchange costs budgets on 28 February between the parties and that the Defendant had met this deadline. Males J was of the view that the Claimant’s attempt to seek a Mitchell-type sanction was a “misguided piece of opportunism”.

Interestingly, Males J even referred to Leggatt J’s decision above in warning to other litigants that the “Commercial Court will firmly discourage the taking of futile and time wasting procedural points.”

Comment

These two decisions go some way to allay the fears of many as to the risk of disproportionate sanctions for what would appear to be minor breaches of procedure.

However, the Mitchell decision still stands and despite these two sensible decisions there does appear to be the real risk that a similar Mitchell ruling could be reached if a court found that an application was a justifiable attempt to hold an opponent to account for failing to comply with the CPR and court orders rather than an unreasonable attempt to get one over the other side.

Despite this, these two judgments are an apparent indication of judicial unwillingness to apply Mitchell freely, within the Commercial Court at least, and go some way to redressing the balance following Mitchell.

This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.

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