21 February 2014Print This Post

High Court sends out strong warning against ‘tactical’ use of Mitchell

Watthey: importance of such rulings cannot be overestimated

The Mitchell ruling is not to be used as a tactical weapon, the High Court has warned litigators in a case where its opprobrium was reserved for the conduct of the party on the other side of the default.

The judgment of Mr Justice Leggatt – in which he sought to distinguish the facts from those in Mitchell – is likely to be welcomed across the litigation world.

He said the defendants seemed to have viewed their opposition to a stay being lifted in the case as “a potentially free ride whereby, if successful, they would obtain a fortuitous dismissal of the claim without a trial and, if unsuccessful, would still have their costs paid by the claimants as the defaulting party”. It is, the judge emphasised, “important to discourage that approach”.

Summit Navigation v Generali Romania [2014] EWHC 398 (Comm) concerns a claim on a policy of marine insurance. Under a consent order, the claimants had to provide additional security for costs by 4pm on 5 December 2013, failing which the action would be stayed.

In the event, security was made available on the morning of 6 December, whereupon the defendants’ solicitors refused to accept it, on the basis that the action was now stayed. They refused to consent to the lifting of the stay, and the timetable was derailed: nothing was done in the claim for over two months.

While he said that a stay was a sanction, Leggatt J said not all sanctions are equal for the purposes of CPR 3.9: “There is, in my view, 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.”

The stay was intended to be “non-permanent”, he said, and rule 3.9 is “quite capable of accommodating more than one approach to applications for relief from sanctions taking account of the nature of the sanction and the nature of the relief sought”.

He distinguished the case from Mitchell: “In giving guidance as to how the amended CPR 3.9 should be applied, the Court of Appeal in Mitchell was not concerned with the ‘rather special form of order’ that is an order for security of costs, nor with the granting of relief from a sanction which was not intended to be permanent.”

Under the terms of the new rule 3.9 therefore, neither the need for litigation to be conducted efficiently and a proportionate cost, nor to enforce compliance, provided a good reason to refuse to lift the stay, said Leggatt J.

If he was wrong and Mitchell did apply, he continued, he would still grant relief. The non-compliance was ‘trivial’ – although the judge preferred to say it was not material (“since the whole thrust of the new approach is to inculcate a culture of compliance with rules and orders and to dispel an attitude which trivialises even ‘minor’ breaches”) – and the claimants’ insurance broker was responsible for the non-compliance.

And even had he not come to these conclusions, Leggatt J said he would still have considered it just to grant relief.

“The fact that the claimants missed the deadline for putting up security for costs by a day did not in itself have any impact on the efficient conduct of these proceedings, nor on the wider public interest of ensuring that litigants can obtain justice efficiently and proportionately.” To rule otherwise would have rendered compliance an end in itself, which the Master of the Rolls in his March 2013 lecture, as approved by the Court of Appeal in Mitchell, had warned against.

Indeed, “unlike the claimants’ default itself, the defendants’ response to it has had a very serious impact on the litigation. The whole timetable for the proceedings has been derailed, significant costs have been incurred and court time has been wasted to the detriment of other court users.

“In other words, the reliance placed on Mitchell in this case has had the very consequences which the new approach enunciated by the Court of Appeal in Mitchell is intended to avoid.”

The defendants had acted unreasonably in refusing to agree to lift the stay, he said, and “disregarded the duty of the parties and their representatives to co-operate with each other in the conduct of proceedings, and the need for litigation to be conducted efficiently and at proportionate cost. It stood Mitchell on its head”.

Leggatt J said he was putting his ruling in writing in the hope of discouraging other litigants from makings similar arguments. He further penalised the defendants by making them pay the claimants’ costs.

James Watthey, the barrister at Hardwicke Chambers instructed by Hughes & Dorman to act for the claimants, said: “Today’s judgment is likely to be met with relief amongst solicitors and copied by other High Court judges who are keen to distinguish Mitchell from the circumstances of other cases before them, on the basis that the sanction in question is of a different and less harsh nature.

“If litigants think that they can hitch a ‘free ride’, as the judge put it, on the on the back of their opponent narrowly missing a deadline, they are wrong…

“What constitutes a ‘just result’ remains a key question for the court to determine. The courts have not turned from dispensers of justice into machines, mechanically insisting on compliance as ‘as an end in itself’ – this is certainly good news for litigators.

“The importance of these High Court judgments cannot be overestimated. Daily, at the coal face of litigation in the county court, the junior judiciary is refusing applications for relief in circumstances where the result produces a clear injustice between the parties, despite the lack of any real countervailing imperative.”

Cubism Law and Jason Evans-Tovey of Crown Office Chambers are acting for the defendants.

By Neil Rose

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