The High Court has given a clear demonstration of the more forgiving post-Denton environment by granting relief from sanctions where the defaulting party admitted it had no good reason for its failure.
Mr Justice Hildyard also rejected an argument that the pending Coventry case in the Supreme Court – which questions the legality of the pre-Jackson conditional fee agreement (CFA) regime – should impinge on his decision.
The case – involving a potential professional negligence claim against London law firm Mishcon de Reya – started with a letter of claim in December 2009, after which there was lengthy pre-action correspondence. In February 2013, the claimants changed solicitors to DLA Piper, and entered into a CFA and after-the-event insurance, along with a CFA with counsel the following month.
However, DLA did not notify the defendants of the funding arrangements until June, three months later than it should have done, when it became aware of the default. Applying promptly for relief from the sanction of not recovering additional liabilities, the firm admitted that this was an oversight which did not constitute a good reason for the breach.
Undertaking the first stage of the Denton test – the seriousness or significance of the breach – the judge acknowledged that the sanction was automatic, which indicated the importance of the requirement and the possibility of encouraging the defendant to act in a different way.
However, he noted that every avenue had already been explored to find another means of resolving the dispute, and the defendants’ approach and attitude was not materially affected by the failure. The defendants did not claim that they would have acted differently had they received proper notification.
With there being no good reason for the default (the second stage), he moved onto the third stage, considering “all the circumstances of the case” and particularly the need for litigation to be conducted efficiently and at proportionate cost (factor (a)) and to enforce compliance with the rules, practice directions and orders
Ruling that any prejudice between the parties could be addressed by an appropriate costs order, Hildyard J was more concerned about the diversion of court time, but said there was no specific detriment to court users as happened in Mitchell; he also took into account that the order made in Mitchell was, in the words of Jackson LJ in Denton “very tough”.
Hildyard J said: “It was upheld as being within the generous ambit afforded in the context of case management decisions; but it is not to be taken as implying the need for such very tough orders in every case, even in somewhat similar cases. In the round, I do not think it would be fair, just or proportionate to deny the claimants relief on the basis of factor (a).”
As for factor (b), he said “the rules are a means to an end and not an end in themselves. A culture of observance must be fostered fairly; and not by inappropriate penalty. Unfair adoption of the Admiral Byng principle (the principle, as Voltaire drily remarked of the decision to shoot Admiral Byng for cowardice, that it is beneficial to kill an Admiral from time to time pour encourager les autres) would subvert the overriding objective of doing justice in every case, according to that case.
“With respect to the majority, I suspect that the apparent disagreement in point of emphasis between the majority and Jackson LJ in Denton as to the primacy (or not) of the specially identified factors may melt away in most cases accordingly.”
The defendants argued that the Coventry ruling was another ‘circumstance’ to be taken into account when deciding on relief, and “further or alternatively, that this court is mandated to take it into account given the requirement upon it, as a public body, to exercise its discretion (including when giving relief from sanctions) in accordance with the [European human rights] convention.
Hildyard J said he could not properly accord weight to this possibility “even in the context of the broad inquiry required at the third stage”, given that the Supreme Court has not decided the point.
He concluded: “Whilst the default in this case was serious in the sense that it occurred in respect of a rule for which an automatic sanction is imposed in the event of its breach, I do not consider in the round that it occasioned serious and/or significant adverse effect on the efficient conduct and progress of this litigation nor of the conduct and progress of other litigation in these courts. Despite the need to encourage compliance, I do not consider it would be just to withhold relief from sanction.”