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Richards: Mitchell led to decisions that were “manifestly unjust and disproportionate”

RCJ [1]

Richards LJ: MWP missed the deadlines “by a very large margin”

The Court of Appeal ruling in Mitchell led to decisions that were “manifestly unjust and disproportionate”, the deputy head of civil justice has said.

Revoking an order by Lord Justice Lewison made before the later ruling in Denton, Lord Justice Richards said the “very different light” cast on the case by Denton amounted to “a sufficient change in circumstances” for him to exercise his discretion.

Richards LJ – who was one of the ‘Jackson Five’ judges who sat on Mitchell – described the circumstances as “truly exceptional”. He went on: “Mitchell, as the first decision of the Court of Appeal on the new wording of rule 3.9, gave important guidance on the approach of the courts towards application for relief from sanction.

“But as the court made clear in Denton, that guidance, or the way the guidance was widely understood, led to decisions that were manifestly unjust and disproportionate, to the extent that within a few months the court found it necessary in Denton to provide further guidance, restating the relevant principles.

“I have explained at length above that when this case is viewed through the lens of Denton rather than Mitchell, Lewison LJ can be seen to have approached the matter too narrowly and to have reached a decision that was plainly wrong.”

Michael Wilson & Partners (MWP), which provides legal and consultancy services in Kazakhstan, had applied under CPR rule 3.1(7) for revocation of Lewison LJ’s order.

The Court of Appeal heard in Michael Wilson & Partners v Sinclair and others [2015] EWCA Civ 774 [2]that MWP was in dispute with Sokol Holdings, an American company with interests in Kazakhstan, following complaints relating to “secret commissions”.

Richards LJ said the dispute was dealt with under an arbitration clause, after which Sokol applied to strike out claims made by MWP in the High Court.

Mr Justice Teare struck out the claim, ordering MWP to pay the costs. MWP appealed, and the case came before Lord Justice Rix in January 2013.

Rix LJ ordered MWP to make payments totalling £339,000 by the end of 30 January or the appeal would be stayed.

However, Richards LJ explained that MWP missed the deadlines by a “very large margin”, not making the payments until almost four months later.

The firm was notified that its appeal had been stayed and filed an application to lift the stay. Sokol filed a formal application to strike out the appeal.

Lewison LJ heard the applications in December 2013. Treating the application to lift the stay as “in effect an application for relief from sanctions”, he dismissed it “in strong terms”, relying on Mitchell. Since it was not going to proceed, Lewison LJ struck out the appeal.

Within two weeks of the ruling in Denton the following summer, MWP applied for a revocation of Lewison LJ’s order.

Richards LJ said the breach by MWP was “significant or serious”, given the “lengthy period” of default and there was no good reason for it, but, applying the third stage of the Denton test, Lewison LJ had failed to consider “all the circumstances of the case”.

Richards LJ said the sanction imposed by Rix LJ was “a stay, not a strike-out” and he “expressly declined” to make an unless order with a strike-out, which was “a sanction of last resort”.

Lord Justice Richards concluded that Lewison LJ’s “draconian approach” was wrong. He revoked the order, allowed MWP’s application and, granting relief from sanction, lifted the stay and allowed the appeal to proceed. Lord Justice Christopher Clarke agreed.