ANATOMY OF A POST-DENTON APPLICATION FOR RELIEF FROM SANCTIONS 4: COSTS, INDEMNITY COSTS & EVERYBODY IS AT RISK AS TO COSTS

In the fourth in the series of articles we look at the very heavy incentive the Court of Appeal imposed upon litigants (and litigators) not to object to applications for relief from sanctions in “all but the most serious cases”.

THE ISSUE: DISCOURAGING SATELLITE LITIGATION

The fact that the Mitchell decision was leading to satellite litigation and point scoring is recognised at paragraph 21 of the Denton judgment.

That a culture of point scoring and interlocutory skirmishing was going on was recognised in the interjections by the Judges during the course of the arguments. In the course of the Utilise -v- Davies submissions Dyson M.R. observed:-

There is a serious problem and concerns, especially if the rule committee has provided that parties can agree an extension.

Lots of innocent parties are refusing to agree extensions to grab the prize of a strike out; some solicitors say that they have a duty to their clients to do this.

It was recognised that Mitchell had led to disproportionate sanctions being imposed.  It was also leading to parties opposing applications for relief from sanctions in the hope of an overall win.

It is also recognised at paragraph 39 of the Denton judgment.:

39. Justifiable concern has been expressed by the legal profession about the satellite
litigation and the non-cooperation between lawyers that Mitchell has generate”

THE SOLUTION 1: MAKE IT CLEAR WHERE THE LAWYER’S DUTIES LIE

“40. Litigation cannot be conducted efficiently and at proportionate cost without (a)
fostering a culture of compliance with rules, practice directions and court orders, and
(b) cooperation between the parties and their lawyers. This applies as much to
litigation undertaken by litigants in person as it does to others. This was part of the
foundation of the Jackson report. Nor should it be overlooked that CPR rule 1.3
provides that “the parties are required to help the court to further the overriding
objective”. Parties who opportunistically and unreasonably oppose applications for
relief from sanctions take up court time and act in breach of this obligation.
41. 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. The parties should in any event be ready to agree limited but reasonable
extensions of time up to 28 days as envisaged by the new rule 3.8(4).”

THE SOLUTION 2: CONTESTED APPLICATIONS FOR RELIEF FROM SANCTIONS SHOULD BE “VERY MUCH THE EXCEPTIONAL CASE”

“40. Litigation cannot be conducted efficiently and at proportionate cost without (a)
fostering a culture of compliance with rules, practice directions and court orders, and
(b) cooperation between the parties and their lawyers. This applies as much to
litigation undertaken by litigants in person as it does to others. This was part of the
foundation of the Jackson report. Nor should it be overlooked that CPR rule 1.3
provides that “the parties are required to help the court to further the overriding
objective”. Parties who opportunistically and unreasonably oppose applications for
relief from sanctions take up court time and act in breach of this obligation.
41. 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. The parties should in any event be ready to agree limited but reasonable
extensions of time up to 28 days as envisaged by the new rule 3.8(4).”

THE SOLUTION 3: THE COURTS WILL “PENALISE OPPORTUNISM”

“43. The court will be more ready in the future to penalise opportunism. The duty of care
owed by a legal representative to his client takes account of the fact that litigants are
required to help the court to further the overriding objective. Representatives should
bear this important obligation to the court in mind when considering whether to
advise their clients to adopt an uncooperative attitude in unreasonably refusing to
agree extensions of time and in unreasonably opposing applications for relief from
sanctions. It is as unacceptable for a party to try to take advantage of a minor
inadvertent error, as it is for rules, orders and practice directions to be breached in the
first place. 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.”

A CLOSE LOOK AT THE COSTS PENALTIES THAT THE COURT CAN IMPOSE IF A PARTY UNREASONABLY OPPOSES RELIEF FROM SANCTIONS

I make no apologies for isolating out these issues.

  • Heavy costs sanction should  be imposed on parties who behave unreasonably in refusing to agree extensions of time or unreasonably oppose applications for relief from sanctions.
  • An order that the party, unreasonably opposing, should pay the costs of 3.9 application may not be sufficient.
  • The court can record in its order that the opposition to the relief application was unreasonable conduct to be taken into account under CPR r.44.11 when costs are dealt with at the end of the case.
  • If the offending party wins it may suffer a “substantial reduction” in its costs recovery on grounds of conduct under rule 44.11.
  • If the offending party 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 3.18 in relation to its costs budget.

Note, in particular, the use of the word “should”. This appears almost mandatory.

SO YOU HAVE TO PICK YOUR BATTLES CAREFULLY

We are now in a world where a party, not in default, can end up paying the costs of an application by a party in default and, thereafter, be heavily penalised for taking the point.

This is worth repeating and emphasising.

We are now in a world where a party, not in default, can end up paying the costs of an application by the party in default and, thereafter, be heavily penalised in costs for taking the point.

It is important, therefore, that opposition to an application for relief from sanctions is considered with considerable care. Every litigator (whether in default or not) has to know the principles set out above and in the first three articles in this series.

 

 

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