INDEMNITY COSTS AGAINST RESPONDENT IN RELIEF FROM SANCTIONS APPLICATION: WHAT A WASTE?

There is a brief report on Lawtel* of the decision of Popplewell J in Viridor Waste Management Ltd -v- Veolia Es Ltd (QBD (Comm) 22/05/2015.

THE CASE

The claimant was bringing an action for £27 million unjust enrichment.

  • The claim form was served towards the end of the four month period.
  • An extension of time was agreed for service of the particulars of claim.
  • The particulars arrived one day late, having been sent by 2nd rather than 1st class post.
  • The defendant complained that service by 2nd class mail  was not effective.
  • The particulars were then re-sent by hand, 1st class post and email.
  • The defendant refused to consent to an application for an extension of time.

THE DECISION

  • The particulars had been in the defendant’s hands by lunchtime on the 15th January, a few hours after the time permitted for service.
  • The default had no real impact on the course of the litigation, other litigation or court users.
  • No delay or inefficiency had been caused.
  • The submission that any delay was always serious and significant was unrealistic and not in accordance with the guidance in Denton.
  • The delay was neither significant nor serious.
  • The defendant had decided to take unreasonable advantage of the claimant’s default in the hope of obtaining a windfall strike-out.
  • It was obvious that relief from sanctions was appropriate and the defendant had caused unreasonable delay in refusing to consent and that had impacted other court users.
  • As the defendant had been opportunistic and unreasonable, it was appropriate to award the claimant costs on an indemnity basis.

THE LITIGATOR’S DILEMMA

With £27 million at stake it is not difficult to see why the defendant was keen to take a procedural point.  This case exemplifies the “litigator’s dilemma” in assessing whether to oppose an application for relief from sanctions. (It is an interesting question whether it was safer to refuse to co-operate than risk a £27 million action for negligence for failing to take the point).

THOSE PASSAGES IN DENTON

In any event everyone needs to be aware that Denton was double-sided. It did not encourage breaches of the rules; it sought to discourage satellite litigation.

“Satellite litigation and non-cooperation

  1. Justifiable concern has been expressed by the legal profession about the satellite litigation and the non-cooperation between lawyers that Mitchellhas generated. We believe that this has been caused by a failure to apply Mitchell correctly and in the manner now more fully explained above.
  2. 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.
  3. 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).
  4. It should be very much the exceptional case where a contested application for relief from sanctions is necessary. This is for two reasons: first because compliance should become the norm, rather than the exception as it was in the past, and secondly, because the parties should work together to make sure that, in all but the most serious cases, satellite litigation is avoided even where a breach has occurred.
  5. 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.
  6. We should also make clear that the culture of compliance that the new rules are intended to promote requires that judges ensure that the directions that they give are realistic and achievable. It is no use imposing a tight timetable that can be seen at the outset to be unattainable. The court must have regard to the realities of litigation in making orders in the first place. Judges should also have in mind, when making directions, where the Rules provide for automatic sanctions in the case of default. Likewise, the parties should be aware of these consequences when they are agreeing directions. “Unless” orders should be reserved for situations in which they are truly required: these are usually so as to enable the litigation to proceed efficiently and at proportionate cost.”

* This post is based on the Lawtel summary.

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