Courts must apply a three-stage test when dealing with applications under CPR 3.9 for relief from sanctions.
Summary
The Court of Appeal considered how courts should apply Civil Procedure Rule (CPR) 3.9 when a party to proceedings fails to comply with a rule, practice direction or court order and applies for relief from any sanctions imposed by the court. The sanctions the party is trying to set aside could include default judgment, striking out a statement of case, or costs penalties.
The court set out a three-stage test covering the seriousness of the breach, why it occurred, and any other relevant factors. This is called the Denton test.
Background
The case involved 3 separate appeals, all of which arose from parties breaching rules of procedure and applying for relief from sanctions.
Denton
The court ordered the parties to file witness statements and expert reports by June 2013. A 10-day trial was set to commence in January 2014. During November and December 2013, the claimants served six additional witness statements. Under CPR 32.10 if a witness statement is not served within the time specified by the court, the witness cannot give oral evidence unless the court gives permission.
The court granted the claimant’s application for relief from this sanction. As a result, the trial had to be adjourned. The defendants appealed.
Decadent
Decadent failed to comply with an order that, unless court fees were paid by 4.00 pm on a specified day, its claim would be struck out. A cheque was sent to the court on the due date by document exchange (DX), so it was expected to arrive one day late. The cheque was lost either in the DX or at court. The non-payment only came to the attention of the parties when the judge mentioned it at a pre-trial review. The fees were paid two days later.
The judge refused to grant relief from sanctions and the claimant appealed.
Utilise
There were two breaches of the rules in this case. First, the claimant filed a costs budget 45 minutes late in breach of an order that specifically referenced the automatic sanctions in CPR 3.14. This rule states: ‘unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees’.
Second, the claimant was 13 days late complying with an order requiring it to notify the court of the outcome of negotiations.
The district judge declined to grant relief from the sanctions in rule 3.14, holding that the second breach rendered the first breach, which would otherwise have been trivial, a non-trivial one.
The court's decision
The Court of Appeal allowed all three appeals, stating that the judge in Denton had an unduly relaxed approach to compliance whilst in Decadent and Utilise, an unduly draconian approach had been used.
It stated ‘It seems that some judges are approaching applications for relief on the basis that, unless a default can be characterised as trivial or there is a good reason for it, they are bound to refuse relief. This is leading to decisions which are manifestly unjust and disproportionate.’
Application of Civil Procedure Rule 3.9
The Court of Appeal provided guidance on how courts must apply CPR 3.9 when a party applies for relief from sanctions. Rule 3.9 states:
‘Relief from sanctions
(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need –
(a) for litigation to be conducted efficiently and at proportionate cost; and
(b) to enforce compliance with rules, practice directions and orders.
(2) An application for relief must be supported by evidence.’
There are three stages courts must follow when applying the rule.
Stage one
The court must assess the seriousness and significance of the breach. Relief is normally granted if a judge concludes that a breach is not serious or significant. The court will consider the second and third stages if it decides that the breach is serious or significant.
Stage two
The court must consider why the default occurred. The more serious or significant the breach, the less likely relief will be granted unless there is a good reason for it. Relief is likely to be granted when there is a good reason for a serious or significant breach.
Stage three
The court must evaluate all the circumstances of the case to enable it to deal justly with the application. This should include CPR 3.9(1)(a) and (b). In two of the three cases, judges in the lower courts held that weight should be given to the need to conduct litigation efficiently and at proportionate cost and to enforce compliance with court rules and orders. The third judge said that the rule does not require that they be given greater weight than other considerations but agreed that they must be specifically considered in every case.
Outcome of the appeal in Denton
The breach was significant because it caused the trial date to be vacated and disrupted the conduct of the litigation.
The court did not find a good reason for the breach.
When considering all the circumstances of the case at stage 3, CPR 3.9(1)(a) and (b) weighed heavily in favour of refusing relief from sanctions because of the effect the breach had on the orderly progress of the litigation. The claimants had ample opportunity to serve their additional evidence long before December 2013.
Outcome of the appeal in Decadent
A failure to pay court fees is serious, but the failure in this case was near the bottom of the range of seriousness.
There was no good reason for the breach because the solicitor knew in advance that his method of payment would inevitably give rise to a breach of the court order.
Rule 3.9(1)(a) supported granting relief, since the late payment of the fees did not prevent the litigation from being conducted efficiently and at proportionate cost. Rule 3.9(1)(b) also supported relief, since the breach was near the bottom of the range of seriousness. The one-day delay in sending the cheque was promptly remedied when the loss of the cheque came to light. It was not proportionate to strike out the entire claim.
Outcome of the appeal in Utilise
The court found that the 45-minute delay in filing the costs budget was neither serious nor significant. It did not peril any future hearing date or otherwise disrupt the conduct of the case.
There was no good reason for the delay but neither CPR 3.9(1)(a) nor (b) supported a refusal of relief. The breach did not prevent the litigation from being conducted efficiently and at proportionate cost. The claimant had applied for relief as soon as practicable.
The lower court was incorrect to conclude that the later breach of failing to notify the court timeously of the outcome of negotiations turned the first breach into something significant or serious.
Comments
The court commented that lower courts had misunderstood the rule. They believed that if there was a serious or significant breach without a good reason, the application for relief from sanctions should automatically fail. In fact, CPR 3.9(1) requires the court to consider all the circumstances of the case to enable it to deal justly with the application.
Promptness of the application
The promptness of an application must be weighed in the balance along with all the circumstances.
Other past or current breaches of the rules, practice directions, and court orders by the parties may be taken into account as a relevant circumstance as part of stage three when assessing whether the breach in question is serious or significant.
Parties should not unreasonably oppose an application for relief
CPR 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.
Parties should consent to the granting of relief where:
the failure can be seen to be neither serious nor significant
a good reason is demonstrated
it is otherwise obvious that relief from sanctions is appropriate
The parties should be ready to agree to limited but reasonable extensions of time up to 28 days. Parties who behave unreasonably in refusing to agree to extensions of time or unreasonably oppose applications for relief from sanctions can face costs sanctions.
Default judgment is an application for relief
The Court of Appeal has subsequently confirmed that an application to set aside a default judgment under CPR 13.3 is an application for relief from sanctions and the three-stage test applies. Read a summary of the decision at FXF v English Karate Federation Ltd & Anor.