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No "Free Ride" for Litigants

Jeff_Cox

Jeff Cox

Published: July 01, 2014

 

 

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A recent High Court decision in the case of Summit Navigation and others v Generali Romania Asigurare Reasigurare ([2014] EWHC398) has given much needed guidance as to how strictly procedural time limits must be complied with and underlines the need for litigation to be conducted efficiently and at proportionate cost.    

The claim arose against a background of the recent “Jackson” reforms of April 2013 which brought in reforms to civil litigation funding and costs in England and Wales and took effect from 1 April, 2013.  In general terms the approach of the English civil courts was to excuse non-compliance with procedural timetables if potential prejudice to the opponent party could be remedied, particularly by an appropriate costs order. Previous reforms had attempted to encourage the courts to adopt a less indulgent approach and the Jackson report concluded that a still tougher and less forgiving approach was therefore required.

Since those reforms came into force a year ago, there has been a tendency towards very strict compliance with the procedural timetable for court cases, with a view to speeding up the conduct of litigation and ensuring costs are kept at a minimum.  This has been achieved by a general requirement that courts adopt a more robust approach to granting relief to parties who default on court rules, practice directions and court orders.

Whilst those aims are broadly to be encouraged, there has been considerable uncertainty as to how strictly the courts will enforce those reforms and much comment on the approach the courts are likely to take and have taken when applying the reforms.  For example, in Mitchell ([2013] EWCA 1537) , the Court of Appeal refused relief from sanctions against lawyers representing Andrew Mitchell, a member of the UK Parliament, in his libel action against a newspaper.  The Court set out the consequences of Mitchell’s solicitors’ failure to comply with a practice direction relating to the filing of a costs budget with the Court seven days in advance of a hearing. The budget had been filed the afternoon before the hearing. The appeal was against the High Court’s decision that the Claimant should be treated as having only filed a costs budget made up solely of the applicable Court fees. Mitchell’s appeal had been fast-tracked to the Court of Appeal to allow the senior judiciary to hand the lower courts necessary guidance on the approach they should take in the light of the Jackson reforms. However, the Court of Appeal upheld the High Court’s decision.  The Court was determined that relief from sanctions would not be granted where deadlines were overlooked and so solicitors should not take on so much work that they were unable to meet those deadlines.  The sanction applied in the case was significant – it meant that the claimant could only rely on a costs budget limited to court fees, therefore excluding over £500,000 of the claimant’s own estimated legal fees.  Accordingly, even if Mitchell’s libel action succeeded his legal costs would not be recoverable.

The rationale behind the decision in Mitchell was that a robust approach to the enforcement of procedural time tables and orders should mean that litigation is pursued more efficiently in terms of time and costs to litigants.

However, the tension created by focussing on streamlining the judicial process is that one party could tend to be unfairly penalised in certain circumstances if the court takes a strict approach and imposes a sanction that could be considered disproportionate to the breach in conduct of rules applying to litigation. A consequence of this more robust approach has been that some parties have seen a missed deadline as an opportunity to take advantage, which may be in stark contract with the stated aims of the Jackson Reforms for litigation to be conducted efficiently at with proportionate cost. 

For example, while in the more recent case of Summit Navigation the decision of the Court of Appeal in Mitchell was acknowledged as being a “game changer”, Mr Justice Leggatt stressed that it “is important for litigants to understand, however, how the rules of the game have been changed and how they have not”

This case involved a claim under a H&M policy of marine insurance issued by the defendants. The defendant underwriters had sought to rely on Mitchell to turn a short delay on the part of the claimants in providing security for the underwriters’ costs, which in itself had no material impact on the efficient conduct of the litigation, to their advantage. The defendants had argued that the consequence of the claimants’ failure to provide security should be that the claim was stayed indefinitely.

The underwriters were able to take this position because, on 26 November 2013, the claimants were ordered by the Court to provide security for costs by 5 December 2013, failing which their claim would be stayed.  However, security was provided on 6 December. As such, so the underwriters argued, that failure to provide security in time triggered an automatic stay of the proceedings which they refused to agree to lift, on the basis that Mitchell required a robust approach to the application of sanctions.

Therefore to lift the stay the claimant was forced to make an application to the Court. That application was successful. The Court took the view that the claimants’ failure to provide security in time was immaterial and fitted with one of the categories set out by the Court of Appeal in Mitchell as a breach “where the party has narrowly missed the deadline imposed by the order, but has otherwise fully complied with its terms”. Furthermore, whereas the claimants’ failure was minor, the underwriters’ response had a very serious impact on the litigation. The whole timetable for the proceedings was effectively derailed, significant costs were incurred and court time wasted to the detriment of other court users. 

In other words, the reliance on Mitchell by the underwriters had the very consequence that the new approach enunciated by the Court of Appeal in Mitchell was intended to avoid. Also, this was certainly not a case where the claimant’s solicitor simply overlooked the deadline, or let it pass without attempting to comply with the order.

As Mr Justice Leggatt noted:

The defendants seem to have viewed their opposition to the stay being lifted as a potentially free ride whereby, if successful, they would obtain a fortuitous dismissal of the claim without a trial and, if unsuccessful, would still have their costs paid by the claimants as the defaulting party. It is important to discourage that approach.”

As well as the claimants being the successful party, the ensuing order for the defendants to pay the claimants’ costs reflected the defendants’ unreasonable conduct in refusing to agree to the stay being lifted and the waste of time and money which followed.

It is hoped that the decision in Summit Navigation will temper some of the strictness imposed since Mitchell by making clear the costs risk to any party seeking to take advantage of any failure by an opponent to comply with procedural and /or court imposed timetables or orders, whilst leaving in place a clear message to the lawyers conducting litigation. In this respect it is noteworthy that in three related cases recently heard together in the Court of Appeal - Denton, Decadent and Utilise - the Master of the Rolls and Vos LJ jointly said "It is clear that the guidance in Mitchell needs to be clarified and further explained." The Court of Appeal's decision in these cases will be discussed in a further article as the Jackson Reforms continue to make their effects felt on the English Judicial system.

 

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