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Restoring balance post Mitchell alongside potential further use of ADR

23 April 2014

It is worth trying to set in context recent post-Mitchell developments within the last week which have restored some balance to the important issue of compliance with rules, while at the same time looking at alternative options available to insurers to take forward settlement of claims.

Chartwell v Fergies

Last week we had the Court of Appeal’s reasons for upholding the decision of the High Court judge who allowed relief from sanctions in a situation where both sides had failed to exchange witness statements in compliance with a case management order, in a situation where of course CPR 32.10 provides a sanction.  The decision is important, not only because it is the first time that the Court of Appeal have upheld a view that relief from sanctions should be given, but also because the decision goes a long way in trying to establish more neutral territory in which a more measured approach to default is taken. 

Part of the significance of Chartwell is that the decision is set against the position where the Court of Appeal agreed both that the breach was not trivial, and also that there was no good reason for it.  It was decided that both sides were at fault for witness statement exchange not taking place, but the claimant was more to blame, as the justification it was relying on to explain why exchange had not happened, that additional disclosure was required from the defendant first, should have led the claimant to make either an application either for specific disclosure or for an extension of time. 

Nevertheless, the Court of Appeal still agreed that relief from sanctions should be given.  In applying CPR 3.9, and while regard had to be had both to “the need for litigation to be conducted efficiently and at proportionate costs”, as well as “the need to enforce compliance”, nevertheless the rule still also required the court to “consider all the circumstances of the case so as to enable it to deal justly with the application”.  Whilst the first two of these highlighted three factors were still to be regarded as the most significant ones, they would not always prevail over other factors based on all of the circumstances of the case, and the need to do justice.

In considering the justice of the case, the fact that refusal of relief would effectively end the claim was significant, and the availability of a professional negligence claim against the lawyers was not a full answer to that point.  The fault of the defendants in not being ready to exchange either was also a relevant factor. Relief from sanctions was therefore confirmed.

The significance of the judgment in Chartwell

As a historical comment, the Court of Appeal noted that in his report, Lord Justice Jackson had considered but rejected an approach that would have seen relief from sanctions given only in exceptional circumstances.  The decision in Chartwell emphasises that relief from sanctions is in fact available more widely than that.

It has been said before that judges have been told that the Court of Appeal would look to support them in upholding robust case management decisions, seen as encouragement to them to make decisions such as refusing relief.  In that light, some Courts have already developed an approach which seems to involve them, as a starting point, looking to make robust decisions which involve regularly refusing all relief from sanctions applications, and developing a reputation for that approach. After Chartwell, these types of courts will need to reconsider their approach to relief from sanctions applications. 

The Chartwell decision from the Court of Appeal is significant in demonstrating that a more measured approach is now required from all courts.  In this decision the Court of Appeal has made it clear that courts nationally “should not have as their sole objective a display of judicial musculature”.  The Court of Appeal has made it clear that it will look to support robust and fair case management, not only where relief is refused, but also where it is given. 

Kaneria v Kaneria

Also last week, from the Companies Court, came this decision of a High Court judge, which we see as influential going forwards, and again it is a decision reaching a conclusion in favour of a litigant struggling with a court deadline.

The case confirms that where an application is issued at court for an extension of time of a case management order, and where the application is issued before the step in question needs to be taken, even if it is heard after the deadline has passed, the application will be judged as one seeking only an extension of time, and not as one needing relief from sanctions. The judge saw that the 2003 Court of Appeal judgment in Robert v Momentum Services as confirming that an application for an extension of time made before a deadline had passed should not be treated as an application for relief, remained good law even after Mitchell.

The Kaneria judgment emphasises the key distinctions between the two types of case management orders, that is those involving a sanction, and those which do not.  If there is no sanction, then the party who needs more time should ask the other side for consent, and if it is not given, should apply to the court for the required extension.  A party receiving a reasonable request for an extension should respond in a spirit of co-operation, rather than seeking to take opportunistic advantage.

An application for an extension which did not involve a relief from sanctions application would be judged not under CPR 3.9 but under the overriding objective, and when applying that test, the lack of prejudice to the opposing party in granting an extension had not ceased to be a relevant factor, said the judge. The application for an extension of time succeeded when this test was applied.

The upshot of both judgments

In both the judgments in Chartwell and in Kaneria it was recognised that Mitchell had launched a period of satellite litigation.  Both courts recognised that the reality of the position post-Mitchell was that it was in the interests of non-defaulting parties to take the tactical points which had become available to them, as if their arguments succeeded, their opponents would be left substantially disadvantaged.  In Kaneria the judge saw the risk, post-Mitchell, of litigants responding to each other with aggressive non-cooperation instead of reasonable co-operation, and to avoid that the judge highlighted instead the potential from the outcome of the case to be seen as progressive in moving to a situation where there would be less satellite litigation, where requests for extensions of time would be made and responded to reasonably, and where litigants would recognise that on relief from sanctions applications, if the facts were right, it would be right to give relief.

Buffer orders

As we already knew, we are moving fairly quickly towards buffer orders being written into the CPR in such a way that they will then apply to all litigation.  The relevant wording to be added to the CPR has been worked on by the Civil Procedure Rule Committee and, post-Easter, we now expect to be able to see the wording of the new rule imminently.  It will cover the maximum period by which orders can be extended by agreement between the parties, and also how any such agreement is to be formalised. It will need to be signed off by the Minister.

In addition to reducing demands on the judiciary, it is realistic to see it as another prompt in the need to restore a sense of co-operation between the parties.

Alternatives to litigation post-Mitchell

From a number of quarters has come the suggestion that post-Jackson and post-Mitchell, and prior to the decisions in the two cases highlighted above, there must be alternative routes to litigation.  Arbitration is of course another route, although historically seen mainly if not entirely appropriate only really for commercial cases.  Is it realistically a route for insurers to go down in the range of claims they have to deal with? 

It is understandable that insurers are interested in the range of opportunities for taking forwards larger claims to settlement in appropriate and cost-effective ways.  Arbitration could possibly be a flexible means of resolving certain types of claim or certain issues in claims, in the right circumstances.  The Government’s intentions in increasing court fees can create an additional incentive, although arbitration is not cost-free either. The use of arbitration proposed by some parties should though be carefully considered in order to see whether in fact the alternative process it provides scores higher or lower than current processes on a range of issues before any decisions are made.

One suggestion currently being proposed by a QC specialising in claimant work is the Personal Injury claims Arbitration Service, or PIcARBS for short.  This offers an arbitration service which according to its website is based on rules which contain a number of elements which would be on the wish lists of many claimant solicitors.  PIcARBS arbitrations are proposed to be dealt with under the CPR as it existed prior to the Jackson reforms, that is with no costs budgeting and management, nor with the incorporation of the rule changes that led to Mitchell.  It would seem that arbitrating on the PIcARBS model would probably be doing so on the basis of a return to a system of rules pre-April 2013 that were much criticised by Lord Justice Jackson in his report and which led to the changes that were seen as important last April in creating a more balanced approach that is fair to all litigants, and which controlled to a greater extent the behaviour of litigants both against procedural timetables and as to the costs which they were incurring as they did so. 

Another suggestion that is rather more consistent with current processes used for resolving higher value claims would involve the use of a neutral facilitator who has the confidence of both sides and who can lead the parties forwards in cases in resolving issues in those claims where for one reason or another they require external input. Whilst insurers may well wish to carefully consider new proposals for claims resolution, some work will clearly be needed to create any new processes which are likely to be provide worthwhile mechanisms for dispute resolution to ensure they are both realistic, and they incorporate the important elements of the Jackson influenced changes which should, when the dust has settled, be viewed as having created worthwhile improvements to the dispute resolution process. 


For further information, please contact Simon Denyer, Strategic Legal Development Partner, on 0161 604 1551.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.