Costs Update-the Retreat from Mitchell

It is now well known that, in Denton v T.H. White Limited & others, [2014] EWCA Civ 906, [2014] 4 Costs LR 752, 4 July 2014, the Court of Appeal retreated from (or, as it preferred to say, explained and clarified) the draconian decision in Mitchell v News Group Newspapers Limited [2013] EWCA Civ 1537, [2014] 1 WLR 795. Denton introduced four important changes (or ‘clarifications’) to the Mitchell approach to relief from sanction. The first was to redefine the nature of the breach that triggered the need for the court to investigate further. Mitchell had laid down that only “trivial” breaches could be excused without more. Denton said that the test was whether the breach was “serious or significant”. Importantly, the court defined an “immaterial” breach as one which did not imperil future hearing dates nor otherwise disrupted the conduct of the litigation. In practice, there are going to be few breaches that will be material under this test.

The court in Denton added that there might be some breaches which, though immaterial on this definition, remained serious,  such as a failure to pay a court fee. Again, this looks like a small sub-category. The second change was (by implication) to water-down what the court should regard as a “good reason”  by emphasising that the (extreme) examples given in Mitchell of “good reason” (such as the solicitor suffering from a debilitating illness) were “no more than examples”. The third change was to say that it was a “misunderstanding” that Mitchell decided that, if the breach was significant or serious and there was no good reason for it, the application for relief from sanction would automatically fail. The fourth change was that, when considering all the circumstances of the case, the court no longer had to accord “paramount importance” to the two factors set out in CPR r. 3.9 ((a) the need for litigation to be conducted efficiently and at proportionate cost and (b) the need to enforce compliance with rules, practice directions and orders) but, instead, merely had to attach “particular importance” to those factors, amongst others. Those other factors could include the prejudice to the parties concerned of the breach.

In Denton the Court of Appeal said that “heavy costs sanctions” should be imposed on parties who act in this way. You have been warned!