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The Jackson Reforms: a sea change in the conduct of civil litigation in the UK

11.06.2014

In 2009, Sir Rupert Jackson, a senior Court of Appeal judge, was asked to carry out a review into the costs of civil litigation in England. The resulting changes to civil litigation procedure were brought into the Civil Procedure Rules (“CPR”) in April 2013 and have become known as “the Jackson Reforms”.

The Jackson Reforms affect everyone involved in litigation, not just the lawyers. This article looks at the current status of commercial civil litigation one year on from the implementation of the Jackson Reforms. 

Outline of the Jackson Reforms

Sir Rupert’s reforms involve a number of key changes. The most relevant to commercial disputes are the expansion of permitted contingency fee arrangements; increases to damages where a defendant fails to beat a claimant’s settlement offer; and the recent introduction in the Commercial Court in April 2014 of “costs budgeting”, under which a judge will approve at an early stage in the case a budget in respect of the future costs of the case.
  
The second, and so far more controversial, part of the Jackson Reforms concerns changes to the CPR designed to promote the avoidance of delay and thus a saving of legal costs and therefore improved access to justice. While costs budgeting was only introduced in the Commercial Court one year after the Jackson Reforms came into force, the courts’ more stringent approach to granting relief from sanctions for non-compliance with court orders, timetables and deadlines was evident in the Commercial Court from day one.

As with the CPR generally, the Jackson Reforms, do not strictly apply in arbitration. Nevertheless, in terms of case management and controlling costs, arbitrators may well choose to make orders in arbitration proceedings that conform to the principles underlying the Jackson Reforms. The Reforms are, therefore, worth noting even by those who mostly arbitrate rather than litigate their English law disputes. 
 

Initial High Court decisions – May 2013 to November 2013

As with all things new, it is taking the judges a little time to arrive at a consistent approach to the new Jackson world. At first, the courts cited the Jackson Reforms to support a tougher approach where the parties had failed to take steps in litigation in time, but nonetheless judges were prepared to be lenient in appropriate cases.

  • In Fons v. Corporal Ltd (9th May 2013), the Court granted an application for a very short extension of time to serve witness evidence, while emphasising that litigating parties should be aware that the courts were required to take a much stricter view of the failures by parties to comply with directions, particularly where this was likely to lead to a waste of resources.  
  • In Re Atrium Training Services Ltd (7th June 2013), the applicants applied for a (fifth) extension of time to give disclosure on the basis that new solicitors had been appointed and the whole disclosure process had to be restarted. The Court granted a fixed extension of time but on “unless” terms, namely that the claim would be struck out if the applicants failed to comply.  
  • In Thevarajah v. Riordan (10th October 2013), the Chancery Division gave a party relief from sanctions on the basis that, subsequent to the breach, the Defendants had complied with their disclosure obligations which amounted to a material change in circumstances justifying relief from sanctions. The Judge acknowledged the desire to counter a culture of deliberate delay, but said that regard should be had to be doing justice between the parties. 
  • In Raayan v. Trans Victory Marine Inc (23 August 2013), the Commercial Court granted relief from sanctions where a party had served Particulars of Claim two days late.
Then, in November 2013, came the now famous Mitchell v. News Group Newspapers (27th November 2013), where the  Court of Appeal took a very tough approach to non-compliance, sending shock waves through the world of litigation.
   

Mitchell

Mitchell concerns the claim brought by the former Cabinet Minister, Andrew Mitchell, against The Sun newspaper for its coverage of the so-called “Plebgate” affair. The Claimant failed to file and exchange a costs budget seven days before the first Case Management Conference (CMC).  In the event, the budget was lodged five days late.
  
At first instance, Master McCloud acknowledged that, but for the Jackson Reforms, she would have agreed to adjourn the CMC and order the Claimant to pay any costs thrown away. However, she felt the Jackson Reforms demanded a tougher approach and held that, because of his non-compliance, and even if successful on the claim, the Claimant could only recover court fees and nothing further in respect of his costs of the case. Since court fees are trivial in comparison to the totality of costs in litigation this was a dramatic ruling with serious ramifications for Mr Mitchell.

Permission was immediately granted to leap frog the High Court and appeal straight to the Court of Appeal.  
The Court of Appeal upheld the decision not to grant Mr Mitchell relief from sanctions and advocated a two stage approach.
  
  1. If the non-compliance can properly be regarded as trivial, relief from sanctions will be appropriate.
  2. If the non-compliance is not trivial, the burden will be on the defaulting party to persuade the Court to grant relief. Good reasons would be fairly extreme (“debilitating illness” or being “involved in an accident”) whereas mistakes and oversight probably will not.
The Court of Appeal also criticised the decisions of first instance courts, such as Raayan, which took a more lenient stance. Lord Dyson concluded that the new, more robust approach would mean that in the future relief from sanctions would be granted “more sparingly than previously”. 
 
This decision heralds a sea change in the way the courts will deal with non-compliance.
  

Post Mitchell

Shortly after Mitchell, the Court of Appeal (16th January 2014) overturned the earlier “soft” decision of the High Court in Thevarajah  and denied the Defendants relief from sanctions for failure to comply with their disclosure obligation. Subsequently:
  
  • In MA Lloyd v. PPC International (20th January 2014), the Claimant failed to serve a witness statement in time and the Court issued an order debarring the Claimant from relying on any factual evidence. Note that the Judge described the Defendant’s failure to seek such a sanction as “unduly timid”.
  • In Web Resolutions Ltd v. E-Surv (20th January 2014), the Court set aside the grant of permission to appeal where the appeal application had not been served within the mandatory period.
  • In Lakatamia Shipping v. Nobu Su (13th February 2014), the Court issued an “unless order” requiring the Defendant to provide standard disclosure by a particular date. Absent any order to the contrary, the  CPR states that time for compliance is 4.30 pm. The Defendant’s solicitors however were working on the basis that the deadline was 5.00 pm and offered to exchange at 4.45 pm. The Claimants said the Defendant was out of time. The Defendant’s solicitors served their list at 5.16 pm. The Defendant applied for relief from sanctions and the Judge held that, because the Defendant narrowly missed the deadline by minutes rather than hours, this was a case deserving of relief from sanctions. 
  • In Newland Shipping & Forwarding v. Toba Trading FZC (6th February 2014), the parties were required to exchange witness statements by 25 October 2013. On 24 October 2013, the Defendants’ solicitors wrote to the Claimants’ solicitors advising that they were no longer acting for the Defendants and that their former clients wanted a one month extension of time for serving witness statements. The Claimants’ solicitors responded that they did not agree to the extensions and, on 29 October 2013, sought judgment against the Defendants for non-compliance.  Mr Justice Field ruled against the Defendants and judgment was entered against them for in excess of US$7 million.  The Defendants re-instructed their solicitors and applied to set aside the judgment. They argued that Mr Justice Field should have considered alternative and more appropriate, albeit still severe, sanctions when giving judgment; for example, debarring the Defendants from relying on the witness evidence they had failed to serve. The Defendants also noted that there had been no prior default on their part, they had asked for more time to serve witness evidence and the Claimants’ prior conduct had itself equally delayed proceedings. Citing the Mitchell principles, however, Mr Justice Hamblen refused to give relief; the nature of the non-performance was serious, not trivial and there was no good reason why the default had occurred.
  • In Associated Electrical Industries v. Alstom (7th February 2014), Mr Justice Smith was dealing with a failure by the Claimant to serve its Particulars of Claim in time. The Claimant sought to excuse its non-compliance on the basis that the delay was trivial because the pleadings were only 20 days late, the delay did not prejudice the Defendant, the delay did not have any impact on other court users or on the Court’s resources, there was no breach of a court order or rule which attracted an automatic sanction and the non-compliance was not intentional.  The Judge’s observations capture the shift of approach that the Jackson reforms require. On the one hand, Smith J said:

    “If my decision depended only on what would be just and fair… I would not strikeout the Claim Form and I would grant a retrospective extension of time for service of the Particulars…

    I would consider an order striking out the Claim Form to be a disproportionate response to [the Claimant’s] non-compliance”.

However, previously in Raayan the same judge had decided to give relief from sanctions but was criticised by the Court of Appeal. This time, therefore, Smith J struck out the claim saying: 

“Despite my conclusions about the fairness between the parties and what would be a proportionate response to the non-compliance I allow [the Defendant’s] application”. 

  • In Clarke v. Barclays Bank (27th February 2014), the balance between “justice” and compliance came into focus again. Deputy Judge Hollington sitting in the Chancery Division, opined that the Court of Appeal in Mitchell had not said Raayan had been wrongly decided, only that Mr Justice Smith had applied incorrect reasoning when reaching his conclusion. Deputy Judge Hollington said: 

    “My understanding of Mitchell is that the court should strive to be a tough but wise, not an officious or pointless strict, disciplinarian.”

Unintended consequences

Hardly surprisingly, the Jackson climate has caused litigants to become nervous, for example as regards time extensions, or alternatively to think that they may be able to exploit procedural issues to their advantage. This has led to an influx of applications for time extensions and a decline in what previously would have been regarded as sensible cooperation between litigating parties and their lawyers, neither of which are the desired outcome of Jackson. This is not what serious commercial litigants want and, as a result, there has been a softening of the judicial approach to non-compliance.

  • In Groarke v. Fontaine (22 May 2014), Sir David Eady allowed an appeal from a decision to refuse a Defendant permission to amend his defence late. The Court could be flexible because changing the defence wasted no court resources, would not cause delay and would not prejudice the Claimant.
  • In Hallam Estates & Anor v. Baker (19 May 2014), the Claimant sought an extension of time to serve points of dispute in respect of the Defendant’s bill of costs. The Defendants refused to agree and, before the deadline expired, the Claimant applied to the court for the extension. The issue ended up in the Court of Appeal where none other than Lord Justice Jackson himself gave the leading judgment. Jackson LJ held that the approach adopted by the Court of Appeal in Mitchell and subsequent cases was correct where there had already been a breach of the relevant deadline or rule. However, he indicated that he had not intended that parties should refrain from agreeing reasonable extensions of time and nor was it his intention that the Court should refuse reasonable extensions of time which do not have an adverse impact on hearing dates or disrupt proceedings. Rather, such requests should be considered with reference to the overriding objective to deal with cases justly and at a proportionate cost.

The Buffer Rule

As from 5 June 2014, reflecting Lord Justice Jackson’s comments in Hallam Estates,  Civil Procedure Rule 3.8 has been amended to allow parties to extend time limits by prior written agreement by up to 28 days, without seeking the Court’s permission, provided that such an extension will not affect a hearing date. The buffer rule was introduced partly to deal with the problems caused by the courts being inundated with applications for extensions of time, as well as consent orders needing to be signed off by the courts. Hopefully, this change will greatly reduce the scope for nervousness or exploitative behaviour previously seen by reason of the Jackson Reforms. 

Comment

The Jackson Reforms are meant to improve the delivery and availability of justice before the court by requiring tighter compliance with court procedure, thereby reducing delay and the expense of litigation. 

As with all things new, there have been teething problems. The judiciary is having to come to terms with the new stricter approach and Mitchell has sent shock waves around the litigation community. This has caused litigants to become nervous or, exploitative, neither of which facilitate sensibly conducted litigation. However, the signs are that things are settling down, specifically with the new buffer rule and clear judicial distinction between trivial and non-trivial breaches, and the emerging principle that applications for relief should be made before, not after, the relevant deadline has passed, all of which we welcome. 

Clearly, the Jackson Reforms bear very much on the lawyers. However, an application for an extension of time is not likely to be granted if the need arises because clients have been slow in providing instructions or an expert is late producing a report or a witness has not got round to signing a statement, and so on. All parties involved in litigation therefore are affected by the Jackson Reforms. In the brave new Jackson world, the presumption must now be that non-trivial procedural breaches will not be tolerated, or excused.

Watch this space …

The Court of Appeal has listed three appeals, relating to the principles established in Mitchell, to be heard together in mid-June 2014. The Law Society and the Bar Council have been invited to intervene in the hearings. It is hoped that their Lordships will take the opportunity to set the boundaries for what is and is not a trivial breach.
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