Chartwell – relief from sanctions

Chartwell Estate Agents Limited v Fergies Properties SA & Hyam Lehrer [2014] EWCA Civ 506 is a cautionary tale of a procedural spat that went wrong. The claimant sued the defendants for estate agency fees of £425,000. Directions were given which required a simultaneous exchange of witness statements by 4pm on 22 November 2013.

Trial was fixed for 29 April 2014.

The parties argued over disclosure and the claimant’s stance was that witness statements could not be completed without further disclosure. No applications were made and 22 November came and went without either side serving any witness statements. Neither side sought an extension of time from the court. Ultimately, the claimant sought to agree an order extending the time for the exchange of witness statements. The defendant declined to approve it because of the provisions of Civil Procedure Rule 3.8 which precluded this.

An application was issued for relief from sanctions.  

The judge at first instance applied Mitchell v News Group Newspapers Limited [2014] 1 WLR 795 [2013] EWCA Civ 1537 and found that the breach was not trivial, nor was there good reason for the failure. He found that both parties were at fault and the correspondence between them had not been helpful. He noted that exchange could take place within seven days, the trial date could be met and there were no significant cost consequences.

He found that to refuse relief from sanctions would be a disproportionate penalty on the claimant and confer a windfall on the defendant, and granted relief. The defendant appealed to the Court of Appeal which dismissed the appeal.

The case was the first to consider when ‘other circumstances’ may be relevant.

As Davis LJ said: ‘It must not be overlooked that the Court of Appeal in Mitchell did not say that the two factors specified in CPR 3.9 will always prevail, as a matter of weight, over any other circumstances in a case where the default is not trivial and where there is no good justification. It is true that it later stated that the expectation is that the two factors mentioned in CPR 3.9 will “usually” trump other circumstances. But it did not say that they always will.’

The decision endorses the basic approach in Mitchell but recognises that there will be some cases where the approach to ‘triviality’ and ‘good reason’ will not be definitive. It is a case very much confined to its facts (see in particular the judgment of Laws LJ).  

The decision cites with approval the following aspects of Mitchell:

• The starting point is that the original sanction is properly imposed (paragraph 24).
• It is further wrong to suggest that it would be rare to prevent a party from calling a witness where there had been non-compliance with CPR 32 (see paragraph 55). Thus there are areas where the decision extends the boundaries of robustness.
• The need for litigation to be conducted efficiently and at proportionate cost, and the need to enforce compliance with rules, practice directions and court orders are now to be regarded as of paramount importance and be given great weight.
• Using the old checklist found in the pre-April 2013 CPR is not acceptable (paragraphs 31-34). This is quite important in light of the ratio of the case.  

Paragraph 34 specifically follows Mitchell. So what does Chartwell add?

At the core of the decision in Chartwell is the fact that both parties were in breach of CPR 32 and would suffer the same sanction. There is a note of irritation at the litigation antics of both parties in relation to disclosure and the interrelationship with witness statements. It may be significant that the court distinguished Durrant v Chief Constable of Avon and Somerset Constabulary [2013] EWCA Civ 1624 and Thevarajah v Riordan [2014] EWCA Civ 15, regarding these cases as more serious on their facts. However, it is not surprising that the court found that the default was not trivial and that there was no good reason.

The issue for the court was ‘what should the court do where both parties are at fault and the default is neither trivial nor for good reason?’ That question moves the focus towards the injunction to consider the other circumstances of the case. The critical findings were:

• Both sides were in default;
• A decision to grant relief from sanctions was more even-handed than a decision to refuse relief which provided a windfall for the defendants;
• Any other decision would effectively hand the case to the defendants who were unmeritorious;
• Exchange could take place within seven days;
• The trial date could be maintained;
• There would be no extra cost in the budgets.

Taken in isolation, these factors may not be sufficient to achieve relief from sanctions. The issue of windfall was addressed in Mitchell and was not a trump card, but on the facts of Chartwell, this was an important factor. It is often the case that the cautionary passages get lost in the overall decision.

So it is worth remembering that ‘the fact, in any given case, that refusal to grant relief from sanction imposed by CPR 32.10 in circumstances of failure to serve witness statements within the specified time would in practice mean the end of the claim or the defence will by no means of itself necessarily warrant the grant of relief from sanction’ (paragraph 52).

Plainly, in Durrant and Mitchell the premature termination of the case did not save the defaulting party. Here, where matters were more evenly balanced, it was sufficiently important in the overall blend of the case to cause the court to consider that the overall application of CPR 3.9 permitted the ‘other circumstances’ to dictate the outcome. It is worth remembering that Mitchell had to acknowledge that there would be such cases.  

Two other points are worthy of note. The judge gave specific attention to the effect of the application on budgets (as he was required to do under CPR 3.17). Of course, there is still an argument that the costs inter partes had not altered but somebody would have to bear the bill (either the solicitors or their clients). Is the reference to proportionality in the overriding objective and CPR 3.9 confined to inter parte costs?

It also of note that the Court of Appeal suggested that the remedy for a party who can effect simultaneous exchange but is prevented from doing so by the other side may nevertheless file the statements at court. This would not obviate the need for an application for relief from sanctions, because the rule requires service not filing.

In conclusion, Chartwell is derived from an exception to the general rule that efficiency and proportionality will be a paramount consideration in most cases and hence it should not be seen as an antidote to Mitchell.  

District Judge Lethem sits at Tunbridge Wells County Court. He is a regional costs judge and a member of the Civil Procedure Rule Committee