Caliendo & Anor v Mishcon De Reya (A Firm) & Anor

Relief from sanctions under CPR 3.9 requires a structured three-stage inquiry: assess the seriousness and significance of the breach, consider why it occurred, and evaluate all the circumstances so as to deal justly with the application. The court must assess the breach itself, rather than the consequences of granting relief. A failure caused by mere oversight will usually lack a good reason, but that does not automatically defeat the application. Compliance, efficient litigation and proportionate costs have particular importance, while the court must still weigh all relevant circumstances. The effect of an automatic sanction is ordinarily a contingent, not absolute, right. Relief was granted where late notice of funding caused no material litigation prejudice or specific detriment to other court users.

The claimants applied under CPR 3.9 for relief from sanctions imposed by CPR 44.3B after failing to notify the defendants within the prescribed period of conditional fee agreements and an after-the-event insurance policy. Notice was given several months late, and the claimants accepted that the default resulted from oversight and that there was no good reason for it.

The application was initially heard in October 2013 and adjourned pending Mitchell v News Group Newspapers Ltd [2014] EWCA Civ 1537. Further submissions were invited after the Court of Appeal’s decision in Denton & Ors v TH White Ltd & Ors [2014] EWCA Civ 906. The central issue was whether, applying the clarified approach, relief should be granted.

1. The application was allowed and relief from the sanctions was granted. The costs of the application were left for consideration after formal judgment.

2. The court applied the three-stage approach stated by the Court of Appeal in Denton & Ors v TH White Ltd & Ors [2014] EWCA Civ 906: first, assess the seriousness and significance of the breach; secondly, identify why it occurred; and thirdly, evaluate all the circumstances, including the need for efficient and proportionate litigation and compliance with the rules.

3. At the first stage the court must focus on the seriousness and significance of the breach itself, measured principally by its material effect on the efficient progress of the litigation and litigation generally. It must not instead assess the prejudice caused by removing the sanction. The automatic sanction and the importance of funding information were relevant, but the late notification, rather than the existence of the funding arrangements, had to be assessed.

4. The claimants’ oversight did not amount to a good reason. The distinction in Mitchell v News Group Newspapers Ltd [2014] EWCA Civ 1537 between circumstances outside the applicant’s control and mere overlooking of a deadline remained applicable. Nevertheless, the absence of a good reason did not make refusal of relief automatic.

5. At the third stage, the court considered the particular importance of compliance and efficient, proportionate litigation, together with all the circumstances. There was no evidence that timely notice would have altered the defendants’ conduct or settlement position. Any diversion of court time was substantially attributable to uncertainty surrounding the developing guidance, and there was no specific detriment to another court user comparable to that in Mitchell.

6. The defendants did not obtain an absolute accrued right to retain the benefit of the sanction. In cases involving automatic sanctions, the non-defaulting party ordinarily has only a contingent right, subject to the court’s discretion to grant relief. The possibility of recovery by the claimants from their solicitors was relevant but had to be treated with circumspection.

7. The possible human-rights argument concerning the pre-April 2013 funding regime was not given weight. The court could not properly assess that issue in this application, particularly in light of existing authority and the observations in Coventry and others v Lawrence and another (No 2) [2014] UKSC 46.