Mishcon De Reya (a firm) & Anor v Caliendo & Anor

Relief from sanctions for late notification of CFA and ATE funding depends on the seriousness and significance of the breach, its reason, and all the circumstances under CPR 3.9, applying the three-stage approach in Denton. A serious breach and the absence of a good reason do not automatically require refusal of relief. The court must assess the breach and its consequences, while giving particular weight to efficient and proportionate litigation and the interests of justice. The financial effect of relief may be relevant, but does not by itself justify refusal where relief merely shifts responsibility for costs rather than increasing the costs of the litigation. Transitional provisions preserving pre-1 April 2013 funding arrangements may also be relevant. The appeal was dismissed.

The respondents brought professional negligence proceedings against the appellants concerning advice connected with the sale of interests in companies owning Queens Park Rangers Football Club. Before issuing proceedings, the respondents entered into CFAs with their solicitors and counsel and took out an ATE policy. They notified the appellants of those arrangements after the periods required by CPR rule 44.15(1) and paragraph 9.3 of the Practice Direction on Pre-Action Conduct.

The respondents issued the claim and applied under CPR 3.9 for relief from the resulting sanctions. Hildyard J granted relief: [2014] EWHC 3414 (Ch). The appellants challenged the judge’s application of the Denton stages, particularly his assessment of prejudice, the effect of the old costs regime, efficiency and proportionality, and the absence of a good reason for the default. The central issue was whether the judge had erred in principle or was plainly wrong in granting relief.

1. Appeal dismissed. The decision to grant relief from sanctions was an exercise of discretion. The Court of Appeal would intervene only for an error of principle, failure to take account of a material consideration, reliance on an irrelevant consideration, or a plainly wrong conclusion: Fred Perry (Holdings) Ltd v Brands Plaza Trading Ltd & Anr [2012] EWCA Civ 224 at [18].
2. At the first Denton stage, the question was the seriousness and significance of the failure to notify the funding arrangements, not the consequences of relief as such. Funding arrangements were inherently significant, and late notification could cause a defendant to proceed on a false footing. Nevertheless, the judge was entitled to find that the appellants had not shown material prejudice in the conduct of the case, given the exhausted negotiations, the absence of evidence that earlier notice would have altered their position, and the absence of a material change after actual notification.
3. At the second stage, the respondents had no good reason for the default. That did not make refusal of relief automatic. The court had to consider all the circumstances, even where the breach was serious or significant and no good reason existed.
4. At the third stage, the judge properly considered the respondents’ access to the pre-1 April 2013 costs regime, the possible financial exposure for the appellants, the criticisms in the Jackson Report, equality between the parties, the effect on other court users, and the possibility of a negligence claim against the respondents’ solicitors. The appellants’ financial exposure was relevant but subsidiary. Relief did not increase the litigation costs by the possible ATE premium; it shifted responsibility for that element of costs if the respondents succeeded.
5. The transitional provisions in sections 44(6) and 46(3) of Legal Aid, Sentencing and Punishment of Offenders Act 2012, together with CPR rules 48.1 and 48.2(1)(a)(i), recognised the continuing legitimacy of relevant pre-1 April 2013 arrangements. The possible Convention argument based on Campbell v MGN Ltd (No 2) could not properly be given weight in the circumstances, particularly in view of existing House of Lords authority and the caution expressed in Coventry and others v Lawrence and another (No 2) [2014] UKSC 46.
6. The judge’s decision fell within the reasonable ambit of his discretion. Relief from sanctions was granted and the appeal was dismissed. Costs were left for consideration after formal judgment.

1. Court of Appeal (Civil Division): Appeal dismissed. The court upheld Hildyard J’s order granting relief from sanctions, dated 21 October 2014, in [2014] EWHC 3414 (Ch).
2. High Court of Justice, Chancery Division: Hildyard J granted relief under CPR 3.9 from sanctions arising from late notification of CFA and ATE funding arrangements.