Relief from Sanctions: A Guide

Denton  v  T H White Ltd [2014] 1 WLR 3926 established the appropriate way to deal with an application for relief. Although, the draconian principles of Mitchell were reigned in, litigators are still acutely aware that obtaining relief from sanctions is no forgone conclusion. Despite Denton being handed down over 5 years ago, too many applications are poorly prepared and fail to deal with the Denton test correctly. This article reminds litigators of the test and the most common factors which should be taken into account, regardless of the nature of the breach.

The first stage: Identify and assess the seriousness and significance of the breach

If the first is passed, stages 2 and 3 are unlikely to be looked at in great detail and your chances of succeeding are high. However, the reality is few breaches will be deemed to be not at all serious or significant. A party who takes this first stage too lightly does so at their peril. To incorrectly suggest that a breach is neither significant or serious can get your application off on the wrong foot. It is often more beneficial to accept that a breach is ether serious or significant but only to a limited extent.

The second stage: Why did the breach happen?

An applicant is obliged to provide an explanation for the delay, even if the reason for the breach is not a good one. No explanation at all could see the application fail, see Redbourn Group Ltd -v- Fairgate Development Limited [2017] EWHC 1223 (TCC). However, Denton confirms that the failure to provide a good reason is not necessarily decisive. The applicant in British Airways PLC -v- Airways Pension Scheme Trustee Limited [2017] EWHC 1191 (Ch) successfully applied for relief despite the absence of a good reason.

Ultimately, there is little option with this but to be honest. Do not try to engineer a good reason if one does not exist. In practice, the vast majority of breaches are honest mistakes and oversights and, whilst such explanations will not constitute a ‘good reason’, they at least explain what happened.

The third stage: An evaluation of all the circumstances of the case, so as to enable the court to deal justly with the application

More often than not, this is the stage which determines success or failure. It will of course be very fact specific but as well as following the guidance we suggest for dealing with stages 1 and 2 (which will also influence how the court deals with stage 3), there are other things that can be done to increase your chances here.

Regardless of the nature of the default, or the reasons for it, there is no excuse for any delay in making an application for relief. Delay can be fatal to the application’s prospects, even when other factors appear to be in the applicant’s favour. See Durrant v Avon and Somerset Constabulary (2013) EWCA Civ 1624 and British Gas v Oak ash and carry (2016) 1WLR 4530.

Delay just increases the seriousness and consequences of the breach, especially if it causes slippage in the timetable. Bear in mind that an application is made when it is filed with the court and not when it is date stamped or when the application is heard.

Every day that passes without the breach being remedied is a day that will count against your application. This will minimise any prejudice that may have been suffered. Don’t expect much success if you turn up at a relief from sanctions application without remedying the breach beforehand, see Sinclair -V- Dorsey & Whitney (Europe) LLP [2015] EWHC 3888 (Comm).

Never forget that an application must always be supported by evidence; CPR3.9(2). Such evidence should be a witness statement from the person responsible for default. They should also be prepared to attend the application hearing even if they are not doing the advocacy.

Avoid giving chapter and verse about case law on relief from sanction matters and aim to keep the statement fairly short. Stick to the facts.

The judge has to consider the consequences of the breach for the court administration as a whole and not just for the parties, see Falmouth House Ltd v Abou-Hamdan [2017] EWHC 779 (Ch)

If the breach has caused no delay to a timetable of the action, make this very clear.  It is also important to stress, if possible, that no other court users have been prejudiced. For example, say an application has been consented to and takes place at a hearing which was going to take place in any event.

Relief may be granted in such circumstances, even where the breach is serious, see Mott v Long [2017] EWHC 2130 (TCC) where a budget was served 10 days late but relief was granted on this basis.

Conversely, where a breach causes prejudice to other court users, the chances of success are diminished, see BMCE Bank v Phoenix Commodities (2018) EWHC 3380 (Comm)

This factor should also affect your time estimate for the relief application hearing too. Don’t underestimate the time required. If the application is opposed, it may be difficult to deal with in less than an hour. If the application hearing has to be adjourned because of an inadequate time estimate, this will only undermine the application’s prospects.

If you’ve made an honest mistake, make an honest apology and don’t use the application as an opportunity to sling mud at an opponent. In Lakhani v Mahmud [2017] EWHC 1713 (Ch) there was much of this type of correspondence between the parties but the court refused relief for serving the budget one day late even though the breach was not considered to be serious.

Paragraph 96 of Denton states that CPR 3.9 is not intended to introduce a harsh regime of almost zero tolerance, as some commentators have suggested.  There are clearly supposed to be occasions where granting relief is the just thing to do, and try to persuade the Court that your application is one such example.

It may be obvious but do not undermine your own application with needless errors such as typos, pages missing, exhibits unmarked and bundles not lodged, or lodged in time. Such mistakes can suggest a lack of seriousness to the application.

It is also important to point out, if true, that the breach was an isolated incident and that all other directions have been complied with.

Other important issues

Facing an application – Oppose or consent?

Only a court can determine whether relief should be granted but that does not prevent an opposing party from consenting to an application for relief – see para 80 of Denton. Therefore, it is not necessarily a good idea to remain neutral and attempt to avoid dealing with a request for consent. 

In light of this, it is not very easy to oppose an application in the absence of prejudice. However, remember the prejudice does not just have to be suffered by the opposing party. There may still be prejudice caused to other court users.

Bear in mind that if there is no realistic prospect of persuading the judge to refuse relief and you are seen to be pedantic, it can lead to an adverse costs order, see Freeborn & Another v Marcal (t/a Dan Marcal Architects) [2017] EWHC 3046 and Summit Navigation v Generali Romania (2014) EWHC 398 (Comm).

A deadline is approaching – What do you do?

The simple answer is make an application for an extension. Do not consciously wait for the deadline to expire and make a retrospective application for relief.

The Denton Principles do not apply in such applications. See Guidezone Ltd [2014] EWHC 1165 (Ch) and Hallam Estates Ltd & Anor v Baker [2014] EWCA Civ 661.