‘Draconian’ sanctions based on Mitchell are overturned
The Court of Appeal has overturned a judgment that imposed ‘draconian’ sanctions on a law firm for missing four cost deadlines, ruling that the previous judge was ‘mistaken’ in his approach.
In a previous case, Lord Justice Lewison struck out an appeal made by Kazakhstan-based firm Michael Wilson & Partners (MWP), after it missed costs deadlines ‘by a very large margin’ without providing any good reason for the breach.
Lewison based his decision on the Mitchell ruling from November 2013, which he described as a ‘game-changer’. But MWP appealed the judgment after Lord Dyson in the Denton case in July last year ruled that the Mitchell guidance had been ‘misunderstood and misapplied’.
In Michael Wilson & Partners Ltd v Sinclair & Ors, Lord Justice Richards ruled that Lewison’s judgment to strike out MWP’s appeal, given the firm by that time had already paid the cost orders, was a ‘very strong step indeed’.
He said although he saw why Lewison took the ‘draconian’ approach he did based on his understanding of the principles laid down in Mitchell, viewing the case through the lens of Denton, Lewison had approached the matter ‘too narrowly’ and reached a decision that was ‘plainly wrong’.
Richards said he was satisfied that there was no good reason for MWP to miss the deadlines, as previously the firm had given the impression it was ‘full of money’, and he agreed that the subsequent excuses for the delay ‘ring hollow’.
But he said that Lewison did not ‘have regard to all the circumstances of the case’, which the Denton ruling stressed must be done.
Richards said: ‘This is a key point, since consideration of all the circumstances of the case casts a very different light on the matter.’
These considerations included the fact that a previous judge had ruled that in the event of MWP failing to pay the costs within the deadline the appeal would be stayed rather than struck out, with the intention that this stay would be lifted once a payment was made.
Richards also pointed that a strike-out is a ‘sanction of last resort’, which he concluded meant that a move straight from a stay to a strike-out would be unexpected unless MWP continued to default on its payments.
He said in this light he would revoke Lewison’s decision, and also lift the stay on the appeal, allowing it to proceed. Lord Justice Christopher Clarke agreed with the judgment.
The judgment will allow MWP to appeal a previous decision to strike out a claim the firm had made against its former director John Emmott.
Readers' comments (12)
• David Crawford 27 July 2015 02:26 pm
So all those parties who were adversely affected by the Mitchell decision, including Mitchell's solicitors, were wrongly prejudiced. It makes a mockery of the law, or rather the original Mitchell decision did.
And the CofA itself said the original Mitchell decision was decided correctly. Alice in Wonderland, or what?
• Anonymous 27 July 2015 02:34 pm
The original decision in Mitchell is clearly consistent with Mitchell.
What I don't understand about Mitchell is why his opponent's cost budget was allowed to stand, when it too was served out of time without explanation.
• David Crawford 27 July 2015 05:43 pm
I agree with your first paragraph, but was the result the only possible one? The order was made c 11 working days before the hearing, and it was to the effect that the costs estimate be filed 7 days before, so four working days. In fact it was filed four days before the hearing. And all that when the person dealing with the file was on maternity leave.
It is a bit like saying, if the maximum penalty for littering were £100, that if you drop a sweet paper and you are fined £100 'that is consistent with the law'. Surely a lesser sanction could have been considered e g no costs for drawing up the estimate, but not no costs at all. That's bonkers in my view.
Still, as they say, it couldn't have happened to a nicer guy!
• Anonymous 27 July 2015 06:58 pm
Mitchell achieved nothing except to clog up the courts and cause untold anxiety for solicitors. Thank god for the Denton ruling. I feel for the solicitors in Mitchell. The Judge in Mitchell clearly got it so wrong and we all of course failed to understand and apply the ruling properly. Sometimes i really think that Judges who get it so wrong should be reprimanded in some way-fat chance!
• John James Cox 27 July 2015 07:02 pm
Mitchell was obviously an exceptionally foolish result; the question is whether it was a reasonable decision applying exceptionally foolish rules, or an exceptionally foolish decision applying reasonable rules. Although to be sure there is space for suggesting that it was both a foolish decision and a decision applying foolish rules.
• Richard Peter Whitehurst 27 July 2015 08:17 pm
I seem to recall mentioning the Barclays Bank and O'Brien effect at the time of the Mitchell decision. Tough, if you were a bank, but legally justifiable decision with chaotic consequences. Deep breaths all round and start rowing backwards.
The problem is that sometimes judges are over borne by (especially novel) arguments or changes in perception or procedure and overlook, or are not told, the consequences in the real world.
I was told by someone, who might be expected to know, that of the Equitable had told the HoL (as was) that it would go bust if it adopted Plan A in its judgment , then it wouldn't have.
Maybe the LS should apply to intervene more in these sorts of cases?
• Anonymous 27 July 2015 09:11 pm
I fail to understand 2 points:
1. Since Mitchell lost, and badly so, isn't this entire debate academic? Costs budgets affect only what is recovered from the other side and so his lawyers will presumably not be recovering a penny from anyone but their client.
2. Am I the only one to have sat up reading 'a Kazakhstan-based firm'? A ruling suitable for Borat seems almost logical in this context.
• clive wismayer 27 July 2015 09:38 pm
Every 20 years, when memories of the last train crash have faded, some silly judge decides it's time to sort everything out resulting in expensive chaos.
Almost more important than everything else is predictability. Many judges don't understand this.
• David Crawford 28 July 2015 07:17 am
Anon 8.11, you are right in the result in Mitchell in that he lost and has to pay the defendants' costs as well as his own. But the decision was not academic for all those who suffered at the hands of the Mitchell late costs estimate decision which terrified litigators until rectified.
It was sheer High Court judge divorced from reality madness compounded by the CofA establishment type decision not to disagree with an order which was within the boundaries allowed by the rules. How crazy can you get when intelligent men go so bonkers that they refuse to put right what they know to be wrong when that is the main reason for their existence?
• Anonymous 28 July 2015 10:47 am
Mitchell was hugely damaging to the profession. Frankly embarrassing.