SANCTIONS JUDGMENT: THE KEY POINTS (1): STAGES 1 AND 2 OF CONSIDERATIONS IN RELIEF FROM SANCTIONS APPLICATIONS
The history and arguments in relation to the Court of Appeal hearings on sanctions have been fully recorded on this blog. In the judgment given today there are a number of Key points.
MITCHELL HAS BEEN THE SUBJECT OF CRITICISM BUT HAS BEEN MISUNDERSTOOD
This may seem an understatement to some.
“3. The correct approach to the application of this rule has given rise to much litigation
and debate among practitioners and academics. As is well known, this court gave
some guidance in its decision in Mitchell v. News Group Newspapers Ltd 
EWCA Civ 1537,  1 WLR 795 which has been the subject of criticism. In the
light of this, the court invited the Bar Council and the Law Society to intervene in
these appeals. We are grateful to them (as well as the representatives of the parties)
for their submissions. For the reasons that we give later in this judgment, we think
that the judgment in Mitchell has been misunderstood and is being misapplied by
some courts. It is clear that it needs to be clarified and amplified in certain respects.”
The judgement rehearses the facts and finding of Mitchell and reviews the major subsequent authorities.
CRITICISM OF THE MITCHELL GUIDANCE
“The criticisms of the Mitchell guidance
21. The principal criticisms may be summarised as follows. First, the “triviality” test
amounts to an “exceptionality” test which was rejected by Sir Rupert Jackson in his
report and is not reflected in the rule. It is unjustifiably narrow. Secondly, the
description of factors (a) and (b) in rule 3.9(1) as “paramount considerations” gives
too much weight to these factors and is inconsistent with rule 3.9 when read in
accordance with rule 1.1. They should be given no more weight than all other
relevant factors. It is said that the Mitchell approach downplays the obligation to
consider “all the circumstances of the case, so as to enable [the court] to deal justly
with the application”. Thirdly, it has led to the imposition of disproportionate
penalties on parties for breaches which have little practical effect on the course of
litigation. The result is that one party gets a windfall, while the other party is left to
sue its own solicitors. This is unsatisfactory and adds to the cost of litigation through
increases in insurance premiums. Fourthly, the consequences of this unduly strict
approach have been to encourage (i) uncooperative behaviour by litigants; (ii)
excessive and unreasonable satellite litigation; and (iii) inconsistent approaches by the
ANALYSIS AND GUIDANCE
Analysis and guidance
22. Before we examine the criticisms of Mitchell, we think it is important to undertake an
analysis of rule 3.9 itself.
Analysis of Rule 3.9(1)
23. In understanding the correct approach to the grant of relief from sanctions, it is
necessary to start with an examination of the text of rule 3.9(1) itself. The rule
contains three elements (which are not to be confused with the three stages in the
guidance that we give below). First, it states when the rule is engaged by providing
that it applies “[o]n an application for relief from any sanction imposed for a failure to
comply with any rule, practice direction or court order”. This makes it clear that the
court’s first task is to identify the “failure to comply with any rule, practice direction
or court order”, which has triggered the operation of the rule in the first place.
Secondly, it provides that, in such a case, “the court will consider all the
circumstances of the case, so as to enable it to deal justly with the application”.
Thirdly, it provides that the exercise directed by the second element of the rule shall
include a consideration of factors (a) and (b).
24. We consider that the guidance given at paras 40 and 41 of Mitchell remains
substantially sound. However, in view of the way in which it has been interpreted, we
propose to restate the approach that should be applied in a little more detail. A judge
should address an application for relief from sanctions in three stages. The first stage
is to identify and assess the seriousness and significance of the “failure to comply
with any rule, practice direction or court order” which engages rule 3.9(1). If the
breach is neither serious nor significant, the court is unlikely to need to spend much
time on the second and third stages. The second stage is to consider why the default
occurred. The third stage is to evaluate “all the circumstances of the case, so as to
enable [the court] to deal justly with the application including [factors (a) and (b)]”.
We shall consider each of these stages in turn identifying how they should be applied
in practice. We recognise that hard-pressed first instance judges need a clear
exposition of how the provisions of rule 3.9(1) should be given effect. We hope that
what follows will avoid the need in future to resort to the earlier authorities
GUIDANCE TO FIRST INSTANCE JUDGES
The Court expressed the hope that their guidance would make it unnecessary for courts to look at earlier case law. There were a number of stages.
THE FIRST STAGE: LOOK AT THE SERIOUSNESS OR SIGNIFICANCE OF THE FAILURE
The first stage
25. The first stage is to identify and assess the seriousness or significance of the “failure
to comply with any rule, practice direction or court order”, which engages rule 3.9(1).
That is what led the court in Mitchell to suggest that, in evaluating the nature of the
non-compliance with the relevant rule, practice direction or court order, judges should
start by asking whether the breach can properly be regarded as trivial.
26. Triviality is not part of the test described in the rule. It is a useful concept in the
context of the first stage because it requires the judge to focus on the question whether
a breach is serious or significant. In Mitchell itself, the court also used the words
“minor” (para 59) and “insignificant” (para 40). It seems that the word “trivial” has
given rise to some difficulty. For example, it has given rise to arguments as to
whether a substantial delay in complying with the terms of a rule or order which has
no effect on the efficient running of the litigation is or is not to be regarded as trivial.
Such semantic disputes do not promote the conduct of litigation efficiently and at
proportionate cost. In these circumstances, we think it would be preferable if in future
the focus of the enquiry at the first stage should not be on whether the breach has been
trivial. Rather, it should be on whether the breach has been serious or significant. It
was submitted on behalf of the Law Society and Bar Council that the test of triviality
should be replaced by the test of immateriality and that an immaterial breach should
be defined as one which “neither imperils future hearing dates nor otherwise disrupts
the conduct of the litigation”. Provided that this is understood as including the effect
on litigation generally (and not only on the litigation in which the application is
made), there are many circumstances in which materiality in this sense will be the
most useful measure of whether a breach has been serious or significant. But it leaves
out of account those breaches which are incapable of affecting the efficient progress
of the litigation, although they are serious. The most obvious example of such a
breach is a failure to pay court fees. We therefore prefer simply to say that, in
evaluating a breach, judges should assess its seriousness and significance. We
recognise that the concepts of seriousness and significance are not hard-edged and
that there are degrees of seriousness and significance, but we hope that, assisted by
the guidance given in this decision and its application in individual cases over time,
courts will deal with these applications in a consistent manner.
27. The assessment of the seriousness or significance of the breach should not, initially at
least, involve a consideration of other unrelated failures that may have occurred in the
past. At the first stage, the court should concentrate on an assessment of the
seriousness and significance of the very breach in respect of which relief from
sanctions is sought. We accept that the court may wish to take into account, as one of
the relevant circumstances of the case, the defaulter’s previous conduct in the
litigation (for example, if the breach is the latest in a series of failures to comply with
orders concerning, say, the service of witness statements). We consider that this is
better done at the third stage (see para 36 below) rather than as part of the assessment
of seriousness or significance of the breach.
28. If a judge concludes that a breach is not serious or significant, then relief from
sanctions will usually be granted and it will usually be unnecessary to spend much
time on the second or third stages. If, however, the court decides that the breach is
serious or significant, then the second and third stages assume greater importance.
THE SECOND STAGE: LOOK AT WHY THE BREACH OCCURRED
29. The second stage cannot be derived from the express wording of rule 3.9(1), but it is
nonetheless important particularly where the breach is serious or significant. The
court should consider why the failure or default occurred: this is what the court said in
Mitchell at para 41.
30. It would be inappropriate to produce an encyclopaedia of good and bad reasons for a
failure to comply with rules, practice directions or court orders. Para 41 of Mitchell
gives some examples, but they are no more than examples.