Failure to apply for relief from sanctions does not mean that relief cannot be granted: a case commentary on Boodia v Yatsyana [2021] EWCA Civ 1705

Background

The Claimant had brought two claims against the Defendant who had carried out building work for her at two buildings, known as the Gables and the Barn. In the case of the Gables, the works were completed in June 2015; and in the case of the Barn in mid-May 2010. Both claims were issued on 11 November 2015. DJ Jarzabkowski, sitting in the county court at Brentford, tried the claim relating to the Barn on 7 January 2019; and gave judgment for the Claimant for damages of £10,920 plus interest.

However, it was raised by the Defendant that the Claimant had failed to comply with a Directions Order dated 18 January 2018 which stated amongst other things:-

“Unless the claimant does by 4.00pm on the 24 May 2018 pay to the court the trial fee of £545.00 or file a properly completed application (i.e. one which provides all the required documentation in the manner requested) for help with fees, then the claim will be struck out with effect from 24 May 2018 without further order and, unless the court orders otherwise, you will also be liable for the costs which the defendant has incurred.

A later directions notice was issued by the Court dated 3 September 2018 which set a new date of 7 December 2018 for payment of the trial fee and the Claimant paid the fee on 5 December 2018. Nevertheless, in the absence of an application for relief from sanctions to reinstate the claim after the initial failure to pay the trial fee, the Defendant argued that the claim stood struck out and as a consequence, the court did not have jurisdiction to try the case.

The Defendant appealed the trial decision on a number of grounds. The only one that succeeded was based on the argument that the District Judge did not have jurisdiction to try the claim because it had already been struck out for failure to pay a trial fee; and no application for relief from sanctions was before the court. The same applied to the claim relating to the Gables. HHJ Luba QC accepted that argument “with a heavy heart”, ruling that as relief had never been applied for and granted, that the case remained struck out. 

That decision was then appealed by the Claimant to the Court of Appeal.

The approach in the Court of Appeal

In allowing the appeal, the Court concluded that the key error to have been made by HHJ Luba QC was to determine that in the absence of a formal application for relief from sanctions, the Court was unable to grant relief.

At paragraph 55 of the judgment, it was asked by Lewison LJ “Is it an essential prerequisite to reinstatement of the claim that the claimant must have made an application for reinstatement?”

Despite the wording of CPR 3.8 seeming to suggest that the answer to that question was “yes”, the Court went on to consider a series of authorities that led them to reach a different conclusion.

CPR 3.8(1) states as follows:-

Sanctions have effect unless defaulting party obtains relief

3.8

(1) Where a party has failed to comply with a rule, practice direction or court order, any sanction for failure to comply imposed by the rule, practice direction or court order has effect unless the party in default applies for and obtains relief from the sanction.

However, in Keen Phillips v Field [2006] EWCA Civ 1524 the Court of Appeal held that CPR 3.8 did not cut down the court’s powers to extend time; and to act of its own motion. Jonathan Parker LJ said that the contrary interpretation would be “perverse”. He went on to say at [19]:

“The words “has effect” in CPR r 3.8 mean, in my judgment, no more than that, absent any exercise by the court of its general case management powers in extending time or otherwise granting relief from the sanction, the sanction will remain in effect until relief from is granted by the court on an application made under CPR r 3.8 by the party in default.”

In Marcan Shipping (London) Ltd v Kefalas [2007] EWCA Civ 463, [2007] 1 WLR 1864 the existence of that jurisdiction was accepted, but Moore-Bick LJ said at [33]:

“However, the jurisdiction is one which is likely to be exercised only rarely because it will usually be necessary for evidence to be placed before the court to enable it to consider the various matters to which rule 3.9 refers.”

In Nelson v Circle Thirty Three Housing Trust Ltd [2014] EWCA Civ 106, [2014] 3 Costs LO 355 the Claimant, despite her efforts, was in breach of an unless order. Fresh evidence was placed before the Court of Appeal. Sir Robin Jacob confirmed that the Court was able to grant relief against sanctions of its own motion, relying on Marcan. The Court then proceeded to consider the circumstances themselves; and granted relief against sanctions.

This being the case, it followed, in the judgment of the Court of Appeal, that HHJ Luba QC was not correct to say that DJ Jarzabkowski’s “only possible response” would have been to invite an application for relief against sanctions and that in the absence of a formal application, relief could not be granted and the cases would stand struck out.

In reaching its conclusion, the Court of Appeal made reference to the case of Denton v TH White Ltd [2014] EWCA Civ 906. 

However, it did not specifically deal with the stages of this test and instead considered a number of different factors, in essence, skipping to stage 3 of the test laid down in Denton. Amongst the factors considered when deciding to grant relief from sanctions were (at paragraph 73):-

i) Mr Williams (Mrs Boodia’s solicitor) had explained that the failure to pay the court fee was inadvertent.

ii) The court did not comply with PD 3B paragraph 1 by notifying Mrs Boodia that her claim had been struck out, thus alerting her to the need to apply for relief against sanctions. Mr Williams said that had such notification been given, an application for relief against sanctions would have been made.

iii) The original trial date was vacated because of lack of court time. The failure to pay the court fee was not the cause of the adjournment. If (as I think) the purpose of the trial fee is to throw onto the litigant part of the cost to HMCTS of providing the trial (both in terms of the cost of the venue and judicial and other staff time) then that purpose was not, in the event, compromised.

iv) Non-payment of the trial fee did not disrupt the orderly conduct of the litigation. Nor does non-payment of a trial fee generally have any direct impact on the opposing party.

v) The court itself proceeded to give directions (and thus to cause the parties to continue to incur costs) on the basis that the claim had been reinstated. Both parties complied, more or less, with those directions. Thus Mrs Boodia was led to believe (albeit erroneously) that the claims were still on foot.

vi) The court could had been asked at the hearing on 23 November 2018 to set aside the listing of 3 September; but it did not.

vii) The trial fees in both cases were in fact paid in obedience to the listing notification of 3 September before the trial took place. If the argument for Mr Yatsyna is correct, Mrs Boodia need not have paid them. If the claims are not reinstated, it is an open question how Mrs Boodia can get her money back.

viii) The trial of the Barn claim has now taken place. A judge has considered the merits of the claim and has pronounced judgment.

ix) Once Mrs Boodia was disabused by HHJ Luba’s judgment of the belief that the claims had been reinstated, an application for relief against sanctions was made very promptly.

x) It would be grossly disproportionate to invalidate the trial of that claim, and thus either cause both parties to incur yet further legal costs (some of which may be duplicated); or prevent Mrs Boodia from having her claims heard at all if, as seems likely, both claims would now be statute-barred. Moreover, the court would itself have to devote more time and resources to managing any new proceedings, with only partial recovery of the cost of doing so. That would put a strain on an already overstretched system.

An additional consideration of the Court was that the Defendant had been unable to identify any particular prejudice that they had suffered as a consequence of the Claimant’s failure to pay the trial fee. In exercising a balance of prejudice assessment, the Court of Appeal could not see how any perceived disadvantage to Mr Yatsyna could outweigh all of the manifold disadvantages that would be caused to Mrs Boodia in the event that the claims were not reinstated.

Considering all of the above, Lewison LJ concluded (at paragraph 76) that “I would have no hesitation in granting relief against sanctions, even though no formal application is before us.”

Conclusion

This is a positive decision for litigants who fall into the trap of failing to pay the trial fee in a case.

It is always best practice to issue an application seeking relief from sanctions under CPR 3.9 at the earliest opportunity upon discovering a failure to pay the trial fee or upon realisation of any other any other procedural failure to which a sanction is attached. However, even for those who have failed to do so,  this decision illustrates that the court still holds the power to grant relief from sanctions, depending on the relevant facts surrounding the breach in question, even in the absence of a formal application.