IF YOU ARE AT TRIAL AND HAVEN’T PAID THE TRIAL FEE: STRIKE OUT IS AUTOMATIC: A FORMAL APPLICATION FOR RELIEF FROM SANCTIONS NEEDS TO BE MADE
In Hyslop -v- 38/41 CHG Residents Company Limited  EWHC 3893 (QB) Mr Justice Freedman considered a case in which the fact that a claimant had not paid the trial fee only came to light at the trial itself. On appeal it was held that the striking out provision was automatic, the claimant should have made a full application for relief from sanctions, supported by evidence. It was not for the defendant to take the point or make an application for an unless order. It is an important reminder of the need for claimants to ensure that the trial fee is paid timeously. The fact that the parties are at trial and ready to proceed does not remove the need for the defaulting party to make a formal application for relief from sanctions.
“the judge appears also to have had in mind that this matter could and should have been raised by the appellant at an earlier stage. That seems to me to have failed to give weight to the statement in Marcan that the strikeout here was automatic and that it was for the defaulting party to apply for relief from sanctions in order to revive the action.”
The claimant brought an action for arrears service charges and ground rent.
THE JUDGMENT OF THE TRIAL JUDGE
At the trial the defendant took the point that no trial fee had been paid. Upon enquiries being made the claimant conceded that it had not been paid. The trial judge accepted an undertaking from the claimant’s solicitor that the fee would be paid the following day.
“I am tempted to say, it is almost absurd for the parties to get ready for a trial, turn up for a trial, two days of court hearing time being allocated to the trial and then the judge sending everybody away because a fee has not been paid which now will be paid.”
20 Thereafter, there was an interchange from page 19 of the transcript onwards between the appellant and the judge. At page 22(b), the judge said that:
“If you were energetic about it, as soon as they were in breach of a time limit, you would have … applied to the court for what we call an Unless Order, get an order saying, ‘Unless you do what you’re required by a fairly early date then you are struck out’ and that is something you could have done.”
THE CLAIMANT’S INITIAL SUCCESS ON RELIEF FROM SANCTIONS AT AT TRIAL
The case proceeded to trial and the claimant was successful. The defendant appealed. One of the grounds of appeal was that the matter stood automatically struck out and the case should not have proceeded at all.
THE JUDGMENT ON APPEAL: THE SANCTION TOOK EFFECT AUTOMATICALLY
On appeal Mr Justice Freedman considered the fact that the sanction had, in fact, operated automatically (there was no need for the defendant to apply for an unless order). He found that the trial judge had erred in their approach to the breach and the issue of relief from sanctions.
22 The effect of the failure to comply with the fee notice rendered the claim automatically struck out without further order: see CPR 3.7A1(7). Accordingly, the action had been automatically struck out at 4.00 p.m. on 23 August 2017. In order to be able to continue the action, the respondent/claimant was required to make an application for relief from sanctions. The rules in this regard are set out at CPR 3.8 and 3.9, the relevant part of which reads as follows:
“Sanctions have effect unless defaulting party obtains relief
(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.
(Rule 3.9 sets out the circumstances which the court will consider on an application to grant relief from a sanction)…
Relief from sanctions
(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need – (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders. (2) An application for relief must be supported by evidence.”
23 In Marcan Shipping (London) Limited v Kefalas  EWCA Civ 463;  1 WLR 1864, the Court of Appeal held that CPR rule 3.8 expressly provides that where a party has failed to comply with an order any sanction imposed by the order has effect unless the party in default applies for and obtains relief from the sanctions. No further order is required to render the sanction effective. On the contrary, the onus is on the defaulting party to take steps to obtain relief (per Moore-Bick LJ at ). It was further held that the court has jurisdiction to give relief from sanctions on its own initiative despite the wording of the rule which assumes that the party in default will make an application for relief. At  and  in Marcan, reference was made to the case of Keen Phillips v Field  EWCA Civ 1524;  1 WLR 686. In that case, there was a failure to obtain an approved transcript of the judgment by a specific date failing which permission to appeal would be refused. Through no fault of the claimant, the transcript was lodged one day late. It was submitted that in the absence of an application for relief, the general power under rule 3.1(2)(a) to extend time was excluded by rule 3.8 which only allowed the court to grant relief if the party in default had made an application for it. The Court of Appeal held that the court’s power to extend time under rule 3.1(2)(a) and to act on its own initiative under rule 3.3(1) was not cut down by rule 3.8 so that the judge had jurisdiction to make the order extending time for lodging the transcript
24 However, at  in Marcan, Moore-Bick LJ said that Keen Phillips was a very unusual case:
“The only question for decision was whether the court had jurisdiction to grant relief from sanctions under rule 3.8 in the absence of an application by the party in default. This court held that despite the wording of rule 3.8, which naturally assumes that the party in default will make an application for relief, the court has jurisdiction to act of its own initiative in an appropriate case. 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 that case, however, there was no dispute relating to the manner in which the judge had exercised his discretion, and rightly so, because it was accepted that the claimant’s failure to comply with the order had resulted from matters wholly outside its control, had caused no prejudice of any kind to the defendant and had had no adverse effect on the course of the proceedings.”
25 At the time of Marcan, CPR 3.9(1) contained a list of nine circumstances to be considered, and they were treated at the time as a checklist. The amendment by the Civil Procedure (Amendment) Rules 2013 to CPR 3.9 removed those nine circumstances and provided simply for the two circumstances referred to above.
26 In a subsequent case, Nelson v Circle Thirty-Three Housing Trust Limited  EWCA Civ 106, the Court of Appeal confirmed that the court consider a release from sanctions of its own motion under CPR rule 3.9. In that case, there had been a failure to comply with an unless order in respect of a disclosure of various documents relating to whether a defendant was or was not living at a property which was the subject of possession proceedings. Fresh evidence submitted before the Court of Appeal showed that the defaulting party had tried hard to get the documents and that the failure to produce them was not her fault but the bank’s: see  of the judgment of Sir Robin Jacob. There had been substantial compliance with the disclosure order. The Court of Appeal therefore decided that this was a proper case for granting relief from sanctions which meant that the defence was restored.”
APPLYING THIS TO THE CURRENT CASE
The judge held that this was not one of the rare cases where a court could proceed to grant relief from sanctions without a formal application and evidence.
27 Mr Van Heck for the appellant submitted that these rare cases where the court could give relief from sanctions of its own motion were cases where compliance had been frustrated for a reason outside the control of the parties or their group or representatives. I accept that that was the case in both Keen Phillips and in Nelson, but I should be reluctant to categorise those cases where such a course was permissible. It seems to me to be preferable to take the law from  of Marcan to the effect that the jurisdiction is one which is likely to be exercised only rarely because usually it is necessary to have evidence.
THE TRIAL JUDGE’S FAILURE TO GO THROUGH THE THREE STAGE TEST
Mr Justice Freedman found that the trial judge had erred in failing to go through the three-stage Denton test.
33. It is apparent from the factual history that the judge took what he believed to be a pragmatic view. He took the view that it would have been “quite absurd” to adjourn the trial when everyone was there for the trial. He took the view that the normal course in respect of such fees was to ensure that it had been paid, albeit late, and move on.
34 In my judgment, the judge erred in the following respects. First, the judge ought not to have dispensed with a formal application for relief from sanctions under CPR 3.9. This was not one of the rare cases discussed above where this would have been appropriate. It was not a case where there was no fault. On the contrary, there was almost one month of delay in failing to pay the court fee. When the point was raised, the position was aggravated by the statement that the fee had been paid when this was not the case. In these circumstances, it behoved the respondent/claimant carefully to explain in evidence what the system was to ensure that court fees were paid and why and how in the circumstances of the instant case the trial fee had not been paid.
35 It was submitted by Mr Clargo that there was nothing to be said about the failure to pay the trial fee because it was simply a mistake on the part of the solicitors. It was accepted as a mistake by the judge. However, in my judgment, there was something to explore and evidence required. There is a need to explain on the best evidence possible as to how such a mistake had been made or any steps taken to procure the payment of the trial fees at any stage. What was the system in place for making such payment? What was the reason why the solicitors informed counsel who, in turn, informed the judge that the payment of the trial fees had been made? How did that mistake arise? One would have expected that if the judge had required evidence about the non-payment of the trial fees and the precise circumstances in which this arose that this would have been properly explored rather than casually giving the wrong information that the payment had been made. The evidence should have gone on to explain how this wrong information had been given to counsel and thus to the court.
36 Secondly, although the judge knew about the Mitchell and Denton line of authorities, he should have gone expressly through the three-stage test. Mr Clargo has made submissions recognising that the judge did not do that and having to make inference as to what he may have had in mind. In my judgment, all of this would have been avoided if the three-stage test had been applied expressly. In any event, I do not accept that the judge’s reasoning does amount to the same as if he had gone through the three stage test as is apparent from my further reservations about the approach below.
37 Thirdly, it is not apparent to me that the judge appreciated that a failure to pay a trial or court fee is to be treated as a serious breach (see Denton at ). If he did, the judge failed to consider the level of seriousness of the breach. His remarks that it is the court’s and his practice to accept a solicitor’s undertaking as to payment subject to hearing about prejudice suffered by the appellant appeared to evidence that not sufficient attention was given to the seriousness of the breach. The same applies to his remarks at page 19 of the transcript cited above that the likelihood is that there will be relief from sanction if “you do not threaten … the trial”. It was this practice which short-circuited the requirement to have evidence from the solicitors as to the failure to pay the trial fees and to waive it through even where false information had been given as to payment having been made when apparently it had not been made.
38 Further, to concentrate only on the prejudice to the appellant was not to place sufficient weight on those cases where a breach is treated as serious even though it had not had any effect on the efficient progress of the litigation of which the failure to pay a court fee was provided as “the most obvious example” ( of Denton). In Decadent, the majority judgment in the Court of Appeal said that the failure to pay court fees was treated as serious because “it is important that litigants pay court fees on time”. However, in the circumstances of that case referred to above, the failure was regarded as near the bottom of the range of seriousness ( of Denton). This case is not the same as Decadent because no attempt had been made to pay and when asked about it, inaccurate information was provided to the court as to non-payment.
39 Mr Clargo submitted that the judge must have given attention to the fact that a failure to pay a court order is to be treated as serious since he went on to consider both the reason for nonpayment and the other circumstances of the case. Absent express references to the stages, it is not apparent to me that he did consider whether the breach was serious. However, if he did, in my judgment, the judge has not given sufficient consideration to the level of seriousness of the breach. Without evidence, this was not possible.
40 Fourthly, the judge had to go on to consider all the circumstances of the case, i.e. the third stage because there had been a serious or substantial breach and the reason for the breach was not a good one (something which, as Mr Van Heck rightly points out, he did not actually say). The judge’s statement that it would be “almost absurd” not to go on with the trial bearing in mind the fact that the trial was ready to be heard and court time had been allocated for the trial does not show that the judge did a proper balancing act of all the circumstances. He had to do a balancing act between those factors and the seriousness of the breach in the absence of a good explanation for the failure to pay the trial fees. Although he did give some consideration to earlier breaches, they were not fully investigated so as to see the matter in the round. In my judgment, whilst the judge was right to consider the readiness for trial as an important factor, that did not absolve the court from doing that balancing act of all relevant circumstances including the two set out at paragraph 3.9(1)(a) and (b). The root of this problem was not requiring evidence and not carrying out expressly the three-stage process.
41 Fifthly, the judge appears also to have had in mind that this matter could and should have been raised by the appellant at an earlier stage. That seems to me to have failed to give weight to the statement in Marcan that the strikeout here was automatic and that it was for the defaulting party to apply for relief from sanctions in order to revive the action. The fact that the appellant who did raise the matter in her skeleton argument did not articulate the precise consequence does not mean that the automatic strikeout can be ignored or that there was any less responsibility on the defaulting party to apply for relief from sanctions.
A FORMAL APPLICATION FOR RELIEF FROM SANCTIONS SHOULD HAVE BEEN MADE
42 In all the circumstances, the judge should not have embarked upon a trial without requiring a formal application for relief from sanctions especially in circumstances where there was objection from the appellant to the failure of being excused. The court should have required a formal application with evidence and a timetable to enable the appellant to consider the evidence and respond. It is not an answer that the appellant would have had nothing to say about the failure to pay fees because it was outside her knowledge. First, she was entitled to check with the court office in order to ensure that the court was being given accurate information and, second, she was entitled to consider what other evidence might be put before the court including as regards the nature of the previous breaches and in addition to the evidence which was already before the court in this regard.
The matter was sent for retrial by a different judge. The claimant would be required to make a formal application for relief from sanctions.