THE COURT OF APPEAL AND FAILURE TO PAY THE TRIAL FEE: RELIEF FROM SANCTIONS GRANTED EVEN THOUGH NO FORMAL APPLICATION WAS BEFORE THE COURT

In  the judgment in  Boodia v Yatsyna [2021] EWCA Civ 1705 the Court of Appeal allowed a decision that a Circuit Judge had made with a heavy heart.  The judgment reviews the cases in relation to non-payment, or late payment, of the trial fee and the automatic striking out provisions.  The Court granted the claimant relief from sanctions even though there was no formal application before it.

 

“I would have no hesitation in granting relief against sanctions, even though no formal application is before us.”

THE CASE

The claimant obtained judgment at trial for £10,920 in a case tried by a District Judge. The defendant’s appeal to the Circuit Judge was successful on one point – that the claimant’s failure to pay the court fee meant that the action had been struck out and the District Judge had had no jurisdiction.  The Circuit Judge allowed the defendant’s appeal with a “heavy heart”.

THE CLAIMANT’S SUCCESSFUL APPEAL TO THE COURT OF APPEAL

The Claimant was successful in the appeal to the Court of Appeal.

 

  1. The Court of Appeal did not accept the claimant’s argument in relation to notification of the need to pay the court fee.  The Court found that the claimant had been given appropriate notice.
  2. The Court of Appeal also rejected an argument that time for payment of the court fee had been extended by the listing notification.

RELIEF AGAINST SANCTIONS

The defendant had argued that there was no application for relief from sanctions before the court.  Lord Justice Lewison considered whether relief from sanctions should be granted.
    1. The approach to the grant of relief against sanctions is now that laid down by this court in Denton v TH White Ltd [2014] EWCA Civ 906[2014] 1 WLR 3926. That requires a three-stage approach:
i) Identify and assess the seriousness of the breach.
ii) Consider whether there is a good reason for the breach.
iii) Consider all the circumstances of the case.
    1. As the authorities show, it is not always necessary for a formal application for relief against sanctions to be made before the court has the power to grant such relief. In fact, as I have said, a formal application has been made to the county court; and we have seen the evidence filed by both parties in support of and in opposition to the application.
    1. One of the cases heard with Denton was Decadent Vapours Ltd v Bevan. That was a case in which the claimant failed to pay a trial fee on time. The judge at first instance refused relief against sanctions. At stage one of the inquiry Lord Dyson MR and Vos LJ said in their joint judgment at [62]:
“All failures to pay court fees are serious, because it is important that litigants pay court fees on time. But some failures to pay fees are more serious than others.”
    1. They went on to say that there was no good reason for the failure and thus proceeded to the third stage. As to that, they said:
“[64] At the third stage, however, the judge should have concluded that factor (a) pointed in favour of relief, since the late payment of the fees did not prevent the litigation being conducted efficiently and at proportionate cost. Factor (b) also pointed in favour of the grant of relief since the breach was near the bottom of the range of seriousness: there was a delay of only one day in sending the cheque and the breach was promptly remedied when the loss of the cheque came to light. It only affected the orderly conduct of the litigation, because of the approach adopted by the defendants and the court.
[65] On a consideration of all the circumstances of the case, the only reasonable conclusion in this case was to grant relief. If relief were not granted, the whole proceedings would come to an end. It is true that the claimant had breached earlier court orders (as indeed had the defendants). As discussed at paras 27 and 36 above, previous breaches of court orders may be taken into account at the third stage. Nevertheless, even taking account of the history of breaches in the Decadent litigation, this was not a case where, in all the circumstances of the case, it was proportionate to strike out the entire claim. In our judgment, the defendants ought to have consented to relief being granted so the case could proceed without the need for satellite litigation and delay.”
    1. There are four other cases in which the effect of a failure to pay court fees has been considered.
    1. In Hyslop v 38/41 CHG Residents Company Ltd [2018] EWHC 3893 (QB) parties arrived at court for a trial, when the point was taken that the trial fee had not been paid. The trial judge gave relief against sanctions on the basis of a solicitor’s undertaking to pay the required fee; and proceeded to hear the claim. He gave judgment for the claimant. On appeal to the Queen’s Bench Division, Freedman J held that the judge was wrong not to have required a formal application for relief against sanctions, which would have allowed evidence to have been considered on all three aspects of the Denton test. Nor did he in fact go through those stages; and he did not appear to have appreciated that the failure to pay a court fee was, of itself, serious. He declined to carry out the exercise himself, but remitted the matter to the county court. Of some significance to this appeal is what he said at [43]:
“I have heard from the parties that they both consider that the failure to have an application supported by evidence does not, by itself, invalidate the trial below and so I do not have to consider that aspect.”
    1. I find it difficult to see what useful purpose was served by remitting the question of relief against sanction to the county court, if the validity of the trial that had actually taken place was not in question.
    1. Alesco Risk Management Services Ltd v Bishopsgate Insurance Brokers Ltd [2019] EWCA Crim 1552 was another decision of Freedman J sitting in the Queen’s Bench Division (with the consequence that its neutral citation number appears to be erroneous). That was also a case of failure to pay a trial fee, which was remedied some three weeks before trial. In that case, however, he decided to grant relief despite the fact that the breach was serious and there was no good reason for it. He summarised his reasons at [7]:
“It is plain, in the circumstances, that it will be just to grant relief from sanctions first of all because all the Defendants have consented; secondly, because it was an inadvertent failure to comply with the rules and to pay the fee on time, which has not caused any prejudice; thirdly, because of the swift way in which the Claimants’ solicitors acted; fourthly, the default in this case was not indicative of any other failure; and fifthly, because to strike out this claim would be disproportionate.”
    1. Chalfont St Peter Parish Council v Holy Cross Sisters Trustees Inc [2019] EWHC 735 (QB), [2019] Costs LR 227 was another case of a failure to pay a trial fee; but it was paid shortly after the claimants discovered that their claim had been automatically struck out. Sir Alistair McDuff granted relief against sanctions. He said at [7]:
“This was an oversight, which is not a good reason, but the level of seriousness is modest, the fee was paid shortly afterwards as soon as the strikeout was disclosed. There had been, clearly, a misunderstanding though that is no excuse but there is no disservice to the defendants by reinstating the case. There is no injustice and it would be wholly disproportionate at this very late stage when this trial is about to commence to say that the whole case would be struck out with all that that entailed when everybody is, effectively, ready for trial.”
    1. The last of these cases is Badejo v Cranston [2019] EWHC 3343 (Ch), [2019] Costs LR 1993. The trial fee was not paid on the due date; but the claimant’s solicitor realised the mistake a week later; and two days thereafter applied for relief against sanctions. The county court did not expedite the hearing of that application; but instead vacated the trial date because of the automatic strikeout. One of the matters that weighed heavily with the judge at first instance was that the trial date had been lost. He also held that because the strikeout was the consequence of the rules themselves, the claimant could not say that the sanction was disproportionate. On appeal Fancourt J disagreed. In fact what had been argued was not that the sanction itself was disproportionate, but that the refusal of relief would be.
    1. At [22] Fancourt J said:
“If the county court had heard the application shortly before or at the trial, I cannot conceive that if a solicitor’s undertaking had been given to pay the trial fee, relief would have been refused, though no doubt relief would have been granted on terms as to the costs of the application and any costs wasted. Those costs would have been significantly less than the budgeted costs of the whole claim.”
    1. It is of some interest that this is the opposite view to that which Freedman J expressed in Hyslop (to which Fancourt J does not appear to have been referred). I agree that it is not always necessary to require a formal application to be made, and that in some circumstances acceptance of a solicitor’s undertaking to pay the trial fee would suffice; just as in the old days a court would often accept a solicitor’s undertaking to pay the stamp duty (plus any necessary penalty) on a document which was required to be stamped before it became admissible in evidence. If, for example, the parties arrive at court expecting a trial to take place and are ready for it, it places an unnecessary burden on them to send them away again. There will inevitably be irrecoverable costs thrown away; the parties will have to reinstruct their lawyers and reassemble their witnesses. The court will (at least potentially) not be able to make good use of the slot that has been allocated for the trial. The court would also have to allocate time for the hearing of a formal application for relief against sanctions; and, if successful, another trial window. And if the application is unsuccessful, the court will not be paid the trial fee (although it will have been paid the lower fee due on an application).
    1. Fancourt J set out a number of factors that pointed in favour of relief against sanction and summarised his view at [23]:
“Ultimately, in my judgment, despite the fact that a moderately serious breach was committed without mitigating circumstances, justice is better done in this case by enabling the current action to proceed to a trial, rather than requiring the appellant to start new proceedings for his claim, or alternatively a claim for negligence against the solicitors, or possibly both. Paying all the costs of the current claim, and incurring the cost of funding two new actions, would in my judgment be disproportionate to the seriousness of the breach and any harm done to the administration of justice or to the respondent that is attributable to the breach, as opposed to being attributable to the court’s failure to list the application urgently. So far as prejudice to the respondent is concerned, the respondent would be equally troubled by a new claim that the appellant would be able to bring.”
    1. Of these five cases, there is only one (Hyslop) in which relief against sanctions has not been granted; and even then that was on the basis (a) that it might be on an application for that purpose and (b) that the trial that had taken place was not invalidated.
    1. In the present case:
i) Mr Williams (Mrs Boodia’s solicitor) has 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 have been asked at the hearing on 23 November 2018 to set aside the listing of 3 September; but it was 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.
    1. In his evidence in opposition to the application, Mr Batra (Mr Yatsyna’s solicitor) did not identify any particular prejudice that the non-payment of the trial fee had caused. Like Mrs Boodia, Mr Yatsyna proceeded on the basis that the trial was to go ahead on 7 January 2019. Mr Batra did intimate that Mr Yatsyna wished to apply for relief against sanctions in relation to the procedural rulings that went against him at trial. But despite Mr Goodfellow’s valiant attempts to argue the contrary, there was no causative link between the procedural shortcomings on Mr Yatsyna’s part and Mrs Boodia’s failure to pay the trial fee on time.
    1. Mr Goodfellow suggested in oral argument that reinstating the claims would deprive Mr Yatsyna of the advantage of costs judgments in his favour which arose by reason of CPR Part 3.7A1 (7) and CPR Part 44.9 (1) (a). In the first place, that prejudice would always be caused to a defendant every time that a claim is reinstated; so it is not something peculiar to this case. Second, since both parties were proceeding until the eve of trial on the basis that the claims would be heard, it is not an advantage that Mr Yatsyna was aware that he had, or on which he relied. I do not consider that that disadvantage to Mr Yatsyna can outweigh all the manifold disadvantages that would be caused to Mrs Boodia in the event that the claims were not reinstated.
    1. I would have no hesitation in granting relief against sanctions, even though no formal application is before us.
    1. Finally, Mr Goodfellow argued that if we were to grant relief against sanctions, as I consider we should, that relief should not be retrospective, but should operate only from the date of our order. I can see no good reason to limit the effect of an order in that way. It would have the consequence of invalidating the trial of the Barn claim which has already taken place; and it is difficult to see what effect it would have on the claim relating to the Gables, which has yet to be tried.
  1. The objection taken by Mr Yatsyna is, in my judgment, wholly opportunistic. I would allow the appeal.