COURT OF APPEAL UPHOLDS RELIEF FROM SANCTIONS GRANTED WHEN A PARTY HAD NOT MADE A FORMAL APPLICATION

In Park v Hadi & Anor [2022] EWCA Civ 581 the Court of Appeal upheld a decision granting a claimant relief from sanctions. The initial application had been made informally, during the course of an application, the defendant’s appeal against that decision did not succeed.

 

“An application for relief from sanctions should be made (and usually is made) by a Part 23 application notice supported by a witness statement. It is, however, clear that the court has a discretion to grant relief from sanctions in two situations: where (as in the present case) no formal application notice has been issued, but an application is made informally at a hearing; or where no application is made, even informally, but the court acts of its own initiative.”

THE CASE

The claimant brought an action alleging he had been underpaid following the sale of a business to the defendants, consisting of two pubs. The defendants applied to strike out a claim.  At the defendants’ application the judge made a series of peremptory orders.  The claimant did not fully comply with those orders. At the resumed hearing the judge granted the claimant relief from sanctions. The claimant had not made a formal application.  The judge also refused the defendants’ application for an order that the claimant pay the outstanding costs into court by way of security of costs.

THE DEFENDANTS’S APPEAL

The defendants appealed the judge’s orders granting relief from sanctions and refusing to order that the claimant pay the outstanding costs into court.

THE DECISION OF THE COURT OF APPEAL

The Court of Appeal refused the Defendants’ appeal.  It was possible for a court to make an order granting relief from sanctions and such an order had been appropriate in the current case. The judge was also entitled not to require the claimant to pay the costs by way of security.

Analysis:
    1. The principles applicable to this case, which we extract from the rules and case law referred to earlier in this judgment, can be shortly stated. An application for relief from sanctions should be made (and usually is made) by a Part 23 application notice supported by a witness statement. It is, however, clear that the court has a discretion to grant relief from sanctions in two situations: where (as in the present case) no formal application notice has been issued, but an application is made informally at a hearing; or where no application is made, even informally, but the court acts of its own initiative. The discretion must of course be exercised consistently with the overriding objective. The court, therefore, should initially consider why there has been no formal application notice, or no application at all; whether the ability of another party to oppose the granting of relief (including, if appropriate, by the adducing of evidence in response) has been impaired by the absence of notice; and whether it has sufficient evidence to justify the granting of relief from sanctions (though the general rule in CPR r32.6 does not impose an inflexible requirement that the evidence be in the form of a witness statement). It follows, from the need for those initial considerations, that the discretion will be exercised sparingly. That is particularly so where there has been no application at all, and the court is contemplating acting of its own initiative, because in such a situation there may well be prejudice to an opposing party and/or an absence of relevant evidence. If, however, the initial considerations lead to the conclusion that relief might justly be granted, the court will then go on to follow the Denton three-stage approach. It will, no doubt, very often be the case that factors relevant to the initial considerations are also relevant to the Denton stages.
    1. We are satisfied that the judge’s approach and decisions in the present case accorded with those principles. Mr Bompas fairly and properly accepted that Mr Park had made what amounted to an informal application at the hearing for relief from sanctions. This is not, therefore, a case in which the judge acted of his own initiative. Mr Park’s failure to file an application notice did not occasion any real difficulty to the Appellants in opposing the informal application. The judge was entitled to find that he had sufficient evidence to enable him to determine that informal application, and it would have been a needless increase in costs and delay to adjourn so that a formal witness statement could be filed.
    1. At the first of the three Denton stages, the judge was entitled, for the reasons he gave, to find that Mr Park’s defaults in compliance with Lavender J’s order were neither serious nor significant. It is in our view impossible to say that his decision was not properly open to him, having regard in particular to the following points. Insofar as Mr Park had been late in filing and serving documents which had been prepared for filing within Lavender J’s time limit, the delay was short; was to a substantial extent explained by a technical difficulty (in opening one of the attachments to an email) in respect of which Mr Park is not said to have been at fault; and caused no real prejudice to the Appellants. The deficiencies in the signature and verification of the witness statements could fairly and sufficiently be dealt with by the judge’s order requiring that the statements be re-served in compliant form. The failure to obtain, file and serve bank statements relating to HFKL was due to an oversight rather than to a wilful disregard of Lavender J’s order, and the judge accepted that both Mr Park and Mr Syed were working under difficulties. The Appellants were able to rely on the failure in support of their argument that Mr Park had not shown himself to be unable to pay the outstanding costs orders. The information provided by Mr Park in the Form EX140 is not said to have been false. It showed Mr Park to be substantially without means, and therefore provided sufficient information to achieve the purpose of Lavender J’s order.
    1. Given that the judge’s decision on the first Denton stage cannot successfully be challenged, the remaining two stages can be addressed very shortly. At stage (ii), Mr Ross rightly concedes that the judge found that there was no good reason for at least some aspects of the default, though he accepted what he was told by Mr Syed as providing both an explanation and substantial mitigation. That was relevant to his decision at stage (iii), which again he was entitled to reach. We do not accept the Appellants’ submission that the judge failed to give sufficient weight to factors (a) and (b) in CPR r3.9(1): they were, as always, important factors for him to consider, but they were not the only factors. Notwithstanding the recital which we have quoted at paragraph 10 above, and which the judge had well in mind, the judge was entitled to set the relatively venial deficiencies against the substantial compliance with Lavender J’s order and to conclude that striking out the claim would be disproportionate and contrary to the overriding objective of dealing justly with the case. In that regard, it is to be noted that there has been no challenge to the judge’s decision that the claim has a real prospect of success. We agree with the judge that this is a case in which the real issues can only properly be dealt with at a trial.
    1. As to the second ground of appeal, the decisions whether to impose a condition requiring payment of the outstanding costs, or to require Mr Park to give security for costs, were matters for the judge’s discretion. Given the evidence of impecuniosity provided by Mr Park in his answers on Form EX140, the judge was entitled to exercise his discretion in the way he did. We can well understand why the judge was not prepared to make a costs order which, on the evidence before him, would in practice have brought to an end a claim which he had held should continue.
  1. It was for those reasons that we dismissed the appeal.