Bhandal v HM Revenue and Customs  EWHC 3387 (Admin)
Exploring the reasoning behind denying a party the opportunity to defer payment of costs. With a refresher on the Denton test.
When an Order for costs is made against a party, there may be one reason or another that payment cannot be made on time. As such it is not uncommon for leave to be granted of the paying party to make an Application for further time to pay the costs. But when will this be permitted?
The case of Bhandal v HM Revenue and Customs highlights some of the conditions which need to be met in order for such an Application to be successful.
The circumstance of the case are interesting, but complex and certainly beyond the scope of this article. The important development is that Claimant was ordered to pay costs of an Application summarily assessed in the sum of £83,000.00. Liberty was given for the Claimant to apply on or before 4pm on 24th August 2016 for further time to pay the costs awarded.
The Claimant bought their Application and in support of doing so the Claimant provided a statement in support of his impecuniosity. The Claimant submitted that his only considerable asset was an outstanding Judgment debt owed by the Respondent but which the Respondent was unreasonably withholding. The Respondent in turn submitted that they were investigating the circumstance surrounding the outstanding Judgment and were considering an Application of their own to set aside that Judgment.
Justice Holroyde criticised the Claimant for the vagueness of the statement provided in support of his Application.
“The statement consists of nothing more than bare assertions of impecuniosity and vague reference to a number of loans from unnamed friends and family.”
While this lack of detail was criticised, it was not the reason the Claimant was not granted further time to pay the costs Order. With reference to Gulf International Bank v Al Ittefaq Steel Products Co & Ors  EWHC 2601 (QB) Justice Holroyde explained that further time should only be granted if the paying party could show they would be able to pay, given the requested extension of time. The Claimant here only showed that he was unable to pay as it stood and did not show that he would be in a position to pay if an extension were granted. The Claimant asked for an extension until the outstanding Judgment debt was paid by the other side, however as this Judgment was not certain (given the possibility of it being appealed) it was only considered speculative income in nature and could not be relied on for purposes of evidencing the Claimant’s ability to pay down the line.
As a result of the above, Justice Holroyde sided with the respondent and no further time was granted for payment of the costs.
Relief from Sanctions
In addition to the above, the Claimant’s Application for relief was actually made outside of the timescales of the original Order. While a witness statement was filed on time (i.e. on the 24th August 2016), the Application itself was not made for a further 7 days. As would be expected, Justice Holroyde referred to the three stage test in Denton.
Seriousness and significance of the breach – The breach was considered serious and significant:
“Given the context of the Application, and given that Mr Bhandal had been ordered to pay a substantial sum by way of costs”.
It is interesting to note that discrepancies in the Claimant’s submissions, which were potentially misleading as to the circumstance of the Application, were held against the Claimant under this stage of the test.
Why did the Breach occur? – The Claimant offered no explanation at all as to why the Application was made late.
Evaluating all of the circumstance – The reason costs had been awarded against the Claimant in the first place was the result of an Application he had made, pursued and withdrawn.
In all of the circumstance, regardless of the unreasonableness of the Application itself (as above), relief would still not have been granted as there were no grounds for doing so under the three stage Denton test.
Any specific lesson to take from this case would be very narrow in terms of scope. However the general lessons are as important as they should be obvious to a conscientious practitioner.
- If you have deadlines / dates of compliance within an Order, meet them.
- If a deadline is likely to be missed, if at all possible make an Application for additional time before the deadline expires.
- If you make an Application for relief from sanctions, ensure you provide a full and factually accurate explanation as to why the breach occurred.