In this case the Court refused to overturn a decision at
first instance which had refused an extension of time for the filing of a Costs
Budget (filed with the Court one day later than it should).
1.
Draconian
consequences: the consequences attendant on the late filing of a Costs
Budget can be draconian. The relevant
provisions are those of Civil Procedure Rule [CPR] 3.14. These provisions state that any party failing
to file a Costs Budget in time “will be
treated as having filed a budget comprising only the applicable Court fees”. In other words the party in default is
debarred from claiming any part of their legal costs from their opponent, even
if they are successful. Claims for
recovery of any professional fees are torpedoed.
2.
Escape
hatches: should such a situation unhappily occur, the door is not
necessarily locked. The hapless solicitor
can look to the following escape hatches to be found in the provisions of CPR
1.1(2)(a): the Court’s ability to ensure that parties are placed on an equal footing and those of CPR
3.9 which empower the Court to grant relief
from sanctions.
3.
Mitchell: the
leading case in this area is still that of Mitchell
[2013] EWCA Civ 1537. In that case
the Costs Budget was filed substantially out of time and on the cusp of the
Court Hearing appointed inter alia to
consider and approve it. The Claimant
Mr. Mitchell’s application for relief from sanctions was refused and he was
restricted to recovery of the Court fee alone (that is the fee paid to the
Court on the issue of his legal action).
4.
The Three
Stage Test: there followed Denton v.
T.H. White Limited [2014] EWCA Civ 906.
In Denton the Court of Appeal
decided that a three stage approach
should be adopted:
Stage 1: there
should be an assessment of the gravity or significance of the failure to
comply.
Stage 2: if
grave or significant, the reasons
for breach should be considered and
Stage 3: the Court should then look to all the circumstances of the case and in particular those factors
contained within CPR 3.9(1)(a) and (b) so as to deal with the application
justly.
5.
CPR 3.9(1)(a)
: this emphasises the need “for
litigation to be conducted efficiently and at proportionate cost”
6.
CPR 3.9(1)(b):
this obliges the Court “to enforce
compliance with rules, practice directions and orders”.
7.
Mitchell
and reasoning: in Mitchell Lord Justice
Dyson the Master of the Rolls stated that “the
Claimant’s non-compliance caused substantial extra work and extra costs to be
incurred by the Defendant. It also disrupted
the work of the Court”. (The Court
had been obliged to vacate half a day which had earlier been allocated for
asbestosis claims.)
In relation to factors (a) and (b)
Lord Justice Dyson said “these
considerations should now be regarded as of paramount importance and be given
great weight. It is significant that
they are the only considerations which have been singled out for specific
mention in the Rule”.
8.
Trivial
Breach: the principle de minimis non
curat lex (the law is not concerned with trivial things) applies. The Court will normally be sympathetic if the
failure to comply was insignificant (e.g. where a party has narrowly missed the
deadline imposed by the Order but has otherwise fully complied with its terms).
9.
In contrast if the breach is serious or
significant, the burden rests with the party in default to persuade the Court
to grant relief. The Court will want to
consider why the default has occurred, thus bringing into play Stage 2.
10.
Good
reason: if a good reason can be shown it is more likely than not that the
Court will grant relief. (For example
where a party or their solicitor was suffering from a debilitating illness or
involved in an accident such might well constitute good reason; late and
unforeseeable developments in the litigation might also constitute good
reasons. Mere oversight is unlikely to
suffice.)
Lakhani:
The facts of Lakhani were
these: on 18 November 2016 a Order had been made which required the parties to
litigation to file and serve updated Costs Budgets 21 days before the hearing
at which they would be considered, that is at a Costs and Case Management
Conference [CCMC].
The CCMC was appointed for 10 January 2017.
The Claimant served his Costs Budget in time on 19 December
2016. The Defendant’s solicitor did not
do so until the following day, 20 December 2016. The Defendant’s Costs Budget was one day
late. The Claimant contended that this
triggered the automatic sanctions of CPR 3.14 and that the Defendant was
therefore limited to the Court fee should it be successful in obtaining a Costs
Order.
The Defendant failed to make a prompt Application for Relief:
no attempt was made until the actual day of the CCMC. The consequence was that a hearing originally
listed for 45 minutes to approve Costs Budgets ran to half a day and was wholly
dominated by the Defendant’s Application for relief from sanctions. The Defendant’s Application was refused.
Lakhani: Appeal:
The Defendant Appealed; its Application came before Mr.
Daniel Alexander QC sitting as a Deputy Judge of the Chancery Division. The Learned Judge had regard to the provisions
of CPR 3.9, Denton and Clearway Drainage Systems Limited v. Miles
Smith Limited EWCA Civ 20161258.
Clearway: The First
Stage:
Clearway related
to an Appeal from an Order dated 21 June 2016 of Her Honour Judge Moulder,
sitting as a Judge of the Queen’s Bench Division in the Manchester District
Registry, which dismissed the Application of the Claimant Clearway from relief from sanctions in respect of its failure to
serve Witness Statements in time with an allied failure to serve a Witness
Summary.
On the facts the Judge said that the failure for over two
months to serve Witness Statements (and to serve them less than a month before
trial) had affected the efficient progress of the litigation (even if no
particular prejudice was identified) and that such a prolonged failure over a
period of months had to be viewed by the Court as serious or significant.
Clearway: the Second
Stage:
Turning to the Second Stage identified in Denton, the Judge said that it seemed to
her that there had been no good reason for the failure to serve the witness
evidence in time.
(Clearway had
contended that there were issues of disclosure which prevented their filing
their witness evidence earlier in the day.
The Judge stated that it had been open to Clearway’s solicitors to make an Application to the Court well
before the deadline for exchange of witness evidence and for Specific Disclosure
of any documents believed to have been outstanding or required in order for
them to deal with witness evidence competently).
Clearway had
effectively disregarded the Court Order.
Lakhani: Court of
Appeal review:
In Lakhani the
Court proceeded to review the Three Stage Test adopted by the Deputy Judge in
the Court below. On Appeal the Court
below had found that the breach had not been trivial but was serious. The Court of Appeal took the view that the
breach was borderline but of sufficient seriousness as would
warrant the refusal to grant relief from sanctions. There was no basis on which the Appeal Court
could properly interfere with the decision or reasoning of the Court below in
relation to the gravity of the breach.
The Court of Appeal proceeded to the Stage Two that is, an
examination of whether the failure could be reasonably excused. The Deputy Judge on Appeal concluded that it
could not: there had been no reasonable misunderstanding of the requisite
rules. The Defendant’s solicitors had
only commenced their preparations on the Costs Budget following receipt of the
Claimant’s Costs Budget. The work had been
done at the last minute. Apparently the
Defendant’s solicitor had misread the rules: this could not be described as an understandable mistake.
Proceeding to Stage Three the Court was heavily influenced
by the lateness of the Application. Put
another way, the Defendant’s solicitors’ delay in seeking to remedy the
original default was of itself open to criticism.
Accordingly taking into account all of the circumstances of the
case meant that there was no persuasive basis upon which to alter the decision
of the Court below.
Summary:
In relation to the filing of Costs Budgets the following
lessons may properly be drawn; these are in many ways of general application in
relation to the conduct of Civil Litigation in England and Wales.
(1)
All Court Orders are to be obeyed and every
effort should be made to ensure timeous compliance therewith.
(2)
Breaches which might properly be classed or
viewed as trivial or negligible will ordinarily justify relief from sanction.
(3)
Those which are serious or substantial will not.
(4)
If serious or substantial, then good reasons will
need to be shown.
(5)
Even if good reasons are shown any Application
for Relief must be made promptly and without delay.
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