Costs Budgeting, New Rules are in, make sure you comply!

BUDGETING – NEW RULES ARE IN, MAKE SURE YOU COMPLY!

As regular readers of our blogs will be aware, new rules in relation to the procedure for the budgeting process came into force on 6 April 2016 (see our blog here). As past experience has shown, compliance with the rules is essential if a “world of pain” is to be avoided. Whilst the amendments do not carry with them any enhanced or more explicit sanctions than applied previously, as with nearly all rule changes, it is highly likely the Judiciary will be keen to ensure that practitioners follow the rules. During the initial “bedding down” period it just may be that a more heavy-handed approach may be adopted.

It is perhaps therefore appropriate at this point for us to consider a recent case which again deals with the vexed issue of late filing and exchange of budgets.

In Murray v BAE Systems PLC in the Liverpool County Court (unreported), the Claimant’s Solicitors missed the deadline for filing and exchanging budgets. It appears that a combination of factors worked against them in that there was a change of fee earner at or about the time the budgets fell due and each understood that the other was dealing with matters. Further, the requirement to file and exchange budgets was not explicitly set out in the notice of hearing, but rather arose as a consequence of the requirements in CPR 3.13. Their position was further complicated by the fact that the Defendant had reminded them that a budget was awaited about 3 weeks and then again 1 week, before the due date.

The Claimant’s budget was sent to the Defendant 3 days later than required, but not until 6:24 PM and therefore in accordance with the rules was deemed as treated being served the following day. The budget was filed 2 days before the hearing, but again not until 4:45 PM and so was treated as being filed the day before the hearing.

At the hearing before the District Judge, it was accepted that this was a genuine mistake and an isolated breach. It was also found that the Court could have proceeded with costs management notwithstanding the breach. Nevertheless, the Judge found that the delay was significant and serious because the budget was 7 days late and that given the provisions upon relief from sanctions, namely that the Court should seek to enforce compliance with rules and orders, the budget would be treated as being for court fees only pursuant to CPR 3.14.

The Claimant successfully appealed to the Circuit Judge. The Circuit Judge reviewed the case law to include Mitchell, Denton, Long v Value Properties Ltd and another [2014] EWHC 2981 (Ch); Azure East Midlands Ltd v Manchester Airport Group Property Developments Ltd [2014] EWHC 1644 (TCC) and Altomart Ltd v Salford Estates (No 2) Ltd [EWCA Civ. Following the 3 stage test in Denton (1- is the breach serious and significant, 2 – why did the breach occur, 3 – consider all the circumstances) it was found that the District Judge erred in rejecting the suggestion that consideration of consequences of the breach (or the absence of the same) in having an adverse impact on the further conduct of the litigation at proportionate cost without any knock-on disruption to the litigation generally, should be a factor. It was found that the District Judge had failed to consider materiality at all and if this was an appropriate measure of determining whether there had been a serious and significant breach. The Circuit Judge found that he could not identify any more appropriate basis than materiality when determining the question of whether the breach was serious and significant.

Therefore, whilst noting the requirement to enforce compliance with rules and orders, the Circuit Judge held that in these circumstances, the breach was not serious and significant and therefore awarded relief from sanction.

He went on to say that even if he was wrong about that, it was clear that there were degrees of seriousness of any breach and that in his view, the circumstances here would fall towards the bottom end of that range. Therefore, when moving to the 3rd stage of Denton and applying all the circumstances, the need to enforce compliance with rules and orders was heavily outweighed by all of the other factors here and relief from sanction should be given.

This is an interesting case because the Claimant’s Solicitors had been chased by the opponent and had no real excuse for the delay. It is also a good reminder that service after 4:30 PM on any particular day will be treated as service the following working day. It does take account of the reality of much litigation in that many District Judges will not have had the opportunity of considering the papers much before the time of the hearing and that therefore late filing of budgets may not in reality have any impact upon the ability of the Court to deal with matters. However, if such a liberal view were taken more generally, it would have course undermine the need for proper compliance with the rules.

As ever, our very strong advice is that practitioners should be fully aware of the deadlines for compliance, whether explicitly set out in notices or implied by the rules. The circumstances in this case are ones which really do need to be avoided.