Relief from Sanction Denied for Costs Budget 1 day out of time – Lakhani & Another v Mahmud & Others [2017] EWHC 1713 (Ch)

July 13, 2017

Relief from Sanction Denied for Costs Budget 1 day out of time – Lakhani & Another v Mahmud & Others [2017] EWHC 1713 (Ch).

 

Ever since the introduction of costs budgeting, there has been a wealth of case law developed surrounding the same, and no more so than where a party has been in default of the rules. The provisions of CPR 3.14provide that a party failing to file a budget in accordance with the rules “…will be treated as having filed a budget comprising only the applicable court fees.” and thus in such circumstances there is an automatic sanction restricting that party’s costs to court fees only, unless a successful Application for Relief from Sanction can be pursued.

 

The first matter to really address such default was the matter of Henry, decided even before the reforms brought in on 1 April 2013, and was followed by the matter of  Mitchell in which relief was not granted and thus the claimant was restricted to the recovery of court fees only, notwithstanding the very substantial nature of the litigation, after which it was clear that the Court of Appeal required to provide guidance as to the appropriate test to be applied if, what at that time was seen to be, overly draconian sanctions for minor defaults in timescales were to be avoided.

 

Further guidance, and perhaps most importantly a test to be applied, was provided in the matter of Dentonwhich developed a 3 stage test, obliging the court upon any such Application for Relief to

  1. identify and assess the seriousness or significance of any failure to comply with any rule, practice direction or court order;

  2. consider why any failure or default occurred; and

  3. if it is found that any such failure was either serious or significant, deny any relief from sanction unless there is a good reason for that failure or default.

Since the advent of Denton, matters had been largely quiet in terms of published decisions on such applications, however more recently the issue has come to the fore once more in the matter of Lakhani & Another v Mahmud & Others [2017] EWHC 1713 (Ch).

 

In this matter, an order had been made on 18 November 2016, providing for the parties to file and serve updated cost budgets 21 days before the CCMC, which had been scheduled to take place on 10 January 2017.

 

The Claimant served their costs budget on 19 December 2016 which was the correct day, however this prompted the Defendant’s solicitor to prepare their cost budget, which was served the following day, 20 December 2016.

 

The Claimant’s costs budget was over £100,000, with the Defendant’s being approximately half that amount however the Claimant contended that as service of the Defendant’s budget had been late, the automatic sanctions imposed by CPR 3.14 applied and thus, unless relief from sanction was granted, nothing more than court fees would be recoverable in the event that the Defendants were successful in obtaining a costs order.

 

It is significant in the consideration of this matter to note that no application for relief was made until the matter came before the court upon the CCMC, whereupon a hearing which had originally been listed for 45 minutes to determine simple costs budgets turned into a half day hearing which was entirely dominated by the application, and resulted in such relief being refused.

 

The matter came on appeal, from HHJ Lochrane in the County Court at Central London, before Mr Daniel Alexander QC, sitting as a Deputy Judge of the Chancery Division, whereupon the judge had regard to the comments of HHJ Lochrane that “…in certain circumstances being one day late with the costs budget “might not be regarded as terribly serious“.” and noted the judge’s overall conclusion that the breach was

 

“…not a trivial breach. It is a serious breach. It is a breach which has imperilled the proper conduct of this litigation. It has reduced the time available for these parties to conduct themselves in the way that is expected by the Rules to narrow the issues on the costs budget. It has further created an environment in which the attention of both parties, by the default of the defendants, has been distracted onto a matter which is relevant to those costs budgeting issues.”

 

In considering the Defendant’s appeal against HHJ Lochrane’s refusal of relief, the Deputy Judge had regard both to the provisions of CPR 3.9 and the matters of Denton and Clearway, clearly approaching the appeal as a review and not a rehearing and addressing the grounds of appeal, which contended that HHJ Lochrane had (i) erred in his approach by failing to take into account key matters in assessing the seriousness of the breach and (ii) had given too little weight to the fact that there were innocent reasons for the breach.

 

In this regard, the Deputy Judge approached the review to consider firstly the seriousness of the breach and, thereafter, whether there was any reasonable excuse.

 

In respect of the former of these, the Deputy Judge having weighed up the issues extensively within his judgement, concluded that

 

“…HH Judge Lochrane was entitled to take the factors into account that he considered particularly relevant in this case in determining whether the breach was serious or significant and was not obliged to treat the fact that costs budgeting could be done as the overriding one. Other judges may have approached the matter somewhat differently, giving factors more or less weight and reached a different conclusion. This seems to me a case on the borderline of sufficient seriousness to warrant refusal of relief from sanctions. However, I do not consider that this court can properly interfere on that basis, having regard to the approach required on an appeal of this nature.

 

 “…there is a risk in these cases in attempting a purist compartmentalisation of factors into the respective stages of Denton and criticising judges if that is imperfectly done in ex tempore judgements. Some factors may be considered at more than one stage. In this case, even had HH Judge Lochrane concluded that the breach was not serious, he would have been entitled to conclude at the 3rd stage that the manner in which it was sought to be remedied, including the dispute over whether there was a breach in the lateness of the application, meant that relief from sanctions should not be ordered. That being so, it is somewhat artificial to criticise his judgment on the footing that factors which were legitimately considered at the first stage but which might better have been considered at the third stage also came in at the first.”

 

Considering whether there was any reasonable excuse, the Deputy Judge concluded, in his view, that there was not, considering that there had been no reasonable misunderstanding of the rules as to the due date of the costs budget as, firstly, the defendant solicitor had only started to prepare the cost budget after receiving the claimant’s costs budget and thus, on any interpretation, the work was undertaken at the last minute; secondly the position in this matter was similar to one in which a solicitor excuses not serving a cost budget until the last minute, having “…taken the incorrect and “rather arrogant” decision that none was required because of his reading of the rules…“; and thirdly, notwithstanding that the mistake was explicable, he was not satisfied that it was properly described as an “understandable mistake”.

 

Concluding the matter overall, the Deputy Judge was not critical of the approach taken by HHJ Lochrane, considering the same to have been proper both in principle and on the facts, and further finding that the “…conclusion was open to him in the exercise of his discretion and is of a kind which the Court of Appeal has recommended should normally be upheld.

 

 “The decision was, perhaps, on the tougher end of the spectrum as to substance and on the leaner end of the spectrum as to analysis. But the defendants have not been deprived of a trial altogether. Had that been the consequence, the situation would have merited more detailed scrutiny than the judge gave it. HH Judge Lochrane’s decision operates to deprive the defendants of their budgeted costs in the event that they succeed at trial. If the claimant succeeded at trial, the decision will have had a limited adverse impact on the defendants other than enabling the claimants to litigate without significant risk of having to pay the defendants’ costs. In those circumstances it is hard to criticise it as disproportionate.

 

 “Nor is this a case in which the claimants were using the rules of the tripwire. The claimants’ solicitors pointed out correctly and promptly following late service of the defendants’ costs schedule that without an application for relief from sanctions the consequences of CPR 3.14 would follow. They were not obliged to consent in advance to an application for relief from sanctions which had not been made and which was not provided to them until the day of the hearing, giving them almost no opportunity to address it fully.”

 

This matter once again demonstrates the very broad discretion which can be applied in applications for relief from sanctions and, perhaps more importantly, the necessity to ensure that, where at all possible, all rules, practice directions and court orders are fully complied with, especially with regard to the costs budgeting regime.  Failing compliance any application for relief must be made swiftly.

 

We operate a highly efficient and cost-effective costs budgeting department, which can assist you in all aspects of costs budgeting from the preparation of budgets up to and including attendance upon CCMC’s and, where necessary, a priority service. To find out how we can assist, please contact us either by telephone on 01772 435550 or 01604) 604035 or email costs@sphcostingservices.com

 

Share on Facebook
Share on Twitter
Please reload

Featured Posts

Mandatory Electronic Filing for Court of Protection Bills of Costs

November 11, 2019

1/1
Please reload

Recent Posts