Party that filed budget a day late loses appeal against relief from sanctions refusal

Deadline: budget filed a day late

A defendant that filed its £50,000 costs budget a day late – meaning it was limited to the applicable court fees only – has failed to overturn a decision not to grant relief from sanctions.

Daniel Alexander QC, sitting as a deputy judge of the High Court, said the decision of HH Judge Lochrane in Central London County Court “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”.

Mr Alexander described the circuit judge’s ruling as “perhaps on the tougher end of the spectrum as to substance and on the leaner end of the spectrum as to analysis”, but noted that the defendants had 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 claimants succeed 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.”

In Lakhani & Anor v Mahmud & Ors [2017] EWHC 1713 (Ch), an order of 18 November 2016 provided that the parties should file and serve updated costs budgets 21 days before the case and costs management conference scheduled for 10 January 2017.

Mr Alexander noted: “It is common ground that the purpose of this order was to enable the parties to communicate with each other in good time prior to the costs and case management conference to limit disputes over costs budgeting and to smooth the resolution at that hearing.”

The claimants served their costs budget on 19 December 2016, “the correct day”.

The judge went on: “According to the evidence, this prompted the defendants’ solicitor with conduct of the case, Mr Fellows at IBB Law, to ask a colleague to prepare the defendants’ Precedent H costs budget. This was served the next day on 20 December 2016.”

The claimants’ costs budget sought over £100,000 in costs and the defendants’ budget was approximately half that amount.

There was a dispute up until the hearing before HHJ Lochrane as to whether the defendants were indeed out of time, but it was ultimately agreed that they were.

Despite all this, the parties’ solicitors had commented on each other’s budgets, and most of the defendants’ was agreed, evidence they said showed that the claimants had suffered no prejudice.

At the hearing, the claimants’ proposed costs budget was “significantly reduced”, but because relief from sanctions was not granted, the defendants’ costs budget was not considered at all.

Had relief been ordered, Mr Alexander said, “there is little doubt that it would have been possible for the court to exercise its costs budgeting powers relatively easily” – which the defendants said showed it was not a serious breach.

The defendants only applied for relief on the day of the hearing. Mr Alexander said: “The judge said, in my view rightly, that in certain circumstances being one day late with a costs budget ‘might not be regarded as terribly serious’.”

However, HHJ Lochrane said that in the circumstances there was no sensible excuse for the breach, continuing: “My conclusion is that this is 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 irrelevant to those costs budgeting issues.”

On appeal, the defendants argued that the circuit judge failed to take key matters into account in assessing the seriousness of and reasons for the breach.

On seriousness, Mr Alexander found that HHJ Lochrane was entitled to take the factors into account that he considered particularly relevant.

“Other judges may have approached the matter somewhat differently, given 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.

“Finally, there is a risk in these cases of attempting a purist compartmentalisation of factors into the respective stages of Denton and criticising judges if that is imperfectly done in ex tempore judgments.

“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 third stage that the manner in which it was sought to be remedied, including the dispute over whether there was a breach and 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.”

Mr Alexander gave the idea that there was a reasonable excuse short shrift, noting among other factors that “on any view, this was work undertaken at the last minute”.

He concluded that this was not a case in which the claimants were using the rules as a 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.”

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