FAILING TO SIGN STATEMENT OF TRUTH DOES NOT MEAN COSTS BUDGET WAS FILED OUT OF TIME: HIGH COURT DECISION
It has to be recognised that the decision in Mitchell means, inevitably, that parties will take issue with minor breaches. Indeed it may be negligent for them not do so. In The Governor and Company of the Bank of Ireland -v- Phillip Rank Partnership  EWHC 284 (TCC) Mr Justice Stuart-Smith considered (and rejected) an argument that an error in the statement of truth meant that the costs budget was filed late.
The claimant filed a costs budget, using Precedent H, but on the first page failed to include a full Statement of Truth. Instead the document had the words “statement of truth” immediately above the place for signature by the claimant’s legal representative. The document was signed and filed by a partner in the claimant’s firm. A further copy was served later, in identical form, with the full statement of truth included.
THE DEFENDANT TAKES THE POINT
The defendant took the point 17 days after budgets had been exchanged and one day before the CMC. In response the claimant applied for relief from sanctions. The claimant’s explanation was that it was an error by the solicitor. The Precedent was prepared externally and the solicitor failed to notice that the document did not contain the full statement of truth.
THE DEFENDANT’S SUBMISSIONS
The defendant argued that
- The original budget did not have a statement of truth. The claimant was in breach of CPR 3.13.
- The claimant required relief from sanctions.
- There was no reasonable excuse for the failure.
- Statements of truth were important and pervasive in current procedure.
THE JUDGE’S RESPONSE: THE DEFENDANT’S ARGUMENTS “HAVE NO MERIT, TECHNICAL OR OTHERWISE”.
The judge gave a robust judgment on this issue.
“8. Despite Mr Quiney’s submissions, in my judgment these submissions have no merit, technical or otherwise.
- Technically, I do not accept the first step in the Defendant’s argument. CPR 3.13 requires that parties must file and exchange budgets “as required by the rules or as the court otherwise directs.” CPR 3.14 provides for a sanction in the event that a party “fails to provide a budget” but does not include the additional words “complying in all respects with the formal requirements laid down by PD 3E” or any other words to similar effect. There is nothing in the rules or practice directions which requires any and every failure to comply with the formal requirements for budgets as rendering the budget a nullity, as opposed to being one which is subject to an irregularity. The logical consequence of the Defendant’s argument would be that any failure to comply with the form of Precedent H or PD 22 would render the filing of a budget a complete nullity. It would, presumably, apply if the prescribed form for verifying a costs budget had been followed generally but words had been omitted, mis-spelt or muddled up; or even if the order of the two sentences had been reversed.
- Such a conclusion would, in my judgment, serve only to bring the rules of procedure and the law generally into disrepute. Fortunately, it is not required or even permitted by the terms of the rules to which I have referred. What has happened here is that the Claimant has filed and exchanged a costs budget on time; but the budget suffered from an irregularity.
- The importance of Statements of Truth must not be underestimated; but it varies depending on context. Thus a Statement of Case is only converted from being a series of allegations into a document upon which a party may rely as evidence by the attachment of a Statement of Truth. If a witness statement were served which was entire and complete save for a Statement of Truth, the Court might not permit it to be used in the absence of the witness; but it might well permit the evidence to be given upon the witness affirming the truth of the statement. With costs budgets, the purpose is that the solicitor should effectively certify the reasonableness of the budget. While I do not underestimate the importance of Statements of Truth in the scheme for the provision of costs budgets or elsewhere, the notion that a document which includes the words “Statement of Truth” and is signed by a partner in the firm of solicitors is a complete nullity seems to me to be quite unsustainable. In argument, Mr Quiney accepted that a recipient of a budget in this form would understand it was a costs budget and that these were the figures that the solicitor contended should be chargeable. He was realistic and right to accept that was so.
- Since I do not accept that this is a case where CPR 3.14 applies, it follows that it is unnecessary to consider whether relief from sanction should be granted. However, in case I were wrong in my first conclusion, I should make clear that I would grant relief if it were necessary to do so.
- Two citations may be regarded as complementary when considering the new and more rigorous application of CPR 3.9. The first is the passage from Mitchell in the Court of Appeal at [40-41], a passage that is already so well known that it is not necessary to set it out again here. The guidance includes the following points of particular relevance for this case. First, if the non-compliance can properly be regarded as trivial, the court will usually grant relief; and, second, relief will usually be granted where there has been a failure of form rather than substance.
- The second citation is from Lord Dyson MR’s 18th Lecture in the Jackson Implementation Programme, which is set out in the notes in the White Book, where he said:
“Relief against sanctions is still available if the circumstances require it. The court’s new no-nonsense approach does not make compliance an end in itself which is superior to doing justice in any case: it has not changed the CPR to trip wires for the unwary or incompetent, nor turned them into weapons for the unwary or incompetent, nor turned them into weapons for use by unscrupulous parties.”
- As I have said, statements of truth have an important role in the scheme for costs budgeting. It is therefore inappropriate to characterise the absence of the statement of truth as “trivial”. However, on the facts of this case, the inclusion of the words “Statement of Truth” and the absence of the wording prescribed by PD 22 is a failure of form rather than of substance: there can have been no reasonable doubt in the Defendant’s mind that the intention of the signing partner was to certify the costs as required by Precedent H but that he had made a mistake in the form of the document. As such, this case is far removed from the failure to file and exchange a costs budget at all and no sensible reason has been advanced for not following the usual course in accordance with the guidance in Mitchell to which I have referred. Particularly in the light of page 23 of the October Supplement, what happened here was a trip for the unwary as referred to in Lord Dyson MR’s lecture.
- The Defendant’s submission is therefore rejected. The Claimant did not fail to file and exchange a costs
budget on 24 January 2014. It filed and exchanged a budget that was subject to an irregularity that has since been rectified. No question of relief from sanctions arises. If the taking of this issue serves to alert others to the need to change the form of Precedent H from that set out in the Supplement, some useful purpose will have been served.”
There have been reports of judge’s disallowing costs budgets because of the statement of truth being in square brackets, for instance. Hopefully this provides some guidance on both costs budgeting, statements of truth and irregularities that can be rectified.