COSTS BUDGET SERVED LATE: RELIEF FROM SANCTIONS ALLOWED ON APPEAL
In a judgment given today His Honour Judge Peter Gregory allowed an appeal against a decision to confine a claimant’s costs budget to court fees following late service of the costs budget. The case indicates that a more nuanced approach should be taken to applications for relief from sanctions; it also highlights the significance of an application for relief being made extremely promptly.
Murray -v-BAE Systems PLC (Liverpool County Court, 1st April 2016) (The judgment is available here MURRAY V BAE FINAL)
- The claimant’s costs budget was due to be served on the 19th August 2015.
- The defendant sent out reminders to the claimant that the budget was due.
- The costs budget was served late. It was e-mailed to the defendant on 21st August 2015 (a Friday) but not until after 6.24 am.
- The budget was sent to the court on Monday 24th August 2015, but not until 4.45 pm.
- On the 24th August 2015 the claimant also made an application for relief from sanctions.
THE HEARING BEFORE THE DISTRICT JUDGE
The District Judge refused the application for relief from sanctions. The delay was 7 days which was, the judge considered, “serious and significant”. She accepted the explanation given and was a genuine mistake and not a disregard of court rules. However relief from sanctions was refused.
THE APPEAL TO THE CIRCUIT JUDGE
The Circuit Judge considered the high burden on a party seeking to appeal the exercise of a discretion.
THE ARGUMENTS ON APPEAL: WAS THIS A “MATERIAL BREACH”
The Judge reviewed the case law in Mitchell, Denton and many of the subsequent cases, in detail. (The links to the cases referred to have been added for ease of reference).
“It is convenient here to note the other reported cases upon which Mr Exall relies in support of his submission that the failure by the Claimant’s solicitor to serve, within the requisite timescale, a costs budget should not have, in the context of this particular case, been deemed to be a “serious and significant” breach.
Azure East Midlands Limited v Manchester Airport Group Property Developments Limited  EWHC 1644 (TCC) is another case involving a failure to serve a costs budget on time – in that case by two days. Decided before the Court of Appeal case of Denton, His Honour Judge David Grant found that the Claimant’s initial failure in missing, by two days, the requirement to file and serve a costs budget 7 clear days before a case management conference was, or had become – in the context of the facts of that particular case – no more than an insignificant failure given that the court was considering a party’s costs budget not at the first, but at the second hearing of the case management conference with the additional passage of time having diluted any impact or effect of the initial delay. The learned judge commented on the relevance of the interrelation between the breach, i.e., the non-compliance on the one hand, and its consequences on the other hand and found that the non-compliance or breach in that particular case was trivial and/or insignificant and/or inconsequential.
Long v Value Properties Limited (2014) EWHC 2981 (Ch) involved the late (by some 5 weeks) service of further information required by CPR PD47.32.7 (the Costs Practice Direction) of information to supplement a detailed bill of costs served in detailed assessment proceedings. The judge, Barling J, in allowing the Claimant to appeal against sanction, noted that the Master had found that there was no significant prejudice to the Defendant’s, or to the efficient conduct of the assessment proceedings at proportionate costs, or to the court or to other litigants as a result of the breach. He went on to state, at paragraph 71 of his judgment :-
“In my view when looked at in its context as discussed above, the breach here is properly regarded as “insignificant” and therefore “trivial” as those expressions are understood in the light of the guidance in Mitchell (see in particular paragraph 40 of the Judgment of the Court of Appeal in that case). For the same reasons I consider the breach to be neither serious nor significant in the terms of the Denton guidance. It is clear that in view of the concession the judge did not receive the assistance he should have received in regard to the meaning of “triviality”. His instinct was to hold that the breach was trivial but he appears to have fallen into the error by attaching insufficient weight to the circumstances surrounding the breach as well as to the absence of any significant prejudice of any kind to anyone. “
The issue was considered by the Court of Appeal again in Altomart Limited v Salford Estates (No. 2) Limited  EWCA Civ 1408, a case concerning a delay of approximately 5 weeks in the filing of a Respondent’s Notice of Appeal. The Notice should have been filed by 24 March 2014. Although Altomart’s case was fully set out in a skeleton argument filed on time on 22 April 2014 the Respondent’s Notice was not in fact filed until 29 April 2014, the relevant appeal having been set down for hearing on 10 or 11 November 2014.
Moore-Bick, LJ delivering the judgment of the court reviewed the Mitchell principles, as qualified and explained by Denton stated (at paragraph 19):-
“More recently the rigour of the decision in Mitchell has been tempered by the decision in Denton. In that case the court recognised that Mitchell had been the subject of criticism and, while holding that the guidance it provided remain substantially sound, sought to explain in rather more detail how it should be interpreted and applied. In doing so it identified three stages of enquiry: (i) Identifying and assessing the seriousness and significance of the default which engages Rules 3.9; (ii) Identifying its cause; and (iii) Evaluating all the circumstances of the case, including those specifically mentioned, so as to enable the court to deal with the application justly. The court clearly contemplated that if the default is not serious and significant, relief is likely to be granted. For these purposes a default which does not disrupt the progress of the litigation or the business of the court more generally may well not be regarded as serious or significant. The court did not consider it appropriate to elaborate on the second stage, given the range of circumstances likely to arise. One of the most significant aspects of the decision, however, is to be found in paragraph 31, in which the Master of the Rolls makes it clear when dealing with the third stage that, even if there is a serious and significant default for which no good reason can be given, the application will not automatically fail. Although the factors mentioned in Rule 3.9 are of particular importance, they are not of overriding significance”.
Moore-Bick LJ went on (at paragraph 22 of his judgment) as follows:-
“Applying the Mitchell principles as expanded in Denton, the first question for consideration was the seriousness and significance of the breach of the Rules which had given rise to the need for the application. In terms of the lapse of time the delay was considerable, but it was clear that it was likely to have had little, if any, effect on the course of the proceedings. Neither party suggested, for example, that it would lead to an adjournment of the hearing and there was no reason to think that the need to allow additional time for argument would be likely to interfere with the court’s other business. In those circumstances I did not think that the delay could properly be regarded as serious or significant in the sense in which those expressions were used in Denton. That suggested that relief should probably be granted: see Denton, paragraph 28”.
The learned Lord Justice went on to observe that :
“since the delay itself had had no real effect on proceedings and had caused to substantive prejudice to Salford, (he) did not consider that to be of great significance ….there was nothing else in its conduct of the proceedings or in the circumstances more generally that militated against granting relief and it would not have been appropriate to refuse relief simply as a punitive measure ……”.
Finally Mr Exall draws the court’s attention to the case of Joshi and Welch Limited v Tay Foods, a decision of Green J of 2 December  EWHC 3905 (QB) a case in which the Claimant/Appellant successfully appealed an order for judgment entered upon a counterclaim to proceedings, the Claimant having failed to serve a formal defence to counterclaim, although its detailed position in relation to the counterclaim advanced by the Defendant had been comprehensively dealt with in a witness statement already served. Green J, in quoting extensively from paragraph 26 of the Denton case, observed (at paragraph 27 of his own judgment):-
“in my judgment, the Court of Appeal was, at least in some degree, endorsing a test of materiality as a useful guide in determining the seriousness and significance of a violation. Of course, the other side of the coin has to be acknowledged. Rules exist for a good reason. Non-observers can create adverse ripple effects in the administration of the court service which litigants are rarely cognisant of ……..However whilst in no way under-playing the importance of observance of the rules in Denton, the Master of the Rolls and Vos, LJ were, at the end of the day, anxious to emphasise the CPR was not to be used as a tripwire …..”
He continued (at paragraph 29):-