ANOTHER LATE COSTS BUDGET: RELIEF FROM SANCTIONS GRANTED TO ERRANT DEFENDANTS WHO SERVED BUDGET 10 DAYS LATE

In Mott & Anor v Long & Anor [2017] EWHC 2130 (TCC) His Honour Judge Grant (sitting as a judge of the High Court) considered a relief from sanctions application in relation to  defendants who had served a costs budget ten days late.  The judge granted the defendant relief from sanctions, but ordered that they pay the costs of the application.  A significant factor was the fact that a second costs budget hearing would probably have been needed in any event, regardless of the defendant’s failure.

THE CASE

The parties were ordered to file a costs budget. The defendants failed to file a costs budget on time. The defendants filed a budget 10 days late, after reminders from the claimant. The reason the budget was late was not clear, partially technical problems, partially human error. The judge considered the Denton test.

THE JUDGE’S VIEW AS TO THE SERIOUSNESS OF THE BREACH

1. I have come to the following conclusions on the first stage. Firstly, as a pure matter of time, filing a cost budget 10 days late is not of the same relatively modest order of time as being a few hours or even one or two days late. Secondly, the degree of lateness in every case is always to be construed in the context of the particular circumstances of that case. To my mind the circumstances in Lakhani illustrate that point very clearly. Thirdly, I accept Mr Christie’s main submission that lateness in serving a cost budget has the capacity to prejudice the very process of co-operation in the cost budgeting process which the rules are designed to achieve. In those circumstances I have come to the conclusion that the period of delay in this case answers the description of being serious or significant, perhaps with particular emphasis on the latter word.

THE REASON FOR THE BREACH

1. A reasonable conclusion to draw from the evidence in the defendants’ solicitor’s witness statement is that the document which she drafted on 6 July was not saved to the defendants’ solicitors’ IT system. I deliberately use the passive sense in that sentence. It is not clear, on the evidence in the application, whether the failure was hers or someone else’s at the defendants’ solicitors i.e. a human error, or whether it was a fault in the IT system itself i.e. a system error. There is no detail about what the “IT difficulties” were. In his oral submissions Mr Christie QC submitted that if Plexus were indeed experiencing problems of the magnitude inferred in the defendants’ solicitor’s witness statement, such problems might have been explained by a witness statement from someone from their IT department or from someone having the relevant or appropriate IT expertise. In my judgement, there is force in that observation.

2. I have therefore come to the conclusion that while there may have been a reason why the failure or default occurred, which might have amounted to a good reason, I am not satisfied on the evidence in the application that the defendants have established that there was good reason for the default.

“ALL THE CIRCUMSTANCES OF THE CASE”

1. 1. To my mind the following are material among the circumstances of the case. Firstly, the fact that the defendants’ solicitors have in fact served a cost budget, and have done so some nine days before this CMC. However, in answer to that Mr Hoskins states in paragraph 18 on his written statement that, notwithstanding that, the timing of the service of the second cost budget was such that there was only one working day for consideration and discussion of that second cost budget so as to provide a budget discussion report. I bear that point in mind.

   2. Secondly, there is also an important practical aspect to consider here. As the claimants’ solicitor pointed out in paragraph 1 of his email dated 20 July 2017 (page 89) albeit in the context of the first cost budget of 6 July in the amount of £39,420:

‘The budget is in my view artificially low, wholly unrealistic and falls within the type discussed in Findcharm Limited v Churchill Group Limited, the purpose of which is no doubt to make our client’s budget seem too high’.

1. As I say that observation was made in respect of the first budget, dated 6 July. In his oral submissions Mr Christie QC confirmed that a like observation was maintained in respect of the second cost budget of 21 July which was in the slightly higher figure of £47,680. Those figures to be contrasted with the claimants’ budget in the sum of £281,000 in round terms, in respect of which the defendants have offered the sum of £170,000: see the last page under tab G of the case management file.

2. The difference between those budgets is explained by the parties taking very different approaches and stances to the case. Firstly, as regards expert opinion evidence the claimants’ position was that the parties should be permitted to adduce expert opinion evidence from two categories of expert, firstly from a structural engineer, and secondly from a surveyor on the allegations of trespass. The defendants took the view, certainly as it appeared at an early stage in the proceedings, that only one discipline of expert witness should be permitted, and furthermore that such an expert should be appointed to act as a single joint expert. Secondly, as a consequence of the disparate stances which the parties had taken about expert evidence, the parties took materially different positions as regards the estimated length of hearing: the claimants estimating a four-day trial and the defendants a two-day trial.

3. Mr Christie QC submitted that had the defendants filed and served its cost budget in time those 10 days could have been put to good use, and the parties might have been able to agree some of the substantive matters which were apparently in issue between them, in particular the issues regarding the number and status of expert witnesses, their discipline and whether or not one or other should be appointed as a single joint expert. However, it is also to be contemplated that, despite proper and appropriate co-operation, the parties might not have been able to agree those matters. In those circumstances those issues would then have become the subject of oral submissions at this case management conference, and the court would then have made its decision on those issues (which is what has already occurred at an earlier stage of today’s hearing).

4. In such circumstances a party who has filed a cost budget reflecting its own views on such aspects (here as regards expert opinion evidence and estimated length of hearing) both of which, of course, have a significant impact on the overall content of any cost budget, is likely to be ordered to file and serve a revised cost budget which reflects the orders which the court has in fact made at the CMC, with a view to the parties discussing such revised budget, and in default of agreement a cost management hearing would be listed, often taking place by telephone.

   1. In those circumstances, the process of cost budgeting would not have been completed today in any event. In my judgment, the inability of the parties to discuss the defendant’s cost budget dated 21 July is to be viewed in that context. To my mind, this is perhaps another example of the type of matter better considered under this third stage of Denton, rather than under the first stage; see paragraph 27 of the judgment of the majority in Denton.

5. Mr Christie QC also pointed to other factors of the defendants’ solicitors’ conduct of the case as being relevant to consideration of the overall circumstances of the case. Firstly, that the defendants’ solicitors had failed to file a case management information sheet (‘CMIS’) before this hearing, none such being in the case management file. Secondly, that they had also failed to file a disclosure report; again, none such being in the case management file. Thirdly, that although an order for costs had been made on 4 April 2017 (page 66) in the sum of £282-odd, that sum was not in fact paid until 25 July, which was some three months later than it otherwise should have been paid. I bear those matters in mind.

6. However, I have come to the overall conclusion, having regard to all the circumstances of the case, in particular the reasons set out above as regards the need for the defendant to file and serve a revised cost budget reflecting the substantive orders for directions relating to expert opinion evidence and the estimated length of the forthcoming trial which the court has now made, that this is a case where I should grant the defendants relief from sanction. The fact that the parties are now in precisely the same procedural position in which they would have been so far as the process of cost budgeting is concerned, had the defendants served their cost budget in time, is a highly significant circumstance in the case, and one to which the court should have proper regard.

7. However, such relief from sanction will come at a cost to the defendants. I will order that they are to pay the claimants’ costs of and occasioned by the application, and I will now hear from counsel precisely what such an order to costs may or may not involve.