WHAT HAPPENS WHEN ONE BUDGET IS PROVIDED INSTEAD OF THREE? IS THERE A BREACH AND WOULD THE COURT GRANT RELIEF FROM SANCTIONS?
Arguments about the form of compliance are likely to become as commonplace as about the time of compliance. These arguments were considered by Master Kay Q.C. Important observations are made about the appropriate form for costs budgets when one or more claims are consolidated
LOTUS CARS LIMITED V MECANICA SOLUTIONS INC  EWHC 76 (QB)
This was a claim for restitution and declaratory relief. A transcript of the case is available here.
- On the 31st July 2013 the claimant’s claim against the defendant was joined with two other claims made by the claimant against different defendants
- The consent order which joined the actions also stated that parties “must file and exchange costs budgets within 14 days of the service of the Order and thereafter seek to agree them. In the event that the budgets were not agreed the matter was to be listed for a costs case management conference.”
- On the 6th August 2013 the court made a standard allocation order, which was inconsistent with the consent order of the 31st July 2013.
- All of the parties filed their costs budgets in accordance with the order of the 31st July 2013.
- However the claimant filed a combined costs budget which encompassed the costs in all three cases.
- Shortly before the CMC the claims against two other defendants were compromised. The claimant filed a revised costs budget which dealt with the action against the remaining defendant.
- The defendant refused to agree the claimant’s budget as it was combined in respect of all three cases.
THE ISSUES BEFORE THE MASTER
The Master was required to decide two questions:
(1) Had the claimant failed to file a costs budget in accordance with rule 3.14?
(2) If so, should the claimant be granted relief from sanctions?
THE CLAIMANT’S ARGUMENTS
The Claimant argued that they had filed a costs budget in accordance with the CPR and that even if there was a failure to file the budget then relief from sanctions should be allowed.
- The apparent purpose of the rule is to allow the court to deal effectively with costs budgeting on the appointed day.
- The decision of Master McCloud in Mitchell did not apply in the current case because in Mitchell no budget was filed.
- The claimant had complied with the rule, if not the precise form.
- The CPR adopts a pragmatic approach to formal defects and if there are defects in the present case they are not so substantial that it should be treated as being a nullity.
- The provision of the costs budget did comply with the Order of the 31st July 2013 which was that the cases were to be case managed and tried together.
- The fact that the defendant required the claimant to file three costs budgets did not mean that the claimant was in breach of the rule or order.
- The court should not unduly penalise a litigant because “some of the particular aspects of costs budgeting may be unfamiliar or even counter intuitive (Stella Wills v J . Rundell & Associated Ltd  EWHC 2923)”
- Where there has been a substantial compliance with the rule but there is a criticism of the form in which the costs budget has been produced or there has been a mistake as to the form of the cost budget it would be fair to permit relief from sanctions.
THE DEFENDANT’S ARGUMENTS
The Defendant argued that
- The claimant’s costs budgets failed to comply with both the 31st July Order and the Order of the 6th August. Therefore no valid costs budget had been submitted by the claimant.
- The Claimant’s sole entitlement is to the costs of court fees pursuant to paragraph 7 o the Order of the 6th August 2013.
- The three claims were not consolidated.
- Both of the Orders are to be interpreted as meaning that separate cost budgets were required.
- The three defendants each submitted separate costs budgets which was “obviously” the correct thing to do.
- The defendant repeatedly stressed to the claimant that separate costs budgets were needed. The claimant had the opportunity to rectify the situation.
- The 5th November budget superseded the previous budgets.
- The approach adopted in Mitchell should be followed and there is no good reason not to apply the strict rule to the claimant.
DID THE COMBINED COST BUDGETS BREACH THE COURT ORDERS?
The Master first considered whether the Claimant was in breach of the two court orders:
“16. The first question is whether the Claimant’s provision of the costs budgets were in breach of the Orders of the 31st July and 16th August. The Defendant asserts that was plainly the case but I do not accept that submission. The first order was by consent and it was accepted that the three cases were to be “case managed and tried together”. Although the order was not for consolidation the intention was sufficient for the Claimant to understand that the progress and trial of the claims were to be handled as a single matter.
17. A significant purpose of cost budgeting is to ensure that the cases are handled as economically as possible and it seems logical that if cases are to be managed and tried together a single cost budgeting exercise should be sufficient. The provision of three separate budgets merely adds to the costs. If the other two claims had not been settled the single budget approach would have proved effective and it may well be that the Defendant’s multi budget approach might have been open to criticism. In my view the Claimant’s approach was not unreasonable.”
18. In my view the Defendant’s assertion that the Order clearly required separate costs budgets is putting the matter far too high. The wording of the Orders does not specify separate budgets and I am not persuaded that there is a “sensible” reason for assuming that it does. Of course each case must be treated on its own merits but in the case of large group actions where the management of the various cases is to be treated as common and is dealt with accordingly there is no sensible reason why the costs budgeting should always be considered separately and some good reasons why it should not.
19. Although the Defendant sought to rely upon the fact that it had provided three separate budgets and had urged the Claimant to do the same I do not think that one party’s view of the meaning of an order can be determinative of the result particularly since I have held that the Claimant’s approach was not unreasonable. The reality is that the Defendants, who are alleged to have shown such concerns, could have applied to the Court for a ruling. In my view that would have been a far more sensible and proportionate approach to that actually adopted and would at least have had the merit of demonstrating co-operation between the parties.
20. In my view Mr. Rubens’ submission that the November 5th cost budget should be disregarded has little merit. The November 5th budget was put forward because two of the claims were settled on the 1st November. Provided that the earlier budgets were, as I have found, made properly it is absurd to criticise a party for seeking to provide the Court with an adjusted budget.”
WOULD IT HAVE BEEN APPROPRIATE TO ALLOW RELIEF AGAINST SANCTION?
Although the Master held that the claimant has not been in breach of the Court Orders, he also considered whether relief would have been granted in any event.
“21. The Second Question is whether, assuming that the Defendant’s criticisms have any foundation, it would be appropriate to allow a relief against sanction in relation to the penalty proposed by the Defendant. In my view, on that assumption, this is a case in which the Court should exercise its discretion in favour of the Claimant for the following reasons :
a. The failure to comply with the rules as found by Master McCloud in Mitchell was much more serious and, in my view, that decision is distinguishable from the present case where the Claimant was trying to comply with the Orders made;
b. The Dicta of Coulson J. in Stella Willis v J. Rundell & Associates Ltd  EWHC 2923 indicated that the court should be cautious about penalising a party in respect of non-compliance with the cost budgeting rules;
c. I have had the opportunity to read the decision of the Court of Appeal in Mitchell  EWCA Civ 1537 given on the 27th November 2013 in which it was considered that the first task is to consider whether the non-compliance is trivial and, if it is not, then to consider whether there is a good reason for the default. If there is then the court is likely to grant relief. Applying those tests it seems to me that the default, if default it was, should be considered as trivial and even if it was not there was an understandable reason for the default which did not arise from the solicitor’s failure to act promptly or dereliction of duty.
d. Although the decision in Mitchell indicated that a more robust approach should be taken with applications for sanction from penalty it does not provide that a party should be penalised where the balance of justice and fairness would indicate that a contrary approach is appropriate. In my view, the reality of this case was that the Claimant was trying to comply with an aspect of the Orders and the rules which were not entirely clear and if, with hindsight it is found that it failed to do so properly I think that it would be contrary to the overriding principle to apply the penalty required by the Defendant. ”
- Providing a combined cost budget, in cases where two or more claims have been consolidated, is not a breach of the cost budgeting provisions. (However, as ever I urge caution in all these matters).
- If there are inconsistencies between court orders, the court should be asked for clarification.It is clear that disputes are going to take place on the form of costs budgets as well as their time.
- A party filing a costs budget is best advised to ensure that it complies, totally, with the requirements of Precedent H.