COSTS LAWYERS BEWARE: COURT REFUSES TO SET ASIDE DEFAULT COSTS CERTIFICATE: “AVOIDABLE DELAY” IS NOT LOOKED AT KINDLY

In  Masten v London Britannia Hotel Ltd [2020] EWHC B31 (Costs) Mr Leonard refused to set aside a default costs certificate.  This serves as a salutary warning of the importance of time limits.  Further the Master observed that if a party cannot comply with a time limit the only prudent course of action is to apply, in advance, for an extension.  To allow the time limit to pass, and any sanction to be effective, is a dangerous strategy.  The setting aside of a default costs certificate (or indeed any sanction) is not a routine administrative matter.

 

“That avoidable delay, and the way in which it was allowed to come about, have led me to the conclusion that I should refuse this application.”

THE CASE

The claimant served a Notice of Commencement of a Bill of Costs on 3 January 2020.   The parties agreed an extension of the time for service of the points of dispute to 14th February 2020.   A further agreement was made extending the time for service until the 28th February, but this was conditional upon a an interim payment of £120,000 being received by the 21st February.

The defendant missed the relevant date and the claimant applied for a default costs certificate. This was issued in June 2020 in the sum of £363,695.25.

An application to set aside the certificate was made on the 26th August 2020 (earlier attempts in July 2020 had been rejected for various reasons). The explanation for the failure to file points of dispute and the subsequent delay was, in essence, overwork.

THE MASTER’S JUDGMENT

The Master rejected the defendant’s application.

“Conclusions: Some Points of Principle
    1. I should address first the proposition that this application must be dismissed because it is not framed as an application for relief from sanction. It seems to me that that is plainly wrong. CPR 47.12 and the accompanying Practice Direction set out the procedure for an application to set aside a DCC and the criteria to be applied upon such application. They have not been abolished and replaced with CPR 3.9. The application must be made under CPR 47.12 and the extent to which the criteria for relief from sanctions apply to it is, as Mr Innes points out, open to argument.
    2. In any case one looks at the substance of the application, not the way in which it is worded. Mr Innes has also referred me to Cutler v Barnet LBC [2014] EWHC 4445 (QB): the court could grant relief from sanctions of its own motion if the overriding objective justifies it.
    3. Equally, it seems to me to be obviously wrong to measure the promptness of the application to set aside by reference to the fact that points of dispute were due by 28 February. This is to confuse the period of default with the promptness of the application, as Edwards-Stuart J put it in Tideland, to “visit the defendant with a sanction twice over for the same offence”.
    4. An application to set aside a DCC, self-evidently, cannot be made until a DCC has been issued. On the evidence the Claimant did not apply for this DCC until 10 June. That aside, basic fairness requires that the promptness of the application be measured by reference to the point at which the paying party knew, or should have known, that the certificate had been issued. In this case that would have been within one or two days after it was sent to QM Costs by DX on 18 June.
    5. Nor is it appropriate to refer to the agreed extended time for serving points of dispute as a factor that weighs against the application to set aside. Evidently the Claimant’s representatives thought it reasonable that the Claimant should have until 28 February to serve, or they would not have agreed to it. That agreement was made as part of a bargaining process in which the Claimant’s own delays were taken into account. It is not open to the Claimant to reopen the agreement now.

Conclusions on the Application of Practice Direction 47 Paragraph 11.2

    1. Turning to the criteria set out at Practice Direction 47 paragraph 11.2, I start with whether this application was made promptly, measuring that from the date upon which the Defendant became aware that an application needed to be made.
    2. Practice Direction 47 paragraph 11.2 expressly requires that an applicant file with the application a copy a draft of the points of dispute. Between about 19 June and 17 July 2020 Mr Gaskell had to obtain the papers, re-familiarise himself with a substantial case and complete the exercise of drafting points of dispute with which, plainly, he had not got to grips in February.
    3. I agree with Mr Innes that it would be inappropriate to overlook Mr Gaskell’s attempts to file the application from 15 July 2020. The SCCO’s CE-filing system is still relatively new and as I know from experience, does not always function perfectly. Mr Gaskell’s difficulty in obtaining the right reference to allow him to file his application (because the DCC reference and the CE-File reference do not match) is a fairly typical example of the sort of problem that arises with a new system. He should have been able to obtain the correct file reference without difficulty or delay but, through no fault of his own, he could not. Had he been able to do so, the application would have been filed on 15 July. I accept that it was made as promptly as he could reasonably manage.
    4. As for whether there is good reason that a detailed assessment should proceed, the points of dispute are not, as Ms McDonald describes them, “technical”. There are substantial challenges to a very substantial bill, and on many applications to set aside a DCC that would be decisive. I must bear in mind, however, that I have never seen a bill as drawn by a receiving party that is not, at least on a standard basis assessment, open to substantial challenge. Whether that furnishes sufficient reason for the detailed assessment to continue will, in my view, depend on the circumstances.

Conclusions on the Application of the Denton Criteria

    1. In exercising any power conferred by the Civil Procedure Rules, including the power to set aside a DCC, CPR 1.2 requires the court to give effect to the overriding objective at CPR 1.1, which requires that cases be dealt with justly and at proportionate cost. That expressly, includes ensuring that cases are dealt with expeditiously and fairly, and enforcing compliance with rules, practice directions and orders.
    2. It seems to me that this is the primary reason why (although this is not, strictly speaking, an application for relief from sanctions) the Denton criteria must have a bearing on this application. CPR 3.9, in referring to the need for litigation to be conducted efficiently, and the need to enforce compliance with rules, practice directions and orders, repeats key provisions of the overriding objective. Denton offers essential guidance on how those provisions are to be applied.
    3. I also bear in mind that CPR 47.9(3) does impose a sanction on a paying party that serves points of dispute late, albeit in time to prevent the issue of a default costs certificate. That party may not be heard further in the detailed assessment proceedings unless the court gives permission.
    4. As I read it, that rule does not prevent reliance on the points of dispute themselves: otherwise, CPR 47.9(5) would not prevent the issue of a default costs certificate in those circumstances. Nor do I believe that CPR 47.9(3) is meant to have any application once a DCC has been issued: in such circumstances, points of dispute cannot be served until the DCC has been set aside, and if that happens the court will provide for the points of dispute to be served and for the detailed assessment to proceed in the usual way.
    5. The rule does, nonetheless, impose an automatic sanction, and where it applies the late-serving party will have to meet the Denton criteria in order to be heard. Even given that the penalty imposed by CPR 47.9(3) is less than that represented by a DCC, it seems to me that a party who serves points of dispute in time to prevent the issue of a DCC should not, on order to obtain relief, have to meet a stricter test than a party who fails to do so.

Conclusions on Setting-Aside

    1. It is accepted that the Defendant’s default was serious and significant, nor does the Defendant attempt to argue that there was good reason for it. The remaining question is whether it would be just, bearing in mind all the circumstances of the case, to set the DCC aside.
    2. I do not think that it is entirely fair to attempt to equate this case with Kavuma v Hunt. In that case, the applicants had been given a clear opportunity by the court to make an application to set aside within a specified period, and had simply failed to do it until well over two months later. In this case, Mr Gaskell got to work on the problem as soon as he became aware of it.
    3. The facts of this case nonetheless bring to mind paragraph 34 of the judgment of The Master of the Rolls and Lord Justice Vos in Denton, and in particular the court’s consideration of the rationale behind CPR 3.9, which was introduced in 2013 (following Sir Rupert Jackson’s December 2009 report) in order to address a “culture of non-compliance”, Referring to (a) the need for litigation to be conducted efficiently and at proportionate cost and (b) the need to enforce compliance with rules, directions and court orders, they observed:
“Factor (a) makes it clear that the court must consider the effect of the breach in every case. If the breach has prevented the court or the parties from conducting the litigation (or other litigation) efficiently and at proportionate cost, that will be a factor weighing in favour of refusing relief. Factor (b) emphasises the importance of complying with rules, practice directions and orders. This aspect received insufficient attention in the past. The court must always bear in mind the need for compliance with rules, practice directions and orders, because the old lax culture of non-compliance is no longer tolerated.”
  1. What troubles me about this particular case is that, between mid-February and mid-March 2020 when lockdown started, it was allowed to drift into default without any effective action being taken either to avoid default or to remedy it at the earliest possible time.
  2. Mr Gaskell does not say that he had overlooked the need to serve points of dispute within the agreed period of extension. Evidently he was overworked, but equally evidently he felt obliged, as a matter of practice management, to give other matters priority: there is a certain irony in his citing the need to oversee a professional standards audit as an explanation for allowing a crucial time limit to expire.
  3. I do not mean to underestimate the difficulties faced by Mr Gaskell, but he was not without options in February and March 2020. Given that agreement to a further extension after 28 February was not likely to be forthcoming then if he were simply unable to prepare points of dispute in time, the obvious step would I suggest have been to apply to the court for an extension, making arrangements in the meantime for them to be prepared before the application was heard. I appreciate that Mr Gaskell’s workload was heavy, but the application in itself need not have been a very time-consuming exercise. Making it before the extension period had expired would also have put paid to any argument about relief from sanction.
  4. I do not say that the application would necessarily have been successful, but if the court had been presented with an explanation of the difficulties and a timeframe within which points of dispute would be forthcoming, I think it probably would. It would at least have set a timeframe to focus minds and to allow something effective to be done. More to the point, it would have put the matter in the hands of the court, rather than accepting default, and in consequence the likely issue of a DCC, as a fait accompli.
  5. In the event no such application was made, but action could still have been taken to remedy the default at the earliest possible time. This case was, on Mr Gaskell’s evidence, the only case handled by QM Costs on which default had arisen and he had been given fair warning that application would be made for a DCC. One would expect therefore that this case would have been treated as exceptionally urgent, with a view to ensuring that, even if points of dispute could not be served in time to prevent issue of a DCC, at least an application to set aside could be made within the shortest practicable period. If that had been done, then substantial progress should have been made towards completion of the points of dispute by the time QM locked down on 17 March, with the work continuing during lockdown, at least with sufficient speed to prevent issue of the DCC in mid-June. Instead, the case was allowed to go entirely adrift. Lockdown then exacerbated the effect of failures that had already occurred.
  6. I appreciate that the issue of a DCC in early March, rather than mid-June, might well have brought the case back into focus for QM, although (as Mr Oldale had already given fair warning of his intention to apply) it is not evident to me that it necessarily would have done. In any case, it was not the Claimant’s responsibility to remind the Defendant of its own default.
  7. In summary, default and the issue of a DCC seems to have been accepted as a fait accompli and the application to set aside treated as a routine administrative matter, rather than being prioritised sufficiently to prevent its going astray, as it did. It was partly the result of subsequent unfortunate circumstances that the default extended as long as it did, but all of that was preventable, and not enough was done to prevent it.
  8. Had the Claimant received the Points of Dispute by the end of February, as agreed, she would have been in a position to request a detailed assessment hearing with a view to the assessment being completed within about 6 months. I appreciate that it is possible that this might not have been done promptly: the timing of the DCC suggests that the Claimant’s representatives were having their own problems. It is not, however, for me to speculate on that. The Claimant would have had a right to expect that her representatives would request a hearing with reasonable speed, and I have no good reason to suppose that they would not have done so.
  9. By the time Mr Gaskell contacted the Claimant’s representatives to invite them to agree to setting aside the DCC, over four months had passed. The Claimant was not only being asked to relinquish the DCC but to accept an avoidable delay of over four months to a process that should have been completed in six. One can hardly be surprised that she refused. That avoidable delay, and the way in which it was allowed to come about, have led me to the conclusion that I should refuse this application.
  10. It is not an answer to that to say that the Claimant will be compensated by receiving interest on the unpaid part of her costs. She should not be kept out of her money for any longer than is necessary and she is entitled to a hearing as soon as reasonably possible. A delay of over four months is not, in all the circumstances, acceptable given the prejudice to the Defendant and the need for the expeditious administration of justice.
  11. I have given some thought to whether it is fair to count against the Defendant the fact that even had the application been filed on 15 July, it would have been unlikely to come before me for hearing until the six months in which the Claimant might have hoped for a hearing had passed (I leave out of the reckoning both the delay in filing the application after 15 July, which is not the Defendant’s fault, and the time it has taken me to prepare this judgment). I tend to treat the period needed to list and hear a set-aside application as neutral, even where, as here, the application has been reasonably resisted. In the circumstances of this case I think that it is fair to take it into account, because the conduct of the case on the Defendant’s behalf made the issue of an application, and the attendant delay, inevitable. Certainly from the Claimant’s point of view it adds to the prejudice.
  12. I appreciate that refusal to set aside will almost certainly result in the Claimant recovering more than would have been the case had there been a detailed assessment, but as I have observed that may not be decisive. One must look at all the circumstances. Both the failure to serve points of dispute within the agreed period and the subsequent mismanagement of the file were, by an objective standard, negligent. The loss of the opportunity to challenge the bill is the result of that negligence. DCCs are often entered as a result of negligent omission, and that in itself need by no means be fatal to an application to set aside, but in my view there are cases in which the application of the overriding objective and the balance of fairness require that the consequences of negligence must be borne by the negligent party. This is one of them.
  13. It seems to me that if I am to place appropriate weight on the importance of dealing with cases expeditiously, of complying with rules, practice directions and orders, and of the inevitable prejudice to the Claimant on setting aside the DCC, this application must be refused.”