When the Courts will grant relief from sanctions for late costs budgets

In Mott & Anor v Long & Anor [2017] EWHC 2130 (TCC), the defendants applied for permission to be able to rely on their costs budget, which was filed some 10 days late (an earlier costs budget was not filed due to IT problems, although the defendants’ solicitors thought it had been filed). HHJ Grant held (applying the principles laid down in Denton v TH White Ltd [2014] EWCA Civ 906) that the delay here was serious or significant, in part because “lateness in serving a cost budget has the capacity to prejudice the very process of cooperation in the cost budgeting process which the rules are designed to achieve” (paragraph 21). Furthermore, although IT failures can amount to a good reason, the defendants had not established a good reason on the evidence, no witness statement from someone in the solicitors’ IT department having been produced.

However, the judge was prepared to grant relief taking into account all the circumstances in the case. The costs budget had now been served (some nine days before the CMC) and, importantly, there was a significant difference between the figures in the costs budgets for the claimants and the defendants. That was because of a difference in approach between the parties, e.g. the claimants wanted to adduce expert evidence from two categories of expert, the defendants from only one. It was possible that the parties might not have been able to agree these matters and so would have had to make oral submissions at the CMC (with a revised costs budget likely to then be ordered): “In those circumstances, the process of cost budgeting would not have been completed today in any event… 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” (paragraph 35).

By contrast, in Lakhani & Anor v Mahmud & Ors [2017] EWHC 1713 (ch), it was found that a district judge did not err in refusing relief from sanctions where costs budget were filed a day late. The automatic consequence for the defendants filing a late cost budget under the rules is that they cannot recover any more than court costs if they win, unless relief from sanctions is permitted. The district judge refused to grant relief and so the defendants appealed. That appeal was dismissed. The defendants argued that the breach had not been serious because the parties had still been able to engage in debate about the costs estimates and there was little dispute about the defendants’ costs (which were estimated to be about half of the claimants’ budget).

It was held that the district judge had not erred in finding that the breach was serious (the appeal from that decision was a review, and not a rehearing, by the appeal court). Whilst the actual impact on the ability to perform a task required by an order is very important, the authorities do not suggest that it is the overriding factor: “In my judgment, in evaluating the seriousness of breach, a court is entitled to consider the risk of difficulty that the failure to meet a deadline has created even if, in the event, it has been possible to perform the task required, notwithstanding the breach. That is particularly legitimate in the case of orders whose performance requires a degree of co-operation because, in such cases, even though it may be possible for the non-defaulting party still to do what is required as well, it may make it more inconvenient and costly, since extra time may need to be made available. That may be all the more so, if the number of effective working days to complete a co-operative task is limited, thereby reducing flexibility” (paragraph 37).

The judge was also entitled to take into account the distraction caused by a debate between the solicitors as to whether the time limit had been breached: “if a party in breach takes rapid and reasonable steps to minimise the impact of any default on the opposite party and the court, the court may conclude that a minor breach has been kept minor … leading to it being treated as less serious” (paragraph 45).

Nor had there been any reasonable excuse for the default. The defendants’ solicitors had miscalculated the time for filing the costs budget and: “while it is true that some judges may have taken a more charitable view as to the calculation of time and whether days had to be clear or not, I am unable to say that the judge’s evaluation was clearly wrong in this case” (paragraph 55). Although an error by a legal representative can provide support for the grant of relief against sanctions, this factor did not have to be treated as of significance in this case.