High Court gives partial relief from sanction for partially complete budget

A claimant who submitted a budget that did not include figures for trial preparation or trial has won relief from a decision that limited the entire budget to court fees only – but only for those parts of the budget that were completed.

Mr Justice Walker found that Master Thornett at first instance had failed to consider whether to disapply the sanction under CPR 3.14, which applies when a budget is not filed.

Page v RGC Restaurants Ltd [2018] EWHC 2688 (QB) was a claim against a restaurant owned by the defendant that served the claimant – who suffers from a severe nut allergy – a milkshake containing cashew nuts, having told him that it would be a safe product.

This caused respiratory failure and cardiac arrest. Mr Page was resuscitated, and was then kept in an induced coma for five days. His respiratory difficulties led to cerebral hypoxia, resulting in brain injury.

RGC disputed liability, but in July 2017 Master Thornett granted summary judgment in favour of Mr Page on primary liability. Issues around contributory negligence, causation and quantum remain to be tried.

A case and costs management conference (CCMC) was set for December 2017 ahead of which City firm Fieldfisher, for Mr Page, prepared what was called an “interim costs budget” listing £71,000 of incurred costs and £115,000 of budgeted costs.

However, it entered zero for trial preparation and trial on the basis that it thought a second CCMC would be needed after the initial medical evidence was considered so as to decide whether any further expert reports were required. Fieldfisher said this was a proportionate way to deal with the case.

RGC’s budget, prepared by Keoghs, put incurred costs at £51,000. As to future costs, it made no reference to a second CCMC but budgeted £2,900 for a pre-trial review (PTR).

It also included £1,736 for trial preparation and £15,000 (in disbursements) for trial.

Following discussion, each side agreed the other’s budget. They included a second CCMC/PTR, but did not cover trial preparation or trial. Mr Page’s agreed budget was £163,000 and RGC’s £59,000, both including incurred costs.

However, at the hearing, Master Thornett was not persuaded that a second CCMC or a PTR would be needed and expressed concern that the agreed directions did not take the case through to trial and that, by not including those latter phases, the claimant had not filed a budget that complied with the CPR.

He said the rule 3.14 sanction applied and the claimant’s budget was limited to applicable court fees only.

The judge approved the defendant’s agreed costs budget, subject to an increase in the trial phase to reflect the longer-than-budgeted trial he had set, and not including the provision for a PTR.

On appeal, Walker J rejected the argument that, because the claimant had submitted a costs budget, the master was wrong to hold that rule 3.14 was engaged.

He said a contention that only a total failure to file a budget engaged the sanction was precluded by the Court of Appeal decision in Mitchell – though that ruling did not concern an incomplete budget, Walker J said the approach taken was “equally applicable”.

He gave several reasons for this, including a need for certainty: “When Mr Page’s interim budget was filed, no one knew whether RGC would agree with the approach that was taken in it. The parties and the court need to know where they stand once the time for filing has expired.

“It seems to me that CPR 3.14 gives a clear answer: once a party has failed to file a budget despite being required to do so, that party will, unless the court otherwise orders, be treated as having filed a budget comprising only the applicable court fees.”

Also, “there can be no doubt that the obligation under CPR 3.13 as amplified in PD 3E is, unless the court otherwise orders, to file a budget ‘in the form of Precedent H’, and which follows the Precedent H guidance note in all respects.

“In the present case it is clear that Mr Page’s interim budget did not meet important requirements of Precedent H. Precedent H required Mr Page to set out his budgeted costs for trial preparation and for trial. Mr Page’s interim budget did not do this.”

Another reason was that PD 3E expressly contemplated a prospective direction by the court if a party wanted to limit budgets initially to only one part of the proceedings.

The other major limb of the appeal was that CPR 3.14 provides that the sanction will be imposed “unless the court otherwise orders” and that the master had not considered this.

Walker J said it was a “striking feature” of the case that the claimant had undertaken “considerable work” in preparing a budget, dealing with Precedent R and negotiating agreed costs, and had been deprived “of any credit whatever” for this.

He continued: “At the stage when the court becomes involved, and proposes to make a formal decision continuing to treat Mr Page as subject to the CPR 3.14 sanction, it is necessary for the court to consider whether the court should take a different course…

“The suggestion by RGC that the defaulting party might be better off if left to make an application for relief ignores the vital points stressed on behalf of Mr Page: at the stage of an application for relief, the court proceeds on the basis that the sanction applied by the earlier order was in accordance with the overriding objective.”

Walker J ruled that the master erred in law in the approach he took.

He then used the Denton approach to decide whether to make an order which disapplied the sanction.

He found the breach “moderately serious and moderately significant”. The judge said the claimant should have produced a full budget through to trial that did not include a second CCMC, and the one he did deliver as an alternative.

At the same time, the claimant’s stance “had not impeded the costs management process in relation to earlier phases”.

As to why the default occurred, Walker J said Fieldfisher had genuinely believed its approach was right, and RGC had been prepared to go along with it, even though this turned out to be wrong: “The culpability amounted to negligence, but it was not gross negligence.”

At the third stage – considering all the circumstances of the case – the judge said the master’s order was unjust: “It would provide RGC, which had been in agreement with the course proposed by Mr Page, with the benefit of the give and take that had occurred in negotiations, while at the same time depriving Mr Page of almost everything.”

He concluded: “I am persuaded that the CPR 3.14 sanction should not be applied to those parts of the agreed budget as deal with the position up to the phases of trial and trial preparation, prior to the proposed ‘2nd CMC/PTR’.

“The consequence will be that they, and the corresponding phases in RGC’s budgets, can and should accordingly be recorded as agreed.

“The suggested phase for ‘2nd CMC/PTR’ should not be recorded, as the master’s case management directions do not permit any such phase.

“As regards the phases of trial and preparation for trial, however, I am not persuaded by Mr Page that it would be right to disapply the CPR 3.14 sanction. In my view it is necessary to apply that sanction to those phases in order to recognise the importance of the considerations identified at CPR 3.9(1)(a) and (b).”

The judge said he was conscious that the Court of Appeal in Mitchell warned of dangers in a partial sanction.

“The present case, in that regard, seems to me to be exceptional. There is an unusually clear dividing line between the parts of the budget which were satisfactory and those which were not, and an equally clear dividing line between those consequences of a sanction which would in all the circumstances be unjust, and those which would not.”

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Costs News
Published date
17 Oct 2018

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