High Court overturns ruling allowing party that failed to submit budget to recover costs

A judge was wrong to exercise his general discretion in favour of claimants who defeated a counterclaim without submitting a budget to recover their costs, the High Court has ruled.

Bhat and Anor v Patel and Anor [2021] EWHC 2960 (Ch) followed a decision by Recorder Geraint Jones QC in Basildon County Court. There were two actions: first was a claim by Dr and Mrs Patel for possession and arrears of rent in respect a property, while the second – which was consolidated as a counterclaim at trial – was a claim by Dr and Mrs Bhat claiming a beneficial interest in land adjoining the property and damages.

The recorder found for the Patels on both and ordered the Bhats to pay their costs of both actions.

The Bhats argued on appeal that the recorder had erred in awarding the Patels their costs of the counterclaim because they were in default of a case management order last year requiring them to submit any budget for the costs of the counterclaim by 12 October 2020. No budget was submitted and relief from sanctions was not sought.

The recorder held that the Patels were not in default of a mandatory order to file a costs budget, so that relief from sanctions was not required. In the exercise of his discretion, he allowed the Patels to recover their costs of the counterclaim.

The court had previously approved budgets for the possession claim. The order consolidated the two claims and gave permission for the parties to file and serve updated costs budgets to reflect this.

Mr Justice Fancourt said it was clear from the wording of the order that, if they did not do this, the parties would be limited to the costs budgets already filed on the possession claim.

“To interpret the order in the way contended for by the Patels would have given the parties an option whether to file updated budgets or not, and, if not, the ability to seek to recover costs of the counterclaim without a budget. That is not what the order means, though I accept that it could have been better expressed.”

Since the Patels did not do this, their costs for the counterclaim should be limited to the applicable court fees unless they sought relief.

There was also disagreement between the parties’ solicitors as to whether they orally agreed on the day before trial to dispense with budgets for the counterclaim.

The recorder did not resolve this, but he should have done, said Fancourt J. If the conclusion was that there was no agreement, he should then have considered whether to grant relief.

“The recorder was, in my judgment, in error in exercising a broader discretion as if the parties had waived non-compliance with the order, without making a finding that they had done so,” he said.

He allowed the appeal and substituted an order that the defendants must pay only the claimants’ costs of the possession claim. However, he said the county court should consider the questions of the oral agreement and, if then necessary, relief from sanctions, if the Patels notified it within 14 days that they wanted to pursue the costs of the counterclaim.

Oluwaseyi Ojo (solicitor-advocate of Taylor Wood Solicitors) for the appellants. Antonia Halker (instructed by Rainer Hughes Solicitors) for the respondents.

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Costs News
Published date
11 Nov 2021

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