Party that filed budget a day late loses sanction appeal

A defendant that filed its £50,000 costs budget a day late – meaning it was limited to the applicable court fees only – has failed to overturn a decision not to grant relief from sanctions.

Mr Daniel Alexander QC, sitting as a deputy judge of the High Court, said the decision of HH Judge Lochrane in Central London County Court was within the reasonable exercise of his discretion.

In Lakhani and Anor v Mahmud and Ors [2017] EWHC 1713 (Ch), an order of 18 November 2016 provided that the parties should file and serve updated costs budgets 21 days before the case and costs management conference scheduled for 10 January 2017.

The claimants served their costs budget on 19 December 2016, “the correct day”, which prompted the defendants’ solicitor to prepare theirs and serve it the next day. The claimants’ costs budget was for more than £100,000 and the defendants’ was approximately half that amount.

There was a dispute up until the hearing before HHJ Lochrane as to whether the defendants were indeed out of time, but it was ultimately agreed that they were.

The defendants only applied for relief on the day of the hearing. Mr Alexander said: “The judge said, in my view rightly, that in certain circumstances being one day late with a costs budget ‘might not be regarded as terribly serious’.”

However, HHJ Lochrane said that in the circumstances there was no sensible excuse for the breach, continuing: “My conclusion is that this is not a trivial breach. It is a serious breach. It is a breach which has imperilled the proper conduct of this litigation.

“It has reduced the time available for these parties to conduct themselves in the way that is expected by the rules to narrow the issues on the costs budget.

“It has further created an environment in which the attention of both parties, by the default of the defendants, has been distracted onto a matter which is irrelevant to those costs budgeting issues.”

On appeal, Mr Alexander described the case as being “on the borderline of sufficient seriousness to warrant refusal of relief from sanctions” and said the court should not interfere with the decision.

He added: “There is a risk in these cases of attempting a purist compartmentalisation of factors into the respective stages of Dentonand criticising judges if that is imperfectly done in ex tempore judgments.

“Some factors may be considered at more than one stage. In this case, even had HH Judge Lochrane concluded that the breach was not serious, he would have been entitled to conclude at the third stage that the manner in which it was sought to be remedied, including the dispute over whether there was a breach and the lateness of the application, meant that relief from sanctions should not be ordered.

“That being so, it is somewhat artificial to criticise his judgment on the footing that factors which were legitimately considered at the first stage but which might better have been considered at the third stage also came in at the first.”

He concluded that this was not a case in which the claimants were using the rules as a tripwire. “The claimants’ solicitors pointed out correctly and promptly following late service of the defendants’ costs schedule that, without an application for relief from sanctions, the consequences of CPR 3.14 would follow.

“They were not obliged to consent in advance to an application for relief from sanctions which had not been made and which was not provided to them until the day of the hearing, giving them almost no opportunity to address it fully.”

Mr Alexander suggested that had the defendants been deprived of a trial, “the situation would have merited more detailed scrutiny than the judge gave it”.

“HH Judge Lochrane’s decision operates to deprive the defendants of their budgeted costs in the event that they succeed at trial. If the claimants succeed at trial, the decision will have had a limited adverse impact on the defendants other than enabling the claimants to litigate without significant risk of having to pay the defendants’ costs. In those circumstances, it is hard to criticise it as disproportionate.”


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Costs News
Published date
14 Jul 2017

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