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Denton Test Relief from Sanctions

National Bank of Kazakhstan v Bank of New York Mellon 

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What is the Denton Test Relief from Sanctions?

The Denton Test is a test which is often referred to by the Court when deciding if applications for relief from sanctions should be granted. A party will apply for relief from sanctions after failure to comply with rules, practice directions and Orders for example the late filing of a costs budget. The Court will apply sanctions after breaches in a case so as to enable efficient conduct.

The Denton Test relief from sanctions arrives from the Court of Appeals decision in Denton v TH White. [2014] EWCA Civ 906.

A three stage test to grant relief from sanctions was created as follows:

  1. The seriousness and significance of the breach – if the breach is not one which is serious or significant to the case then the Court is likely to grant relief from sanctions. If the breach is deemed to be serious then the assessment will move to the following stages of the test.
  2. The reasons why the default occurred – if a good reason can be provided then relief from sanctions can be allowed. It should be noted that for this to be satisfied, there is a high bar set on what can constitute as a good reason. An example of a good reason may be when the Court Order is received after the deadline has passed.
  3. The circumstances of the case – the full circumstances of the case will be assessed before a decision can be made on the application for relief from sanctions, such as if the case has been conducted efficiently. This is usually considered in line with CPR 3.9

CPR 3.9

It should be noted that CPR 3.9 is written to support the Denton Test, stating that the Court should:

“consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need – (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders.”  

National Bank of Kazakhstan & Anor v The Bank of New York Mellon SA/NV, London Branch & Ors [2021] EWHC B7 (Costs)

This is a recent case where the Denton Test was applied in assessing an application for relief from sanctions in relation to costs. The Defendant failed to file Points of Dispute on time following the service of Notice of Commencement. Costs Judge Rowley refused an application to set aside the Default Costs Certificate.

Under Practice Direction 47, paragraph 11:

“(1) An application for an order under rule 47.12(2) to set aside or vary a default costs certificate must be supported by evidence.

“(2) In deciding whether to set aside or vary a certificate under rule 47.12(2) the matters to which the court must have regard include whether the party seeking the order made the application promptly.

“(3) As a general rule a default costs certificate will be set aside under rule 47.12 only if the applicant shows a good reason for the court to do so and if the applicant files with the application a copy of the bill, a copy of the default costs certificate and a draft of the points of dispute the applicant proposes to serve if the application is granted.”

Master Rowley held that there was no good reason for the failure to file points of dispute and stated the following;

“I would have expected any litigation firm to have links with external costs lawyers so that instructions could be sent immediately. In these days of costs budgets and Costs and Case Management Hearings, the interplay between cost lawyers and instructing solicitors goes far beyond the traditional instruction of a cost draftsman to prepare a bill (or points of dispute) at the end of a case when the substantive proceedings have concluded. It may be that the “several days” required to instruct Overtons was a result of the clients taking time to provide instructions to KSI but, whatever is the case, a period of nearly a fortnight just to instruct a costs lawyer in these circumstances does not suggest any urgency.”

 

Denton Test Relief from Sanctions

Costs Jude Rowley applied the Denton Test in ruling that firstly, the failure to file Points of Dispute in time is a serious breach of the detailed assessment process and of the rules. It was found that this breach had a significant impact on the paying party in being served with a Default Costs Certificate and being left with their hands tied in disputing the receiving party’s bill any further.

Costs Judge Rowley went on to assess the application for relief in line with stage 2 of the Denton Test regarding there being a good reason for the breach. This is also listed as a requirement in the CPR relating to the setting aside of a Default Cost Certificate, namely CPR 47.12. The Judge found that the reason given, a simple oversight, cannot be deemed as a good reason under the Denton Test.

Finally, the Costs Judge assessed whether it would be just in all the circumstances of the case to rule in favour of the applicant (Denton Test stage 3). When assessing this stage, it was found against the applicant especially given that they had not prepared any Points of Dispute even at the time of the application being made.

Costs Judge Rowley held:

‘the absence of any points of dispute, or even some outline of the points to be taken, leaves me with no indication of what purpose the detailed assessment hearing will serve save for the trite point that at any detailed assessment some costs are likely to be reduced. That point cannot be an answer to a failure to serve points of dispute originally as otherwise these applications would indeed be a rubberstamping exercise.’

The Denton Test relief from sanctions was refused and the application set aside the Default Costs Certificate was, therefore, dismissed.

 

How Can ARC Costs Assist?

ARC Costs are experienced Costs Draftsmen and Costs Lawyers who can assist in costs disputes from preparing the costs claim by way of a Bill of Costs to running it to Detailed Assessment proceedings and preparing representation a the same.

We hold vast experience in preparing Points of Dispute and always ensure these are filed in time to avoid issues such as Default Costs Certificates.

We act on behalf of both the paying party and the receiving party in applications such as setting aside a Default Costs Certificate and can provide advice and representation as such application hearings as Costs Lawyers.

To discuss your costs query further, you may contact us on 01204 397302 or info@arccosts.co.uk.

 

 

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