Failure to File Costs Budget & Relief from Sanctions 

Manchester Shipping Ltd v Balfour Shipping Ltd and Heathfield International LLC v Axiom Stone

 

Failure to File Costs Budget 

There have been many cases which demonstrate the consequences faced by a party for failure to file a Costs Budget on time. In all Multi-Track cases, a Costs Budget should be filed 21 days before the first Case Management Conference as part of the process to ensure all cases are subject to proportionate costs. If a party fails to file and serve a Costs Budget on time, they should make an application to the Court for relief from sanctions. If an application for relief from sanctions, is unsuccessful, the party will face significant costs consequences in the form of restriction of their costs to Court fees only.

Relief from Sanctions for Failure to File and Serve Costs Budgets

The Court will not agree to grant relief from sanctions in every case; instead, they will base their decision on the circumstances of the case. Under CPR 3.9, 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.”

In a recent article, we discussed the outcome in the case of BMCE Bank International plc v Phoenix Commodities PVT Limited& Anor. In this case, the Defendant’s Solicitor was not granted relief from sanctions following a failure to file a Costs Budget on time. The Court used the Denton Test when considering the breach in this case, and it was concluded that a CPR 3.14 sanction should apply. The late filing of the budget was considered a significant breach which also had other serious implications. Therefore the receiving party were able to recover Court fees only from the paying party. 

Manchester Shipping Ltd v Balfour Shipping Ltd

In the case of Manchester Shipping Ltd v Balfour Shipping Ltd, Nikolay Viktorovich Sochin [2020] EWHC 915 (Comm), the Defendant served their Costs Budget 13 days late and claimed that they were unaware that the Claimant Solicitors intended to have costs management take place at the Case Management Conference, and therefore did not apply for relief from sanctions.

The issues for the Court to consider were whether the defaulting party under CPR 3.14 was required to apply for relief from sanctions, and whether it was appropriate to grant relief.

The Court held that it was not necessary for a defaulting party under CPR 3.14 to apply for relief in every case. The case of BMCE Bank International PLC v Phoenix Commodities was considered; however, the Court held it would be contrary to the guidance at paragraph 3.14.2 of the White Book. The White Book stated that “the defaulting party might invoke the saving provision in CPR r3.14 by seeking to persuade the Court to adopt that course at the hearing convened for cost management purposes”. The Court held there would no doubt be cases where a party seeking to invoke the saving provision would be well advised to do so by making a prompt application under CPR r3.9. The case at hand would not be one of those cases, the Defendants’ Solicitors had clearly set out their position in their letter of 9 January 2020. 

It was also held that relief from sanctions would be granted following the application of the Denton Test. It was considered that the breach was serious in terms of lateness, but it did not prevent the litigation from being conducted efficiently or at a proportionate cost. No inconvenience was caused to the Court or other Court users. It would not be proportionate to deprive the Defendants of the potential to recover their own costs should they ultimately be successful at Trial.

Heathfield International LLC v Axiom Stone [2020] EWHC 1075

In this case, a Defendant was not granted relief from sanctions following the failure to file a Costs Budget on time (due 18 November 2018, but only filed and served on 14 April 2020). The Costs Budget was filed extremely late, and the Defendant subsequently applied for relief from sanctions on 28 April 2020, leaving one day for the parties to consider the application before the CCMC took place on 30 April 2020 (originally listed for 10 December 2019). The Defendant had made numerous procedural failures previously and in the run up to the CCMC placing a burden on the Claimant’s Solicitors, such as the failure to use an updated Statement of Truth, and failure to comply with Court directions to file hearing bundles.

The Denton Test was again applied and it was held that the Defendant’s failure to serve and file a Costs Budget on time was serious; however, the Judge stated that the reason for the late service was not a good one, this being that the incorrect date had been inserted into the Defendant Solicitor’s diary. The Judge also pointed to the numerous other failures throughout the case and held that relief from sanctions would not be appropriate in this case given the failure of all three stages of the Denton test.

The Judge stated:

“I regard the breach as serious, both in its own right and as a continuing demonstration of D2’s lack of engagement with costs budgeting. I also disagree with their contention that D2’s failure has not affected the efficient progress of the litigation. It placed an unreasonable burden on C in preparing for the CCMC and also on the Court.”

Relief was therefore rejected on the basis that the application for relief was extremely late and had disrupted litigation, no good reason had been given, and that the Defendant’s conduct throughout had caused inefficient litigation, a waste of Court time and a lack of compliance with Court Orders and directions.

How Can the ARC Costs Team Assist? 

The ARC Costs team are always happy to help with costs challenges and can advise on the prospects of and assist with the preparation of any application for relief. We assist with all elements of parties’ costs, including the preparation of any Cost Budget and negotiation of the same, as well as providing any advocacy services at any Costs and Case Management Conference.

We can be contacted via email at info@arccosts.co.uk, or by telephone on 01204 397302. For more information on legal costs, please find out more about our speciality areas of expertise and our services on our legal costs page

 

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