Kerry Underwood

LATE BUDGET AND RELIEF: NEW CASE

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By Robert Males, Managing Partner, Underwoods Solicitors

In Mott v Long (2017) EWHC 2130 (TCC) 2 August 2017

the Technology and Construction Court, part of the High Court, considered an application for relief from sanctions from a defendant who had served a cost budget 10 days late.

The Case Management Conference was listed for 2 August 2017 and pursuant to CPR 3.13 costs budgets were due to be filed no later than 21 days before the CMC.

The claimant’s solicitors served their client’s cost budget on 11 July 2017 and the covering letter confirmed that the claimant’s solicitor awaited receipt of the defendant’s budget which was due that day.

A week later on 18 July 2017, no cost budget had been filed by the defendant and the claimant’s solicitor wrote to the defendant’s solicitor explaining that they believed an application for relief from sanctions would be required if the defendants were to provide a cost budget late.

The defendant’s solicitors said that the budget had been sent on 11 July and that a copy would be sent the following day. However, no such cost budget had been received by the claimant’s solicitors nor by the court.

It then transpired that a cost budget had been drafted by the defendant on 6 July but it was not clear as to when, if at all, that budget had been served on the claimant’s solicitors or filed at court.

The defendant’s solicitor confirmed that she had started to draft the cost budget on 6 July but stated that she had experienced IT difficulties around this time which included problems with saving word documents and printing those documents.

She believed that the cost budget had been saved and printed correctly.

However, upon review, she realized that the claimant’s solicitors had not received the cost budget.

On receipt of the claimant’s email of 20 July, the defendant’s solicitor appreciated that there was likely to have been an error and therefore on 21 July she filed a correct version of the cost budget.

The court considered Denton v TH White Ltd [2014] EWCA Civ 906, and whether the breach was a trivial or minor breach.

The defendant submitted that this was a minor delay which had no material effect on the proceedings, and nor had it prejudiced the claimant in any material way.

The judge considered that the court should consider both the seriousness and significance of the breach of which relief from sanctions is sought, as per Denton.

The claimant’s position was that there was a prejudice suffered as a result of the delay of 10 days in filing the cost budget.

The purpose of exchanging 21 days in advance of the CMC is to allow parties sufficient time to consider those budgets and discuss them in time to file budget discussion reports which are due 7 days before the CMC.

The failure by the defendant to serve a cost budget in time meant there was very little time for consideration of the budgets and to produce a budget discussion report.

This, in turn, would have a significant impact on the preparation for the CMC and for discussion and potential agreement of budgets.

It would be more acute in this case because of the different approaches to the parties in relation to the issue of expert evidence which then impacted upon the length of trial.

The claimant’s submitted that the breach was both serious and significant and referred to the case of Lakhani v Mahmud and Others (2017) EWHC 1713 CH where the court refused an application for relief from sanctions in circumstances where a cost budget had been served one day late on 20 December 2016.

However, the defendant’s solicitor who had served the budget late knew that their office would be shut between 23 December 2016 and 3 January 2017, therefore limiting the time available for the agreement of costs to just a couple of days before Christmas and a few days in the new year. The court rejected an argument that it did not matter that the budgets were not agreed anyway.

In Lakhani, the court referred to a decision of the Court of Appeal in Clearway Drainage Systems Ltd v Miles Smith Ltd (2016) EWCA Civ 1258 including the following passage:-

“Denton made clear that the focus of the enquiry at the first stage should be on whether the breach was serious or significant. The court expressly rejected the notion that the sole test was whether a future hearing date was imperiled. It emphasized that, although there are many circumstances in which materiality in that sense would be the most useful measure of whether a breach has been serious or significant, it is deficient in leaving out of account those breaches which are incapable of affecting the efficient progress of the litigation, although they are serious.”

Thus there may be a breach which, on the face of it does not imperil the litigation, but may none the less affect the progress of that litigation.

The court in Lakhani had to evaluate the seriousness of a breach where a deadline is missed and held as follows:

“In considering the amount of time lost by failure to meet a deadline, it is legitimate for a court to take into account of the effective amount of time available and how much of that was lost as a result. Moreover, the amount of time lost can be more significant where a task involves a degree of cooperation, such as attempting to agree a matter, rather than the unilateral performance of an act, such as the service of witness statements, which does not involve coordination with an opposing party of availability to discuss matters or exchange correspondence.”

The judge went on as follows:

“While the impact on the ability to perform the task required by the order is very important and may be decisive in many cases, the authorities do not suggest that it is the overriding factor in every case. In my judgment, in evaluating the seriousness of breach, a court is entitled to consider the risk of difficulty that the failure to meet a deadline has created even if, in the event, it has been possible to perform the task required, notwithstanding the breach. That is particularly legitimate in the case orders whose performance requires a degree of cooperation because, in such cases, even though it may be possible for the non-defaulting party still to do what is required as well, it may make it more inconvenient and costly, since extra time may need to be made available…”

Here the court held that the filing of a cost budget 10 days late is not a modest order of time such as a few hours or even one or two days late.

The degree of lateness in every case is to be construed in the context of the particular circumstances of the case. Serving a cost budget late has the capacity to prejudice the process of cooperation cost budgeting, which the rules are designed to achieve.

In these circumstances, the delay in this case is serious or significant with a particular emphasis on the latter word.

As far as a good reason is concerned, the court concluded that the draft cost budget prepared by the defendant’s solicitor on 6 July was not saved to their IT system although it was not clear on the evidence exactly whose fault that was, whether it was an IT system error or a human error but it was noted on behalf of the claimant that should there have been IT problems, one would have expected a witness statement from someone in the IT department to explain this and no such evidence was provided.

As a result, the court determined that it was not satisfied that the defendant’s had established there was good reason for the default.

The court then turned to the third stage of the Denton criteria in considering all the circumstances of the case.

There was an important practical aspect to consider in that the first cost budget of the defendant prepared on 6 July amounted to just under £40,000.00 and the claimant’s solicitor believed that that was wholly unrealistic and artificially low and simply designed to make the claimant’s budget seem too high.

The second cost budget of the defendant was slightly higher at a figure of just over £47,000.00 and that is in contrast with the claimant’s budget in the sum of £281,000.00 in respect of which the defendant had offered a sum of £170,000.00.

The difference in these cost budgets was explained by the parties taking very different approaches to the case.

The claimant believed that the parties should be allowed to adduce expert evidence from two categories of expert whereas the defendant took the view that only one type of expert was necessary and, furthermore, a single joint expert could be instructed.

As a result of this, the claimant was estimating a four-day trial whereas the defendant a two-day trial.

It seemed to the court that in these circumstances, it is unlikely that during the discussion of cost budget an agreement would have been reached and that it is likely that a decision would have to have been made at the CMC and the court would have to decide on the cost budgets.

This would have led to revised costs budgets having been ordered to be provided at the CMC and in these circumstances, the cost budgeting process would not have been completed at the CMC.

The inability of the parties to discuss the defendant’s cost budget had to be viewed in that context.

So the court came to the overall conclusion that having regard to all the circumstances in the case, it was a case where the court should grant relief from sanctions.

A factor of considerable importance was that the parties were now in precisely the same procedural position as far as cost budgeting is concerned, had the defendant served its budget in time.

However, the court did order that the defendant was to pay the claimant’s costs of the application as a result of having to make the application for relief from sanctions.

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Written by kerryunderwood

August 24, 2017 at 8:04 am

Posted in Uncategorized

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