Relief from Sanctions required where party did not file revised costs budget
Posted on 5th November 2021 at 16:52
By Sean Linley, Costs Draftsman
Where parties had been ordered to file and exchange revised Costs Budget and the receiving party had not done so, the High Court held that to recover the additional counterclaim costs the receiving party must make an application for relief from sanctions.
In Bhat & Anor v Patel & Anor [2021] EWHC 2960 (Ch) the Defendant sought its costs of the counterclaim, however, they had not filed or exchanged a revised Costs Budget. The recorded in the initial decision held that as it was not a mandatory order, relief from sanctions was not required.
In Mr Justice Fancourt's judgment he stated that:
The final ground of appeal was that the Recorder had erred in awarding the Patels their costs of the counterclaim, to be assessed. The reason given was that the Patels were in default of a case management order dated 25 September 2020 (“the Order”) requiring them to submit any budget for the costs of the counterclaim by 12 October 2020, and accordingly, subject to any later court order, they are to be taken as having filed a budget comprising only the applicable court fees of the counterclaim: CPR rule 3.14. No such costs budget was submitted and relief against 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 against sanctions was not required. In the exercise of his discretion, he allowed the Patels to recover their costs of the counterclaim.
The Bhats appeal on the basis that the Recorder was wrong to interpret the Order as not requiring a costs budget to be filed; that he should have required the Patels to seek relief against sanctions, not merely exercise a broad discretion on whether to award the Patels their costs of successfully defending the counterclaim; and that in any event he was wrong to exercise his discretion to allow the costs of the counterclaim to be recovered.
By the Order, the possession claim and the separate beneficial ownership claim were consolidated, with the possession claim ordered to be the lead claim. The Order was made before the first CMC on the beneficial ownership claim. Directions were given in the Order up to and including listing the trial of the consolidated claim in a trial window. The Court had previously approved costs budgets for the possession claim. Paragraph 9 of the Order states:
“The parties have permission to file and serve updated costs budgets by 12 October 2020 if so advised, to reflect the consolidation of the proceedings. The parties will endeavour to agree their updated budgets and any points of disagreement will be dealt with by the Trial judge.”
The High Court stated there was "clearly an order giving the parties the opportunity to file an amended costs budget, to add additional budgeted costs of the beneficial ownership claim, and requiring them to file one by 12 October 2020 if they wished to do so. Otherwise, the parties would be limited to the costs budgets already filed on the possession claim."
It was held that where no updated budget was filed that the exisisting budget would be the only applicable budget.
Mr Justice Fancourt stated that "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."
He added that: "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."
The High Court concluded that:
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. It is not possible for this Court to resolve the issues set out in paragraph 55 above. I will therefore allow the appeal on Ground 4 and substitute an order that the Defendants must pay the Claimants’ costs of the possession claim. An interim payment of £35,568 will be paid within 28 days. The issues in paragraph 55 will be heard by the County Court if the Patels notify that court within 14 days of the order following this appeal that they wish to pursue the costs of the counterclaim.
Practical Points
The decision highlights a need to be cautious of all and any orders made in relation to Costs Management, even where a Precedent H has already been filed in accordance with an earlier order. Where there is doubt this is likely to create problems and the possibility of opening up costs where an updated budget could have otherwise given surety.
If you have filed a Costs Budget and are later order to provide an updated one, make sure you comply, else be prepared to face the potential consequences.
Here the Defendant has an opportunity to make an Application for Relief from Sanctions so depending on whether an application is made and the conclusions the Court reaches, all may not be lost but this is a battle which could have easily been avoided and will now be costly to either rectify or concede.
Compliance is always the best defence.
Should you need any support with Costs Budgeting, please get in touch with our friendly team - call 01482 534567 or email info@carterburnett.co.uk and we'll be happy to help.
Tagged as: Costs Budgeting
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