Former Tory Chief Whip Andrew Mitchell MP’s foray into the hard fought privacy litigation known as “Plebgate” produced the most important costs case reported in 2013 (see Mitchell v News Group Newspapers). His libel action had turned on what he had (or had not) said to a police officer at the entrance to Downing Street when attempting to depart through the gates on his bicycle without dismounting. The case failed at trial before Mitting J, so the issue which had intrigued costs gurus became academic: had he won, Mr Mitchell’s budgeted costs would have been limited to applicable court fees, owing to his solicitor’s failure to serve a costs budget within the time limit set out in CPR 3.13. As he lost, that did not happen.
Master McCloud’s decision, refusing relief from sanctions under CPR 3.9 on that point, had been resoundingly upheld by the Court of Appeal. The court’s reasoning: the default of seven days was not minor or trivial and there was no good excuse for it. Only if the deadline had been narrowly missed and the terms of the budgeting order otherwise complied with, would relief have been given, since if that had been the case, the principle of de minimis non curat lex (the law is not concerned with trivial things) would have saved Mr Mitchell.
The aftermath of Mitchell was one of almost universal criticism at the decision, since it had led to point-taking by so-called “innocent” parties, where the so-called “offender” had just missed a deadline and was thus compelled to apply for relief from sanctions. At least 40 cases involving relief were reported at High Court level and above, with many others being decided below: not only that, there was a lack of consistency. As an example, in McTear v Englehard, relief from sanctions was refused where a witness statement had been served 50 minutes late (the decision was subsequently reversed by the Court of Appeal on 24 May 2016) but in Nelson v Circle Thirty Three Housing Trust Ltd, a differently constituted Court of Appeal gave relief where there had been breach of an unless order for disclosure.
Attributing responsibility to the legal profession for having “misunderstood” Mitchell and to some courts for having “misapplied” it, the Court of Appeal had another go in Denton v White, (Jackson LJ dissenting in part) by ditching the “trivial ” test and replacing it with a three-limb test: what was the breach and was it serious? Why had the default occurred? What were all the circumstances of the case so as to enable the court to deal justly with the application?
Until recently, Denton appeared to have brought back some semblance of good sense and justice, and the abundance of relief from sanctions applications which had followed Mitchell diminished significantly. Of Mitchell itself, even the Court of Appeal accepted that the guidance it had given had led to “… decisions that were manifestly unjust and disproportionate…”, to the extent that “… within a few months the court found it necessary in Denton to provide further guidance, restating the relevant principles” (see Richards and Christopher Clarke LJJ in Michael Wilson & Partners Ltd v Sinclair).
Unfortunately the lessons of Mitchell and the satellite litigation and injustice it caused appear now to have been forgotten. First we have had Gladwin v Bogescu, in which Turner J not only reversed the decision of the judge below who had granted relief from sanctions following late service of Mr Gladwin’s witness statement, but also struck out his claim in its entirety, even though liability had been admitted. Gladwin has already been discussed in a post, but hot on its heels, we now have Lakhani v Mahmud, a decision of a silk sitting as a deputy judge of the High Court on appeal from an experienced circuit judge.
In Lakhani, both at first instance and on appeal, the court refused to give the defendants relief from sanctions when an updated costs budget had been served one day late, thereby limiting the costs going forward to applicable court fees under CPR 3.14.
How did this come about?
On 18 November 2016, the court had ordered updated costs budgets to be filed and served 21 days before a costs and case management conference fixed to take place on 10 January 2017. The claimant did so on 19 December, “the correct day” according to the deputy judge. The defendants did not and served their budget on 20 December in the belief that that was the “correct” date, at least so far as it was argued between the parties’ solicitors.
Comments were provided on each budget and Precedent R reports were exchanged before the hearing, but matters were not helped by the fact that the defendants’ solicitors had stopped work for Christmas on 23 December and the office had not reopened until 3 January. As a result, the application for relief from sanctions was made at the last minute, with the result that it dominated the appointment on 10 January so that, instead of there being a short hearing on costs budgeting, additional valuable court time had been used up. If relief had been granted, that would have required a second costs management hearing which would have added to the costs and lengthened the litigation, so it was said. Whilst the decision was, according to the Deputy Judge “…perhaps at the tougher end of the spectrum as to substance” it was not one that could be categorised as “wrong”, so the appeal failed.
Minds now need to be cast back to Mitchell. Correct, Mr Mitchell was seven days out of time with his costs budget, but what is less well known is that News Group Newspapers (NGN) also served its budget late, to the tune of, guess what, one day! That was a point taken on the appeal: the date of service did not count although NGN thought it had, so its budget had been served outside the time permitted by the rule and strictly speaking, the newspaper needed relief from sanctions as well. What was sauce for the goose was sauce for the gander, so it was argued.
Did that avail Mr Mitchell as a persuasive point in his favour at the appeal? It did not. In the view of Elias LJ, one day late was de minimis and did not matter, so the submission failed, but the decision in Lakhani suggests that the old ways have returned with a vengeance. The defendants’ one day default was deemed to be so serious that relief from sanctions was refused, even though an identical delay in Mitchell had not raised a judicial eyebrow.
For Mr Mahmud and the other defendants in Lukhani, this unhappy state of affairs does not end here. They might usefully reflect upon what might have happened if their appeal had been heard by a different judge. In Intellimedia Systems v Ricard, Warren J also dealt with an application for relief from sanctions when the budget had been served late after the claimant’s solicitor had fallen ill. His approach was not to punish the client for the fact that his solicitor had been unwell. Instead, he said that preparing the budget should have been delegated elsewhere in the office, or that the client should have been advised to go elsewhere, but that said, relief would be given on terms that the costs of the application would be paid to the defendant on the indemnity basis. No damage done. Justice done instead.
One further thought. For whose benefit are these sanctions rules being enforced so strictly? The answer is certainly not for the hapless litigant who finds that his or her claim has been struck out or that the costs of his or her counsel and experts will be irrecoverable if he or she wins, even if the solicitor who caused the problem charges nothing for his or her work. In Mr Gladwin’s case, he will now have to sue his solicitors for negligence, which will include having to prove his claim for damages as well as obtaining an indemnity for the costs, which he is now liable in principle to pay Mr Bogescu even though he won on liability.
And what of Mr Mahmud and his co-defendants? One day late with the updated budget and, if the defence succeeds, none of his post 18 November 2016 costs will be recoverable from Mr Lakhani who will, to all intents and purposes, be litigating in a risk-free costs environment for all costs from that date. Thus, the answer to the question as to “who benefits” appears to be “the tortfeasor” or the loser. If the claimant is late, the defendant either escapes liability to pay any compensation altogether on a struck out claim, or he is absolved from paying out thousands in costs.
At the Costs Law Reports Conference on 30 September 2014, Jackson LJ had this to say about Mitchell:
“… I am not responsible for one matter for which I am constantly blamed – sometimes vilified – in the press. I was not a member of the court which decided Mitchell. If anyone wishes to see how I think rule 3.9 should be applied, they should read my partially dissenting judgment in Denton v White”.
In view of these sentiments, it is difficult to believe that a judge as clever as Jackson LJ would view the decisions in Gladwin and Lakhani as being illustrative of the way in which he anticipated or would have wanted his reforms to work. If either Mr Gladwin or Mr Mahmud have the funds to do it, perhaps, on a further appeal, we shall find out.
