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When is a costs budget not a costs budget?

In a recent County Court case (Narinder Singh Birdi v Balwinder Singh Birdi), where I acted for the defendant against his brother, the claimant’s original particulars of claim were struck out due to numerous irregularities which meant that neither the defendant nor the court could identify exactly what was being claimed. The claimant filed amended particulars of claim and the defendant subsequently filed an amended defence and counterclaim. The claim was issued in March 2015, but due to these procedural matters, the first real costs and case management conference (CCMC) was not held until November 2016.

By the time we got to the CCMC, the pleadings of both sides were finalised; both parties were claiming £50,000 from the other (that is, the total value of the claim and counterclaim was £100,000). The last hearing before the CCMC was in September 2016, when DJ Lightman approved the particulars of claim and directed that the matter be listed for a CCMC. However, the judge did not say specifically when costs budgets should be filed and exchanged.

Costs budget

Since the claim was issued in March 2015, the amended Civil Procedure Rules (CPR) applied. The defendant considered that costs budgets were due seven days before the CCMC and accordingly filed and served on this date (it is worth noting that the defendant’s solicitors had contacted the claimant’s solicitors twice before serving, seeking to exchange budgets to allow more time to narrow the issues). The claimant did not file and serve a costs budget until 22 November 2016 (the day before the CCMC). The defendant therefore argued that the sanction, as set out in the CPR, should apply.

In addition to being served late, the claimant’s costs budget was inadequate. No assumptions had been included, and the total on the front page of Precedent H did not correlate with the totals of the phases on the subsequent pages. It was also unsigned.

CCMC

The CCMC had been listed with an estimated time of 45 minutes. Unsurprisingly, it took more than twice as long. The claimant made an oral application for relief from sanctions and the judge considered whether what the claimant purported to be a costs budget, was in fact a costs budget.

Late filing

Since the costs budget had only been filed and served the day before the hearing, the claimant had not complied with CPR 3.13. The sanction, as per CPR 3.14, was that the claimant was treated as if they had filed a costs budget which comprised only the applicable court fees.

The claimant sought relief from sanctions, arguing that the sanction would be draconian and that, although it had only been served the day before, the defendant had had an opportunity to consider this; therefore, any prejudice was minimal.

The judge agreed with that the sanction was draconian and that the prejudice caused by the late service was minimal. However, that did not address the other failings in the claimant’s costs budgeting.

Failure to provide details of assumptions

Without setting out the assumptions that had been used to estimate the costs included in the costs budget, it was very difficult to consider how reasonable it was. For example, there was no information about how many witnesses the claimant intended to rely on. This would have affected how much work would have to have been undertaken in relation to witness statements, and the length of the trial. Additionally, no details had been provided about the contingent cost.

DJ Lightman had determined in a previous case that the lack of assumptions in themselves did not render the costs budget invalid. This issue on its own would also not have been fatal to the claimant’s costs budget.

Incorrect calculations

On the front page of the claimant’s Precedent H, the phases of the budget came to a total exceeding £72,000. However, the phase totals on the front page were not the same as the phase totals outlined on the subsequent pages, which came to a sum exceeding £56,000. The claimant explained that this was due to an error in the auto-calculations within the spreadsheet. The judge was again sympathetic and, having seen them in the past, could understand how such an error could have occurred.

Unsigned costs budget

It is a requirement of costs budgets that they are verified by a statement of truth signed by a “Senior Legal Representative” (CPR Practice Direction (PD) 3E, paragraph 6). If the claimant’s costs budget was unsigned, it could not have been verified; therefore, it did not comply with the Practice Direction. Counsel on behalf of the claimant argued that the costs budget could be relied upon and committed to sending a signed copy to the court that afternoon.

The judge was not satisfied. He did not consider that the claimant’s purported costs budget was in fact a costs budget. In his mind, there had been a serious breach and sanctions should apply.

Application for relief

The judge went on to consider whether he should have granted relief from sanctions as sought in an oral application by the claimant. He followed the three stage Denton test, but did not grant the claimant relief and ordered that he be treated as if he had filed a costs budget comprising only the applicable court fees.

Conclusion

It appears from the comments made by the judge that the courts will apply a wide interpretation as to what constitutes a costs budget. In this case, the court may well have forgiven other failings had the claimant’s costs budget been signed.

The rules around costs budgets, and particularly the deadlines for filing and serving them and their form, have been subjected to a number of amendments and alterations since they were introduced in 2013. Practitioners should therefore check which rules apply to their case and diarise deadlines accordingly.

In light of the fact that it seems that the courts are ready and willing to forgive a party that files a budget late, parties should exchange budgets at an early stage so that as much as possible can be agreed prior to a CCMC. For cases issued on or since 6 April 2016, costs budgets are due to be exchanged 21 days before a CCMC.

Hodge Jones & Allen Joseph Henry

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