Sanctions for failure to file a full costs budget

The recent judgment on Justyn James Page v RJC Restaurants Ltd serves as a timely reminder that as far as compliance with court directions and rules is concerned, the courts are not prepared to indulge any party who fails to follow the rules to the letter.

In this case the parties had agreed some directions including a provision for a second CMC and also various phases in their respective costs budgets. In view of their agreement, the claimant’s solicitors had filed an “interim” costs budget which did not include estimated costs of trial preparation or trial.  This was on the understanding that further directions would be given at the second CMC and as such costs to be incurred thereafter could be budgeted for at that stage.  Both parties filed and served what they believed to be costs budgets and directions in compliance of the court order and the matter proceeded to a CCMC before Master Thornett.

It is fair to say that Master Thornett was less than impressed with the parties’ assumptions that their agreement of directions and some of the phases in the costs budgets would automatically be approved by the court. He concluded that filing of an “interim” costs budget which did not include the claimant’s estimated costs of trial preparation and trial was a failure to comply with CPR PD 3E. It was not a costs budget filed in the acceptable form.  Therefore, the sanction imposed by CPR r.3.14 applied and the claimant was only entitled to court fees. Master Thornett could not see why directions up to trial could not be determined at the CCMC. He refused to order another CMC and directions to trial were given.

Interestingly, he approved the defendant’s costs budget which had been budgeted to trial save for one or two outstanding items, and which was agreed by the claimant.

Understandably, and for obvious reasons, the claimant’s solicitors who had genuinely believed a second CMC would be permitted, appealed and also sought relief from sanctions under CPR r.3.9. Essentially, their main grounds for appeal was that CPR r.3.14 could only apply if the claimant had failed to file a costs budget.  This was not the position in this instance.

In what was a reasonably lengthy judgment, Walker J considered all the leading case authorities, including Mitchell v Newgroup Newspapers Ltd [2013] EWCA CIV1537 and Pittalis v Grant [1989] QB605. Following Denton v TH White Ltd [2014] EWCA Civ 906, he partially allowed the claimant’s appeal. Taking all the facts into consideration, his view was that CPR r.3.14 could only apply if the claimant had “failed to file a costs budget”. In this instance, although the filing of the interim costs budget excluding the trial preparation and trial costs was of moderate seriousness and significance, it was not the same as not filing a budget. The claimant’s solicitors had mistakenly believed those phases could be dealt with at a second CMC. As they had agreed some of the phases up to the first CCMC, it was appropriate to disapply the sanction to those parts of the agreed budget as dealt with up to those phases. However, he concluded due to the serious breach of the case management rules, the sanction must apply to the trial preparation and trial phases, leaving the solicitors entitled to court fees only in respect of those phases.

A harsh judgment and one which will no doubt put the claimant’s solicitors under enormous pressure to compromise the claim pre-trial but without under-settling and potentially, in conflict with their client.

Thi judgment illustrates that even with co-operation between the parties, there is no escaping the fact that one must never assume the court would approve any agreement that falls short of compliance of the rules and court orders. It is a trap which could catch the unwary. It seems the only way is to avoid breaching the case management rules is to prepare a full costs budget even in cases where there are uncertainties about the future, unless, of course, prior direction is obtained from the court.