In this case the Court refused to overturn a decision at first instance which had refused an extension of time for the filing of a Costs Budget (filed with the Court one day later than it should).
1. Draconian consequences: the consequences attendant on the late filing of a Costs Budget can be draconian. The relevant provisions are those of Civil Procedure Rule [CPR] 3.14. These provisions state that any party failing to file a Costs Budget in time “will be treated as having filed a budget comprising only the applicable Court fees”. In other words the party in default is debarred from claiming any part of their legal costs from their opponent, even if they are successful. Claims for recovery of any professional fees are torpedoed.
2. Escape hatches: should such a situation unhappily occur, the door is not necessarily locked. The hapless solicitor can look to the following escape hatches to be found in the provisions of CPR 1.1(2)(a): the Court’s ability to ensure that parties are placed on an equal footing and those of CPR 3.9 which empower the Court to grant relief from sanctions.
3. Mitchell: the leading case in this area is still that of Mitchell  EWCA Civ 1537. In that case the Costs Budget was filed substantially out of time and on the cusp of the Court Hearing appointed inter alia to consider and approve it. The Claimant Mr. Mitchell’s application for relief from sanctions was refused and he was restricted to recovery of the Court fee alone (that is the fee paid to the Court on the issue of his legal action).
4. The Three Stage Test: there followed Denton v. T.H. White Limited  EWCA Civ 906. In Denton the Court of Appeal decided that a three stage approach should be adopted:
Stage 1: there should be an assessment of the gravity or significance of the failure to comply.
Stage 2: if grave or significant, the reasons for breach should be considered and
Stage 3: the Court should then look to all the circumstances of the case and in particular those factors contained within CPR 3.9(1)(a) and (b) so as to deal with the application justly.
5. CPR 3.9(1)(a) : this emphasises the need “for litigation to be conducted efficiently and at proportionate cost”
6. CPR 3.9(1)(b): this obliges the Court “to enforce compliance with rules, practice directions and orders”.
7. Mitchell and reasoning: in Mitchell Lord Justice Dyson the Master of the Rolls stated that “the Claimant’s non-compliance caused substantial extra work and extra costs to be incurred by the Defendant. It also disrupted the work of the Court”. (The Court had been obliged to vacate half a day which had earlier been allocated for asbestosis claims.)
In relation to factors (a) and (b) Lord Justice Dyson said “these considerations should now be regarded as of paramount importance and be given great weight. It is significant that they are the only considerations which have been singled out for specific mention in the Rule”.
8. Trivial Breach: the principle de minimis non curat lex (the law is not concerned with trivial things) applies. The Court will normally be sympathetic if the failure to comply was insignificant (e.g. where a party has narrowly missed the deadline imposed by the Order but has otherwise fully complied with its terms).
9. In contrast if the breach is serious or significant, the burden rests with the party in default to persuade the Court to grant relief. The Court will want to consider why the default has occurred, thus bringing into play Stage 2.
10. Good reason: if a good reason can be shown it is more likely than not that the Court will grant relief. (For example where a party or their solicitor was suffering from a debilitating illness or involved in an accident such might well constitute good reason; late and unforeseeable developments in the litigation might also constitute good reasons. Mere oversight is unlikely to suffice.)
The facts of Lakhani were these: on 18 November 2016 a Order had been made which required the parties to litigation to file and serve updated Costs Budgets 21 days before the hearing at which they would be considered, that is at a Costs and Case Management Conference [CCMC].
The CCMC was appointed for 10 January 2017.
The Claimant served his Costs Budget in time on 19 December 2016. The Defendant’s solicitor did not do so until the following day, 20 December 2016. The Defendant’s Costs Budget was one day late. The Claimant contended that this triggered the automatic sanctions of CPR 3.14 and that the Defendant was therefore limited to the Court fee should it be successful in obtaining a Costs Order.
The Defendant failed to make a prompt Application for Relief: no attempt was made until the actual day of the CCMC. The consequence was that a hearing originally listed for 45 minutes to approve Costs Budgets ran to half a day and was wholly dominated by the Defendant’s Application for relief from sanctions. The Defendant’s Application was refused.
Lakhani: Appeal:The Defendant Appealed; its Application came before Mr. Daniel Alexander QC sitting as a Deputy Judge of the Chancery Division. The Learned Judge had regard to the provisions of CPR 3.9, Denton and Clearway Drainage Systems Limited v. Miles Smith Limited EWCA Civ 20161258.
Clearway: The First Stage:Clearway related to an Appeal from an Order dated 21 June 2016 of Her Honour Judge Moulder, sitting as a Judge of the Queen’s Bench Division in the Manchester District Registry, which dismissed the Application of the Claimant Clearway from relief from sanctions in respect of its failure to serve Witness Statements in time with an allied failure to serve a Witness Summary.
On the facts the Judge said that the failure for over two months to serve Witness Statements (and to serve them less than a month before trial) had affected the efficient progress of the litigation (even if no particular prejudice was identified) and that such a prolonged failure over a period of months had to be viewed by the Court as serious or significant.Clearway: the Second Stage:
Turning to the Second Stage identified in Denton, the Judge said that it seemed to her that there had been no good reason for the failure to serve the witness evidence in time.(Clearway had contended that there were issues of disclosure which prevented their filing their witness evidence earlier in the day. The Judge stated that it had been open to Clearway’s solicitors to make an Application to the Court well before the deadline for exchange of witness evidence and for Specific Disclosure of any documents believed to have been outstanding or required in order for them to deal with witness evidence competently).
Clearway had effectively disregarded the Court Order.Lakhani: Court of Appeal review:
In Lakhani the Court proceeded to review the Three Stage Test adopted by the Deputy Judge in the Court below. On Appeal the Court below had found that the breach had not been trivial but was serious. The Court of Appeal took the view that the breach was borderline but of sufficient seriousness as would warrant the refusal to grant relief from sanctions. There was no basis on which the Appeal Court could properly interfere with the decision or reasoning of the Court below in relation to the gravity of the breach.The Court of Appeal proceeded to the Stage Two that is, an examination of whether the failure could be reasonably excused. The Deputy Judge on Appeal concluded that it could not: there had been no reasonable misunderstanding of the requisite rules. The Defendant’s solicitors had only commenced their preparations on the Costs Budget following receipt of the Claimant’s Costs Budget. The work had been done at the last minute. Apparently the Defendant’s solicitor had misread the rules: this could not be described as an understandable mistake.
Proceeding to Stage Three the Court was heavily influenced by the lateness of the Application. Put another way, the Defendant’s solicitors’ delay in seeking to remedy the original default was of itself open to criticism.Accordingly taking into account all of the circumstances of the case meant that there was no persuasive basis upon which to alter the decision of the Court below.
In relation to the filing of Costs Budgets the following lessons may properly be drawn; these are in many ways of general application in relation to the conduct of Civil Litigation in England and Wales.
(1) All Court Orders are to be obeyed and every effort should be made to ensure timeous compliance therewith.
(2) Breaches which might properly be classed or viewed as trivial or negligible will ordinarily justify relief from sanction.
(3) Those which are serious or substantial will not.
(4) If serious or substantial, then good reasons will need to be shown.
(5) Even if good reasons are shown any Application for Relief must be made promptly and without delay.