Late Filing of Costs Budgets and Relief from Sanctions - A Stark Warning

Raghav Trivedi, an advocate based on the Midlands Circuit, analyses the decision in Jagdish Lakhani v Ibrahim Sheikh Abadullah Mahmud [2017] EWHC 1713. Mr Daniel Alexander QC, sitting as a Deputy High Court Judge, dismissed the Defendant’s appeal of the order of His Honour Judge Lochrane which refused the Defendant’s application for relief from the sanction automatically imposed under CPR 3.14 for the failure to comply with the Court’s case management order relating to the filing of costs budgets.



The case concerned a claim for an injunction. An order of 18 November 2016 required the parties to file and serve updated costs budgets 21 days before the costs and case management conference listed on 10 January 2017. The purpose of the order was to enable the parties to communicate with each other in good time prior to the hearing to limit the issues over costs budgeting. The Claimant served their costs budget on 19 December 2016 and the Defendant served theirs on 20 December 2016, one day late under the order. The automatic sanction under CPR 3.14 was that the Defendant could only recover their Court fees if successful in the claim, unless relief from the sanction was granted.

The solicitors for each party debated as to whether or not the Defendant’s costs budget was out of time. However, both parties were still able to engage in the analysis of each other’s costs budgets prior to the hearing. The Defendant’s solicitors submitted that the Claimant had therefore not suffered prejudice as a result of the Defendant missing the deadline by one day.

The application for relief from sanctions was made shortly before the hearing as the Defendant’s solicitors advanced that no application was needed until then. The 45 minute hearing to consider costs budgets lasted half a day, dominated by the application for relief from sanctions.

Following the three stage test set down in Denton and Others v TH White Limited and Others [2014] EWCA Civ 906 (“Denton”), His Honour Judge Lochrane concluded that the failure to file costs budgets on time was a serious breach. This failure had imperilled the proper conduct of the litigation, reducing the time available for the parties to narrow the issues on the costs budgets and diverted the attention of the parties away from any costs budgeting issues. The Claimant’s costs budget was reduced but the Defendant’s costs budget was not considered at all as the application for relief from sanctions was refused.


The Defendant contended, in their grounds of appeal, that His Honour Judge Lochrane:


(i)    Failed to take into account key matters in assessing the seriousness of the breach; and

(ii)   Attributed too little weight to the fact that there were innocent reasons for the breach.


Judgment and Reasoning

Mr Daniel Alexander QC (“the Judge”) first considered the recent authority of Clearway Drainage Systems Ltd v Miles Smith Ltd [2016] EWCA Civ 1258, which sets out a useful summary of the three stage approach taken in Denton to CPR 3.9. He stated that judges will not interfere with robust and fair case management decisions made by judges of first instance unless satisfied that the decision was plainly wrong and regarded as outside the generous ambit of the discretion entrusted to that judge.

Considering the first ground of appeal, the Judge stated that an evaluation of the seriousness of the breach is not a binary question of primary fact but a multifactorial question of degree. Whilst noting that it was impossible to list the full range of factors relevant in assessing the seriousness of a breach, the Court was entitled to take into account certain factors and give them such weight as appeared appropriate.

The first factor considered by the Judge was the “absolute and relative amount of time lost by missing the deadline.” The Judge stated that previous authorities had not expressly considered a situation in which a generous period for compliance was provided in terms of a number of days but the available time was limited given the intervening Christmas and New Year holidays. The Judge stated that it was legitimate for a Court to take account of the effective time available and how much of that was lost as a result, which would be more significant where the task involved cooperation (e.g. agreeing costs budgets). The Judge agreed with the first instance Judge that the failure to serve costs budgets one day late was serious because the available time to agree costs budgets was less than 21 days.  


The Judge then considered “whether missing the deadline affected the litigation or a procedural step in it or was likely to do so”. He stated that the Court should not consider this as an overriding factor and should consider the difficulty that the failure to meet the deadline creates, even if it had been possible to perform the task, which was considered more important with respect to orders requiring cooperation. The Judge noted that this was the case when considering costs budgeting and, if this was made more difficult, then this was a legitimate factor to consider in evaluating the seriousness of the breach: he believed costs budgeting to be an additional task for the Court and therefore the pain of performance should always have been minimised. The Judge was not persuaded that His Honour Judge Lochrane was obliged to take this as a conclusive factor: the weight to be given to this factor was a matter for him.

The third factor considered was “the direct consequences of missing the deadline and how it was addressed”. The Judge stated that His Honour Judge Lochrane had correctly taken account of the distraction caused by the debate over what the time limit was and whether there had been a breach. The Judge made it clear that where a party in default makes a mountain of procedural annoyance out of a molehill of missing a deadline, the breach would be considered more serious.

The final factor considered under this ground of appeal was the “impact of missing the deadline on litigation generally.” The focus here was whether the default wasted Court time, making additional demands on the resources of the Court and adding to the costs incurred. The Judge stated it was not wrong to take the consequence of late service of the costs budget and application for relief from sanctions into account when determining the seriousness of the breach. The short costs budget hearing had considerably exceeded its listed time due to turning into a long relief from sanctions application, which wasted valuable Court time.

With respect to the second ground of appeal, the Judge found that the finding by His Honour Judge Lochrane that there was no reasonable excuse for the default was open to him to consider on the evidence. Preparation of the Defendant’s costs budget was done at the last minute and he could not accept the Defendant’s argument that there had been a misunderstanding of the rules.

The Judge found that His Honour Judge Lochrane had been open to exercise his discretion in the manner he did and the appeal was dismissed.


Potential Impact

This judgment demonstrates why it is important to file costs budgets on time and also acts as a stark warning to legal representatives that there is more to an application for relief from sanctions than meets the eye. It has been shown (not for the first time) that it is not easy to satisfy the CPR 3.9 and associated Denton tests. Further factors have been added to the mix, with the conduct and behaviour of the defaulting party post-breach and the consequences of these put into focus in this judgment. Indeed, this case reinforces the importance of making an application for relief from sanction promptly and the need to actively take steps to remedy the consequences of the breach as soon as possible.


The Judge’s comments that courts on appeal will not interfere with case management decisions unless they are plainly wrong and outside the generous discretion entrusted to the original judge are noteworthy. It remains that assessing an application for relief from sanctions is a case by case exercise, with a very wide discretion available to the judge.


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