In Ashi Group Ltd v Daniels & Daniels, the County Court at Bristol held on appeal that a late Precedent U does not engage CPR 3.9, because CPR 45.63(2) contains no implied sanction. A District Judge who refused fixed recoverable costs for a delay of about five hours had applied the wrong framework. For receiving parties, the question is prejudice and proportionality, not relief from sanctions.
Background
The claimant succeeded at trial on both of its claims in breach of contract, which concerned the defendants’ refusal to pay invoices [2]. Its completed Precedent U was filed and served about nineteen hours before trial, rather than the 24 hours required by CPR 45.63(2) [3]. The case had not been assigned to a complexity band until the District Judge did so at the trial itself [8].
The District Judge raised the issue of short service himself [8]. He denied the claimant’s oral application for relief from sanctions and made no order as to costs in reliance on the failure to comply with CPR 45.63 [11, 12]. The claimant was deprived of approximately £15,000 in fixed recoverable costs, together with the enhanced consequences of beating its Part 36 offer [5].
Costs Issues Before the Court
HHJ Michael Berkley allowed counsel for the appellant to expand the grounds of appeal to raise an anterior question of law [14]. The issues were whether CPR 45.63(2) imposes an express or implied sanction capable of engaging CPR 3.9. If it does not, the question was whether the District Judge erred by deciding the application under CPR 3.9 rather than the ordinary case management jurisdiction under CPR 3.1(2)(a). If CPR 3.9 was engaged, the question was whether the discretion had been exercised in error [15].
The Parties’ Positions
The respondents did not appear and were not represented [6]. Mr Luxton, for the appellant, submitted that procedural defaults fall into three categories: those attracting express sanctions, those attracting implied sanctions, and those attracting no sanction, which fall within the court’s ordinary case management powers [18]. He relied on FXF v English Karate Federation Ltd for that taxonomy.
He argued that implied sanctions are exceptional. They arise where the expiry of a time limit deprives a party of an existing procedural right, such as the right to appeal [19]. CPR 45.63(2) does not say that fixed recoverable costs cease to be recoverable, or that relief is required [23]. Had the Rules Committee intended a condition precedent to recovery, it could easily have said so [25]. Properly construed, he submitted, the rule creates a procedural obligation, not a sanction [29].
The Court’s Decision
The judge started from the review of CPR 3.9 by Birss LJ in Yesss (A) Electrical Ltd v Martin Warren, and set out two passages from it [30]. In the first, Birss LJ said that the hurdle for identifying an unexpressed but implicit sanction must be a high one. In the second, he said that, absent an express sanction, and outside the third category identified in FXF and the recognised implied sanctions for notices of appeal and respondent’s notices, CPR 3.9 does not apply [30].
Macdonald concerned costs schedules for summary assessment under the practice direction to CPR 44, whereas the present requirement sits in CPR 45.63 itself [31]. The judge considered that distinction unimportant, because Birss LJ did not distinguish between rules, practice directions and orders. More relevant was that CPR 44 PD §9.5 is in almost identical terms to CPR 45.63. Birss LJ had also warned against treating mandatory wording as indicative of an implied sanction [31].
HHJ Berkley concluded: “Accordingly, MacDonald is very persuasive authority for the proposition that a breach of CPR 45.63 does not invoke CPR 3.9 and when combined with the cited dicta in Yesss, I find that CPR 45.63 does not contain an implied sanction.” It followed that CPR 3.9 does not apply to a breach of CPR 45.63(2) [31]. Macdonald had been cited with approval in Say Chong Lim v Chee Kong Ong, and so remained good law [32].
The judge noted Birss LJ’s further reminder in Yesss that this reasoning is not a rowing back from the modern approach to procedural compliance. In that passage, Birss LJ said that mandatory provisions in orders, rules and practice directions are meant to be adhered to [33].
The District Judge had approached the late Precedent U through CPR 3.9, which was an error of law [47]. HHJ Berkley also found the judgment curious, because the Denton three-stage test had not been applied either: “That in itself was an error of law.” The District Judge might have refused the application on broad case management grounds, but instead he denied the oral application for relief [47]. That combination was sufficient to set the orders aside [48].
The judge declined to remit the matter, considering that remittal would be contrary to the overriding objective. He exercised the discretion afresh in light of the Macdonald guidance [53]. Under that guidance, the court should take the failure into account, but its reaction should be proportionate. Where there is a mere failure without aggravating factors, the first question is what prejudice it caused. If there is none, the court should assess costs in the normal way [34].
If there is prejudice, Neuberger J identified three normal answers: a brief adjournment, a stand-over to detailed assessment, or a stand-over that keeps the assessment summary. Where there is an aggravating factor, it may very well be right to deprive a party of all or a significant proportion of its costs [34].
Here the failure was a mere failure. There was no aggravating factor, such as a deliberate decision to deny the other side advance notice or a history of failing to act in time [54]. The respondents had not lost the opportunity to argue quantum, hourly rates or hours worked. The five-hour delay could not realistically have affected their decision to go to trial [55]. They suffered no meaningful prejudice, save losing the windfall of avoiding costs altogether [56].
On proportionality, it would have been impossible to file and serve a reliable Precedent U for want of banding. The appellant did not seem to go so far as to say that this alone caused the lateness [57]. Forgoing £18,850.47 for a relatively small delay was out of all proportion [58]. The court should have assessed costs in the normal way, taking into account any Part 36 offers [59].
Practical Implications
The decision is a County Court appeal rather than a higher court authority. Its value lies in fixing the framework: a late Precedent U is a matter for proportionate case management, not for CPR 3.9 [31].
For receiving parties faced with an objection at trial, the first step is to point out that CPR 45.63(2) carries no implied sanction, so relief from sanctions is not the test [31]. The argument should then turn to the Macdonald questions: whether the failure was a mere failure, and what prejudice it caused [34, 54]. In a fixed costs case, the point that the costs were, or should have been, clear once the case was banded may carry weight [50].
Paying parties who want any response to the lateness need to identify concrete prejudice or an aggravating factor, such as a deliberate decision to deny notice or a history of lateness [54]. Without either, Macdonald points to costs being assessed in the normal way; prejudice alone normally calls for a remedy short of forfeiture, such as a brief adjournment [34].
Compliance still matters, and the judge expressly noted Birss LJ’s reminder that mandatory provisions are meant to be adhered to [33]. Practitioners should check before trial that the case has been allocated to a complexity band. If it has not, they should ask the court to deal with banding, so that the Precedent U can be completed accurately and served in time [51].
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