Background
This was an appeal from an order made by Master Thornett at a CCMC on 5 December 2017 imposing a sanction which limited the claimant’s costs budget to applicable court fees only.
Prior to the CCMC the parties had agreed all directions and costs budget figures for phases up to and including a proposed second case management conference or pre-trial review. It had been proposed that subsequent directions and costs budget figures be left over to be dealt with at the proposed second CMC.
The Master did not agree the proposed course and found that in failing to file a complete budget the claimant was in breach of the rules and consequently deemed to have filed a costs budget comprising court fees only.
The Order read as follows:
… UPON the Court finding that the Claimant had failed to file a costs budget that complied with PD 3E and is in breach of CPR 3.14 [sic] such that the sanction under CPR 3.14 applies and the Claimant shall be treated as having filed a budget comprising only the applicable court fees
IT IS ORDERED that
COSTS BUDGETS
Upon it being noted that hourly rates and incurred costs are not agreed:
1.1 The Claimant’s costs budget is limited to applicable court fees only
1.2 The Defendant’s costs budget is approved in the sum of £66,321.00 excluding VAT (see attached full budget as allowed).
Grounds of Appeal
The claimant appealed on grounds that:
- The master was wrong in law to find CPR 3.14 applied in this case. CPR 3.14 did not apply, as the claimant had filed a costs budget.
- The master was therefore wrong in law to hold that the claimant’s budgeted costs were, by operation of CPR 3.14, limited to court fees.
- In addition, it was irrational of the master to conclude that the claimant had failed, within the meaning of CPR 3.14, to file a costs budget simply because the claimant’s budget was incomplete, in circumstances where he made no such finding in respect of the defendant’s budget, although that was also incomplete. The master should instead have found that CPR 3.14 applied to neither budget.
- [A] The defendant had agreed all phases except trial preparation and trial, and as such the master was obliged by CPR 3.15(2)(a) to give effect to that agreement. [B] The master was therefore wrong not to make a costs management order recording that the defendant had agreed those phases, with those agreed sums therefore to stand as the claimant’s budget for those phases.
- As to the trial preparation and trial phases of the budget, in circumstances where CPR 3.14 did not apply, and given that the parties had agreed that they would not be subject to budgeting until a later stage, the master should at most have directed that the parties serve supplemental costs budgets to address those phases, making provision for any further costs management to follow as necessary.
- Even if, contrary to the claimant’s contention, CPR 3.14 did apply to this case, that rule is expressly subject to the court’s power to ‘order otherwise’ and to disapply the default sanction provided for. In this case, the master was wrong not to ‘order otherwise’ and to disapply the sanction having regard to the overriding objective of the CPR, and all the circumstances of this case. These included:
[Ground 6(1)] the claimant’s substantial compliance with the obligation to prepare a budget;
[Ground 6(2)] the agreement between the parties of all the pre-trial preparation phases of the claimant’s budget; and
[Ground 6(3)] the defendant’s express agreement with the claimant that budgeting for the trial-related phases of the case should be deferred; and therefore
[Ground 6(4)] [the defendant’s] own resulting omission fully to budget for those phases.
In grounds of appeal 1 to 4A the claimant relied on three bases for asserting that the master wrongly held CPR 3.14 to be applicable to his interim budget:
- CPR 3.14 only applies if “a budget” has not been filed, and an incomplete budget is “nonetheless a budget” for the purposes of CPR 3.14 (grounds of appeal 1 & 2);
- the defendant agreed his interim budget, and by CPR 3.15 (2)(a) the parties’ agreement overrides CPR 3.14 (ground of appeal 4); and
- alleged irrationality on the part of the master entreating RGC as outside CPR 3.14 when RGC’s budget was incomplete (ground of appeal 3).
The Defendant’s Concession
The defendant (“RGC”)’s primary response to the appeal was that it should be dismissed. However, in the course of argument they made the following concession:
“D accepts that it could not properly and in good conscience seek to go behind the agreed figures. We therefore formally accept that the agreement in respect of those phases will constitute a good reason to depart from budgeted nil figures in favour the agreed figures.
“The effect of this concession is that the sanction can only bite on those phases which were not agreed (i.e. trial preparation and trial as per what was previously our fall back position).”
In response to that concession, Mr Williams QC for the claimant said:
“[1] While we are grateful for the concession, this is actually an admission that the appeal must be allowed. It necessarily follows that the defendant accepts that the master approached matters wrongly. It cannot be a legitimate exercise of discretion for a master to make a costs management order that there will inevitably be a ‘good reason’ to depart from on grounds which were already known when the order was made. Indeed, it makes the order a nonsense.
“[2] By the concession, either the defendant is accepting that CPR 3.14 was never engaged (because not only had the claimant filed a budget, but the defendant had agreed it!) or it is accepting that there was an exceptional feature of this case which should have caused the master to “otherwise order” under CPR 3.14 (the fact that the parties had agreed the approach to budgeting which the master rejected and also that the defendant had agreed all pre-trial phases of the claimant’s budget).
“[3] On either view, the defendant tacitly accepts that the master’s exercise of discretion cannot stand, and that this court must substitute its own judgment.”
Addressing this concession and response, Mr Justice Walker said:
At para 27:
“The response suggests that either “actually” or “tacitly” RGC has accepted that certain of its contentions at the hearing of the appeal were unsound. I do not accept that RGC has done this. It has made a concession only as to what should happen if it is the paying party and if there is an assessment.”
At para 123:
“In my view nothing in that concession assists Mr Page in relation to the question of the true meaning of CPR 3.14. The concession recognises only that it would not be right for RGC, in the event that it were the paying party, to object at the assessment stage to allowing Mr Page the specific amounts which had been agreed for specific phases.”
MR JUSTICE WALKER:
E. Applicability of CPR 3.14: grounds 1 to 5
E1 CPR 3.14 applicability: general
116. In grounds of appeal 1 to 4A Mr Page relies on three bases for asserting that the master wrongly held CPR 3.14 to be applicable to Mr Page’s interim budget…
117 … For the reasons given in those sections I conclude that each of these bases lacks legal merit. In these circumstances I deal only briefly with matters that do not need to be resolved:
(1) Mr Page’s assertions as to the consequences if CPR 3.14 did not apply (ground of appeal 4B and 5: see section E5 below);
(2) RGC’s reliance on a bar which it said prevented Mr Page from raising relevant arguments on appeal because he had not relied on them below (issue (1) for determination, see section E6 below).
E2 Grounds 1 & 2: meaning of “a budget” in CPR 3.14
118. CPR 3.14 will only apply to Mr Page if he “failed to file a budget”. Mr Page’s first contention is that, on an ordinary use of language, he had filed a “budget”. In this context, RGC accepted that
a mere irregularity would not nullify what would otherwise be a costs budget. I agree. It seems to me that RGC’s approach in this regard is consistent with the decision of Stuart-Smith J in Americhem Europe Ltd v Rakem Ltd [2014] EWHC 1881 (TCC). There a solicitor had served and filed a costs budget in the form of Precedent H in time, but it was signed by a costs draftsman and not by a senior legal representative within the meaning of PD 3E. Stuart-Smith J found that while this was contrary to PD 3E, there was nothing to impede the normal constructive discussions on figures.
In those circumstances what went wrong in that case was entirely different in nature from the present case, where what was filed omitted important sections of Precedent H.
119. I disagree with Mr Page’s contention that on an ordinary use of language he filed “a budget”. It is inconsistent with the terminology used on Mr Page’s behalf: the document filed on 13 November was not described as “a budget”, nor was it described as “a costs budget”. It was described as an “Interim Costs Budget”.
On an ordinary use of language, as it seems to me, an interim budget is something which is not yet a budget.
120. I accept that the name used when filing is not determinative. If, despite the ordinary meaning of the name used, what was filed can properly be regarded as a “budget” within the meaning of CPR 3.14 then that provision will not be engaged. The question is whether that word should be interpreted as being satisfied by filing a materially incomplete budget. It was submitted for Mr Page that such an interpretation was required because the policy of costs management was to allow the court, to the extent that it is not agreed, to set a budget. I shall refer to this policy as the “manage only what is not agreed” policy. I accept that this is a policy which underlies certain aspects of costs management rules and practice directions. But it does not follow from this that CPR 3.14 was not engaged by filing an incomplete budget.
121. RGC submits that a contention that only a total failure to file a budget engages the sanction is precluded by the Court of Appeal decision in Mitchell. I agree. In paragraph 30 of its judgement (see section B4.3 above) the court rejected a contention that CPR 3.14 was directed to the case of a party who does not file a budget at all.
122. I recognise that Mitchell was not concerned with an incomplete budget. Nevertheless it seems to me that the approach taken in Mitchell is equally applicable to a case where what is filed is materially incomplete. Important factors in this regard are:
(1) First, there is a need for certainty. When Mr Page’s interim budget was filed no one knew whether RGC would agree with the approach that was taken in it. The parties and the court need to know where they stand once the time for filing has expired. It seems to me that CPR 3.14 gives a clear answer: once a party has failed to file a budget despite being required to do so, that party will, unless the court otherwise orders, be treated as having filed a budget comprising only the applicable court fees. It was submitted on behalf of Mr Page that the operation of CPR 3.14 was not automatic. I disagree.
CPR 3.8 makes it plain that the operation of a sanction such as that in CPR 3.14 is not dependent upon there being any further order by the court. On the contrary, the sanction applies unless the court otherwise orders. The natural meaning of this provision is that once there has been a relevant failure, then in the absence of any contemporaneous or earlier order to the contrary, CPR 3.14 bites.
From that time on, unless and until there is an order by the court to the contrary, the party in question is deemed to have filed a budget comprising only the applicable court fees. Whether that continues to be the case for the purposes of costs budgeting is a matter for the court.
(2) Second, on its face what was filed was contrary to the “manage only what is not agreed” policy. Mr Page’s interim budget made it clear that Mr Page was not content to allow the management process, within the timeframe prescribed by rules and practice directions, to be agreed by the parties or conducted by the court in relation to the phases of preparation for trial and trial itself: see section C2.1 above.
The failure to complete relevant parts of Precedent H carried the risk that there might be similar adverse consequences to those identified in the second part of paragraph 30 of the Mitchell judgment: see section B4.4 above.
(3) Third,
there can be no doubt that the obligation under CPR 3.13 as amplified in PD 3E is, unless the court otherwise orders, to file a budget “in the form of Precedent H”, and which follows the Precedent H Guidance Note in all respects. Paragraph 6 of PD 3E says so: see section B3.2 above.
In the present case it is clear that Mr Page’s interim budget did not meet important requirements of Precedent H. Precedent H required Mr Page to set out his budgeted costs for trial preparation and for trial. Mr Page’s interim budget did not do this.
(4) Fourth,
PD 3E expressly set out what should be done if it were proposed to limit budgets initially to part only of the proceedings. Under paragraph 6(a) the first question was whether the present case fell within the category of “substantial cases”. If so then the court might direct a limitation of the kind proposed. It is plain that the Practice Direction contemplates a prospective direction by the court: in the absence of such a direction there would be no restriction, at the time of filing, on the requirement that the budget must be in the form of Precedent H.
(5) Fifth, it was submitted that failure to comply with CPR 3.13(1) and PD 3E could be adequately dealt with under CPR 3.10. I do not agree.
The mischief at which CPR 3.13 and CPR 3.14 are directed is the last moment filing of costs budgets: see Mitchell paragraph 30, cited in section B4.3 above. CPR 3.14 is the sanction designed to ensure compliance with CPR 3.13. Accordingly it can be expected that it is this sanction which will apply where there is material non-compliance with CPR 3.13, or PD 3E which amplifies what CPR 3.13 requires.
(6) Sixth, there was an oral submission on behalf of Mr Page that CPR 3.14 should be interpreted as imposing a sanction only in relation to such phases in Precedent H as had not been completed. RGC would, if necessary, have adopted a fall-back position to that effect. I am not persuaded that such an interpretation can be adopted. There is no hint of any such approach in the express words of CPR 3.14. The new policy of greater robustness is consistent with the sanction being applicable, unless the court orders otherwise, for any material breach.
(7) Seventh, it was urged more generally that the severity of the CPR 3.14 sanction should lead the court to adopt a restrictive interpretation of CPR 3.14. This argument would have more force if CPR 3.14 had not contained the words, “unless the court otherwise orders …”. This saving provision is intended to ensure that the sanction is imposed to give effect to the overriding objective: see Mitchell paragraph 45, cited in section B4.7 above. In circumstances where the saving provision will ensure compliance with the overriding objective, there is no need to read down CPR 3.14 for fear that the sanction it imposes may be too severe.
123. I add that the passage from Q&A 2, now Q&A 24, in Questions & Answers cited in section B4.3 above is consistent with my conclusion. It was noted on behalf of Mr Page that what is said in Questions & Answers does not come under the responsibility of the editorial team of Civil Procedure. That is true, but it remains the case that Questions & Answers is prepared by experts in the field. Mr Page also relied on the apparent assumption in the Chief Chancery Master’s informal note (see section B3.3 above) that a party could, without sanction, file a limited version of Precedent H where all parties sought to agree an order that the case should be taken out of the costs management regime. As to that, however, it seems to me that the informal note was not specifically addressing the question of sanction under CPR 3.14.
124. Finally on grounds of appeal 1 and 2 I turn to RGC’s concession. In my view nothing in that concession assists Mr Page in relation to the question of the true meaning of CPR 3.14. The concession recognises only that it would not be right for RGC, in the event that it were the paying party, to object at the assessment stage to allowing Mr Page the specific amounts which had been agreed for specific phases. This gives no basis for thinking that the concession points to any flaw in the reasoning leading to my interpretation above of CPR 3.14.
E3 CPR 3.14 applicability: agreement under CPR 3.15
125. I deal in this section with what I have called ground of appeal 4A: see section D1.4 above. CPR 3.15(2)(a) lays down that by a costs management order the court will record the extent to which the budgeted costs are agreed between the parties. At paragraph (2)(b) it adds that “in respect of the budgeted costs which are not agreed” the court will record its approval after making appropriate [revisions]. Mr Page derives from this a proposition that the court has no power either to approve or vary budgets to the extent that they have been agreed. He asserts that because ours is an adversarial system, it follows that agreement between the parties on the amount of recoverable costs will be final. Such an agreement may have, and Mr Page submitted in the present case did have, contractual effect. In oral submissions it was asserted that CPR 3.14 served to protect the opposing party, and nothing in it ousted a subsequent agreement of the parties.
126. By contrast, RGC submitted that nothing in the rules stated CPR 3.14 could be displaced by agreement, and that there was no good reason to imply anything to that effect. I agree, at least in the context of the present case. It seems to me that
on the ordinary use of language CPR 3.15(2)(a) is not engaged once CPR 3.14 has taken effect. Once the time for filing a budget had expired, and Mr Page had not complied with that requirement, then unless and until the court ordered otherwise the only “budgeted costs” within the meaning of CPR 3.15 as regards Mr Page were the applicable court fees.
127. Moreover, there are sound policy reasons for adopting this approach: see section E2 above. The sanction in CPR 3.14 is so important that disapplication of the sanction should not automatically result from the mere fact that figures are agreed.
128. In these circumstances
I am not persuaded by Mr Page’s contention that CPR 3.15 trumps CPR 3.14. I do not accept that the negotiations between the parties resulted in a contract. But even if they had resulted in a contract, it seems to me that a contract made for costs management purposes must give way to overriding provisions in relevant rules, practice directions and orders.
Nevertheless, I recognise that the costs management provisions create a tension between the importance, in the public interest, of forcing parties to grapple with potential costs consequences on the one hand, and principles of freedom of contract on the other under which parties should, unless the costs management provisions require otherwise, be able to reach agreement as to costs consequences. Thus
in circumstances where the parties are aware that the sanction in CPR 3.14 has taken effect, but nevertheless reach a new agreement intended to supersede that sanction, then it might be arguable that under CPR 3.18 on assessment the court is to have regard to the new agreed budget in place of the deemed budget under CPR 3.14.
The argument is not straightforward, however, and as it does not arise in the present case I do not think it is desirable to say more about it.
E4 CPR 3.14 applicability: RGC’s Budget
129. In this section I deal with ground of appeal 3. As explained in section D1.3 above, it starts with a premise that RGC’s budget was incomplete. From the fact that the master made no finding that RGC’s was incomplete, it proceeds to a contention that the master could not rationally conclude that the incomplete nature of Mr Page’s interim budget was such as to engage CPR 3.14. The skeleton argument for Mr Page, however, put the matter in a more nuanced way. It said that this ground of appeal was “relied upon as an additional illustration of the irrationality of the master’s approach, and as fortifying the submission that it cannot be allowed to stand.”
130. Whichever way the matter is put, it seems to me that this ground of appeal is fundamentally misconceived. There are two reasons for reaching that conclusion. The first is that, taking Mr Page’s allegations at their highest, it is simply not possible to say that RGC’s budget was “incomplete”. Unlike Mr Page’s interim budget, RGC’s budget dealt with all phases in Precedent H. Mr Page asserted that RGC’s figure for the trial phase had failed to allow for certain matters which RGC’s solicitor would need to deal with as part of that phase. For present purposes, however, that is neither here nor there. RGC put in its figure for the trial phase, along with its explanation for that figure. There was no basis whatever for asserting that RGC was in a similar position to Mr Page.
131. Second, it is difficult to see how any “irrationality” on the part of the master could assist Mr Page on this appeal. As RGC pointed out, even if (which seems to me to be far from the case), the master had reached a conclusion that was not rationally open to him as regards RGC’s budget, and ought to have held that CPR 3.14 applied, then it would be open to Mr Page to challenge the master’s decision as regards RGC’s budget: but Mr Page has not done so.
E5 CPR 3.14 applicability: potential consequences
132. I noted in section D1.5 above that ground 4B is concerned with what the master would have been required to do if CPR 3.14 were not engaged. The same is true of ground of appeal 5. For the reasons given above, however, I have held that CPR 3.14 was engaged, and thus these questions do not arise.
E6 CPR 3.14 applicability: RGC’s alleged bars.
133. Under CPR 52.21(1) an appeal is, unless the court orders otherwise, limited to a review rather than a rehearing: see section B5.1 above. There was a tentative suggestion on behalf of Mr Page that a rehearing might be the appropriate approach in the present case. This was not, however, pursued.
134. It was in those circumstances that RGC raised what I have called the first issue for determination: see section D4 above. RGC’s contention was that none of the arguments raised on appeal had been raised below. RGC submitted that in a review it was not open to an appellant to seek to rely on arguments not raised below. It could not have been wrong of the master not to accede to arguments which were never made, and it would be unfair to him and RGC if Mr Page were permitted to raise new arguments on appeal.
135. So far as questions as to the applicability of CPR 3.14 are concerned, this argument on the part of RGC is superfluous. I have held, for reasons given above, that none of Mr Page’s arguments for challenging the applicability of CPR 3.14 has merit. In those circumstances it is unnecessary to resolve this particular point in the present context, and I do not do so. I return to RGC’s suggested bar in section F3 below.
…
F4 Disapplication: consideration of disapplication below
146. In the exceptional circumstances of the present case it is a striking feature that:
(1) considerable work had been done by Mr Page in preparing a budget dealing with all but the last two phases in Precedent H, preparing Precedent R commenting on RGC’s budgets in relation to those phases, responding to RGC’s Precedent R dealing with those phases, and negotiating agreed costs for all those phases;
(2) the effect, as regards Mr Page, of the master’s unmodified application of the CPR 3.14 sanction was that Mr Page’s failure to do what he should have done in relation to two later phases deprived Mr Page of any credit whatever for all the work he had done on the earlier phases; and
(3) by contrast, the effect on RGC was not only (because its original budget included figures for the last two phases) to give RGC the benefit of the master’s determination of budget costs for the final two phases, but also to give RGC the benefit of the agreement that had been reached on all but the last two phases.
147. At the hearing below Mr Mehta, in his first and second breach/relief observations, referred both to the reasons for Mr Page’s approach of budgeting for the period up to a proposed second CMC, and to the fact that agreed figures had been produced as a result of canvassing the matter with RGC. As it seems to me, those matters, and the three features identified above, would in any event have been plain to the master from what had been filed and from the agreed documents handed to him at the start of the hearing.
148. The approach of the master in his fourth breach/relief observation was that only if there had been a dispensation order [i.e. an order made under the saving provision] could solicitors assume that they were entitled to file a budget which did not comply with the rules and the practice direction. That is right, and (for the reasons given in section E above) in the absence of an earlier dispensation order the sanction under CPR 3.14 took effect. There was, however, no reference to the possibility of a dispensation order being made at the hearing.
149. Mr Mehta, in his second breach/relief reply, referred to what had been canvassed between the parties. The master interrupted him, stating in his fifth breach/relief observation that he thought this irrelevant. If the master had in mind the need to consider the overriding objective in the context of the saving provision, it is difficult to see how he could have dismissed this consideration as “irrelevant”. What the master then contemplated in his sixth and seventh breach/relief observations was that there could or would be an application for relief from sanction. This did not, however, take account of the point made in Mitchell that an application for relief assumes that the sanction was in principle appropriate.
150. RGC accepted that there was a discretion to disapply the sanction in CPR 3.14. It submitted that, applying the principles described in section B5.3 above, the appeal court should assume that the master knew he had a discretion. The appeal court should accordingly hold, submitted RGC, that in the absence of any submission to the master asking him to exercise that discretion the master was entitled to decide not to exercise it.
151. The difficulty with that submission is that it is inconsistent with what happened at the hearing below. I pay particular regard to what was said by Lord Hoffmann in Piglowska [v Piglowski [1999] 1 WLR 1360 (HL)]. In the present case, however, it is not a “narrow textual analysis” which leads to the conclusion that the master misdirected himself. It was the master who, without prompting, contemplated that there could or would be an application for relief from sanction. This was in circumstances where the master had already made reference to the saving provision in CPR 3.14, but only as a provision which could have been utilised prior to the hearing in order to file an interim budget of the kind which Mr Page had filed. In these circumstances it is clear that the master simply did not apply his mind to the question whether the order to be made at the hearing should be anything other than an order imposing the CPR 3.14 sanction.
152. It was urged by RGC that the master should not “descend into the arena”. However in circumstances where CPR 3.14 expressly states that the sanction is to apply unless “the court otherwise orders” it would be entirely appropriate for the court to pause, and canvas with the parties whether there is any reason for the court to make a different order. Doing so is certainly no less permissible than what the master actually did of his own motion when he repeatedly made reference to a possible application for relief.
153. In the circumstances described above, the approach taken by the master did not involve any such “multifactorial” evaluation of degree as was contemplated in Lakhani [v Mahmud [2017] EWHC 1713 (Ch); [2017] 1 WLR 3482]. Nor was it a case management decision of the kind identified in Mannion [v Ginty [2012] EWCA Civ 1667].
154. In the email sent on 27 March 2018 RGC referred to the decision of the Court of Appeal in Marcan Shipping (London) Ltd v Kefalas [2007] EWCA Civ 463; [2007] 1 WLR 1864 concerning the jurisdiction of the court to grant relief from sanction of its own initiative, despite the requirements in CPR 3.9 for there to be an application for relief supported by evidence. The decision in Marcan holds that the court can act on its own motion in that regard, but it is under no duty to do so and the party in default cannot complain if that party fails to take appropriate steps to protect that party’s own interests.
155. The present case, as it seems to me, is to be distinguished from Marcan. The reason is that CPR 3.14 itself embodies the saving provision. Thus at the stage when the court becomes involved, and proposes to make a formal decision continuing to treat Mr Page as subject to the CPR 3.14 sanction, it is necessary for the court to consider whether the court should take a different course.
156. RGC submitted that the approach I have just described should not be adopted because it would “leave no entry point for CPR 3.9 where there has been a failure to file a budget”, and because the preferable route was to leave the defaulting party to an application under CPR 3.9 rather than insisting that an unprepared legal representative should make submissions at the hearing in relation to exercise of the saving provision. I do not agree. As to the first point, what is stressed in Mitchell is that there are only very limited circumstances in which it would be appropriate for the court to grant relief under CPR 3.9. The “entry point” for CPR 3.9 is accordingly very narrow. The approach I have described above does not remove that possible entry point. I accept that it makes it less likely that such an “entry point” will either be needed or be available in many cases. If that is the result it seems to me to be entirely consistent with Mitchell.
157. The suggestion by RGC that the defaulting party might be better off if left to make an application for relief ignores the vital points stressed on behalf of Mr Page: at the stage of an application for relief, the court proceeds on the basis that the sanction applied by the earlier order was in accordance with the overriding objective. It may well be that if the court canvasses whether the saving provision should be exercised, then one or other party may make an application for an adjournment in order to deal with it. Any such application would fall to be dealt with in accordance with the overriding objective.
158. For these reasons I am satisfied that Mr Page’s fundamental argument is sound, and that the master erred in law in the approach taken at the hearing.
F5 Disapplication: whether to order otherwise
159. It follows from my conclusions thus far that I must consider, in the light of the parties’ submissions to me, whether I should make an order which disapplies the sanction under CPR 3.14 in whole or in part. Both sides agree that for this purpose I must adopt the structured approach set out in Denton.
160. The first Denton stage is to identify and assess the seriousness and significance of the failure to comply with the relevant rule. Here it is relevant to note that in ground of appeal 5 Mr Page identified what he said should have happened at the hearing in relation to the parts of his budget (and, he contended, RGC’s budget) which were incomplete. This was that, “… the master should at most have directed that the parties serve supplemental costs budgets to address those phase, making provision for any further costs management to follow as necessary.”
161. Oral submissions from Mr Page went further: it was suggested that it would have been possible to identify budget figures for trial, and for preparation for trial, “on the hoof”. By contrast, RGC strongly contended that, by necessitating at least two and possibly more hearings rather than one, Mr Page’s approach had undermined the very thing which the master had sought to achieve: directions to trial with no need for any further hearing in the meantime. It was, submitted RGC, an attempt by Mr Page to force an agreed position on the court.
162. In my view Mr Page’s breach of the rules and the practice direction was moderately serious and moderately significant. The first point I would stress is that
costs budgets should be prepared, and utilised, in order to assist the court when the court is making case management decisions. Mr Page wanted the court to make a case management decision under which directions to trial would proceed in two stages. If he were to persuade the court of this, it was in his own interests to prepare, as suggested in Questions & Answers, a full budget through to trial without a second case management conference. That could then be compared with an alternative budget which would, on his case, demonstrate the advantage of providing for a second case management conference with budgets for later costs to be looked at then.
163. While I am attracted by the submission that it could have been possible to remedy the deficiencies in Mr Page’s budget “on the hoof”, I do not consider that this significantly alters the seriousness and significance of what occurred. At the hearing Mr Metah did not try, and probably did not feel able, to take this course. In the circumstances it was inevitable that if Mr Page were to be given the benefit of budgeted figures for trial and preparation for trial then those aspects of the matter would have to go off for further consideration. However there had been a full discussion of the trial phase at the hearing. In the light of that discussion I consider that it would have been possible for Mr Page’s proposed figures for the last two phases to be identified immediately after the hearing, discussed promptly with RGC and submitted, either as agreed or with the benefit of RGC’s observations, for paper consideration by the master. Nevertheless I cannot conclude that Mr Page’s breach was of minor seriousness or significance.
164. On the other hand, however, it was clear that the stance taken by Mr Page had not impeded the costs management process in relation to earlier phases. On the contrary, there had been service of budgets which complied what was required for those phases, and which had enabled the parties to negotiate and reach agreement on both the costs incurred and the costs to be incurred for those phases. In those circumstances I assess the breach on the part of Mr Page as having been of no more than moderate seriousness and significance.
165. The second Denton stage is to consider why the default occurred. As to this, I am satisfied that Mr Page’s advisors genuinely considered that a second CMC was needed and mistakenly thought that in such circumstances it was appropriate to file a budget which left over the trial phase and preparation for [trial] phase for consideration later. The course adopted was wrong, but I do not consider that it was deliberately wrong. Moreover, the approach so far as case management was concerned was an approach which RGC was content to adopt. RGC was equally content first, that the court should be presented with agreed figures for phases up to and including a second case management conference, and second, that the court should be asked to defer subsequent costs management until the second case management conference. In these circumstances there was a culpable failure by Mr Page to complete the final parts of his budget. The culpability amounted to negligence, but it was not gross negligence.
166. At the third Denton stage the court must evaluate all the circumstances of the case so as to deal justly with the matter, including taking account of the need (a) for litigation to be conducted efficiently and at proportionate cost, and (b) to enforce compliance with rules, practice directions and orders. Looking at the matter in the round, it seems to me that there was a clear distinction between what happened in relation to the phases of trial and preparation for trial and what happened in relation to earlier phases. As regards the earlier phases, I return to the striking features I identified in section F4 above. Application of the CPR 3.14 sanction to all that had been done by way of work on those phases by Mr Page can, if a pause for reflection is taken, be seen on the face of it to be unjust: it would provide RGC, which had been in agreement with the course proposed by Mr Page, with the benefit of the give and take that had occurred in negotiations, while at the same time depriving Mr Page of almost everything. For that reason I am not persuaded by RGC’s submissions that the present was a case that can be compared with Mitchell or Lakhini.
167. Turning to the crucially important considerations identified at (a) and (b) of CPR 3.9(1), application of the CPR 3.14 sanction to the phases of trial and trial preparation would have severe consequences for Mr Page. Those severe consequences, in my view, would be such as would fully serve the important considerations of encouraging efficiency, proportionality, and compliance.
168. On behalf of Mr Page forceful submissions were made that the sanction should be disapplied as regards the trial phase and the phase of preparation for trial. The key elements of those submissions, and my comments on them are:
(1) There had been substantial compliance with the requirements for the filing of costs budgets: I disagree, for in relation to the phases of trial and trial preparation there had been no compliance;
(2) There had been no ineptness or disregard of the rules, but rather a genuine professional judgment: I accept that there was a professional genuine judgment, but I cannot accept that there was a lack of ineptness, for to my mind the requirements in the rule and the practice direction were clear;
(3) The approach adopted had been agreed with RGC: in general terms this is true, but there had been no specific agreement on the part of RGC that it was within the rules for Mr Page to omit the later parts of his cost budget;
(4) RGC’s budget was incomplete: I disagree, for the reasons given in section E4 above;
(5) Mr Page had no history of prior default: this is true, but I do not consider that it can be more than a makeweight factor.
169. Accordingly
I am persuaded that the CPR 3.14 sanction should not be applied to those parts of the agreed budget as deal with the position up to the phases of trial and trial preparation, prior to the proposed “2nd CMC/PTR”. The consequence will be that they, and the corresponding phases in RGC’s budgets, can and should accordingly be recorded as agreed.
The suggested phase for “2nd CMC/PTR” should not be recorded, as the master’s case management directions do not permit any such phase.
As regards the phases of trial and preparation for trial, however, I am not persuaded by Mr Page that it would be right to disapply the CPR 3.14 sanction. In my view it is necessary to apply that sanction to those phases in order to recognise the importance of the considerations identified at CPR 3.9(1)(a) and (b).
170. I am conscious that in Mitchell the Court of Appeal warned of dangers in a partial sanction. The present case, in that regard, seems to me to be exceptional. There is an unusually clear dividing line between the parts of the budget which were satisfactory and those which were not, and an equally clear dividing line between those consequences of a sanction which would in all the circumstances be unjust, and those which would not.
171. This approach is, to my mind, consistent with the two remaining authorities relied upon by RGC in its emails of 27 March and 20 April 2018:
(1) Kimathi v Foreign and Commonwealth Office [2018] EWHC 605 (QB) concerned a saving provision in a court order. The court there applied the same approach as has been adopted under CPR 32.10 where, subject to a saving provision, a witness may not be called to give oral evidence if no witness statement or witness summary has been served within the time specified by the court. Under that approach the question is not whether the sanction is of itself disproportionate or unjust, but whether the sanction should be disapplied in the particular case, a matter to be determined in accordance with CPR 3.9. This is, in essence, the approach described in paragraph 32 of Mitchell: see section B4.5 above.
(2) Ali v Channel 5 Broadcast Ltd [2018] EWHC 480 (Ch) concerned CPR 3.14 in the context of a failure to file a costs budget in December 2016. In April 2018 it was suggested “somewhat tentatively” that the court should disapply the sanction by reference to the saving provision. As was observed on behalf of Mr Page, in such circumstances, it was hardly surprising that the court concluded that there was no basis for an order disapplying the sanction in CPR 3.14.
G. The concession and relief against sanction
172. The conclusion I have reached in section F above has the consequence that Mr Page would not need to rely upon the concession made by RGC. Accordingly I need say no more about the concession in the present judgment.
173. I turn to the application for relief. That application is purportedly made under CPR 3.10. The first point to note is that CPR 3.10 is a general provision which must give way to the more specific provision in CPR 3.9. Accordingly I treat the application for relief as made under CPR 3.9, supported in accordance with CPR 3.9(2) by Mr Mehta’s witness statement: see sections A and D2 above.
174. I can deal with the merits of the application shortly. There is, as it seems to me, no scope for any suggestion that Mr Page could benefit from his application for relief against sanction once that sanction has been confined so as only to apply to the phases of trial and trial preparation: see the reasons given in section F above for maintaining the CPR 3.14 sanction in relation to those phases.
H. Conclusion
I ask counsel to seek to agree on appropriate consequential orders on the basis that:
(1) I allow the appeal.
(2) The words of various parts of the master’s order will need to be appropriately modified. In that regard I envisage (1) removal, in the second recital, of the words “and the Claimant shall” onwards; and (2) removal in its entirety of the last recital “Upon it being noted .. not agreed:”.
(3) I also envisage varying paragraphs 1.1 and 1.2. The variation will, as regards all matters other than “2nd CMC/PTR”, record:
(a) that the budgeted costs of each side are agreed as set out in the documents submitted to the court at the hearing on 5 December 2017,
(b) that RGC’s costs for the phases of trial preparation and trial are approved in specified amounts [which are to be taken from the approved budget attached to the master’s order], and
(c) that Mr Page’s costs for those phases are limited to any applicable court fees for those phases.
