In the judgment today in Page v RGC Restaurants Ltd [2018] EWHC 2688 (QB) Mr Justice Walker allowed an appeal in relation to the  sanctions imposed when a claimant failed to file an costs budget that complied with the rules.  The judgment merits careful reading.  In particular all those involved in litigation should be aware that a “partial” budget is not a budget as defined by the rules.

“3.14 Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees.”

KEY POINTS:  SUMMARY

This judgment is extremely nuanced.  The claimant filed a budget that did not include anything for trial preparation and trial. The Master held that this budget did not comply with the rules. The claimant’s appeal was partially successful.

• The judge did not grant relief from sanctions.
• Rather the judge held that the Master erred in failing to consider whether the sanction should have been applied to the entire budget.
• The judge referred to the Denton principles, but in the context of considering whether the sanction should apply, rather than in granting relief from sanctions.
• The sanction was imposed in part: it was applied to those parts of the budget that the claimant had not completed.  The sanction was not applied to those parts of the budget that had been completed.

NEVER, EVER FILE A “PARTIAL” BUDGET

The failure to file a complete budget in this case was described as “negligent but not grossly negligent”. Any partial budget filed after this decision can only be the result of gross negligence.  A budget must include all the phases.  Any budget that does not is not a “budget” that complies with the rules.

THE JUDGMENT IN MORE DETAIL

THE CASE

The claimant brings an action for damages following serious injuries, including a brain injury, he suffered as a result of an acute allergic reaction.  He had obtained summary judgment on primary liability.

THE DIRECTIONS AND COSTS BUDGET

The claimant’s solicitors prepared an “interim costs budget.  This left the figure for trial preparation and trial as £0.00 on the basis that a further CCMC was needed and further directions in relation to experts would be needed at that stage.  That budget was filed in time, in advance of the CCMC.

Substantial parts of the costs budget were agreed prior to the hearing.

THE HEARING BEFORE THE MASTER

The Master expressed concern that the matter had not been timetabled and budgeted all the way to trial.

The Master held that the claimant’s budget did not comply with the rules and directed that the claimant’s budget be limited to court fees.

THE CLAIMANT’S APPEAL

The claimant appealed to the High Court judge.

THE DECISION ON APPEAL

1. The judge rejected the argument that the claimant had filed a “budget”.  A partially complete budget could not be construed as a budget within the meaning of the rules.
2. The judge held that the defendant’s agreement in relation to certain heads of costs under CPR 3.15 could not “trump” the mandatory requirements of 3.14.

THE ISSUE IN THE CURRENT CASE

The judge held that there were striking features of the current case. The claimant had not ignored the requirement to file a budget, many items had been agreed.  Consequently he allowed the appeal to permit the budget to recover those elements of the budget that had, in fact, been before the Master.  He held that the Master had erred in failing to consider whether the sanction, barring recovery of all budget items, was appropriate on the facts of this case.

THE CLAIMANT’S ARGUMENT

1. At an early stage in the oral submissions on behalf of Mr Page a premise underlying ground of appeal 6 was identified. It was said, in this regard, that there was a question of law whether the master had failed to consider the saving provision in CPR 3.14 in circumstances where, as a matter of law, he was required to consider it.

THE JUDGMENT ON THIS ISSUE

1. 1. 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.

1. 1. 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.

   2. 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.

   3. 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.

   4. 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.

   5. 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. 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.

   6. 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.

   7. 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. Nor was it a case management decision of the kind identified in Mannion.

   8. 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.

   9. 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.

   10. 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.

   11. 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.

   12. 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

1. 1. 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.

   2. 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.”

   3. 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.

   4. 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.

   5. 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.

   6. 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.

   7. 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 trail 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.

   8. 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.

   9. 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.

   10. 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.

1. 1. 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 “2^nd 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 “2^nd 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).

   2. 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.

   3. 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

1. 1. 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.

   2. 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.

   3. 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

1. 1. 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 “2^nd 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.