Category Archives: Costs

Day’s delay serving cost budget excused by construction court

If a party to litigation is late in serving their costs budget then the potential consequence is set out in the rules of court (here CPR rule 3.14), namely, they will be treated as having filed a budget comprising only the applicable court fees.

The issue has again come up in the Technology and Construction Court. In the previous case reported here the court showed a healthy common sense in tempering the rigours of the rule,

In Wain v Gloucestershire County Council & Ors [2014] at the first case management conference and costs management hearing the fourth defendant was one day late in filing her costs budget, so that instead of having been served seven clear days before the hearing, it was served six clear days before.

The court concluded that this breach was. having regard to all the circumstances, a trivial breach.

i) The delay was of one day in the context of a time frame of seven days.

ii) The claimants had not suffered any prejudice by reason of the delay of one day. Though it does not necessarily follow that the same position would apply in another case where there was a similar delay of one day.

iii) Here, the parties had been perfectly able to deal with the costs management at that hearing, though the fourth defendant had served her costs budget only six rather than seven clear days before the hearing.

iv) Unlike in the Andrew Mitchell Case, no disruption had been caused to the court by the delay in serving her costs budget.

Indeed, the only additional burden on the court had been the need to take time out to consider the point, and prepare that ruling.

In Mitchell the Court of Appeal said:

“It will usually be appropriate to start by considering the nature of the non-compliance with the relevant rule, practice direction or court order. If this can properly be regarded as trivial the court will usually grant relief provided that an application is made promptly. The principle de minimis non curat lex, namely that the law is not concerned with trivial things, applies here as it applies in most areas of the law. Thus, the court will usually grant relief if there has been no more than an insignificant failure to comply with an order: for example, where there has been a failure of form rather than substance; or where the party has narrowly missed the deadline imposed by the order, but has otherwise fully complied with its terms”.

Applying those principles this was an instance where the fourth defendant, had only narrowly missed the requirement to file and serve a costs budget seven clear days before the hearing of that case management conference and costs management hearing.

The court concluded that the fourth defendant would be entitled to rely upon her costs budget as served late.

This blog has been posted as a matter of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Party who Refuses to Engage with Alternative Dispute Resolution Proposals may face Costs Sanctions unless they give a Reasoned Refusal

The Court of Appeal decision in PGF II SA v OMFS Company 1 Limited (2013) involved three dilapidations claims the landlord, PGF II SA (PGF). pursued against the tenant OMFS Company 1 Limited (OMFS). PGF twice invited OMFS to mediate but OMFS failed to reply.

On the day previous to trial, PGF accepted a part 36 offer OMFS had made 9 months earlier.

Although PGF had failed to beat that Part 36 offer, it argued OMFS silence to mediation invitations constituted an unreasonable refusal to mediate. That meant that unusually OMFS could not claim their costs for the ‘relevant period’ i.e. from 21 days following the date that successful Part 36 offer was made.

OMFS appealed. The Court of Appeal was persuaded by the view, in the Jackson ADR Handbook (Blake,Brown and Sime (2013), that silence when offered Alternative Dispute Resolution (ADR) was generally unreasonable even if reasonable grounds for refusal might have been put forward.

This is because the objections might have been addressed by the ADR.

The case highlights the fact that a party who refuses to engage with proposals for ADR can, and will, face costs sanctions unless they give a reasoned refusal.

This blog is posted as a matter of general interest. It does not replace the need to get proper legal advice in individual cases.

Technology and Construction Court shows Common Sense towards Breach of Cost Budget Rules

The technology and construction case of Bank of Ireland & Anor v Philip Pank Partnership [2014] EWHC 284 (TCC) (12 February 2014) may serve to highlight the need to change the form of Precedent H from that set out in the precedent Supplement, according to the judge in that case.

It was another chance for the courts to demonstrate their (so far) harsh attitude to breaches of the new court rules post the Mitchell case.

On 24 January 2014, the parties exchanged costs budgets. The sums included in the Claimant’s costs budget were not disputed but the Claimant’s submission, based on Precedent H, failed to include a full Statement of Truth. Instead, the document had the words “[Statement of Truth]” immediately above signature and dating by the Claimant’s legal representative a partner in the Claimant’s firm of solicitors. Contrary to his usual practice, this costs budget had been prepared by external draftsmen who had assured him that it was ready to sign.

Since then, a replacement Claimant’s budget had been served which was in identical form but included a full Statement of Truth.

The Defendant contended that the Claimant failed to file and exchange a costs budget on 24 January 2014.

The court dismissed the Defendant’s case on:

1. Technical Grounds

CPR 3.13 required that parties must file and exchange budgets. CPR 3.14 provided for a sanction in the event that a party “fails to provide a budget” but did not include the additional words “complying in all respects with the formal requirements laid down by PD 3E” or any other words to similar effect.

Nothing in the rules or practice directions meant that any and every failure to comply with the formal requirements for budgets rendered such an irregular budget a nullity.

The judge said the Claimant’s contention “would, presumably, apply if the prescribed form for verifying a costs budget had been followed generally but words had been omitted, mis-spelt or muddled up; or even if the order of the two sentences had been reversed.

Such a conclusion would, in my judgment, serve only to bring the rules of procedure and the law generally into disrepute. Fortunately, it is not required or even permitted by the terms of the rules to which I have referred. What has happened here is that the Claimant has filed and exchanged a costs budget on time; but the budget suffered from an irregularity.”

That was not to belittle the importance of Statements of Truth but it varied depending on context.

“Thus a Statement of Case is only converted from being a series of allegations into a document upon which a party may rely as evidence by the attachment of a Statement of Truth. If a witness statement were served which was entire and complete save for a Statement of Truth, the Court might not permit it to be used in the absence of the witness” but “it might well permit the evidence to be given upon the witness affirming the truth of the statement.”

With costs budgets, the purpose was that the solicitor should effectively certify the reasonableness of the budget. There could be no room for the notion that a document which included the words “Statement of Truth” and was signed by a partner in the firm of solicitors acting for a party was a complete nullity.

The defendant had in the proceedings accepted that someone who received a budget in this form would understand it was a costs budget and that the solicitor had contended therein that those figures should be chargeable.

2. Relief Grounds

Since the judge did not accept that this is a case where CPR 3.14 required a cost sanction, it was unnecessary for the court to consider whether it should grant relief from sanction.

However, had CPR 3.14 applied and required a cost sanction the judge made it clear he would have granted the claimant relief against it.

Whilst not trivial, on the facts of this case, and given the inclusion of the words “Statement of Truth”, the absence of the wording prescribed by Practice Direction 22 was “a failure of form rather than of substance”.

The Defendant’s submission was therefore rejected. The Claimant did not fail to file and exchange a costs budget on 24 January 2014. It filed and exchanged a budget that was subject to an irregularity that had since been rectified. No question of relief from sanctions therefore arose.

Its an all too rare instance of the courts applying a lighter touch to breaches of the new court rules post the Mitchell case.

This blog is posted out of general interest. It does not replace the need for proper legal advice in individual cases.

Costs disproportionate to claim at costs management

In Willis v MRJ Rundell & Associates Ltd & Anor [2013] EWHC 2923 (TCC) (25 September 2013) the defendant was a firm of construction professionals.

The claims concerned building works carried out to the claimant’s property in Notting Hill.

The principal claims were threefold. First, there were claims for the cost of rectifying defects, which were originally pleaded in the sum of about £480,000 together with a claim for alternative accommodation costs. The second was a claim for overpayment of monies to Grovecourt, the contractor, by way of VAT, in the sum of £335,000. The biggest claim of all, for £617,000, was in relation to the alleged overpayment of monies to Grovecourt for the works themselves.

The overpayment claim broke down into three parts. First, there were the additional costs because of what is alleged to be the unsuitable form of contract. Secondly, there were the claims that various elements of the contractor’s claim had not been justified or supported by reference to invoices or similar. Thirdly, there were criticisms of the defendant’s approach to valuation generally which, so it is said, led to significant overpayment.

The total value of the claim originally pleaded was in the order of £1.6 million. But this had now been reduced.

The VAT had largely been repaid by Grovecourt and the proposed remedial works could be carried out in a differenly thereby reducing the cost and the total value of the remedial work claim to around £250,000

In this way the total value of the claim was now put at a maximum of about £1.1 million. Accordingly, by the standards of most litigation in the Technology and Construction Court, the sums claimed were relatively modest.

The original case management conference took place on 14 December 2012. The court set a timetable for the case, with the trial fixed for early October 2013. At that hearing each side produced a costs budget. The claimant’s costs budget was in the sum of £821,000 together with VAT and the defendant’s cost budget was in the sum of £616,000. The court then expressed the view that in the context of a claim worth up to £1.6 million those figures were high and appeared disproportionate.

As noted above, the claim now had a maximum value of £1.1 million. The total amount of the costs in the costs budgets (excluding VAT on the claimant’s costs), was about £1.6 million. In other words, it would cost significantly more to fight this case than the claimant would ever recover.

The costs in the costs budgets were both disproportionate and unreasonable.

The court accepted that a professional negligence claim of this kind can involve costs that other commercial disputes may not. For example, expert evidence would almost always be necessary to demonstrate that a professional fell below the standard required and a professional reputation was at stake.

But even making due allowance for both these factors, the budget costs figures in this case were disproportionate and unreasonable, particularly given the relatively limited nature of the disputes between the parties.

The individual dispute which was worth the most was the overpayment/overvaluation claim. That would involve some quantity surveying evidence.

However experience of such disputes led the court to suspect that this would not necessarily be extensive The involvement of such experts ought to be relatively limited.

The court declined to waste further time and costs convening any further cost management hearings but warned that the successful party faced cost recovery limited to say £450,000.