Failure to File a Costs Budget: Asghar v Bhatti  EWHC 1702 (QB)
In this matter, in the course of the costs management process, the claimant had failed to file a costs budget in accordance with the relevant time scales. Therefore Master Leslie confined the claimant to court fees only in line with CPR 3.14. The claimant did apply for relief from sanctions however this was refused.
The matter proceeded and the trial was listed for six days. However, once the trial had begun, it became clear that an additional six days would be required and the trial was subsequently adjourned. When adjourning the trial Nicol J's order allowed for the parties to apply for a further costs CMC, but directed that any application must be made to the Master.
Amending Approved/Agreed Budgets
Practice Direction 3E, paragraph 7.6 allows parties to revise their budgets in respect of future costs if significant developments in the litigation warrant such revisions. Both the claimant and defendant subsequently applied to revise their budgets on the basis of the increased trial period. The applications were heard and the Deputy Master decided that she would permit the revision of the claimant’s budget in respect of the additional six days of the trial.
The trial re-started but settled on the second day when the defendants were given permission to accept the claimant’s offer. The defendants were therefore ordered to pay the claimant’s costs. The defendant appealed the order made by the Deputy Master revising the claimant’s costs budget, the appeal was heard by Mr Justice Lewis.
Defendant’s Appeal of the Costs Management Order
One of the defendant’s grounds of appeal was that the practical effect of the Deputy Master’s order, allowing the claimant to revise their original budget, was to overturn the costs sanction imposed by Master Leslie. Mr Justice Lewis considered:
“…if there was a significant development, and if costs budgets were revised to permit the costs relating to the additional matters arising out of that significant development, that would not necessarily undermine the policy underlying CPR Rule 14.
“It is clear that she [the deputy master] did have in mind that this was a case where the events that had happened amounted to a significant development, and she was well aware that she was allowing a later revision because of that significant development and that that was something that was contemplated by the notes in the White Book as being appropriate. She was aware of and decided that it would be appropriate to make a revision of the costs budget in the light of that change in circumstances since the failure.
The question before this court is, given that events occurred after that failure to lodge a budget, was it open to the deputy master to exercise her discretion to allow a revision of the budgets to deal with that extra work? In my judgment she was entitled to do that, and there is no indication that she erred in the exercise of her discretion…”
The Importance of Part 36 Offers
Another key element to this case relates to well-timed Part 36 offers. The claimant made an early Part 36 which was accepted by the defendant half way through the trial; the Part 36 rules relating to the costs consequences when an offeror’s costs have previously been limited to court fees are clear:
CPR 36.23 (1) This rule applies in any case where the offeror is treated as having filed a costs budget limited to applicable court fees, or is otherwise limited in their recovery of costs to such fees.
(Rule 3.14 provides that a litigant may be treated as having filed a budget limited to court fees for failure to file a budget.)
(2) “Costs” in rules 36.13(5)(b), 36.17(3)(a) and 36.17(4)(b) shall mean—
(a) in respect of those costs subject to any such limitation, 50% of the costs assessed without reference to the limitation; together with
(b) any other recoverable costs.
Always Consider Making a Part 36 offer!
CPR 36.23 therefore allows that if a receiving party’s Part 36 offer is not beaten, a party subject to a nil costs budget can still recover 50% of their costs for the period after the offer expires. Therefore parties subject to the sanction at CPR 3.14 should make careful consideration as to a realistic Part 36 offer, thus potentially allowing them to recover up to 50% of their costs.
This rule could certainly be considered disadvantageous for the paying party who, only furnished with the other side’s nil budget, may only discover their potential liability for costs at the detailed assessment stage.