In the matter of National House-Building Council v Hodson Developments Ltd & Ors [2025] EWHC 3438 (TCC) the court found that a failure by the First Defendant to file a costs budget was such a serious breach that relief should not be granted. This was found to be the case despite the fact that the First Defendant’s solicitor had terminated its retainer by the date that the budget became due. Other relevant factors included the fact that the First Defendant’s solicitor had advised of the upcoming deadline and also that the Defendant intended did not intend to conduct the matter as a litigant in person.
Factual Background
The claim concerned a dispute relating to a number of development projects. The Claimant sought remediation against the First Defendant or an indemnity under an agreement that was said to have been entered into by the Second and Third Defendants. Proceedings were issued in January 2024. The First Defendant instructed Gowlings in February 2024, whilst the Second and Third Defendants instructed North Star, which was said to be due to a conflict of interest albeit the nature of the conflict was not explained.
The CCMC was listed for 20 June 2025, meaning costs budgets were due by 30 May 2025. A planning inquiry was underway during February 2025, which was adjourned to April and May 2025. By the First Defendant’s own admission, attention was focussed on the planning inquiry and there was not full engagement with the proceedings brought by the Claimant. On 3 March 2025 Gowlings advised the First Defendant of its intention to terminate the retainer due to a failure to provide instructions. This correspondence included warnings regarding the consequences of failing to file a budget 21 days ahead of the CCMC, although the specific deadline of 30 May was not referred to.
On 14 May 2025 Gowlings proceeded to terminate the retainer and applied to formally come off the record on 23 May 2025. An Order was made to this effect on 3 June 2025. On 18 June 2025 North Star agreed to represent the First Defendant and a combined budget was filed and served on 19 June 2025. The CCMC took place on 20 June 2025. Relief from sanctions was granted to the Second and Third Defendants, who had served costs budgets 1 day late. As no application had been made by the First Defendant at this time, the Court was not prepared to grant relief and a further hearing was listed to further consider the residual budgeting issues.
The First Defendant submitted its application for relief from sanctions on 4 July 2025. This was considered by the Court at the further hearing on 15 September 2025.
Legal Principles
Mr Recorder Singer KC considered the budgeting principles under CPR Part 3 along with the leading authority on relief from sanctions, which is of course Denton v White [2014] EWCA Vic 906.
Denton provides a “3 stage test”; was breach serious and significant, what was the reason for the reason for the default and was there good reason for it? The Court also considered the matter of BMCE Bank Plc v Pheonix Commodities PVT Ltd & Anor [2018] EWHC 3380, where relief was not granted for a delay of only 14 days due to the conducting solicitor being abroad on business. It was however also noted that all of the decisions on these matters are case specific and each outcome will come down to the facts of each individual matter.
Decision
Mr Recorder Singer KC confirmed that the delay was serious and significant; it was a delay from 30 May to 19 June and resulted in the need for a further hearing.
In order to determine whether there was good reason for the breach, he considered the First Defendant’s witness statement. The witness statement submitted that the First Defendant was not aware of the deadline nor of the automatic costs sanctions that would apply. Whilst the judge did not dispute the veracity of this statement, he did consider that the First Defendant was provided with sufficient information to identify the deadline for himself. He also considered that the First Defendant should have attempted to rectify the error at an earlier stage.
The Court then turned to exclusion of litigants in person under 3.13. The judge noted that the reason for this exclusion is on the basis that litigants in person do not generally seek large sums of money upon a successful claim. The First Defendant had hoped that Gowlings would remain on the record in the lead up to the CCMC. The First Defendant had also obtained alternative legal representation by the time the CCMC took place. At the point that the budget was due, Gowlings were still on the record and so he was not a litigant in person at this time, in any event.
Whilst the First Defendant had good reasons for hoping that Gowlings would remain on the record, there was no good reason for the delay; he may not have been aware of the deadline but he should have been.
The Court also held that it would not be unjust to impose the sanction. The fact that the First Defendant accepted its conduct was below par, and that alternative action would have been taken had the First Defendant been aware of the consequences, did not outweigh the fact that additional court time required and the court’s resources were wasted as a result. It was not agreed that depriving the First Defendant of its costs moving forwards was a disproportionate sanction, as submitted by the First Defendant. CPR 3.14 sets out this sanction and CPR 3.14 cannot be said to be disproportionate in itself.
Commentary
This is arguably a harsh decision given that the First Defendant was technically unrepresented at the time that the budget became due however it demonstrates the Court’s firm approach to the budgeting requirements. This gives a clear warning to any party that, a missed budget deadline should be rectified quickly, regardless of the circumstances.
It is interesting to note that, whilst Gowlings remained on record, the First Defendant was in practice conducting the matter without legal representation at the time that the budget was due. Perhaps the outcome may have been different had the order removing Gowlings from the record been provided by 30 May.
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