Costs: Mismanagement of file results in Court refusing to set aside Default Costs Certificate

The Senior Courts Costs Office recently refused an application to set aside a Default Costs Certificate ("DCC"), offering guidance on how similar applications will be considered.

Masten v London Britannia Hotel Ltd [2020] EWHC B31 (Costs)

The Defendant provided no good reason why the DCC should be set aside, and in addition, the Court placed “appropriate weight on the importance of dealing with cases expeditiously, of complying with rules, practice directions and orders”. This justified a refusal of the application in this instance.

The Defendant’s legal representatives had submitted that there was an initial reallocation error and that subsequent issues of “work pressure, family commitments and administrative failures” justified setting aside the DCC.

Background

Following the Claimant's successful personal injury claim, the Claimant served a Notice of Commencement and a Bill of Costs. Two extensions were agreed for service of the Points of Dispute ("PODS") up to 28 February 2020. The Defendant's costs draftsman stated that preparation of the PODS but submitted that due to his high workload, he did not complete them by the agreed date. On the afternoon of 28 February, the Claimant's representative advised they would be filing a request for a DCC.

The DCC was not processed for a lengthy period, being issued on 16 June 2020. Due to an internal error at the Defendant’s costs draftsman, the Claimant's file had not been reallocated to a new handler. Furthermore, the costs draftsman submitted that due to lockdown and the firm's change in working circumstances, this was not discovered until the DCC was issued. The PODS had still not been prepared in any event.

On 6 July, the costs draftsman wrote to the Claimant's representative seeking consent for the DCC to be set aside with the Defendant to pay the appropriate costs. This was not agreed. An application to set aside the DCC was initially issued prepared on 15 July. However, due to difficulties with electronic filing and the refusal of the Senior Court Costs Office to accept a paper copy, the application was filed successfully on 26 August.

Application

The Defendant submitted that an application to set aside the DCC was not subject to the Denton principles in approaching an application for relief from sanctions. The appropriate approach was for the Court to consider the procedure laid down in CPR 47.12 and Practice Direction 47 Paragraph 11. This procedure states that “the court may set aside or vary a default costs certificate if it appears to the court that there is some good reason why the detailed assessment proceedings should continue”.

The Defendant submitted there was ‘good reason’ to set aside the default judgment because a substantial reduction on the bill could be achieved at detailed assessment. Further, the Defendant had acted promptly once aware of the DCC, and the application was originally sent to court on 17 July.

In response, the Claimant argued as the Defendant's application did not address CPR 3.9, there was no application for relief from sanctions and the application must be dismissed. In line with the Denton principles, it was submitted there was no good reason for the default, which was serious, significant and inexcusable, and it would not be just to grant relief.

Outcome

Firstly, Master Leonard offered some guidance for practitioners in respect of the principles of these applications. He made clear that an application to set aside the DCC was to be considered in line with CPR 47.12 and was not to be framed as an application for relief from sanctions pursuant to CPR 3.9.

Nonetheless, the application to set aside the DCC was refused by Master Leonard. It was noted that the Defendant’s default was serious and significant, with no ‘good reason’ for it. Therefore, the remaining question was that of whether it would be “just, bearing in mind all the circumstances of the case, to set the DCC aside”.

The failure to serve PODS within the agreed period and the subsequent file mismanagement was negligent, and setting aside the DCC would result in "inevitable prejudice to the Claimant". Whilst DCCs "are often entered as a result of negligent omission", this does not mean applications to set aside will not be successful, but in this case "the application of the overriding objective and the balance of fairness require that the consequences of negligence must be borne by the negligent party".

What can we learn?

• In respect of how the promptness of an application to set aside a DCC is considered, Master Leonard made clear that it is “obviously wrong to measure the promptness of the application to set aside by reference” to the due date of the PODS. Any reference to promptness should be measured against the date that a paying party knew, or should have known, a DCC had been issued. Similarly, attempting to rely upon previously-agreed extensions for the filing of PODS as a factor in considering the application was wrong.
   
• Any proposed application of the Denton criteria in this matter related to CPR 1.2, which “requires the court to give effect to the overriding objective at CPR 1.1”, including the need for cases to be dealt with justly and at proportionate cost. Whilst Master Leonard made clear “this is not, strictly speaking, an application for relief from sanctions”, CPR 3.9 refers to the need for litigation to be conducted efficiently, and compliance with rules, practice directions and orders.
   
• The impact of the pandemic on the conduct of litigation is likely to arise in further decisions. The decision of Master Leonard can be contrasted with the decision of the High Court in Stanley v London Borough of Tower Hamlets, in which a default judgment was set aside. However, a reading of the two decisions suggests the reasoning for the difference between the decisions is apparent. The alleged inaction of the Defendant in Stanley was very much a product of the lockdown and circumstances imposed on the company. In Masten, the failures and mismanagement of the Defendant’s professional costs draftsman were, as Master Leonard identified “by an objective standard, [as] negligent”.