BMCE Bank International PLC v Phoenix Commodities PVT LTD & Anor  EWHC 3380(Comm)
There is an abundance of caselaw reiterating time and time again how a party should act when there is a failure to comply with Rules, Practice Directions or Orders of the Court. Nevertheless, there remain occasions when a party has, what we will diplomatically call ‘a moment’ and conduct themselves in a manner which is the opposite of the approach which the Court expects.
On this occasion, the Court made a clear example of the defaulting party and the consequence were significant.
The specific nature of the claim is of little significance for our purposes. Procedurally Cost Budgets needed to be served on the 27th September 2018, in advance of a CCMC to take place on the 19th October 2018. The Claimant served their budget on the 26th September, the Defendant however did not do so until the 11th October 2018. The Claimant responded to the late service stating that ‘I reserve my client’s position with regard to late service/filing’. The Defendant responded, acknowledging that their budget was late but alleging that the Claimant’s budget too was served late as well. This was incorrect. A brief exchange of correspondence took place however no substantive developments occurred.
On the 10th October, both parties filed skeleton arguments prior to the CCMC, in accordance with the Commercial Court Guide. Within the Claimant’s skeleton were detailed submissions that any Application for Relief from Sanctions would be contested. The Defendant’s Skeleton did not make any such Application in any event.
It was not until the very morning of the CCMC, that the Defendant made an Application for relief from sanctions.
It should come as no surprise that Justice Bryan referred to the three stage test established in Denton v White when considering whether to grant the Defendant Relief from sanctions:
“A judge should address an application for relief from sanctions in three stages. The first stage is to identify and assess the seriousness and significance of the “failure to comply with any rule, practice direction or court order” which engages rule 3.9(1). If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to consider why the default occurred. The third stage is to evaluate “all the circumstances of the case, so as to enable [the court] to deal justly with the application including [factors (a) and (b)]”.
As it happened, there was little difficult establishing that the breach was serious and significant. In fact the Defendant in the course of submissions accepted as much. The breach was not a matter of hours or even days, rather the budget was served 2 weeks into a 3 week period. This meant the 2 weeks from service of the budget to service of the Budget Discussion Report, which should be used for discussion and negotiation were effectively wasted. This resulted in the Defendant’s budget unable to be dealt with at the CCMC. Which brings us to why the Court considered the breach to be significant. Considerable Court time was wasted as a result of the breach and J Bryan highlighted that if relief were granted, further time would be wasted at a subsequent CCMC as well. This wasted time not only impacts on the parties and the Court, but also on other users of an already stretched Court service.
Again it was accepted by the Defendant that there was no good reason for the delay/breach. While the breach was not deliberate it was ultimately a case of the conducting solicitor dropping the Ball, J Bryan explains:
“That regrettably does happen in life, but it does not amount to a good reason… however hard pressed solicitors are there must be compliance with the rules”
As the Breach was serious, significant and there was no good reason for the same, the final step is to evaluate all of the circumstance surrounding the breach and the Application. Here J Bryan considered a number of factors and as always the breaching parties conduct was at the forefront. The factors taken into account were as follows:
- The breach meant that the litigation had not been conducted efficiently, contrary to CPR 3.9(1)(a).
- There is a clear rule (CPR 3.14) which clearly sets out the consequence for failing to serve a budget on time.
- The Defendant were aware of the breach and the consequence under CPR 3.14 but their Application was not made promptly.
- Rather than making the Application the Defendant made a misconceived counter attack against the fully compliant Claimant.
- The impact on the Court and Other Users
In an effort to minimise the prejudice caused by the breach, the Defendant had offered to provide an undertaking to pay all of the Claimant costs stemming from the same. J Bryan did consider this, however little weight was put to it the undertaking could never fully remove the prejudice caused to the Claimant and offered no benefit to the Court or other Court users who were also prejudiced.
Unsurprisingly, the Court found that the Defendant was not granted relief from sanctions and their budget was therefore limited to applicable court fees only in line with CPR 3.14.
The main lessons to learn from this case are nothing new, but it is critical they are understood.
- Cost management is an important part of case management. Deadlines relating to cost management, especially the service of the budget must be strictly adhered to.
- If a mistake does occur and rules are breached, steps should be taken to resolve the matter immediately. Any embarrassment or cost will be significantly worse if the defaulting party buries their head in the sand or worse (as happened in this case) take a combative stance instead of accepting the mistake. J Bryan summarises in the very final paragraph of the Judgment:
“If there is a failure to comply, then an application for relief from sanctions should be made promptly, supported with evidence, after which it will be considered in accordance with CPR 3.9 and the established principles I have identified.”