Jagdish Lakhani (and another) v Ibrahim Sheikh Abdullah Mahmud  EWHC 1713 (Ch)
A Case which highlights how to conduct an Application for relief from sanctions, and the consequence of failing to act properly.
There are numerous reported examples of how the 3 stage Denton test should be applied. With each new case the possibility of incorrectly interpreting CPR 3.9 is reduced. However, as long as the decision whether or not to grant relief is based on multifactorial evaluations, there will remain some ambiguity. Jagdish v Ibrahim Sheikh fell into this grey area.
The case reminds us that the hurdles to overcome in order to be granted relief from sanctions are high and depend as much on conduct following the breach as the breach itself. Further, the case highlights the judiciary’s reluctance to overrule first instance case management decisions unless that decision falls ‘outside the generous ambit of discretion entrusted to the trial judge.’
The Claim itself relates to an injunction bought by the freehold owners of a plot of land, for the Defendant to restore car parking spaces to a condition in which they are available to the Claimants. By Order dated 18th November 2016, the parties were directed to file cost budgets 21 days prior to a Case Management Conference listed for the 10th January 2017. The deadline for filing therefore fell on the 19th December 2016. The Claimants served their budget on the 19th December. The Defendant filed their cost budget on the 20th December, 1 day late.
Despite the late service of the Defendant’s budget, the parties undertook consideration of 1 another’s budgets and while budgets were not agreed a cost budget comparison was served the day before the Case Management Conference. Alongside the discussions regarding the budget figures, the parties also addressed the late service of the Defendant’s budget, with the Defendant submitting that in fact the budget was not late.
The Defendant maintained that their budget was not filed late until shortly before the Cost Management Conference, when they filed their Application for Relief from Sanctions.
At the Case Management Conference, HH Judge Lochrane refused the Defendant’s Application for relief from sanctions concluding as follows:
“My conclusion is that this is not a trivial breach. It is a serious breach. It is a breach which has imperilled the proper conduct of this litigation. It has reduced the time available for these parties to conduct themselves in the way that is expected by the Rules to narrow the issues on the costs budget. It has further created an environment in which the attention of both parties, by the default of the defendants, has been distracted onto a matter which is irrelevant to those costs budgeting issues.”
As a result of their late service of the budget, the automatic consequence in accordance with the rules was that the Defendant was limited to recover their court fees only if successful. As a result, the Defendant appealed the decision.
In order to consider why the Defendant was not granted relief, it is worth reminding ourselves of the law.
CPR 3.9 provides:
“(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need –
(a) for litigation to be conducted efficiently and at proportionate cost; and
(b) to enforce compliance with rules, practice directions and orders.
(2) An application for relief must be supported by evidence.”
The application of these rules is laid down in Denton where a 3 stage test is envisioned:
“A judge should address an application for relief from sanctions in 3 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)]”.”
Stage 1 – Seriousness of the Breach
The first element of seriousness considered by Judge Daniel Alexander QC, was the amount of time ‘lost’ as a result of the breach. Azure v Manchester Airport (Unreported) establishes a delay of 2 days was ‘trivial’. In determining whether or not the 1 day delay here should be considered as ‘serious’ it was considered in the context of the effective useable days between service of the budget and the Cost Management Conference. While the budget was served 20 days prior to the conference, this encompassed the Christmas season, when the Defendant Solicitors offices were closed. HH Lochrane took into account that the Defendant had effectively ‘taken themselves out of the game’ for almost half of the effective period. Against this context HH Lochrane ruled that the delay of a single day ‘mattered’ and was a relevant factor in considering the seriousness of the breach. On Appeal DJ Alexander explained that:
‘Although others may have reached a different conclusion, I am not able to say that the judge was wrong to take this into account and give it appropriate weight.’
This was a common theme in the Appeal. While HH Lochrane erred on the severe side, his decisions were within the scope of reasonable and as such were not overruled on Appeal.
One of the Defendant’s weightiest submissions regarding the breach not being serious was that it had not affected the litigation or any procedural steps in the case. As outlined in the background provided above, the parties were still able to consider one another’s budgets in preparation for the Case Management Conference. HH Lochrane highlighted that the ability to perform a task despite the deadline having been missed did not of itself mitigate the seriousness of the breach. Furthermore the dispute over whether the budget had been served on time or not distracted the parties’ attentions which could have been better served negotiating the budgets, a task which was rendered more difficult due to the environment created by the breach.
Because the Defendant had ‘made a mountain out of a procedural molehill’ the distractions which resulted from the Defendant’s conduct were taken into account in considering the seriousness of the breach.
Further to the above, the impact of the breach on litigation generally was held to be a serious factor. Because of the manner which the Defendant conducted themselves following the breach, a 45 minute Cost Management Conference instead took considerably more court time, contrary to CPR 3.9 and ultimately the overriding objective.
Stage 2 Reason / Excuse for Breach
The Defendant submitted that they as legal representatives had misinterpreted the rules (regarding service days) and that this ‘reasonable’ misunderstanding of the rules amounted to a reasonable excuse as to why the breach occurred.
While the court accepted this as the explanation for the breach, it was not deemed an ‘understandable mistake’ upon which to grant relief from sanctions. Following the seriousness of the breach being established, this cannot have come as a huge surprise. The decision is entirely consistent with caselaw and the general position that ignorance of the rules is no excuse for failing to comply with the rules.
Again on Appeal it was held that:
‘While it is true that some judges may have taken a more charitable view as to the calculation of time and whether days had to be clear or not, I am unable to say that the judge’s evaluation was clearly wrong in this case.’
With the seriousness of the breach established and considered within the reasonable bracket of the judge’s discretion, alongside the decision that there was no reasonable excuse for the breach, the Appeal was dismissed.
Upon discovering their breach, the Defendant failed to take appropriate and immediate steps to remedy it. Had the Defendant applied for relief from sanctions on the 20th December 2016 much of the justification provided for denying the Application for relief would have been avoided and relief may well have been granted.
The lesson to be taken then, is that fee earners will make mistakes, when they do they should be prepared to ‘take their medicine’ and apply to the court as swiftly and openly as possible. Trying to ‘get around’ the breach will likely serve only to strengthen the other side’s argument that the breach was serious.
This decision runs somewhat contrary to pre Denton caselaw which establish relatively short delays as trivial (including Azure v Manchester Airport referenced above). Whether or not the judgment in this case may be somewhat on the ‘tougher end of the spectrum’ the case serves to remind us that a judge’s scope for discretion is wide, an Appeal will not overturn a decision which falls within the generous ambit of this scope.
If you are looking for an alternative approach to drafting cost budgets, please don’t hesitate to get in touch.