The sanction imposed for failing to file a costs budget when required applied to future costs only in the recent appeal case of Hardy v Skeels (04.03.21, County Court at Stoke).
The ‘court fees only’ restriction was found to have been wrongly interpreted at the detailed assessment when only court fees were recoverable by the defaulting party who filed their budget a day late. Recovery of incurred costs, which can be substantial by the time a requirement for filing budgets arises, were seemingly overlooked.
In points of dispute, the paying party referenced Ali v Channel 5  to support their position, as the court took the view in this case that the purpose of the CPR 3.14 sanction would be undermined if it were applied to future costs alone and had no effect on incurred costs. The District Judge at the Hardy assessment sided with this stance, reportedly commenting that the sanction was intentionally draconian. This resulted in the sanction being applied to all costs.
In the subsequent overturning of this decision on appeal the CPR wording was scrutinised.
CPR 3.14: Failure to file a budget, states “Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees”.
Although the term ‘budget’ is a blanket reference to both incurred and future costs, the second reference to the term in the Rule was in effect found to mean costs comprising of only ‘future costs’ or ‘budgeted costs’. Incurred costs were therefore determined as recoverable subject to assessment. As the claim settled shortly after the budget filing deadline, the recovery by the receiving party of almost all costs became a possibility.
The rationale behind the appeal decision has brought to the fore how CPR 3.14 is not aligned with other Part 3 rules such as 3.15 and 3.18 which clearly define applicability to future costs. The Circuit Judge who dealt with the Hardy appeal was said to have commented on how CPR 3.14 was poorly worded and that the drafters may not have anticipated the effect of its literal definition. It seems the intention of the Rule was more meaningfully explored in the appeal as CPR 3.14 was found not be a standalone sanction of court fees and instead had to be read in conjunction with CPR 3.18 which has clear applicability to future costs only.
Anna Lockyer is an Associate in our Costs and Litigation Funding team. If you have any questions please contact her on 0113 2885619 or at firstname.lastname@example.org.
This article was featured in our March 2021 newsletter, see the full newsletter here.