Manchester Shipping Ltd v Balfour Shipping Ltd & Anor

Relief from the sanction imposed for late costs budgeting does not invariably require a separate application under CPR 3.9. A defaulting party may invoke the saving provision in CPR 3.14 by asking the court to otherwise order at the costs-management hearing, although a prompt application may be advisable in appropriate cases.

The court must apply the three-stage approach in Denton v TH White Ltd [2014] 1 WLR 3926: assess the seriousness and significance of the breach, consider why it occurred, and evaluate all the circumstances so as to deal justly with the application. Relief was appropriate where the late budget caused no practical disruption and the costs-management hearing remained effective.

The claimant brought proceedings concerning admitted liability for procuring a breach of contract and, against the second defendant, breach of fiduciary duty. The remaining issue concerned loss. At a costs and case management conference, the defendants’ costs budget had been filed and served 13 days late.

The claimant relied on CPR 3.14 and submitted that the defendants had to make a timely application for relief from sanctions under CPR 3.9. The defendants relied on the agreed procedural timetable and sought to invoke the saving provision in CPR 3.14 at the hearing. The issue was whether relief should be granted.

1. Relief granted. The defendants’ late costs budget was accepted and the sanction under CPR 3.14 was lifted.
2. CPR 3.14 imposed the default sanction that a party failing to file a budget would be treated as having filed a budget comprising only the applicable court fees, unless the court otherwise ordered. The rule itself provided a route by which the court could grant relief at the costs-management hearing.
3. The court rejected the submission that every CPR 3.14 default necessarily required a separate application under CPR 3.9. The observation in BMCE Bank International Plc v Phoenix Commodities PVT Ltd & Anor [2018] EWHC 3380 (Comm) did not establish such an absolute requirement. In suitable cases, a prompt application supported by evidence would be advisable, but it was not invariably necessary.
4. Applying the three-stage approach in Denton v TH White Ltd [2014] 1 WLR 3926, the breach was serious because the budget was nearly two weeks late, but its significance was limited. The budget was available more than a week before the conference, the claimant had sufficient time to consider it, and the court was able to conduct costs management fully.
5. The reason for the breach was an understandable, though mistaken, assumption that the agreed procedural timetable identified all pre-conference steps. The default was inadvertent and not egregious.
6. Considering all the circumstances, the breach had not prevented efficient or proportionate conduct of the litigation and had caused no inconvenience to the court or other court users. It was therefore proportionate to grant relief, preserving the defendants’ potential entitlement to recover their costs if successful at trial.