Henderson and Jones Limited v Stargunter Limited & Anor

Where a party serves a materially defective costs budget by the deadline and a complete replacement budget late, the court may disapply the sanction in CPR 3.14 without a separate application notice. The court should apply the three-stage test in Denton v TH White Ltd: assess the seriousness and significance of the breach, identify why it occurred, and consider all the circumstances, including efficient and proportionate litigation and compliance with rules. A breach may be neither serious nor significant where the late replacement causes no material disruption to the proceedings. Lack of a good reason remains relevant, but relief may be granted where the breach is isolated, unintentional and the litigation can proceed efficiently.

The claimant pursued claims assigned from an insolvent construction company concerning the valuation of works and the validity of notices terminating a construction contract. The claim was valued at approximately £980,802.

At the first costs and case management conference, the first defendant had served an incomplete and unsigned costs budget by the deadline. It later served a complete budget five days late. The sanction in CPR 3.14 therefore applied, treating the defendant as having filed a budget comprising only applicable court fees unless the court otherwise ordered.

The defendant sought permission to rely on the replacement budget. The issues were whether a formal application notice was required and whether relief should be granted under the Denton approach.

1. Relief granted. The court permitted the first defendant to rely on its complete costs budget dated 20 June 2023. The costs management process had proceeded and revised budgets were ordered.
2. A separate application notice was not necessarily required where a party sought to invoke the saving provision in CPR 3.14 at the costs management hearing. In any event, the court had discretion to consider the application informally under the principles stated in Park v Hadi. Relevant considerations included the explanation for the absence of a formal notice, prejudice to the other party’s ability to respond, and whether sufficient evidence was available.
3. The three-stage test in Denton v TH White Ltd applied. The breach was neither serious nor significant. Although the first budget was defective and Henderson had wasted work responding to it, the replacement was served 16 clear days before the conference, full budget discussion reports were served in time, and costs management was not disrupted.
4. There was no good reason for the default. The failure resulted from leaving the budget preparation until the last minute, ineffective IT systems and unavailable personnel. Those matters amounted to inefficiency in the solicitors’ offices.
5. At the third stage, granting relief was consistent with efficient and proportionate litigation and did not undermine the need to enforce compliance with the rules. The breach was isolated and unintentional, the application was pursued promptly, and the defendant’s solicitors later cooperated in progressing the case. The authorities in Lakhani v Mahmud and BMCE Bank International Plc v Phoenix Commodities Pvt Ltd were distinguishable because the breaches there disrupted the efficient conduct of litigation.
6. Henderson was entitled to oppose the application. Its opposition was not opportunistic.