Stephen Herbert Hunt v Oceania Capital Reserves Limited & Ors

Relief from sanctions may be refused where a late costs budget is also fundamentally inaccurate and unsupported by a credible explanation. The court may examine the document filed to assess the seriousness and significance of the breach. A costs budget containing materially incorrect figures, particularly where verified by a statement of truth, may compromise the integrity of the budgeting process and the administration of justice. Under Civil Procedure Rules 1998, rule 3.9, the court applies the three-stage Denton test: seriousness and significance, the reason for default, and all the circumstances. A short delay does not make the breach trivial where the document itself is incoherent or illusory. Relief may remain disproportionate where the revised budget and the evidence explaining the original default leave the court without confidence that the budget was properly prepared.

The claimant brought proceedings alleging that he had been defrauded of £1,050,000 paid to the first defendant under an investment agreement. Claims were made against the second and third defendants for breach of trust, dishonest assistance and breach of the general prohibition in the Financial Services and Markets Act 2000, section 19. Judgment in default had been entered against the first defendant.

The second and third defendants failed to file and serve their costs budget within the period required before the first case management conference. They later sought relief from sanctions. The claimant relied on inaccuracies and inconsistencies in the budget, its apparent similarity to his own budget, the absence of a budget discussion report and failures concerning disclosure. The central issue was whether relief should be granted under rule 3.9 in light of the delay, the contents of the budget, the explanations given and the revised budget.

1. The application for relief from sanctions was dismissed. The second and third defendants were therefore treated as having filed budgets limited to the applicable court fees.
2. The court applied the three-stage test in Denton v TH White Ltd and as summarised in Diriye v Bojaj: assess the seriousness and significance of the breach; identify why it occurred; and evaluate all the circumstances.
3. The relevant breach was not merely the delay of about an hour. The budget contained materially incorrect and incoherent figures, including figures apparently copied or closely adapted from the claimant’s budget, and was verified by a statement of truth. This made the breach serious and substantial. A costs budget filed late with such defects is more serious than an accurate and properly completed budget filed late.
4. The explanation for the default was inadequate. Hardware and software difficulties might have contributed to the problem, but they did not explain the insertion of figures mirroring the claimant’s budget. The court regarded the failure to address the central issue as equivalent to the inadequate excuses criticised in Diriye.
5. At the third stage, the court considered the additional hearing, the real prejudice caused by the costs-fees limitation, the revised budget and the integrity of the budgeting process. The revised budget contained further unexplained discrepancies, including fees for counsel who had not attended the case management conference. The court had no confidence that it accurately reflected the statement of truth.
6. Granting relief would effectively sanction both the original serious breach and the unsatisfactory response to it, and would permit reliance on a budget that had not been shown to be properly prepared. That outcome would undermine the administration of justice and was not disproportionate. The objection that the claimant’s opposition was opportunistic was misconceived.