A costs firm that allowed its work on a paying party’s case “to drift into default without any effective action being taken either to avoid default or to remedy it at the earliest possible time” has had an application to set aside a default costs certificate (DCC) rejected.
Master Leonard said this was a case where “the consequences of negligence must be borne by the negligent party”.
The claimant in Masten v London Britannia Hotel Ltd [2020] EWHC B31 (Costs) settled his personal injury claim on 2 August 2019 for $450,000, with the consent order providing for the defendant to pay his costs, starting with £100,000 on account.
The claimant served a notice of commencement and a bill of costs on 3 January 2020, just over two months outside the period provided for by CPR 47.7. On 16 January, the parties agreed a 21-day extension of time for service of points of dispute, to 14 February.
Philip Gaskell, the defendant’s costs draftsman and a director of QM Legal Costs Solutions, did “not shrink from acknowledging failures of case management”, the master noted.
He admitted he was overworked at the time, with both fee-earning and management responsibilities, including overseeing a Lexcel audit, and was unable to complete the points of dispute by the agreed date. There was an extension to 28 February, at which point the claimant said he would be filing a request for a DCC.
Around this time, Mr Gaskell decided to reallocate his files to other colleagues so as to focus on management, with an instruction in this case to complete the points of dispute and revert to him with an application to set aside the DCC as soon as it was received.
As it happened, it took over three months for the DCC to be processed; it was issued, in the sum of £364,000, on 16 June. In the meantime, the file “had not been properly allocated within QM Costs”, the master recounted, and the error was not identified until the DCC was issued, which Mr Gaskell said was because of lockdown last March.
Master Leonard said: “QM Costs continued to be busy, and as a small business had to cope with moving from having 5% of work undertaken by staff working from home to 95%. That was particularly difficult because 70% of the files worked on were paper files. QM Costs experienced decreased working hours and increased levels of work throughout the lockdown period. He himself, and his spouse, both continued to work through lockdown but also had to care for their daughter an additional 3.5 days a week.”
After receiving the DCC and realising what had happened, Mr Gaskell recommenced preparing the points of dispute, a process made more difficult by QM Costs’ lockdown policy of allowing only one person to attend its offices per day. In July, QM requested that the claimant consent to setting aside the DCC on the basis that the defendant would pay the costs of obtaining it, which was refused.
After significant difficulties with filing the application to set aside the DCC electronically – which the master said was not his fault – Mr Gaskell finally managed it on 26 August, nearly six weeks after first trying.
Master Leonard went on to decide that, though not an application for relief from sanctions, he should use the Denton criteria to the application as they provided “essential guidance” on how key provisions of the overriding objective should be applied.
It was accepted that the defendant’s default was serious and significant, and it did not attempt to argue there was good reason for it. The remaining question was whether it would be just, bearing in mind all the circumstances of the case, to set the DCC aside.
Master Leonard said: “What troubles me about this particular case is that, between mid-February and mid-March 2020 when lockdown started, it was allowed to drift into default without any effective action being taken either to avoid default or to remedy it at the earliest possible time.
“Mr Gaskell does not say that he had overlooked the need to serve points of dispute within the agreed period of extension. Evidently he was overworked, but equally evidently he felt obliged, as a matter of practice management, to give other matters priority: there is a certain irony in his citing the need to oversee a professional standards audit as an explanation for allowing a crucial time limit to expire.
“I do not mean to underestimate the difficulties faced by Mr Gaskell, but he was not without options in February and March 2020. Given that agreement to a further extension after 28 February was not likely to be forthcoming, then if he were simply unable to prepare points of dispute in time, the obvious step would, I suggest, have been to apply to the court for an extension, making arrangements in the meantime for them to be prepared before the application was heard.”
This would probably have been successful, the master said. “More to the point, it would have put the matter in the hands of the court, rather than accepting default, and in consequence the likely issue of a DCC, as a fait accompli.”
In the absence of such an application, “action could still have been taken to remedy the default at the earliest possible time”, he went on, with QM on notice that an application for a DCC would be made. “One would expect, therefore, that this case would have been treated as exceptionally urgent, with a view to ensuring that, even if points of dispute could not be served in time to prevent issue of a DCC, at least an application to set aside could be made within the shortest practicable period.”
The master found that default and the issue of a DCC “seems to have been accepted as a fait accompli and the application to set aside treated as a routine administrative matter, rather than being prioritised sufficiently to prevent its going astray, as it did”.
The delay was preventable, he said, and it was no surprise that the claimant refused to agree to set aside the DCC given that over four months had already passed. “That avoidable delay, and the way in which it was allowed to come about, have led me to the conclusion that I should refuse this application.”
It was not an answer to that to say that the claimant would be compensated by receiving interest on the unpaid part of his costs. “She should not be kept out of her money for any longer than is necessary and she is entitled to a hearing as soon as reasonably possible. A delay of over four months is not, in all the circumstances, acceptable given the prejudice to the defendant and the need for the expeditious administration of justice.”
Master Leonard said his decision would almost certainly result in the claimant recovering more than would have been the case had there been a detailed assessment, but that was not necessarily a decisive factor.
“DCCs are often entered as a result of negligent omission, and that in itself need by no means be fatal to an application to set aside, but in my view there are cases in which the application of the overriding objective and the balance of fairness require that the consequences of negligence must be borne by the negligent party. This is one of them.
“It seems to me that if I am to place appropriate weight on the importance of dealing with cases expeditiously, of complying with rules, practice directions and orders, and of the inevitable prejudice to the claimant on setting aside the DCC, this application must be refused.”
Margaret McDonald (instructed by Pennington Manches Cooper) for the claimant. Stephen Innes (instructed by QM Legal Costs Solutions) for the defendant.