Legal Cost Specialists

Costs of an application for relief from sanctions

The recent decision in O’Brien v Shorrock & The MIB [2015] EWHC 1630 (QB) deals with a number of interesting costs issues.

One of these concerned an application for relief from sanctions by a party who had given incorrect information concerning the date a CFA had been entered into.

Pre-Jackson, one could be fairly confident that a defaulting party would have to pay the cost of such an application even if successful. Post-Mitchell, the position was believed to be the same except for the fact the prospects of obtaining relief were significantly diminished. Post-Denton, the position appears to be more complex. The problem comes from the following warning in Denton:

“We think we should make it plain that it is wholly inappropriate for litigants or their lawyers to take advantage of mistakes made by opposing parties in the hope that relief from sanctions will be denied and that they will obtain a windfall strike out or other litigation advantage. In a case where (a) the failure can be seen to be neither serious nor significant, (b) where a good reason is demonstrated, or (c) where it is otherwise obvious that relief from sanctions is appropriate, parties should agree that relief from sanctions be granted without the need for further costs to be expended in satellite litigation. … Heavy costs sanctions should, therefore, be imposed on parties who behave unreasonably in refusing to agree extensions of time or unreasonably oppose applications for relief from sanctions. An order to pay the costs of the application under rule 3.9 may not always be sufficient. The court can, in an appropriate case, also record in its order that the opposition to the relief application was unreasonable conduct to be taken into account under CPR rule 44.11 when costs are dealt with at the end of the case. If the offending party ultimately wins, the court may make a substantial reduction in its costs recovery on grounds of conduct under rule 44.11. If the offending party ultimately loses, then its conduct may be a good reason to order it to pay indemnity costs. Such an order would free the winning party from the operation of CPR rule 3.18 in relation to its costs budget.”

The innocent party now appears to be at risk of paying for an application caused by the other party’s default.

In O’Brien, relief from sanctions was granted. As to the costs of the application, the judge ruled:

“The costs of the application for relief from sanctions are small, because it was served so late. Nevertheless, I consider that in principle they must be paid by the claimant (or his solicitors) because it was their default in giving an erroneous date on the Notice of Funding which required the application.”

A sensible decision, although this was in the context that the judge had ruled the breach to be “significant”.

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