Margaret McDonald, Head of Civil Litigation and Costs at Kenworthy's Chambers, instructed by Pennington Manches Cooper LLP, successfully represented the claimant in Masten v London Britannia Hotel Ltd [2020] EWHC B31 [Costs] in the Senior Courts Cost Office.

In Masten v London Britannia Hotel Ltd [2020] EWHC B31 [Costs] Master Leonard refused to set aside a default costs certificate. He stated that if a party cannot comply with a time limit the only prudent course of action is to apply, in advance, for an extension. To allow the time limit to pass, and any sanction to be effective, is a dangerous strategy. The setting aside of a default costs certificate is not a routine administrative matter.

The substantive action arises from an accident at the defendant's hotel on 16/06/16. The claimant was staying at the hotel in the course of her employment as a Presidential Appointee assigned as an Executive Assistant to the Presidential Envoy & US Ambassador to Iraq.

The claimant was working at her desk when she pushed back her chair to stand up when the front legs of the chairs came away from the main frame and she fell and banged her head rendering her unconscious. The case settled at a Joint Settlement Meeting on 25/07/19 for US$450,000.

On 03/01/20 the claimant served a Notice of Commencement of a Bill of Costs in the sum of US$363,549.28. Points of dispute were due on 24/01/20. The parties agreed to extend time for service of the points of dispute to 14/02/20. A second extension was agreed with the PODs being due on 28/02/20 but this was not complied with.

Having warned the defendant that the time limit had expired the claimant applied for a Default Costs Certificate which was finally granted on 10/06/20.

An application to set aside the Default Costs Certificate was finally issued on 26/08/20. The explanation for the delay was excessive workload and unsuccessful delegation.

In a detailed and considered reserved judgment Master Leonard refused to set aside the Default Costs Certificate.

He found that the three-stage test in Denton applied to an applications to set aside a Default Costs Certificate. In relation to the first stage the defendant accepted that the default was serious and significant. With regard to the second stage the defendant conceded that there was no good reason for it.

The third stage was whether it would be just, bearing in mind all the circumstances of the case, to set the DCC aside. Master Leonard dealt with this at Paragraphs [59] - [63] stating:

59. In exercising any power conferred by the Civil Procedure Rules, including the power to set aside a DCC, CPR 1.2 requires the court to give effect to the overriding objective at CPR 1.1, which requires that cases be dealt with justly and at proportionate cost. That expressly, includes ensuring that cases are dealt with expeditiously and fairly, and enforcing compliance with rules, practice directions and orders.

60. It seems to me that this is the primary reason why (although this is not, strictly speaking, an application for relief from sanctions) the Denton criteria must have a bearing on this application. CPR 3.9, in referring to the need for litigation to be conducted efficiently, and the need to enforce compliance with rules, practice directions and orders, repeats key provisions of the overriding objective. Denton offers essential guidance on how those provisions are to be applied.

61. I also bear in mind that CPR 47.9(3) does impose a sanction on a paying party that serves points of dispute late, albeit in time to prevent the issue of a default costs certificate. That party may not be heard further in the detailed assessment proceedings unless the court gives permission.

62. As I read it, that rule does not prevent reliance on the points of dispute themselves: otherwise, CPR 47.9(5) would not prevent the issue of a default costs certificate in those circumstances. Nor do I believe that CPR 47.9(3) is meant to have any application once a DCC has been issued: in such circumstances, points of dispute cannot be served until the DCC has been set aside, and if that happens the court will provide for the points of dispute to be served and for the detailed assessment to proceed in the usual way.

63. The rule does, nonetheless, impose an automatic sanction, and where it applies the late-serving party will have to meet the Denton criteria in order to be heard. Even given that the penalty imposed by CPR 47.9(3) is less than that represented by a DCC, it seems to me that a party who serves points of dispute in time to prevent the issue of a DCC should not, on order to obtain relief, have to meet a stricter test than a party who fails to do so. Master Leonard concluded at Paragraphs [73] - [79]

73. In summary, 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. It was partly the result of subsequent unfortunate circumstances that the default extended as long as it did, but all of that was preventable, and not enough was done to prevent it.

74. Had the claimant received the Points of Dispute by the end of February, as agreed, she would have been in a position to request a detailed assessment hearing with a view to the assessment being completed within about six months. I appreciate that it is possible that this might not have been done promptly: the timing of the DCC suggests that the claimant's representatives were having their own problems. It is not, however, for me to speculate on that. The claimant would have had a right to expect that her representatives would request a hearing with reasonable speed, and I have no good reason to suppose that they would not have done so.

75. By the time Mr Gaskell contacted the claimant's representatives to invite them to agree to setting aside the DCC, over four months had passed. The claimant was not only being asked to relinquish the DCC but to accept an avoidable delay of over four months to a process that should have been completed in six. One can hardly be surprised that she refused. 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.

76. It is not an answer to that to say that the claimant will be compensated by receiving interest on the unpaid part of her 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.

77. I have given some thought to whether it is fair to count against the defendant the fact that even had the application been filed on 15 July, it would have been unlikely to come before me for hearing until the six months in which the claimant might have hoped for a hearing had passed (I leave out of the reckoning both the delay in filing the application after 15 July, which is not the defendant's fault, and the time it has taken me to prepare this judgment). I tend to treat the period needed to list and hear a set-aside application as neutral, even where, as here, the application has been reasonably resisted. In the circumstances of this case, I think that it is fair to take it into account, because the conduct of the case on the defendant's behalf made the issue of an application, and the attendant delay, inevitable. Certainly, from the claimant's point of view it adds to the prejudice.

78. I appreciate that refusal to set aside will almost certainly result in the claimant recovering more than would have been the case had there been a detailed assessment, but as I have observed that may not be decisive. One must look at all the circumstances. Both the failure to serve points of dispute within the agreed period and the subsequent mismanagement of the file were, by an objective standard, negligent. The loss of the opportunity to challenge the bill is the result of that negligence. 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.

79. 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.'

Prior to Masten there was a widely held belief that it was easy to set aside a Default Costs Certificate. Master Leonard has made it crystal clear that this is not the case. An Application to set aside a Default Costs Certificate must be prioritised, must be made promptly and must comply with the three-stage test in Denton.

Let paying parties beware!

Find a full transcript of the Judgment here.

Margaret McDonald is The Head of Civil Litigation and Costs at Kenworthy's Chambers. She is a Deputy District Judge and a Mediator, specialising in costs mediations. If you have a Civil Litigation or Costs case you need advice or advocacy for, call our Civil Clerks Michael Jones and Matthew Thomas on 0161 832 4036, email [email protected], [email protected] or fill out our contact form.