Default costs certificates

In legal costs it can often be the case that a judgment that is concerned with one particular issue may have unexpected relevance in another area.  One example of this is the case of Roundstone Nurseries Ltd v Stephenson Holdings Ltd [2009] EWHC 1431 (TCC).

The matter concerned a claim where proceedings had been issued.  The parties agreed that the proceedings should be stayed by court order to allow for the parties to complete the Pre-Action Protocol process.  The period of the stay came to an end but neither party had applied to the court to extend the stay of the proceedings, despite the Defendant noting in correspondence that such an extension was needed.  In the absence of a defence being filed by the Defendant, the Claimant, without any further reference to the Defendant, applied for and obtained judgment in default. 

The Claimant subsequently agreed to have the judgment in default set aside by consent but claimed they were entitled to their costs of the application to set aside and should not be required to pay the Defendant’s costs of the application.

The judge, Mr Justice Coulson, accepted that the Claimant was technically entitled to enter judgment.  However, the judge concluded:

“During the course of his helpful submissions on this point, Mr. Crangle went so far as to say that, if a claimant was technically entitled to enter judgment in default then he was entitled to do so, even if he knew that the defendant had a real prospect of defending the claim and therefore setting aside such judgment.  I am afraid I do not accept that submission: it seems to me that it is contrary to the entire basis of the Civil Procedure Rules.  If a claimant knows that, because of some technical glitch, he could enter judgment in default against the defendant, but that the defendant had a real prospect of successfully defending the claim (and therefore getting judgment set aside) then that claimant should not, at least as a general rule, enter judgment in default.  If he does, it seems to me that he must face the costs consequences of that decision.”

This decision seems to be relevant in relation to default costs certificates.  Although the gentlemanly thing to do where a paying party has not served Points of Dispute within time is to remind the paying party, it is common for the receiving party to simply proceed with an application for a default costs certificate without further reference to the paying party.    

A default costs certificate can be set aside where “it appears to the court that there is some good reason why the detailed assessment proceedings should continue” (CPD 47.12).  There is only limited case law on the issue of what amounts to a “good reason”.  One useful starting point is Seray-Wurie v London Borough of Hackney [2002] EWCA Civ 909.  The Court of Appeal, commenting on the decision of the Court below, said:

“When the judge considered the effect of the overriding objective, he said that there was a clearly articulated dispute about the amount of costs.  For the purposes of this judgment he was content to assume that the council had been late in submitting its points of objection, but it did dispute them and there was clearly a dispute to be determined.  The overriding objective necessarily implied that dealing with a case justly included actually dealing with the case.  If the deputy judge had made any other order [to that setting aside the default costs certificate], he would have shut out the council entirely from pursuing the disputed points in relation to costs, and both sides agreed that the amount of costs were very substantial indeed.  In these circumstances, whilst assuming that the disputed facts (some of which related to the hearing before the deputy costs judge) were found in the claimant’s favour, there was no possibility of any reasonable costs judge reaching any other conclusion.  There was therefore no realistic prospect of an appeal succeeding.  Permission to appeal was accordingly refused.”

Although each case will depend on its own facts, where an application to set aside a default costs certificate, supported by points of dispute, is filed reasonably promptly it is hard to envisage many situations where the Court will not set aside the certificate.  In the past, where this happens, it would generally be accepted that the paying party should have to pay the associated costs.  The decision in Roundstone Nurseries Ltd v Stephenson Holdings Ltd suggests that this may not be appropriate.  If a receiving party has been too quick off the mark and failed to warn the paying party that they intend to apply for a default costs certificate, may they find themselves having to pay the costs of having it set aside?