National House-Building Council v Hodson Developments Ltd & Ors [2025] EWHC 3438 (TCC)

[2025] EWHC 3438 (TCC)

Case No HT-2024-000019

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

TECHNOLOGY AND CONSTRUCTION COURT (KBD)

Venue The Rolls Building, 7 Rolls Buildings, Fetter Lane, London

Date 15 September 2025

EC4A 1NL

Before

MR RECORDER SINGER KC

(sitting as a Judge of the TCC)

Between

NATIONAL HOUSE-BUILDING COUNCILClaimant

HODSON DEVELOPMENTS LTD & ORSDefendants

MR S TOWNEND KC (instructed by BP Collins LLP) for Claimant

MR P LETMAN (instructed by North Star Law Ltd) for Defendants

Approved Judgment

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[1]This is an application dated 4 July 2025 by the first defendant for relief from sanction. The matter was last before the court on 20 June for a case and costs management conference and all costs management issues should have been dealt with on that occasion, but for reasons which will appear below, this application was required before any costs management order might be made in respect of the first defendant’s costs.

[2]The claimant is represented by Mr Townend KC and D1- D3 but for today just D1, by Mr Letman. I am very grateful to them both for their very helpful and focused written and oral submissions. I have considered everything that has been put before me, the evidence and the documents, and, of course, the authorities in reaching my decision.

[3]So far as the law is concerned CPR 1.1 provides the overriding objective. CPR 3.9, which applies in the sense that the matters at 3.9(1)(a) and (b) are specifically to be taken into account by the court on this application, (which technically is an application under 3.14), provides:

“On an application for relief from any sanction imposed for failure to comply the court will consider all the circumstances so as to enable it to deal justly with the application, including the need - (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders.”

[4]CPR 3.13 provides that:

“(1) Unless the court otherwise orders, all parties except litigants in person, must file and exchange budgets - (a) where the stated value of the claim is less than £50,000, with their direction questionnaires; or (b) in any other case not later than 21 days before the first case management conference.”

[5]3.14, which is central to this matter, provides:

“3.14 Unless the court otherwise orders, any party which fails to file a budget despite being required to do so, will be treated as having filed the budget comprising only the applicable court fees.”

[6]The leading case on relief from sanction is Denton v White

[2014] EWCA Civ 906

. In brief, when the court is facing an application for relief from sanction, there is a three-stage test. The first is: is the breach serious and significant? The second is why the default occurred, and is there a good reason for it? The court has to deal justly with the application as to which the factors I have already mentioned in 3.9 are of importance. Third, in all the circumstances of the case, would maintenance of the sanction be manifestly unjust and disproportionate?

[7]Of course all decisions on these matters are fact-sensitive. In BMCE Bank International Plc v Phoenix Commodities PVT Ltd & Anor

[2018] EWHC 3380

Bryan J did not grant relief for a 14 day delay due to the solicitor with conduct having been away abroad on business. In that case an application for relief was made and the issue whether to disapply a CPR 3.14 sanction arose at a costs and case management conference and took up virtually the rest, if not all of the rest, of the hearing. In that case, at paragraphs 70 and 71, Bryan J said:

“70. When I come to stand back, as I do, having looked at all the circumstances, and having given full weight and account to everything that was said ... orally, and ask myself whether it is an appropriate case for relief from sanctions in all the circumstances of the case so as to enable me to deal justly with the application, I consider that this is a case where there has been a serious and significant breach of the order. Costs budgeting is an important part of case management. It is made clear by CPR 3.14 itself what the sanction is for failure to comply. Failing to comply with the provisions hinders agreement of costs budgets and cost management by the court, it causes delays, it causes inconvenience to the court and it causes inconvenience to the other party and other court users – it is also contrary to the need for litigation to be conducted efficiently and at proportionate cost. This was a case where the deadline was not just missed. It was missed by a very substantial period of time. The breach was serious and significant. There is no good reason in terms of explanation for it, the application for relief was itself not made promptly, and when one considers all the circumstances of the case as part of the third stage, so as to deal justly with the application, I consider that it would be quite inappropriate to give relief from sanctions on the facts of this case. “71. This is an archetypal case where it would not be appropriate to grant relief from sanctions. There was a serious breach without good reason, followed by a very late application to seek relief, and a consideration of all the circumstances demonstrates that it is not an appropriate case for relief. The failure to comply with the rules has prevented the litigation being conducted efficiently and at proportionate cost, there is a need to enforce compliance with the rules of the CPR in relation to costs budgeting, and on a consideration of all the circumstances relied upon it is not appropriate to grant relief... Accordingly, and for all the reasons that I have given, I refuse to give relief ... the defendants will be treated as having filed a budget comprising only the applicable court fees.”

[8]Now, I pause there to note that both parties before me agreed, as do I, that if the sanction imposed by 3.14 does continue to be in effect after this hearing, that would only apply to the future costs of the litigation. There would still be a possibility, should such an order be made, that the first defendant will be entitled to recover its costs already incurred, i.e. those that are in the incurred side of the Precedent H -- in other words, that the sanction is forward-facing only.

[9]In Page, the court drew attention, as did Mr Letman, to the distinction between disapplying the sanction in 3.14, and an application under 3.9. Whilst I accept that there is that distinction, in this case parties also agree, as do all the authorities, that the relevant test is still the three-stage Denton test. The most recent Court of Appeal decision is that in Leadingway Consultants v Saab & Anr

[2025] EWCA Civ 852

, which identifies what the proper factors are to be taken into account and when or more likely when the Court of Appeal will not interfere with the trial judge’s discretion in these matters.

[10]Clearly proportionality of the sanction by reference to the breach is a key issue when considering whether to order otherwise than in accordance with CPR 3.14.

[11]As far as the factual background is concerned, although there is a long history to this matter, I do not need to deal with that in this judgment. Proceedings against all three defendants commenced in January 2024. The claim is for around £5 million against D1. D1 is the development company. D2 is the director of D1, and D3 is the former director of D1.

[12]In brief, the claimant claims against D1 under its rules for remediation and other costs in respect of a number of developments and, in the alternative, under an indemnity agreement said to have been entered into by D2 and D3. In late February 2024, the defendants retained Gowlings as their solicitors. In late July 2024, due to what is said to be a conflict but an unexplained conflict, D2 and D3 instructed North Star who had some stage acted for all the parties in the pre- proceeding state. Pleadings closed in June 2025.

[13]There was a Planning Inquiry in February 2025, which adjourned until mid-April and May 2025, which, according to the evidence submitted by Mr Hobson, on behalf of the first defendant, took up effectively all of his and D1’s time to the detriment of any work on this matter. It does appear that there had been a failure to give proper instructions to Gowlings by D1 well before February, April or May of 2025.

[14]On 3 March 2025 Gowlings sent an email to the first defendant telling them that they were planning to terminate their retainer and that did include warnings as to the consequences of not filing a costs budget in time.

[15]Whilst the date of 30 May was not in terms set out in that letter, and Mr Letman rightly points that out -- nor did a later email in May in terms point that out -- nevertheless it does seem to me that it would not have been a difficult exercise by any stretch of the imagination to work out when 21 days before 20 June was; or indeed, as a responsible director of a company, to ask when it was. It does not appear that Mr Hodson actually did that at any time.

[16]Gowling did then terminate the retainer on 14 May 2025 and I have already referred to the correspondence in that regard, which again gave another warning about the consequences of not filing a costs budget in time.

[17]They then applied for an order on 23 May 2025, as they promised to do in their previous correspondence, for an order pursuant to CPR 42.3(1) declaring that they had ceased to act for the first defendant and Waksman J made that order on 3 June. I am satisfied, for the avoidance of doubt, that D1 did have notice of that application before it was made, and also that the order had been made. In fact, he knew himself that the order was being applied for because Mr Blay told him, he says, in late May.

[18]As it happens, all three of the defendants missed the deadline to file budgets on 30 May 2025. In the June hearing I granted relief to D2 and D3, but that application was not contested. The delay in that case was a day and the sensible and pragmatic approach was taken as to the effect of it. But what I would not do on that day, because there was no formal application or evidence before me to allow me to do it, was to entertain an application for relief on behalf of D1, although on that day Mr Letman had agreed to act for all three defendants, as had, by then, North Star. That agreement was on 18 June and there was a combined budget before me on 19 June. As I say, I made an order that this hearing should take place today -- that being during vacation -- and also this being a week when I had agreed to be one of the duty TCC judges.

[19]Pursuant to the order that I made at the CCMC, a further uplifted costs budget has been served on behalf of the defendants and the amount of the estimated elements of the budget, i.e. the part that would be cost-managed if relief is granted, is approximately £260,000.

[20]With that fairly short canter through the facts and without ignoring the contents of any of the documents, I turn to the question of whether relief should be granted. First of all, I find that the delay in serving a cost budget was serious. It was from 30 May to 19 June, and it has caused the need for another hearing, thereby depriving other litigants of the chance to use this date for their own matters. Indeed, in his skeleton argument and again before me, Mr Letman, quite properly accepted that the breach was serious, although he does not accept that it was at the worst end of the scale.

[21]As to that, in my judgment this can only be described as a serious breach of the rules. It is a relatively long delay in the context of those decisions which I have been given, including of course BMCE Bank v Phoenix where the delay was for less time and the sanction was upheld.

[22]Is there a good reason to the breach? I agree with Mr Townend KC’s criticism of the witness statement for the defendants and the lack of reference to the particulars of the 3 March email. The witness statement is certainly not comprehensive. Whoever received the correspondence, Mr Hodson on behalf of D1 clearly did not read it properly or take account of it, It was not just that correspondence that came from Gowlings; there was also, in my view, perfectly clear correspondence from the court making it absolutely clear what would happen insofar as cost budgets were concerned.

[23]There is no documentary support for the matters raised at paragraph 19 and there was a failure to engage with correspondence until too late . I do, of course, accept Mr Hodson's apology at paragraph 19 of his statement where he apologises that a costs budget was not filed in accordance with the rules. He goes on to say:

“Had I realised in advance of 30 May that the first defendant’s representation was indeed going to be withdrawn without filing a budget and D1 would then fall subject to an automatic costs sanction, I would have done something about it. Unfortunately, I did not see the sanction coming because D1 had no solicitors advising it after 14 May and I did not identify the deadline for myself.”

[24]I accept, certainly for the purposes of today, that as a matter of fact Mr Hodson did not identify the deadline for himself, but I do not accept that he was justified in not seeing the deadline, by which I mean he ought to have worked it out either for himself or with the assistance of others. I have already noted that was not a difficult task at all.

[25]It seems to me that whilst Mr Hodson, for no doubt very good reasons, was hoping to persuade Gowlings to stay on the record or indeed to come back on the record before and after 30 May 2025, whilst that was something he was entitled to try to do, it brought with it a very significant risk that something bad might happen in the meantime when D1 was not a litigant in person, because it is not a private litigant, but an unrepresented limited company. Indeed that is what had happened in the sense that the sanctions had arisen automatically and thereafter Mr Hodson might, in my view, properly have taken steps earlier than 19 June to correct the position vis-à-vis filing a budget and might have taken more advice than the advice he says he was given by Mr Blay which, if he was given that advice, as he says, it was, in my view, clearly wrong and, in any event, unhelpful because it is clear that D1 does want to have a costs budget which can be cost-managed because it wants to recover costs if it is successful in defending the claim.

[26]The reason why litigants in person do not put in costs budgets is because they are not normally asking for very large sums of money to be recovered by them should they succeed. That is why 3.13 excludes them. However, D1 is not excluded, and in any event, when the sanction was imposed, strictly speaking, D1 was not unrepresented because the order had not yet been made by the court. Furthermore, Mr Hodson was hoping that Gowlings would continue to represent D1.

[27]Therefore it does seem to me that there was not a good reason for the breach, notwithstanding Mr Letman’s eloquent attempts to persuade me to the contrary. It seems perfectly clear that the first defendant either knew from what was sent to him or should have known, and from his knowledge of the case generally, that cost budgets were required to be served, and even if he did not fully understand the need for it to be filed by 30 May, he did know that one was required, and he had been told on a number of occasions well in advance of the 30 May that he had to do that.

[28]I also accept there has clearly been a lack of engagement in this matter by the first defendant for some time, as is clear from the evidence from Gowlings in their statement. Whilst that may well be because D1 thought it had more important things to do in terms of the planning inquiry, which was obviously an important matter, nevertheless this is also an important matter. This is High Court litigation which is subject to rules which need to be complied with.

[29]I turn to the question of whether maintenance of the sanction would be manifestly unjust. I will focus on the non-compliance, views as to its seriousness, the reasons for it and its effect. In my judgement the breach was serious as is accepted; the reasons for it are not good reasons; whilst the reasons for it do not fall into the category of being intentional or could perhaps be described as contumelious failures, nevertheless, it seems to me that they are consistent with a party which does not take its obligations to comply with court orders seriously, nor to be taking this litigation terribly seriously -- as opposed to the other matter, the planning inquiry, in the immediate run up, and indeed for some time before that, as Mr Townend pointed out to me in his submissions.

[30]As against that Mr Hodson says: I would have acted differently had I actually known that something had to be done by 30 May and I did not know that. I accept that that is his position. That does not mean that he had a good reason for acting as he did. But it does mean that there is some credit perhaps to be given to him for saying that and, of course, I accept that is what he says and that that is what he says he would have done had he known differently. So I do weigh in the balance the fact that one of the reasons for the breach was that Mr Hodson did not himself know, although he should have done, that there is an automatic sanction which would be imposed on 30 May. So there is some minor credit to be given to Mr Hodson.

[31]Does it make it unjust to maintain the sanction? In my view and on balance it does not because the consequence, which I do need to take into account, is that this court has had to have another hearing. The case has not been dealt with efficiently because there has needed to be this hearing today. True it was that a lot of work was done at the previous hearing and that the trial is some way away but of its very nature, the fact that we are having this application today, means that the case has not been dealt with as efficiently as it should. It also means that this afternoon, which could have been used for other litigants in this court, has not been used for those other litigants because it could not be.

[32]So those factors in my view weigh against demonstrating that it will be manifestly unjust to maintain the sanction.

[33]Mr Letman, quite properly and forcefully, pressed on the court that there was no real proportionality between missing deadlines and being deprived of costs going forward. And of course that may be right in one sense, but the problem with that is that that is precisely the sanction that 3.14 provides for, and 3.14 cannot be said to be of itself disproportionate. 3.14 allows the court to otherwise order, but that cannot mean that every time a court does not otherwise order, it will necessarily be disproportionate. Certainly in my view it cannot mean it in this case where there has been a relatively long delay, where the reason for the delay is not a good reason, and where the court and other parties will have been inconvenienced in the way in which I have described.

[34]Therefore, it follows that I do not grant the application and that the sanction imposed by CPR 3.14 will remain in place. - - - - - - - - - - (This Judgment has been approved by the Judge.) Digital Transcription by Marten Walsh Cherer Ltd 2nd Floor, Quality House, 6-9 Quality Court, Chancery Lane, London WC2A 1HP Telephone No: 020 7067 2900 DX: 410 LDE Email: info@martenwalshcherer.com Web: www.martenwalshcherer.com