Costs update

So how does the costs land lie six months after implementation of the Jackson reforms on 1st April 2013? Rumours swirl as to the impact of the new costs budgeting and management provisions: judges who will, judges who won’t, judges who in reality conduct costs assessments without the information which they would have at the end of the case... But there are as yet few hard facts to impart.

In Mitchell v News Group Newspapers Limited¹⁹ a breach of the rules led to an order that the claimant can recover court fees only. Master McCloud imposed on the claimant a sanction for two breaches of Practice Direction 51 D (a failure to engage in attempts to discuss costs budgets and budgetary assumptions and failure to file and exchange a budget no later than seven days before the CMC), the pilot provisions in defamation cases for costs budgeting. The claimant is the MP Andrew Mitchell, who is bringing a defamation action against News Group Newspapers Limited for its reporting of the Plebgate incident in Downing Street. The first hearing on 18th June 2013 was a case management and costs budgeting hearing. There had been no practical engagement by the claimant with the substance of the budgeting requirements until the Master sent a chasing email. The first response from the claimant’s solicitors blamed counsel’s chambers, but the explanation then given in court was pressure of litigation elsewhere in the firm. A budget was finally produced the day before the hearing. There was no application or statement to explain the delay. The Master held that that was a failure to comply with PD 51D and the overriding objective. Whereas before the advent of the Jackson reforms she might have adjourned for the matter to come back, with costs thrown away, no adequate excuses had been given and the solicitors thought that the pilot scheme Practice Direction for defamation had ended, when it had not, and of course the solicitor had no evidence to deal with any relief from sanctions. Since the new Rule 3.14 (which was not applicable to the case before the Master) applied a mandatory sanction, namely that a party who failed to filed a costs budget within seven days prior to the date of the first hearing would be limited to a budget comprised of the court fees, that sanction was what the Rules Committee considered proportionate, and all that was missing from Practice Direction 51D was a stipulation as to the nature of the sanction. That was therefore the sanction the Master applied. She adjourned the matter so that the claimant could apply for relief from sanction or she could deal with costs budgeting.

The claimant then applied for relief from the sanction, and the matter came back before the Master on 1st August 2013.²⁰ It was said that the claimant’s solicitors were a small firm, with two London partners, two of three trainees were on maternity leave, and the senior associate who had dealt with costs budgeting had just left the firm. The firm was very busy with the phone hacking litigation, and was very stretched in terms of resources. Counsel’s chambers had also been slow to provide information. The Master had no truck with the reasons given for non-compliance. None of the matters relied on had been brought to the court’s attention before the hearing and in advance of the deadlines for dealing with the budget. She said there was no evidence before her of particular prejudice to Mr Mitchell, and it would be wrong for her to make assumptions about the wording of his CFA with his solicitors – anyway he was not being driven from the court by the sanction. Judicial time was scarce and court resources had been wasted by the failures. Relief was not given. The case is proceeding directly to the Court of Appeal, to be heard in a window beginning on 29th January 2014.

So beware! It will be interesting to see what the outcome is, where the Court of Appeal will no doubt want to reinforce that the new provisions are to be complied with not ignored. But it is hard to see the sanction as other than harsh. The Master could simply have conducted the costs budgeting hearing, given that she had the budgets before the hearing, but making it clear that she would take a tough line with the claimant’s budget, and would order the claimant to meet the defendant’s costs of extracting the budget and of conducting the hearing.

Although not a personal injury case, it is also instructive to look at the approach of the Court to costs management in Willis v (1) MRJ Rundell & Associates Limited (2) Grovecourt Limited²¹ because it offers some robust criticism of the costs budgets served by the parties and underlines how sensible it is for parties to seek to agree budgets with each other where they can. The new Practice Direction 51G applied (Costs Management in the TCC). Coulson J emphasised that whilst he understood that the costs management regime was in its infancy, and it was not for the court to penalise unduly litigants or their solicitors because of their lack of familiarity with it, it was important that all litigants and their solicitors got to grips with it as soon as possible. He concluded that the costs budgets on each side were disproportionate; emphasised that budgets must separate costs incurred from future estimated costs; expressed the view that the projected expert costs were disproportionate; and it was inadequate to put in a lump sum contingency figure without stating what the possible contingency was. The court expressly declined to approve either budget and did not impose alternative figures where it had no supporting material with which to do so, but also declined to order another costs management hearing, in the interests of costs and time, and instead ordered that the costs budgets be kept up to date. It was made clear that equally that his decision did not mean that the successful party would not recover costs at all. Clearly the parties will rely upon Coulson J’s comments when it comes to the incidence and assessment of costs, but it seems unsatisfactory that a no doubt expensive hearing has not led to a costs management decision at all.

See also the decision of Coulson J in Elvanite Full Circle Ltd v AMEC Earth & Environmental (UK) Ltd,²² where he rejected the attempt of the successful defendant to almost double its approved costs budget of £270,000 after the case had concluded and said that an application to revise or amend the costs management order should be made immediately it becomes clear that the original costs budget has been exceeded by more than a minimal amount. Although a month before the trial the defendant had filed and served a revised budget, that was not enough and if significant changes to the costs budget were required, the party seeking an increase had formally to seek such approval. It followed that an application to amend an approved budget after the end of the trial would be a contradiction in terms, since it would make a nonsense of a costs management regime if a party at the end of a case could apply to double the amount of the costs budget.

Meanwhile Ramsey J, who has assumed the Jackson implementation mantle, has indicated that he is turning his attention to pre-action costs management, which is under consideration by a working party he is chairing.