We are now approaching the five month mark post 1 April 2013 and cases are emerging which are setting the landscape for the Judiciary’s approach to cost budgeting.  Whilst to date, the reported cases have been under the defamation costs pilot scheme, a pattern of approach is starting to emerge, particularly in relation to how the Judiciary will interpret the rules to post 1 April 2013 cases.

The first case was in January 2013.  In Henry v News Group Newspapers Ltd, whilst the Court of Appeal allowed the claimant her assessed costs, notwithstanding the claimant had exceeded her costs budget and had not applied to increase this, the case carried with it a ‘health warning’.  The court made clear post 1 April 2013 cases would not be considered with such leniency. Murray v Neil Dowlman Architecture Limited, followed in April 2013, in which Coulson J, in allowing for the rectification of an erroneous costs budget, made clear that the same rationale would not be followed in cases post 1 April 2013.

Further, Master McCloud’s decision in Andrew Mitchell MP v News Group Newspapers Limited has most recently provided an even starker warning to those thinking about ignoring costs budgeting. This was another defamation claim to which the pilot scheme applied.  However, in this case, it was not so much that the claimant had exceeded a costs budget as in Henry, or was seeking to rectify a mistake as in Murray, but in fact had failed to file a costs budget 7 days before a case management conference and had failed to enter into any cost budgeting discussions with the defendant.

 In Mitchell the parties were called to a case management conference.  In the first instance this was listed with a three day notice period.  However, the defendant brought this to the attention of Master McCloud and indicated it would mean the parties were unable to file costs budgets within 7 days of the CMC in accordance with Rule 3.13.  Master McCloud therefore relisted the hearing 7 days later, to allow the parties time to comply.  The defendant was able to comply with the requirement.  However the claimant was unable to do so and ultimately filed a budget one day prior to the hearing and did not enter into any discussion with the defendant on costs budgeting.

As a result at the CMC on 18 June 2013, the Master ordered that the claimant was entitled to recover court fees only in accordance with CPR Rule 3.14.  The claimant applied for relief from sanctions and the matter came back before Master McCloud on 1 August 2013. The claimant’s solicitor argued that the size of its firm was a key factor in their inability to prepare and file the costs budget in time.  Mr Mitchell’s solicitor provided a statement explaining that the firm was small and had limited human resources available.   However in a stark warning to all solicitors, whilst Master McCloud had sympathy with the claimant’s solicitors’ situation she refused to move from her position and held that the sanctions applied.   She remarked, “…Budgeting is something which all solicitors by now ought to know is intended to be integral to the process from the start, and it ought not to be especially onerous to prepare a final budget for a CMC even at relatively short notice if proper planning has been done.”

All solicitors involved in civil litigation would be wise to consider this decision. It would be foolhardy to consider that any case is exempt from the rules, unless it is absolutely clear that this is so.  The key factor to be taken from this judgment is the importance of forward planning.  Solicitors must have in place a plan for costs budgeting and it must not be left to the last minute.  The ruling acts as a stark warning that failure to comply can and will lead to what some may see as a draconian measure, but others may see as a way in which to ensure a case is dealt with justly and at proportionate costs, which is a key element to the Jackson reforms.

The matter is of such importance that on her own motion, Master McCloud has granted permission to appeal.  In her ruling she stated, “… The stricter approach under the Jackson reforms has been central to this judgment. It would have been far more likely that prior to 1/4/13 I would have granted relief on terms, and in view of the absence of authority on precisely how strict the courts should be and in what circumstances, I shall grant permission to appeal to the Claimant of my own motion, under CPR 52.3(6)(b), on the basis that the severe nature of the sanction which I have imposed in giving effect to the Jackson reforms to the overriding objective and to r.3.9 in its new form here are of necessity not backed by specific authority on point, and the risk of injustice if I were adopting too strict an approach is such as to provide ‘some other compelling reason’ for an appeal to be heard. It will be for the appeal court to determine whether such a strict approach is appropriate.”