Relief from sanctions in costs budgeting

First instance decisions on relief from sanction under the new Civil Procedure Rule 3.9 and compliance with costs management rules are percolating through and will be anxiously pored over by a legal profession that is wondering just how tough the post-Jackson regime will be.

Many will have been hoping for the early arrival of ‘a Biguzzi moment’, an expression coined by Jonathan Seitler QC in his address to the Property Litigation Association Conference on the eve of the April reforms. In Biguzzi v Rank Leisure Plc [1999] 1 WLR 1926, with the ink barely dry on the CPRs, the Court of Appeal dismissed an appeal by a defendant whose application for strike-out for delay had initially succeeded but was then overturned on first appeal. This was despite confirmation that ‘under the CPR the keeping of time limits… is in fact more important than it was’ and despite serial non-compliance with directions. To many this signalled an immediate dilution of the purpose of the Woolf reforms.

The first potential Biguzzi moment in the Jackson context arose in a decision of Mr Justice Walker in Wyche v Careforce Group Plc (unreported, QBD, 25 July 2013). Here the defendant succeeded in its application for relief from the sanction of strike-out the defence. The issue is reported as concerning non-compliance with an ‘unless order’ regarding e-disclosure; specifically the adequacy of search terms used and the inaccurate categorisation of certain documents as privileged.

The triggers to relief in Wyche appear to have been inadvertence, the speed with which the errors had been remedied and the fact that the trial date had not been affected. If Wyche is followed, those hoping for a commonsense approach and some latitude for human error will be doubly relieved.

In contrast, the costs management regime has seen some markedly tough decisions on non-compliance. Mr Justice Coulson declined to allow retrospective budget variation in Elvanite Full Circle Ltd v AMEC Earth and Environmental (UK) Ltd [2013] EWHC 1643 and placed very tight constraints on what might constitute good reason to depart from budget. Restriction to budget in that case could result in a costs shortfall for the otherwise successful defendant of more than £267,000.

A less-forgiving approach to human error was taken, also by Mr Justice Coulson, in Kim Murray and Another v Neil Dowlman Architecture Ltd [2013] EWHC 872 (TCC), in which he said: ‘The courts will expect parties to undertake the costs budgeting exercise properly first time around, and will be slow to revise approved budgets merely because, after the event, it is said that particular items had been omitted or undervalued. I also agree that any other approach could make a nonsense of the whole costs management regime.’

The largest shockwaves yet are likely to be felt from a decision handed down by Master Victoria McCloud on 1 August 2013 in Andrew Mitchell MP v News Group Newspapers Ltd [2013] EWHC 2355 (QB). In this high-profile libel action, colloquially known as “Plebgate”, the defendant’s solicitors Simons Muirhead and Burton, assisted by my colleagues at Practico, produced a budget in accordance with the Defamation Pilot PD51D and attempted to engage in discussions with the claimant’s lawyers, Atkins Thomson.

The claimant did not comply either by engaging in discussions or by lodging his own budget until prompted by the court on the eve of the costs management conference. Master McCloud limited the claimant’s costs budget to court fees only. The claimant applied for relief from sanction. What distinguishes Mitchell from earlier cases (notably Sylvia Henry v NGN) is that the new CPR 3.9 applied. The court heard full argument from experienced costs counsel and had the benefit of witness evidence.

Master McCloud’s judgment in dismissing the application for relief can be summarised as follows:

• Relief engages ‘old fashioned’ concepts of fairness, access to justice and the new overriding objective;
• It was relevant to consider the rights of other litigants to a ‘fair crack of the whip’ where judicial resources are very limited;
• There was an absolute failure by the claimant to engage and no attempt to ask for extra time or notify difficulties in complying;
• The explanations by the claimant’s solicitors (pressure of work, small firm, unexpected delays with counsel) were not unusual and carry even less weight post-Jackson;
• There was no evidence that Mr Mitchell would suffer particular prejudice;
• The very fact that the defendant, using costs lawyers, was well able to deal with this in time highlighted that time was not too short or unfairly so.

The Master granted permission to appeal on the court’s own motion, commenting that under the old regime it was far more likely that relief would have been granted. Until such an appeal is heard those waiting for a Biguzzi moment are going to remain on tenterhooks.

Andy Ellis is a costs lawyer and managing director of Practico Ltd