Budget Nightmares Come True For Solicitors

The Court of Appeal handed down their decision in the case of Mitchell MP v News Group Newspapers Ltd [2013] EWCA Civ 1537 on 27 November 2013. The judgment further supports the already strong argument for solicitors, conducting civil litigation, outsourcing their costs management and budgeting requirements to experts thereby avoiding both the associated responsibilities and risks.

Whilst the decision specifically concerns costs management and budgeting, its impact resonates far beyond such matters and is a message to all as to how parties should conduct themselves in civil litigation.

Background

The case, which arose out of an incident widely referred to as “plebgate,” fell within the Defamation Proceedings Costs Management Scheme at the pre-1 April 2013 CPR PD51D. The PD requires parties to discuss the assumptions and timetables on which their budgets are based and file and serve them not less than 7 days before the hearing for which the costs budgets are required. The Defendant served their costs budget in the sum of £589,558 on 11 June 2013, 7 days before the CMC was listed (18 June 2013). After being prompted by the Judge with conduct, Master McCloud, at noon on 17 June 2013, the Claimant served their budget in the sum of £506,425 that afternoon. At the hearing on 18 June 2013, counsel for the Claimant cited the reason for the delay as being pressure of litigation in another case within the firm.

Due to the Claimant’s failure to both discuss their budget with the Defendant and their failure to file and serve it not less than 7 days before the date of the CMC, Master McCloud ordered that the Claimant’s costs be limited to the Court fees only. Whilst not an explicit sanction within the Defamation Proceedings Costs Management Scheme, the Master took guidance from the sanction imposed by CPR.r.3.14 in all relevant Multi Track cases from 1 April 2013. The Master allowed the Claimant to apply for relief from sanctions pursuant to CPR.r.3.9.

The application was heard in accordance with the “new” (post 1 April 2013) test at CPR.r.3.9 on 25 July 2013. The application was dismissed on the grounds that the Claimant had failed to engage with the process, had failed to comply with the requirements of the rules thereby breaching the new overriding objective at CPR.r.1.1(2)(f) and the correct test post 1 April 2013 was a stricter one which must be upheld. Master McCloud gave permission to appeal.

The Court of Appeal

The appeal was dismissed by the Court of Appeal on 27 November 2013. The Court addressed the issue of how strictly Rules, Practice Directions and Court Orders should be enforced. It was recognised that, historically, the Courts had become too tolerant of delays and non-compliance. The result was that Courts, when considering whether to provide relief from sanctions, must ensure litigation was conducted efficiently, proportionately and in accordance with Rules, Practice Directions and Court Orders. The Claimant’s failure in this case resulted in an adjournment and thus impacted upon the management of the case.

The Court of Appeal also gave guidance as to how consideration of granting relief from sanctions should be approached by the Courts below. Effectively, if the non-compliance can be regarded as “trivial” then the Court will usually grant relief provided the application is made promptly. Alternatively, if the non-compliance was not trivial but was a result of a “good reason,” then relief may be granted. A “good reason” is likely to arise out of circumstances outside of the control of the party. Pressure of work will rarely be a good reason given that most firms suffer such pressures.

The Implications and Application of Mitchell

So what happens now in the Mitchell case? There are two logical ways forward.

The first is that the Claimant cannot now proceed with the case knowing that he is paying his solicitors costs which he will never recover from his opponent (save for Court fees) irrespective of the outcome. Nor is it likely the Claimant’s solicitors will continue to act for the Claimant for free. The Claimant is unlikely to be able to engage new solicitors because it is the Claimant who is not able to recover costs beyond the Court fees in the event of a win, not the solicitors. What other firm would take the case on for free (except perhaps for PR purposes)? Surely, the Claimant’s case can no longer continue on economical grounds? The case is effectively dead isn’t it, resulting ultimately in the Claimant having to pay the Defendant’s costs of the action he cannot now pursue?

Either that or the Claimant’s Solicitor’s professional indemnity insurers will have to pick up the tab for the Claimant’s future costs that would need to be incurred to progress the claim on behalf of the Claimant.

The Court of Appeal’s judgment sends a message to all aimed at case management as a whole and not simply that which concerns costs management and budgeting.

Conducting litigation efficiently, proportionately and in accordance with the Rules, Practice Directions and Court Orders is paramount and unless non-compliance is either trivial or is a result of circumstances beyond a party’s control, relief is unlikely to be granted.

The key to applying this decision positively to a firm’s practice is pro-active case management. By compliance there will never be a requirement for relief from sanctions. Conversely, by monitoring an opponent’s case management, appropriate measures can be taken quickly where non-compliance has occurred.

Further, and specifically in relation to costs budgeting, the Defendant used outside costs lawyers to prepare their costs budget whilst the Claimant’s was prepared in-house. The Claimant’s solicitor’s non-compliance, by their own admission, was the result of “pressure of litigation elsewhere in the firm on another case.” Such pressures are very real and constant for most firms.

If the Claimant had outsourced the costs budgeting task and the same circumstances had occurred, the Claimant in the Mitchell case would rightly have had a claim in professional negligence against those who it had been outsourced to.

We, at Just Costs Solicitors, are experts in this field and regularly conduct costs management and budgeting work for our clients. We work collaboratively with our clients applying our expertise to the costs management and budgeting process.

Further, whilst we aim never to use it, Just Costs Solicitors have professional indemnity cover of £10,000,000. This begs the question “Why on earth would you not outsource your costs management and budgeting requirements to experts?”

28 November 2013

 

    

Nick McDonnell

Senior Associate and Costs Lawyer

Tel: 0161 618 1784

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