Costs and Compliance: Jackson 6 Months In

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Since the Jackson reforms to civil litigation in England and Wales came into effect in April 2013, Walker Morris has tracked the key changes and cases in our Costs and Compliance series of articles [1].  Looking back over the last six months, what have the key cases shown us, what have very recent cases decided and what practical experiences are we starting to see?

Relief from sanctions

CPR Rule 3.9 (relief from sanctions) has been simplified but with a clear message that the courts are adopting a very much stricter approach than ever before.  When considering any breach of a rule, protocol, practice direction or order, it seems that the court will take into account not only the circumstances of the individual case and parties in question, but also the effect of non-compliance and any consequential delay, cost and inefficiency for the court and resources as a whole.  The new test under CPR 3.9 does allow the court to consider all the circumstances of the case so as to enable it to deal justly with an application for relief, but it specifically focuses on the need for litigation to be conducted efficiently and at proportionate cost; and to enforce compliance with rules, practice directions and court orders.  It is significant that there is no longer any reference to prejudice to the particular parties in the case, nor to the merits of the case in question.


The opening words of the CPR have been varied by requiring the court to deal with cases justly and at proportionate cost.  The addition of these four words has far-reaching consequences.  Proportionality of costs has been placed on the same footing as justice and there has been a shift from ‘necessity’ to ‘reasonableness’ when considering the recoverability of costs.  An analysis of all the key Jackson cases to date tells us that, in order for justice to be done, the costs of litigation must be proportionate to the case in hand.  Crucially, there is now a trade off between justice in the individual case on the one hand, and cost and efficiency in the judicial system overall on the other.

As yet there is no real guidance as to what proportionality means.  This is unfortunate because proportionality pervades some of the most fundamental and important aspects of post-Jackson cost and case management.  It seems that the meaning of proportionality will have to be discerned, on a case-by-case basis, through satellite litigation.  There is, so far, little to go on, but the consequences of judicial interpretation and application of post-Jackson proportionality can be significant.  In relation to court resources, in Cruddas v Calvert [2] it was ordered that, in accordance with the new importance of proportionality in the overriding objective, a trial must proceed on the timetabled date even though counsel could not attend.

Proportionality may also have consequences for interim payments on account of costs, which may be useful if you are the receiving party, less so if you are paying.  If the court has said at cost budgeting stage that it is proportionate and therefore reasonable to spend £100,000, then why not give a significant percentage of that on account?  (Incidentally, this could also mean that detailed assessment is less likely if the only amount left to argue is a small percentage of the costs.)

Costs budgeting

Sir Rupert Jackson has said that budgeting is the single most important reform.  It is all about recoverability of costs. It shifts the focus of costs control from being retrospective to being prospective, with the court and the parties focusing upfront on how much should be spent (or at least recovered) in the litigation.

The court now has power to make a costs management order (CPR 3.15) which will record the extent to which the budgets are agreed between the parties and, in respect of budgets or parts of budgets which are not agreed, record the court’s approval after making appropriate revisions.  The approved or agreed budget is a prima facie limit on the amount of recoverable costs.  A cost budget, in the form of Precedent H, requires a party to confirm who is going to be working on the case, identifying their charging rates and how much work they will be doing at the different stages of the litigation.  The form also has to include budgets for counsel and experts and so it is essential to obtain detailed and accurate information from them very early on in a case.

We have recently started to see the courts becoming more critical than ever before of counsel’s and experts’ fees.  We have experienced a CMC where counsel’s budgeted fees, including his brief fee and refresher, were reduced to a sum that the judge considered more reasonable.  In the recent case of Willis v MRJ Rundell & Associates Limited and another [3] Coulson J commented that expert’s fees of £100,000 excluding involvement at trial were unreasonable, commenting “Unhappily, my recent experience is that the amount of experts’ fees in cases like this [a professional negligence claim] is often out of all proportion to the assistance provided”.

In that case the judge also criticised the inclusion in one party’s Precedent H of a lump sum figure for a contingency without any explanation as to what that sum might cover.  (This was a tactic presumably employed so that the party in question did not reveal its hand.  This highlights the practical difficulty with cost and case management on the one hand, versus protecting a party’s interests on the other.)  A practical method by which we consider parties should be able to avoid recoverable costs being limited to an unacceptable extent, is the utilisation of ‘assumptions’ which can be included to explain the basis on which the budget has been prepared.  If those assumptions do not then pan out, the budget may be more easily amended.

In Willis v MRJ Rundell, Coulson J actually refused to approve either party’s budget, saying both were unreasonable and disproportionate.  The claim was for some £1.1 million and the aggregate of the parties’ costs totalled some £1.6 million.  Even though the parties’ budgets were similar, the judge would not approve them on the basis that it would cost more to fight the case than the claimant could ever recover, and that could not be proportionate.  Declining to make a costs management order, he noted that this did not mean that the parties would not recover any costs when it came to assessment, but that his adverse comments would be taken into account at that stage.

If a party fails to file a budget it will be treated as having filed a budget comprising (and therefore being able to recover from the other side) only the applicable court fees. This purposefully draconian sanction is one which the courts are already applying.  In Mitchell v New Group Newspapers Ltd [4] costs for the claimant (Andrew Mitchell MP, former Government Chief Whip of ‘plebgate’ fame) were limited to court fees only, due to his solicitors’ failure to file a cost budget on time. We understand that the Court of Appeal has expedited the appeal of this case to be heard any day now because it is crucial to get high level guidance for the profession.  We will report separately on this important decision as soon as it is published.

Budgets have to be revised and updated if warranted by significant developments in the case.  The court may approve, vary or disapprove the revisions.  So, in practice, when assessing costs on the standard basis where a costs management order has been made the court will have regard to the receiving party’s last approved or agreed budget for each phase of the proceedings and will not depart from such approved or agreed budget unless satisfied that there is good reason to do so.  However, our latest thinking is that no-one should take comfort any longer from the Henry v News Group Newspapers Ltd [5] which had, until recently, been the only authority on this point.

Henry had been seen by the profession as an indication that, perhaps despite the rules and the rhetoric, in practice the courts might remain relatively flexible as regards departures from cost budgets but recent decisions demonstrating the strict approach that the courts are taking in relation to costs and compliance generally suggest that this is unlikely to be the case.

There has been one very recent case (in the TCC) in which the High Court has allowed an upward departure from the approved cost budget: The Board of Trustees of National Museums and Galleries on Merseyside v AEW Architects and Designers Limited [6].  In that case both parties had filed greatly increased cost budgets pre-trial, but with good reason.  There had been the addition of a party, substantial amendments and significantly increased complexity to the case since the time the budgets had been approved.

The court is not supposed to be carrying out a detailed assessment of costs when it considers a budget.  However judges will generally look at the costs in some detail (for example how many hours are estimated for tasks) and decide whether they fall within the range of what is reasonable and proportionate and considering “spikes in costs”.  Our experience shows that CMCs have been tantamount to mini assessments, where the judge has looked at budgeted costs on an almost line-by-line basis.

Similarly, the court cannot approve pre-action costs incurred because budgeting is prospective and not retrospective, but it can record comments about pre-action costs and if a very large sum is spent pre-action then a judge might expect that to be reflected in the budget.  In Walker Morris’ experience, judges have decreased budget allowances on the basis that certain elements of the work must have been part of pre-action discussion.  Furthermore, some courts are going so far as to require parties to submit, prior to the first CCMC (costs and case management conference), a full breakdown of pre-action costs, and so it is unlikely that parties will be able to side-step altogether the issue of proportionality of pre-action costs in this post-Jackson landscape.

Cost budgeting is here to stay.  More than that, it is even likely to be extended to cover those cases and courts which are currently subject to exceptions.  It remains to be seen whether costs budgeting is going to be more effective for keeping costs under control than the old system.  Costs being examined at the outset, when neither party knows whether it will be on the paying end or receiving end of a costs award, might mean there is less incentive for the parties to seek to minimise recoverable costs, because they will be more concerned at that stage about fighting the case to try and win it.  In addition, it costs time and money to deal with the cost budgeting process.  We wait with interest to see if budgeting will save more costs than it generates.


The presumption in favour of standard disclosure is replaced by a menu of disclosure options in multi-track cases and parties must now file and serve a disclosure report 14 days before the first case management conference describing what documents exist, where and how they are stored and the likely cost of disclosure. This requires the parties to engage with each other and try and agree upon a proposal for the disclosure exercise, not less than seven days before the first CMC.  These changes force the parties and the court to focus on disclosure from the outset.

The obvious issue with the disclosure report is how much information is the court expecting? There was initial confusion amongst practitioners as to the level of detail to be provided but received wisdom and our experience suggests that the disclosure report is not effectively another list of documents which must set out each document, but rather it is a ‘scoping’ document, which helps the parties and the court to decide the likely extent of disclosure (and to limit it if possible) when considering the appropriate directions.

Part 36 offers

Claimants’ Part 36 offers have been given additional teeth and more pressure is placed on defendants to accept reasonable offers.  For a Part 36 offer made after 1 April 2013, the claimant will get enhanced recovery where a defendant fails to beat a sensible offer.  The claimant’s damages can be enhanced by 10 per cent on awards up to £500,000, and by five per cent on anything above £500,000 with a maximum enhancement cap of £75,000.  In non monetary claims there is an enhancement on costs, again to a maximum of £75,000.  Proportionality does not apply to indemnity costs which are recoverable on a successful Part 36 so this is an added benefit of Part 36 offers.

However, in the first case to consider the new sanctions under Part 36 post-Jackson, the High Court has declined to order enhanced recovery for the successful claimant.  In Feltham v Bouskell [7] the claimant made a Part 36 offer of settlement 25 days before the trial started (so that the offer expired immediately before trial).  With interest on damages awarded at trial, the claimant beat its own Part 36 offer and so, on the face of it, became entitled to the new enhanced recovery.  However, siding with the defendant on the question of the Part 36 offer and its consequences, the judge declined to order the new sanction on the basis that it would be unjust.  The principal line of reasoning was that the claimant’s offer was made absolutely at the last minute, and the court does have discretion to take into account the stage in the proceedings at which a Part 36 offer is made.  In addition, key documents were disclosed only on the eve of the trial and a key allegation was only raised during trial.  It is possible that this decision will be appealed in March 2014 and we await the outcome with interest.

WM Comment

An understanding of the new culture of strict compliance, proportionality and cost budgeting, as well as co-operation between solicitors, clients and opposing party representatives is essential in the post-Jackson era, not only to avoid the pitfalls and sanctions associated with non-compliance, but also in terms of strategy with regard to disclosure and budgeting.

Similarly, counsel, experts and witnesses should be made aware (if they are not already) of the new litigation landscape and every court order and direction or instruction affecting an expert or witness should be sent to them immediately.

[1] Costs and compliance: a High Court decision, Costs and compliance update: Jackson in practice, Costs and Compliance: A strict approach

[2]  [2013] EWHC 1791 (QB)
[3]  [2013] EWHC 2923 (TCC)
[4]  [2013] EWHC 2179 (QB)
[5]  [2013] EWCA Civ 19
[6]  [2013] EWHC 3025 (TCC)
[7]  [2013] EWHC 3086 (Ch)