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Costs and compliance update: Jackson in practice

Court Exterior Print publication

03/07/2013

The Jackson reforms aim to streamline the civil litigation process and to promote proportionality and efficiency in the resolution of disputes. The reforms seek to achieve this through effective costs management and budgeting, and through strict compliance with case management directions. A number of recent cases in the key areas of costs and compliance begin to provide valuable guidance for solicitors and clients alike, as to how post-Jackson civil procedure should work in practice.

Costs

The case of Elvanite Full Circle Limited v AMEC Earth & Environmental (UK) Limited [1] is a clear example of the court adopting a strict, no-nonsense approach to costs budgeting.  In that case the successful defendant sought to amend its approved costs budget post-trial, and was given short shrift.  The defendant’s costs budget was originally approved by the court at approximately £270,000, including some £30,500 estimated expert’s fees.  In reliance on that budget (and of some relevance to the judge’s reasoning), the claimant had obtained ATE insurance cover to the limit of £250,000.  Shortly before trial the defendant filed an increased costs budget, this time of around £500,000 and including £200,000 of expert’s fees, although it did not make a formal application to amend its budget.  When the defendant finally did make a formal application to amend its budget after it had won the case, its application was refused.

Coulson J held that a strict approach to costs budgeting was necessary. As the Court of Appeal had emphasised in Henry [2], the function of the cost budget was to impose a limit on recoverable costs; and as Coulson J had commented himself in Murray v Neil Dowlman [3], it should be difficult to persuade a court that mistakes in an approved budget should be rectified lightly or should constitute good reason to depart from that budget.  The judge also stated that a formal application to amend a cost budget would be required immediately costs began to exceed an approved budget by more than a minimal amount.  In this particular case, the approved budget would stand and, whilst the question of whether there was good reason to depart from it could be considered by the costs judge on assessment, Coulson J commented that, certainly in respect of the increased expert’s fees, he did not think that there would be.

If Elvanite is an example of cost budgeting having a potentially negative impact on a successful party, the case of Slick Seating Systems & Another v Adams & Others [4] is an example of the process working to a  successful party’s advantage.  It is also an example of how the Jackson reforms can improve efficiency within litigation, as they are intended to do.

The claimants were awarded damages of £4.4m, along with all of their claimed costs of £351,000, which came in under the approved budget of £359,000. The judge commented that the claimants had laudably controlled costs and kept within their budget for each phase of work, and as such he awarded payment of the full claimed costs on summary assessment (and so without the need for the delay and expense of detailed assessment) within 14 days.  The approach here again seems strict: if you get your budget right, you get your costs.

However, there remains significant uncertainty within the profession and the judiciary both as to the principles to be applied when the court considers and approves costs budgets, and as to the approach to be adopted by costs judges when assessing costs in light of approved budgets. In the case of Troy Foods v Manton [5], the parties disagreed upon the approach that should be adopted when costs budgets were being considered for approval by the Court.  Manton applied to the Court of Appeal for permission to appeal on the basis that the approach by the judge at first instance had resulted in the approval of an over generous budget for Troy and out of concern that on detailed assessment the costs judge would be likely to treat approval of a budget as establishing that costs within that budget were necessarily reasonable. The Court of Appeal granted leave, commenting that “the court may wish to comment further on the proper approach to be taken by costs judges on detailed assessment in a case in which the court has approved the receiving party’s budget.”  Unfortunately for those of us seeking guidance in this emerging area the case settled before the appeal was heard.

Compliance

The recent case of Venulum Property Investments v Space Architecture [6] may be one of the Jackson reform cases that practitioners have been dreading.  In that case an application for permission to extend time for service of particulars of claim was refused by the court, on the basis that the new CPR 3.9 places a real emphasis on compliance with directions and deadlines. This new provision is intended to bring about a radical change in culture for the courts and court users to ensure  rigorous observance of rules and orders.  The court also noted that enforced compliance is now enshrined within the amended overriding objective [7].  As a result, and due to the late issue of proceedings in any event, Venulum’s claim was statute-barred.  The case of Fons [8] is an example of a lucky escape for the parties.  There had been at least two directions orders providing for the filing of witness statements and the dates in each had passed without either party complying.  HHJ Pelling QC sitting as a High Court Judge did allow a further extension, but issued the following clear statement: “I am only persuaded to extend the time for the filing of witness statements because this hearing is taking place only a very short while after the amendment of the CPR and because the period that has elapsed since the final extension expired is relatively short. However, all parties and the wider litigation world should be aware that all courts at all levels are now required to take a very much stricter view of the failure by parties to comply with directions.”

Re Atrium Training Services Limited [9] is a further case in which the new emphasis on compliance in the overriding objective has been paramount.  In that case the High Court granted an extension of time for compliance with a disclosure order, making the extension subject to an unless order such that in the event of non-compliance the case would be struck-out.  However, it was the judge’s comments in the case that provide helpful guidance as to the Jackson reforms in practice.  Henderson J noted that courts will scrutinise applications for extensions more rigorously than before and must firmly discourage any assumption that an extension will be granted merely because that does not cause obvious prejudice.  However, he tempered his comments with the recognition that there are some directions orders made at a time in the case when there are “so many imponderables… that the date for compliance cannot sensibly be regarded as written in stone, and so reasonable extensions of time may be needed as the matter develops“.  This is likely to be widely quoted by parties in future cases.

Current Conclusions

The Jackson reforms are here to stay and starting to take effect in practice: litigation practitioners are having to interpret and adopt the new rules and to embrace a new culture; and for the most part, the courts seem to be enthusiastically applying costs and case management in a strict and relatively straightforward manner. There are even some useful comments within the new case law which provide for a just result when the facts or circumstances of a particular case so require.

Therefore the advice is clear. If you are aware of and abide by the rules, adhering to a strict interpretation (when in any doubt), but applying to the court in a timely fashion when a budget or direction can no longer be complied with, not only will you not go far wrong – you may even achieve full clarity and certainty for your case and a generous costs recovery at  the conclusion of the case.

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[1] [2013] EWHC 16432 (TCC)
[2] Silvia Henry v News Group Newspapers Limited [2013] EWCA Civ 19
[3] [2013] EWHC 872 (TCC)
[4] [2013] EWHC B8 (Mercantile)
[5] Troy Foods Limited v Manton [2013] EWCA Civ 615
[6] Venulum Property Investments Limited v Space Architecture Limited & Others [2013] EWHC 1242 (TCC)
[7] CPR 1.1 (f)
[8] Fons HF v Corporal Limited (1) and Pillar Securitisation Limited (2) [2013] EWHC 1278
[9] [2013] EWHC 1562 (Ch)

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