One law firm’s mistake becomes a grave lesson for litigatorsPrint publication
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The Court of Appeal has handed down one of the most keenly awaited court judgments of the year. The decision in Mitchell MP v News Group Newspapers Ltd makes clear that those who do not comply with the new court rules will be penalised heavily in costs with no – or very little – chance of obtaining relief. In Lord Dyson’s words, “[This] more robust approach… will mean that from now on relief from sanctions should be granted more sparingly than previously”. Those not concerned with the legal detail and the nitty gritty of the court rules might like to jump to the Commercial tips at the bottom of this briefing where we list actions you can take to avoid significant costs penalties when involved in litigation.
This has been a year of change for litigators and their clients. Following a comprehensive review of civil litigation costs by Lord Justice Jackson, substantial changes to the Civil Procedure Rules (CPR) were made in April 2013. The changes were intended to control costs and promote access to justice. The revised rules have been in place for nearly eight months and already they have brought in a whole new approach to conducting litigation. Just have a look at some of the recent cases on costs budgeting, Part 36 offers and disclosure as commented on in our last newsletter: Costs and Compliance: six months in.
One case in particular has attracted a lot of attention – in the public as well as the legal arena. That case is the publicly fought defamation battle between Mr Mitchell and the News Group following the latter’s reporting in the Sun Newspaper of the incident commonly referred to as ‘plebgate’ .
Dispute resolution specialists have recently been more interested in the procedural rather than the verbal wrangles involved in these proceedings. In particular, the Court of Appeal was asked to consider an issue relating to Civil Procedure Rule Part 3.9, which deals with relief from sanctions. Mr Mitchell’s solicitors failed to file a costs budget with the court on time, for which the judge imposed a heavy costs sanction. This effectively meant that Mr Mitchell would be unable to recover most of his costs. He appealed and the big issue was whether he would be granted relief from that onerous costs sanction…
He wasn’t: his appeal was rejected. In making this decision, the Court of Appeal sent out an emphatic message that they would enforce compliance strictly and in line with the now fundamental requirement that cases be managed cost efficiently and proportionately.
Read on for more on the facts and the decision – or skip to the end for our summaries on ‘How to avoid costs sanctions.’
- The first summary sets out issues for in-house lawyers
- The second summary sets out commercial issues for those involved in or facing court proceedings.
Earlier this year, Mr Mitchell’s solicitors filed a costs budget the day before the Case Management Conference (CMC). They were several days late and in breach of the CPR PD51D Defamation Proceedings Costs Management Scheme (the pilot scheme) which applied to these defamation proceedings.
The parties attended the CMC on 18 June 2013 and, as a consequence of the non-compliance with the pilot scheme, the Master decided that a costs sanction was required. However, while the wording of the pilot scheme was almost identical to the new CPR part 3.9, the pilot didn’t set out a specific sanction for a breach of the rule. The Master therefore looked to the wording of the new CPR rule part 3.14 which sets out a sanction for not filing a budget – and decided that it was appropriate to treat Mr Mitchell as having filed a budget comprising only the applicable court fees. In effect, this costs sanction reduced his potential costs recovery (if successful in his claim) from the £500,000 he had actually budgeted for to a little under £1000.
Needless to say, Mr Mitchell and his legal team applied for relief from this costs sanction under Civil Procedure Rule Part 3.9 (CPR 3.9). The application was rejected by the Master at a hearing on 25 July 2013. She did, however, acknowledge the wide importance of the issue, of when relief should be granted, by allowing Mr Mitchell permission to appeal her decision.
Faced with the prospect of pursuing a negligence claim against his solicitors with all the attendant costs considerations, Mr Mitchell appealed. Recognising the significance of the issue of relief from sanctions to the legal profession as a whole, the appeal was ‘leap-frogged’ over the High Court to the Court of Appeal to be dealt with by the Master of the Rolls, Lord Justice Richards and Lord Justice Elias.
The Court of Appeal judgment
The appeal hearing took place on 27 November. It dealt with issues as to whether the Master was entitled:
- to sanction Mr Mitchell by limiting his recoverable costs
- to order no relief from sanctions.
In dismissing both appeals, and in line with the legal profession’s expectations, the Court of Appeal set out guidance as to when relief from sanctions might be granted. Here are the highlights:
- non-compliance with court rules, orders and practice directions will result in a sanction
- the court does still has power to grant relief – but only if one of these two important grounds is established:
- the non-compliance with a rule is trivial (for example, narrowly missing a deadline where all substantive elements are effectively dealt with)
- there is good reason. By way of example: a solicitor incapacitated by virtue of an accident or serious illness might be a good reason; a solicitor under pressure from work commitments is not
- an order giving partial relief from sanctions will not normally be given on the basis that it would engender uncertainty, make the proceedings more complex and probably lead to more satellite litigation
- in deciding whether to give relief from sanctions, ‘paramount importance’ is now to be placed on conducting litigation efficiently and proportionately and in a way so as to enforce compliance with court orders. All other circumstances which held sway before 1 April 2013, (such as whether a party has suffered prejudice as a result of the non-compliance) will now have less weight – although they might in some, very limited, circumstances be appropriate
- if you do need to make an application under CPR 3.9, apply as soon as possible
- if you are applying for both relief from sanctions and to vary or overturn the original sanctions order, deal with the latter appeal first. Bear in mind that:
- attributing the reason for non-compliance to pressure of work will not suffice as a good reason
- “well-intentioned incompetence, for which there is no good reason, [will] not usually attract relief from a sanction unless the default is trivial” 
- the Court of Appeal will “not lightly” interfere with a case management decision
- there has been a fundamental shift away from focusing exclusively on doing justice in an individual case in favour of ensuring the application of proportionality, justice and efficiency in case management for the civil litigation system as a whole.
Finally, the court stressed that compliance with the rules should not become the main goal of litigation proceedings. The court should still consider relief from sanctions where the non-compliance was trivial and, where otherwise, a party has complied substantively with the rules, orders and practice directions.
Commentary on the decision
The Court of Appeal acknowledged that this was a harsh decision against Mr Mitchell – but considered it necessary to reinforce the new rules promoting efficient case management and costs budgeting in line with the overriding objective of ensuring justice and proportionality. Indeed, for the court to have found otherwise at this first appellate, high profile opportunity would potentially have undermined the purpose and effect of the Jackson changes.
As the Master of the Rolls said, “The tougher, more robust approach to rule-compliance and relief from sanctions is intended to ensure that justice can be done in the majority of cases”.
The court must think about all court users and not just the parties in the immediate case. Adjournments resulting from a party’s non-compliance have a knock-on effect. New hearings have to be set up in a short timescale. This might lead (as happened in the Mitchell case) to the hearing in another case being adjourned. Such changes increase costs.
The courts are trying to implement the new case management rules and give a consistent, clear message about how they will deal with breaches; the rules are intended to ensure that the parties engage with each other and that cases are dealt with cost effectively and proportionately. Few litigators will deny they are positive goals.
The new costs sanctions are in place to persuade parties and their lawyers to conduct their cases accordingly. If everyone follows the rules, if parties engage with the other side, if clients and their lawyers work together, justice for the many can be achieved more efficiently and cost effectively.
How to avoid costs sanctions?
Whether you are a lawyer working in-house or a party involved in or facing future court proceedings, there are important issues to absorb from this major decision. Costs budgeting and stringent case management are here to stay.
Solicitors and in-house lawyers
You will not be surprised to hear that this decision has gripped the litigators – and should be of equal interest to those of you who are in-house lawyers and conduct your own litigation. The judgment delivers a strong warning about the effects of non-compliance with the Civil Procedure Rules. Since 1 April 2013, none of the following should come as a surprise but it’s worth restating the key points dealt with in the Mitchell judgment:
- don’t wait for the Case Management Conference (CMC) to be scheduled before starting work on case management and costs budgeting
- discuss with your opposing party the assumptions and timetable on which your respective costs budgets are based
- file your costs budgets in good time before the CMC
- if you are under time pressure, raise the issues with the other party and the court as soon as possible
- apply for extensions of time if needed before any deadline, allowing as much time as possible. Ensure you have a good reason and bear in mind that reasons are more likely to be deemed good if they arise from circumstances outside your control
- if you do need to apply for relief from sanctions, make the application as soon as possible and, again, ensure your reasons are good.
For those involved in or facing the prospect of court proceedings, be aware that:
- non-compliance with the court rules, court orders and practice directions will lead to a costs sanction
- such a sanction could mean you are unable to recover your costs even if successful in the litigation proceedings
- if the non-compliance was attributable to the negligence of your lawyer, you may then be in the unenviable position of having to start negligence proceedings – meaning you may well be conducting at least two sets of legal proceedings at the same time.
To avoid this position, keep the following guidance in mind:
- your solicitor will advise you of the important deadlines – diarise and monitor them
- work with your solicitor and comply with any requests for information or evidence by the requested deadline
- bear in mind that timescales for compliance might be tight – within days in some cases
- if you think the deadline is not achievable, raise your concern with the solicitor as soon as possible. This will enable your solicitor to discuss the timetable with the other party and if necessary apply to the court for an extension of time before the court deadline.
The position is now clear: those in breach of court rules, orders and practice directions will be subjected to sanctions; there is little chance of relief unless the breach was trivial or you have (very unusual) good reason.
The Court of Appeal believes that the culture of delay and non-compliance has damaged the civil justice system and that it is time to redress the balance between ensuring justice for the individual and the fair and efficient administration of justice for all at a proportionate cost.
Finally, spare a thought for Mr Mitchell’s lawyers. Even the Master of the Rolls acknowledged that an example had to be set by upholding the stringent sanction. He believed that the publicity for this decision would help to cement the changes to litigation practice made by the rule changes earlier this year – for the benefit of all litigants. While there were no good excuses for the delay, the misfortune of Mr Mitchell’s lawyers shines a beacon down the path of compliance for other lawyers.
 Lord Justice Jackson in the foreword to his final report, 21st December 2009
 Mitchell MP v News Group Newspapers Ltd  EWCA Civ 1537 (27 November 2013)
 judgment, paragraph 48