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Court of Appeal warns of "change in culture" as it upholds cost sanctions against Andrew Mitchell

Out-Law News | 28 Nov 2013 | 10:01 am | 2 min. read

It would have been a "major setback" to the civil court costs reforms to overturn a High Court judgment preventing former Conservative chief whip Andrew Mitchell from claiming anything more than court fees in his legal action against The Sun, the Court of Appeal has ruled.

In its judgment, the court acknowledged the "harsh" consequences to Mitchell of his lawyers' failure to comply with the changes to the cost regime, which came into force on 1 April. However, it said that its decision should "send out a clear message" to parties that they must "routinely comply with rules, practice directions and orders" in costs matters.

Legal costs expert Keith Levene of Pinsent Masons, the law firm behind Out-Law.com, said that the decision was "what was expected, having regard to the Jackson Reforms and what the courts want to implement going forward".

"This was a sensible and reasoned judgment, which highlighted the courts' strict and robust approach to the new rules," he said.

"The Court of Appeal has also provided useful guidance on the practical application of the new rules, including examples of 'trivial' non-compliance for which relief will normally be granted. However, if the non-compliance is not trivial, the burden will be on the party seeking relief to persuade the court that there is a good reason to grant it. Solicitors being overworked or under pressure will 'rarely' be a good reason, as the judgment says," he said.

The new costs management regime was introduced in April. It requires most parties in civil court actions to prepare and exchange costs budgets for agreement by the court. Parties that do not file a budget will be heavily penalised. Parties can submit amendments to the budget at any time; however, approval will be at the discretion of the court. Costs recoverable by the winning party will be linked to the court-approved budget.

Mitchell had taken The Sun to court after it published a story claiming that the MP had sworn at a police officer outside Downing Street and called him a "pleb". Mitchell, who was the Conservative Party's chief whip at the time of the incident, was forced to stand down from his post during the subsequent public outcry.

In June, the parties were called to a case management conference (CMC) and were told to file and exchange budgets in accordance with the new regime. After Mitchell's lawyers failed to do so in time, the High Court limited the fees he would be entitled to claim back from the newspaper if he won his libel action to applicable court fees only. The judge refused to lift the sanction even after hearing evidence about the reasons for non-compliance with the order. However, she referred the decision to the Court of Appeal due to the "absence of authority" on how strictly the courts should interpret the new rules.

In his judgment, Lord Dyson said that the High Court was entitled to rule as it did. He said that the purpose of the new regime was to enable court hearings to be conducted "efficiently" and at proportionate cost. The failings by Mitchell's lawyers were "not minor or trivial and there was no good excuse for them", he said.

"The need to comply with rules, practice directions and court orders is essential if litigation is to be conducted in an efficient manner," he said. "If departures are tolerated, then the relaxed approach to civil litigation which the Jackson reforms were intended to change will continue."

"We accept that changes in litigation culture will not occur overnight. But we believe that the wide publicity that is likely to be given to this judgment should ensure that the necessary changes will take place before long," he said.

"This is further evidence of the courts recognising the commercial reality of litigation for businesses and the importance of their lawyers managing costs in a proactive way," said litigation expert Jonathan Fortnam of Pinsent Masons. "There will clearly be a competitive advantage for those lawyers who can do this."