Out-Law News 2 min. read

Parties to litigation must be aware of courts' "strict and robust approach" to new costs rules, says expert

Parties to civil court litigation must ensure that they file and exchange costs budgets no later than seven days before the first case management conference or risk strict penalties under the new costs management regime, an expert has said.

Litigation costs expert Keith Levene of Pinsent Masons, the law firm behind Out-Law.com, said that courts were taking a "strict and robust approach" to enforcement of the new regime, which came into force on 1 April. In the most recent example, the High Court limited costs awarded to MP Andrew Mitchell in his legal action against The Sun to applicable court fees only due to his "absolute failure" to discuss budget assumptions with the newspaper and failure to ask for additional time in advance.

"Save for the Court of Appeal in future delivering a judgment providing guidance on the issues raised by costs budgets and allowing more leniency, judges are taking on board the need to stand firm and enforce the rules to further the new overriding objective," Levene said.

"Absent this guidance, parties should fear the worst if they fail to comply with court rules or practice directions relating to exchanging and filing of costs budgets. Where an exchanged or filed costs budget is going to be exceeded, whether or not the costs budget is subject to an approved court costs management order, consideration must be given as to a revised budget being served and lodged with the court, and if required an application made to the court for any approved budget to be increased. These steps should be taken as soon as possible and without delay," he said.

A 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 alleged 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 costs budgets in accordance with the new regime. After Mitchell's lawyers failed to do so in time, the court said that he would be "limited to a budget consisting of the applicable court fees for his claim". The judge refused to lift the sanction even after hearing evidence about the reasons for non-compliance with the order.

"Budgeting is something which all solicitors by now ought to know is intended to be integral to the process from the start, and it ought not to be especially onerous to prepare a final budget for a CMC even at relatively short notice if proper planning has been done," she said.

"The court must now, as part of dealing with cases justly, ensure that cases are dealt with at proportionate cost and so as to ensure compliance with rules, orders and practice directions," she said.

The judge noted that it would have been "far more likely" that she would have lifted the costs sanctions against Mitchell before the new regime came into force. She said that in "the absence of authority on precisely how strict the courts should be and in what circumstances", she would refer the decision to the Court of Appeal.

That appeal would be "on the basis that the severe nature of the sanction which I have imposed in giving effect to [the costs reforms] ... are of necessity not backed by specific authority on point, and the risk of injustice if I were adopting too strict an approach is such as to provide 'some other compelling reason' for an appeal to be heard", according to the judgment.

"It will be for the appeal court to determine whether such a strict approach is appropriate," she said.

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