I am quite sure that by now all of our followers are aware that under the new rules (with the notable, and quite frankly in my opinion cynical, exception of the Commercial Court and budgets in excess of £2m in the TCC, Mercantile and Chancery courts) parties to an action are required to exchange and file costs budgets in the form of a new precedent H.  The court will then consider and “approve” the total figure.   If the party fails to file within the specified time rule 3.14 applies, “Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees.”

Costs budgets must set out what costs have already been incurred as well as those anticipated costs to the conclusion of the case.    Assumptions must be provided and will be extremely important particularly if, at any time in the future, there needs to be any amendment to the approved budget.

These changes were implemented on 1 April 2013 (please note the date!) and since then we have all been waiting with bated breath for some decisions from the courts bearing in mind the earlier case of Henry –v- NGN and in that case the court’s refusal to allow the claimant’s solicitor to recover costs in excess of an earlier approved budget.

The first apparently relevant case is that of Mitchell –v- NGN.

In March Andrew Mitchell MP commenced an action against News Group Newspapers.   This came after The Sun claimed that Mitchell had sworn at and called police officers plebs at the gates to Downing Street.

The parties were ordered to file costs budgets.  Whilst the Master accepted that this case falls outside the brave new world post April, it did fall within the previous defamation proceedings pilot (as did the case of Henry –v- NGN).  Mr Mitchell’s solicitors failed to file the budget in time.

The Master considered the sanction in relation to failure to provide a budget as per the principles of the new rule 3.14 although accepted that the rule did not apply in this case and as a result the court found that Mr Mitchell would be “limited to a budget consisting of the applicable court fees for his claim”.

The Master also considered the new wording of the overriding objective (which does apply) and the more rigorous requirements of relief from sanction under 3.9

(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need –

(a) for litigation to be conducted efficiently and at proportionate cost; and

(b) to enforce compliance with rules, practice directions and orders.

(2) An application for relief must be supported by evidence.

The reasons given for the failure to engage in discussions with the Defendant and to provide a budget until the afternoon before the hearing were mainly said to be as a result of lack of notice, delays with Counsel, problems with lack of staff and work being done on other cases, in particular one other notable important case.  The court was not notified beforehand about these difficulties and it was only when the Master contacted the Claimant on the day before the hearing that their budget was received.

The reasons given for the delay were not considered sufficient to allow the application for relief from sanction.  The Master also pointed out that the Defendant had managed to comply with the benefit of using external Costs Lawyers.  The Claimant’s solicitors were allowed the applicable court fees as the budget.

On an application for relief from sanction the Master refused to lift the sanction despite hearing further as to the reasons for the non compliance. Indeed the Master, when considering whether 4 days was too short a time for production of the budget, simply said that such matters ought already to have been given consideration from the outset of the action. Whilst sympathising with the claimant and his solicitors the Master said “Budgeting is something which all solicitors by now ought to know is intended to be integral to the process from the start.” Indeed, as it was a Defamation claim they should have known that the budgeting rules had been in force for a long time.  The Master went on to say that “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 the rules, orders and practice directions.”

This judgment does seem to endorse the use of Costs Lawyers to prepare budgets.

Dare I suggest that had Mr Mitchell’s solicitor contacted an external Costs Lawyer they would now be considerably better off?

Mary Collins, Partner and Costs Lawyer

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