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The Court of Appeal’s clear message on new costs regime

The Master of the Rolls has delivered a unanimous judgment limiting Andrew Mitchell MP’s legal costs in his defamation action against “The Sun” newspaper to his court fees only despite his budget being in excess of £500,000.  This is the first time the Court of Appeal has considered sanctions under the new Jackson costs regime and is a sobering lesson for litigators.

By way of background, Mitchell’s solicitors filed their cost budget late. Whilst they ought to have filed it not less than seven days before the hearing for which the costs budget were required, they did so less than 24 hours beforehand, having ignored prompting from the Defendant’s solicitors and only done so upon a reminder from the court.  At the hearing, Master McCloud found that there were “really no adequate excuses for the breach”;  pressures of litigation and being a small firm not being good excuses, legal professionals had had ample warning about the new regime for many months, and that they knew that the courts would adopt a strict approach to non-compliance. As a result, she ordered that Mitchell’s budget be limited to court fees only.

Mitchell then applied for relief from the sanction. Master McCloud rejected that application in an “impressive judgment”, noting that (at 11-18):

• The new Overriding Objective meant that the court must ensure compliance with rules, order and practice directions;
• The Master had had to clear her diary for the relief application to the detriment of other court users;
• The Claimant had failed to engage in discussions with the Defendant about their budget;
• The Claimant had made no attempt to apply to the court for extra time or ask for informal relief;
• The budget had only been produced upon prompting by the court;
• Another hearing had had to be listed;
• The explanations about pressures of work, being a small firm, and unexpected delays with counsel carried less weight in a post-Jackson era than they did before;
• There was no particular prejudice to the Claimant since he would not be denied access to the Court; and,
• Whilst there was “something of a windfall” for the Defendant, “that is the way with sanctions”.

Upon appeal, the Court of Appeal found that the Master was entitled to apply CPR 3.14 by analogy and, of some note, endorsed “the tougher, more robust approach to rule-compliance and relief from sanctions…to ensure that justice can be done in the majority of cases”.

The Court then gave guidance on relief from sanction (at 40-48):

• It will usually be appropriate to start by considering the nature of the non-compliance with the relevant rule, practice direction or court order;
• If it can be regarded as “trivial”, relief will usually be granted provided an application is made promptly;
• If it cannot be regarded as “trivial”, the burden is on the defaulting party to persuade the court to grant relief;
• If there is a “good reason”, the court will likely decide that relief should be granted;
• A “good reason” could be debilitating illness or an accident but overlooking a deadline or overwork is unlikely to be. In short, a “good reason” is likely to arise from circumstances outside the control of the party in default; and,
• From now on relief from sanctions should be granted more sparingly than previously.

The final paragraph from the Court of Appeal – “we hope that our decision will send out a clear message”. We have been warned.