Strictly compliance - orders and rules must be obeyed

27 November 2013

Following the introduction of the Jackson reforms in April 2013, many practitioners questioned just how strictly the courts would enforce compliance with the Civil Procedure Rules, practice direction and court orders post-implementation.

The first post-reforms Court of Appeal decision dismissing the 'plebgate' costs appeal in Mitchell v News Group Newspapers Ltd has just answered that question. Enforcement will be robust. Litigators have been warned: failure to comply, for which there is no good reason, will not usually attract relief from sanction.

The background

The proceedings relate to the high-profile defamation claim brought by Andrew Mitchell MP (AM) following The Sun's coverage of the 'Plebgate' scandal. The proceedings were subject to the costs budgeting pilot (PD 51D of the Civil Procedure Rules (CPR)) for defamation proceedings which required the parties to discuss their budgets and exchange and file the budgets (in precedent HA format) not less than seven days before the case management hearing.

The defendant had unsuccessfully sought to agree its costs budget with AM's solicitors and had filed its budget in time. AM's solicitors failed to engage in budget discussions and did not produce their budget until the day before the hearing and only after prompting by the court. This was a breach of PD 51D and of the overriding objective. They had also failed to apply for any additional time to submit the budget or apply for relief when it was realised there was a timing issue.

As proceedings had been issued before 31 March 2013, the costs budgeting rules under PD 51D applied to the case, as opposed to the new costs budgeting rules under CPR 3.12. However, the hearing took place after 1 April 2013, and therefore the revised overriding objective under CPR 1.1 and the amended wording under CPR 3.9 (relief from sanctions) had to be considered. With this in mind, the Master noted the court's requirement to deal with the case justly and at proportionate cost, and the need to enforce compliance with rules, practice directions and orders.

The new costs budgeting rules are nearly identical to those in PD 51D, with one exception: the sanction in CPR 3.14 limiting a costs budget to the applicable court fees only where a party has failed to file the budget within the specified time, unless the court otherwise orders. In PD 51D, the nature of the sanctions for failure to comply was not stipulated.

First instance decision

Given that the circumstances of the breach in this case were identical to that envisaged by the new rules, and that practitioners had had "ample warning" with regard to the court's stricter interpretation of the application of the rules, the Master considered that the correct approach in this case would be to apply the same sanction as that in CPR 3.14. The budget, and so the recoverable costs should AM be successful, would cover the applicable court fees only.

The Master refused to grant relief from sanctions, applying the stricter approach courts are now required to take pursuant to the reworded CPR 3.9 which refers, among other things, to the need to enforce compliance with rules, practice directions and orders.

The reasons AM's solicitors put forward to excuse the failure to comply included:

  • They were a small, two-partner firm.
  • They had a number of staffing issues.
  • Other litigation they were involved in at the same time put them under considerable time constraints.

The Master held these would not have been good reasons to grant relief prior to the new rules and were even less so now. The Master did however grant leave to appeal of her own motion, given the lack of authority on how to interpret the new rules and how strict the courts should be.

The Court of Appeal's decision

The appeal was leapfrogged to the Court of Appeal with the reserved judgment handed down today. The full judgment can be read here. The court dismissed the appeal with the Master of the Rolls saying he hoped the decision would send out a clear message.

The court held:

  • The Master was correct to apply the sanction in CPR 3.14 by analogy. It represented the considered view as to what constituted a proportionate sanction for failure to file a costs budget in time, unless the court ordered otherwise.
  • The sanction would apply to late filing of the budget as well as a failure to file it at all. CPR 3.12(2) made it clear that the purpose of costs management was to enable the court to manage the litigation and the costs to be incurred to further the overriding objective. This could not be achieved unless costs budgets are filed in good time before the case management conference, giving the parties time to discuss them and to enable the conference to be conducted effectively.
  • CPR 3.9 requires the court to look at all the circumstances of the case to enable it to deal with the case justly. Most importantly, this requires the court to ensure that the two requirements of CPR 3.9 are met. Firstly, that litigation is conducted efficiently and at proportionate cost and secondly, to enforce compliance with rules, practice directions and orders. These two considerations should now be regarded as being of paramount importance and be given great weight. This was a deliberate shift of emphasis.

The court provided the following guidance for applying the new approach in practice:

  • The nature of the non-compliance needed to be considered.
    • If the non-compliance was trivial, the court will usually grant relief provided an application is made promptly. Relief may be granted where there has been no more than an insignificant failure to comply with an order (i.e. a failure of form rather than substance).
    • If the non-compliance cannot be classed as trivial, then the burden is on the defaulting party to persuade the court that there is good reason to grant relief. Merely overlooking a deadline or pressure of too much work will rarely be good reason. Something more substantial is required. Good reason is likely to arise from circumstances outside the control of the defaulting party.
  • Applications for an extension of time made before time has expired will be looked upon more favourably than applications for relief from sanction made after the event.

The court held that failure to comply, for which there is no good reason, should not usually attract relief from sanction unless the default is trivial. Satellite litigation may occur but the court expected that once it was understood by practitioners that a firm line on enforcement had been adopted, litigation would be conducted in a more disciplined way and there would be fewer applications for relief from sanction.

Comment

The shift of emphasis that was promised pre-Jackson has been robustly applied in this decision. Parties and their advisors should now expect a real change to the courts' approach to compliance with rules and orders.

Relief from sanction will be granted more sparingly than previously and parties can no longer expect to get away with non-compliance just because no real prejudice has been suffered by an opponent and a costs penalty will suffice.

The "culture of delay and non-compliance" as described by Lord Justice Jackson has, according to the Court of Appeal, seen its day and no lawyer should be in any doubt about that.


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