The issue of costs budgeting and the preparation of Form H – thrust into the spotlight by the Mitchell judgment – has encouraged the Courts to take a hard line, making the threat of costs sanctions very real, partner Juliet Schalker explains.

Under the Court of Appeal’s new approach, a failure to comply with a rule, direction or order is of itself a clear breach of the overriding objective and our prediction that it is likely to result in severe costs sanctions has been proved accurate.

Practitioners will be very familiar with the Court of Appeal decision in Andrew Mitchell MP v Newsgroup Newspapers Limited [2013] EWCA Civ 1537, where it was held that a failure to file a costs budget in time meant that a party, in this case Mr Mitchell, was to be treated as having filed a costs budget comprising only the applicable Court fees. Additionally, and perhaps more significantly, the Court of Appeal also upheld Master McCloud’s subsequent decision to refuse relief from sanctions. Essentially, the question asked of the Court of Appeal was how strictly should the Courts enforce compliance with rules, practice directions and Court Orders post-Jackson? The apparent answer: very strictly.

The Mitchell decision is significant for two reasons. Firstly, it highlights the judiciary’s desire to make the Jackson reforms bite and the principle of costs budgeting work. It would seem that the appropriate sanction for failure to file a costs budget on time will be that the offending litigant’s recoverable costs will be limited to Court fees only. Secondly, Mitchell suggests that there is now a change in approach when considering relief from sanctions, with a real emphasis on ensuring compliance with rules and orders. Although preserving an exception, so that relief may be granted if a breach is trivial, the Court of Appeal nevertheless held that “relief from sanctions should be granted more sparingly than previously”. Similarly, in Bianca Durrant v Chief Constable of Avon & Somerset Constabulary [2013] EWHC 1984 (QB), the Court of Appeal took an equally hard-line approach to the issue of relief from sanctions and refused to uphold an order granting relief for late service of witness statements. The Court held that “application of the guidance of Mitchell points clearly to that result”.

These decisions suggest a permanent dramatic change in the Appeal Court’s approach to the way in which civil litigation is conducted. That being said, recent post-Mitchell decisions have taken pains to clarify that the relationship between justice and procedure has not changed so as to “transform rules and rule compliance into trip wires”. In one of the first post-Mitchell cases, Adlington & 133 Others v Els International Lawyers LLP (in administration), the High Court adopted a less draconian approach to relief from sanctions. A string of subsequent decisions of the High Court and Court of Appeal have also illustrated the extent to which Judges are prepared to depart from the hard-line approach adopted in Mitchell, and, where appropriate, grant relief from sanctions. In Circle Thirty Three Housing Trust Ltd v Nelson and Others [2014] EWCA Civ 106, relief from sanctions was granted by the Court of Appeal where a defendant’s failure to comply with an Unless Order was shown to lie with a third party outside of proceedings. Similarly, in Summit Asset Management Ltd v Coates, an extension of time to file a Defence was permitted due to the ‘procedural unfairness’, which would have arisen due to a clerical area of the Court. In Vivek Rattan v. UBS AG, London Branch [2014] EWHC 665 (Comm), the Commercial Court firmly discouraged the taking of futile and time wasting procedural points.

Although these few decisions may be said to temper the effect of Mitchell and Durrant, it is evidently clear that failure to comply with deadlines will no longer be tolerated. Considering the Court of Appeal’s current approach, parties would be well advised to:

• Prepare and file Form H’s on time;

• Ensure compliance with deadlines by ensuring they have an effective system of diarising;

• Avoid waiting for Court Orders when it is clear that a procedural step has to be taken; and

• Consult with Counsel and experts in a timely manner.
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