Costs Management – Pooh Traps for Heffalumps
Posted: in by Michelle Barron.
In his 18th Lecture in the Jackson Implementation Programme, Lord Dyson MR stated that the approach of the Jackson reforms had been criticised as “…transform[ing] rules into tripwires for the unwary and the incompetent… or equally into procedural weapons for the unscrupulous.” Unsurprisingly, following the refusal by the Court of Appeal to overturn Master McCloud’s decision to withhold relief from sanction in , that is exactly what is happening, particularly in relation to budgeting or costs management. Indeed, how could it be otherwise when the prize is effectively hamstringing an opponent’s case for relatively minor technical infringements, unless they can afford to litigate without hope of recovering costs, or their solicitors are bound by their retainer to litigate without such hope. A particular problem which has arisen, notably in Birmingham, is that District Judges were treating the direction to file a Directions Questionnaire as a Direction to file a budget. The problem came about because section H of the Directions Questionnaire presents a box which can be ticked to confirm that precedent H is attached. However, CPR 3.13 is quite specific in that if the Notice of Proposed Allocation (form N189C) does not specify a date for filing budgets, the default is seven days before the first Case Management Conference. The version of N189C available on the Court Service website contains a specific term for the filing of budgets. Unfortunately the version used by some Courts, in particular the Northampton Bulk Centre, omits that provision. Presumably, this was the original version prepared when the draft CPR 3.13 stipulated that budgets had to be filed within 28 days of the filing of a Defence. The White Book points out that the alternative date for filing budgets, seven days before the first CMC, was meant to catch Part 8 proceedings which are automatically allocated to the multi-track. The interplay between the Court’s use of the wrong form and the text of CPR 3.13 as it was implemented has sown the seeds of confusion. That confusion could have huge repercussions for litigants, given the consequences imposed by CPR 3.14 for failure to file a budget in accordance with the rules. One of our clients received a number of orders from the Birmingham County Court stating that they would receive Court fees only having not filed a budget with their Directions Questionnaire. Fortunately, the Court has since retreated from this position and? there are now at least two helpful judgments out of Birmingham which clarify matters. In , the Notice of Proposed Allocation contained no term for the filing of costs budgets. As a result, neither party filed a budget with their Directions Questionnaire, which caused the Court to make an Order restricting both to Court fees only in accordance with CPR 3.14. The Claimant appealed, supported by the Defendant. HHJ Worster found that the Notice of Proposed Allocation under CPR 26.3(1)(b)(i) must specify any matter to be complied with by the date specified in the Notice. Reading that rule in conjunction with CPR 3.13, he held that a Notice requiring budgets to be filed would have to specify that budgets were to be filed and the date by which they were to be filed. It was more natural to read the rules that way than to find that budgets must be filed by a date specified in the Notice for doing something else, i.e. the filing of a Directions Questionnaire. As a matter of general principle, the Judge considered that the harsher the sanction, the greater the need for clarity and, whilst not determinative, the severity of CPR 3.14 would tend to militate in favour of the defaulter where there was a genuine ambiguity in the rules. Even had he refused the appeal, HHJ Worster would have granted relief from sanction because the parties were not refusing to engage in the process of budgeting and their approach was entirely understandable. Whilst the default would not have been trivial, there was a good reason for it. In , District Judge Lumb also found that, although it might not have been the intention of the rule makers, the absence of a requirement to file budgets on a Notice of Proposed Allocation, coupled with the wording of CPR 3.13 meant that a budget did not have to be filed with the Directions Questionnaire. Unfortunately, whilst the Court gave with one hand, it took away with the other. The Defendant filed his budget only five days prior to the CMC, not seven. The Defendant sought to characterise this as a trivial breach of the rules but the learned District Judge was not persuaded. Even pre-Jackson he found examples where attempted compliance even one day after the event was unsuccessful. He also commented that those who left things to the last minute and got it wrong had only themselves to blame and would struggle to gain the sympathy of the Court. Such conduct was not consistent with the overriding objective of dealing with litigation justly and at proportionate cost. Early preparation could have led to a narrowing of the issues or even agreement of budgets which would have freed up time for other matters. However, the Defendant’s failure had meant that most of the CMC had been taken up with his application for relief which had necessitated a further hearing. Perhaps the only crumb of comfort for the Defendant in this case is that having admitted liability at an early stage, the restriction on his costs would only be relevant if the Claimant were to fail to beat a Part 36 offer. What these cases show is that costs management is a technical and contentious area of law, frequently driven by dogma and concealing yawning chasms into which the unwary tumble. …the prize is effectively hamstringing an opponent’s case for relatively minor technical infringements, unless they can afford to litigate without hope of recovering costs, or their solicitors are bound by their retainer to litigate without such hope. Robert Parness is a Costs Lawyer at Jennings Costs Consultants. Email: firstname.lastname@example.org