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Recent rulings show "sensible and pragmatic" approach to costs sanctions emerging, says expert

A recent run of High Court rulings shows that a "sensible and pragmatic" approach to the circumstances in which relief from sanctions for breaches of the civil court costs rules will be granted is gradually beginning to emerge, an expert has said.25 Feb 2014

Keith Levene of Pinsent Masons, the law firm behind Out-Law.com said that "a line of precedents" was emerging about what was a 'trivial' breach from sanctions, as per the guidance set out in a recent Court of Appeal ruling against the MP Andrew Mitchell. These precedents would ultimately prevent the sort of "litigation games" in which one party tried to use the rules to gain a tactical advantage against the other, he said.

"Some have expressed concerns about the draconian decisions emerging from the lower courts, where costs judges were strictly interpreting the new rules and there wasn't necessarily enough money at stake to challenge the decisions, but recent High Court cases form a line of precedents that will ultimately trickle down to the lower courts," he said.

"It is clear that what is gradually emerging is a sensible, proportionate, pragmatic application of the guidance set out in Mitchell, particularly in relation to what constitutes a 'trivial' breach of the rules," he said.

Levene was commenting following a recent High Court ruling in relation to a claim on a marine insurance policy, which was stayed after the claimants did not provide additional security for costs until the morning after their deadline for doing so had passed. In his ruling, Mr Justice Leggatt distinguished the facts of the case from those in the Mitchell case, saying that the insurers had seemed to view their opposition to the stay being lifted as a "potentially free ride" which would either result in the case being dismissed without trial or their costs being paid.

"The decision of the Court of Appeal in Mitchell ... has rightly been described as a 'game changer'," he said. "It is important for litigants to understand, however, how the rules of the game have been changed and how they have not. The [insurers] have sought to rely on Mitchell to turn to their tactical advantage a short delay by the claimants in providing security for costs which in itself had no material impact on the efficient conduct of the litigation."

"Unlike the claimants' default itself, the defendants' response to it has had a very serious impact on the litigation. The whole timetable for the proceedings has been derailed, significant costs have been incurred and court time has been wasted to the detriment of other court users. In other words, the reliance placed on Mitchell in this case has had the very consequences which the new approach enunciated by the Court of Appeal in Mitchell is intended to avoid," he said.

New costs management rules came into force in April 2013. The new regime requires most parties in civil court actions to prepare and exchange costs budgets for agreement by the court. Parties that do not file a budget, or do not do so in time, will be heavily penalised. Amendments can be submitted to the budget at any time but will only be approved at the discretion of the court. Costs recoverable by the winning party will be linked to the court-approved budget.

The purpose of the changes, as reiterated by Lord Dyson as part of the Mitchell appeal in November, was to enable court hearings to be conducted "efficiently and at proportionate cost". To that end, relief from sanctions could not be granted where breaches were "not minor or trivial and there was no good excuse for them", he said.

Referring to this guidance, Mr Justice Leggatt said that the present case fell "squarely within the category of case where the non-compliance with a court order can properly be regarded as 'trivial'"; or non-material, as he preferred to label it, "since the whole thrust of the new approach is to inculcate a culture of compliance with rules and order and to dispel an attitude which trivialises even 'minor' breaches". Even if this had not been the case, the fact that the claimants missed their deadline by a day "did not in itself have any impact on the efficient conduct of these proceedings, nor on the wider public interest of ensuring that litigants can obtain justice efficiently and proportionately", he said.

"It is notable that in the Mitchell case the claimant's failure to file a costs budget caused an adjournment and an abortive hearing," he said. "To accommodate the adjourned hearing, a hearing in another case had to be vacated, to the detriment of other litigants. In making this point, the Court of Appeal emphasised the importance of the court having regard, when managing an individual case, to the needs and interests not only of the parties to that case but of all court users ... The default in the present case had no consequence of that kind," he said.

The judge's approach echoed that in a number of cases that have been decided this month, including one in which relief from sanctions was granted when a statement of truth was left out of the budget by mistake; and another in which documents were exchanged 46 minutes late.