On 1 April 2013 reforms recommended by Lord Justice Jackson came into effect by amendment to the Civil Procedure Rules 1998 ("the rules"). They introduced significant changes to the way in which civil litigation is conducted, particularly in relation to costs and sanctions for failure to comply with court orders, rules or practice directions. This article examines some of the key cases over the last year and their implications for others embarking on litigation.
One of the key changes introduced by the reforms was the introduction of costs budgeting. The concept of costs budgets was not new but the way in which the budgets now have to be prepared is, as are the sanctions imposed by the Court in the event that parties should fail to file budgets in accordance with the time limits laid down in the rules.
Unless the court orders otherwise, all parties (except litigants in person) must now file and exchange costs budgets by the date set out in the notice the court sends out following filing of a defence or, if there is no date in that notice, no later than 7 days before the first case management conference ("CMC"). The rules also specify that any party who fails to file a costs budget in accordance with the above time scales will be treated as having filed a costs budget comprising court fees only. It is this second part of the rules which has had the most impact, not just in relation to costs budgets, but also case management generally as regards compliance with time limits laid down in other rules (or related practice directions) or court orders.
Prior to the reforms courts would consider applications for extensions of time and/or relief from sanctions on a just and fair basis having regard to a long checklist of matters to consider, including, for example, any prejudice to the innocent party and whether that party could be compensated for the prejudice by way of costs. The reforms removed the reference to the checklist and instead introduced a requirement that the court should consider all the circumstances of the case so as to enable it to deal with the application justly and to enable litigation to be conducted in an efficient manner and at proportionate cost.
Confirmation that the courts would adopt a stricter approach was confirmed in the case of Mitchell V News Group Newspapers . In this case, Mitchell filed his costs budget late, one day before the date fixed for the first CMC. The Court of Appeal held that this did not amount to a trivial breach of the rules and that there was no good reason for the breach. This was despite the fact that the resources of Mitchell's solicitors, a small two partner firm, were stretched by staff absences and a heavy caseload and had only been given 11 days' notice of the CMC. The Court refused Mitchell's application for relief from sanctions and he was treated as having filed a costs budget which comprised court fees only, thereby preventing him (if successful) from recovering any of his solicitors' costs, estimated at a little over £500,000 from his opponent.
Since Mitchell there have been a number of similarly strict decisions. In Associated Electrical Industries Ltd v Alstom UK , the claimant issued and served a claim form (without accompanying particulars of claim) towards the end of September 2013. Separate particulars of claim should have been filed and served 28 days after the date when the defendant filed its acknowledgement of service which it did at the beginning of October 2013. The court should have notified the claimant of the filing of the acknowledgement of service but it failed to do so. The claimant's solicitors only learnt of the filing of the document about a week later when they made enquiries of the court office. About two weeks later they sought from the claimant's solicitors an extension of time for service of the particulars of claim. When this was refused the claimant pressed on with completion of the particulars and served them 20 days late. They then applied to court for a retrospective extension of time. The court was not persuaded that there had been insufficient time to draft the particulars of claim after the claimant had learnt of the filing of the acknowledgement of service and did not therefore think there was a good reason for the failure to comply with the time limit. The claimant's application for relief was refused and its claim was struck out.
In Singh V Singh , the parties were mother and son. These proceedings commenced by way of an injunction application. Following disposal of that application the court made an order in November 2012 setting out directions for filing and service of the particulars of claim and defence (and counterclaim). That order also provided for the matter to be listed for a CMC. The claimant filed and served her pleading but the defendant did not do so. The claimant's solicitors issued an application for an unless order which the Court granted providing that the defence (and counterclaim) should be filed and served by the date of the CMC. An unsigned version was available at the CMC and the court gave the defendant further time at the CMC to file and serve a signed copy. Upon service, however, the claimant made a further application seeking to strike out the defence (and counterclaim) on the grounds that it disclosed no reasonable grounds for defending the claim. At the hearing of that application the court struck out the defence (and counterclaim) but allowed the defendant one further period of time within which to file a perfected version, failing which the defence and counterclaim would be struck out. Although a further version was filed and served in accordance with the time limits laid down in this further order the claimant contended that the defendant was not compliant with the further order, and claimed that the defence and counterclaim should stand struck out. The court at first instance agreed and held that the defence and counterclaim stood struck out. The court also refused the defendant's application for relief from sanctions, holding that the breach was not trivial and there was no good reason for it. This decision was subsequently upheld by the Court of Appeal.
In Durrant V Chief Constable of Avon & Somerset Constabulary  the Court of Appeal refused to grant relief from sanctions to the defendant who had served a number of witness statements late, including two which had only been served 21 hours late. Whilst the Court of Appeal conceded that this might of itself be regarded as a trivial breach (and therefore relief would normally be granted) the application for relief had not been made promptly and the defendant had been specifically warned by the court that it would not be able to rely on any witness evidence other than that of witnesses whose statements had been served on time.
In Chambers V Buckinghamshire Healthcare NHS Trust  the court made a directions order at the end of November 2012 setting out the timetable by which the litigation was to be conducted. A further order made in May 2013 granted permission to the parties to rely on expert evidence, providing a date for when such evidence should be served. Further orders extending time for service of expert evidence were made in August 2013 and September 2013. Despite these further orders the defendant failed to provide its expert evidence by the extended deadline. The evidence was eventually served about four weeks later. Upon service the claimant's solicitors made an application seeking an order preventing the defendant from relying on its expert evidence. This in turn prompted the defendant's solicitors to make their own application for relief from sanctions. The court considered that the breach was not trivial but that this might be a case where the defendant could show a good reason for the breach, difficulties having arisen as regards the instructions to the expert. However, applying the principles laid down in Mitchell the Court also had to have regard to the timing of the application. As the application had been made over a month after the date for which the evidence had been ordered to be served the court considered that it had not been made promptly and accordingly, relief from sanctions was refused.
In Utilise TDS Ltd V Davies and others  the claimant filed its costs budget 41 minutes late. The court found that viewed in isolation that was a trivial breach. However, the claimant was also 13 days late in updating the court as regards progress of settlement discussions between the parties. The court considered that when viewed together the breaches of the same order could not be considered to be trivial, particularly in the absence of any good reason for the breaches. Accordingly, the claimant's application for relief was refused. This case is subject to appeal.
In Burt V Christie Birmingham Civil Justice Centre  the notice sent to the defendant advising of the service of a defence had not set out any date for the filing of costs budgets. The defendant therefore considered it need not be filed until seven days before the first CMC. However, the defendant's solicitors failed to take into account that the seven day period under the rules was to be calculated as seven "clear" days. As a result, the defendant filed his costs budget one day late. The court held that the breach was not trivial and, in the absence of any good reason for the default, refused relief from sanctions. The defendant was therefore treated as having filed a costs budget comprising court fees only.
These cases demonstrate the increased risk parties face of having their claims/defences struck out or being unable to rely on key witness or expert evidence or being disadvantaged in some other way – for example, a costs budget comprising only the applicable court fees. It can also mean that parties who run their cases efficiently may enjoy unexpected windfalls at the expense of the defaulting party.
Whilst the courts are now very much focused on ensuring stricter compliance with timetables, parties should not assume that a failure to comply with a particular time period will automatically result in the courts refusing to grant an extension of time or relief from sanctions. Parties should also be careful not to unreasonably refuse to grant an extension of time on a voluntary basis or consent subject to the court's agreement, to any request for relief from sanctions as is clear from the following cases.
Adlington and others V ELS International Lawyers LLP (In Administration)  was a group professional negligence action in which the court had made an unless order providing a final date by which the claimants had to file and serve their particulars of claim. 126 of the 134 claimants had signed their particulars of claim in good time before the expiry of the deadline set out in the order, but the remaining 8 had not done so because they were abroad or otherwise unavailable. The court concluded that the failure was insignificant, being one "of form rather than substance" and allowed the claimants' request for an extension of time.
In Lakatamia Shipping Co Ltd V Nobu Su and others  the defendant sought relief from sanctions imposed by an order dated 13 December 2013 that their defence and counterclaim would be struck out unless standard disclosure was provided on or by 17 January 2014. The order did not specify a precise time by which the order was to be complied with. However, the Commercial Court Guide makes it clear that absent specific provision in an order the latest time for compliance with orders is 4.30 pm on the day in question. The defendant's solicitors had overlooked the provisions of the guide and were working on the assumption that the deadline was 5.00 pm. By an email timed at 4.45 pm they wrote to the claimant's solicitors confirming that they were ready to exchange lists. The claimant's solicitors replied stating "there is an argument that this is out of time. We are considering and will revert soonest.". Having heard nothing further at 5.16 pm the defendant's solicitors proceeded to serve their client's list and requested that the claimant do likewise. Having heard nothing further on 20 January the defendant's solicitors issued an application for relief from sanctions. Given that the claimant was itself in breach of the order and the fact that the breach was trivial in nature, it having no bearing on the efficient conduct of the litigation or other court users, the court granted the defendant relief from sanctions.
In Chartwell Estate Agents Ltd V Fergies Properties SA and another  the claimant issued an application seeking a variety of orders including an extension of time for the exchange of witness statements and relief from sanctions for the late service thereof. The defendant opposed the application in relation to exchange of witness statements. At a CMC in October 2013 the court made an order for directions which provided, inter alia, for the exchange of witness statements no later than 22 November 2013. An issue subsequently arose between the parties as regards disclosure of documents. The claimant's solicitors contended that full disclosure had not taken place and although they repeatedly suggested that an application for specific disclosure would be made no such application was made. The defendant, on the other hand, stated that full disclosure had taken place. On 20 November they wrote to the claimant's solicitors asking whether they would be in a position to exchange witness statements in accordance with the directions order or were going to seek an extension of time for service. The claimant's solicitors replied stating that they would not be able to do so until full disclosure had taken place but did not make any application for an extension of time. The defendant likewise did not make an application and neither party took any steps to comply with the order as regards exchange of witness statements. By the end of January 2014, the situation had still not been resolved and the claimant issued an application. As a result of that application it became clear that although the defendant may well have been in a position to exchange statements in accordance with the original timetable it had not taken steps to finalise its witness statements because the claimant had said it was not ready. The court found that the default could not be described as trivial but that as both parties had been at fault for what had happened, and the trial date could still be met the case could still be conducted justly and at proportionate cost, and it was appropriate to grant relief from sanctions together with an extension of time for service of the statements.
In Nelson V Circle Thirty Three Housing Trust Ltd  the claimant, a registered provider of social housing issued possession proceedings against the Nelson family on the basis that the first defendant, Mrs Nelson, was in breach of her tenancy agreement as she had failed to live at the property as her principal home. In her defence Mrs Nelson contended that she had resided at the property at her principal home since commencement of the tenancy. Plainly relevant to that issue therefore were documents showing whether or not she was in fact living at the property. In December 2013 a specific disclosure order was made providing for Mrs Nelson to provide various documents including inter alia credit card statements by the end of January 2014. The documentation was produced on a piecemeal basis and had not been fully provided by the end of January 2014. The claimant sought and obtained an unless order. This order extended Mrs Nelson's time for compliance until the end of March and provided that if the documentation was not provided by that time her defence would be struck out. By the end of March certain credit card statements remained outstanding. Accordingly, the court went on to grant a possession order. Mrs Nelson appealed. Evidence in support of the appeal showed that Mrs Nelson had contacted her credit card provider on five separate occasions with a view to endeavouring to obtain copies of the statements and her inability to comply with the order was therefore as a result of the bank's failure to action her request. The court, allowing the appeal, held that there had been substantial compliance with the order and that Mrs Nelson had made proper efforts to obtain the missing documents. As the default was not as a result of any fault on the part of Mrs Nelson and the documents had in any event since been received and served on the claimant, the court considered this was a case where relief from sanctions should have been granted.
In Summit Navigation Ltd and others V Generali Romana Asigurare Reasiguarare SA and other  the claimant was a Maltese company and in March 2013 it was ordered to provide security for the defendant's costs in the sum of £25,000. That security was provided but in November 2013 the claimant then sought further security. A consent order was made providing that further security in the sum of £100,000 be provided by 5 December 2013. The order went on to provide that if security was not forthcoming the action was to be stayed. The further security was to be provided by way of a new bond but it was not possible to arrange for signature of the bond until 6 December. The defendant's solicitors refused to take any steps to assist with the necessary requirements for the new bond, contending that the claim had now been stayed, and they refused to agree to the stay being lifted. The claimant therefore sought a declaration that the claim should no longer be stayed and/or an order lifting the stay. The defendant made a cross application seeking a declaration that the claim remained stayed in view of the claimant's failure to provide security and/or opposing the application lifting the stay. The court held that it was necessary for there to be an application to lift the stay, the stay being a "sanction" within the meaning of the rules. Thus, it was necessary for the claimant to seek relief from sanctions. The court, indicating its willingness to treat the claimant's application as an application for relief from sanctions, held that the breach was trivial and further that even if it could not be characterised as trivial there was a good reason for the default bearing in mind the claimant's difficulties in obtaining the underwriter's signature on the new bond. Lastly, the court found that the default had no bearing on the efficient conduct of the proceedings. In the circumstances, the court was willing to grant the defendant relief from sanctions and lifted the stay. The court also went on to find that the defendant's conduct in refusing to agree to accept the late provision of the bond was unreasonable and "stood Mitchell on its head". As a result, the court ordered that the defendant should pay the claimant's costs of both applications, save for the costs incurred by the claimant in issuing its application, which were necessitated by their default.
In Wain V Gloucestershire County Council and others  the fourth defendant was one day late in filing her costs budget. Notwithstanding the late service, the parties were still able to deal fully with the question of costs at the first CMC. As a result, there was no disruption to the court's timetable. The court found that the breach was trivial and directed that the fourth defendant be allowed to rely upon her costs budget in full.
In The Bank of Ireland and another V Philip Pank Partnership  the parties exchanged costs budgets in accordance with the time limits laid down in the rules. The sums set out in the claimant's costs budget were not disputed as such but the defendant sought to take issue with the form of the budget. The claimant had completed the standard Precedent H costs budget but on the first page had failed to include a full statement of truth. The document was signed and dated by a partner in the claimant's firm of solicitors but underneath was wording which simply said "[statement of truth]". The claimant's solicitors subsequently filed another version of the budget in identical format save that the full wording for the statement of truth as laid down in the rules was included. The defendant contended that the failure to serve a costs budget with a full and complete statement of truth meant that the claimant had failed to file a budget in time in accordance with the rules and thus should be taken as only having filed a budget comprising of court fees. The court found that the budget as filed suffered from an irregularity rather than a budget which had been filed and exchanged late. Accordingly, the court held that the claimant was entitled to rely on its budget in full.
The way forward
There is likely to be a considerable amount of satellite litigation over whether a default is trivial and/or there is good reason for the default as there are no "hard and fast" rules defining these terms. However, parties should give serious consideration before deciding to use the Mitchell decision as a tactical weapon – as can be seen from the Summit decision such a tactic may result in the so-called innocent party ending up on the wrong end of an order for costs. Unless and until there is specific definition in this regard parties would be well advised to ensure that they run their cases efficiently so that wherever possible deadlines are not missed. If it becomes clear that a party may be in danger of missing a deadline an approach should be made to the other side sooner rather than later with a view to endeavouring to agree an extension of time and if this is not forthcoming an immediate application to court should be made. Ideally, such an application should be made prior to the date by which time is due to expire – the Court of Appeal made it clear in Mitchell that applications for an extension of time would be looked on more favourably than an application for relief from sanctions made after the time period has expired.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.