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The notions of promoting access to justice and controlling costs in civil litigation have walked arm-in-arm down the red carpet and through the doors of Lord Justice Jackson’s reforms which have been in force since 1 April 2013. For civil practitioners, claim strategies must be adapted to manage cases in line with new Practice Directions, modifications to the concept of the overriding objective and deep-seated procedural changes in the area of costs management. An immediate interpretation of these rules paves the way for the concept of proportionality to lead civil justice into a new era of increased fairness.
The philosophy behind the reforms was to strive for proportionality between the costs and the quantum claimed. At the heart of the change is the overriding objective. In essence, the overriding objective now overflows into the rules of case management, making it strategically difficult to obtain relief from sanctions. With the advent of CPR r 1.1(2)(f), requiring compliance with rules, practice directions and orders, practitioners may no longer rely heavily on CPR r 3.9 at a later stage to comply. The Court of Appeal has now condoned the robust approach taken by judges in the exercise of their case management powers when facing applications for a relief from sanctions. It therefore becomes an overriding matter for lawyers to adhere further to the rule that cases must be dealt with justly and at a proportionate cost.
But to what extent is this true? Henderson J in Smailes v McNally  EWHC 1562 (Ch),  All ER (D) 105 (Jun) allowed for an extension on complicated disclosure matters because the application was brought before the expiry of the period for compliance. The debate surrounding applications for an extension of compliance prior to any deadline becomes a simple way around the operation of CPR r.3.9. In Fons HF v Corporal Ltd  EWHC 1278 (Ch),  All ER (D) 292 (May) HHJ Pelling QC, sitting as judge of the High Court, was persuaded to grant an extension to allow a party to file and serve his witness statement because “his hearing [was] taking place only a very short while after the amendment of the CPR and because the period that has elapsed since the final extension expired is relatively short”.
Henderson J identifies this potential loophole and re-emphasises that “it must firmly discourage any easy assumption that an extension of time will be granted if it would not involve any obvious prejudice to the other side”. In terms of practicality and in order to adhere to the new principle of proportionality as to costs, lawyers may find that their applications for extensions will be rejected by judges who are rightly robust in their approach in the spirit of the new rules.
A significant departure from the previous “norm” is that all cases allocated to the small claims track will automatically be referred to mediation. The changes to the small claims track are, however, far more elaborate in nature. By raising the bar up to £10,000, cases may now be allocated to the small claims track if they fall within that value bracket. The position is further complicated by the removal of CPR r 26(7)(3) which, in practical terms, allows the court to “pick and mix” which case drops into which track. As a result, we can expect more self-represented litigants to attend court and cause significant delays in the process, contrary to the spirit of the overriding objective.
On the other hand, civil practitioners may well appreciate that cases brought in the small claims track are no less complex than their counterpart cases as dealt with in the fast and multi tracks. In emphasising this point, previously a case would have been allocated to the fast track if its value was over £5,000. By widening this bracket to £10,000, it can mistakenly be assumed that there is greater access to justice.
A few months into the reforms we cannot begin to unmask the level of legal and factual difficulties inherent in claims that fall within the upper range of a case allocated to the small claim track since 1 April 2013. The necessity for parties to prepare and bring to court witness statements, file direction questionnaires and crucial statements of case outweigh the courts’ less onerous directions and relaxed rules of evidence and disclosure that come from hearing a case allocated to the small claims track. Consequently, intimidated claimants could be deterred from issuing proceedings in the following ways:
Predominately, the legal procedure for filing documents within proscribed periods could be a daunting and overwhelming task with which to comply, even more so if the claimant is an organisation that is kept preoccupied by its internal operations to appreciate these legal formalities.
Second, those claimants who are considering whether to employ solicitors to handle their dispute may decide against the idea due to the inability to recover costs to which they are entitled.
The reforms enable cases to enter into the fast track should its value exceed the £10,000 threshold and fall within the £25,000 boundary. Should a case have the value of above £25,000 then it would normally be allocated to the multi track. The most profound change to the multi track is the rule of cost budgets. Significantly, all parties apart from self-represented litigants are now required to file and exchange cost budgets, which must be verified by a statement of truth (see HHJ Simon Brown QC’s exclusive series on costs budgeting).
Solicitors must note that, should these budgets not be exchanged within the proscribed time period, then the budget shall automatically, by virtue of CPR r. 3.14, be comprised only of court fees. The important date to bear in mind in order to avoid this potential fiasco is to exchange the cost budgets by the date given in the notice of proposed allocation. Should no date be indicated, then these budgets should be exchanged at least seven days prior to the first cost management conference. This requirement drastically reduces the period of time spent over detailed assessments of costs.
Civil practitioners must not assume that a court approved budget limits the cost expenditure of clients. The position is quite the reverse. Commercial clients will continue to protect their commercial interests and are fully entitled to do so, even where the budget is quite considerable. In these circumstances, such budgets may well be approved given the commercial interests of the party.
The budget in Troy Foods v Manton  EWCA Civ 615 was approved following a claim for breach of contract. Lord Justice Moore-Bick alarmed lawyers and parties involved in a civil dispute by holding that even where some parts of the costs budget do not seem grossly disproportionate, the judge in the case may approve the figure. In doing so, however, the judge would, he claimed, be applying the test of proportionality in the incorrect way.
Cost budgets would still be subject to the test of proportionality, in which case a disproportionate amount may be disallowed or reduced, even if it is considered reasonable and consequentially unrecoverable from the other side. This is the case even if “any figure for a particular element of the claim…was not so unreasonable as to render it obviously excessive” or as Lord Justice Moore-Bick put it “grossly disproportionate”.
The matter will be one that ultimately resides with the opinion of the judge directly involved in the case. Therefore, there will no doubt be precedents that highlight inconsistent decisions at both extremes. Lord Justice Moore-Bick viewed this situation as one the “court will not readily interfere with” as the “judge’s decision in a matter of this kind involves an exercise of judgment”.
To restrict a range of decisions being made, CPR 44.3(5) offers guidance that would assist a judge. Accordingly, costs incurred would be considered proportionate if they bear a reasonable relationship to:
In order to recover the costs incurred by going through the process of mediation in the pre-trial stages of litigation, the costs must first be proportionate to the factors set out in CPR 44.3(5), unless the mediation agreement itself dictates how costs are to be apportioned between the parties.
The recent case of Northern Oxford Golf Club v A2 Dominion Homes Ltd  EWHC 859 gives a salient warning that costs can be distinguished between costs that are participation costs (which are restricted to the cost of the mediator and hire of the room) and those costs that involve preparation and presentation of the mediation, which would be recoverable at court. If the parties in dispute have agreed for the cost of mediation to be the costs of the case or the agreement is silent on the issue, the judge may make such a ruling.
Unfortunately for lawyers, the path of mediation prior to trial will be a test of patience, since most cases may well still end up in trial over disagreements between the parties. Such disagreements may bring into question the test of proportionality, whereby one party may consider a point of dispute significant in contrast to its opponent’s view on that point. Even where the courts were to take a proactive role in case management, the court’s power would still leave this area practically untouched.
Direction questionnaires, as opposed to allocation questionnaires (abolished), must now be used prior to the allocation of a case to its track. Aside from the change in the name of this document, it appears to simply offer the court more information in assisting its decision to select the most appropriate track.
Given that proportionality is now the “ying” to the costs “yang”, any party wishing to adduce expert evidence must provide the court with an estimate of the costs of that evidence. This requirement places a restriction on the recoverability of costs in the context of adducing expert evidence. There is some inconsistency here, especially between the notion of proportionality and an increase of costs for each expert in the small claims track, from £250 to £750 in order to adduce that expert evidence. This almost appears to defeat the purpose behind the overriding objective of dealing with cases justly and at a proportionate cost.
The new era of proportionality is yet to mature. As it does, it is only then we will have a better understanding of how elastic the concept will prove to be throughout the Civil Procedure Rules.
Mohammed Saleem Tariq, barrister & Anton van Dellen, BPP University & barrister, Holborn Chambers. This article was first published in the New Law Journal on 6 September 2013.
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