Budgets and relief from sanctions – the message is clear

12 December, 2013

Who knew that the famous ‘plebgate’ case of an (allegedly) truculent Chief Whip and a determined police officer would, in addition to weeks of juicy headlines, end up providing the Court of Appeal with its first opportunity to flex some serious Jackson muscle?


In Andrew Mitchell v News Group Newspapers [2013] EWCA Civ 1537 their Lordships confirmed that relief from sanctions will be very hard to come by unless a breach of a rule, order or practice direction ‘can properly be regarded as trivial’ or there is a ‘good reason’ for that breach.


Summary points to note

• Start work on budgets as soon as you can. 

• Discuss budgets and assumptions with the other side.

• If you miss the deadline for filing your budget, your client’s recoverable costs will be limited to court fees unless there has been a serious event (a ‘good reason’) which prevented filing.

• Relief is available for ‘trivial’ breaches but you don’t want to be the test case that says what ‘trivial’ means.

• Use key date systems to record and monitor deadlines and timetables.  Ensure all staff know that this is essential.

• Ensure external providers know the deadlines they must meet and the consequences of failure.

• If you know you are going to struggle to meet a deadline apply for an extension of time before the date has passed, not relief from sanctions afterwards.

• Lack of prejudice to the other party is no longer relevant.

• The interests of other court users are relevant when deciding where ‘justice’ lies.



Following the Sun newspaper’s reporting of an incident with a police man in Downing Street, Andrew Mitchell brought a defamation claim against the newspaper’s publishers. Issued in March 2013, the proceedings were run under the PD51D Defamation case management pilot scheme.  This required the parties to file costs budgets at least 7 days before the first CMC but did not specify a sanction for non-compliance. 


Costs budgets form part of the new costs management regime introduced to implement recommendations made in Lord Justice Jackson’s Review of Civil Litigation Costs: Final Report.  In most multi-track cases issued since 1 April 2013 each party, except litigants in person, must prepare a costs budget for the litigation.  The budgets must be filed and exchanged by the date specified in the Notice of Proposed Allocation or, if none, at least seven days before the date of the first case management conference (CPRr.3.13).  Failure to do so carries an automatic sanction limiting that party’s recoverable costs to court fees only, ‘unless the court otherwise orders’ (CPRr.3.14).


Mr Mitchell’s solicitors filed their budget the day before the first CMC.  The opponents had filed theirs in time.  Without a specific sanction, the Master handling the CMC adopted the r.3.14 sanction by analogy, as it was the clearest indication of the appropriate sanction for failure to file a costs budget at least 7 days before the CMC.  She gave leave to apply for relief from sanctions.


On the application for relief the Master considered the new over-riding objective and the new CPR r.3.9 and refused relief.  The estimated £500,000 costs would be irrecoverable.  The Court of Appeal confirmed that this was the correct approach.


Why so draconian?

The aim of the Jackson reforms is to improve the efficiency and reduce the costs of civil litigation.  Delays caused by non-compliance clog up the court system and increase costs.  The new over-riding objective, of dealing with cases ‘justly and at proportionate cost’, includes ‘enforcing compliance with rules, practice directions and orders’.  ‘Justly’, or doing justice, has a newly expanded meaning.  It includes not only doing justice to the parties to the case but also to other litigants. The effect on other litigants will be taken into account when case management decisions are made, as will the need to ensure that court resources are allotted fairly between cases and parties. 


Mr Mitchell’s solicitors argued that r.3.14’s extreme sanction of limiting recoverable costs to court fees was aimed at those who did not file a budget at all.  The CA disagreed.  Budgets have to be filed and exchanged at least 7 days before the CMC to give the parties time to discuss them and the court time to consider them before making case and costs management decisions.  The CA also refused to allow them a percentage of their budget.  It is a stark all or nothing rule to encourage compliance.


Failure to file budgets on time – is there a get out clause? The ‘good reason’

The restriction to court fees applies ‘unless the court otherwise orders’.  The CA held that there will have to be a ‘good reason’ for the court to make a different order.  A ‘good reason’ will be a sudden and calamitous event which couldn’t have been anticipated e.g. serious illness or accident to lawyer or client.  Mere pressure of work, inadvertent incompetence, staff shortage or late notice of the CMC will not be enough unless the breach was trivial (see below).  Parties should not treat notice of the CMC as the starting gun for preparation of budgets.  They must become part of the claim process from an early stage.  As we are obliged to give clients costs estimates at the outset it should not be too difficult to start work on the budgets, even if only in outline, right at the start. 

Overlap with r.3.9 relief from sanctions

In most cases, application for relief from r.3.14 consequences will be dealt with under the discretion built into that rule.  The CA said the considerations the court will take into account when deciding whether to order otherwise under r.3.14 will be the same as those applied to applications for relief from sanctions made under new r.3.9.  This means there will be little point applying under r.3.9 if the court has refused relief under r.3.14.  So prepare the application under r.3.14 as if it were a r.3.9 application, with strong supporting evidence to explain the default.  In Mitchell both the Master and the CA commented on the lack of evidence in support of the application for relief e.g. the reasons for it and the prejudice the claimant would suffer if relief was not granted.


Applications for relief from sanctions under new r.3.9

To give effect to the over-riding objective and deal justly with the application for relief the court will take  account of all the circumstances but with particular emphasis on the need (i) for litigation to be conducted efficiently and at proportionate cost and (ii) to enforce compliance with rules, practice directions and orders.


The impact on other court users will be an important factor.  If, by granting relief, other litigants will be inconvenienced this will weigh against the application. 


The CA outlined how applications for relief under r.3.9 will be dealt with.

• Trivial breaches will usually be granted relief, provided the application is made promptly. ‘Trivial’ means a failure of form rather than substance or a narrowly missed deadline but otherwise full compliance.

• If not trivial, the applicant must have a ‘good reason’.  Accident or debilitating illness to solicitor or client may suffice.  Also, if later developments in the litigation process have made the timetable for compliance unreasonable, and an appeal was unrealistic, that may be sufficient. 

• Clear evidence of why the default occurred will be crucial.


Don’t use r.3.9 if you want to argue that the original order was defective

CPR r.3.9 presupposes that the order attracting the sanction was properly made.  If there is doubt about the substance of the order you should appeal, or ask the court making the order to exercise its general discretion to revoke or vary an order under r.3.1(7).  That discretion will not be exercised lightly but if there has been a material change of circumstances since the order was made, the facts underlying the original decision were misstated or the judge has clearly made a mistake in formulating the order then it can be invoked but the application must be made promptly.


If the application includes both an application for relief and an application to vary or revoke, the r.3.1(7) application will be considered first.


Other points to note

Part 36 – If a party’s recoverable costs are effectively nil, Part 36 offers will have very little impact on the opponent because there will be no real sanction if the opponent fails to beat or match the offer at trial.


If a claimant’s budget is disallowed and the limitation period has not expired, can you discontinue and start again? – This is likely to be a cheaper option than proceeding with no budget.  There would be no loss to the defendant, who is otherwise looking at a windfall if the case continues, but will almost certainly face argument that it is an abuse of process. 


Experts – Experts are usually very busy people running a professional practice alongside expert witness work and can find it hard to meet deadlines.  It is now essential that they understand the need to meet deadlines and the consequences of failure.  Instructions to experts should make this clear to them.


Counsel and other external providers – Again, it is essential to ensure they know of the deadlines and consequences of failing to meet them.  If instructing counsel, or any other person whose input is essential, don’t leave it to the last minute.


If you are struggling with work load, so that deadlines are at risk, tell your supervisor and ask for help.


Good project planning and management are now crucial to the litigator’s armoury.



Reviewed in 2015