It woz your number one, soar-away Sun wot won it !

Today, 27th November 2013, the Court of Appeal handed down judgment in what is now the leading case on the application of the new rule 3.9, in force post 1st April 2013, namely Andrew Mitchell MP.v.News Group Newspapers Limited [2013] EWCA Civ 1526.

This keenly awaited decision, marks a further endorsement at the highest level of one the key tenets of Sir Rupert Jackson’s reforms, a new tough and uncompromising approach to relief from sanctions. The judgment is far more significant in its scope than the implementation lecture given by Lord Dyson, extra-judicially, in March 2013 to the Association of District Judges as it is a binding judgment of the appellate court and must be applied by judges at first instance.

The facts of the case are well known. The substantive litigation concerns a defamation action by the MP and former Cabinet minister Andrew Mitchell against the publishers of the Sun, involving their reporting of the so called Plebgate affair.

The proceedings were subject to CPR51D, the Defamation Proceedings Costs Management Scheme. This provided In paragraph 4.1 that there should be discussions between the parties about their budgets, and the parties must lodge their budgets, 7 days before the date of the hearing for which the costs budgets are required.

The court issued an Order on 5th June 2013, requiring the parties to attend a case management and costs budgeting hearing on 10th June 2013. The court (presumably because it realised it had made an Order that was impossible to comply with) then relisted the hearing for the 18th June 2013. On 11th June 2013 the Defendant filed a costs budget: seeking costs of £589,558. After a chasing email from the court, the Claimant’s budget was filed on 17th June 2013.

The hearing was before Master McCloud. Noting the non compliance with the requirement to lodge a costs budget timeously, she decided to impose a sanction: there was no sanction provided by the relevant paragraphs of the Costs Practice Direction, but she limited the Claimant’s budget to court fees. In so doing it should be noted she effectively disallowed the costs budget of £506,425. She based herself, by way of analogy, on the new rule 3.14, which would have had the same sanction, had it applied directly.

On 25th July 2013, the Master heard the Claimant’s application for relief from sanction. She refused relief from sanction. The results for the further progression of the claim, can only be seen to be catastrophic.

An appeal was lodged, the matter was “leapfrogged” to the Court of Appeal.

The Court of Appeal

The new wording of rule 3.9 provides as follows:

“On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need—

(a) for litigation to be conducted efficiently and at proportionate cost; and

(b) to enforce compliance with rules, practice directions and orders.”

The overriding objective has also been amended to read as follows:

“(a) ensuring that the parties are on an equal footing;

(b) saving expense;


(d) ensuring that it is dealt with expeditiously and fairly;

(e) allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases; and

(f) enforcing compliance with rules, practice directions and orders”

The Court of Appeal proceeded to discuss the new rules, and to provide commentary on guidance, on the proper approach that the courts should take under the new regime. The first question, was of course the proportionality of the sanction that the Master had decided to apply: it should be noted, that in effect the Claimant’s had had potentially £500,000 + of costs disallowed, by a point taken by the court of its own motion, for an infraction which was breach of a practice direction, not a rule, and certainly not an “unless” order. In short, did the punishment fit the crime ? The difficulty for the Claimant was that the Master had based herself on an analogous provision, which provided for precisely that sanction, for that default, albeit as for a breach of a rule not a practice direction.

30. The second question is whether the Master was wrong to construe CPR 3.14 as referring to a failure to file a budget within the time prescribed by CPR 3.13 (in the present case, seven days). Mr Browne says that it is significant that the words “within the time prescribed by CPR 3.13” are absent from CPR 3.14 and that CPR 3.14 is directed to the case of a party who does not file a budget at all. In our judgment, this is not a sensible interpretation and it cannot have been intended. If it were right, it would mean that CPR 3.14 would not apply to a party who filed a budget just before the hearing of the first case management conference, but would apply to a party who had filed the budget immediately after the conclusion of the hearing. The mischief at which CPR 3.13 and 3.14 are directed is the last-minute filing of cost budgets. As CPR 3.12(2) makes clear, the purpose of costs management (including costs budgets) is to enable the court to manage the litigation and the costs to be incurred so as to further the overriding objective. This cannot be achieved unless costs budgets are filed in good time before the first case management conference. No less important is the requirement that parties should discuss with each other the assumptions and timetable on which their respective costs budgets are based. This is to enable the hearing for which the costs budgets are required to be conducted efficiently and in accordance with the overriding objective. The history of what happened in the present case shows how important it was to comply with both of the obligations in PD 51D. As a result of the defaults of the claimant’s solicitors, no costs budgeting or case management was possible on 18 June 2013. Having imposed the CPR 3.14 sanction, the Master was unable to do anything other than adjourn.

31. The third question is whether the Master’s decision to impose the CPR 3.14 sanction by analogy was in accordance with the overriding objective. Mr Browne says that it did not give effect to the overriding objective, because it was not a proportionate decision. That is because (i) it did not reflect the fact that the breach of PD 51D was easily remedied; (ii) the breaches caused no prejudice to the defendant; (iii) they had no lasting effect on the conduct of the litigation; (iv) the breaches were minor; (v) the claimant had no history of default; and (vi) the order caused prejudice to the claimant.

32. As we have said, the costs management hearing of 18 June proved to be abortive. The claimant was not in a position to invoke the saving provision in CPR 3.14 (“unless the court otherwise orders”) and ask the Master to make an order relieving him from the sanction imposed by the rule itself. That is because his solicitors had not produced evidence which might have persuaded the court to adopt that course. We should add that in our view the considerations to which the court should have regard when deciding whether it should “otherwise order” are likely to be the same as those which are relevant to a decision whether to grant relief under CPR 3.9. In each case, in deciding whether to “otherwise order”, the court must give effect to the overriding objective: see rule 1.2(a).

33. We have concluded that the Master was entitled to make the order that she made on 18 June. She did so in the knowledge that the claimant would have the opportunity to apply for relief at the adjourned hearing and that she would then be able to decide what response the court should give to the claimant’s defaults so as to give effect to the overriding objective.

Having dismissed the appeal against that part of the decision, the actual imposition of the sanction, the Court of Appeal went on to comment in more general terms, on the New Order, that applies in civil litigation these days.

34. Much has been said about the Jackson reforms and in particular on the question whether the court is now required to adopt a more “robust” approach to granting relief to defaulting parties from the consequences of their defaults. The amendment to CPR 3.9 followed the recommendations made in Sir Rupert Jackson’s Final Report Ch 39. At para 6.5, he said:

“First, the courts should set realistic timetables for cases and not impossibly tough timetables in order to give an impression of firmness. Secondly, courts at all levels have become too tolerant of delays and non-compliance with orders. In doing so, they have lost sight of the damage which the culture of delay and non-compliance is inflicting upon the civil justice system. The balance therefore needs to be redressed. However, I do not advocate the extreme course which was canvassed as one possibility in [the Preliminary Report] paragraph 43.4.21 or any approach of that nature”.

35. The “extreme course” to which he was referring was that non-compliance would no longer be tolerated, save in “exceptional circumstances”. Instead, he recommended that sub-paragraphs (a) to (i) of CPR 3.9 be repealed and replaced by the wording that is to be found in the current version of the rule. He said that the new form of words “does not preclude the court taking into account all of the matters listed in the current paragraphs (a) to (i). However, it simplifies the rule and avoids the need for judges to embark upon a lengthy recitation of factors. It also signals the change of balance which I am advocating.”

36. As Sir Rupert made clear, the explicit mention in his recommendation for the version of CPR 3.9 of the obligation to consider the need (i) for litigation to be conducted efficiently and at proportionate cost and (ii) to enforce compliance with rules, practice directions and court orders reflected a deliberate shift of emphasis. These considerations should now be regarded as of paramount importance and be given great weight. It is significant that they are the only considerations which have been singled out for specific mention in the rule.

37. We recognise that CPR 3.9 requires the court to consider “all the circumstances of the case, so as to enable it to deal justly with the application”. The reference to dealing with the application “justly” is a reference back to the definition of the “overriding objective”. This definition includes ensuring that the parties are on an equal footing and that a case is dealt with expeditiously and fairly as well as enforcing compliance with rules, practice directions and orders. The reference to “all the circumstances of the case” in CPR 3.9 might suggest that a broad approach should be adopted. We accept that regard should be had to all the circumstances of the case. That is what the rule says. But (subject to the guidance that we give below) the other circumstances should be given less weight than the two considerations which are specifically mentioned.

38. In the 18th implementation lecture on the Jackson reforms delivered on 22 March 2013, the Master of the Rolls said in relation to CPR 3.9 that there was now to be a shift away from exclusively focusing on doing justice in the individual case. He said:

“25. In order to achieve this, the Woolf reforms and now the Jackson reforms were and are not intended to render the overriding objective, or rule 3.9, subject to an overarching consideration of securing justice in the individual case. If that had been the intention, a tough application to compliance would have been difficult to justify and even more problematic to apply in practice. The fact that since 1999 the tough rules to which Lord Justice Brooke referred have not been applied with sufficient rigour is testament to a failure to understand that that was not the intention.

26. The revisions to the overriding objective and to rule 3.9 and particularly the fact that rule 3.9 now expressly refers back to the revised overriding objective, are intended to make clear that the relationship between justice and procedure has changed. It has changed not by transforming rules and rule compliance into trip wires. Nor has it changed it by turning the rules and rule compliance into the mistress rather than the handmaid of justice. If that were the case then we would have, quite impermissibly, rendered compliance an end in itself and one superior to doing justice in any case. It has changed because doing justice is not something distinct from, and superior to, the overriding objective. Doing justice in each set of proceedings is to ensure that proceedings are dealt with justly and at proportionate cost. Justice in the application of the CPR consistently with the overriding objective.

27. The tougher, more robust approach to rule-compliance and relief from sanctions is intended to ensure that justice can be done in the majority of cases. This requires an acknowledgement that the achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations. Those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds. But more importantly they serve the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the court enables them to do so.”

39. We endorse this approach. The importance of the court having regard to the needs and interests of all court users when case managing in an individual case is well illustrated by what occurred in the present case. If the claimant had complied with para 4 of PD 51D, the Master would have given case management and costs budgeting directions on 18 June and the case would have proceeded in accordance with those directions. Instead, an adjournment was necessary and the hearing was abortive. In order to accommodate the adjourned hearing within a reasonable time, the Master vacated a half day appointment which had been allocated to deal with claims by persons who had been affected by asbestos-related diseases.

The Court of Appeal, then went on expressly, to set out what it termed guidance as to how the new approach was to be applied in practice. These paragraphs are essential reading, and will form the core arguments of many an application from now on.

40. We hope that it may be useful to give some guidance as to how the new approach should be applied in practice. It will usually be appropriate to start by considering the nature of the non-compliance with the relevant rule, practice direction or court order. If this can properly be regarded as trivial, the court will usually grant relief provided that an application is made promptly. The principle “de minimis non curat lex” (the law is not concerned with trivial things) applies here as it applies in most areas of the law. Thus, the court will usually grant relief if there has been no more than an insignificant failure to comply with an order: for example, where there has been a failure of form rather than substance; or where the party has narrowly missed the deadline imposed by the order, but has otherwise fully complied with its terms. We acknowledge that even the question of whether a default is insignificant may give rise to dispute and therefore to contested applications. But that possibility cannot be entirely excluded from any regime which does not impose rigid rules from which no departure, however minor, is permitted.

41. If the non-compliance cannot be characterised as trivial, then the burden is on the defaulting party to persuade the court to grant relief. The court will want to consider why the default occurred. If there is a good reason for it, the court will be likely to decide that relief should be granted. For example, if the reason why a document was not filed with the court was that the party or his solicitor suffered from a debilitating illness or was involved in an accident, then, depending on the circumstances, that may constitute a good reason. Later developments in the course of the litigation process are likely to be a good reason if they show that the period for compliance originally imposed was unreasonable, although the period seemed to be reasonable at the time and could not realistically have been the subject of an appeal. But mere overlooking a deadline, whether on account of overwork or otherwise, is unlikely to be a good reason. We understand that solicitors may be under pressure and have too much work. It may be that this is what occurred in the present case. But that will rarely be a good reason. Solicitors cannot take on too much work and expect to be able to persuade a court that this is a good reason for their failure to meet deadlines. They should either delegate the work to others in their firm or, if they are unable to do this, they should not take on the work at all. This may seem harsh especially at a time when some solicitors are facing serious financial pressures. But the need to comply with rules, practice directions and court orders is essential if litigation is to be conducted in an efficient manner. If departures are tolerated, then the relaxed approach to civil litigation which the Jackson reforms were intended to change will continue. We should add that applications for an extension of time made before time has expired will be looked upon more favourably than applications for relief from sanction madeafter the event.

42. A similar approach to that which we have just described has been adopted in relation to applications for an extension to the period of validity of a claim form under CPR 7.6. In Hashtroodi v Hancock [2004] EWCA Civ 652, [2004] 1 WLR 3206, this court said that (i) the discretion to extend time should be exercised in accordance with the overriding objective and (ii) the reason for the failure to serve the claim form in time is highly material. At para 19, the court said:

“If there is a very good reason for the failure to serve the claim form within the specified period, then an extension of time will usually be granted….The weaker the reason, the more likely the court will be to refuse to grant the extension.”

43. This approach should also be adopted in relation to CPR 3.9. In short, good reasons are likely to arise from circumstances outside the control of the party in default: see the useful discussion in Blackstone’s Guide to The Civil Justice Reforms 2013 (Stuart Syme and Derek French, OUP 2013) at paras 5.85 to 5.91 and the article by Professor Zuckerman “The revised CPR 3.9: a coded message demanding articulation” in Civil Justice Quarterly 2013 at pp 9 to 11.

Although this position is clear, the seasoned observer, will note that by reason of this approach, it is now easier to lift a time bar imposed by statute, pursuant to section 33 of the Limitation Act 1980, than it is to gain relief from sanction. That seems an extra-ordinary situation.

Secondly, it should be noted that a solicitor who is actually off work sick, and suffering from stress and depression caused by overwork from trying to comply with court timetables, is oddly in a better position than one who remains at work and tries to struggle through.

Thirdly, that in every application now, it will be argued that default is trivial, and the door is set firmly open for further litigation, as the realms of what is and is not trivial are explored at length.

The Court of Appeal continued:

44. Mr Browne sought to rely on certain factors which, he contended, showed that the sanction should not have been imposed by the Master in the first place. That was in our view a misguided submission. An application for relief from a sanction presupposes that the sanction has in principle been properly imposed. If a party wishes to contend that it was not appropriate to make the order, that should be by way of appeal or, exceptionally, by asking the court which imposed the order to vary or revoke it under CPR 3.1(7). The circumstances in which the latter discretion can be exercised were considered by this court in Tibbles v SIG Plc (trading as Asphaltic Roofing Supplies) [2012] EWCA Civ 518, [2012] 1 WLR 2591. The court held that considerations of finality, the undesirability of allowing litigants to have two bites at the cherry and the need to avoid undermining the concept of appeal all required a principled curtailment of an otherwise apparently open discretion. The discretion might be appropriately exercised normally only (i) where there had been a material change of circumstances since the order was made; (ii) where the facts on which the original decision was made had been misstated; or (iii) where there had been a manifest mistake on the part of the judge in formulating the order. Moreover, as the court emphasised, the application must be made promptly. This reasoning has equal validity in the context of an application under CPR 3.9.

45. On an application for relief from a sanction, therefore, the starting point should be that the sanction has been properly imposed and complies with the overriding objective. If the application for relief is combined with an application to vary or revoke under CPR 3.1(7), then that should be considered first and the Tibbles criteria applied. But if no application is made, it is not open to him to complain that the order should not have been made, whether on the grounds that it did not comply with the overriding objective or for any other reason. In the present case, the sanction is stated in CPR 3.14 itself: unless the court otherwise orders, the defaulting party will be treated as having filed a budget comprising only the applicable court fees. It is not open to that party to complain that the sanction does not comply with the overriding objective or is otherwise unfair. The words “unless the court otherwise orders” are intended to ensure that the sanction is imposed to give effect to the overriding objective. As we have said, the principles by which the court should decide whether to order “otherwise” are likely to be the same as the principles by which an application under CPR 3.9 is determined. In most cases, the question whether to relieve a party who has failed to file a costs budget in accordance with CPR 3.13 from the CPR 3.14 sanction will therefore be dealt with under CPR 3.14. That did not happen in the present case. That is why the question of relief from sanctions was dealt with under CPR 3.9.

46. The new more robust approach that we have outlined above will mean that from now on relief from sanctions should be granted more sparingly than previously. There will be some lawyers who have conducted litigation in the belief that what Sir Rupert Jackson described as “the culture of delay and non-compliance” will continue despite the introduction of the Jackson reforms. But the Implementation Lectures given well before 1 April 2013 were widely publicised. No lawyer should have been in any doubt as to what was coming. We accept that changes in litigation culture will not occur overnight. But we believe that the wide publicity that is likely to be given to this judgment should ensure that the necessary changes will take place before long.

In a coded warning to any judges out there, who may still believe that they are meant primarily to achieve justice between the parties, rather than to husband the court’s scarce and precious resources, the Court of Appeal proceeded to obliquely criticise two recent decisions.

47. We recognise that there are those who will find this new approach unattractive. There may be signs that it is not being applied by some judges. In Ian Wyche v Careforce Group Plc [2013] EWHC 3282, the defendant had failed to comply in all respects with an “unless” order. Walker J acceded to an application for relief under CPR 3.9 for two failures which he described as “material in the sense that they were more than trivial”. But he said that they were “unintentional and minor failings in the course of diligently seeking to comply with the order”. At para 61 of his judgment, Walker J said:

“The culture which the court seeks to foster is a culture in which both sides take a common sense and practical approach, minimising interlocutory disputes and working in an orderly and mutually efficient manner towards the date fixed for trial. It would be the antithesis of that culture if substantial amounts of time and money are wasted on preparation for and conduct of satellite litigation about the consequences of truly minor failings when diligently seeking to comply with an ‘unless’ order.”

48. We have earlier said that the court should usually grant relief for trivial breaches. We are not sure in what sense the judge was using the word “unintentional”. In line with the guidance we have already given, we consider that well-intentioned incompetence, for which there is no good reason, should not usually attract relief from a sanction unless the default is trivial. We share the judge’s desire to discourage satellite litigation, but that is not a good reason for adopting a more relaxed approach to the enforcement of compliance with rules, practice directions and orders. In our view, once it is well understood that the courts will adopt a firm line on enforcement, litigation will be conducted in a more disciplined way and there should be fewer applications under CPR 3.9. In other words, once the new culture becomes accepted, there should be less satellite litigation, not more.

It depends what of course, is meant by satellite litigation. If professional negligence claims against solicitors, who have allowed cases to be struck out constitutes satellite litigation, then an upsurge in satellite litigation can be expected for years to come. If second sets of proceedings have to be issued, because a first set of proceedings has been struck out within a limitation period, constitutes satellite litigation, then there will be more satellite litigation for years to come, with additionally the interesting interlocutory argument as to whether the second set of proceedings per se, is an abuse of process.

49. The other decision to which we wish to refer is that of Andrew Smith J in Raayan Al Iraq Co Ltd v Trans Victory Marine Inc [2013] EWHC 2696 (Comm). The claimant applied for an extension of two days for the service of its particulars of claim. In substance, the application was for relief from sanctions under CPR 3.9. The judge acknowledged that the list of circumstances that was itemised in the earlier version of the rule had gone. Nevertheless, he proceeded “somewhat reluctantly” to apply the old checklist of factors. We accept that, depending on the facts of the case, it will be appropriate to consider some or even all of these factors as part of “all the circumstances of the case”. But, as we have already said, the most important factors are the need for litigation to be conducted efficiently and at proportionate cost and to enforce compliance with rules, practice directions and orders.

50. Having examined the case by reference to the old checklist of factors, Andrew Smith J concluded at para 18 that the “overriding objective demands that relief be granted and I grant it”. But it seems to us that he may not have recognised the particular importance of the two elements of the overriding objective that are mentioned in the revised version of CPR 3.9. It is true that at para 15 the judge referred to the culture of delay and non-compliance and what Sir Rupert Jackson had said about that in his Final Report. As to the effect of the revision to CPR 3.9, he said:

“Nor do I accept that the change in the Rule or a change in the attitude or approach of the courts to applications of this kind means that relief from sanctions will be refused even where injustice would result.”

51. It seems to us that, in making this observation, the judge was focusing exclusively on doing justice between the parties in the individual case and not applying the new approach which seeks to have regard to a wide range of interests.

The Court of Appeal went onto dismiss the balance of the appeal noting the following:

56. In our view, even if there is some force in all three of these criticisms, they do not go to the heart of the Master’s reasoning. Her main finding was that the claimant’s solicitors had been in breach of two provisions of PD 51D and that, in the light of the new approach mandated by the Jackson reforms, the case for granting relief from the CPR 3.14 sanction was not established.

57. Finally, Mr Browne submits that the decision to refuse relief did not give effect to the overriding objective. His main points are the same as those summarised at para 31 above. It is not suggested that the Master failed to have regard to any of these points in her comprehensive judgment. They would have carried considerable weight if the application had been considered under the earlier version of CPR 3.9. The Master was right to recognise that the emphasis has now changed. In these circumstances, we consider that there is no proper basis for interfering with her decision. On the question of prejudice, we wish to highlight the fact that there was no evidence to show what prejudice (if any) the claimant would suffer as a result of a refusal to grant relief.

One would have thought that the prejudice was obvious: but plainly any evidence in support of such an application in the future, must spell this out, in chapter and verse, particularly if it is dependent on the Claimant being under a continuing liability for costs.

58. A central feature of Mr Browne’s submission was that, whenever a sanction is imposed, the court must have regard to considerations of proportionality. In this case, he says that a more proportionate response would have been to grant partial relief from the sanction, for example, by making an order that the costs budget should be 50% of the actual estimated figure or should not include the costs connected with the budget itself. We accept that the Master had the power to make such an order. But we do not consider that the grant of partial relief from CPR 3.14 will often be appropriate. The merit of the rule is that it sets out a stark and simple default sanction. The expectation is that the sanction will usually apply unless (i) the breach is trivial or (ii) there is a good reason for it. It is true that the court has the power to grant relief, but the expectation is that, unless (i) or (ii) is satisfied, the two factors mentioned in the rule will usually trump other circumstances. If partial relief were to be encouraged, that would give rise to uncertainty and complexity and stimulate satellite litigation.

In ominous tones, the Court of Appeal made it plain that the interests of the Claimant were being sacrified pour encourager les autres who would be interested in watching what happened in this particular case.  

59. We therefore dismiss the appeals against both orders. The Master did not misdirect herself in any material respect or reach a conclusion which was not open to her. We acknowledge that it was a robust decision. She was, however, right to focus on the essential elements of the post-Jackson regime. The defaults by the claimant’s solicitors were not minor or trivial and there was no good excuse for them. They resulted in an abortive costs budgeting hearing and an adjournment which had serious consequences for other litigants. Although it seems harsh in the individual case of Mr Mitchell’s claim, if we were to overturn the decision to refuse relief, it is inevitable that the attempt to achieve a change in culture would receive a major setback.

60. In the result, we hope that our decision will send out a clear message. If it does, we are confident that, in time, legal representatives will become more efficient and will routinely comply with rules, practice directions and orders. If this happens, then we would expect that satellite litigation of this kind, which is so expensive and damaging to the civil justice system, will become a thing of the past.

Richard of York gives battle again

About 40 miles from here, in 1485, Richard III unwittingly brought the Middle Ages to an end, by losing the Battle of Bosworth Field to the victorious Henry Tudor. The defeated king’s remains were taken to Leicester and lost. Found in 2013, the Divisional Court on 26th November 2013 will hear the substantive challenge brought in relation to their re-interment and location of the dead king’s final resting place.

The challenge brought by the Plantagenet Alliance Limited has already generated some interesting ancillary litigation in the field of protective costs orders: on 15th August 2013 Mr Justice Haddon-Cave granted permission to bring judicial review and also made a protective costs order on the papers. On 26th September 2013 the court heard a number of applications, including one to vary or discharge the protective costs order. In a full and careful judgment given on 18th October 2013, the court handed down its reasoned judgment reported at [2013] EWHC 3164 (Admin).

The law relating to protective costs orders

The learned judge began by restating the substantive law, that prescribes when and in what circumstances, the court will exercise its discretion to make a protective costs order:

17. The general principles governing Protective Costs Orders were restated by the Court of Appeal in R (Corner House) v Secretary of State for Trade and Industry [2005] 1 WLR 2600 (CA) at [74] as follows (see also The White Book at paragraph 48.15.7):

“(1) A protective costs order may be made at any stage of the proceedings, onsuch conditions as the court thinks fit, provided that the court is satisfied that:

(i) the issues raised are of general public importance;

(ii) the public interest requires that those issues should be resolved;

(iii) the applicant has no private interest in the outcome of the case;

(iv) having regard to the financial resources of the applicant and the respondent(s) and to the amount of costs that are likely to be involved it is fair and just to make the order;

(v) if the order is not made the applicant will probably discontinue the proceedings and will be acting reasonably in so doing.

(2) If those acting for the applicant are doing so pro bono this will be likely to enhance the merits of the application for a PCO.”

(3) It is for the court, in its discretion, to decide whether it is fair and just to make the order in the light of the considerations set out above.

18. A PCO can take a number of different forms and the choice of the form of the order is an important aspect of the discretion exercised by the judge (Corner House, ibid, at [75]). There is room for considerable variation, depending on what is “appropriate and fair” in each of the rare cases in which the question of a PCO may arise (Corner House, ibid, at [76]).

19. The Court of Appeal in Corner House said that the earlier guidance in the case of King v Telegraph Group Ltd [2004] EWCA Civ 613 at [101-2] (a defamation case) will “always” be applicable, but rephrased the King guidance in the present context as follows (Corner House, ibid, at [76]):

(1) When making any PCO where the applicant is seeking an order for costs in its favour if it wins, the court should prescribe by way of a capping order a total amount of the recoverable costs which will be inclusive, so far as a CFA funded party is concerned, of any additional liability.

(2) The purpose of the PCO will be to limit or extinguish the liability of the applicant if it loses, and as a balancing factor the liability of the defendant for the applicant’s costs if the defendant loses will thus be restricted to a reasonably modest amount. The applicant should expect the capping order to restrict it to solicitors’ fees and a fee for a single advocate of junior counsel status that are no more than modest.

(3) The overriding purpose of exercising this jurisdiction is to enable the applicant to present its case to the court with a reasonably competent advocate without being exposed to such serious financial risks that would deter it from advancing a case of general public importance at all, where the court considers that it is in the public interest that an order should be made. The beneficiary of a PCO must not expect the capping order that will accompany the PCO to permit anything other than modest representation, and must arrange its legal representation (when its lawyers are not willing to act pro bono) accordingly.

20. The Court should not set a PCO aside which has already been granted unless there is “compelling reason” for doing so (Corner House, ibid, at [79]).

The learned judge then went onto two deal with two further aspects of the substantive law, relating to protective costs orders:

21. Subsequent cases have, however, repeatedly emphasised the need for “flexibility” when applying the Corner House guidelines, and in particular guideline (iii) that an applicant should have no “private interest” in the outcome of the judicial review case (see R (Bullmore) v. West Hertfordshore Hospitals NHS Trust [2007] EWHC 1350 (Admin), per Lloyd Jones J; R (Compton) v Wiltshire PCT [2008] EWCA Civ 749 (Waller and Smith LJJ, Buxton LJ dissenting) ; R (Buglife) v Thurrock Thames Gateway Development Corp [2008] EWCA Civ 1209, [2009] 1 Costs LR 80 (Sir Anthony Clarke MR, Maurice Kay and Stanley Burnton LJJ); and Morgan v. Hinton Organics (Wessex) Ltd [2009] Env LR 30 (Laws, Carnwath and Maurice Kay LJJ). Compton (2008)

22. In Compton (supra), Waller LJ examined the 2006 Kay Report of a Working Group on Public Interest Litigation and the 2008 Sullivan Report of a Working Group on Access to Environmental Justice. Waller LJ went on expressly to approve Lloyd Jones J’s “flexible” approach and emphasise that the Corner House guidelines should not be read as statutory provisions or in an “over-restrictive” way (ibid, at [23]). Waller LJ also dismissed the notion of an “exceptionality” principle in addition to the Corner House guidelines (ibid, at [24]). Waller LJ concluded with the following observations on the meaning of “general public importance” (ibid, at [24]):

“Finally I do not read the word “general” as meaning that it must be of interest to all the public nationally. On the other hand I would accept that a local group may be so small that issues in which they alone might be interested would not be issues of “general public importance”. It is a question of degree and a question which Corner House would expect judges to be able to resolve.”

23. Smith LJ endorsed a similarly “flexible” approach to Waller LJ in Compton and gave the following guidance in relation to the question of “general public importance” at [77]:

“It seems to me that a case may raise issues of general public importance even though only a small group of people will be directly affected by the decision. A much larger section of the public may be indirectly affected by the outcome. Because it is impossible to define what amounts to an issue of general public importance, the question of importance must be left to the evaluation of the judge without restrictive rules as to what is important and what is general.”

24. Smith LJ enunciated the following useful, common sense yardstick in Compton at [85] (which was cited by Sir Anthony Clarke MR in Buglife at [20]):

“It seems to me as a matter of common sense, justice and proportionality that when exercising his discretion as to whether to make an order and if so what order, the judge should take account of the fullness of the extent to which the applicant has satisfied the five Corner House requirements. Where the issues to be raised are of the first rank of general public importance and there are compelling public interest reasons for them to be resolved, it may well be appropriate for the judge to make the strongest of orders, if the financial circumstances of the parties warrant it. But where the issues are of a lower order of general public importance and/or the public interest in resolution is less than compelling, a more modest order may still be open to the judge and a proportionate response to the circumstances.”

Having noted the flexible nature of the jurisdiction, he then went onto consider some further decisions of the Court of Appeal:

25. In Buglife (supra), the Court of Appeal stated Waller LJ’s views were of general application (ibid, at [17]) and said that the correct approach was to follow Corner House as explained by Waller LJ and Smith LJ in Compton (Buglife, ibid, at [18-19]). The Court of Appeal in Buglife also expressly agreed with Waller LJ’s view that it was “difficult to separate” the two tests of “general public importance” on the one hand, and “public interest” on the other (per Sir Anthony Clarke MR giving the judgment of the Court, ibid, at [17]).

26. In Morgan Hinton (supra), the Court of Appeal noted that the Rules Committee had not yet addressed the criticisms of the narrow approach to the Corner House guidelines and went on to say that, in the meantime, the “flexible” basis proposed by Waller LJ and approved by Buglife, should be applied to all aspects of the Corner House guidelines (Morgan Hinton, ibid, at [40]):

27. In the very recent decision of R (Litvinenko) v. Secretary of State for the Home Department (Goldring LJ, Treacy LJ and Mitting J, 4th October 2013), the Court of Appeal is summarily reported as having stated as follows:

(1) The starting point was that a PCO would not be made unless (a) there was a real prospect of success in the judicial review proceedings, (b) the issues raised were of general public importance and (c) there was a compelling public interest for them to be resolved.

(2) A private interest in the judicial review claim is not fatal to the application for a PCO. Subsequent cases have emphasised the need for flexibility when considering the requirement in Corner House that an applicant should have no private interest in the case. The correct approach was that an applicants’ private interest was (merely) “a factor” to consider when balancing against the other elements of the Corner House guidance.

(3) In the present case, Mrs Litvinenko’s liquid assets outweighed the value of the Secretary of State’s estimated costs and she had greater means than many other litigants. She had the financial means to bring the proceedings if she chose to and it would not be “fair or just” to make a PCO, nor was it an “exceptional” case for the Corner House principles to apply.

28. It should be noted that the reference in Litvinenko to an “exceptionality” requirement is in contrast to the Court of Appeal’s previous endorsements of Waller LJ’s approach in both Buglife and Morgan Hinton (see above). A full transcript of Litvinenko is not yet available.

He then concluded after carefully listing and considering the various factors, that the requirements for a  protective costs order were satisfied.

Relationship with security for costs

The Secretary of State in addition to seeking the discharge of the protective costs order, made a counterblast, of seeking an order for security for costs, noting that the claimant was a limited company set up by an individual with the real interest in pursuing the claim.

Such a cross application could be characterised by a cynical observer as a transparent attempt to stifle the claim: but in any event it covered the same ground and the same consideration of whether a protective costs order should be made, it being the claimant’s case that if such an order was not granted, the claim would not proceed. In the event it was given short shrift by the court.

56. The Justice Secretary made a separate and stand-alone application for an order for security for costs against the Claimant pursuant to the discretion given to the Court to grant permission to apply for Judicial Review and/or pursuant to CPR 25.12, 25.13(1)(a) and 25.13(2)(c). Mr Weisselberg submitted on behalf of the Justice Secretary that the incorporation of the company was simply a ‘device’ to avoid the consequences of an adverse costs order being visited on its sole director and shareholder (Mr Nicolay), that the Claimant was a ‘busy-body’ and the Claimant should be ordered to put up substantial security, failing which the case should be stayed.

57. In my judgment, however, an order for security for costs would not be appropriate in the present case for three reasons. First, an inference as to improper motivation cannot properly be drawn in view of the actual reasons given for incorporation of the applicant company (see above) (see the similar observation by Richards J in R v Leicestershire County Council, ex p Blackfordby & Boothorpe Action Group Ltd [2001] Env LR 2 [35]). Second, on the evidence presently before the Court, an order for security for costs would simply stifle the claim. Third, in any event, as Miss Proops acknowledged, the application for security for costs simply does not arise if the Court decides to maintain the PCO.

Quantum of costs

The effect of the protective costs order, is to prevent the defendants to the litigation from recovering their costs, even if they are successful. The learned judge had to decide however, how much the claimant would recover in turn, if it won, a cap on the claimant’s costs being the quid pro quo, for the protection the court had granted against adverse costs.

59. The principles governing the quantum of cost-capping in the context of PCOs are in summary as follows:

(1) Costs should be capped at a level that is “modest” (Corner House, supra, at[76].

(2) This will normally mean restricting claimants to the costs of solicitors and one junior counsel; but there is no absolute rule (Buglife, supra, at [25]).

(3) CFA uplifts are, in principle, recoverable because it was important that those skilled in public interest litigation should continue to operate (per Moses LJ in Corner House, supra, at [17-19].

(4) Cost-capping in context of PCOs involves having regard to concepts of public interest (and the public purse) (c.f. R (Davey) v Aylesbury Vale District Council [2007] EWCA Civ 1166).

(5) There is a wide discretion for judges to do what is fair and just in all the circumstances of the particular case subject to the guideline cases.

60. The Courts have employed a variety of costs solutions in different PCO cases, including: e.g. (i) ordering Treasury rates only but with a full CFA uplift (R (Medical Justice) v Secretary of State for the Home Department [2010] EWHC 1425 (Admin), per Cranston J at [27-28]); (ii) allowing commercial rates equivalent to the defendant’s rates but without a CFA uplift (R (Public Interest Lawyers Ltd) v Legal Services Commission [2010] EWHC 3259 (Admin) per Cranston J); (iii) allowing leading and junior counsel where the Secretary of State has the same (R (Medical Justice) v Secretary of State for the Home Department [2010] EWHC 1425 (Admin) CA); and (iv) allowing two junior counsel where the case warranted (R (Public Interest Lawyers Ltd) v Legal Services Commission [2010] EWHC 3259 (Admin) CA).

61. A number of cost caps have been in the £20-25,000 range (see e.g. Badger Trust v Welsh Ministers [2010] EWCA Civ 807; and R (Mencap) v Parliamentary & Health Service Ombudsman [2010] EWCA Civ 875 at [30]); but some caps have been £100,000 (Public Interest Lawyers Ltd, [2010] supra).

62. In a helpful analysis of the case law prepared by Miss Emmerson, Junior Counsel for the University of Leicester, it is clear that it is common to link partial PCOs linked with reciprocal caps, i.e. the cap matches the level of protection at which the partial PCO is set (see e.g. Garner v. Elmbridge [2010] EWCA Civ 1006). In this case, however, I have granted a full PCO

63. Mr Clarke, Counsel for the Claimant, said that it was accepted that any costs recovery had to be relatively modest. He submitted that the Court should take as its starting point commercial rates similar to those being paid to the University of Leicester’s legal team and allow two counsel to match the defence teams. Mr Clarke further submitted that, whilst the Court might not give effect to a straight CFA, the Court should consider ‘building in’ a 50% uplift for a success fee to reflect ‘aggravating factors’ arising from the Justice Secretary’s conduct in particular in (a) breaching the disclosure order of 15th August 2013, (b) publicly criticising these proceedings in the media using a number of epithets, and (c) failing to engage with the Claimant’s open offer to settle the matter. He referred me to the witness statement of Mr Howarth of Messrs Gordons LLP who explained that (i) a significant amount of work was done by Messrs Gordons LLP and the Claimant’s Counsel prior to the entering into of a CFA but this had been treated on a pro bono basis due to the Claimant’s limited means; (ii) some £60,000 fees had already been incurred between 15th August and 17th September 2013; and (iii) that total fees in the region of £200,000 were estimated for the case, including dealing with any appeal. Mr Clarke pointed out that Claimants bringing the case would be put to more work than those responding. Claimant’s Counsel recognised, however, that recovery of fees of the order £200,000 would not be appropriate. He submitted that, in all the circumstances, a cap of around £100,000 would be appropriate.

64. Mr Weisselberg, Counsel for the Justice Secretary, argued for Treasury rates, one junior counsel, no CFA or uplift and a modest cap of between £20,000 and £40,000 on the basis that was a ‘fairly standard’ judicial review, not factually or commercially complex or document-heavy, albeit it was a high profile case and much publicised. He took issue with many aspects of the Claimant’s draft estimate of costs. He accepted, however, that it was reasonable to assume that the Justice Secretary would spend over £50,000 in total on the case.

65. Miss Proops, Counsel for the University of Leicester, adopted Mr Weisselberg’s stance and argued for a global cap in the region of £35,000. She also submitted that because this was ‘unquestionably an extremely interesting, colourful and high-profile’ case, the Claimant should have explored getting entirely pro bono representation. In my judgment, as stated above, this submission runs counter to the time-honoured principle that people are entitled to instruct lawyers of their choice (within reason) and that lawyers are entitled to be paid a reasonable fee for work done.

66. The Court necessarily adopts a broad-brush approach when deciding levels of costcapping. It does so having proper regard to all the circumstances, including (a) the general nature of the case and (b) any particular features of proposed litigation and the parties. Each case depends on its own facts.

67. My ruling on appropriate cost-capping in the present case is as follows:

(1) Rates: Treasury rates are appropriate for a case such as this, rather than commercial rates. Treasury rates are, in general, a more suitable benchmark of modesty. This case also involves scholarship and intrinsic interest, rather than burdensome commercial, factual or documentary analysis.

(2) CFA: Giving effect to a CFA would not be appropriate in the context of this case or a full PCO. The concept of a CFA does not generally sit easily with the notion of a modestly funded case in any event. Moreover, the tide has turned against CFAs in the post-Jackson world.

(3) ‘Uplift’: It would not be appropriate to delve into ‘unreasonable conduct’ issues at this stage in order to second-guess any uplift to any eventual costs recovery (albeit that such conduct might not go entirely unremarked). To do so would be premature and speculative.

(4) Counsel: It would be appropriate, in the interests of fairness and equality of arms, to allow the Claimant to recover the cost of both retained Junior Counsel (Mr Clarke and Mr Cleaver of Blackstone Chambers) since theJustice Secretary has allowed himself the luxury of the Treasury Devil (Mr James Eadie QC) and two Junior Counsel, and the University of Leicester has two Junior Counsel.

(5) Overall Cap: It seems that this case will be hard fought, despite entreaties, with no quarter being given on either side. The overall cap should have regard to this fact, the amount of costs already expended and likely future costs assuming Treasury rates, allowing some headroom but reflecting the principle of modesty. In my judgment, taking all factors into consideration, an overall cap of £70,000 would be appropriate. I am fortified that this is a fair figure because it splits the difference between the parties’ proffered figures (see above).

The decision is a useful illustration of how an application for a protective costs order works in practice. This is a topic that will become of more importance, given the increasingly restrictive approach to a grant of Legal Aid to bring judicial review, coupled with the non-recoverability of ATE premiums.

In this sense the jurisdiction, fills the funding gap, which would otherwise exist and leave a claimant potentially exposed to an adverse costs order.

To leave a claimant so exposed, could have a “chilling” effect on the ability to bring proceedings for judicial review, if claimants with meritorious claims are dissuaded from issuing them, for fear of the financial consequences of failure.

Group litigation, costs budgeting and costs capping

One of the more interesting and challenging areas of costs, relates to the practice of costs in the context of group litigation, commonly arising out of mass claims for industrial disease or disastrous accidents.

Part 19 of the Civil Procedural Rules 1998 provides a specific set of rules which deal with the making of a Group Litigation Order (GLO) and the case management of claims which give rise to common law related issues of fact or law and the provision for keeping of a group register.  The cases are run through a management court usually supervised by a managing judge.

Costs incurred under a GLO are usually divided first of all into individual costs which are those costs incurred in the pursuit or defence of an individual claim and common costs which are those costs incurred in pursuing or defending the GLO issues. Common costs will include costs incurred by the lead solicitor in administering the group litigation such as the costs of keeping the group register and those elements of generic work, undertaken by panel solicitors to collectively service their individual cases.

GLOs often give rise either to the making of a costs sharing agreement between the various claimants or in default of such an agreement a costs sharing order is typically made. What this means is that if the claimants do not reach accord between themselves which would be unusual but sometimes happens because the solicitors representing them simply assume they are going to win and do not trouble themselves with minutia relating to costs, then Rule 48.6A (4) provides as follows:

The general rule is that where a group litigant is the payment party, he will, in addition to any costs he is liable to pay to the receiving party, be liable for:

(a)The individual costs of his claim; and

(b)An equal proportion, together with all the other group litigants of the common costs. 

This is the general rule that when a litigant is a paying party he is liable not only for the costs of his claim but for a share of the common costs.

Although in some cases, no formal GLO may be made, similar issues will arise in relation to cases advanced as informal test cases: that is that the cases will have both their individual costs and also the common costs attributed to the common issues which it is sought to litigate. The tacit intention of the parties, isto make the test cases carry a very high quantum of costs upon them.In those circumstances it would  be usual for orders to made for case management which will include provisions, which to a large extent mirror the terms of a GLO.

That is, it would provide for individual costs and common costs and also make provision for failed claims, late joiners and settlers and discontinuers, all of which might reasonably be anticipated as the litigation is refined down and issues narrowed in advance of any trial.

GLOs tend to attract claims for higher hourly rates. In any high value litigation whether individually through one large claim or collectively through many thousands of small claims it would be unusual for a court to restrict solicitors to the guidelines hourly rates of the locality where the case is tried. Rather the approach of the Court is to enhance hourly rates by reference to the factors that are contained in Rule 44.5(3). Although guideline hourly rates are expressed in single figures rather than under the old A + B criteria, it is important to note the approach that has been taken by the Court in the past.  Thus in the case of Johnson -v- Reed Corrugated Cases Limited (1992) 1ALL ER 169 at 183, Mr. Justice Evans had this to say:

I approach the assessment on the following basis.  I am advised that the range for normal i.e., none exceptional cases starts at 50%, which the Cost Judge regarded, rightly in my view, as an appropriate figure for run of the mill cases.  The figure increases above 50% so as to reflect the number of possible factors…… but only a small percentage of accident cases results in an allowance over 70%.  To justify a figure of 100% or even on closely approaching 100% there must be some factor or combination of factors which means the cases approaches the exceptional.  A figure above 100% would seem to be appropriate only when the individual case or cases of the particular kind can properly be regarded as exceptional and such cases will be rare.

In the case of Loveday -v- Renton (Number 2) (1991) Cost LR Cor. Vol. 04, Mr. Justice Hobhouse said this:

To justify an uplift of 100% it is necessary….. to demonstrate that the case is exceptional.  There has been a tendency among some firms of solicitors to put forward grossly inflated percentages by way of uplift and a failure to appreciate that to justify an uplift even as high as 100% requires the demonstration that the case is exceptional.

Part 3 of the Civil Procedural Rules 1998 has been heavily amended by the Jackson Reform introduced on the 1st April 2013.  In effect in any case of the kind contemplated there is an armoury of tools now available to the Court which is enjoined to use in order seek to make costs proportionate. In terms of the hierarchy that one would expect to see in a case of this nature those are costs budgeting, costs management and costs capping.

I turn to consider how this will work in practice.

The starting point for costs budgeting is to consider Rules 3.12 to 3.18 of the Civil Procedure Rules and the new Practice Direction 3E together with precedent H and the all important guidance notes on precedent H.

These are tools by which the Court hopes to achieve the new goal set out in the redefined section 1.1 of the Civil Procedure Rules enabling the Court to deal with cases justly and at proportionate costs.

The starting point for consideration is that when putting forward a litigated case there is an obligation now in the context of this sort of litigation to put forward a cost budget.   The cost budget according to Practice Direction 3E must be in precedent H unless the Court orders otherwise being landscape format with an easily legible type face and must be dated and verified by a Statement of Truth signed by a senior legal representative. Precedent H comprises a function that summarises a budget and sections which cover the 10 phases of the litigation which are as follows:

(i) Pre-action costs;

(ii) Issues/pleadings;

(iii)Case management conference;


(v)Witness Statements;

(vi)Expert’s report;

(vii)Pre-trial review;

(viii)Trial preparation;


(x)ADR/Settlement discussions.

Precedent H also splits costs between those costs already incurred and estimated costs for the litigation going forward. Precedent H requires a lawyer to in essence construct a costs matrix for the work they intend to do on the case.  Each section has to be completed giving information about the time cost or the solicitor’s profit costs, the expert and counsel’s fee together with other disbursements. The guidance to precedent H provides assistance in attributing work to the correct phase of the litigation but in order to carry out the task of estimating future work the lawyers must create assumptions about the future shape of litigation both in terms of what work would be required and then that work would be carried out.

The lawyers will need to rely on their knowledge of both the specific case in question and their experience in dealing with other similar litigation to create appropriate high level and phased specific assumptions.

It follows, that in any GLO, there will probably be budget(s). That is a Precedent H, dealing with the common costs to be incurred by the solicitors, and a further precedent H, dealing with the individual costs. One cannot reasonably expect the court to require or to read, say 3000 costs budgets, if the cohort of claimants are 3000 strong. Thus the individual budget will set out typical costs for a typical case. The assumptions and contingencies, will demonstrate how that might be increased, if the cohort actually has several subsets of cases.

An example of a level assumption would be that the claimant will prosecute the claim to a conclusion.  But phase specific assumptions include such details as to whether the parties will obtain separate expert evidence or how many experts the parties will chose to construct.  The assumptions and their formulation is critical because once the assumptions are clearly defined the assumptions help the solicitors to attribute time and cost to each phase.  The assumption should be set out on the front page of precedent H.

Lawyers should not be afraid to state the obvious and of course it will be necessary to obtain input from experts and counsel in the assumptions.

Precedent H also deals with contingencies which are different to assumptions.  Examples of contingencies might be applications for security for costs or applications for specific disclosure or for mediation though it might be contemplated that these particular contingencies may not apply in the context of this sort of case.

It should be noted that the costs management regime does not apply to costs that have already been incurred at the pre-issue stage because those costs incurred cannot be reduced but it is important to note that costs already incurred may influence decisions in relation to cost budgets for the future conduct of the litigation and the court is free to record comments on costs already incurred which may well be influential at any detailed assessment.

There will then be an opportunity at the first case management conference in GLO litigation, to seek either a costs management order or  a costs capping order.  A costs management order will record the extent to which the budgets are agreed between the parties and if they are not agreed record the court’s approval after making appropriate revisions.

The Practice Direction 3E, in particular in paragraph 2.3, notes that this is not a process of detailed assessment but the court must consider whether the budget and costs fall within the range of reasonable and proportionate costs.  After the case management conference the parties will need to refile the budgets in the approved form.  If a costs management order is made, it will enable the to court to control the parties budgets in relation to recoverable costs.

Paragraph 2.6 of Practice Direction 3E provides for a party to submit a revised budget if there are significant developments in the litigation which warrants a revision. It should be noted that mistakes such as self induced inaccuracies in a budget will not be acceptable reasons to revise a budget because the court will expect parties to undertake robust costs budgeting first time round.

The significance of costs budgets will come into their own when a costs management order has been made and a detailed assessment is undertaken.  For rule 3.18 says as follows:

In any case where a costs management order has been made, when assessing costs on the standard basis, the Court will:

(a)Have regard to the receiving parties last approved or agreed budget for each phrase of the proceedings; and

(b)Not depart from such approved or agreed unless satisfied that there is good reason to do so.

Thus in effect costs budgets with costs management orders should function as a de facto cap upon costs but do not in fact do so: that is because there is plenty of “wriggle room” contained in the rules and also cases such as the decision of the Court of Appeal in Henry -v- News Street Newspapers Limited (2013) EWCA Civ 19, where the Court of Appeal allowed an appeal permitting a departure from a costs budget albeit that that was in the context of the defamation pilot scheme.

I turn therefore what represents the potentially more potent weapon in the arsenal for controlling costs, which is the costs capping order.  Rule 3.19 provides that a costs capping order is an order limiting the amount of future costs, including disbursements, which a party may recover pursuant to an order to costs subsequently made and future costs mean costs incurred in respect of work done after the date of the costs capping order. A costs capping order can be made in respect of the whole litigation or any issue which are ordered to be tried separately.

The test provided by Rule 3.19(5) is as follows:

The court may at any stage of proceedings make a costs capping order against all of any of the parties, if –

 (a)It is in the interest of justice of to do so;

(b)There is a substantial risk that without such an order costs will be disproportionately incurred; and

(c)It is not satisfied that the risk in sub-paragraph B can be adequately controlled by –

(i)Case management directions for orders made under this part; and

(ii)Detailed assessment of costs.

The rule goes on to say at 3.19(6):

In considering whether to exercise its discretion under this rule, the court will consider all the circumstances of the case, including –

(a)Whether there is a substantial imbalance between the financial position of the parties;

(b)Whether the cost of determining the amount of the cap are likely to proportionate to the overall cost of the litigation;

(c)The stage which  the proceedings have reached; and

(d)The costs which have been  incurred to date and future costs.

There is an interesting provision in Rule 3.19(7) which says this:

A costs capping order, once made, will limit the costs recoverable by the parties subject to the order unless a party successfully applies to vary the order.  No such variation will be made unless:-

(a)There has a been a material and substantial change of circumstances since the date when the order was made; or

(b)There is some other compelling reason why a variation should be made.

I have to say that there is something of a curate’s egg in the different tests which apply to departure from a costs management order and an actual costs capping order. That is that one can readily envisage that it might in certain circumstances be easier to satisfy the test to vary a costs capping order than it will be to show good reason to depart from a costs management order.

One also notes that the very existence of costs management orders may be thought to render costs capping orders otiose. Having said that the benefit of a costs capping order which it should be noted would be applied for with a costs management order in the alternative is that it would represent a line in the sand over which costs could not creep unless something exceptional occurred.

This is of particularly acute concern given the tension between the existence of the rules and the fact that the judiciary in such cases as Barr -v- Biffa Waste Services Limited (Number 2) (2010) 3 Costs LR 317, have been reluctant to make costs capping orders.  In that case the High Court Judge dealing with the former rules which were contained in Rule 44.18 took a restrictive approach to costs capping and took the view that such a case had to be exceptional applying earlier case law, such as the decision in Peacock -v- MGM Limited (2009) EWHC 769. The High Court Judge took the view that the crucial issue was whether there is a risk that costs would be disproportionately incurred and that a costs capping order should not be made if the disproportionate costs being incurred almost always by claimants, could be contained by case management or detailed assessment.

The defendant did not establish that case management directions and costs assessment did not between control any risk that base costs would be disproportionately incurred and so a costs capping order was refused.

Given the new emphasis on controlling costs prospectively, one awaits with interest to see whether the judges are now prepared to more readily “cap” costs, in advance of the determination of the litigation.