21 February 2013Print This Post

Major widening of costs management exemption for commercial cases

Construction disputes: added to costs management exception

Cases going through the Chancery Division, Technology and Construction Court, and Mercantile Courts are to be exempt from automatic costs management, it has emerged.

The move, which will be seen as undermining the introduction of costs management and application of the Jackson reforms beyond personal injury, comes despite the fact that costs management was piloted in the Technology and Construction Court and Mercantile Courts.

The President of the Queen’s Bench Division, Sir John Thomas, and Sir Terence Etherton, the Chancellor of the High Court, have issued a statement that new rule 3.12(1) will be amended in the statutory instrument being made next month to correct problems that have already been identified with the changes to the CPR published last week.

As a result of Sir Rupert Jackson’s recommendations, the Admiralty and Commercial Courts were already to be exempt from costs management, subject to the discretion of the judge, because it would not be appropriate for the high-value cases which generally pass through them. Sir Rupert did encourage judges actively to adopt costs management in any lower-value cases.

The statement said: “On further reflection, it has been recognised that it is undesirable for an exception from automatic costs management to apply only to the Admiralty and Commercial Courts, when in many commercial cases there is an element of concurrent jurisdiction between that court, the Chancery Division, the Technology and Construction Court and the London Mercantile Court, all of which function in the Rolls Building.

“Equally, outside London, the Chancery Division, Technology and Construction Court and Mercantile Courts have a similar concurrent jurisdiction.”

As a result, the rule committee earlier this month approved an amendment to allow for a similar exemption from automatic costs management in all of those jurisdictions, although it was too late to include it in the published CPR changes.

There will also be a direction made under the amended rule that the new section II of CPR 3 and Practice Direction 3E (which both relate to costs management) shall not apply to cases in these extra jurisdictions where, at the date of the first case management conference, the sums in dispute exceed £2m, except where the court so orders. It is not clear what this means for cases worth less than £2m.

The judges said the Master of the Rolls, Lord Dyson, agreed with the decision. “Parity of approach in relation to costs management between these courts is considered to be important to avoid any inappropriate forum shopping as parties get used to the new rules.

“The revised rule is an interim measure, as it is thought that the case for any exception should be re-visited, given that under the rules there is a discretion which might be exercised in particular cases not to make a costs management order, which could deal with any remaining concerns as to the appropriateness of costs management in high-value cases.

“Also, after that review of the position, it will be desirable for the principle finally decided on to be incorporated in rule 3.12(1) itself rather than in a direction.”

They said that aside from these exceptions, “it is envisaged that costs management orders would be made in all cases except where there is good reason not to do so. Even when the exceptions in the rule and the direction apply, the use of costs management should always be considered”.

By Neil Rose

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