19 March 2014Print This Post

Busting the budget: applications to dis-apply the costs budgeting regime

McCormick: make an application as early as possible

By Lucy McCormick, Henderson Chambers

It is often thought that costs budgeting is mandatory. However, there is a little known discretion to dis-apply costs budgeting. This is derived from the wording of CPR 3.12:

(1) This Section and Practice Direction 3E apply to all multi-track cases commenced on or after 1st April 2013, except –
(a) cases in the Admiralty and Commercial Courts;
(b) such cases in the Chancery Division as the Chancellor of the High Court may direct; and
(c) such cases in the Technology and Construction Court and the Mercantile Court as the President of the Queen’s Bench Division may direct,
unless the proceedings are the subject of fixed costs or scale costs or the court otherwise orders.

The costs budgeting regime is still young, which means that no cases have yet been reported on how the court should exercise its discretion in this regard. Anecdotally, however, a number of applications to dis-apply costs budgeting have been made under CPR 3.12.

The most common scenario is where a post-April 2013 case has been joined with a pre-April 2013 case – I understand that at least one of these applications has been successful, while another settled before determination of the point.

However, that is not the only potential application of the discretion. I recently succeeded in having costs budgeting dis-applied from a post-April 2013 multi-track property dispute where the defendant was a litigant-in-person. I submitted that coming up with a costs budget requires the drafter to predict the likely course of the litigation. When both sides are legally represented, the course of litigation is relatively predictable. It becomes less so where litigants-in-person are involved, simply because they are less familiar with how things normally work.

In itself, the fact that one party is a litigant-in-person would not be sufficient to justify dis-applying the costs budgeting rules. Had that been the intention, it would have been simple to have incorporated that into the new rules. However, in the present case there had already been some instances of the litigant-in-person wilfully failing to comply with court orders. As a matter of common sense, this meant that he might well fail to comply in future, necessitating for example the costs of additional chasing and applications for unless orders.

The new rules offer some scope for varying costs budgets, but in the circumstances it would be more expedient to simply dis-apply costs budgeting altogether. The judge was satisfied it was appropriate to exercise his discretion under CPR 3.12.

There are no doubt plenty of other scenarios where costs budgeting can be argued to be inappropriate on a case-by-case basis. I note that the Property Litigation Association has made a strong case for seeking to dis-apply costs budgeting as a matter of course in all 1954 Act renewals.

It argues: “The vast majority of such proceedings are purely protective and frequently get to the CMC stage but little further as the parties agree terms for a new lease. It is also difficult to decide on a meaningful costs budget for a lease renewal before you know what aspects are actually in dispute.”

It is likely to be easier to persuade the courts to dis-apply costs budgeting in part 8 and judicial review claims than full length matters. Litigants may point to the preliminary view of the Civil Procedure Rule Committee’s costs budgeting sub-committee in July 2013 that “whilst costs management orders have a particular benefit to longer cases, they are of much less relevance to the short form procedure envisaged in part 8 and in judicial review. Accordingly, it may be appropriate for the mandatory costs management regime to be dis-applied in relation to all part 8 claims (including judicial review)”.

Of course, at least for now the costs budgeting provisions do still apply to part 8, so a party seeking to have it dis-applied would still need to be able to point to a specific feature of their case which would make cost budgeting inappropriate.

Whatever one’s reason for seeking to dis-apply costs budgeting, such an application should be made as early as possible. Ideally, an application to dis-apply costs budgeting should be made in good time to allow the court to make a decision before the deadline for filing and exchanging costs budgets under rule 3.13.

If the court has not made a decision by that point, a protective cost budget will need to be filed in any event to avoid the Draconian consequences of Mitchell.

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