Costs Update (the Retreat from Mitchell)

The eight months (from 27 November 2013 to 4 July 2014) during which Mitchell reigned unchallenged produce a host of extraordinarily harsh decisions. One of those was Long v Value Properties & Ocean Trade, Unreported, 12 December 2013. This was a pre-1 April 2013 CFA case. The receiving party served her bill and notice of commencement in time. Unfortunately, she failed to serve a statement of reasons for the percentage increase or a copy of the risk assessment or a copy of the CFA itself (‘the Further Information’) with the bill.  Master Rowley held that this was a breach of CPR Costs PD 32.5(1)(c) & (d); and, that CPR r. 44.3B(1)(d) provided an automatic sanction (i.e. that no success fee could be recovered). Following Mitchell, the Master refused relief from sanction on the basis that the default was not trivial and there was no good reason for it. This was a grossly unjust decision. The receiving party had corrected her default within 8 days of the point being taken in the Points of Dispute and 5 weeks after service of the bill itself. There was absolutely no prejudice whatsoever to the paying party. The receiving party found itself in a worse position that if she had not commenced detailed assessment within time (since the sanction for this default is loss of interest only under CPR r 47.8(3)). Furthermore, had the default been a failure to provide information about a finding arrangement under CPR r. 44.3B(1)(c) the sanction would have merely been to disallow the success fee for the period of the default rather than to disallow it altogether.

Master Rowley’s decision has now  been overturned on appeal: [2014] EWHC 2981 (Ch). Mr. Justice Barling held: (1) CPR Costs PD 32.5(1)(c) & (d) required the receiving party to serve the Further Information with the bill; (2) the sanction was the one imposed by CPR r. 44.3B(1)(c) rather than CPR r. 44.3B(1)(d) so that, rather than a total disallowance of success fees the only success fees that would be disallowed were those incurred during the 5 week period of default;  but, (3) even if the sanction had been the disallowance of all of the success fees, the court would have granted relief from sanction because the breach was not serious or significant, it was swiftly remedied and the paying parties had behaved in an unreasonable, opportunistic and non-cooperative manner.

While Barling J. indicated that he would have reached the same decision even in absence of the guidance in Denton, this decision is a welcome confirmation of the retreat from Mitchell that is now underway. Four practice points emerge. First, prevention is better than cure. It should be remembered that, in pre-1 April 2013 CFA cases, the Further Information must be served with the bill and notice of commencement. Second, if there is a default, it should be rectified as quickly as possible. Third, when CPR 43.3B is engaged it is important to carefully consider which sub-rule provides the relevant sanction as different sub-rules impose different sanctions. (The judge described the current positon as “obscure, unnecessarily complex and in need of rationalisation”). .Fourth, it is no longer acceptable for highly technical points of this type to be taken. Any litigant considering taking a technical point should consider whether there is any prejudice suffered by reason of the breach or if a trial date is imperilled. If not, the parties should be willing to agree limited but reasonable extensions of time. Barling J. characterised the paying party’s conduct as unreasonable, opportunistic and uncooperative. In Denton the Court of Appeal said that “heavy costs sanctions” should be imposed on parties who act in this way. You have been warned!

Mark James, Barrister Temple Garden Chamber

For DeNovo
Costs Lawyers, Costs Draftsmen and Legal Costs Experts

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