Author: Alison Mould
1 April 2013 saw the introduction of the most far-reaching changes to the Civil Procedure Rules since they were introduced in 1999. They are the result of a review, undertaken by Lord Justice Jackson in 2009, into whether changes in case management procedures could bring about more proportionate costs in litigation.
While the new focus on proportionality and costs budgets is aimed at reducing costs, legal advisers also need to consider how the new rules should apply to quasi-litigation such as business tenancy renewals.
Previously, a successful party could hope to recover from the other side legal costs which had been ‘reasonably’ and ‘necessarily’ incurred. Now the need for costs to be ‘proportionate’ will likely trump either of these requirements.
‘Proportionality’ is a more stringent test than mere ‘reasonableness’, and litigators will therefore need to be very mindful of the need to be able to justify their costs on this basis, lest their clients find themselves out of pocket.
In order to manage such risks, litigators are now required – in most kinds of multi-track High Court or county court claims – to actively work with the courts and opponents, throughout the course of litigation, in agreeing a working costs budget. This budget will seek to quantify in detail the anticipated costs of each stage and aspect of proceedings, all the way to trial. It will be prepared at the start of proceedings and must then be actively managed, revised and approved – in conjunction with the courts and the other side – as proceedings develop.
In principle, the result is greater certainty of what costs will be recoverable and therefore greater confidence for clients that they will recover their costs – provided they fall within an approved costs budget. The fear is that more time and fees will be incurred in actively managing the costs budget, and that not all of these extra costs will be recoverable from the other side.
Particular issues arise in respect of business lease renewals, where proceedings are usually protective; focusing on facilitating the negotiation of a new lease, and where the court does not usually make an order for costs. It is to be hoped that some leeway is granted in cases of this kind. It will also be noted that a ‘proportionality’ cap on costs may be unfair where the lease in question is of a very low rent. We would therefore suggest that the parties agree to exclude the costs budget procedures early in the proceedings. The extent to which this approach will work will depend upon the attitude of the courts.
On a more positive note, the new rules on disclosure (the process of litigation exchanging copies of relevant documents) will now allow more flexibility.
Disclosure is one of the most time-consuming and costly aspects of litigation and also offers little value in lease renewal and some property disputes.
Prior to 1 April, the ‘standard procedure’ for disclosure was followed by default. The Jackson Reforms dispense with this position in many types of claim. Instead, the parties are required to discuss and agree a disclosure exercise which is appropriate and proportionate to their dispute, early in proceedings.
Although the Jackson reforms are now in place, it will undoubtedly be some time before the revised procedures are running smoothly and efficiently. There may even be a need for amendments or formal carve-outs at the fringes for specific cases such as business lease renewals.
For further information, please contact: Alison Mould, Partner, Fladgate LLP