Civil Procedure Rules and the Dilapidations Protocol

The Jackson reforms to the Civil Procedure Rules (CPR) which came into effect on 1 April 2013 introduced wholesale changes to the management of litigation costs.

In the overriding objective for all litigation contained in CPR 1, there is now a requirement to deal with cases both justly and at proportionate cost.

The previous rules on costs (CPR 43) have been abolished and replaced with new rules under CPR 44 which are set out below. In summary, a test of proportionality will be applied at all stages of litigation. CPR 44.3(5) says that costs will be proportionate if they bear a reasonable relationship to 5 factors:

• the sums in issue;
• the value of non-monetary claims;
• the complexity;
• any additional work generated by the conduct of the paying party; and
• wider factors such as reputation and public importance.

Proportionality will prevail over the reasonableness of costs and so it will be important always to have an eye on proportionality. It had been assumed that these rules only applied to normal standard costs recovery and not to indemnity costs awarded where someone has behaved badly. However, this was called into question in Courtwell Properties Limited v Greencore PF (UK) Limited and it now appears that proportionality may apply to indemnity costs as well, particularly in relation to the costs of the application itself (£100,000 in that particular case).

There will also be much more stringent costs management which requires parties at the start of litigation to file and exchange costs budgets as directed or within 7 days of the first case management conference (CMC). Parties are then encouraged to discuss and agree budgets.  The court will then make a costs management order either recording the agreed budgets or revised budgets if the parties cannot agree them. Once these orders are made the court will have regard to the approved or agreed budget for each stage of the proceedings and will not depart from them unless satisfied there is good reason for it. There is provision to revise budgets up or down but only where there are significant changes in a case. Therefore, it is important that the budgets accurately reflect the likely costs of the litigation.

It is also worth pointing out there are now very serious consequences for not complying with any court rules including those relating to costs. Mitchell MP v News Group Newpapers Limited [2013] is worth reading. In this case a costs budget was not filed on time and the consequence was that the party who failed to file it was limited to the recovery of its court fees only (CPR 3.14). The Court of Appeal gave guidance on how it would sparingly give relief to any sanctions imposed by courts for non-compliance with rules pursuant to its powers under CPR 3.9. The gist is that relief will be granted very rarely and parties must therefore make sure they comply with all court rules to avoid serious sanctions such as the potential for claims being struck out or from being disentitled to costs.

It is therefore extremely important that practitioners are aware of the CPR Parts 44.2 (Court’s direction as to costs), 44.3 (Basis of assessment) and 44.4 (Factors to be taken into account in deciding the amount of costs) which can be accessed via the Ministry of Justice’s website.