Ramifications of the Mitchell Costs Appeal

27 Nov 2013

There have been lots of sound bites from today’s costs and CPR compliance judgment dismissing the appeal in Mitchell v News Group Newspapers Limited [2013] EWCA Civ 1526. Other articles will detail the Court’s findings, although I suggest it would be negligent for any civil litigator not to read the entire judgment. It is the most far-reaching decision in civil litigation since the introduction of the CPR in 1999. I plan to analyse the consequences (and unintended consequences) for litigators, the Courts and civil litigation generally. My initial tweet was: “Mitchell costs appeal dismissed. Check your insurance policies litigators. The CPR alligators are coming and this time they're hungry!” Here are my views, not limited to 140 characters.

An unashamedly harsh decision marking a sea change

Some predicted, myself included, that the Court would allow the appeal, substituting a firm, but proportionate sanction, whilst using the opportunity to sound a tough warning about compliance. That prediction proved incorrect as the Court felt granting partial relief would give rise to uncertainty [paragraph 58]. The Court recognised that the outcome, “seems harsh in the individual case of Mr Mitchell’s claim” [59]. However, overturning the decision to refuse relief would, the Court held [59], “give the attempt to achieve a change in culture [heralded by the Jackson reforms] a major setback.” The actual result ranks compliance as more important than the justice of the individual case.

The significance of this sea change in approach to civil litigation cannot be overestimated. The risk is that this will lead to a form of CPR trench warfare.
The Court held that trivial non-compliance should result in relief [41, 48] as should cases where there are "good reasons" which were outside the control of the party for the default [43]. But, there will still need to be: (i) test cases to determine where the "trivial" or "good reasons [outside the control of the party]" lines are to be drawn in each distinct procedural area; and (ii) swathes of satellite litigation about where the lines are to be drawn in individual cases.

Increased interim applications

Of course, whilst Mitchell concerned the failure by the Claimant’s solicitors to file a costs budget in time, the case applies across the procedural landscape [1] encompassing everything from late payment of fees to disclosure and exchanging witness statements or expert reports.

The effect of Mitchell is that litigators will be compelled to make applications to avoid draconian sanctions, even in cases where they think and the Court ultimately finds, there has been trivial non-compliance. Such applications are now necessary for fear of falling foul of the “prompt application” requirement [40] if a party delays or spends time seeking agreement from its opponents to waive a breach or grant an extension.

Moreover, parties will have little choice but to make an application where there is a mere risk of a breach. There will be a proliferation of such prospective applications just before deadlines to avoid the tougher regime of an after-the-event application by virtue of the Court’s statement that “…applications for an extension made before time has expired will be looked upon more favourably than applications for relief from sanction made after the event” [41].

Although Mitchell is of course the Claimant in this case, in time I anticipate Defendants in future cases falling foul of sanctions more often than Claimants. Well advised Claimants will front-load their preparation as much as possible, making Defendants play "catch-up" even more so than they do now. This will give rise to ever increasing risks for Defendants of tripping up in their rush to catch up in investigating and gathering evidence to defend the claim, once served with proceedings and a directions order. The pre-action stages will take on a much heightened significance.

CPR trench warfare

Many litigators will regrettably decide to refuse extensions of time or minor indulgences (previously granted), hoping the other side will be caught out. They will be even less willing to agree that a breach is trivial and move on with the case by consent. What if they were wrong, but had consented to waiving a breach and losing the windfall that strict compliance may bring to the opposing party: would that not amount to professional negligence? Many will feel that their clients’ interests lie in taking a tough line with opponents’ requests for indulgence and minor breaches. A tit-for-tat approach will result. So making these "trivial breach" or "good reasons" distinctions will increase, not reduce, the volume of applications as the compliance bar has now been set so high.

The sort of sensible co-operation, whilst robustly contesting the real issues in the case, which often occurs between opposing representatives in litigation will simply dry up. That is of great significance as it is that co-operation which greases the wheels of justice and has hitherto stopped the Courts being clogged up with procedural turf wars. The CPR "cards-on-the-table" approach could well also be a victim of a new hard-nosed approach to litigation.

More strain on the courts and growth in professional negligence

The suggestion is made in the judgment [48], repeated in the final paragraph of the conclusion [60], that there will be fewer applications once the message gets across and we all routinely comply with rules, practice directions and orders. I am pessimistic about this: litigators will continue to make mistakes and overlook things; that is human nature and frailty which no judgment can abolish. The professional reality for many at the coal face is that pressure of work means they will continue to leave things to the last minute. But where such an approach goes wrong, they will face no mercy [41] even if the other side is not prejudiced [1]. This also comes against a backdrop of huge funding pressures in civil litigation. Financial viability requires most litigation to be conducted under greater pressure of time, increasingly using less qualified staff and expending fewer resources on each case overall. That financial reality will inevitably lead to more, not less, non-compliance. This is presumably what the Court of Appeal had in mind as “well-intentioned incompetence” [48] which under the new regime: “…should not usually attract relief from a sanction unless the default is trivial [or there are good reasons].

These are the consequences for qualified (or supervised) litigators. The position is even more stark for the rapidly increasing numbers of litigants in person for whom access to justice has become even more of a minefield, and, aside from cost budgeting, are not excused from most procedural requirements.

The final sentence of the judgment recognises that: “…satellite litigation of this kind [is] so expensive and damaging to the litigation process…” I predict that this will get much worse, not better. The Courts and Court staff are under huge pressure of time and resources already. Court lists are long and getting longer. The extra time needed to hear costs budgeting hearings, not to mention a wave of prospective and retrospective time extension and CPR 3.9 relief from sanctions applications will severely test the system. I anticipate that cases will routinely be held up for many months waiting for hearings (and potential appeals) about whether a sanction was properly imposed in the first place [44] or whether relief should be granted if it was. That will be the antithesis of expeditious litigation at proportionate cost.

The aim of this "tough love" procedural strictness is ensuring that litigation is at proportionate cost in the wider interests of all litigants. But the effect will be to produce a raft of professional negligence claims on the back of failed applications for relief from sanctions. Those claims will have to start the litigation from scratch, have budget hearings and case management on issues of loss of a chance, often more complex than the underlying action.

Those professional negligence claims will be equally susceptible to the procedural banana skins which now await all litigators. This does beg the question, where is the cost saving and time saving (for litigants and the Court) in that? Dealing with cases justly should involve proportionate sanctions and getting on with the existing claims. If you cut the head off the Hydra you can be sure that more than one will re-appear in its place.

Procedural compliance should be enforced but in a proportionate way or we will undermine, rather than advance, the aims of the CPR and the Jackson reforms: if so, goodbye proportionality and doing justice between the parties.


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