COST BUDGET REQUIREMENT DOES NOT APPLY TO PART 8 CASES: A CASE IN POINT

There has been considerable discussion about whether the requirements to lodge a costs budget applies to Part 8 cases.  Part 8 cases are automatically allocated to the Multi Track and the requirements to lodge a budget was thought to apply. In  Kershaw -v- Roberts [2014] EWHC 1037 (Ch) Mr Justice Hickinbottom held that the requirement to lodge a budget did not apply to Part 8 cases. He also pointed out that changes in the rules introduced on 22nd April mean that it is now totally clear that the costs budget requirements do not apply in Part 8 cases unless the court makes a specific order. The crucial point, however, is that the requirement to file costs budgets, and the sanctions for non-compliance, have never applied to Part 8 proceedings (and the notes in the white book indicating that they did are wrong). 

KERSHAW -v- ROBERTS: THE ISSUES: DID THE COSTS BUDGETING REQUIREMENTS APPLY TO PART 8 PROCEEDINGS?

Proceedings had been issued under Part 8.  A directions hearing was listed to be heard on the 21st November 2013. On the 14th November 2013 the claimant filed a costs budget. The defendant’s budget was served late.  The claimant raised the issue of the defendant’s budget being served late and argued that the defendant’s budget should be confined to court fees.  This issue was heard at a hearing before a circuit judge who held that the hearing was not a CMC and that the defendant’s budget was not restricted. The claimant appealed to the High Court judge.

THE APPEAL: COST BUDGETING DID NOT APPLY TO PART 8

The judge considered the costs budgeting procedure under Part 7 claims and then considered the provisions of Part 8.

1. An alternative procedure for claims is found in Part 8, which replaced the former originating summons procedure. The Part 8 procedure is “in general terms designed for the determination of relevant claims without elaborate pleadings” (White Book Note 8.0.2), especially claims which are unlikely to involve substantial dispute of fact. The hallmark of Part 8 claims is not high value and/or complexity, it is the nature of the claim which makes a less sophisticated procedure appropriate irrespective of value or complexity. Indeed, Part 8 claims cover a wide spectrum of value and complexity, from straightforward landlord and tenant actions to sophisticated commercial claims. Generally, evidence is in written form and served with the claim form, acknowledgment of service and in reply. Some parts of the general rules apply to Part 8 claims; but, as I have indicated (paragraph 15 above), some (e.g. by virtue of Rule 8.9(c), Part 26) do not.

1. However, Rule 8.9(c) does not automatically allocate Part 8 claims to the multi-track, as Miss Candlin suggests: it merely provides that such claims are “treated as allocated to the multi-track”. As a matter of language, that is not the same thing as, in fact, being allocated to the multi-track by the court; and it is clear from reading the CPR as a whole that the deeming provision of Rule 8.9(c) is not intended to – and does not – allocate all Part 8 claims to the multi-track. Thus, it is still open to the court in fact to allocate a Part 8 claim to a particular track, including the multi-track. Paragraph 8.2 of CPR PD 8 expressly provides, in respect of a Part 8 claim:

“Case management directions may include the specific allocation of a case to a track.”

It is noteworthy that this refers to “allocation” of a Part 8 claim not “re-allocation – which underscores the point that a Part 8 claim is not automatically allocated to the multi-track by CPR Rule 8.9(c).

1. And, crucially, the CPR attach different attributes to a Part 8 claim which the court in fact allocates to the multi-track, and a Part 8 claim which is not in fact so allocated. The routes of appeal of such claims are different: a final decision in a Part 8 claim in fact allocated to the multi-track is to the Court of Appeal, otherwise it is to a single circuit judge (if from a district judge) or single High Court judge (if from a circuit judge). Within the CPR, these routes of appeal are set out in paragraphs 3.4 and 3.5 (including Table 1) of CPR PD 52A, which reflect the Access to Justice Act 1999 (Destination of Appeals) Order 2000 (SI 2000 No 1071). These provisions expressly draw a distinction between “Part 8 Claim, other than a claim allocated to the multi-track” and “Part 8 claim, allocated to the Multi-track”. This suggests that the underlying presumption in the CPR is that a Part 8 claim is not of high value or complexity, only actual allocation to the multi-track after judicial consideration being sufficient to route an appeal from the county court to the Court of Appeal.

1. Another difference is in the application of CPR Part 29. As and when a Part 8 claim is in fact allocated to the multi-track, then the case management provisions of Part 29 (including the power to fix a CMC under Rules 29.2 and 29.3) apply (see paragraphs 24-27 above). Those provisions are triggered by the actual allocation of the claim by the court. On the other hand, the regime for a Part 8 claim not in fact allocated to the multi-track is covered by Part 8 itself and CPR PD 8A. There is no mention here, at all, of CMCs. “Managing the claim” is dealt with in paragraph 6 of CPR PD 8A:

“6.1 The court may give directions immediately a Part 8 claim form is issued either on the application of a party or on its own initiative. The directions may include fixing a hearing date where –

(1) there is no dispute, such as in child and protected party settlements;

(2) where there may be a dispute, but a hearing date could conveniently be given.

6.2 Where the court does not fix a hearing date when the claim form is issued, it will give directions for the disposal of the claim as soon as practicable after the defendant has acknowledged service of the claim form or, as the case may be, after the period for acknowledging service has expired.

6.3 Certain applications may not require a hearing.

6.4 The court may convene a directions hearing before giving directions.”

1. Miss Candlin submitted that “directions hearing” in this context means “case management conference” as that term is used in Part 29; but I cannot accept that proposition. In my view, as a matter of construction, the Rules are clear on their face that, unless and until a Part 8 claim is allocated to the multi-track by the court, the CMC provisions of Part 29 do not apply. As I have explained, CMCs are a creature of CPR Part 29; and the express power to fix such a hearing is triggered by the allocation of a claim to the multi-track by the court. It is that actual allocation that triggers the various procedural obligations attached to a CMC. If the Rules intended this paragraph of CPR PD 8A to refer to a CMC it could (and would) have said so. Deliberately, the Rules use a different expression.

1. Whilst I consider Miss Candlin’s proposition falters on the face of the Rules, there are sound practical reasons for CMCs not featuring in track-unallocated Part 8 claims. As I have indicated, Part 8 claims cover a wide spectrum, from very simple to legally complex claims, the procedure being designed for claims of a particular nature, in which there are few or no factual disputes. Part 8 claims are reviewed by a procedural judge once the defendant’s response is in, and that judge is able to determine how the claim should proceed in the light of the overriding object of dealing with claims justly and proportionately. He must consider whether a particular claim should be proceed under Part 7 (e.g. if there are substantial factual disputes that would benefit from that procedure); or, if not, whether the claim should be allocated to a specific track (so that the case management regime of that track will apply to it) or remain track-unallocated. As paragraph 6 of CPR PD 8A makes clear, the judge may call a directions hearing before making any directions. At a stage when the judge has not made a decision that the case is of sufficient value/complexity to warrant specific allocation to the multi-track – which would plunge the claim into Part 29, CMCs and all – time and money spent on preparing for a CMC, including costs budgets, may well be unnecessary and wasteful. For example, at a first directions hearing, the judge may not allocate the claim to the multi-track: he may allocate it to the fast track or even the small claims track, or not allocate it to any track at all. He may be able to dispose of the claim at that first hearing.

1. If Miss Candlin were correct and the first hearing in a Part 8 claim were always a CMC requiring a costs budget, that would mean costs budgets would or might be required in all sorts of case which normally proceed by way of Part 8, including (e.g.) landlord and tenant claims and applications to the High Court for bail. If it were the case that such first hearings were inevitably CMCs, it would result in unnecessary costs being expended on preparation for hearings (including the preparation of costs budgets) which would run counter to the premise upon which the CPR is based (namely that the court maintains control and flexibility over its procedure to ensure that justice is done and proportionality maintained), and to the spirit of the Jackson reforms and Mitchell (which were designed to reduce, not increase, the burden of the costs of litigation). Unsurprisingly, on their proper construction, the CPR do not, even as a default position, drive Part 8 claims into procedures that may be entirely disproportionate. The court maintains control over such claims, and is required to be pro-active in case managing them.

THE COSTS BUDGETING PROVISIONS COULD APPLY BUT ONLY IF THE COURT EXPRESSLY DECIDED TO APPLY THEM

1. 
   Simply because the CMC provisions of Part 29 do not automatically apply, that does not mean that, in an appropriate case, those provisions (including the costs budgeting provisions of CPR Part 3.12-3.14) will never apply to a Part 8 claim. They will apply, if appropriate. They will apply if the court, having reviewed the claim (as it must) allocates the claim to the multi-track as a Part 8 claim, or transfers the claim to the Part 7 procedure if that is more appropriate. It is also open to the court to order a costs management conference (under CPR Rule 3.16) or costs budgeting, without taking either of those courses. Judges have all of these procedural weapons in their armoury: it is for the procedural judge considering a Part 8 claim to determine which is the most appropriate procedural course to ensure that the claim is case managed in accordance with the overriding objective, i.e. justly and proportionately.

36.Procedural judges who look at a Part 8 claim for the first time must therefore always consider the most appropriate                              course for any particular Part 8 claim, including the following questions:

i) Should the claim proceed as a Part 8 claim, or would the Part 7 procedure be more appropriate (because, e.g., there are significant disputes of fact that will require oral evidence)? If the latter, the usual Part 7 procedures apply, including tracking and (if it is allocated to the multi-track) the provisions of Part 29 including CMCs.

ii) If the claim remains as a Part 8 claim, should the claim be specifically tracked and, if so, what is the appropriate track? If it is positively allocated to the multi-track, then again the provisions of Part 29 including CMCs will apply.

iii) If the claim remains as track-unallocated, can and should any directions be given immediately without a hearing; and, if so, what directions?

iv) If a hearing is necessary, what is the nature and scope of the hearing that is necessary? The notice of hearing should make clear the scope of the hearing, and any particular matters which the court may wish to consider at a hearing. Being a Part 8 claim, one of those issues might be whether the claim can be disposed of at that first hearing. Indeed, in many cases, the first hearing will be a disposal hearing, and the notice should be marked as such.

1. A party will only be required to serve a costs budget if such a requirement is triggered, e.g. by the fixing of a CMC following specific allocation of the claim to the multi-track. Because a costs budget is only triggered by the first CMC – and there are no CMCs in such unallocated Part 8 claims – I appreciate that that means that track-unallocated Part 8 claims will not usually be the subject of costs management under CPR Part 3 Section II. However, in my judgment, that is the clear intention of the CPR; and fully understandable and justified because of the nature of Part 8 claims.

1. For those reasons, to the extent that the Note 8.0.5 of the White Book (quoted above at paragraph 16 above) suggests that (i) any directions hearing in a Part 8 claim must be a CMC, and (ii) the CMC provisions of Part 29 apply to Part 8 claims not in fact allocated by the court to the multi-track, those suggestions are wrong.

APPLYING THESE PRINCIPLES TO THE FACTS OF THAT CASE

The case was not allocated to the multi-track until the court made an order. The costs budgeting provisions therefore did not apply

1. Those are the principles. Their application to this case is straightforward. This claim was not allocated to the multi-track until the district judge specifically allocated it at the Taunton hearing. Consequently, that hearing itself was not – indeed, could not have been – a CMC. The district judge was fully entitled to hold a directions hearing before he gave directions. He was fully entitled, at that hearing, to allocate the claim to the multi-track, transfer the claim to North Wales and give whatever directions he could give at that stage. He was fully entitled, then, to direct that there be a CMC in the allocated claim, to include a costs management hearing. Not only was he entitled to make those orders, most judges would have made the orders he made. Subject possibly to transferring the claim to Part 7 procedure – because of the now-obvious substantial issues of fact between the parties – I would have made a similar order. The district judge’s approach was unexceptional, and he was clearly entitled to take the approach and make the orders that he did.

THE CHANGES INTRODUCED ON 22ND APRIL MAKE IT CLEAR THAT COSTS BUDGETING DOES NOT AUTOMATICALLY APPLY TO PART 8 ACTIONS

1. 
   At the outset of this judgment, I indicated that the issues raised concerning costs management and costs budgets in Part 8 claims are of real importance to the parties to this claim. To put that into context, the whole estate is worth about £160,000. The Defendants’ costs budget as subsequently assessed by the court (and, of course, excluding the costs of this appeal) is about £32,500 excluding VAT. The Claimant’s costs budget has been assessed at £46,000 excluding VAT and success fee, his costs being the subject of a conditional fee arrangement. Consequently, whether the first hearing in this claim was or was not a CMC is a very important issue for both of them in the context of this case.

1. However, I also said that the issues would soon be of historical interest only. That is because on 1 April 2014 (the same day as the appeal hearing), the Civil Procedure Rules Committee, under its powers under section 2 of the Civil Procedure Act 1997, made amendments to the CPR by the Civil Procedure (Amendment No 4) Rules 2014 (SI 2014 No 867). The amendments come into force on 22 April 2014. From that date, Rule 3.12(1) will be amended to read:

“This Section and Practice Direction 3E apply to all Part 7 multi-track cases…”.

There are then listed a number of exceptions, none relevant to this appeal. Therefore, from 22 April 2014, the CPR indicate that the costs management provisions of CPR Rule 3 Section 2 and CPR PD 3E (including costs budgets) will not automatically apply to any Part 8 claim. Those provisions will only apply if the court makes a positive order that they should (as expressly confirmed by new Rule 3.12(1A)).

1. I have not asked the parties to comment on this development, because any further submissions are unnecessary for the determination of the appeal before me. However, I note that the Explanatory Note reads:

“These Rules make the following amendments to the [CPR]:

(1) amendments to rule 3.12… to clarify the proceedings to which Section II (costs management) of Part 3 of the CPR applies…”.”

1. Although I appreciate that from 22 April 2014 no Part 8 claims will be the subject of costs management (whether tracked or not), as the amendment is said to be by way of clarification rather than change, this is some support – albeit, I appreciate, very slight – for the conclusion to which I have come on the construction of the Rules as they currently stand in relation to the absence of any requirement to serve costs budgets in track-unallocated Part 8 claims.

SUMMARY: COST BUDGETING IN PART 8 CASES: HAS TO BE ORDERED, IT DOES NOT TAKE PLACE AUTOMATICALLY

A court can, and should, still consider whether costs budgeting is required in Part 8 cases.  It is an issue for the procedural judge to consider, and presumably for the parties to make representations about.

SOMETIMES YOU HAVE TO ASK: “IS IT WORTH THE CANDLE?”

This was the phrase used by Jackson L.J. to consider whether costs budgeting itself was worthwhile.  Sometimes you have to consider whether it should be applied to arguments over procedure. The figures involved were mentioned in the judgment

At the outset of this judgment, I indicated that the issues raised concerning costs management and costs budgets in Part 8 claims are of real importance to the parties to this claim. To put that into context, the whole estate is worth about £160,000. The Defendants’ costs budget as subsequently assessed by the court (and, of course, excluding the costs of this appeal) is about £32,500 excluding VAT. The Claimant’s costs budget has been assessed at £46,000 excluding VAT and success fee, his costs being the subject of a conditional fee arrangement

We are not told how much the costs of the appeal were , (and  there were some other interlocutory hearings where the claimant was ordered to pay part of the costs). However it is certain that these costs were eating, considerably, into the £160,000 estate.