Costs budgets, Inheritance Act claims and contesting a will

25 Jun 2014 | Comment


Roman takes a ‘technical’ look at how the changes to litigation following reforms in April 2013, in particular regarding costs budgets and costs case management conferences, have had an impact on contested will, trust and estate claims.

It has now been over a year since the sweeping reforms to civil litigation took effect following proposals by Lord Justice Jackson which, for the purpose of this article, I shall refer to as ‘the reforms’.

The main aims of the reforms were to change how litigation is funded with a greater focus on proportionality over necessity, drive down costs and ensure compliance of court dates and the rules governing civil litigation.  However, there were also changes to disclosure and a focus on settlement offers.

In addition, in many civil cases, solicitors are now required to file costs budgets.  These are documents which set out what each party estimates that their costs will be all the way to trial.  But for exceptional cases, those parties will then be bound by the figures in those budgets should the court make an order for costs.

Many cite 1 April 2013 as being the date when the reforms took effect.  However, technically the reforms took effect on 2 April 2013 as 1 April was Easter Monday, a bank holiday.

Some may think that I am just being pedantic and focusing too much on the trivial details, rather than on the bigger picture.  However, if there is one thing that is apparent above all else, it is that the reforms require a keen, and technical, eye for detail.

That is because of the way the reforms have been applied, the fact that this is unchartered territory for all and because of the severe sanctions should any party fall foul of the strict, technical deadlines.

“Plebgate” and the importance of ‘clear days’

To illustrate, many will know about the ‘plebgate’ incident involving former chief Tory whip, Andrew Mitchell.  However, the name ‘Mitchell’ is synonymous with something altogether different to most of us lawyers in the land.  To us, it represents a stark reminder of the potential sanctions of missing a deadline post 1 (or is that 2) April 2013.

In short, in the Mitchell case (Mitchell v News Group Newspapers Limited [2013] EWCA Civ 1537), the lawyers acting for Andrew Mitchell failed to file their costs budget in time.  As such, and despite appealing the decision, it was held that Andrew Mitchell could only recover his court fees, but none of his lawyers’ costs, should the court make an order for costs.  This undoubtedly shifted the status quo as between Mr Mitchell and News International and, I imagine, had Andrew Mitchell’s lawyers referring to their professional indemnity insurers.

The Civil Procedure Rules, which govern how civil litigation is conducted in England and Wales, state at rule 3.13 that, where applicable, costs budgets must be filed at court and exchanged with the other parties:

“by the date specified in the notice served under rule 26.3(1) or, if no such date is specified, seven days before the first case management conference.”

As such, if, say, the first case management conference is on Tuesday, 8 July 2014 then it may not be unreasonable to assume that you could send your costs budget out on the preceding Tuesday, 1 July 2014.  However, that would be wrong and may land you with similar sanctions to those faced by the lawyers in the Andrew Mitchell case.  A quick glance to the Civil Procedure Rules, which deals with the application and interpretation of the Civil Procedure Rules, confirms, at rule 2.8(2), that:

“A period of time expressed as a number of days shall be computed as clear days.” (emphasis added).

Ok, so what does that mean exactly?  Well, sub-rule (3) confirms that ‘clear days’ means that:

‘in computing the number of days –

(a)  the day on which the period begins; and

(b)  if the end of the period is defined by reference to an event, the day on which that event occurs are not included.’

So, for our case management conference on Tuesday, 8 July 2014 I would need to post my costs budget on Sunday, 29 June 2014 or, erring on the side of caution and account for the postal system, the morning of Saturday, 28 June 2014, right?  Wrong.

Rule 6.26 of the Civil Procedure Rules deals with deemed service of documents other than a claim form and confirms that, if service is effected by first class post, it is deemed served (i.e. filed and exchanged) on ‘the second day after it was posted’.

Ok, so no problem.

Not quite.  Rule 6.26 goes on to state that this is only ‘provided that day is a business day; or if not, the next business day after that day’.

In short, if you wanted to file and exchange your costs budget in sufficient time for the first case management conference on Tuesday, 8 July 2014 by post, you would need to ensure that it was sent on Thursday, 26 June 2014, nearly two weeks before the case management conference.

Of course, it may be possible to serve a party by fax or e-mail, but only if that party has confirmed that they are willing to accept service by those methods.  Alternatively, if all else fails, an urgent dash to their offices to deliver the costs budget personally may be the only option if you risk running out of time.

Costs budgets and will disputes

In a recent case of mine for which I acted for the defendant seeking to contest a will, proceedings had been issued but the court had yet to list the matter for directions or a first case management conference.

Whilst the usual practice is that the court sends out directions questionnaires under part 26.3(1) of the Civil Procedure Rules (being the ‘notice’ mentioned in rule 3.13 above), no such questionnaires had been sent out in this case.  As such, it is common in such instances for one or both solicitors to write to the court to ask for directions questionnaires to be sent out and to list a directions hearing.  Now, as we know from rule 3.13, that notice may specify a date by which to file costs budgets.  Alternatively, if the court were to list a first case management conference then we would need to file and exchange costs budgets 7 clear days before that first hearing.

However, in this case the claimant’s solicitors took it upon themselves to issue an application to the court, attaching to it proposed directions and seeking an order for ‘Case management to trial’.

The court therefore listed a hearing of the claimant’s application and accordingly sent out notices of hearing of applications to each party.  This hearing was clearly not a first case management conference, nor were directions questionnaires sent out, so rule 3 did not bite.

Despite this, 7 clear days before the hearing, albeit at the 11th hour, I received the claimant’s costs budget purporting to be served upon me ‘in advance of the first case management conference’.

As such, whilst the hearing ought to have focused on having a timetable laid down to trial, much of it was sadly spent in a legal tussle with the solicitors on the other side regarding whether or not I was in default by not having filed a costs budget.

Despite the claimant’s solicitors best efforts to convince the judge at the hearing that we had failed to comply with the strict rules, and therefore that our client ought not to be able to recover any more than their court fees, the judge rightly agreed with me that the hearing was not a first case management conference but, instead, a hearing of the claimant’s application seeking case management; a small, technical, distinction, perhaps, but one with huge implications for my client.

Costs budgets, costs case management conferences and Inheritance Act claims

So what of claims under the Inheritance (Provision for family and Dependants) Act 1975?

Inheritance Act claims are largely issued under part 8 of the Civil Procedure Rules.  Part 8 usually applies to claims where there is no significant dispute of fact and the formal procedures are therefore different to those applying to claims involving factual disputes.  The latter, such as the will dispute above, are instead governed by part 7 of the Civil Procedure Rules.

Prior to 22 April 2014, costs budgets could apply both to part 7 and part 8 claims in the multi-track.  However, following the 72nd update to the Civil Procedure Rules on 22 April 2014 to rule 3.12, costs budgets and costs management now only apply to part 7 claims unless the court otherwise orders.

This brings some relief to many of us dealing with Inheritance Act claims although has, again, led to confusion by some.  That is because, following proceedings being issued, the court often lists a ‘directions hearing’.  Prior to 22 April 2014, there was much confusion as to whether that directions hearing constituted a ‘first case management conference’.

Thankfully, the case of Kershaw v Roberts [2014] EWHC 1037 clarified that the first directions hearing is not to be mistaken for a first case management conference and so there is no need to file a costs budget in advance of that hearing, unless the court has ordered otherwise.

Although the Civil Procedure Rules have been amended so as not to apply to part 8 claims as a general rule, paragraph 5(d) of practice direction 3E of the Civil Procedure Rules confirms that costs budgets ‘may be particularly appropriate in […] claims pursuant to the Inheritance (Provision for Family and Dependants) Act 1975’.

For my part, I have noticed that the court are applying costs management to Inheritance Act claims and ordering the filing and exchange of costs budgets as well as listing costs management hearings.  These hearings can often go one for in excess of two hours and are designed to ensure that costs are proportionate.

In addition, as part of the costs management process, it is not uncommon for the court also to order the filing and exchange of the following, in addition to costs budgets:

  • agreed case summary;
  • agreed bundle index;
  • agreed issues in dispute;
  • agreed chronology;
  • agreed draft directions;
  • agreed list of witnesses;
  • statements dealing with proposed experts;
  • statements dealing with electronic disclosure;
  • joint statement on the agreed costs and costs in dispute; and
  • statement dealing with pre-action conduct of the parties.

There is some irony that, in earnest efforts by the court and parties to ensure that costs are proportionate, this unavoidably involves engaging in lengthy hearings and in the preparation of large volumes of documents which, itself, increases costs.

Of course, the reforms do appear to have had the effect of ensuring better compliance, particularly for some of the ‘regular offenders’

Unfortunately, they have also created a culture of fear and mistrust between many solicitors which was clearly not the intention of the reforms, as well as an overemphasis on technicalities rather than pragmatism.

Be that as it may, it looks like the reforms are here to stay and so the best way to guarantee compliance is to ensure that you are proactive, understand the rules and, whilst doing all this, adopt a pragmatic approach to ensure that the main focus of the matter, namely to seek to achieve your client’s goal, is at the forefront of the matter.

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