Spotlight: 72nd Update to the CPR and Inheritance Act 1975 claims

What’s happened?

On 22 April 2014, the Ministry of Justice published the 72nd Update to the Civil Procedure Rules (CPR), which included amendments to part 3 dealing with the courts’ case management powers. The preamble to the amendments states:

“The rules are amended to provide clarification of the rules introduced in 2013 which extended the courts’ management powers in respect of costs. Cases to which cost management will apply and costs budgets are to be filed is more clearly defined and limited to Part 7 Multi-track claims except where the claim is valued at £10m or more. In other types of case the court will have the discretion to implement costs management and parties will be able to apply for costs management if it is deemed appropriate by the circumstances of the individual case.”

These amendments are found in CPR 3.12(1), which now states:

“(1) This Section and Practice Direction 3E apply to all Part 7 multi-track cases, except–

(a) where the claim is commenced on or after 22nd April 2014 and the amount of money claimed as stated on the claim form is £10 million or more; or

(b) where the claim is commenced on or after 22nd April 2014 and is for a monetary claim which is not quantified or not fully quantified or is for a non-monetary claim and in any such case the claim form contains a statement that the claim is valued at £10 million or more; or

(c) where the proceedings are the subject of fixed costs or scale costs or where the court otherwise orders.”

Why is it important?

There has been much confusion about the applicability or otherwise of costs budgeting to Inheritance (Provision for Family and Dependants) Act 1975 (‘1975 act’) claims. Many practitioners, for instance, have been filing costs budgets in advance of the first directions hearing, considering it to be a “first case management conference” for the purposes of CPR 3.13.

Thankfully, Kershaw v Roberts [2014] EWHC 1037 provided clarity on the matter, confirming that the first directions hearing is not to be mistaken for a first case management conference.

However, the court can, and does, order costs budgeting in 1975 act claims at any point whilst the claim remains live.

In the (now infamous) case of Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537, Mr Mitchell’s lawyers filed their costs budget a day before the case management conference, rather than seven clear days before, as stipulated by CPR 3.13. The Court of Appeal held that the lawyers could therefore only recover their court fees, but not their own costs, in the event of an adverse costs order.

Since then, the conjoined appeals of Denton & Ors v TH White, Decadent Vapours Ltd v Bevan & Ors and Utilise TDS Ltd v Davies & Ors [2014] EWCA Civ 906 have provided welcome relief for many practitioners. The decision provides that the onus is now on the party opposing an application for relief from sanctions to show that any breach is serious, as opposed to the party applying for relief to show that it is trivial.

Be that as it may, it is still crucial for private client practitioners to be mindful of how and when the rules now apply if they are to avoid potentially serious sanctions.

How does this fit into existing law and practice?

The majority of 1975 act claims are issued under part 8 of the CPR, which applies to claims where there is usually no significant factual dispute. CPR 8.9(c) confirms that claims issued under that part are automatically treated as allocated to the multi-track.

Before 22 April 2014, costs budgets applied both to part 7 and part 8 multi-track claims. The 72nd Update amends the position such that they now only apply to multi-track claims issued under part 7, unless the court otherwise orders.

However, a look to paragraph 5(d) of Practice Direction 3E of the CPR confirms that costs budgets “may be particularly appropriate in […] claims pursuant to the Inheritance (Provision for Family and Dependants) Act 1975”.

In what ways does this affect practitioners?

Quite simply, it means that, unless the court orders otherwise, practitioners acting in a 1975 act claim issued under part 8 now need not file costs budgets.

However, the court are still ordering costs budgeting in many 1975 act claims and, where it is ordered, it is crucial to ensure that costs budgets are filed within the time stipulated in any such order.

CPR 2.8(2) confirms that: “A period of time expressed as a number of days shall be computed as clear days.”

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.”

As such, if the court orders costs budgets to be filed seven days before a hearing date, the budget must be filed seven clear days beforehand. This could be anything up to nearly two weeks before, once the rules regarding deemed service are taken into account.

Further, many 1975 act claims may themselves have significant disputes of fact or may have been issued in conjunction with, or consolidated with, other claims which have such disputes of fact. For instance, it is not uncommon to issue a 1975 act claim alongside an equitable claim, say, on the basis of proprietary estoppel or seeking to assert a beneficial interest on the basis of a resulting or constructive trust. In such cases, the court will often order any such claim originally issued under part 8 to proceed under part 7 and so costs budgeting may then apply.

What, if anything, should I be doing differently as a result?

Quite simply, where a claim is issued under part 8, practitioners need not file costs budgets, unless specifically ordered to do so by the court. It is crucial, therefore, to ensure that all orders are thoroughly checked as soon as they are received and that any hearings and directions to file costs budgets are diarised accordingly with appropriate reminders, taking into account the rules on deemed service and clear days.

Where, because of a significant dispute of fact or otherwise, a 1975 act claim is issued under part 7 and assigned to the multi-track, or where such a claim is subsequently assigned to the part 7 procedure from part 8 (in which case, it will automatically have been assigned to the multi-track), then costs budgeting will automatically apply, subject to the limited exceptions in CPR 3.12(1). Costs budgets will then either need to be filed by the date specified in the part 26 directions questionnaire, or, where no such date is given, seven clear days before the first case management conference, in accordance with CPR 3.13.

If in any doubt, it is advisable to contact the court to see whether or not the judge expects costs budgets to be filed and to check with the lawyers acting for the other parties to determine whether they propose to file costs budgets. It is often better to err on the side of caution, although the costs of preparing the costs budget itself will need to be relayed to the client beforehand.

In all cases, practitioners should use their best endeavours to try to agree costs budgets prior to any costs case management conference, as the court will only revise those parts of the budget which are not agreed.