The Court of Appeal today upheld a strict costs judgment in a landmark case which establishes the court’s post-Jackson hardline approach to costs budgeting.

In a judgment released this morning, the court refused relief from sanctions to lawyers representing Andrew Mitchell (pictured) in his libel action over The Sun’s ‘plebgate’ story.

Master of the rolls Lord Dyson said that overturning the appeal would be a ‘major setback’ to the change in culture envisaged in the Jackson reforms.

He added that any relief from sanctions 'would give rise to uncertainty and complexity and stimulate satellite litigation'.

The two-partner firm Atkins Thomson had its budget limited to court fees alone after failing to submit a figure seven days before the first case management conference.

In effect, the ruling meant that even if the Conservative former chief whip wins his libel case, The Sun would not have to pay his legal fees.

The Court of Appeal today said that ruling was correct and dismissed the appeal.

Lord Dyson admitted the claimant’s solicitors had been ‘stretched very thin in terms of resources’ but he decided to refuse relief on the grounds these problems were not unusual.

The judgment said: ‘The defaults by the claimant’s solicitors were not minor or trivial and there was no good excuse for them. They resulted in an abortive costs budgeting hearing and an adjournment which has serious consequences for other litigants.

‘Although it seems harsh in the individual case of Mr Mitchell’s claim, if we were to overturn the decision to refuse relief, it is inevitable that the attempt to achieve a change in culture would receive a major setback.’

The case is seen as a definitive guide to the court’s new approach to costs budgeting following the Jackson reforms which came into force last April.

Many firms involved in litigation will be concerned at the court’s strict approach to non-compliance with costs rules, but others will be pleased at least to have certainty about where they stand. 

Dyson added: 'We hope that our decision will send out a clear message. If it does, we are confident that, in time, legal representatives will become more efficient and will routinely comply with rules, practice directions and orders.

'If this happens, then we would expect that satellite litigation of this kind, which is so expensive and damaging to the civil justice system, will become a thing of the past.'

Sue Nash, costs lawyer and founder of Litigation Costs Services, said: 'Today's judgment is likely to make solicitors more than a little twitchy, but the good news is that it provides much needed guidance at a time of upheaval for the profession.

'Compliance with the rules and court timetables is key and solicitors can no longer be in any doubt about the need to do their homework around costs budgeting.'

The Mitchell case was fast-tracked to the Court of Appeal to allow the senior judiciary to hand the lower courts necessary guidance on the approach they should take.

In the original judgment, Master Victoria McCloud said the explanations put forward by Atkins Thomson – ‘pressure of work, a small firm, unexpected delayed with counsel and so on’ – were ‘not unusual’, and could not justify granting relief from sanctions.

Law Society chief executive Desmond Hudson said: 'I have very great sympathy for this firm. Since the introduction of the new courts’ case management powers the Law Society has been advising of the serious implications for members of getting these cost budgeting rules wrong. It was always our view that the judiciary were likely to impose serious sanctions for failure to comply with these rules.

'Solicitors will obviously want to review their procedures and processes to comply with these rules. At our next council meeting we will be discussing plans to establish a costs section intended to share best practice across the profession, establish a dialogue with the judiciary and build the profession’s awareness of how to use these rules to ensure solicitors are properly rewarded for a job well done.'