Judgment Call: 25 February 2013

Civil procedure

KC v MGN Ltd (Costs). [2013] EWCA Civ 3. Lord Judge LCJ; Lord Neuberger; Eady J. 22 January 2013

Where, under the Defamation Act 1996 s.2-s.4, a defendant had made an appropriate apology and an offer of amends which had been rejected by the claimant and which was the same as the damages subsequently awarded by the court, the burden of what proved to have been unnecessary legal expense fell on the claimant who had caused it to be incurred.

Costs determined

For the claimant KC

3 Hare Court’s James Dingemans QC; 1 Garden Court’s Julien Foster; YVA Solicitors legal executive Mario Economides

For the defendant MGN Ltd

5RB’s Desmond Browne QC; 5RB’s Yuli Takatsuki; MGN legal department


Fox & Ors v Bassetlaw District Council. Unreported. Judge Peter Clark. 16 January 2013

An employment judge had been entitled to find that the withdrawal of an equal pay claim by a group of employees, with a view to bringing a second set of proceedings which raised substantially the same cause of action, amounted to an abuse of process.

Appeal dismissed

For the appellant Fox & Ors

Littleton Chambers’ Niran De Silva; Thompsons Solicitors’ assistant Haf Jones

For the defendant Bassetlaw District Council

Parklane Plowden’s Seamus Sweeney; Weightmans solicitor Jawaid Rehman

Company law

(1) Peter Eckerle; (2) Willem Bertheux & (3) Stephan Hallensleben v Wickeder Westfalenstahl GmbH. [2013] EWHC 68 (Ch). Norris J. 23 January 2013

An application under the Companies Act 2006 s.98 by “holders of not less in the aggregate than 5% in nominal value of the company’s issued share capital” for the cancellation of a special resolution by a public company to be re-registered as a private limited company could be made only by registered shareholders; in the instant case, the claimants, being indirect investors in the company, lacked standing to make such an application.

Application granted

For the claimants (1) Peter Eckerle; (2) Willem Bertheux & (3) Stephan Hallensleben

Erskine Chambers’ Stephen Horan; ASB Law partner Lyndsey Ratcliffe

For the first defendants Wickeder Westfalenstahl GmbH

Serle Court’s Daniel Lightman; Orrick Herrington & Sutcliffe (Europe) partner Simon Willis

Family law

Hamilton v Hamilton. [2013] EWCA Civ 13. Thorpe LJ; Kitchin LJ; Baron J. 24 January 2013

In proceedings under the Matrimonial Causes Act 1973 s.31, the court had power to vary a provision in a consent order made in ancillary relief proceedings as to the payment of a lump sum by instalments over time. Where there was disagreement as to whether the terms of the order were, in reality, correct, the court retained jurisdiction and had to assess what the parties agreed against the factual matrix of what occurred during the relevant period.

Appeal dismissed

For the appellant Hamilton

Coram Chambers’ Michael Horton; Moss Beachley Mullem & Coleman partner Alan Mullem

For the respondent Hamilton

29 Bedford Row’s Christopher Wagstaffe QC; 29 Bedford Row’s Anthony Geadah Cripps Harries Hall partner Alex Davies

Featured case: civil procedure


Henry v News Group Newspapers Ltd. [2013] EWCA Civ 19. Moore-Bick, LJ; Aikens LJ; Black L. 28 January 2013

There was a good reason under CPR PD 51D para.5.6 to depart from the court-approved costs budget of a successful claimant in defamation proceedings, where the failure of the claimant’s solicitors to observe the requirements of the practice direction did not put the defendant at a significant disadvantage and did not seem likely to have led to costs being incurred that were unreasonable or disproportionate.

Appeal allowed

Henry appealed against a decision that there was no good reason in detailed assessment proceedings to depart from the court-approved costs budget. The claimant was a senior social worker employed by a local authority.

Following the death of a child known as “Baby P”, she had been the victim of a sustained and vitriolic campaign by a newspaper published by the respondent, The Sun. She brought defamation proceedings against the tabloid newspaper.

It defended the case vigorously and amended its defence four times. Shortly before trial The Sun settled the proceedings by making a substantial payment and a statement in open court and publishing an apology.

It agreed to pay the claimant’s costs on the standard basis, to be assessed if not agreed. The parties were unable to reach agreement on the costs and she commenced detailed assessment proceedings.

News Group Newspapers (NGN) objected to the bill of costs on the grounds that it exceeded the costs budget approved by the master pursuant to the Defamation Proceedings Costs Management Scheme in CPR PD 51D.

The senior costs judge considered as a preliminary issue whether there was good reason under para.5.6 of the practice direction to depart from the costs budget.

He held that, although it was strongly arguable that Henry’s costs were both reasonable and proportionate, she had failed to comply with the mandatory requirements of the practice direction to keep NGN informed of the fact that her budget was being exceeded; it followed that the parties were no longer on an equal footing within para.1.3 and there was no good reason to depart from the approved budget under para.5.6.

Appeal allowed

The judge had misunderstood the reference in para.1.3 of the practice direction to the parties being on an equal footing and took too narrow a view of what could amount to good reason under para.5.6.

The reference to the parties being on an equal footing was concerned with the unfair exploitation of superior resources rather than the provision of information about how expenditure was progressing. Failure to exchange information about expenditure as required by para.5.5 did not of itself put the parties on an unequal footing within para.1.3. In the instant case neither party was financially embarrassed and there was no inequality of arms.

Compliance with all the requirements of the practice direction was not essential before a party could ask the court to depart from the approved budget. It was no more than one factor the court could take into account.

In the instant case both parties exceeded their budgets to a significant extent and when the case was before the court it had failed to take the initiative by enquiring whether the parties’ costs were within the approved budgets.

It was open to the costs judge to find that the essential objects of the scheme had not been frustrated. In those circumstances he was obliged to consider all the circumstances of the case, including the extent to which the parties and the court had exercised their respective responsibilities under the scheme, the way in which the proceedings had developed, the response of Henry’s solicitors to the demands imposed by the way in which NGN’s case had developed and NGN’s agreement to pay Henry’s costs as part of the compromise of the claim.

Unless the court departed from the budget Henry would not be able to recover the costs of the action. That alone would not be enough; if it were the scheme would be otiose, but it was an important factor to the extent that on examination the court was persuaded that the costs incurred were reasonable and proportionate to what was at stake.

Henry’s failure to observe the requirements of the practice direction did not put NGN at a significant disadvantage and did not seem to have led to the incurring of costs that were unreasonable or disproportionate.

It would be unreasonable and disproportionate to penalise Henry by refusing to depart from the budget simply because she had not complied with the practice direction. That was all the more so in the context of proceedings which were constantly changing.

Henry was not alone in failing to comply with the practice direction. Taking those matters together there was good reason to depart from the approved costs budget.

For the claimant/appellant Henry

Daniel Taylor, partner, Taylor Hampton

James Heath, solicitor, Taylor Hampton

Simon Browne QC, Temple Garden Chambers

Joanna Hughes, Temple Garden Chambers

For the defendant/respondent NGN

Alexander Hutton QC, Hailsham Chambers

Adam Wolanski, 5RB

Keith Mathieson, partner, Reynolds Porter Chamberlain

Commentary James Heath

James Heath

This judgment is undoubtedly (and quite rightly) fact-led. It concerns the implementation of the Defamation Proceedings Costs Management Pilot Scheme, which was the precursor for additions to CPR 3 that will apply to all multitrack cases commenced on or after 1 April.

This case was the first to fall into the pilot scheme. It would be fair to say that, being the first such case, both parties and the court were feeling their way. Costs budgets were prepared by and approved at a case management conference in September 2010. Thereafter, there were no further conferences to consider budgets.

It is important to note that NGN also failed to update its budget or inform the claimant of its costs on a monthly basis. After the conference the case quickly entered a world of relative compliance.

After approval of budgets the case was then to develop in a manner that simply could not have been predicted by the claimant. NGN served 10 lots of disclosure documents (making a raft of non-party disclosure applications) and mounted a vigorous and lengthy defence, amended four times.

NGN, in preparation for the meeting that eventually settled the case, asked for and received the claimant’s figure for total costs.

In settling the matter NGN raised no protest with regard to the figures with which it had been supplied and settled the matter armed with knowledge of those costs. As Lady Justice Black observed during the appeal hearing, prior to settlement The Sun had something far better than any updated costs budget – it was in possession of the actual figure for costs being sought.

Following settlement costs could not be agreed and so the matter went to assessment before Senior Costs Judge Hurst.

NGN then sought to argue the claimant should be limited to her budget alone. A preliminary issue hearing was held to determine whether, in the words of the practice direction, there was “good reason” to depart from the approved budget. In his judgment the judge found there had been no good reason to depart from it.

The effect of the judge’s order was to disallow £268,832 of base costs before any success fee was added. The judge concluded that the purpose of the practice direction was to put parties on an “equal footing” and he reasoned that if NGN had not been informed that the claimant had exceeded her budget the parties were not on equal footing with regard to knowledge on costs. He reasoned that if the practice direction had not been complied with there was no good reason to depart from the approved budget.

In a leapfrog appeal by agreement the Court of Appeal (CoA) considered the judgment of the court below, reversing the senior costs judge’s decision.

In doing so, it gave guidance on the meaning of equal footing and the purpose of the practice direction. The purpose is twofold: (i) to ensure that costs are proportionate to what is at stake, including reputational issues; and (ii) to ensure that parties are on an equal footing in that one party must not be able to exploit superior resources by conducting the litigation in a way that puts the other at a significant disadvantage.

The CoA found in the unusual circumstances of this case that there was good reason to depart from the approved budget.

This was because, among other things, the claimant did not put the defendant at a significant disadvantage in its ability to defend the claim; it seemed unlikely the claimant incurred costs that were unreasonable or disproportionate and the defendant had exceeded its budget.

Contrary to reports declaring the judgment a disaster for the Jackson reforms, the CoA was at pains to point out that the new rules coming into effect on 1 April are different from those of this pilot scheme. Multi-track litigators would be advised to study the new rules carefully and be sure procedures are in place to ensure compliance. The CoA gives a clear warning – ignore the new rules at your peril.

James Heath, solicitor-advocate, Taylor Hampton