The Court of Appeal has allowed a claimant to depart from her stated costs budget in the first case to test budgeting in defamation proceedings.
The ruling, handed down by Lord Justice Moore-Bick, has been criticised by litigators who say it is opposed to the reforms put forward by Lord Justice Jackson, which are due to be implemented in April.
Jackson LJ envisaged a system whereby litigants in defamation proceedings must devise and stick to a budget for costs. Should that budget be exceeded, he said, it would be down to the court to order a costs reduction.
Today’s ruling concerns a case bought by Sylvia Henry against the publishers of The Sun, News Group Newspapers (NGN).
NGN had settled the defamation claims brought against the tabloid over stories it ran about former social worker Henry in connection with the death of ‘Baby P’, agreeing to pay her reasonable legal costs.
The parties’ base costs estimates – including allowance for a trial that was avoided – were similar; the claimant’s was £539,847 and the defendant’s £531,746. The final bill of costs also revealed that Henry’s bill for claimant witnesses was 18 times higher than the figure the claimant had given in its costs budget for this category and the disclosure exercise was eight times higher.
In total, the base costs exceeded the approved budget by almost £300,000.
Senior Costs Judge Hurst, in deciding a preliminary issue, held that Henry was only entitled to the amount of base costs specified in the approved budget. However, the CoA said that ruling was too narrow and reversed the ruling.
In his judgment Moore-Bick LJ stated: “When considering whether there is good reason to depart from the approved budget it is necessary to take into account all the circumstances of the case, but with particular regard to the objectives of the cost budgeting regime.”
The aim, he said, was to manage the litigation in a way that was proportionate to the issues at stake in the case and to ensure that the parties were broadly on an equal footing.
The president of the Forum of Insurance Lawyers (Foil) Rod Evans said the ruling was “disappointing” and that the appeal court had effectively undermined the Jackson reform programme.
“Lord Justice Jackson made clear that cost budgeting was a key proposal in his raft of reforms to tackle the disproportionate and unbalanced costs of civil litigation and that his reforms were intended to be implemented as a whole and interlocking package,” Evans said. “We now have major concerns over the adherence to the new cost budgeting rules from 1 April and what sanctions will be available to apply against those who don’t adhere.”
Mayer Brown partner Rani Mina added: “One of Jackson’s concerns was that his reforms should not increase the level of satellite litigation over costs. This decision must surely increase the likelihood of appeals in relation to tough cost budgeting decisions at first instance.”
The claimant’s lawyer, James Heath, insisted that the ruling was sensible. he said: “As any close reading of this judgment makes absolutely clear: it does not undermine the new regime. It in fact contains the a stark warning to both claimants and defendants.
“Lord Justice Moore- Bick states, ‘Although the court will have power to depart if it is satisfied there is good reason to do so, I should expect it to place particular emphasis on the function of the budget as imposing a limit on recoverable costs’.
“It could not be clearer: budgets impose a limit on recoverable costs but the court does have discretion where there is good reason.”
Temple Garden Chambers’ Simon Browne QC was instructed for the claimant by Taylor Hampton. He faced Hailsham Chambers Alexander Hutton QC, who was instructed by Reynolds Porter Chamberlain for NGN.