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Costs Budgeting Appeal - Henry V News Group Newspapers

30 January 2013

Since the Senior Costs Judge’s decision in Sylvia Henry v News Group Newspapers Ltd [2012] EWHC 90218 (Costs) we have been eagerly awaiting for the Court of Appeal to determine whether there was a good reason in this case to depart from the Appellant’s approved budget. 

In Henry, Senior Costs Judge Hurst originally decided that there was no good reason to depart from the Appellant’s budget.  This was because the Appellant had failed to comply with the provisions of the Defamation Proceedings Costs Management Scheme and specifically the mandatory terms of the Practice Directions relating to informing the Court and Opponent that the previously approved budget was being exceeded and therefore it was his view that the parties were not on an “equal footing”. 

The effect of the judge’s order was to disallow £268,832.00 before any success fee was added under the Appellant’s Conditional Fee Agreement.  This despite expressing himself to be in no doubt whatsoever that, if it were to be subject to detailed assessment, those representing the Appellant would be able to argue very strongly that the costs incurred were both reasonable and proportionate.

In this judgment (Sylvia Henry v News Group Newspapers Ltd [2013] EWCA Civ 19 (28th January 2013) Lord Justice Moore-Bick with Lord Justice Aikens and Lady Justice Black sitting with Costs Judge Campbell as Assessor decided to allow the Appellant’s appeal and determined that there was good reason to depart from the Appellant’s previously approved budget. 

The Court of Appeal having considered the rather unusual circumstances of this case stated that although the Appellant had failed to observe the requirements of the practice direction the failure had not led to the objectives which the practice direction sought to achieve being undermined i.e. ensuring that the costs of each party are proportionate to the value of the claim and the reputational issues at stake and that the parties are on an equal footing.  A refusal to depart from the budget simply because the Appellant had not complied with the practice direction would achieve nothing beyond penalising her, which would be unreasonable and disproportionate.   

The matter was therefore referred back to a Costs Judge to decide in what respects and to what extent the Appellant should be allowed to recover costs in excess of those for which the budget allows.

The Court of Appeal however emphasised the fact that the practice direction with which this appeal was concerned applied only to proceedings under the first pilot scheme for defamation and that any costs management directions adopted as part of the ordinary procedure governing claims allocated to the multi-track effective from 1st April 2013 are likely to differ in some important respects. 

In particular it is stated that they are likely to impose greater responsibility on the Court and therefore parties for keeping budgets under review as the proceedings progress.  These are likely therefore to place greater emphasis on the importance of the approved and agreed budget as providing a prima facie limit on the amount of recoverable costs. 

In those circumstances whilst the court will still have the power to depart from the approved or agreed budget if it is satisfied to do so, it is less likely where the court has approved and revised budgets at regular intervals.  It therefore appears that the importance of producing accurate budgets in the future is going to be fundamental with regard to costs recovery and reducing the risk of satellite litigation.  Budgets will need to be monitored closely and regularly to ensure that the risk of losing recoverable costs is negated or considerably reduced.

Please do not hesitate to contact us to discuss any aspect of this decision or its impact on costs recovery.