Libel litigant exceeded costs budget 'for good reason'

The Court of Appeal has ruled that a libel litigant who greatly exceeded her costs budget could depart from it ‘with good reason’.

The case involved Sylvia Henry, the Haringey council social worker who found herself on the receiving end of what Lord Justice Moore-Bick called a “sustained and vitriolic” campaign by The Sun newspaper following the death of Baby P. Henry accepted a undisclosed amount in damages before the case reached trial.

The ruling was billed as a test case on costs budgeting, which has been piloted in defamation actions since October 2009 before being extended across all other areas of civil litigation on 1 April 2013.

Paragraph 5.6 of practice direction 51D, which sets out the costs management regime for libel, states that the court will only depart from budgets where they are satisfied that there is “good reason”.

Delivering judgment in Henry v News Group Newspapers [2013] EWCA Civ 19, Lord Justice Moore-Bick said senior costs judge Hurst held that because Henry’s solicitors had ignored the provisions of the practice direction there was no good reason for departing from it.

Moore-Bick LJ went on: “I would accept that costs estimates fall at one end of a scale that runs through costs budgets to cost caps. Clearly the very fact that the court has responsibility for approving budgets as a means of managing costs is an indication that budgets are intended to provide some constraint.

“On the other hand, the budget is not intended to act as a cap, since the court may depart from it when there is good reason to do so.”

He allowed Henry’s appeal, but said it was the costs judge to decide to what extent she should be able to recover costs in excess of those for which the budget allowed. Lord Justice Aitkens and Lady Justice Black agreed.

Rod Evans (pictured), president of FOIL, said that as a result of the judgment there were now “major concerns” over adherence to the cost budgeting rules from the 1 April and what sanctions will be available to apply against those who break the rules.

“We are disappointed that the Court of Appeal has seemingly undermined the implementation of the Jackson reforms which are needed as a matter of urgency to tackle the current dysfunctional costs of civil litigation,” he said.

Iain Stark, chairman of the Association of Costs Lawyers (ACL), said the judgment sent out “completely the wrong message” to anyone involved in litigation.

“The government has made it clear that it wants costs budgeting to help constrain the spiralling costs of litigation, yet the decision flies in the face of this intention. “Not only does it undermine the government’s efforts, but it also gives licence to further undermine costs judges and places yet more burdens on them.”

Stark went on: “This ruling gives litigants carte blanche to ignore the new rules – and satellite litigation is certain to follow. Post April it looks like we will be waiting, as in the bad old days of the Costs War, for cases to reach the Court of Appeal, thus paralysing the courts underneath and the everyday administration of justice.”

While admitting that the ruling was a “victory for common sense and the underdog”, Tom Blackburn, national advocacy manager at Just Costs, said the result was that the Jackson reforms had been “watered down” before they were rolled out.

“Unfortunately the legacy of Henry v NGN might be to encourage all parties (claimant and defendant alike) to spend millions of pounds in satellite litigation, as the clarity which was intended by Lord Justice Jackson’s costs budgeting and management, has just disappeared.”