Assessment – Detailed assessment – Defamation

Henry v News Group Newspapers Ltd: Court of Appeal, Civil Division: 28 January 2013

The claimant, a senior social worker employed by Haringey Council, was the victim of a sustained and vitriolic campaign by the Sun newspaper following the death of the child known as Baby P. She brought proceedings for defamation against the defendant publisher. Those proceedings were eventually settled on payment of a substantial sum, a statement in open court and the publication of an apology in a prominent position in the paper.

The apology acknowledged that there had been no truth in any of the defamatory statements made by the Sun and that its campaign against the claimant had been entirely unjustified. As part of the settlement the defendant agreed to pay the claimant’s costs of the proceedings to be assessed on the standard basis if not agreed. A consent order in Tomlin form was made to give effect to the settlement, which included a term to that effect. Costs budgets had been prepared by both parties for the first case management conference in accordance with Practice Direction 51D (the Defamation Proceedings Costs Management Scheme) (PD 51). The Master had approved both budgets, but thereafter neither party sought approval to any revised budged.

The parties were unable to reach agreement on the amount of costs recoverable by the claimant, who thereafter commenced detailed assessment proceedings. The defendant objected to the claimant's bill of costs on the grounds that it exceeded the budget that had been approved by the Master. There was subsequently a hearing before the Senior Courts Cost Office in order to determine a preliminary issue, namely, whether there was good reason to depart from the claimant's approved budget. The senior costs judge concluded that the failure of the claimant's solicitors to tell the defendant's solicitors that they were exceeding their budget prevented the parties from being on an equal footing and that because they had largely ignored the provisions of PD 51 there was no good reason for departing from the approved budget. The issue was whether there had been a good reason to depart from the claimant's approved budget. The appeal would be allowed.

The approved budget was not intended to act as a cap, since the court could depart from it when there was good reason to do so. When considering whether there was good reason it was necessary to take into account all the circumstances of the case, but with particular regard to the objective of the costs budgeting scheme. In the case of the present scheme the objective was set out in paragraph 1.3 of PD 51, namely, to manage the litigation so that the costs of each party were proportionate to what was at stake and to ensure that the parties were on an equal footing. It would not be wise to attempt an exhaustive definition of the circumstances in which there might be good reason for departing from the approved budget.

However, the starting point had to be that the approved budget was intended to provide the financial limits within which the proceedings were to be conducted and that the court would not allow costs in excess of the budget unless something unusual had occurred. Whether there was good reason to depart from the approved budget in any given case, therefore, was likely to depend on, among other things, how the proceedings had been managed, whether they had developed in a way that had not been foreseen when the relevant case management orders were made, whether the costs incurred were proportionate to what was in issue and whether the parties had been on an equal footing. When paragraph 1.3 spoke to the parties being on an equal footing it was concerned with the unfair exploitation of superior resources rather than with the provision of information about how expenditure was progressing. Compliance with all the requirements of PD 51 was not essential before a party could ask the court to depart from the approved budget it was no more than one factor which the court could take into account in deciding whether there was in fact good reason to do so (see [17], [18], [20], [21], [24] of the judgment).

In the instant case, the judge had misunderstood the reference in para 1.3 of PD 51 to the parties being on an equal footing and had taken too narrow a view of what might amount to good reason under paragraph 5.6(2)(b). In the circumstances, there had been good reason to depart from the claimant's budget. First, unless the court departed from the budget the claimant would not be able to recover the costs of the action. Allied to that was the fact that the failure of the claimant’s solicitors to observe the requirements of PD 51 had not put the defendant at a significant disadvantage in terms of its ability to defend the claim, nor was it likely that it had led to the incurring of costs that had been unreasonable or disproportionate in amount. In other words, the objects which PD 51 sought to achieve had not been undermined. In those circumstances a refusal to depart from the budget simply because the claimant had not complied with PD 51 would have achieved nothing beyond penalising her. Further, there was the fact that the claimant’s solicitors had not been alone in failing to comply with the requirements of PD 51. Finally, the failure of the defendant’s solicitors to register any protest when they were finally informed of the amount of costs incurred by the claimant suggested some recognition of the extent to which the development of the litigation had affected the claimant’s preparation (see [20], [25]-[26] of the judgment). Leigh v Michelin Tyre plc [2004] 2 All ER 175 considered.

Per curiam: In the light of the experience gained from those pilots the Rule Committee decided to adopt Sir Rupert Jackson’s recommendation that the management of costs by the court should in future form an integral part of the ordinary procedure governing claims allocated to the multi-track. Those rules, which will become effective from 1 April 2013, differ in some important respects from the practice direction with which this appeal is concerned. In particular, they impose greater responsibility on the court for the management of the costs of proceedings and greater responsibility on the parties for keeping budgets under review as the proceedings progress.

Read as a whole they lay greater emphasis on the importance of the approved or agreed budget as providing a prima facie limit on the amount of recoverable costs. In those circumstances, although the court will still have the power to depart from the approved or agreed budget if it is satisfied that there is good reason to do so, and may for that purpose take into consideration all the circumstances of the case, I should expect it to place particular emphasis on the function of the budget as imposing a limit on recoverable costs. The primary function of the budget is to ensure that the costs incurred are not only reasonable but proportionate to what is at stake in the proceedings. If, as is the intention of the rule, budgets are approved by the court and revised at regular intervals, the receiving party is unlikely to persuade the court that costs incurred in excess of the budget are reasonable and proportionate to what is at stake (see [28] of the judgment). Decision of Senior Costs Judge Hurst [2012] EWHC 90218 (Costs) affirmed.

Simon Browne QC and Joanna Hughes (instructed by Taylor Hampton Solicitors Ltd) for the claimant; Alexander Hutton QC and Adam Wolanski (instructed by Reynolds Porter Chamberlain LLP) for the defendant.