Sylvia Henry v News Group Newspapers Ltd  EWHC 90218 (Costs)
The Claimant was a Senior Social Worker at Haringey Council. She was the subject of a series of defamatory articles in The Sun concerning the role of social services in the circumstances surrounding the death of ‘Baby P’. The Claimant brought a claim for libel which was settled shortly before trial with the payment of a substantial sum in damages to the Claimant, a Statement in Open Court and a prominent apology in the newspaper. The Claimant was entitled to recover her costs of the libel action on the standard basis.
The case was one of the first to be dealt with under the Defamation Proceedings Costs Management Scheme, set out at Practice Direction 51D, which applies to libel claims commenced on or after 1 October 2009. The Costs Management Scheme requires each party to prepare a costs budget in advance of any case management conference. The budgets detail reasonable allowances for the various elements of the litigation, including any specified contingencies. These budgets are then approved or disapproved by the court. In the event of disapproval, the budget “will record the court’s view”.
Under the Costs Management Scheme, solicitors must liaise on a monthly basis to check that their budget is not being exceeded. If the budget is being exceeded, either party can apply to the court for a costs management conference.
At the conclusion of the litigation, when the court assesses costs on the standard basis, the court will not depart from the approved budgets unless it is satisfied that there is good reason to do so.
In this case, both the Claimant and the Defendant exceeded their budgeted costs. Most significantly however, the Claimant exceeded her budgeted costs for disclosure by £76,306 (the original allowance was £11,250) and for witness statements by £216,404 (the original allowance was £12,487).
The question for the court therefore was whether there was “good reason” for the court to depart from the approved costs budgets in this case.
Senior Costs Judge Hurst found that the Claimant had failed to establish “good reason” to depart from the approved budget, even though he was “in no doubt whatsoever” that the Claimant’s bill of costs would be regarded as reasonable and proportionate if subjected to a detailed assessment.
The court stressed that the provisions of the Practice Direction were in mandatory terms: each party must prepare a costs budget or revised costs budget; each party must update its budget; solicitors must liaise on a monthly basis to check that the budget is not being, or is likely to be, exceeded.
These requirements reflect the objective of the Practice Direction to manage the litigation so that the costs of each party are proportionate to the value of the claim and reputation issues at stake, and so that the parties are on an equal footing. Here, the court found that the Claimant’s solicitors had not adhered to the provisions of the Practice Direction to keep the parties updated as to the ongoing costs of the case. Accordingly, since the Defendant was unaware that the Claimant’s budget had been significantly exceeded, the parties were no longer on an equal footing and the purpose of the Costs Management Scheme was lost.
The court reached this decision, even though the Defendant’s conduct of the litigation (mounting a vigorous and lengthy defence which was amended four times and serving ten lists of documents) had had a major effect on the way in which the Claimant had pursued her case, and that consequently the Claimant would otherwise have been able to make “a very good case” on a detailed assessment for the costs claimed.
The court did give permission to appeal in light of the significant amount of money at stake and the importance of the issues involved which required a definitive binding decision to be given to provide a precedent in future cases.
This is the first judgment giving detailed consideration to the application and consequences of the Defamation Proceedings Costs Management Scheme (although it also applies to malicious falsehood claims) and demonstrates the stark costs consequences which may result from a party failing to follow the requirements of the Practice Direction.
The ruling emphasizes the mandatory nature of the Practice Direction and the ongoing requirement to update the opposing party in the event that costs exceed their budget. In doing so, the parties must take a proactive approach to the budgeting and management of the costs of litigation. As libel claims can be unpredictable, proactive costs management can be particularly difficult. However, as this case demonstrates, the requirements of the Practice Direction means that the consequences of not paying adequate attention to costs management can be draconian. Raising any changes contemporaneously, and if necessary seeking a further costs management conference, will help to avoid any unexpected issues at the culmination of proceedings.
Harvey Starte, instructed by Taylor Hampton, appeared as junior Counsel for the Claimant.
The judgment is available here.