Lord Justice Jackson’s review into civil litigation costs has generated great interest and many debates, and every civil practitioner and law student must get up to date with his recommendations and how they will be implemented in April 2013. Lord Jackson made recommendations on success fees, PSLA damages and changes to Part 36 of the CPR. In this paper however I will look specifically at the recommendation regarding costs budgets, how they are being implemented, and the first test of the courts’ approach to costs management in the case of Henry v NGN.
THE COSTS MANAGEMENT RECOMMENDATIONS
Even though it has received less press than other recommendations such as removal of recoverability of success fees, costs management is central to Lord Jackson’s aim of preventing disproportionate costs in civil litigation. In his final report he proposed a costs management regime based on budgets prepared by the parties and approved by the courts, who would manage cases so that they stay within the approved budgets. The winning party’s recoverable costs would then be assessed in accordance with the approved budget.
Implementation – pre April 2013
Two pilot schemes were established to implement the costs management recommendations. Initially a pilot was launched in the Birmingham TCC and Mercantile Courts. Then from 1st October 2011 this was extended to every TCC and Mercantile Court, to run until 31st March 2013. The details of this scheme can currently be found in Practice Direction 51G. A costs management pilot for defamation cases was introduced in 2009, and details of this can currently be found in Practice Direction 51D. It applies to all defamation proceedings in the Royal Courts of Justice and the Manchester District Registry started on or after 1 October 2009 and will run until 31 March 2013.
Both pilots in PD 51D and 51G run along the same themes – parties must prepare, file and exchange costs budgets using standard template forms (Precedent HA for defamation and HB for Mercantile and TCC) which are attached to the relevant practice directions. Parties are required to update the budgets before case management conferences, pre-trial reviews and costs management conferences (regular hearings conducted by the courts to manage costs of the litigation). Solicitors are charged with the task of liaising monthly to check that the budgets are not being exceeded, and in the event that it is the court will not depart from the approved budget ‘unless satisfied that there is good reason to do so’.
Parties are therefore constantly reminded to make accurate budgets and to update each other and the courts whenever budgets are being exceeded. However under what circumstances would the courts consider that there was ‘good reason’ to depart from a costs budget? Fortunately we did not have long to wait to find out the answer to this question, as the first case on costs management was decided in January 2013.
Henry v NGN Ltd (2013) EWCA Civ 19
Facts: This case concerned Sylvia Henry a former senior social worker employed by Haringey Council, who sued the publishers of the Sun newspaper over stories it had ran about her over the death of ‘Baby P’. The Defendants settled the defamation claims made by the Claimant, and agreed to pay her costs of the proceedings, to be assessed on the standard basis if not agreed. The parties were unable to agree on the Claimant’s costs and began a detailed assessment. The Claimant’s final costs bill exceeded her budget by almost £300,000, and the parties agreed that the issue of whether there was good reason to depart from the Claimant’s be tried as a preliminary issue.
Ruling on Preliminary Issue: Senior Costs Judge Hurst decided that there was no good reason to depart from the Claimant’s budget on the basis that it had been exceeded by a significant amount and the Claimant had failed to communicate this to the Defendant. Interestingly he acknowledged that on a detailed assessment of the costs being claimed the Claimant would have been able to argue very strongly that her costs were reasonable and proportionate.
Court of Appeal Decision: Lord Justice Moore-Bick considered that the costs judge had taken a rather narrow view of what may amount to good reason under the rules and allowed the Claimant’s appeal. He stated that in considering whether there was good reason to depart from an approved budget it was necessary to look at all the circumstances of the case and the aims of the costs management scheme, i.e. managing proceedings to keep costs to proportionate levels and keeping parties on an equal footing. He emphasised that the approved budgets are intended to impose a limit on recoverable costs, however in this case the court had good reason to depart from the budget as the objectives of the costs management scheme had not been undermined.
Implementation – After 1 April 2013
From 1 April 2013 costs budgeting will be extended to all multi-track cases that are started in a County Court and the Chancery and Queens Bench Divisions (apart from Admiralty and Commercial Courts), unless the court otherwise orders. The new rules will be in CPR 3.11-3.18 and PD 3E. In brief parties will be required to exchange and file costs budgets 28 days after service of the defence using standard form Precedent H. The courts will manage the costs of the case and parties are responsible for reviewing, revising and agreeing budgets, and in the absence of agreement the courts will review and approve the budgets using a new test of proportionality. The court continues to have the power to depart from the budget if there is good reason to do so.
Whether the case of Henry will lead to an increase in litigation over the courts’ costs decisions is yet to be seen. However that case was borne out of the defamation pilot, and may have to be read on its own merits. The new rules’ emphasis on agreed, revised and court approved budgets may make it more likely that parties will stick to their budgets, and less likely that those who don’t will be able to persuade the courts that there is good reason to depart from them.
Marian is a barrister and lecturer who was called to the Bar in November 2000. After pupillage she undertook practice in general common law, human rights and immigration. She joined City Law School (then Inns of Court School of Law) in January 2006 as a Visiting Lecturer, and then as a full-time lecturer in January 2011. She teaches Civil Litigation, ADR, Drafting, Opinion Writing, Civil Advocacy, Conference and Company Law.