17 May 2012

Senior Costs Judge disallows budget overrun in landmark costs management ruling

A social worker involved in the Baby P case faces a £300,000 shortfall in the costs she can recover after a successful libel claim against The Sun because there was no good reason to depart from the court-approved costs budget, the Senior Costs Judge has ruled.

This was despite the fact that she would have a “very good case” to justify the extra costs in a detailed assessment.

Master Hurst’s judgment is the first such ruling in relation to budgeting – which is set to become standard under the Jackson reforms – and is likely to head straight to the Court of Appeal because of its importance after the judge granted leave without even being asked.

London media firm Taylor Hampton acted for Sylvia Henry, who was one of the individuals named in the newspaper’s high-profile and prolonged campaign against Haringey Social Services following the death of Baby P.

It sent a pre-action protocol letter to News Group Newspapers (NGN) on 2 March 2010, the budget was approved on 20 September 2010 under the defamation costs management pilot, and the case settled on 4 June 2011, shortly before both a costs management hearing and then the trial. Ms Henry received a prominent apology in the newspaper and “substantial” damages.

Her approved budget, excluding trial costs, was £381,305, broken down into nine categories. In four of the categories the budget was exceeded by “relatively modest amounts”, the judge noted, while three others were under budget, largely because the expected 10-day trial did not happen.

However, in relation to disclosure the claimant sought £87,556, against an approved figure of £11,250, and in relation to witness statements it was £228,891 against a budget of £12,487.

The claimant argued that this was because of the way the defence was conducted, and Master Hurst said NGN’s argument that “its actions should not have had any major effect on the way in which the claimant was dealing with her case rings somewhat hollow”.

He explained: “The defendant in these proceedings mounted a vigorous and lengthy defence which was amended four times. They served 10 lists of documents. I do not suggest that the defendant was not entitled to act as it did, but it cannot now try to pass off this constantly changing scenario as being no more than a minor inconvenience to the claimant.”

However, he said the sole question was whether there was good reason for the claimant to depart from the court-approved budget. “It is true that neither side managed to keep within its budget but the defendant did at least make some attempt to comply with practice direction 51D [governing the pilot]… The claimant’s solicitors for their part do not appear to have responded to the defendant’s solicitors in any meaningful way in respect of the budgets, save for a telephone call on 20 May 2011, shortly before the case settled.”

The provisions of the practice direction – such as updating the budgets and solicitors having to liaise monthly on them – are mandatory, Master Hurst said. “I am forced to the conclusion that if one party is unaware that the other party’s budget has been significantly exceeded, they are no longer on an equal footing, and the purpose of the cost management scheme is lost.”

It was common ground that the court will not depart from the approved budget unless there is “good reason” to do so, which is not defined. The judge said: “Whilst… I have no doubt that the claimant could make out a very good case on detailed assessment for the costs being claimed, the fact is the claimant has largely ignored the provisions of the practice direction and I therefore reluctantly come to the conclusion that there is no good reason to depart from the budget.”

Taylor Hampton partner Daniel Taylor said: “We are naturally disappointed with the decision. However, what is very significant is that the Senior Costs Judge gave us permission to appeal without our having to request it.

“Given the facts of this case and the finding that the actions of the defendant had a major effect on the way that the claimant dealt with the case and that on any detailed assessment the claimant could make out a very good case for the costs claimed, we feel that there was more than good reason to depart from the budget. We will be appealing the decision.”

He explained that each time a further list of documents was served – “and there was no inkling the defendant would be serving 10 such lists” – they had to amend the witness statements. “Not only that but the defendants had contractually agreed to pay the costs of the amendments and that had been embodied in a court order,” he said. 

To read an analysis of the case by costs lawyer Andy Ellis, who advised NGN in Henry, click here.

 

By Legal Futures

Tags: costs management, Jackson report