Costs management: first decision under Defamation Proceedings Pilot Scheme

Practical Law UK Legal Update Case Report 5-519-5599 (Approx. 5 pages)

Costs management: first decision under Defamation Proceedings Pilot Scheme

by PLC Dispute Resolution

Background

Practice direction 51D provides for a pilot scheme of costs management to operate at the Royal Courts of Justice and Manchester District Registry. It is a mandatory pilot scheme and applies to defamation proceedings started on or after 1 October 2009. The pilot is set to continue until September 2012.

The details of the scheme are:

The court manages the costs of the litigation as well as the case itself, making use of CMCs and costs management conferences in accordance with PD 51D. The objective is to have costs proportionate to the value of the claim and the reputational issues at stake and so that the parties are on an equal footing.
There is a prescribed template, Form HA (an annex to PD 51D).
Each party must prepare and update a budget in advance of any CMC or costs management conference, for service with the pre-trial checklist (PTC) and at any other time ordered by the court. Specified contingencies also have to be included.
The parties are to discuss the assumptions and timetable on which their budgets are based and must exchange and lodge them not less than seven days before the hearing in question.
The court will take account of the budgets when giving case management directions, and will record approval or disapproval of each side's budget either by agreement or after argument.
In the event of disapproval, the court "will record the court's view", which presumably means that the court will indicate the figure which it regards as appropriate. The court cannot approve costs incurred before the date of the first case management conference. However, it can record its comments on those costs and take them into account when considering the reasonableness and proportionality of all subsequent costs.
After each hearing dealing with costs management, the lawyers on either side are to give their clients copies of the directions made and the budgets as approved or disapproved.
Solicitors must liaise monthly to ensure their budget is not being exceeded. In the event that it is, either party may apply to fix a costs management conference.
The judge conducting a detailed or summary assessment will have regard to the budget estimates of the receiving party and to any view previously expressed by the court. The court will not depart from the approved budget unless satisfied that there is "good reason" to do so. ("Good reason" is not defined and involves a value judgment upon the evidence and materials put before the costs judge.) Unless there has been a significant change in circumstances, the judge will approve as reasonable and proportionate any costs claimed which fall within the last previously approved budget. Save in exceptional circumstances, the judge will not approve as reasonable and proportionate any costs claimed which do not fall within the last previously approved budget.
When approving or disapproving a budget, the court will not attempt to undertake a detailed assessment in advance but will consider whether the budgeted totals for each stage of the work are within the broad range of reasonable and proportionate costs.

For background and more information about costs management, including details of another pilot scheme running in the Technology and Construction and Mercantile Courts, see Practice note, Costs management.

Facts

The claimant social worker brought libel proceedings against The Sun newspaper after it published articles concerning her involvement in the cases of Victoria Climbié and Baby P. The proceedings were settled and the claimant was entitled to recover her costs on the standard basis.

The case was one of the first to be dealt with under the Defamation Proceedings Costs Management Scheme. The claimant had exceeded the budget which had been approved by the court. This led to the trial of a preliminary issue on whether there was good reason for the court (on detailed assessment) to depart from the court approved costs budget.

The position regarding the claimant's budget as against the actual costs claimed on assessment was as follows:

In respect of pre-action, issues/pleadings/CMC and settlement, the claimant had exceeded the approved budget by relatively modest amounts.
In respect of expert reports, PTR and trial preparation, the amounts claimed were less than the approved budget, largely because the ten day trial budgeted for did not take place.
In respect of disclosure and witness statements, the approved budget had been exceeded by significant amounts (disclosure by £76,306 and witness statements by £216,404).

The defendant submitted that there was no good reason to depart from the claimant's approved budget. The claimant had failed to comply with PD 51D so that neither the court nor the defendant were aware of the significant increase in costs.

The claimant submitted that PD 51D was not intended to operate in a draconian manner and asked the court to consider all the circumstances, including that:

The tactics adopted by the defendant gave rise to extra work which would make it fair and proper to find good reason to depart from the costs budget. (The defendant maintained a robust defence up to trial, that in the latter stages heightened its allegations against the claimant.)
The defendant had also exceeded its budget.

Decision

The Senior Costs Judge ruled that there was no good reason to depart from the budget and, therefore, the claimant could not recover any more than in her approved budget.

He was in no doubt that on detailed assessment, the claimant would be able to argue very strongly that the costs incurred were both reasonable and proportionate. However, he was not conducting a detailed assessment but a preliminary issue and the sole question was whether there was good reason for the court to depart from the court approved budget.

There was no good reason in this case because the claimant had largely ignored the provisions of the practice direction.

It was clear that the claimant had not kept the defendant or the court informed of the fact that the budget was being exceeded. The fact that both sides exceeded their budgets did not assist the claimant. The defendant did at least make attempt to comply with PD51D by seeking to discuss budgets prior to the CMC and subsequently by informing the claimant's solicitors of the costs being incurred, and ultimately revising its budget and seeking a further CMC. The claimant's solicitors, however, did not appear to have responded to the defendant's solicitors in any meaningful way in respect of the budgets, save for a brief telephone call shortly before the case settled.

The provisions of the practice direction were in mandatory terms. The word "must" was used. The objective of the practice direction was to manage the litigation so that the costs of each party were proportionate to the value of the claim and reputational issues at stake and so that the parties were on an equal footing (paragraph 1.3). Because of this, the Senior Costs Judge said that he was "forced" to the conclusion that if one party was unaware that the other party's budget had been significantly exceeded, they were no longer on an equal footing and the purpose of the costs management scheme was lost.

The Senior Costs Judge also considered that the claimant should have inserted a figure into the contingency columns of Form HA to deal with unknown issues. It was no excuse that the claimant did not know how many applications there would be or what quantity of documents would be disclosed.

As this was the first case under the Defamation Proceedings Costs Management scheme to reach this stage in the proceedings and also because a significant amount of money was at stake, Master Hurst was prepared to grant permission to appeal under CPR 52.3(6)(B). Although the decision would not be binding on any other court, the issues raised were sufficiently important to require a definitive binding decision to be given.

Comment

This case confirms that the defamation costs pilot scheme under PD 51D is a draconian and restrictive scheme which must be adhered to. Parties and their advisers should take note.

It is interesting, however, that the Senior Costs Judge expressed reluctance that he had to come to the conclusion he did. This may be because the defendant had not come to the court with entirely clean hands, having itself failed to comply to the letter with PD 51D.

Given the importance of the decision and the amount at stake, it seems likely that the case will be appealed.

On the basis of interim feedback on the defamation and TCC and Mercantile Courts pilots, Jackson LJ has concluded that the advantages of costs management outweigh the disadvantages. He has drafted rules and practice directions to introduce costs management in all but heavy Commercial Court cases (where he accepts that the court needs more flexibility). These rules have been approved by the Civil Procedure Rule Committee, subject to minor amendments, and are likely to be introduced alongside other Jackson LJ reforms in April 2013.

Case

Sylvia Henry v News Group Newspapers Ltd 2012] EWHC 90218 (Costs) (16 May 2012).

End of Document

Also Found In

Resource ID 5-519-5599

Published on 23-May-2012

Resource Type Legal update: case report

Jurisdictions

England
Wales