Henry v News Group Newspapers [2013] EWCA Civ 19  is a Court of Appeal case relating to budgets under the costs pilot scheme for defamation cases, and confirms that courts will retain some discretion to depart from budgets when there is ‘good reason’ to do so. The case is a costs appeal following on from litigation by a social worker against the Sun Newspaper for its “sustained and vitriolic campaign” against her after the ‘Baby P’ affair. The Court of Appeal’s decision is important because similar costs management schemes will apply to multi-track cases generally once the Jackson reforms come into force.

In Henry, the Court of Appeal held that it is acceptable to depart from the approved costs budget where there was good reason to do so. This decision has alarmed some commentators who fear it may undermine Jackson’s cost budgeting measures, with one description of the decision as ‘carte blanche to ignore the new rules’. However, on closer inspection of the judgment such a reaction seems unjustified.

The case is important as it is the first superior court decision on the issue; however it is neither unreasonable nor exceptional. What the Court of Appeal has done is acknowledge that there may, on occasion, be situations where it is appropriate to depart from the agreed budget, i.e. there may be ‘exceptions to rule’.

More specifically, the Court of Appeal stated that the new defamation practice direction was designed to act as a costs framework and that although the direction expressly recognises there may be good reasons to depart from the budget, this should only be done with regard to what is reasonable and proportional in the circumstances of the case. The Court was unwilling to provide an exhaustive definition of when such a departure was appropriate, as to do so would be inflexible and prevent courts from examining the ‘infinitely variable’ circumstances in each case. For this same reason, the Court did not agree that compliance with the practice direction was essential before a party could depart from the costs budget; rather, this was just one factor to consider.

The Court also acknowledged that the decision had been given with the civil litigation costs reforms imminent, and that those rules would impose even greater responsibility on courts for the management of costs and proceedings. It added that, as a whole, under the proposed rules a budget should be seen as placing a ‘prima facie limit on recoverable costs’, but that courts will still have the power to depart from that figure if there is good reason to do so in all the circumstances of the case.  Ultimately, said the Court, ‘the function of the budget is to ensure that the costs incurred are not only reasonable but proportionate to what is at stake’.

The full text of the judgment can be found at: http://www.bailii.org/ew/cases/EWCA/Civ/2013/19.html