The Claimant was employed by Haringey Council as a Senior Social Worker and was involved in both the cases of Victoria Climbie and the child know as Baby P.  She brought a defamation claim against the Defendant due to a series of articles published by The Sun Newspaper.

The matter was run under the Libel Budget Pilot scheme and on 20 September 2010 Master Eastman approved the Claimant’s costs budget for a total sum of £381,305.  The Claimant claimed costs in the sum of £650,137.

Costs Management Pilot Schemes have been running in the Technology and Construction Courts and in London and Manchester in respect of defamation cases and will be rolled out to other Courts in April 2013 as part of the Jackson reforms.

The issue to be determined was whether on detailed assessment there was good reason for the Court to depart from the approved budget.

The Claimant contended that there were good reasons.  The Defendant had maintained a robust defence, had heightened and expanded its allegations against the Claimant, the defence had been re-amended, and the Defendant had served additional lists of documents.  Serious Case Reviews had been published in full before trial, witness statements required updating due to the amendments to the defence and additional disclosure, and the Defendant requested further disclosure and questions about the disclosure already provided.

The Senior Costs Judge found that a vigorous and lengthy defence to the claim had been mounted by the Defendant, and the Defendant could not maintain that the amendments and changing nature of the defence only amounted to a minor inconvenience.  However, the Claimant had failed to comply with the provisions of Practice Direction 51D, the requirement to have budgets approved, and there was no good reason to depart from the approved budget.  At first instance, the Claimant was unable to recover costs in excess of the approved budget.

The Judgment

The Court of Appeal found that Master Hurst, the Senior Costs Judge, had interpreted the “good reason” to narrowly.

Compliance with the requirement of the Practice Direction is not essential before a party can ask the Court to depart from an approved budget.  It is just one factor the Court can take into account.  The budget is not intended to act as a cap and failure to comply with the Practice Direction did not lead to inequality of arms and did not result in disproportionate costs.  Therefore the essential object of the scheme had not been frustrated.  It is arguable that the decision to overturn the decision below was fact specific, a point reinforced by the discussion that followed.

The Impact

The Court of Appeal went on to compare the Defamation Practice Direction to the Jackson Reforms coming into effect from 1 April 2013,  under which the parties and indeed the Court have greater responsibility for costs budgeting.  The Court of Appeal envisaged that approved budgets would in fact impose a limit on recoverable costs.  Although the Court will still have the power to depart from such budgets if satisfied there is good reason, it will be difficult to persuade the Court that such costs in excess of approved budgets are reasonable.  This Court of Appeal made clear, the importance of costs budgeting under the Jackson reforms and the cost of getting it wrong.  It will be essential to keep the budgets up to date and to keep the parties and Court informed of any substantive changes.

Active Costs management and budgeting will apply to all multi track cases commencing on or after 1 April 2013 in the County Court and High Court.  It will not however apply to cases in the Admiralty or Commercial Court.