Out-Law News 2 min. read

Civil court claimants must keep costs under control from April, expert warns

The Court of Appeal has reiterated the importance of accurate budgeting once wide-ranging reforms to civil court costs and procedures come into force from April.

Lord Justice Moore-Bick said that the so-called 'Jackson reforms' will "impose greater responsibility" on parties to keep costs budgets under review once they take effect from 1 April 2013. His comments came at the end of a judgment in which he found there was "good reason" for a costs award that was more than £250,000 higher than originally budgeted for by the claimant in a defamation case.

Speaking to the Law Society Gazette, Rod Evans of the Forum of Insurance Lawyers said that the judgment would "undermine" the implementation of the reforms, which will see parties have to set out their anticipated costs in advance of the first case management conference with any departures requiring court approval. However legal costs expert Keith Levene of Pinsent Masons, the law firm behind Out-Law.com, said that there were particular reasons the costs award had been approved in this case.

"This decision was extremely case-specific, as it was brought under a pilot costs scheme applying only to defamation actions," he said. "What Lord Justice Moore-Bick was saying was that going forward, parties will be at risk if they do not regularly review their budgets."

"Parties will always be at liberty to apply to court to amend their budgets, however these changes will not always be allowed," he said.

The case concerned Sylvia Henry, a senior social worker with Haringey Council who had been the victim of a "sustained and vitriolic" defamation campaign by The Sun newspaper following the death of child abuse victim 'Baby P' in 2007. Henry's claim against the newspaper was settled out of court for a "substantial" undisclosed sum, as part of which The Sun agreed to pay her legal costs "to be assessed on the standard basis". The case had been brought under a pilot costs management scheme for defamation proceedings, known as 'Practice Direction 51D', which was designed to protect the media against the rising cost of defamation proceedings.

Under the scheme, each party must prepare a costs budget for consideration and approval by the court at the first case management conference and a revised budget at various later stages of the proceedings. The scheme also gives the court responsibility for managing the costs of the litigation, as well as the case itself, in a manner which is "proportionate to the value of the claim" and the issues at stake.

Assessing Henry's costs claim, the original judge said that the provisions of the pilot scheme were "in mandatory terms" and noted that Henry had not informed either the newspaper or the court that she had gone over budget. For this reason, he limited her claim to the last approved budget and disallowed costs worth £268,832. This ruling was overturned at the Court of Appeal, with Lord Justice Moore-Bick pointing out that the scheme "expressly recognises that there may be good reasons for departing from the budget" in order to ensure that parties remained "on an equal footing".

Although he acknowledged that judges would still have the power to depart from an agreed budget once the new regime takes effect from April, Lord Justice Moore-Bick said that the pilot scheme "[differed] in some important respects" from the new rules.

"Read as a whole, [the reforms] lay greater emphasis on the importance of the approved or agreed budget as providing a prima facie limit on the amount of recoverable costs," he said. "In those circumstances, although the court will still have the power to depart from the approved or agreed budget if it is satisfied that there is good reason to do so, and may for that purpose take into consideration all the circumstances of the case, I should expect it to place particular emphasis on the function of the budget as imposing a limit on recoverable costs."

"If, as is the intention of the rule, budgets are approved by the court and revised at regular intervals, the receiving party is unlikely to persuade the court that costs incurred in excess of the budget are reasonable and proportionate to what is at stake," he said.

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