On Monday 28 January 2013 judgment was handed down by the Court of Appeal in the Sylvia Henry v News Group Newspapers Limited ( EWCA Civ 19). Almost immediately there were the predictable howls of anguish from the insurance industry, followed by attention grabbing headlines such as “Jackson reforms ‘undermined’ by landmark costs ruling” declaring the Jackson reforms dead and buried before they had begun. This could not be further from the truth. This judgment is fact-dependent. It concerns the implementation of CPR PD51D “The Defamation Proceedings Costs Management Pilot Scheme”, which was the pre-cursor for new additions to CPR 3 which will apply to all multi-track cases commenced on or after 1 April 2013. Jackson is alive and well.
The Claimant, Sylvia Henry, was a senior social worker employed by Haringey Council, in charge of one of the Referral and Assessment teams. In mid-December 2006, 17 month-old Peter Connelly, who was to become known as “Baby P”, was referred to the team by the Whittington Hospital. The team were responsible for Peter for a few weeks until he was transferred to the Long Term Team in January 2007. Peter died on 3 August 2007 in horrific circumstances.
During the short six week period that Ms Henry was responsible for Peter’s care (nine months before he tragically died), she made numerous attempts to have Peter placed with foster carers or have safeguards put in place.
Following Peter’s death The Sun decided, without any evidence, to accuse Ms Henry (amongst other serious allegations) of responsibility the fact that this young innocent baby was subject to horrific torture and abuse. And they did so persistently in a sustained and vitriolic campaign, over 80 articles in The Sun newspaper (including 11 front-page articles). They called for Ms Henry’s sacking and asked that she never be allowed to work with vulnerable children again in a petition that gathered 1.6 million signatures, becoming what they proudly boasted as “the biggest campaign of its kind in newspaper history”. The petition was hand-delivered to Downing Street by The Sun. Ms Henry was a prisoner in her own home due to the press attention and was fearful for the lives of her family.
The Sun then dragged Ms Henry through the courts for over a year and a quarter, standing by their allegations, vigorously defending their position until, a week before trial, they settled . As part of the settlement, they agree to pay Ms Henry a substantial sum in damages, printed a prominent apology in the newspaper acknowledging that there was no truth in the allegations and that its campaign was entirely unjustified, and agreed to pay Ms Henry’s costs (to be assessed if not agreed).
As it transpired, this case was the first to fall into the Defamation Costs Pilot Scheme. Both parties and the court were feeling their way in relation to the scheme. Costs budgets were prepared by both parties and approved by the court at a CMC in September 2010. Thereafter, there were no further CMCs within which to consider budgets, and the court did not consider the question of budgets at any of the interim hearings that happened in the case. The Defendant also failed to update its own budget or inform the claimant of its costs on a monthly basis. After the CMC, the case quickly entered a world of relative compliance.
After approval of budgets, the case was then to develop in a manner that could not have been predicted. The Defendant served ten lots of disclosure documents (making a raft of non-party disclosure applications) and mounted a vigorous and lengthy defence, which it amended four times.
The Defendant, in preparation for the meeting that eventually settled the case, asked for and received the Claimant’s actual figure for total costs. In settling the matter, the Defendant raised no protest with regard to the figures with which it had been supplied and settled the matter armed with knowledge of those costs. As Lady Justice Black observed during the appeal hearing: prior to settlement The Sun had something far better than any updated costs budget, it was in possession of the actual figure for costs being sought.
Following settlement, costs could not be agreed and so the matter went to assessment before Senior Costs Judge Hurst. The Defendant then sought to argue that the Claimant should be limited to her budget alone. A preliminary issue hearing was held to determine whether, in the words of the Practice Direction, there was “good reason” to depart from the approved budget. In his judgment, the judge found that there had been no “good reason” to depart from the budget. This was notwithstanding that the judge was clearly unimpressed by the Defendant’s argument that its actions should not have had a major effect on the way in which the Claimant dealt with the case, and notwithstanding that the judge expressed that he was in no doubt whatsoever that, were the Claimant’s costs subject to detailed assessment, she would be able to argue very strongly that her costs were both reasonable and proportionate.
The effect of the judge’s order was to disallow £268,832 of base costs before any success fee was added (the Claimant had a conditional fee agreement with her solicitors). The judge concluded that the purpose of the Practice Direction was to put parties on “equal footing” (as referred to within the Practice Direction) and he reasoned that, if the Defendant had not been informed that the Claimant had exceeded her budget, parties were not on equal footing with regard to knowledge on costs. He reasoned that, if the Practice Direction had not been complied with, there was no “good reason” to depart from the approved budget. The judgment was appealed by the Claimant.
In a leapfrog appeal (by agreement) the Court of Appeal reversed the senior costs judge. In doing so, it gave clear guidance on the meaning of “equal footing” and the purpose of the Practice Direction. The purpose is twofold: (i) to ensure that costs are proportionate to what is at stake (including reputational issues) and (ii) to ensure that parties are on an equal footing in that one party must not be able to exploit superior financial resources by conducting the litigation in a way that puts the other at a significant disadvantage.
In this case, the Claimant was a Haringey social worker defending her reputation against the might of a multi-billion dollar multi-national corporation. Clearly there was no way that the Claimant could have put the Defendant at a significant disadvantage in this way, even though no updated budget was served for her.
In its judgment, the Court of Appeal found in the unusual circumstances of this case that there was “good reason” to depart from the approved budget, taking into account these particular facts and the particular reputational issues at stake (as is required by the Practice Direction). This was because: the Claimant did not put the Defendant at a significant disadvantage in its ability to defend the claim; it seemed unlikely that the Claimant incurred costs that were unreasonable or disproportionate; the proceedings were constantly changing in nature; the Defendant had also exceeded its own budget and its own compliance was severely lacking; the court was less than active in monitoring parties’ expenditure; and the Defendant did not register any protest when informed of the actual amount of costs incurred. With all that taken into account, refusing to find good reason in this case would have achieved nothing more than penalising the Claimant for a procedural error.
The Defendant should not have picked this case as a test case. If the insurance industry is unhappy at the result, they have to look to their own defendant brethren for taking the point in this case where all sympathy was with the Claimant due to the Defendant’s actions.
So what does this mean come 1st April 2013? Have the Jackson reforms been undermined? Will parties be able to flout rules on budgets and still get all their costs? The answer from the Court of Appeal is a resounding “No”.
The Court of Appeal points out that the new rules coming in to effect for all Multi-track claims on 1st April are different from the Defamation Costs Management Pilot Scheme. The new rules impose greater responsibility on the court for management of costs and impose greater responsibility on the parties for keeping budgets under review. They lay greater emphasis on the importance of the approved or agreed budget as providing a prima facie limit on the amount of recoverable costs
As Lord Justice Moore-Bick states in the judgment: “In these 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 … I should expect it to place particular emphasis on the function of the budget as imposing a limit on recoverable costs.”
The warning is stark: ignore the new rules at your peril.
As with any substantive change to law or procedure, there will inevitably be a certain amount of satellite litigation where a receiving party has fallen foul of the new rules. What is clear, however, is that it will be a particularly brave litigant who would seek to gamble on the court finding “good reason” in order to incur costs outside of its approved budget. Multi-track litigators would be well advised to study the new rules carefully and make sure that procedures are in place to ensure compliance. This judgment makes it clear: Jackson is alive and well and here to stay.
Daniel Taylor and James Heath of Taylor Hampton Solicitors acted for Sylvia Henry. Simon Browne QC and Joanna Hughes both of Temple Garden Chambers represented Sylvia Henry in the Court of Appeal