UK: The Court Of Appeal On Costs Budgeting: Henry v News Group Newspapers

Last Updated: 8 February 2013
Article by Adam Welsh

On 28 January 2013, the Court of Appeal upheld the Claimant's appeal against the costs award made by Senior Costs Judge Hurst in the High Court. In a unanimous decision, the Court of Appeal held that there was good reason to depart from the Claimant's Court approved costs budget in the circumstances.


The Claimant, a senior social worker employed by Haringey Council, was the victim of a sustained and vitriolic campaign by 'The Sun' newspaper following the death of the child known as "Baby P." The Claimant's claim for defamation was eventually settled by payment of an undisclosed sum and a public apology printed in the newspaper.

Following a disagreement over the amount of costs recoverable, the Claimant commenced detailed assessment proceedings arguing that the way in which the Defendant had conducted proceedings had caused her to incur a substantial amount of costs (£268,000) in excess of the agreed budget that could not reasonably have been predicted at the time the budget was prepared. In particular, the Claimant highlighted that the Defendant had served additional lists of documents, amended its defence on more than one occasion and requested further disclosure, questioning the disclosure already provided.

In response, the Defendant argued that there was no good reason to depart from the budget because the Claimant had failed to comply with practice direction 51D.

Practice Direction 51D

These proceedings were brought under a pilot costs management scheme concerning the cost of defamation proceedings. The scheme, embodied in practice direction 51D, requires that:

  • costs budgets are approved at the first case management conference;
  • the Court and the parties have a responsibility to manage the case in a proportionate manner and communicate regularly as proceedings progress; and
  • an approved budget will not be departed from unless the court is satisfied that there is good reason to do so.

High Court Judgment

At first instance, Senior Costs Judge Hurst held that:

  • there was no good reason to depart from the Court approved costs budget;
  • the Claimant did not keep either the Defendant or the Court informed that her budget was being exceeded;
  • whilst the Claimant could make out a very good case on detailed assessment for the costs incurred being reasonable and proportionate, the Claimant had largely ignored practice direction 51D; and
  • PD 51D was mandatory – if one party was unaware that the other party's budget had been significantly exceeded, the parties were no longer on equal footing and the purpose of the scheme was lost.

Court of Appeal Judgment

The Court of Appeal unanimously overruled the first instance decision. In the only written judgment, Lord Justice Moore-Bick held that:

  • Budgets are intended to provide a form of control rather than a license to conduct litigation in an unnecessarily expensive way. Equally, however, it may turn out for one reason or another than the proper conduct of the proceedings is more expensive than originally expected;
  • It is necessary for judges to take into account all the circumstances of the case with particular regard to the objective of the costs budgeting regime – to manage the litigation so that the costs of each party are proportionate to what is at stake and to ensure that the parties are on an equal footing;
  • A failure to exchange information about expenditure at regular intervals does not of itself put the parties on an unequal footing;
  • It could not be said that compliance with all the requirements of the practice direction was essential before a party can ask the Court to depart from the approved budget. It was just one factor. In this case, the Claimant, the Defendant and the Court could all be said to be at fault;
  • The failure of the Claimant's solicitors to observe the requirements of the practice direction did not put the Defendant at a significant disadvantage in terms of its ability to defend the claim, nor does it seem likely that it led to the incurring of costs that were unreasonable or disproportionate in amount. To penalise the Claimant for that reason alone (failure to comply with the practice direction) would be unreasonable and disproportionate;
  • The circumstances of the case meant that there was good reason to depart from the budget – the objects which the practice direction sought to achieve were not undermined.


Whilst ruling in the Claimant's favour and permitting a departure from the agreed budget, the Court of Appeal noted that budgets are intended to provide some constraint, although they are not intended to act as a cap on recoverable costs. However, in line with the Jackson cost reforms (which are effective from 1 April 2013), it would appear that circumstances in which it would be appropriate to depart from the agreed budget will be rare.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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