Court of Appeal
Moore-Bick LJ, Aikens LJ and Black LJ
The introduction of new rules relating to cost management for multi-track cases will come into force on 1 April 2013 as part of the Jackson reforms. The changes are set out in additions to Rule 3 of the Civil Procedure Rules (Rules 3.12 to 3.18), a new Practice Direction 3E and a new form of Precedent H for producing costs budgets. The rules will affect all multi track litigation (i.e. claims with a value of more than £25,000) commenced on or after 1 April 2013, including personal injury claims.
The Issues: The Claimant brought defamation proceedings against The Sun, which were ultimately settled by the Defendant agreeing, amongst other things, to pay the Claimant’s legal costs on the standard basis, to be assessed if not agreed.
Costs fell to be assessed under the Defamation Proceedings Costs Management Scheme
(“the Scheme”) in Practice Direction 51D. In accordance with that Scheme the parties had submitted detailed cost budgets which had been approved by the Master at a Case Management Conference. The Claimant exceeded her court approved budget by approximately £268,000 and the Defendant objected to paying these additional costs. Detailed assessment proceedings were commenced.
The parties agreed that the only real issue between them was whether there was any “good reason” for the court to depart from the Claimant’s approved cost budget pursuant to Paragraph 5.6 of the Scheme.
At detailed assessment, Senior Costs Judge Hurst held there was no ‘good reason’ for the Court to depart from the Claimant’s budgeted figure. Therefore, the Claimant was unable to recover any amount in costs in excess of her cost budget.
Court of Appeal: The Court allowed the Claimant’s appeal.
Moore-Bick LJ analysed the Scheme generally and held that paragraph 5.6 recognised that there may be good reasons to depart from the approved budget in circumstances where the case merited such departure. Such circumstances included the way in which the proceedings were managed, whether they had developed in a way which was unforeseen, whether the costs incurred were proportionate to the matters in issue and whether the parties had been on an equal footing.
Comment: A number of commentators have said that this case has undermined the new budgeting regime before it has begun, because it is clear that budgeting will not be strictly enforced, but a closer reading indicates that this more liberal ruling may of limited value to multi track personal injury claims. Moore-Bick LJ, in a key passage from the Judgment, said:
28 “Those rules [ie those which will apply to personal injury claims], which will become effective from 1st April 2013, differ in some important respects from the practice direction with which this appeal is concerned. In particular, they impose greater responsibility on the court for the management of the costs of proceedings and greater responsibility on the parties for keeping budgets under review as the proceedings progress. Read as a whole 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.(Emphasis added)
It appears that this was a pragmatic decision under a pilot scheme for defamation proceedings and it is unlikely that the Court will adopt a similar approach under the news rules. The reality is that in litigation commenced on or after 1 April 2013, costs are likely to be capped at the levels set out in the cost budget.
This new regime may now lead to the involvement of costs specialists early in the proceedings in order to provide accurate costs estimates, and these will be an additional disbursement on both sides. This will increase the need for claimants to have their disbursements covered by ATE insurance.
The new rules are available at: