A landmark Court of Appeal costs case "gives litigants carte blanche to ignore the new rules", costs lawyers and defendant lawyers have said.
The Court held there was “good reason” for claimant Sylvia Henry to go over her approved costs budget by more than £268,000, in her successful defamation suit against The Sun newspaper, in Henry v News Group Newspapers Ltd [2013] EWCA Civ 19.
Parties to a civil action will need to prepare a detailed costs budget and stick to it from 1 April, when Lord Justice Jackson’s costs reforms come into force.
Henry’s lawyers failed to comply with a practice direction requiring regular communications between each side’s solicitors on the costs budget, but were otherwise thought by the judge to have incurred "reasonable and proportionate" costs.
In his judgment, Lord Justice Moore-Bick said “good reason” was “likely to depend on, among other things, how the proceedings have been managed, whether they have developed in a way that was not foreseen when the relevant case management orders were made, whether the costs incurred are proportionate to what is in issue and whether the parties have been on an equal footing”.
However, Iain Stark, chair of the Association of Costs Lawyers (ACL), said: “This ruling gives litigants carte blanche to ignore the new rules – and satellite litigation is certain to follow.
“Post April it looks like we will be waiting, as in the bad old days of the ‘Costs War’, for cases to reach the Court of Appeal, thus paralysing the courts underneath and the everyday administration of justice. This will produce greater uncertainty, exactly what these reforms were supposed to stop.”
Rod Evans, President of the Forum of Insurance Lawyers (FOIL) said the Court had “seemingly undermined the implementation of the Jackson reforms”.
Rani Mina, partner at Mayer Brown, said: “This decision, the very first we have on cost budgeting, is not the strong message that was widely expected from the Court of Appeal ahead of the implementation of the Jackson reforms in April.
“One of Lord Justice Jackson’s concerns was that his reforms should not increase the level of satellite litigation over costs. This decision must surely increase the likelihood of appeals in relation to tough cost budgeting decisions at first instance.”
Henry, a senior social worker at Haringey Council, was subjected to a fierce and defamatory campaign by The Sun following the death of the child known as Baby P. The newspaper later accepted its statements contained no truth whatsoever, and published an apology.
