Henry v News Group Newspapers Ltd

An approved costs budget provides the normal financial limits for litigation, but it is not an absolute cap. The court may permit recovery above the budget where there is good reason, assessed from all the circumstances and with particular regard to proportionality and equality of arms.

A party’s failure to exchange costs information or seek approval for a revised budget is relevant, but it does not bar departure from the budget. The court should consider how the proceedings developed, how costs were managed, whether unusual events occurred and whether the scheme’s objectives were undermined. The receiving party bears the burden of justifying both the departure and its extent.

The claimant brought defamation proceedings arising from a newspaper campaign against her. The claim settled on terms requiring the defendant to pay her costs on the standard basis, subject to assessment.

During detailed assessment, the defendant objected that the claimant’s bill substantially exceeded the budget approved under Practice Direction 51D. The Senior Costs Judge held that there was no good reason to depart from the budget because the claimant’s solicitors had largely failed to comply with the costs-management requirements.

The claimant appealed. The central issue was whether her procedural non-compliance precluded a finding of good reason under Paragraph 5.6, or was merely one circumstance in the required assessment.

1. Appeal allowed unanimously. The Senior Costs Judge had misunderstood equality of footing under Paragraph 1.3 of Practice Direction 51D and had adopted too narrow an understanding of good reason under Paragraph 5.6. A failure to provide regular expenditure information does not itself create inequality of arms. That concept addresses the unfair use of superior financial resources to place an opponent at a significant disadvantage.

2. An approved budget ordinarily supplies the financial framework for detailed assessment. Costs above the amount budgeted for a stage should not normally be allowed unless something unusual has occurred. The budget nevertheless remains a means of control rather than an absolute cap or a licence to incur unnecessary expense. Recoverable costs must still have been reasonably incurred and proportionate to what was at stake.

3. Whether good reason exists depends on all the circumstances, with particular attention to the objectives of proportionality and equality of arms. Relevant matters include the management of the proceedings and costs, unforeseen developments, proportionality, and whether the parties remained on an equal footing. The expression should retain flexibility and should not be converted into rigid rules.

4. Compliance with every requirement of the practice direction is not a condition precedent to seeking departure from a budget. Non-compliance is one relevant factor. Here, responsibility was shared among the claimant, the defendant and the court. The proceedings had developed in unusual ways, both parties had exceeded their budgets, and the court had missed an opportunity to review costs. The claimant’s failures had neither disadvantaged the defendant in defending the claim nor demonstrably undermined the scheme’s objectives.

5. There was therefore good reason to depart from the claimant’s budget. The matter remained for the Costs Judge to determine the respects in which, and extent to which, excess costs were recoverable. The claimant bore the burden of proving the justification for each departure. The assessment was to depend principally on reasonableness, proportionality and the extent to which proper compliance could have reduced the costs.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. The court held that good reason existed to depart from the approved budget and left the extent of recoverable excess costs for the Costs Judge.

2. Senior Courts Costs Office: Senior Costs Judge Hurst held that there was no good reason to depart from the budget because the claimant had largely failed to comply with Practice Direction 51D.