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I had a very interesting day at the IBC Solicitors’ Costs conference on Tuesday. I had been due to speak immediately after keynote speaker The Hon Mr Justice Ramsey. In the event, I swapped places with Master Haworth who needed to get back to court. This was a pity as it meant I didn’t get the chance to use the absolutely hilarious joke I had prepared about being grateful to Mr Justice Ramsey for agreeing to appear as my warm-up act. (When I say “hilarious” the term is perhaps relative. When I say “joke” the term is perhaps relative.)
Significant attention during the day was naturally focused on the Court of Appeal’s judgment relating to costs budgets in Henry v News Group Newspapers Ltd  EWCA Civ 19.
This judgment has received significant attention with much of the initial commentary suggesting that costs budgeting has been torpedoed by this judgment before it has even been properly launched.
Iain Stark, chairman of the Association of Costs Lawyers, said:
“This judgment sends out completely the wrong message to anyone involved in litigation. The government has made it clear that it wants costs budgeting to help constrain the spiralling costs of litigation, yet the decision flies in the face of this intention. Not only does it undermine the government’s efforts, but it also gives licence to further undermine costs judges and places yet more burdens on them.
Rod Evans, president of the Forum of Insurance Lawyers, said:
“This is an extremely disappointing judgment. … We now have major concerns over the adherence to the new cost budgeting rules from the 1 April and what sanctions will be available to apply against those who don’t adhere. We are disappointed that the Court of Appeal has seemingly undermined the implementation of the Jackson reforms which are needed as a matter of urgency to tackle the current dysfunctional costs of civil litigation.”
Interestingly, the unanimous view of those speakers at the conference who commented on the decision is that this is potentially a significant misreading of the judgment which was very much fact specific and due to it being concerned with a case proceeding under one of the pilot schemes. Paragraph 28 of the judgment was identified as being the crucial one:
“In the light of the experience gained from those pilots the Rule Committee decided to adopt Sir Rupert Jackson’s recommendation that the management of costs by the court should in future form an integral part of the ordinary procedure governing claims allocated to the multi-track. Those rules, 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. In those 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, and may for that purpose take into consideration all the circumstances of the case, I should expect it to place particular emphasis on the function of the budget as imposing a limit on recoverable costs. The primary function of the budget is to ensure that the costs incurred are not only reasonable but proportionate to what is at stake in the proceedings. If, as is the intention of the rule, budgets are approved by the court and revised at regular intervals, the receiving party is unlikely to persuade the court that costs incurred in excess of the budget are reasonable and proportionate to what is at stake.”
The consensus among the speakers was that the courts will adopt a very strict approach to costs budgeting in future and it would be very unlikely that costs greater than those set out in approved budgets will be allowed.
For what it is worth, I am inclined to agree with this interpretation. Parties are likely to find themselves stuck with inaccurate budgets where they have not sought the court’s permission for these to be amended well in advance of the budgets being exceeded. However, I am equally confident that this decision will be seen as giving a glimmer of hope to parties who have exceeded their budgets and they will argue their cases are sufficiently close to the facts in Henry such as the decision should be followed. This will inevitably generate satellite litigation even if, ultimately, such attempts are doomed to fail.