It was an interesting experience to have achieved success in the Court of Appeal for the appellant in Sylvia Henry v News Group Newspapers Limited ( EWCA Civ 19), only for virtually every commentator in the costs world to pour derision on the judgment. Job well done, some might say.
For peace of mind, I hope their lordships in the Court of Appeal follow the acting fraternity mantra and never read their own reviews – although it should be noted that at least the theatre critics actually attend the performance (it is rumoured) and speak with a little knowledge of what went on.
Nevertheless, it remains an intriguing question as to how such a reasoned judgment by three experienced Court of Appeal judges could lead to such criticism which, at its height, was alleging a ‘total abandonment’ of the Jackson reforms and ‘driving a coach and horses’ through the new costs regime.
There are test cases and there are test cases. From the moment the papers landed on my desk, it had always been my personal view, which subsequently I willingly shared with my opposing counsel during the proceedings, that this case was not the one to take as a test case on costs budgeting. It was a highly unusual case in a pilot scheme where the parties, and the court, were finding their way. Both the claimant and the defendant failed to comply with the costs-budgeting practice direction. Little has been said about the defendant newspaper itself exceeding heads within its own budget.
Of perhaps more importance was that, prior to a settlement meeting shortly before trial, the defendant newspaper asked for, and the claimant’s solicitors provided, its total costs to date, including success fees and after-the-event insurance premiums. As commented upon in the Court of Appeal, such information was far more valuable than a costs budget, as it placed a figure on additional liabilities. Indeed, armed with that material, the defendant agreed to a costs order that it pay the claimant’s reasonable costs on the standard basis, to be subject to detailed assessment if not agreed.
Of course, when we leap forward to the judgment in the appeal court, the soundbite age in which we live demands instant reaction. The Forum of Insurance Lawyers said: ‘The judgment was extremely disappointing and will undermine the implementation of the Jackson regime.’ Apart from being wholly wrong in such an assertion, that is the risk to be taken in an adversarial system. No doubt FOIL would have been preaching from the rooftops if the claimant had lost her appeal. In personal injury work defence insurers, in an apparent but unspoken pact, have been perceived to avoid any adjustment to the discount rate being the subject of a High Court decision. Consultation under the Damages Act 1996 was their preferred approach. Similarly, the deduction for contributory negligence for not wearing a seat belt has been left well alone by both claimants and defendants.
As James Heath, the solicitor for Ms Henry, has stated previously: ‘The simple fact of the matter is this: the defendant should not have picked this case as a test case. If the insurance industry is unhappy at the result, they have to look to their own defendant brethren for taking the point in this case where all sympathy was with the claimant due to the defendant’s actions.’ I know not if FOIL spoke to the Fleet Street Lawyers Association about this case but I suspect not. I can provide each with the other’s details, but it may be too late.
For those not familiar with the Henry case the background is as follows. The claimant, Sylvia Henry, was a senior social worker employed by Haringey Council, in charge of one of the Referral and Assessment teams. In mid-December 2006, 17-month-old Peter Connelly, who was to become known as ‘Baby P’, was referred to the team by Whittington Hospital. The team were responsible for Peter for a few weeks until he was transferred to the Long Term Team in January 2007.
Peter died on 3 August 2007 in what can only be described as horrific circumstances. During the short six-week period that Ms Henry was responsible for Peter’s care (nine months before he tragically died), she intervened some 27 times, attempting to have him placed with foster carers and trying to ensure that he was not returned to his mother without proper safeguards in place. She was overruled each time.
Following Peter’s death, the Sun newspaper decided, without any evidence, to accuse Ms Henry (among other serious allegations) of being responsible for the horrific torture, abuse and death of this young, innocent baby. And they did so persistently in a sustained and vitriolic campaign, in more than 80 articles (including 11 on the front page). They called for Ms Henry’s sacking and asked that she never be allowed to work with vulnerable children again in a petition that gathered 1.6 million signatures, becoming what they proudly boasted as ‘the biggest campaign of its kind in newspaper history’. The petition was hand-delivered to Downing Street by the Sun. Ms Henry was a prisoner in her own home due to the press attention, and was fearful for the lives of her family. The case must be one of the very worst of libels in living memory.
The Sun then dragged Ms Henry through the courts for over a year and a quarter, standing by their allegations, vigorously defending their position until, a week before trial, they settled on the proverbial steps of court.
As it transpired, this case was the first to fall into the Defamation Costs Pilot Scheme. Costs budgets were prepared by both parties and approved by the court at a case management conference in September 2010. Thereafter, there were no further CMCs within which to consider budgets, and the court did not consider the question of budgets at any of the interim hearings that happened in the case.
After approval of budgets, the case was then to develop in a manner that simply could not have been predicted by the claimant. The defendant served 10 lots of disclosure documents (making a raft of non-party disclosure applications) and mounted a vigorous and lengthy defence, which it amended four times.
Following settlement, costs could not be agreed and so the matter went to assessment before Senior Costs Judge Hurst. The defendant then sought to argue that the claimant should be limited to her budget alone. A preliminary issue hearing was held to determine whether, in the words of the practice direction, there was ‘good reason’ to depart from the approved budget as allowed by the practice direction.
Judgment of the senior costs judge
Master Hurst found that there had been no ‘good reason’ to depart from the budget; even though he was clearly unimpressed by the defendant’s argument that its actions should not have had a major effect on the way in which the claimant dealt with the case. The judge also made it clear he had no doubt that, were the claimant’s costs subject to detailed assessment, she would be able to argue very strongly that her costs were both reasonable and proportionate.
Consequently, the judgment was something of the proverbial ‘curate’s egg’. The case had entered a world of relevant compliance; the claimant had breached the practice direction more than the defendant. He found that News Group were not on a level playing field, as they had not been informed about Ms Henry’s level of costs; an interesting conclusion as News Group had created all the extra work and, given its financial might, was probably on more of an equal footing (if that can be the case) than a social worker from Haringey.
The problem, though, was that the master found that there was no good reason to depart from the practice direction. Nevertheless, that was not the test. The wording was to determine good reason for departing from the costs budget. That notwithstanding, News Group had won the day as they wished for a strict, indeed draconian interpretation of the practice direction.
Following Master Hurst’s judgment in the summer of 2012, cost lawyers, and particularly the paying defendant costs lawyers, manned the barricades. Here are some of the quotes about the prospects of Ms Henry’s appeal: ‘Policy dictates this appeal must fail’, ‘I can assure you there is no way that the Court of Appeal will allow the Henry appeal’, ‘good reason does not allow claimants to ride roughshod over the directions in the CPR, the appeal will fail’.
Well, just as Marius in his once frequently attended cafe sings ‘Empty Chairs and Empty Tables’, the claimant’s legal team were lonely lawyers with little support as to any success on appeal. Even the ATE providers had serious doubts over success as ‘policy’ would override. Of course, many of the commentators had grown up with the draconian interpretations of the Conditional Fee Agreement Regulations, when the appeal court allowed little leeway. But to be fair, their reasoning then was founded upon protection of the consumer, not of a ‘mega’ newspaper corporation not being on a level playing field.
Unimpressed as I was with the reasoning of the costs judge, in addition to the unfairness of the result given the conduct of News Group, I agreed to take the appeal under a CFA. Many of those commentating adversely on prospects of success were employed in a fairly risk-free environment. Long live the independence of the self-employed bar of England and Wales. In a leapfrog appeal (by agreement) the appeal court carefully considered the judgment of the court below, reversing the senior costs judge’s decision.
In doing so, it gave clear guidance on the meaning of ‘equal footing’ and the purpose of the practice direction. That purpose is twofold: (i) to ensure that costs are proportionate to what is at stake (including reputational issues); and (ii) to ensure that parties are on an equal footing in that one party must not be able to exploit superior financial resources by conducting the litigation in a way that puts the other at a significant disadvantage.
The appeal court found, in the unusual circumstances of this case, that there was ‘good reason’ to depart from the approved budget, taking into account these particular facts and the particular reputational issues at stake (as is required by the practice direction). This was because: the claimant did not put the defendant at a significant disadvantage in its ability to defend the claim; it seemed unlikely that the claimant incurred costs that were unreasonable or disproportionate; the proceedings were constantly changing in nature; the defendant had also exceeded its own budget and its own compliance was lacking; the court was less than active in monitoring parties’ expenditure; and the defendant did not register any protest when informed of the actual amount of costs incurred. With all that taken into account, refusing to find good reason in this case would have achieved nothing more than penalising the claimant for a procedural error. The barricades were blown away.
The Court of Appeal points out that the new rules coming in to effect for multi-track claims on 1 April are different from the Defamation Costs Management Pilot Scheme. The new rules impose greater responsibility on the court for management of costs, and more responsibility on the parties for keeping budgets under review. 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.
As Lord Justice Moore-Bick states in the judgment: ‘In these 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... I should expect it to place particular emphasis on the function of the budget as imposing a limit on recoverable costs.’ Following the Court of Appeal judgment, a spokesman for the Association of Costs Lawyers stated: ‘A budget is there for good reason, ignoring it just begs the question of what is the point of having one in the first place?’
Well, in answer to that one can refer to the Civil Procedure Rules and rule 3.19 where, quite separately from costs budgets, cost capping is provided for. If anything is to be gained from the case of Henry, it is how right the rules committee were to leave the escape clause of ‘good reason’ in the practice direction after 1 April 2013.
From what I have heard, I forecast judges will be subject to arguments to impose a draconian interpretation on the new costs budgeting rules – one hopes they are not persuaded by the soundbite criticism of a judgment. If you are going to criticise a play, go and see it first. If you are going to ignore Henry wholly, it would help if you read the judgment to know what you are ignoring and why. By all means distinguish the case, but by reason, not knee-jerk reaction. I look forward to all such reasoned judgments.
Simon Browne QC of Temple Garden Chambers acted as counsel for Sylvia Henry. This article, which reflects his personal view, is also published in the latest edition of Gazette sister publication Litigation Funding. For subscription details, see the web page.