Sylvia Henry v News Group Newspapers Ltd  EWCA Civ 19 was the first case to consider the effects of exceeding a costs budget.
The Court of Appeal decided that there was good reason to depart from the costs budget. The object of the practice direction is twofold:
- to ensure that the costs incurred in connection with the proceedings are proportionate to what is at stake and
- to ensure that one party is unable to exploit superior financial resources by conducting the litigation in a way that puts the other at a significant disadvantage.
Lord Justice Moore-Bick said that neither party was financially embarrassed and there was no inequality of arms.
Despite the fact that the receiving party had failed to comply with the practice directions, this did not debar her from asking the Court to depart from the approved budget.
Lord Justice Moore-Bick went on to explain that an important factor was that the costs incurred were reasonable and proportionate. The failure to comply with the practice direction did not put the paying party at a disadvantage in terms of its ability to defend the claim. A refusal to depart from the budget for failure to comply with the practice directions would achieve nothing beyond penalising her which would be unreasonable and disproportionate.
However, Lord Justice Moore-Bick explained that the decision to allow a departure from the budget was on the facts of this particular case and that the rules coming into effect on 1 April 2013 impose a great responsibility on the parties for keeping budgets under review. He said that the new rules lay a greater emphasis on the importance of the approved budget as providing a prima facie limit on the amount of recoverable costs.
The underlying message still remains that the parties will need to prepare a realistic budget and will need to monitor this throughout the proceedings.