England and Wales High Court (Chancery Division) Decisions

IN THE MIRROR NEWSPAPERS HACKING LITIGATION
2nd Wave
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Rolls Building, Fetter Lane, London EC4A 1NL
		24/05/2018

Chief Master Marsh:

1. This is my judgement arising from a hearing that took place on 8 and 9 May 2018 dealing with aspects of costs and costs management in the 2nd Wave of the Mirror Newspapers Hacking Litigation ("MNHL"). The MNHL is not the subject of a Group Litigation Order under CPR 19.10 to 19.15 but its structure is similar. One notable similarity is that each wave has a register of claimants and there are agreed procedures for removing a claimant from the register where an individual claim is settled. Mann J is the managing judge designated by the Chancellor to deal with the litigation.
2. A structure has been created to deal with the costs of the 2^nd Wave of MNHL and it will be necessary to refer to parts of it in detail. The following is a brief summary:

(1) The order dated 9 July 2015, in a similar way to a GLO, distinguishes between "Individual Costs" and "Common Costs" (these are defined terms). The costs of the litigation fall to be allocated between those two areas and, in the event of doubt, allocation is to be dealt with by the court.

(2) The order dated 16 May 2016 set up a system for costs management by the application of Template Costs Budgets that were to follow, as far as possible, the layout of Precedent H. The template system applies not only to Individual Costs but also to Common Costs. It was a way of avoiding the need for the court to undertake multiple costs management hearings in similar claims.

(3) There are three categories of template for Individual Costs; A, B and C. For present purposes, the distinction between them does not matter. It suffices to note that the two claims in relation to which the court is asked to undertake a more detailed costs budgeting exercise, Leslie and Houghton, were Template C cases, meaning cases in which there is at least one admission of the misuse of private information and the number of articles complained about exceeds 20.

(4) The order dated 16 May 2016 also permitted any party to apply to the court for an order that a "Bespoke Individual Budget" could be approved by the court in place of the applicable Template Budget.

(5) The order dated 21 July 2016 recorded that the 2^nd Wave claimants had agreed the Defendant's Costs Budgets, as they are defined in the fourth recital to that order. Paragraph 2 of the order determined the approach to be adopted by the court in dealing with the claimants' costs budgets. It requires the court to "approve the estimated base costs in accordance with paragraph 7.3 of PD3E" and it permits the court to comment on incurred base costs in accordance with paragraph 7.4 of PD3E. Directions were given in the order for setting up a cost management hearing.

(6) The order dated 1 November 2016 provided a number of refinements to the costs budgeting system set up under previous orders. I was told that at around November 2016 there were about 120 claims on the 2^nd Wave register.

3. On 21 December 2017 and 5 January 2018 respectively, Mr Leslie and Ms Houghton made an application for the court to approve an Individual Bespoke Budget in accordance with the provision set out in the order dated 16 May 2016. The Defendant made a similar application on 5 January 2018. On 12 January 2018, Mann J directed that the hearing of those applications, and other costs matters, should be released to me. The applications initially came before me on 20 January 2018. Unfortunately, an inadequate amount of pre-reading time had been allocated and it was necessary to adjourn the hearing.
4. Paragraph 3 of the order dated 1 November 2016 provides that the template Individual Costs Budgets shall apply to costs incurred from the date of the order in all MNHL claims, save where an order for a bespoke individual budget is made. The recital to that order records that template budgets do not necessarily represent reasonable and proportionate costs. The order made on 20^th February 2018 records that the parties agree that paragraph 3 of the November 2016 order applies both to the claimants' and the defendant's Individual Template Costs Budgets. Put another way, the parties agreed that there was a need for Individual Bespoke Budgets in the Leslie and Houghton claims. The parties have been able to agree the defendant's Individual Bespoke Budget; there has been only limited agreement about Mr Leslie's and Ms Houghton's budgets.
5. The current position concerning the 2nd Wave of the MNHL is best described as fluid. Of the claims that were originally on the register in the 2nd Wave, only Mr Leslie's and Ms Houghton's claims remain active. They have reached a fairly advanced stage with disclosure having taken place (although some issues about disclosure remain outstanding) but, at present, it is not certain that they will go to trial ahead of other claims. This is due, in part, to the adjournment of the trial in Leslie and Houghton that was fixed to take place in February 2018 and also because the 2nd Wave has been 'refreshed' by the addition of a number of claims that were on the register in the 3^rd Wave. During the course of the hearing the parties were not in complete agreement about the number of live claims that are now treated as being within the 2^nd Wave. However, the precise number does not matter greatly. My understanding is that there are currently 19 claims on the 2^nd Wave register in addition to Leslie and Houghton. About 10 of those claims are in the course of being settled which will leave about 10 live claims. I was told by the claimant that the managing judge and the parties are proceeding on the basis of a likelihood of there being of the order of 100 additional cases in the pipeline.
6. The number of live claims, and the issues that arise in them, are relevant to whether or not the Leslie and Houghton claims can properly be seen as 'test claims'. It is also relevant to whether part of the costs in those two claims should properly be treated as common costs and to issues of proportionality.
7. The other point of significance to mention is a recent revision to Mr Leslie's and Ms Houghton's cases. They obtained permission to amend their claims to plead an allegation that the defendant, the Trinity Mirror Group Board and their legal department were (a) aware of the habitual and/or widespread use of unlawful information gathering activities at their newspapers by at least as early as 2002 and certainly by 2007 and (b) concealed that knowledge. The defendant has pleaded a lengthy response to this new allegation which denies both that the respective boards had such knowledge and the concealment.
8. The additional allegations are placed within the particulars of claim under the heading "Remedies" and go to the amount of aggravated damages that the claimants say are appropriate in these claims. However, it is clear that the scope of the factual enquiry that will take place at the trial of these claims is considerably more extensive than it was previously. The previous assumption was that the trial of the Leslie and Houghton claims, along with two other claims, could be dealt with in the course of a 10 day trial. In light of the amendments, the assumption is now that the Leslie and Houghton claims alone will need a 15 day trial.^[1] Additional disclosure dealing with the issues that arise from the amendments has so far resulted in six lever arch files of further disclosure being provided by the defendant to the claimants. The claimants say that the disclosure is inadequate and I was shown two substantial schedules produced by the solicitors acting for Mr Leslie (who are taking the lead on this aspect of the claim) that interrogate in detail the disclosure that the defendant has given.

Individual Bespoke Costs Budgets for Mr Leslie and Ms Houghton

9. The standard costs management regime is found in CPR 3.12 to 3.18 and PD3E. It is clear, however, that the regime for costs management in the MNHL is a hybrid. There is ample power within CPR 3.1(2)(m) to create a bespoke costs management structure where it is appropriate to do so: (Lloyds/ HBOS Litigation - Sharp v Blank [2017] EWHC 3390 (Ch) at [10]). CPR 3.1(2)(m) is a fairly recent amendment to the CPR. However, it merely gives voice to wide case management powers that already existed under the High Court's inherent jurisdiction. The standard regime for costs management is not well-suited for multi-party/multi-claim litigation either within or outside a GLO. Generally speaking, a bespoke system of costs management is required if costs management is to be made to work in these types of claim.
10. There are features in the MNHL litigation that obviously do not fit with the standard costs management regime. Budgeting common costs, creating template budgets for both Individual and Common costs and permitting bespoke budgets are but a few examples of the bespoke nature of the regime that applies in the MNHL. It would be wrong, however, to see that regime as operating in a wholly parallel universe. It is better seen as an adaptation of the standard regime. The difficulty this creates, however, is that it is not clear to what extent the standard regime has been adopted and/or adapted when it comes to a detailed review of the rules and the Practice Direction. As I have already indicated, the basis of budgeting as set out in PD3E paragraphs 7.3 and 7.4 has been expressly adopted. As to the remaining provisions of the rules and the Practice Direction it is, as the parties accepted at the hearing, more a matter of the bespoke costs management regime 'looking to' the standard regime rather than being a new set of rules that can be derived from a re-drafting exercise. The standard regime is to be applied with the necessary changes. It is unnecessary, and probably unwise, to express any view about what those changes are.
11. It is common ground that the core task for the court when looking at the budgets is explained in PD3E paragraph 7.3, namely:

(1) The court has no power to approve the costs of budget phases that have been agreed between the parties.

(2) Where budget phases are not agreed, the court will review them and approve the budget with appropriate revisions.

(3) The court's approval is to the total figure for the budget phases but the court may have regard to the constituent elements of each total figure.

(4) The court will not undertake a detailed assessment in advance.

(5) The court will consider whether the budgeted costs fall within the range of reasonable and proportionate costs.

12. I would emphasise that the court is not required to have regard to the constituent elements of each budget phase (it may do so) and the court's task is to decide whether the total for each phase falls within a range of reasonable and proportionate costs. Both the words I have emphasised are found in the Practice Direction and they point clearly to the nature of the task the court is to carry out. It is not a calculation. Reasonableness may involve considering the calculations in the budgets; proportionality does not. The total budget phase may be reasonable when the arithmetic of Appendix H is looked at, but it may not be proportionate. And the court is not looking to establish what the budget figure should be objectively ascertained, but rather a figure that falls within the applicable range applying the reasonableness and proportionality tests alongside each other.
13. Proportionality was not addressed in either skeleton argument. I invited submissions on the subject because it is of central importance the costs management, although there are even greater difficulties applying the concept in these cases than in more routine cases. The court must apply both the reasonableness and proportionality tests, but the former may yield to the latter. And, in practice, although PD3E, paragraph 7.3, requires the court to consider each budget phase separately, and therefore to consider the proportionality of each phase total, the task has to be undertaken with an initial overall review of proportionality by reference to the factors in CPR44.3(5):

"Costs incurred are proportionate if they bear a reasonable relationship to –

(a) the sums in issue in the proceedings;

(b) the value of any non-monetary relief in issue in the proceedings;

(c) the complexity of the litigation;

(d) [omitted]

(e) any wider factors involved in the proceedings, such as reputation or public importance."

14. Factors (a), (b), (c) and (e) are all in play in these claims and each needs to be considered briefly.
15. For the purposes of costs management, it is necessary to take a broad view about the sums in issue as, inevitably, there will be a difference between the parties on that subject. In the case of Mr Leslie, his claim for damages is said to have a value in excess of £500,000. His case is that material was obtained by unlawful means and used for the purposes of approximately 145 articles published by the defendant. Ms Houghton's claim is put at a lower value because the extent of the infringement of her rights by the use of unlawfully obtained material is said to have been used for 47 articles.
16. It is right to have regard in these cases to the value of non-monetary relief because Mr Leslie and Miss Houghton will, if their claims settle, require there to be a public statement made by the defendants and they would, understandably, place a high value on such a statement.
17. There is no clear measure of complexity for the purposes of proportionality. These claims would not be in the High Court if they were not complex. However, counsel did not demur when I suggested on a scale of cases in the High Court they fit at around the median.
18. The final proportionality factor concerns "wider matters" with two examples being made explicit in rule 44.3(5)(e). Both examples are in play in these cases. First, the reputation of the claimants is involved. Secondly, and more significantly, these claims have considerable public importance. That importance derives not from the identification of the claimants as 'celebrities' but the importance of the press using its power and influence in a responsible manner. Another 'wider factor' is the possibility that these two claims will be test cases that will affect the outcome of other claims, not just those within the 2^nd Wave but also the 3^rd Wave. It matters not that there is uncertainty about whether they will be chosen by the managing judge to go to trial. For the purposes of costs management, a prospect that is real, as opposed to being fanciful, suffices.
19. The costs in the budget phases must not only be reasonable but must also bear a reasonable relationship with the proportionality factors I have indicated. The proportionality factors that are relevant are to be taken together and given notional weight as a whole. In these cases, the sums in issue are not large for High Court claims when taken in isolation. But when the proportionality factors are put together, the financial value of the claims proves to be relatively unimportant because of the wider factors. The budgets substantially exceed the sums in issue but is not a reason to conclude that the overall budgeted sums and the totals per phase are disproportionate.
20. So much for the theory. How is the court to go about setting budget figures for phases that have not been agreed? There are no benchmarks for claims of this type; they are bespoke claims. The fading light of experience in practice before appointment and judicial experience are incomplete and unreliable guides.
21. The Individual Template Budget as it applies to Mr Leslie's case achieves a total figure of £534,660. The bespoke figure the court is asked to approve is approximately £1,250,000. In the case of Ms Houghton, the template costs figure is £435,646. The bespoke budget figure is £722,825. The claimant in each case would point to the fact that the number of articles relied upon in each claim is considerably in excess of the template number for a category C case. This is particularly so in the case of Mr Leslie.
22. I do not find it easy to apply a principled approach to proportionality in relation to these budgets. I can infer, for what it is worth, from the parties' agreement to having bespoke budgets that they consider larger amounts of costs than those in the template budgets will be reasonable and proportionate. It seems to me that the only principled way of applying the test in these cases is to have only very limited regard to the possibility that proportionality may produce a cap that will limit what would otherwise be a reasonable figure. This is what the parties have done in their submissions. To take any other approach in this bespoke litigation risks the court merely applying arbitrary limits because there is no financial reference point for proportionality.
23. It seems to me that the wider factors I have summarised, in particular the public importance and test case factors, will have the effect that if the costs are reasonable they are proportionate. That conclusion chimes with the approach the parties have adopted and avoids the court wielding a concept of uncertain application.
24. The two budgets are dated 17 January 2018. In accordance with the principles explained in Sharp v Blank the proper approach is to have regard to costs incurred up to that date, but to treat costs incurred between the date of the budgets and the cost management hearing as estimated even though at least in part they will have been incurred by the date of the hearing (and the judgment being delivered). A complicating factor in the case of Mr Leslie is that, without the court's approval, he served revisions to two budget phases very shortly before the hearing. The revised budget shows that very substantial amounts of work have been undertaken between 12 December 2017 to 1 May 2018 and the updated Bespoke Individual Budget proposes that the figures for two phases, namely Mr Leslie's Part 18 request for information and disclosure should be, overall, substantially increased. The late service of these revisions created some difficulty for the defendant. Mr McDonald, who appeared for the defendant, took a pragmatic and helpful view and, in spite the difficulty in obtaining instructions, agreed that the court should look at the revised budget figures. Consistent with the approach I have previously indicated, I will treat the relevant date for the purposes of incurred costs as being 17 January 2018. If that were not so, Mr Leslie would have ousted the court's jurisdiction to consider a significant amount of expenditure.
25. The remaining introductory matter concerns the costs relating to Mr Leslie's Part 18 Request. At the date of the hearing before me on 20 February 2018, Mr Leslie had served a substantial Part 18 Request to which a response had not then been received. Paragraph 10 of the order required him to provide an additional costs budget relating to the cost of considering the defendant's replies to be served by 9 March 2018. This was not done and the defendant's primary case was that the court should apply the sanction contained in CPR 3.14 and disallow that part of the budget in entirety. However, during the course of the hearing reference was made to an exchange of emails between counsel on 23 February 2018 and 1 March 2018. Mr McDonald's email sent on 23 February 2018 suggested it would be sensible to await the defendant's replies to the Part 18 request before taking steps, following which the parties could liaise in correspondence. In other words, there was an invitation to disapply the strict provisions of paragraph 10 of the order. In those circumstances, the court should not take a strict view about the claimants' failure to comply with that part of the order. In any event, even if that were not so, I would not have been disposed to apply a rule which is part of the standard cost budgeting regime to this hybrid scheme in a mechanistic manner. To the extent that may have been any fault on the part of the claimant, it was minor and there has been no significant prejudice. It would be wholly wrong to apply the sanction. To do so would be wholly disproportionate.
26. I will deal with the budget phases that are in issue in turn. In doing so I will not refer to the witness statements that were filed by the parties. They provided useful contextual information but otherwise I found them to be of limited assistance. I will also, in view of the nature of costs budgeting, not set out in detail the submissions that were made to me. And I will use figures that are rounded, usually to the nearest £1000.
27. There are a two headline issues. First, the defendant says the solicitors' charging rates that were approved for the 1^st Wave and/or agreed for the 2^nd Wave should be used, rather than higher rates. The claimants' say that the 1^st Wave rates are now historic and date back to 2012 and the 2^nd Wave rates were agreed in relation to earlier periods. The court is budgeting prospectively for 2018 and beyond and it is right that the rates are adjusted. Beyond that, I am unwilling to be drawn into a debate about charging rates. It is not the role of the court dealing with costs management to set rates although, of course, the total for each budget phase is, in part, a function of the hourly rates that are applied. I need only say that I will have regard to the possibility that the Grade A rate for Taylor Hampton may be more than will be allowed on a detailed assessment. However, the allocation of work in the budget between different grades of fee earner and the total figure claimed for each phase are of greater importance.
28. Secondly, there is an anomaly in relation to counsel's fees. Mr Sherborne's fees have been calculated using an hourly rate of £400 per hour for some purposes and £500 for others. His fees for trial have been apportioned equally between the parties. To the extent that his hourly rate is relevant, I will use the lower figure.

Pleadings/RFI

29. Mr Leslie's January 2018 budget contains no estimated costs relating to a request for information under CPR Part 18. However, the supplementary budget records that from 12 December 2017 and up to 30 April 2018 fees of £26,465 were incurred (£20,160 by the solicitors and £6,305 by counsel) and further costs were estimated from 1 May 2018 £17,310 for solicitors and £17,755 for counsel. The grand total is £61,530.
30. The request is a substantial document and the making of the request and considering the response will have been very time consuming. I have little to go on, but I broadly accept the figures that have been budgeted. I will treat all the costs as estimate for the purposes of this exercise and approve a figure of £60,000.

Disclosure

31. It is helpful to put this budget phase in context with the following information in mind.

(1) Mr Leslie's budget for investigation and pre-action disclosure is £77,000. Ms Houghton's is much less, £5,000.

(2) The incurred costs on disclosure up to the date of the January 2018 budgets were respectively £82,000 and £9,000.

(3) The estimated sums for disclosure in those budgets were £98,000 and £47,000.

(4) The totals for incurred and estimated costs were £180,000 and £56,000.

(5) The revised budget for Mr Leslie records that by 2 May 2018 incurred costs on disclosure had reached £197,000 and further costs were estimated at £85,000. The total budgeted costs, before adjustment by the court, for Mr Leslie are now £282,000.

(6) The aggregate volume of documents that have been disclosed (so far) by the parties can be fitted within 15 lever arch files. This includes six lever arch files of additional disclosure relating to the board knowledge issue.

32. I have regard to the nature of the cases and that they rely both on inferences to be drawn from limited data and on piecing together a jigsaw of data. Where the data is incomplete, it is necessary to interrogate the defendant's disclosure and I have seen examples of the sort of work that is involved. I also have regard to the amount of costs that have been incurred since the January 2018 budgets were produced. The fact these sums have been incurred does not bind me because the relevant budgeting date is, as I have already explained, the date of the January 2018 budgets. Overall, however, this is not an unusually demanding or difficult disclosure exercise when compared to other High Court litigation. I can see no reason why these cases demand a greater input of partner time on disclosure than other cases of comparable complexity.
33. Mr Leslie has included the costs of preparing and pursuing an application for specific disclosure in his (recently revised) disclosure budget phase. This is wrong in principle because the costs of such an application may be the subject of an inter partes costs order. It will be stripped out from the disclosure phase and treated as a contingency.
34. It appears from Mr Leslie's recent budget that the entire estimated sum of £85,000 relates to the proposed application for specific disclosure and can be taken out of account. I have to consider therefore whether a total estimate budget for the disclosure phase of £98,000 is within the range of reasonable costs taking account the amount of costs incurred. I consider that the figure for the budget phase must be reduced, but that the reduction can be relatively modest.
35. Mr Leslie's budget shows very heavy reliance on partner time. This is not justified and the majority of the time reasonably spent on disclosure should be charged at the associate and paralegal rates. The involvement of counsel was estimated at a sum slightly in excess of £7,000 which does not call for comment.
36. Mr Leslie's estimated costs for the budget phase from 17 January 2018 are allowed at £75,000.
37. Ms Houghton's costs of the disclosure phase is agreed at £56,000. That figure was agreed between the parties on the basis of £15,000 being offered to each claimant. However, Mr Leslie's solicitors are making the running on disclosure and I have added £15,000 to the figure I might otherwise have been minded to allow him. It may be that the figure for Ms Houghton is over-budgeted as a consequence but in light of the agreement of her budget phase for disclosure.

Witness statements

38. The factual context in which the court is asked to assess the budget phase for witnesses is unsatisfactory. The budgets for Mr Leslie and Miss Houghton each provide the assumptions upon which the revised calculations are made. In each case it is said the budget is based upon each of them producing witness statements for up to 5 witnesses and considering up to 20 witness statements served by the defendant. However, Mr Browne QC's skeleton argument invited the court to proceed on the assumption that the two claimants will produce up to 20 witnesses between them. I am told the defendant expects to produce up to 10 witness statements dealing with general issues and up to 20 short statements (not exceeding 5 pages) dealing with board knowledge.
39. It appears to be suggested by the claimants that they will, in light of the amendment to the claims, wish to rely on witness evidence relating to the issue of board knowledge. Paragraph 14 of Mr Daulby's witness statement dated 16 February 2018 says:

"… it will be necessary for the claimant to explain what happened and why MGN's senior management could and should have taken numerous steps."

40. I accept, of course, that the claimants will need to provide evidence from which they say the appropriate inferences should be drawn about board knowledge. This is some distance, however, from the claimants providing evidence about what MGN senior management could and should have done. The latter is not primary evidence of fact.
41. During the course of the hearing I suggested to the parties that it is unlikely the court will wish to receive evidence from up to 50 witnesses and, in any event, it would be impractical to do so during a 15 day trial. It is disappointing that the court has been provided with core information that has the appearance of being unreliable. I will place reliance on the assumptions contained in the claimants' budgets because they are supported by a statement of truth and are credible. However, the jump from 5 witnesses each to 10 each is not explained by the amendment and is not credible. Each of the claimants will need a full and careful witness statement to cover their personal circumstances and the effect upon them they say the articles have had. It is not for the claimants, however, to try make out in their evidence the causal links between the underlying evidence and the publication of each article. I am told the claimants will also wish to produce evidence from what Mr Browne QC described as their "associates" and journalists who have agreed to assist.
42. The claimants will need to consider the defendant's witness statements. Here the number is less critical because the assumption is that the majority will be short. I proceed on the basis of a need to review 20 short statements and 10 statements of ordinary length. The same strictures about content (and therefore length) apply to the defendant. As I made clear at the hearing any party who includes irrelevant, argumentative or inadmissible material faces the risk of the offending passages being struck out.
43. Mr Leslie's solicitors have already spent over 70 hours on witness statements by the date of the budget and estimate that a further 95 hours of partner time, 80 hours of associate time and 30 hours of time by a trainee will be spent. This estimate has to be considered alongside the assertion made by Taylor Hampton (Mr Leslie's solicitors) in a letter to RPC dated 23 August 2017 that the preparation of the witness statements was "well advanced". The budget makes provision for counsels' input in drafting the statements and reviewing the defendant's statements of £22,500 (56 hours) in the case of Mr Sherborne and £7,500 (37.5 hours) for Mr Santos.
44. The total budget for witness statements is £125,000 which includes £26,000 incurred costs.
45. Ms Houghton's budget reveals only a very small amount of incurred time. The further work is estimated to require 70 hours of partner time, 65 hours of input from assistants and 40 hours by trainees/paralegals (175 hours in total). £20,000 is included for Mr Sherborne and £7,500 for Mr Santos. The grand total for the phase is £85,000.
46. It is understandable that Mr Leslie's budget should be greater than Ms Houghton's because his evidence will relate to a much larger number of articles. And I accept that task of producing a witness for the claimant in each case is a substantial task. However, the statements must be, as far as possible, the witness' recollection, such as it is, of the relevant events uninfluenced by the exigencies of the case. It is concerning to see an assumption in both cases that there is to be a conference with counsel to review the statements.
47. As a matter of impression, the hours that are included in these budgets are grossly excessive and well above what is within a range of reasonable costs and a similar observation can be made about counsel's fees. The amount of the time that has been budgeted suggests strongly that the statements will have only a passing connection with the direct recollection of the witnesses. They will have become an artificial construct of the lawyers.
48. I set the figures for the estimated costs of this phase at a total of £60,000 for Mr Leslie (having regard to the costs that have been incurred) and £50,000 for Ms Houghton.

Trial preparation

49. The guidance notes on Precedent H provide a summary of the items that are to be included, and those to be excluded, from the trial preparation phase. The three main areas of work will usually be preparing the trial bundles, assembling and liaising with witnesses and holding a conference with counsel. The claimant in each case will no doubt require careful attention both as a witness and because the trial process will need to be carefully explained. The notes expressly exclude from the phase the assembly and copying of the trial bundles because that is not fee earner work.
50. I accept that within the general spirit of this phase there will be work that is difficult to pigeon hole. The immediate run up to a trial inevitably leads to a flurry of activity and the guidance notes include as an example of work that is within the phase "any final factual investigations" albeit this cannot include additional witness evidence. It can include, however, work done in analysing the evidence. And I can see there will inevitably be issues about the trial that will lead to correspondence between the parties.
51. Mr Leslie's figure for trial preparation is £150,000 and Ms Houghton's is £139,000. These are very large sums indeed given that the phase excludes the PTR and the brief fees.
52. Mr Leslie's budget is made up of 195 hours of partner time, 160 hours of associate time and 50 hours of time spent by a trainee. In Ms Houghton's budget the equivalent figures are 150 hours, 180 hours and 50 hours. They total in each case 405 hours and 380 hours. I am satisfied that these amounts of time are a completely artificial budgeting construct and not a genuine estimate of time that will be spent on the limited tasks that fall within this phase. They are some distance from being within the range of reasonable costs.
53. I note also that the assumptions recorded in the budgets include time spent on collating the trial bundles, despite the fact that this work is expressly excluded from the phase (assembly and collating are synonymous).
54. Both budgets include provision for counsels' fees during the trial preparation phase - £9,500 in Mr Leslie's budget and £8,500 in Ms Houghton's budget. I accept there may be some need for advice before the brief is delivered but these figures are more than is reasonable. A conference for the trial should be included in the brief fee.
55. Mr McDonald drew attention to an offer made by the defendant to prepare the trial bundles and suggested I might approve budget figures on alternative bases that the bundles are prepared by the claimants or by the defendants. I do not consider this is a useful approach.
56. I will approve a total of £70,000 for Mr Leslie and £70,000 for Ms Houghton, plus the court fees that are payable.

Trial

57. The working assumption is that the trial dealing with both claims will take 15 days in court in total. No allowance has been made for non-sitting days. I will deal with the estimated time for solicitors first and then deal with counsels' fees.
58. Both budgets provide for a partner and an associate/assistant to be present in court each day and allow 10 hours for each day. In addition, provision is made for 20 hours of paralegal/trainee time. The budgets total £110,400 for Mr Leslie's solicitors and £113,450 for Ms Houghton's. I accept that two fee earners need to be involved but I do not accept that is necessary for a partner and an associate to be involved for the whole trial period. A more reasonable and proportionate combination is a partner, or an associate, to attend with a junior fee earner, although it is reasonable for the partner to be present at key moments. It is also unnecessary for the representatives for both claimants to be in court for the entire trial. Ms Houghton's solicitors do not need to be in court when Mr Leslie and his witnesses are giving evidence and during closing submissions for Mr Leslie and vice versa. 10 hours per court day is a reasonable estimate.
59. I will allow £50,000 in each budget for solicitor's time.
60. Strong objection is taken by the defendant to the figures budgeted for counsels' fees. They have been divided equally between the two budgets. A modest degree of assistance is given in the witness statements provided by Mr Daulby and Mr Hutchings by giving a breakdown of the total figures for Mr Sherborne and Mr Santos. It is telling, however, that the fees are described as being those 'quoted by counsels' clerk'. No indication is given that an attempt was made to negotiate the fees. Mr McDonald suggested this may be because a conditional fee agreement is in place.
61. Mr David Sherborne is junior counsel, albeit he is very experienced. Mr Julian Santos will act as his 'junior' for the trial. I note that in the earlier phases of the budgets, Mr Sherborne's involvement exceeds that of Mr Santos by some margin which suggests that the relationship between them is not quite as if they were leader and junior.
62. The total budgeted for Mr Sherborne, including the brief fee of £250,000, refreshers of £70,000 (£5,000 per day) and fees for taking the judgment and dealing with consequential issues of £10,000, is £330,000. Comparable figures for Mr Santos are £75,000, £28,000 (£2,000 per day) and £3,750 giving a total of £106,750. In aggregate the total is £436,750 to be split equally between the two claims.
63. These figures are far in excess of what is within a range of reasonable costs. I take account of the following points:

(1) It is not in dispute that these are 'two counsel' claims. However, Mr Sherborne has not taken silk and there is no good reason to budget his fees as if he had.

(2) Mr Sherborne's brief fee, broken down using an hourly rate of £400 per hour, involves him charging for an astonishing 625 hours of work in preparation for a 15 day trial. Allowing for a 10 hour day this amounts to 62 days of work (52 days if he were to charge for 12 hour days). It is difficult to conceive these are genuine periods.

(3) Curiously, Mr Santos has been budgeted to spend much less time on the brief than Mr Sherborne (375 hours).

(4) Daily refreshers of £5,000 for Mr Sherborne and £2,000 for Mr Santos are high.

64. I will allow fees of £190,000 for Mr Sherborne and £75,000 for Mr Santos, a total of £265,000. These figures include refreshers. Taken with the solicitors' costs (£100,000 in total), the total for the trial phase in each budget is £182,500 after allocating 50% of the brief fees to each case.

ADR/Settlement

65. £36,000 has been incurred by Ms Leslie and £28,000 by Ms Houghton. They estimate further costs of £25,000 each. I will allow estimated costs of £20,000 in each budget.

Further issues

(1) Apportionment of counsels' fees for the trial between individual and common costs

66. There are three additional issues that were raised before me. The first can be dealt with briefly. It was proposed by the claimants that counsels' fees for the trial should be apportioned between individual costs and common costs on a 50:50 basis. Objection was taken by the defendant. I directed that for the purposes of costs management no apportionment is needed. Indeed, an apportionment at the budgeting stage would be purely notional and would not affect the power of the management judge to make such orders as may be appropriate. It would therefore have been a pointless exercise for me to determine apportionment as it would have had no effect. It was agreed that my judgment would make clear that the issue remains open.

(2) Costs of the 12 January 2018 PTR

67. A hearing took place before Mann J on 12 January 2018. It is described in the order as "3^rd PTR Order". There is an issue that is outstanding concerning the costs of that hearing. It is highlighted in the following paragraphs of the order:

"16. Save for the costs of the Specific Disclosure Application and the costs dealt with in paragraph 4 of this order, the costs of and occasioned by this Pre-Trial Review and the costs of and occasioned by all other applications determined at this Pre-Trial Review shall be costs in the case.

17. The question of whether any of the costs dealt with by paragraph 16 of this order are to be 2nd Wave Common costs rather than Individual Costs is reserved. Chief Master Marsh may deal with this issue if he is able and minded to deal with it. If the Chief Master is not so minded, the question shall be determined at the 15^th CMC."

68. I agreed to deal with the issue. Having so agreed, I indicated to counsel that I would only hear brief submissions on it because an issue about the allocation of costs between individual costs and common costs does not involve an issue of principle. That said, I accept the determination has some real effect because an allocation to common costs can affect Wave 2 claimants both retrospectively and prospectively and will affect the sum the defendant has to pay as part of any settlement.
69. There is no clear precedent that assists me on this issue. I have had regard to the judgment of the management judge delivered on 12 January 2018 dealing with the issue of whether the trial of the Leslie and Houghton claims should be adjourned. I am told this took the better part of the day to deal with. Although Mr Leslie and Ms Houghton were at the time of the hearing the only claimants on the 2^nd Wave Register with active claims, it does not follow necessarily that the costs must be individual costs. The judgment deals with wider issues than the two claims that were before the management judge. It takes explicit account of needs of the MNHL as a whole and the fact that the claims made by Mr Leslie and Ms Houghton were test cases (see paragraph [28]).
70. I have also had regard to paragraph 34 of Mr Heath's witness statement dated 16 February 2018 where he identifies the issues in these two cases, the determination of which will be or is likely to be of benefit to future claims.
71. It is open to me to apportion the costs that are dealt with in paragraph 16 of the order dated 12 January 2018 part to individual costs and part to common costs. I am satisfied, on balance, that this is the correct approach. The question of whether the trial should go ahead had to be dealt with as part of the overall management of the 2^nd Wave claims. However, the circumstances that had to be considered were specific to the Leslie and Houghton claims. I will apportion the costs as to 50% to Individual Costs and 50% to Common Costs.

(3) Costs of the CCMC: individual or common costs?

72. The final issue concerns whether the costs of the case and costs management hearing before me should be treated as being within the budgets or whether they are within the Common Costs regime. If they are within the budgets, should the 2% cap be lifted on the basis that there are exceptional circumstances?
73. Earlier in this judgment, I referred to the bespoke nature of the costs management regime in these claims. The applications made by Mr Leslie and Ms Houghton are a consequence of the limitations of template system. It is unsurprising that they sought bespoke budgets and the outcome of the applications is that the budgets have been varied. I do not consider that I am hidebound by the provisions of paragraph 7.2 of PD3E in those circumstances or by the way in which the budgets have been drafted. The fact that a conventional approach was adopted when drafting the budgets does not tie my hands.
74. The applications were necessary and the 2% cap, if it forms part of the MNHL costs regime, should not apply.
75. The 9^th CMC order dated 9 July 2015 provides the framework for the 2^nd Wave Claims and it contains definitions of the principles that govern costs.

"7. "Individual costs" are those costs incurred for and/or in respect of any Individual Claimant within the Managed Litigation of MNHL in relation to matters which are particular and personal to each such Claimant, save insofar as they are 2nd Wave Common Costs or are deemed to be 2nd Wave Common Costs or are Common Costs (as defined in the order of Mr Justice Mann dated 4th August 2014) or are deemed to be Common Costs.

8. "2^nd Wave Common Costs" means:

a. all costs of the 2^nd Wave of the MNHL other than Individual Costs;

b. Costs (which are not Individual Costs) incurred by: (1) the Lead Solicitor; (2) Counsel instructed by the Lead Solicitor and the costs arising therefrom; (3) other solicitors (and costs lawyers) authorised or instructed by the Lead Solicitor, in relation to any interim or procedural hearing in the Chancery Division relating to the second trial, or in the second trial itself, or relating to the second wave of the Managed Litigation generally (whether designated as a case management conference, cost management conference, pre-trial review, summary assessment or payment on account of common costs, or otherwise, and whether comprising or including any application against one or more respondents who are not parties), save where expressly ordered to the contrary;

…

g. Costs incurred by: (1) the Lead Solicitor; (2) counsel instructed by the Lead Solicitor and the fees arising therefrom; (3) other solicitors (and costs lawyers) authorised to instructed by the lead solicitor for the purpose of budgeting second wave common costs and/or budgeting any template individual costs budgets and/or coordinating the budgeting of individual costs; and

h. Costs incurred by: (1) the Lead Solicitor; (2) counsel instructed by the Lead Solicitor and the fees arising therefrom; (3) other solicitors (and costs lawyers) authorised to instructed by the lead solicitor for the purpose of estimating, reporting, negotiating and/or assessing second wave common costs."

76. These definitions are tortuous and they are not easy to apply. The definition of Individual Costs excludes costs that are Common Costs and the definition of Common Costs excludes Individual Costs. What starting point on this circle should be taken? It is notable that no mention is made of Bespoke Individual Budgets probably because such a concept was first articulated in the order dated 16 May 2016. The issue for the court is whether Bespoke Individual Budgets are "particular and personal" to each claimant? At first blush the answer would appear to be obvious because such budgets must by definition relate only to the work to be carried out that is particular and personal.
77. However, the definition of Common Costs is very broad. Under paragraph 8b of the order Common Costs include (i) any interim or procedural hearing relating to the second trial and, more broadly, (ii) costs relating to the 2nd Wave of the Managed Litigation generally whether designated as a case management conference, cost management conference etc.
78. Paragraph 8 g. points against the budgeting of Bespoke Individual Cost being part of Common Costs because it carefully distinguishes "budgeting" individual template costs budgets from "coordinating" the budgeting of individual costs. To my mind this suggests, when taken in isolation, that only coordinating individual costs forms part of Common Costs. In other words, template costs budgeting is within Common Costs but individual bespoke budgets are Individual Costs. Against that view, the very wide words of paragraph 8 b. point in the opposite direction.
79. It is important to consider the terms of the orders in their context. This is managed litigation, akin to Group Litigation, and it is likely that Mr Leslie and Ms Houghton's cases will be test cases establishing principles that will be applied in many other claims. The need for Bespoke Individual Budgets comes from the amendments and the fact that these claims, by general assent, have outgrown their template. Moreover, although the bespoke budgets are particular and personal to the claimants so were the template budgets, to some degree, because account was taken of the number of articles complained about.
80. The definition of Individual Costs is fairly narrow, the narrowness coming from the use of the words "particular and personal to" and the definition of Common Costs is very broad. It appears to have been the intention that the notion of Common Costs was to include costs relating to cost management hearings. I do not consider, however, that the regime was intended to result in the costs of a cost management hearing, such as the one I have conducted, necessarily to result in an order that the whole of the costs of the hearing should be treated as Common Costs.
81. I conclude that the costs of the hearing should be apportioned between Common Costs and Individual Costs equally. I have indicated, the 2% cap should be disapplied.

Conclusion

82. I will hear counsel about the costs of the hearing before me on the handing down of this judgment or on a convenient later date.

Note 1   Both these periods exclude time for judicial pre-reading and a break before closing submissions.    [Back]