England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
BUSINESS LIST (CHANCERY DIVISION)

		Rolls Building Fetter Lane, London, EC4A 1NL
		19 April 2018

MR JUSTICE ARNOLD :

Introduction

1. On 22 February 2018 I gave judgment in favour of the Claimants on their claim against the Defendant ("Channel 5") for misuse of private information and awarded them damages of £10,000 each ([2018] EWHC 298 (Ch)). I must now resolve a somewhat complex dispute as to the costs of the proceedings.

The relevant correspondence and procedural steps

2. On 17 February 2016 the Claimants' solicitors, Hamlins, sent Channel 5 a letter of claim in which the Claimants sought: (i) an undertaking to remove the Programme from any website; (ii) an undertaking not to publish the Programme in future; (iii) compensatory damages (the quantum of which to be agreed); (iv) an apology (the wording of which to be agreed); and (v) the Claimants' legal costs.
3. On 29 February 2016 Channel 5 replied, contending that, in so far as the Claimants had any Article 8 rights, they were outweighed by Channel 5's Article 10 rights, and relying upon the three OFCOM decisions in Channel 5's favour. The letter concluded:

"Should your clients desire it, Channel 5 is prepared to enter into an alternative dispute resolution procedure should that appear advantageous."

4. On 10 June 2016 Hamlins wrote to Channel 5 to put it on notice that Hamlins and counsel had agreed to represent the Claimants under a Conditional Fee Agreement ("CFA"). Having noted that Channel 5's response to the letter of claim indicated an intention robustly to defend the claim, the letter went on:

"In these circumstances, with fundamental issues of law and regulation in dispute, we do not consider ADR would be productive or appropriate at this stage in proceedings but our clients will be prepared to keep under review the option of ADR once these substantive issues of law and regulation have been addressed further."

5. On 14 June 2016 Channel 5 replied, saying among other things:

"Your clients' claim for injunctive relief to prevent further broadcasts is perfectly suitable for Alternative Dispute Resolution and there is no reason for that possibility not to be properly pursued, especially in view of the Pre-action Protocol."

6. On 30 June 2016 the claim form was issued.
7. On 3 August 2016 Hamlins replied to Channel 5's letter of 14 June 2016. Having noted that Channel 5 had raised a number of issues and that the Programme had been broadcast again on 27 July 2016, the letter went on:

"These circumstances do not appear conducive to ADR, particularly at a point where there [is] no acceptance of wrongdoing on your part. However, we remain fully prepared to engage with ADR at a suitable time and invite proposals for the same."

8. There was no response from Channel 5 to the invitation to make proposals for ADR.
9. On 26 August 2016 the claim form was served, together with a Notice of Funding confirming that both Hamlins and counsel were acting under a CFA which provided for a success fee.
10. At some point the Court sent the parties a Notice of Proposed Allocation to the Multi-Track requiring various documents, including costs budgets, to be filed by 2 December 2016. On 2 December 2016 Hamlins filed and served the Claimants' cost budget. Channel 5 did not file or serve a costs budget. On 6 December 2016 Hamlins drew Channel 5's attention to CPR rule 3.14.
11. On 19 May 2017 an order for directions was made by consent providing for disclosure to take place on 30 June 2017 and witness statements to be exchanged on 4 August 2017 and for there to be a costs management hearing at a date to be fixed.
12. Following a request by Channel 5 for an extension, on 30 June 2017 an order was made by consent extending the time for disclosure to 11 August 2017 and the date for exchange of witness statements to 6 October 2017.
13. Disclosure took place on 11 August 2017.
14. On 19 September 2017 Hamlins wrote to Channel 5's then solicitors, Wiggin, contending that there were significant omissions from Channel 5's disclosure and seeking further disclosure, in particular of documents showing how many times the Programme had been broadcast and the viewing figures and how many times the Programme had been viewed online.
15. On 25 September 2017 Wiggin wrote to Hamlins saying that they were considering the requests in the letter dated 19 September 2017 and proposing that exchange of witness statements be postponed to 3 November 2017.
16. On 27 September 2017 Wiggin sent Hamlins a letter headed "Without prejudice save as to costs" and "Offer pursuant to Part 36 of the Civil Procedure Rules" which stated:

"Our client is confident of success at trial. However, it is conscious that it will be difficult to recover a substantial part of its costs from your clients. Therefore, on a commercial basis only, strictly without any admission of liability and solely to bring about a settlement at this juncture, we have been instructed to put forward the following defendant's offer to settle pursuant to Part 36 of the Civil Procedure Rules.

This offer is a defendant's offer to settle the whole of the claim against it by both of your clients in the abovementioned proceedings in the Chancery Division of the High Court, with claim number HC-2016-002012, on a full and final basis on the following terms:

Our client will pay your clients jointly the sum of £[X] (including interest) (the Settlement Sum);

Our client will make this payment within 14 days of receipt of notice of acceptance;

The Settlement Sum is inclusive of interest until the Relevant Period (defined below) has expired;

The Settlement Sum does not include liability for costs.

Pursuant to Part 36, our client will be liable for your clients' costs in accordance with CPR 36.13 if the offer is accepted within 21 days (Relevant Period).

If your clients do not accept this offer, and fail to do better than this offer at trial, our client intends to rely on CPR 36.17. In other words, our client will be seeking an order that your clients pay our client its costs from the date when the Relevant Period expires and interest on those costs.

This offer is intended to have the consequences of section 1 of Part 36 of the Civil Procedure Rules. If you think that this offer is defective or non-compliant with Part 36, you must let us know promptly."

17. I have omitted the amount which was offered because I have given the Claimants permission to appeal on quantum and having regard to CPR rule 52.22(1), but it was larger than the total amount which I awarded the Claimants.
18. Later the same day Wiggin sent Hamlins an email referring to the Part 36 offer and saying:

"My clients are content to rely on this offer through trial if it is not accepted. However, I can advise that there remains some commercial advantage to my client to have the matter settled this week. … My clients are willing to consider providing your client with a letter apologising for any distress caused to your client, for example by virtue of showing him in his nightwear, provided that terms can be agreed."

19. On 2 October 2017 Channel 5 issued an application seeking an extension of time for exchange of witness statements until 3 November 2017. On 4 October 2017 the Claimants consented to this, and on 6 October 2017 a consent order was made.
20. On 10 October 2017 Channel 5 instructed Lee & Thompson in place of Wiggin.
21. On 12 October 2017 Hamlins wrote without prejudice save as to costs to Lee & Thompson referring to the Part 36 offer sent by Wiggin on 27 September 2017. The letter noted that the offer contained only monetary terms, and continued:

" … in the light of the extent of the broadcast of the programme complained of, our clients require a public apology. Our clients also repeat their request made at the outset that your client undertakes not further to repeat broadcast of the programme complained of."

The letter went on to say that, absent the further disclosure which the Claimants had requested, they were "not presently in a position properly to assess the appropriate level of damages reflecting the extent of broadcast". It also noted Channel 5's request for an extension of time for exchange of witness statements. The letter concluded:

"In all the circumstances, we look forward to prompt disclosure of all further documentation and exchange of Witness Statements, at which stage our clients should be placed in a better position to assess their claim with a view to being able to engage in settlement discussions."

22. On 17 October 2017 Lee & Thompson replied without prejudice save as to costs to Hamlins' letter dated 12 October 2017 saying:

"1. The non-monetary relief set out in your letter is not available to your clients. No Court can or will order an apology, nor is one sought in the Prayer for Relief. That Prayer does seeks an injunction to restrain further broadcasting of 'the information complained of or of any similar information'. That does not extend to the undertaking you seek in your letter, which again will not be ordered by the Court. Even if your clients succeed in their claim and persuade the Court to exercise its discretion to order an injunction, the footage could still be broadcast in anonymised / blurred form.

2. Without prejudice to the above, we have instructions from our clients to confirm that in addition to the monetary relief currently on offer, they would be prepared to undertake not to broadcast again the segment of the programme that featured your clients.

….

5. Although we are still in the process of considering the disclosure requests in your letter dated 19 September, we do not consider that your clients require sight of any of it, and far less witness statements, in order to 'assess their claim' and then 'engage in settlement discussions'. Our clients have made a Part 36 Offer, as they are entitled to do at any stage of the proceedings, and you have not suggested that the offer is in any way invalid nor have you sought clarification of it pursuant to CPR Part 36.8. Moreover, we have now amplified the terms of that offer by the offer of the undertaking set out above.

6. Despite the above, in order to facilitate settlement (on your clients' case) we have prepared the attached table for your information.

If in light of the above your clients now wish to instruct you to accept our clients' Part 36 offer, together with the undertaking set out above, we shall no doubt hear from you in advance of the expiry of the Relevant Period."

The table enclosed with the letter showed the number of times the Programme had been viewed or watched online, slightly overstating the total as 9.7 million.

23. On 19 October 2017 Hamlins replied without prejudice save as to costs to Lee & Thompson's letter stating:

"1. You are correct in asserting that no court would order your client to apologise to our clients. However, it is standard practice in settlements concluding misuse of private information claims for defendants to either apologise via the same medium as the original publication or to make statements in open court doing the same.

This is particularly important in the cases of our clients. They have been very publicity humiliated by the actions of your silent. They wish to be vindicated and to be able to say that Channel 5 has apologised to them.

If this matter does proceed to trial, we are confident that our clients will not only succeed but that the judgment will vindicate them. Because it will make clear that your client behaved very badly indeed towards them. Thereby they would achieve the same kind of vindication which might otherwise be provided via an apology by your client.

…

3. ….

We note you refer to the fact that the Relevant Period for your clients' Part 36 Offer will have expired before 20 October 2017. This is not correct. Your letter of yesterday's date offering an undertaking in addition to the monetary relief offered in your part 36 offer has effectively changed the terms of your Part 36 offer. In accordance with CPR rule 36.9(5)(a) this improved offer shall be treated as the making of a new Part 36 offer on the improved terms and therefore expiry of the Relevant Period will be 21 days from your written notice of the change of terms."

24. On 20 October 2017 Lee & Thompson replied without prejudice save as to costs to Hamlins' letter dated 19 October 2017 disputing that it was standard practice for apologies or statements in open court to be provided in misuse of private information claims or that the Claimants were entitled to vindication as claimed and saying that neither a statement in open court nor an apology would be provided in settlement of the action.
25. Also on 20 October 2017 Channel 5 served a Supplemental List of Documents.
26. Witness statements were exchanged on 3 November 2017.
27. On 23 November 2017 Channel 5 served an Amended Defence which included a Schedule setting out the viewing figures for the Programme.
28. On 27 November 2017 the Claimants filed and served a revised costs budget.
29. On 28 November 2017 Lee & Thompson wrote to Hamlins proposing mediation, saying:

"… if the sentiments expressed by your client Mr Ali in his evidence about the complete inadequacy of damages as a remedy are correct, it is difficult to see why litigation was commenced in the first place without at least exploring alternative methods of resolving his concerns. In any confidential mediation, your clients can explain exactly why they feel a public apology to be so fundamental to their needs Our clients will listen closely to whatever yours have to say, and will consider seriously any reasonable solution on this issue".

30. The letter went on to say that Channel 5 had decided not to broadcast or otherwise transmit or make available for public viewing any footage showing the Claimants' eviction in the future, and offered a formal undertaking to that effect.
31. On 1 December 2017 Hamlins replied agreeing to mediation and saying:

"You state your client's objection to making an apology to our clients. The defendant has been aware as to our clients' requirement for vindication from the outset of this claim. It is our clients' position that, in the event they win this action and obtain Judgment in their favour, this will provide them such vindication. Alternatively, if there can be a settlement, they will need a form of effective vindication. However, as you say, this issue can be explored at a mediation."

32. The mediation took place, but the matter did not settle.
33. On 19 December 2017 there was a costs and case management hearing before Master Shuman at which the Claimants' revised costs budget for pleadings, trial preparation, trial and ADR was approved subject to certain reductions. Channel 5 did not file, serve or seek approval of any costs budget.

Costs down to 18 October 2017

34. It is common ground that, so far as the costs down to 18 October 2017 are concerned, the starting point is that the Claimants have succeeded in their claim and prima facie are entitled to their costs. Channel 5 contends, however, that there should be no order as to costs, alternatively that the Claimants should only recover 50% or 75% of their costs, on the ground that the Claimants wrongly refused to engage in ADR. In support of this contention, counsel for Channel 5 relied upon PGF II SA v OMFS Co 1 Ltd [2013] EWCA Civ 1288, [2014] 1 WLR 1386 and Thakkar v Patel [2017] EWCA Civ 117, [2017] 2 Costs LR 233.
35. In my judgment the Claimants did not refuse to engage in ADR, and there is no justification for depriving them of any part of their costs during this period. While it is true to say that the Claimants did not embrace Channel 5's first suggestion of ADR in its letter dated 29 February 2016, they did say in Hamlins' letter dated 10 June 2016 that they would keep it under review. Moreover, the Claimants' response to Channel 5's second suggestion of ADR (which on its face was confined to the question of an injunction) in its letter dated 14 June 2016 in Hamlins' letter dated 3 August 2016 was to state that they were fully prepared to engage in ADR at a suitable time and to invite proposals. Channel 5 did not propose mediation (or any other form of ADR) until 28 November 2017. When Channel 5 proposed mediation, the Claimants promptly agreed.
36. Accordingly, Channel 5 must pay the Claimants' costs in respect of this period, to be subject to detailed assessment on the standard basis if not agreed.

Costs from 18 October to 8 November 2017

37. Although counsel for the Claimants did not address the incidence of costs during this period separately in his submissions, it was raised by counsel for Channel 5 in his submissions. As counsel for Channel 5 pointed out, on the premise that it would be unjust to make the order specified in rule 36.17(3) (as to which, see below), one possible order would be for the Claimants to recover their costs down to 8 November 2017 and for Channel 5 to recover its costs incurred thereafter. The significance of the date of 8 November 2017 is that it is 21 days after Channel 5's offer of an undertaking not to rebroadcast the relevant part of the Programme in Lee & Thompson's letter dated 17 October 2017.
38. In my judgment the Claimants are entitled to their costs from 18 October to 8 November 2017 for two reasons. First, I consider that Lee & Thompson's letter dated 17 October 2017 amounted to an improved Part 36 offer falling within rule 36.9(5) such that the 21-day period started to run again. This is because it offered an undertaking, which addressed for the first time the non-monetary relief sought by the Claimants in their claim form and Particulars of Claim, namely an injunction to restrain further broadcasting of the information complained of. Secondly, even if that is wrong, I consider that, even on the assumptions that (i) Wiggin's letter dated 27 September 2017 was a valid Part 36 offer and (ii) it would not otherwise be unjust for the consequences specified in rule 36.17(3) to follow, it would be unjust for the Claimants not to recover their costs in respect of this period having regard to the offer of the undertaking.

Costs after 8 November 2017

39. Turning to the costs incurred after 8 November 2017, there are two issues between the parties: (i) was Wiggin's letter dated 27 September 2017 a valid Part 36 offer and, if so, (ii) would it be unjust for the consequences specified in rule 36.17(3) to follow given that the Claimants failed to obtain a judgment more advantageous than that contained in the letter dated 27 September 2017 (as improved in the letter dated 17 October 2017)?

Was the letter dated 27 September 2017 a valid Part 36 offer?

40. The Claimants contend that the letter dated 27 September 2017 was not a valid Part 36 offer because it contained an offer to settle the Claimants' claims by paying the Claimants jointly the sum of £X, whereas the Claimants had distinct individual claims. Accordingly, counsel for the Claimants submitted, the offer was not made in accordance with rule 36.5. That being so, it did not have the consequences specified in Section 1 of Part 36: see rule 36.2(2). In support of this submission, counsel for the Claimants relied upon rule 36.11(3)(c), which provides that the court's permission is required to accept an offer where an apportionment is required under rule 41.3A, which concerns claims under the Fatal Accidents Act 1976 and the Law Reform (Miscellaneous Provisions) Act 1934.
41. I do not accept this contention for two reasons. First, while I accept that the Claimants' claims were technically distinct individual claims, they were parallel claims made by a married couple arising out of the same events. Although it is not necessarily the case that Mr Ali and Mrs Aslam were entitled to the same sum by way of damages, they presented a united front throughout the litigation and could have agreed the division of the sum between them. Thus, in the circumstances of this case, I do not consider that the mere fact that the sum was offered to them jointly meant that the offer was not made in accordance with rule 36.5.
42. Secondly, and in any event, I do not consider that it is open to the Claimants to raise this objection. As can be seen, the letter dated 27 September 2017 stated that it was made in accordance with Part 36 and that it was intended to have the consequences specified in Section 1 of Part 36. It also said, "If you think that this offer is defective or non-compliant with Part 36, you must let us know promptly". No suggestion was made by the Claimants that the offer was defective or non-compliant with Part 36 because the sum in question was offered to them jointly prior to 9 March 2018. On the contrary, paragraph 3 of Hamlins' letter dated 19 October 2017 treated the offer as being a valid Part 36 offer.
43. A similar issue arose in Seeff v Ho [2011] EWCA Civ 401, [2011] 4 Costs LO 443, where Thomas LJ delivering the judgment of the Court of Appeal said at [12]:

"In our view the offer was compliant with Part 36; in any event the letter of 14 May 2010 made it clear that if the offer was in any way defective or non-compliant with Part 36, Mr and Mrs Ho's solicitors were asked to let them know as soon as possible. It seems to us clear that, not only did the solicitors treat the offer as a Part 36 offer in the light of the hearing of the appeal, but they also accepted it as a Part 36 offer in their letter of 21 September 2010."

44. Although Thomas LJ did not express himself in this way, it appears to me that his reasoning was that Mr and Mrs Ho were estopped from challenging the validity of the Part 36 offer made by Mr and Mrs Seeff. In my judgment this reasoning is equally applicable to the present case.

Would it be unjust for the costs consequences specified in rule 36.17(3) to follow?

45. The Claimants contend that, even if the letter dated 27 September 2017 was a valid Part 36 offer and even though the Claimants failed to obtain a more advantageous judgment than that offer (at least as improved on 17 October 2017), it would be unjust for the costs consequences specified in rule 36.17(3) to follow (namely, for the Claimants to be ordered to pay Channel 5's costs from the date on which the improved offer expired).
46. The principles to be applied in these circumstances were set out by Briggs J (as he then was) in a passage in Smith Trafford Housing Trust [2012] EWHC 3320 (Ch) at [13], which was approved by the Court of Appeal in Webb v Liverpool Women's NHS Foundation Trust [2016] EWCA Civ 365, [2016] 1 WLR 3899 at [38]:

"(a) The question is not whether it was reasonable for the claimant to refuse the offer. Rather, the question is whether, having regard to all the circumstances and looking at the matter as it affects both parties, an order that the claimant should pay the costs would be unjust: see Matthews v Metal Improvements Co. Inc [2007] EWCA Civ 215 at [32], per Stanley Burnton J (sitting as an additional judge of the Court of Appeal). (b) Each case will turn on its own circumstances, but the court should be trying to assess 'who in reality is the unsuccessful party and who has been responsible for the fact that costs have been incurred which should not have been': see Factortame v Secretary of State [2002] EWCA Civ 22 at [27], er Walker LJ. (c) The court is not constrained by list of potentially relevant factors in [what was then rule] 36.14(4)] to have regard only to the circumstances of the making of the offer or the provision or otherwise of relevant information in relation to it. There is no limit to the types of circumstances which may, in a particular case, make it unjust that the ordinary consequences set out in [what was then rule] 36.14 should follow: see Lilleyman v Lilleyman (No 2) [2012] 1 WLR 2801 at [16]. (d) Nonetheless, the court does not have an unfettered discretion to depart from the ordinary cost consequences set out in [what was then rule] 36.14. The burden on a claimant who has failed to beat the defendant's Part 36 offer to show injustice is a formidable obstacle to the obtaining of a different costs order. If that were not so, then the salutary purpose of Part 36, in promoting compromise and the avoidance of unnecessary expenditure of costs and court time, would be undermined."

The list of potentially relevant factors to be considered is now set out in rule 36.17(5).

47. Counsel for the Claimants relied upon two factors as meaning that it would be unjust to order the Claimants to pay Channel 5's costs from the expiry of the (improved) offer. The first is Channel 5's failure to disclose the viewing figures for the Programme, even on a without prejudice save as to costs basis until 17 October 2017. In my judgment this does not assist the Claimants for two reasons. First, the Claimants' pleaded case in paragraph 10 of the Particulars of Claim was that they inferred that the Programme had been watched by 2 million or more people. The fact that it had actually been watched by 9.65 million people was and is relied upon by the Claimants as supporting a larger quantum of damages than I awarded. Thus the absence of this information does not justify the Claimants' failure to accept the sum of £X offered. Secondly, and in any event, the information was disclosed by Channel 5 in the same letter as the undertaking was offered. Even if the previous failure to disclosure the information would have made it unjust to impose the ordinary costs consequences after 19 October 2017, the same does not apply after 8 November 2017.
48. Secondly, counsel for the Claimants submitted that Channel 5's failure to offer an apology or agree to a statement in open court made it unjust to impose the ordinary costs consequences of failing to beat the Part 36 offer. In support of this submission, he relied upon the decision of the Court of Appeal in Yentob v MGN Ltd [2015] EWCA Civ 1292, [2015] 6 Costs LR 1103. In that case MGN had offered Mr Yentob by way of Part 36 offer more than the £85,000 which Mann J awarded him. Even though Mr Yentob had failed to beat the Part 36 offer, Mann J held that it would be unjust to order him to pay MGN's costs from the expiry of the offer, and instead made no order as to costs for reasons which Arden LJ explained in her judgment as follows:

"9. The judge said that he found the point a difficult one (judgment, para 41). His conclusion was that in the unusual circumstances of this case, where MGN had made limited admissions and had until shortly before the trial denied any liability, Mr Yentob had 'some form of justification for pursuing the matter to trial' (judgment, para 42). The judge explained in his main judgment at trial that the formal admissions were made as late as November and December 2013. I need not set out the detail of those admissions. The admissions were extensive but limited because, as the judge explained:

'25. … these admissions … do not amount to any admission as to the scope of unlawful activities beyond the use of the word "substantial".'

10. The judge accepted that it was not enough that Mr Yentob wanted to find out what had happened to him as many claimants would want to do that (judgment, para. 43). The case was exceptional because, until the trial took place, Mr Yentob would not know how badly he had in fact been hacked, it was unlikely that MGN would have agreed to make a statement [in open court] which matched the findings made at trial and because it was not apparent until trial that he could never get disclosure of the full extent of the hacking (judgment, para 44). He could not recover his costs from MGN but justice did not, in those circumstances, require him to pay MGN's costs: the outcome could be marked simply by making no order as to costs (judgment, para. 45)."

The Court of Appeal upheld that decision.

49. Counsel for Channel 5 submitted that the present case was to be distinguished from Yentob. I agree. Yentob was an exceptional case for the reasons explained by Arden LJ. In the present case, Channel 5 was not guilty of the kind of serious wrongdoing which MGN was guilty of in that case. Furthermore, Channel 5 did disclose the viewing figures for the Programme on 17 October 2017. Although Channel 5 can be criticised for not having disclosed the figures prior to then (and for only doing so upon an open basis on 23 November 2017), there has never been any dispute as to the accuracy of those figures. Moreover, as I have explained, the Claimants received those figures as part of Channel 5's improved offer, and thus had 21 days in which to consider them prior to 8 November 2017.
50. On the other hand, I do not agree that a further distinguishing factor is that Channel 5 did offer an apology on 27 September 2017. In my judgment that offer was impliedly withdrawn in Lee & Thompson's letter dated 17 October 2017. In any event, it was explicitly withdrawn in their letter dated 20 October 2017.
51. I do agree with counsel for Channel 5 that Channel 5's failure to apologise or agree to a statement in open court does not justify the Claimants' failure to accept the improved offer for three reasons. First, there is no settled practice that claimants in misuse of private information cases are entitled to an apology or agreed statement in open court. Secondly, the Claimants could have applied to make a unilateral statement in open court: see Murray v Associated Newspapers Ltd [2015] EWCA Civ 488, [2015] EMLR 21. Thirdly, damages for misuse of private information are compensatory, not vindicatory: see Weller v Associated Newspapers Ltd [2014] EWHC 1163 (QB), [2014] EMLR 24 at [190]-[191].
52. Accordingly, I am not satisfied that it would be unjust to impose the ordinary costs consequences of failing to beat Channel 5's improved Part 36 offer on the Claimants. I shall therefore order the Claimants to pay Channel 5's costs after 8 November 2017. As sought by Channel 5, those costs will be set off against the costs which Channel 5 must pay the Claimants in respect of the period down to 8 November 2017 (but not against the Claimants' damages). This is subject to the issues considered below.

The consequences of Channel 5's failure to file or serve any costs budget

53. As noted above, Channel 5 failed to file or serve any costs budget. In those circumstances, the Claimants contend that Channel 5 should be treated as having filed a budget comprising only the applicable court fees pursuant to rule 3.14, with the consequences specified in rule 36.23(2)(a), namely that Channel 5 can only recover 50% of its assessed costs. Counsel for Channel 5 somewhat tentatively suggested that the Court should make a different order pursuant to rule 3.14. As counsel for the Claimants pointed out, however, Channel 5 neither made any application for relief from sanction nor filed evidence of the kind which would be required to address the relevant factors so as to enable the Court to consider them under rule 3.14 (see Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537, [2014] 1 WLR 795 at [32]). In those circumstances I consider that there is no basis for an order disapplying rule 3.14, and therefore rule 36.23(2)(a) applies.
54. Channel 5 contends that, even if it is subject to the sanction in rule 3.14, and hence the restriction to 50% of its assessed costs in rule 36.23(2)(a), the sanction and restriction do not apply to the period prior to 19 December 2017 when the costs management hearing before took place before Master Shuman. In support of this submission, counsel for Channel 5 submitted that the costs subject to the restriction in rule 36.23(2)(a) were not incurred costs (which were not subject to costs management), but only budgeted costs (which were).
55. I do not accept this contention for the following reasons. The Court of Appeal held in Mitchell v News Group at [30] that the sanction in rule 3.14 applied not only where a party failed to file a costs budget at all, but also where a party filed a cost budget after the time prescribed in rule 3.13. In the present case, the parties were directed to file costs budgets by 2 December 2016. The Claimants did so, but Channel 5 did not. Accordingly, at that point in time Channel 5 became subject to the sanction in rule 3.14 unless it obtained relief from that sanction (whether by way of an application under rule 3.9 or an application under rule 3.14 itself). It is immaterial that the costs management hearing did not take place until 19 December 2017. It is true that, at the costs management hearing, Master Shuman could only approve budgets for prospective costs, and not costs which had already been incurred by then. But it would undermine the purpose of rule 3.14 to treat it as having no effect with regard to costs incurred between the date on which costs budgets should have been filed and the date on which the court approved such budgets. This is particularly so given that Channel 5 could have applied for relief from the sanction at that hearing, but did not do so.
56. Accordingly, I conclude that Channel 5 is only entitled to 50% of its assessed costs after 8 November 2017.