England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice, Strand, London, WC2A 2LL.
		5th December 2013

MR JUSTICE NICOL:

1. By his claim form issued on 29th November 2012, the claimant sought damages for libel from the first defendant based on three tweets which the first defendant published on 10th October 2012 and two further tweets which were published by a third party in response to her tweets. The first defendant initially acted in person. A case management conference was held by Deputy Master Eyre on 15th March 2013. The first defendant did not attend. The Deputy Master directed, amongst other things, that the claimant had leave to amend the claim form and particulars of claim to seek a permanent injunction and the first defendant was to file a draft amended defence. The Deputy Master adjourned the CMC and ordered the first defendant to pay £824.20 as the summarily assessed costs of the hearing and that, in default of payment within 14 days, the first defendant's defence was to be struck out and she was to be debarred from defending the claim. On 2nd April 2013 the time for complying with payment of the costs was extended to 28 days from service of the order.
2. The first defendant sought to appeal the 'unless' order so far as it related to the payment of costs. She was granted a stay of this part of Deputy Master Eyre's order on 9th April 2013. As it happens, the judge who granted the stay was myself. I made the stay conditional on the first defendant filing a full and proper statement of means.
3. On 29th April 2013, Master Yoxall gave the claimant permission to amend the claim form and amended particulars of claim, to add the second defendant and to serve that defendant out of the jurisdiction in California, USA.
4. On 7th June 2013, Tugendhat J granted the first defendant permission to appeal the 'unless' part of Deputy Master Eyre's order so far as it related to payment of costs. On 16th July 2013, Tugendhat J also directed that the case should be listed before him for consideration of whether the claim disclosed a real and substantial tort or whether it was an abuse of the process of the court and for determination of the actual meaning of the words used.
5. The appeal hearing was listed for 24th July 2013. By a consent order made on 23rd July 2013 the appeal was discontinued, with costs reserved - I shall refer to these as the "appeal costs".
6. In the meantime, the claimant had served the second defendant. By an application notice issued on 16th July 2013, the second defendant challenged the jurisdiction of the court.
7. The claimant is an Irish national. Of greater importance, he appears to be resident in Qatar, which is not a Brussels contracting State, nor a State bound by the Legano Convention, nor a regulation State as defined in the Civil Jurisdiction and Judgments Act 1982. By an application notice dated 23rd August 2013 the first defendant sought an order that he provide security for costs.
8. On 18th November 2013 the claimant gave notice of discontinuance.
9. The claimant accepts that, in consequence of his discontinuance, he is obliged to pay the following costs of the first defendant: the costs of the claim, the first defendant's appeal costs and the first defendant's costs of the security for costs application. The default position is that these costs should be assessed on the standard basis - see CPR rule 44.9(1) - and that is the basis on which the claimant submits those costs should be assessed. However, the first defendant contends that I should order they be assessed on the indemnity basis.
10. The first defendant also seeks an order that the claimant make a payment on account of costs. CPR rule 44.2(8) now provides that:

"Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs unless there is good reason not to do so."

This provision was substituted by the Civil Procedure (amendment) Rules 2013, S.I. 2013 No. 262, rule 16. The amendments came into force on 1st April 2013 and, while there are transitional provisions for certain of the changes (see rule 22), none apply to rule 16 of the Amendment Rules. In any event, the claimant does not dispute that he is obliged to make a payment on account. The amount is disputed.

11. The claimant accepted that he was also obliged to pay the second defendant's costs. Originally, the second defendant argued that its costs should also be assessed on the indemnity basis but, shortly before the hearing of the applications before me, the claimant and the second defendant agreed that these should be assessed on the standard basis and, in principle, the claimant would submit to an order for a payment on account. The amount of this payment was left for me to determine.
12. Consequently, I had to decide the following: (a) should the claimant be required to pay the first defendant's costs of the claim, the appeal and the security for costs application on a standard or an indemnity basis? (b) What amount should the claimant be required to pay the first defendant on account of costs? (c) What amount should the claimant be required to pay the second defendant on account of costs?

Indemnity or standard basis: the principles to be applied

13. In either case, the court will only allow costs which have been reasonably incurred and only in a reasonable amount. However, there are two differences between the two bases. First, on the standard basis any doubt is resolved in favour of the paying party. On the indemnity basis, any doubt is resolved in favour of the receiving party. Furthermore, on the standard basis the receiving party must also show the costs were proportionate - see, now, CPR rule 44.3(1) to (3).
14. The court has a discretion as to which basis to choose but the discretion must, of course, be exercised judicially. Since the default position is that costs are assessed on the standard basis, there has to be some good reason to depart from that position. One of the matters which the court must take into account in any costs decision is the conduct of the parties - see, now, rule 44.4(a) - and the conduct of the parties is of particular importance in deciding whether to order costs on an indemnity basis. The principles were summarised by Tomlinson J in Three Rivers District Council v. The Governor and Company of the Bank of England [2006] EWHC 816 (Comm) at [25]. I have considered all of these but I note especially that there must be some conduct or some circumstance which takes the case out of the norm. So far as the claimant's conduct is relied upon, the test is not conduct attracting moral condemnation, but unreasonableness. The court can consider whether it was reasonable for the claimant to have raised and pursued particular allegations and the manner in which the case was run. Other cases emphasize that it is not enough that the claimant has failed. That will normally be the case whenever a party is ordered to pay the other side's costs. There is a difference between a losing case and a case which was so weak that the claimant ought to pay the costs on an indemnity basis as a result. I also accept the argument of Mr Thrower for the claimant that it is not enough that the claimant has discontinued. Were it otherwise, CPR rule 44.9 would provide that the deemed costs order on discontinuance was that the claimant should pay costs on the indemnity basis, but it does not. There must, I accept, be a significant level of unreasonableness to justify an order for costs on an indemnity basis.
15. However, Mr Thrower also argued that a party who has acted throughout on legal advice is not guilty of conduct such as to merit an award of indemnity basis and that it is only the paying party's conduct which is relevant, rather than the conduct of his legal representatives. Mr Thrower relied on a passage in Volume 1 of the 2013 edition of the White Book 44.4.3 page 1357, which in fact says:

"A party who has acted throughout on professional advice is not guilty of conduct such as to merit an award of indemnity costs."

The authority cited in the White Book is Zissis v. Luklmski [2006] EWCA Civ 341 at [51]. It is not entirely clear from the passage in the judgment as to which professional had given advice in that case. It is certainly not clear that the Court of Appeal was intending to establish a general proposition that a litigant would generally be immune from an order to pay costs on an indemnity basis if the conduct in question was the product of advice from his or her legal representative. That would be a surprising general proposition. However, more fundamentally, if there is such a proposition it cannot help the claimant in this case. As Mr Price for the first defendant observed, there is a dearth of evidence as to whether it was the claimant or his solicitors who was responsible for the unreasonable conduct on which the first defendant relies. Mr Thrower asked me to infer that it was the solicitor. I do not consider that I have the evidence on which such an inference could be based.

The first defendant's submissions as to why the claimant had behaved unreasonably and should be required to pay costs on an indemnity basis

16. In summary, Mr Price argued as follows:

(a) This was a weak claim from the beginning. The claimant's tweets arose out of a dispute between her and the claimant's company, for whom she had provided some transcription services. He had eventually paid her bill, but, for some reason, £25 had been deducted in the course of payment. He or his company had, in her view, been slow to acknowledge the responsibility for the balance. The dispute was primarily with his company rather than him and the tweets made this clear. The meaning pleaded by the claimant was exaggerated and the first defendant had arguable defences of justification and fair comment. There was no evidence that the claimant had a reputation in the UK. He was neither a UK national nor resident here.

(b) The claimant had acted oppressively and disproportionately in relation to the first defendant's appeal. In response to the terms on which I had granted a stay, the first defendant had filed a witness statement as to her means, with a substantial exhibit of over 200 pages, on 9th May 2013. The claimant had asked for further and better particulars on 29th May 2013. That had led to a second witness statement from the first defendant of 11th June 2013, but the claimant had asked for yet further and better particulars on 24th June 2013. That led to a third witness statement from the first defendant on 23rd June 2013. The claimant's pursuit of this matter was even less reasonable once the substance of the appeal had disappeared, when the first defendant did manage to pay the costs of the hearing before Deputy Master Eyre as a result of donations from the public. The bulk of the costs, less £10, was paid on 18th April 2013 and the remaining £10 on 31st May 2013.

(c) Because there was no longer any substance to the appeal, the claimant behaved unreasonably in not conceding that it should be withdrawn earlier than he eventually did. Instead, he persisted in allegations that the first defendant had acted dishonestly.

(d) A trainee solicitor with the first defendant's solicitors had attended on a Master with an application for the trial to be by judge and jury. Such an application within 28 days of the defence was necessary to preserve the defendant's right to trial in this manner - see the Senior Courts Act 1981, s.69 and CPR rule 26.11. The trainee (and for that matter the Master) had made a mistake in actually having an order for jury trial made. The mistake was promptly acknowledged by the first defendant's solicitors but the claimant pursued the matter disproportionately by writing some 25 letters on the subject.

(e) When the claimant wrote to the first defendant indicating a wish to bring in the second defendant, the first defendant's solicitors replied on 17th April 2013 raising concerns but concluded their letter by saying that the first defendant would not resist the application. The claimant unreasonably treated the letter was opposing the application and threatened the first defendant with an adverse costs order on 19th April 2013.

(f) When the first defendant indicated her intention to seek security for costs, the claimant said he would oppose the application but failed at any stage to explain on what basis the order for security would be opposed. The claimant said that the hearing should be fixed, with a time estimate of 2.5 hours, allowing him 1.5 hours to make submissions, and at a time which would allow his solicitor three weeks to prepare for the hearing. Still no explanation was given for the basis of the opposition to the application. Mr Price argued that this was prevarication on the part of the claimant. The only reason which the claimant gave for discontinuing the action was that he was faced with an application for security for costs, but the claimant must have realised that such an application was inevitable, either from the start of the action or at least once the first defendant had secured the services of solicitors.

(g) The claimant had refused to engage with the question of a payment on account of costs and refused to offer to pay anything on account.

(h) Throughout, the claimant's behaviour had been unreasonable. The amendment to the overriding objective in the CPR on 1st April 2013 added to the overriding objective the need to ensure that litigation was dealt with in a way which was at proportionate cost. The claimant's behaviour had repeatedly involved disproportionate cost.

The claimant's response as to why costs should not be ordered on an indemnity basis

17. Again, I am just summarising the submissions which Mr Thrower made in response.

(a) The claimant's reputation had been harmed by the first defendant's tweets. He tried appropriately to settle the matter before commencing litigation but the first defendant was unwilling. The tweets were preserved on her site. There was nothing unreasonable in his pre-trial conduct.

(b) The claim was not weak. There had never been an application by the first defendant to strike it out or for summary judgment in her favour. On the contrary, in the first defendant's solicitors' letter of 10th May 2013 she had offered to undertake to remove the tweets and not repeat the words complained of. This was on the basis that there should be no order as to costs, but it supported the claimant's case that this was not a weak claim.

(c) The first defendant had said in correspondence with the claimant and with the court that she could not afford to attend the case management conference in person. She had asked for it to be conducted by telephone. In an email of 18th February 2013, Master Yoxall had refused this request and said the hearing must proceed in person. The first defendant, nonetheless, failed to attend. Deputy Master Eyre was entitled to make the order that he did, including the 'unless' order for payment of costs. In an email of 9th April 2013, Deputy Master Eyre had explained his reasons, which were the inadequacy of the defence which the first defendant had filed herself, her conduct (referring to her email of 8th March 2013) and her failure to attend the hearing on 15th March had given the distinct impression that she had no intention of attending any hearing, save on her own terms, or of cooperating with the claimant in bringing the action to a fair and prompt conclusion, and there was an unusually high risk of wasted costs. All of this indicated that it was the first defendant rather than the claimant who had behaved unreasonably.

(d) In an email to the court of 2nd March 2013 the first defendant had said:

"I am unable to afford the train fare to London [from her home in Milton Keynes] but it would mean giving up a day's paid work, causing me even further financial difficulties."

In my order of 9th April granting a stay, I had observed that:

"If the respondent [i.e. the claimant] considers the statement of means is deficient, he will be at liberty to apply for further information and/or disclosure, or argue that permission to appeal should be refused or the appeal should be dismissed."

In those circumstances, the claimant was entitled to probe both of the first defendant's claims - i.e. that she lacked the means to attend the hearing in London and attendance would interfere with her work. In her second witness statement the first defendant had said that it was only on 5th March that she was booked to do transcription work which would cover the hearing date. This appeared to be inconsistent with her claim in her earlier email of 2nd March. The claimant was entitled to investigate vigorously this apparent attempt to mislead the court.

(e) It was the first defendant who had behaved unreasonably in appealing the order of Deputy Master Eyre rather than going back to the Deputy Master to ask him to vary his order pursuant to CPR rule 31.7.

(f) The claimant had not opposed the grant of a stay pending appeal.

(g) Once the costs of the hearing before the Deputy Master had been paid and the appeal was effectively moot, the first defendant had proposed that the appeal should be withdrawn, but only on the basis that there would be no order as to costs. This was unacceptable to the claimant. He had been prepared to agree to a costs order on this basis if the first defendant answered the remaining requests for further information to his satisfaction. That was not unreasonable behaviour.

(h) There had been an error on the part of the first defendant's trainee in obtaining an order for trial by judge and jury. That was an important matter and the claimant was entitled to explore how it had come about.

(i) The claimant had always made clear that he opposed an order for security for costs. The time estimate provided by the claimant's solicitors was not out of the ordinary for an application of this kind.

Indemnity or standard basis: decision

18. I agree with Mr Price that the claimant's conduct of this litigation was, or became, unreasonable to such a degree that at least part of the first defendant's costs should be assessed on an indemnity basis. In my judgment, a fair division would be to say that up until 10th May 2013 the costs should be assessed on the standard basis but thereafter they should be on the indemnity basis.
19. The libel claim had the weaknesses which Mr Price identifies. It is true that there had been no application to strike it out. Nonetheless, Tugendhat J had taken the course (which is not standard) of directing a hearing to consider whether the claim was for a real and substantial tort or whether it was an abuse of the process of the court. On an application of the kind which I am considering it is not my function to conduct a mini trial, nor for that matter a mini strike out hearing. However, it is relevant in considering issues of proportionality to bear in mind the limited nature of the publications complained of.
20. I have taken 10th May 2013 as the watershed because that was the date that the first defendant estimated the amount of costs for which she would seek security. The figure given was £140,000, to include an uplift of 100%, since the first defendant had by then obtained representation on a CFA. When the claimant came to discontinue, he attached a "public statement" which alluded to some unidentified private reason for his action. The only other explanation was an unwillingness to risk losing well over £150,000 on costs to the first and second defendant. After 10th May the claimant would have known that he faced legal bills if he lost of something like this magnitude and, more significantly, an application for security for costs in that region. The claimant made clear that he would oppose the application, yet, as Mr Thrower acknowledged, he never explained the basis for his opposition. Part of the modern ethos of conducting litigation is that the parties should disclose to each other what their cases are so that their opponents can understand and meet them. In this present matter either the claimant did not have any good grounds for opposing the proposed application for security for costs or he was in breach of that principle. Either way, his conduct was a departure from the norm and unreasonable. On 10th May as well, the first defendant offered to withdraw her tweets and undertook not to repeat them. It was also on the basis that each side would bear its own costs, which was not acceptable to the claimant. However, coupled with his behaviour in relation to the security for costs issue, the refusal to accept this offer is a further example of the claimant's unreasonable behaviour.
21. The conduct of the claimant pre-action has not been challenged. While the first defendant was acting in person, the tone of the claimant's solicitors' letters was forceful but not unreasonable. However, I accept Mr Price's submissions that over the course of the weeks after Bryan Cave, the first defendant's solicitors, came on to the record, the position changed.
22. The claimant's attempts to explore the first defendant's means lost all sense of proportion. I accept that in my observations to my order of 9th April 2013, I catered for the possibility that the claimant was dissatisfied with the information provided by the first defendant in the statement of means which I directed she should serve. However, the first witness statement she provided was very full. Furthermore, the appeal in connection with which she had been directed to provide this information had become substantially moot very shortly after I made my order. It was wholly disproportionate thereafter for the claimant to pursue the matter in the way that he did.
23. I do not accept that the first defendant behaved unreasonably in appealing the order of Deputy Master Eyre, rather than going back to the Deputy Master to ask him to vary the order. The claimant made quite clear that a change would be opposed and it would have made no difference which route the first defendant pursued. An appeal was a proper alternative open to her.
24. That complete lack of proportion was manifest as well in the way in which the claimant pursued the issue of the mistaken order for trial by jury. Once the mistake was acknowledged, that should have been an end of the matter. Instead, the correspondence was continued at great length by the claimant.
25. The claimant also acted unreasonably in threatening the first defendant with an adverse costs order on the application to bring in the second defendant. While the letter of 17th April 2013 did raise certain concerns, the final paragraph was unambiguous, that the application would not be opposed.
26. As Mr Price also rightly indicated, the claimant did not engage with the question of payment on account. The claimant, according to the email of 27th November 2013, wished to wait until the basis of assessment was determined. However, whatever the basis of assessment, some payment on account was inevitably going to be ordered. That lack of cooperation was also unreasonable, albeit that I accept it related to a relatively short period of time.
27. While there was not a bright line where the claimant's conduct tipped into being unreasonable - and some of what I have referred to took place before 10th May - I consider that it is fair and just to draw the distinction which I have indicated.

Payment on account to the first defendant

28. As I have said, the first defendant was on a CFA with a 100% uplift. Her costs total £157,690, including the uplift. That breaks down to: £65,506.50 base costs; and the same amount again as uplift; extras £475.31; and VAT of £26,202. At 60% of costs but still with a 100% uplift, the interim payment would be £94,614.55. At 50%, but again still with a 100% uplift, it would be £78,845.46. In his oral submissions Mr Thrower submitted that the payment should be 40% of the total amount to allow for the possibility that the claimant did not achieve a 100% success fee on assessment. That would amount to £63,076.
29. The principle behind the power to order a payment on account is that the receiving party should not be kept out of his or her money longer than necessary. Where it is clear that a certain proportion of the costs will be awarded on a detailed assessment, there is no reason why the receiving party should have to wait to receive that part until the assessment has taken place. In deciding what that part is, I am entitled to take into account the fact that, for the majority of the time that Bryan Cave were instructed, I have ordered the assessment to be on an indemnity basis.
30. Mr Price has provided figures based on 50% and 60% of the costs which will be claimed. In the circumstances, I consider it right to take a point towards the 60% figure but not quite as high as that. I will take a profit costs figure of £38,000. A success fee of 100% may be justified, but I must allow for the possibility that a somewhat lower percentage is awarded by the costs judge. I will apply an uplift of 80%, or £30,400. I will add £250 for extras. That is a total of £68,650. I will add £13,730 for VAT. Accordingly, the payment on account will be a grand total of £82,380.

Payment on account to the second defendant

31. The second defendant by letter has said that its total costs are approximately £40,000. It has asked by letter for a payment on account of £20,000.
32. Mr Thrower observes rightly that no break-down of these costs has been provided. He suggested that the order should be for £10,000.
33. The second defendant has agreed to an assessment of its costs being on the standard basis, but the litigation did involve its solicitors in a considerable amount of work. Doing the best I can, I do not consider that their costs will be less than £18,000. I will order the claimant to pay that amount to the second defendant on account of its costs.

Conclusion

34. The claimant will pay the first defendant's costs to include the costs of the appeal against the order of Deputy Master Eyre and the costs of the application for security for costs. They will be subject to detailed assessment if not agreed. The assessment will be on the standard basis for costs incurred up to and including 10th May 2013, thereafter they will be on the indemnity basis.
35. The claimant will pay the second defendant's costs to be subject to detailed assessment if not agreed. The assessment of the second defendant's costs will be on the standard basis.
36. The claimant will pay to the first defendant £82,380 on account of costs within 14 days.
37. The claimant will pay to the second defendant £18,000 on account of costs within 14 days.

MR PRICE: My Lord, there are a couple of bits of tidying up that might need to go into the final order. The costs of the appeal, you have dealt with. The costs of the application to vary Master Eyre's order, to extend it by two weeks, they were reserved by Deputy Master Eyre and I suppose the costs of today have been provided for. They are provided for in the figures already, it is just the principle. Can I ask that we include a provision making both of those costs costs in the case, and no doubt they will be dealt with in the rest of your Lordship's order?

MR JUSTICE NICOL: Mr Thrower?

MR THROWER: My Lord, sorry, I was taking instructions on one point.

MR JUSTICE NICOL: Mr Price is asking that it be clarified that the costs of seeking the extension from Deputy Master Eyre for an extra 14 days and the costs of today be treated as costs in the case.

MR THROWER: My Lord, I think that must follow, save to say that I would ask your Lordship not to make those indemnity costs. They are not affected by your Lordship's judgment on the unreasonable aspects. In fact, as your Lordship has mentioned, Mr Sahota actually consented to the extension of time and leave for appeal. And as for the costs of today, my friend has got indemnity costs after a certain date but not for the whole of the action. If these costs were treated as being done on the indemnity basis, it would seem to mark something out of the norm or something unreasonable about the claimant's argument that costs should not be on an indemnity basis, and in my submission it was not unreasonable or out of the norm for him to come before the court here yesterday and today and to put the arguments that your Lordship has dealt with in your Lordship's judgment. It was not an overwhelming case and, as I have indicated, not all of the costs are on an indemnity basis. In my submission, to order these costs on an indemnity basis would be oppressive towards the claimant, by including such matters as the extension and this hearing, when in reality they are not something that is out of the norm. It is simply at the end of the day costs have to be dealt with, my friend's application has been dealt with and we would submit that it should be on the standard basis.

MR JUSTICE NICOL: I think your solicitor wants to add something.

MR THROWER: My Lord, unless I can help you any further?

MR JUSTICE NICOL: Thank you.

MR PRICE: My Lord, I can deal with this quite shortly. The first set of reserved costs are pre 10th of May.

MR JUSTICE NICOL: So, they would be on the standard basis, anyway.

MR PRICE: The standard basis, anyway. Today, by one of the rulings that your Lordship has made about the unreasonableness, not agreeing that there should be a payment on account, which is one of the reasons we are here, and so your Lordship has found that that unreasonableness went on beyond the discontinuance and encroached upon matters of costs, so it is right, in my submission, that the costs today should be treated on the same basis as the other post 10th of May costs.

MR JUSTICE NICOL: Do you want to reply briefly, Mr Thrower?

MR THROWER: I am not really sure I understand what is unreasonable about the arguments I have put forward. The application was issued on Friday, it has been dealt with, as your Lordship has seen, in a good spirit. Your Lordship has heard the arguments, they were not overwhelming on the defendant's argument, and, in my submission, it is not reasonable or proportionate to visit indemnity costs on a matter such as this, in relation to this application, where there has not been anything untoward.

MR JUSTICE NICOL: Yes, thank you.

I will say, first of all, that the costs of seeking an extension of time for the payment of the costs ordered by Deputy Master Eyre will be treated as costs in the case and, since those were costs that were incurred before 10th May, they will likewise be assessed on a standard basis.

I am asked by Mr Thrower to treat the costs of, I think it is the costs of the hearing yesterday and today, as costs which are to be assessed on the standard basis, and the justification for that being that, as far as the hearing yesterday and today is concerned, there was nothing out of the norm or unreasonable in the claimant's conduct that would justify an award of those costs on anything other than the standard basis. I am going to accept that argument but I am going to accept it and make it clear that I accept it only for the hearing costs yesterday and today.

Mr Price and Mr Thrower, could I ask you please to draft up a note of an order for me to sign that incorporates what I have directed. Is there anything else that I need to deal with? Mr Thrower? No. Thank you both very much for your assistance.

-----------------