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
		14/11/2014

Mr Justice Edis :

1. This case came before Bean J, as he then was, on 29^th July 2014 when he declined to grant an interim injunction to the Claimant and gave directions for a speedy trial, which is due to start on 24^th November 2014. A number of applications have been listed today, the 6^th November 2014 and I have reserved judgment for a short time to enable me to set out my decisions and brief reasoning. Time does not permit any more extensive reasoning than is here set out. There is a real urgency in some of these applications.
2. The Claimant alleges that he is the victim of a campaign of abuse and vilification by the First Defendant, who has not yet been identified in these proceedings. It is, I think, common ground that the allegations of serious criminal behaviour made by the First Defendant are not true. This is not, therefore, a case where the Second Defendant is being asked to remove old but accurate reports of some behaviour which the Claimant finds embarrassing. The Second Defendant, as everyone knows, operates the most widely used search engine in the world and searches made on the Claimant's name produce, prominently, results which lead to websites where the lies about which he complains are available to be read. They are found in a number of services provided by the Second Defendant and different considerations may apply to the different services. That, however, is a matter for trial and not for me.
3. The parties appear to agree about the identity of the publisher of these lies, but the Claimant goes no further than to say that this person is the "prime suspect". The Second Defendant appears to have done a considerable amount of work resulting in a greater degree of confidence in the accuracy of the identification. Neither side has, however, sought to join this person to the proceedings as a named party and this person will not, it seems, be present at the trial. It may be thought a little unusual that the Claimant has had to rely on information provided by the Second Defendant to identify his assailant, since the attacks on him have been pursued with determination and vigour which suggests a relationship turned sour rather than an attack by a stranger. Nonetheless, the position is that the First Defendant remains uninvolved in these proceedings.
4. On the face of it, there would seem to be little scope for factual disagreement between the Claimant and the Second Defendant. It is therefore surprising that the Second Defendant expects its costs to be in the region of £1.68m by the end of the trial, which sum will have been spent in only 5 months. This is approximately £1m more than the Claimant expects to incur over the same period. There is scope for argument about what the law of England requires the Second Defendant to do. The case is not simple, which is why five days have been allowed for its trial, but it is not factually complex. It is certainly important because of the central place in modern society of the internet, and the necessity for search engines in order to maximise its use. There are many people who publish lies designed to damage others on the Web and cases of this kind may be expected to multiply.
5. There are now before me three applications:-

i) An application by the Claimant dated 30^th October 2014 for a costs capping order or a costs management order and for some pre-trial directions. This is supported by a witness statement by the Claimant's solicitor, Mr. Ashley Hurst. The Second Defendant's solicitor has responded with a witness statement (the 4^th statement of David Barker) dated 3^rd November 2014.

ii) An application by the Claimant dated 31^st October 2014 for an order that the Second Defendant should answer some Part 18 requests and give some further disclosure. This is supported by a witness statement by the Claimant's solicitor, Mr. Ashley Hurst (his 4^th, dated 31^st October 2014). The Second Defendant's solicitor has responded with a witness statement (the 6^th statement of David Barker) dated 5^th November 2014. This application has been withdrawn because the grounds of opposition have made it clear that it is unnecessary.

iii) An application by the Second Defendant dated 3^rd November 2014 for an order that the Claimant should answer some Part 18 requests and give some further disclosure. This is supported by David Barker's 5^th witness statement dated the 3^rd November 2014.

6. My principal concern on reading these papers is that this is the first (and I hope only) pre-trial hearing after the close of pleadings and disclosure of documents and evidence. It is the only opportunity that the court has to do any case management to try and ensure that the trial is capable of being conducted in accordance with the overriding objective. The pleadings are lengthy. In some respects the case of both sides has changed and developed since the argument before Bean J. The date fixed for expert evidence for the Claimant is today, and I have examined how the parties propose to approach expert evidence at the trial with the assistance of counsel.
7. It is obvious from the terms of CPR r. 3.19(5)(c) that I must do what I can by way of case management directions or orders at this hearing in order to ensure (among other things) that costs between now and the end of the trial are not disproportionately incurred. Only once I have done that can I assess whether these measures do not adequately control the risk that this will happen and properly decide whether to make a cost capping order (if I also consider that the risk will not be adequately controlled by a detailed assessment of costs by the court after the event). The inadequacy of case management measures before trial, and detailed assessment of costs after trial, is a precondition to a valid exercise of the discretion to make a costs capping order. The Rule provides:-

5) The court may at any stage of proceedings make a costs capping order against all or any of the parties, if –

(a) it is in the interests of justice to do so;

(b) there is a substantial risk that without such an order costs will be disproportionately incurred; and

(c) it is not satisfied that the risk in subparagraph (b) can be adequately controlled by –

(i) case management directions or orders made under this Part; and

(ii) detailed assessment of costs.

8. It seems to be that the objective I must try and attain is that the trial will take place on 24^th November and that enough time is allowed for it so that it can be completed within its allocated slot. This means that I must be able to form a view about the actual time this case will take. This is dependent on the issues which the parties wish the Judge to decide and the evidence which is required to enable him or her to do so. I am satisfied with the assurances I have received from both sides that the case will be tried on 24^th November and that the 5 days allocated to it will be enough. I have directed a list of issues which should be an agreed list of the issues which the parties actually require the Judge to decide at the trial, which will give a better structure to the trial than the current pleadings.
9. It is obvious that a proper identification of the real issues is also necessary in order to decide whether to order answers to Part 18 Requests or further disclosure. I will try to encapsulate the issues to which these applications go:-

i) How many searches using google.com (as opposed to google.co.uk) have been carried out in this jurisdiction over a particular period of time? The parties are in agreement that it is a small percentage of the number of searches done in the jurisdiction because most are done using google.co.uk, but they also agree that "a small percentage of a very large number is a very large number". This having become clear to the Claimant recently, he has not pursued this application because he now has an admission that over the relevant period as described in paragraph 12.4 of the Defence the number of searches in the UK using google.com would have run into millions. Issues arise as to the costs of this application, but the admission makes the position clear for the purposes of the trial.

ii) I have been through the Part 18 Request served by the Second Defendant which raises 38 questions arising from the Claimant's witness statement. These comprise, for the most part, detailed factual questions about the Claimant's links with this jurisdiction. The 2 specific disclosure requests concern first documents which passed between the Claimant and a reputation management company called Digitalis Reputation Limited and secondly material which might be relevant to establishing the identity of the First Defendant, namely deleted emails. I have therefore enquired into the importance or otherwise of these issues to the real questions which need to be decided.

10. The Second Defendant's application under Part 18

i) This is quite an onerous request for detailed information which is predominantly about the Claimant's business, professional and family life. It is designed to test certain statements he has made about his connection with this jurisdiction and it is argued that the Second Defendant should not have to wait until trial for the answers to be given in cross-examination because it will wish to investigate what is said. There are some other requests which cover other areas.

ii) An order will be made under Part 18 only when it is necessary and proportionate to enable the Second Defendant to prepare its case or to understand the case it has to meet.

iii) The significance of this information is that it may be relevant to the discretionary relief which is sought if the Claimant has no real connection with the UK. It is not suggested that the material is relevant to any issue of jurisdiction. Since no claim is made against the Second Defendant for damages, the extent of the distress caused by the publication of the Material on the internet will not require the same level of detailed scrutiny as may otherwise be the case.

iv) As things stand, there is no evidential basis for suggesting that any of the things said by the Claimant in his witness statement and which are the subject of these requests are actually untrue. The Defence at paragraph 1 puts him to proof of his connection with the UK. At paragraph 36 it is denied that any distress occurred in this jurisdiction.

v) It appears to me that on the current state of the evidence the Claimant is bound to establish that he has business and other contacts within the UK and a reputation to protect here. That is what he says, and there is no contrary evidence. I doubt very much if the outcome of this case will be affected by any findings of fact about the precise extent of that reputation. I think it likely that the Trial Judge will permit some limited cross-examination on this issue, but that it is not likely that it will extend as widely as these Requests. No doubt when preparing to give evidence, the Claimant will put himself in a position to provide such further detail as the Trial Judge considers relevant so that this aspect of the trial can be efficiently managed. I doubt for example if the Trial Judge would permit Request 5 to be asked. This would require the Claimant to do a financial analysis of all his business dealings over 4 years to identify the proportion of it which was generated from business contacts living in England and Wales. The trial is due to start in 11 working days and this Request was served on 31^st October. The terms of the enquiry it requires are not precisely defined and the results unlikely to be of any real assistance to the Court.

vi) This is not a case where the provision of the information sought would result in a great saving of time or the narrowing of issues.

vii) In these circumstances I am not persuaded that it is necessary and proportionate to order the provision of this information and refuse this application.

11. Disclosure

i) The Second Defendant seeks an order for disclosure of documents in two quite limited classes. An order for Standard Disclosure was made by Bean J against the Claimant and a Disclosure Statement served by him on 24^th October 2014.

ii) The first class of documents sought is any communication between the Claimant and Digitalis which is not privileged. Privilege was claimed for such communications after the instruction of solicitors in the Disclosure Statement, but it is said that before that happened the communications would not be privileged and should therefore be disclosed.

iii) The Claimant's answer is that the documents sought are irrelevant to any pleaded issue and do not, in any event, exist.

iv) I have no reason to believe that these documents, as a class, are relevant to any issue in the case. If any document within this class is not privileged and is relevant (perhaps because it identifies the First Defendant and thus falls to be disclosed under the Order of Bean J at paragraph 4) then it should have been disclosed already. I have no basis for holding that the Claimant has failed in his search and failed to disclose relevant material.

v) The second class of documents is deleted emails. There is a confusion of explanations for the loss of emails between the Disclosure Statement and the latest witness statement of Mr. Hurst in that two different explanations appear. However, it is clear that emails have been deleted and have not been searched for relevance. I do consider it important that the Claimant should provide a clear and comprehensive account of what has happened to his email correspondence signed by him. I therefore direct that an amended Disclosure Statement should be prepared and served by 4.00pm on 17^th November 2014. This should provide a clear and comprehensive explanation for the loss of any material, and also a statement from the Claimant, to the best of his ability, as to whether any of it was relevant and, if so, why.

COSTS CAPPING AND MANAGEMENT

12. I have identified the headline figures at paragraph 4 above. Costs budgets were exchanged by agreement on 27^th October 2014. The Claimant's total budget comes to £604,405 and that is broken down in costs incurred (as at that date) of £283,395 and costs estimated hereafter of £321,010. In each case these figures include disbursements. The Second Defendant's budget totals £1,681,310.41 and the costs to the date of the budget are £910,339.43 and from that date to the end of the trial are £770,970.98. It will be seen that the Second Defendant's costs are very much higher than those of the Claimant and also that a greater proportion was incurred prior to the date of the budget.
13. I find the figures provided by the Second Defendant surprising. This is a 5 month period and a factually simple (although legally complex) case. It seems to me that the difference between the two budgets raises a concern about the proportionality of the Second Defendant's overall figure and that that figure itself, viewed in isolation, also suggests that it is not proportionate to the true nature of the dispute.
14. In some identifiable respects in my judgment it is possible to see where money may have been spent in a way which means that if any order for costs is ever made against the Claimant significant parts of the Second Defendant's costs should be disallowed. I make the following comments

i) The Second Defendant pleaded in paragraph 12.4 of its very long Defence as follows:-

"It is denied that www.google.com is widely used by individuals in the United Kingdom."

It is now clear that the pleading would have more accurately set out the Second Defendant's case if the word "admitted" had been used instead of "denied". Paragraph 9(i) above records the very recent admission that millions of searches using that part of the Search Engine were made. The percentage of the total is small, but the number of searches very high. Although Mr. White QC has argued that this must always have been apparent from the rest of the Defence, in my judgment this is not so, and the attempt to suggest that searches using www.google.com were irrelevant because they did not happen in this jurisdiction to any substantial extent was wrong. This has been an issue in the case and, by concession, the Second Defendant has lost on it.

ii) The answer given by the Second Defendant on 30^th October 2014 to Requests under Part 18 made by the Claimant is also instructive. In it, they made it clear that there are no technical difficulties in providing the Claimant with the relief sought. This is at variance with its pleaded case, see in particular paragraph 73 of the Defence. It is also at variance with the way the case was advanced before Bean J and with the (recently abandoned) intention of the Second Defendant to serve expert evidence going to this issue. They also admit in that document, for the first time, that they can block search requests by reference to the IP address of the device being used to make the search. They have always accepted that the IP address provides some evidence of the geographical location of the device and that their systems do make use of this information to direct the search towards matters likely to be relevant to a searcher in that location. What is now accepted, however, is that searches for particular material from UK based IP addresses can be blocked. This is not consistent with its Defence and not consistent with the witness statement served on behalf of the Second Defendant by Magdalena Schmidt. The fact is that the remedy sought by the Claimant is not impractical. Again this appears to me to be an important issue on the pleadings and one on which the Second Defendant has now, by concession, lost.

iii) The Defence is a long document which puts in issue matters on which the Second Defendant has very little prospect of success and therefore does not make clear its true case.

15. It appears to me therefore that the detailed assessment of the costs incurred to date (if ever there is one) will have to be done with a careful scrutiny of the costs incurred by the Second Defendant to date. One relevant factor in deciding whether or not to order a costs cap is the efficacy of detailed assessment in controlling disproportionate expenditure on costs. Criticisms of the complexity and expense of that procedure are of less force in a case such as this where this extremely large bill is clearly going to have to be the subject of such an assessment whatever order I make today (if, of course, the Second Defendant succeeds in obtaining an order for costs in its favour). I am intending to work on the basis that in that event there will be such a detailed assessment, it will be properly contested, and given what I have said above, it is likely to result in a substantial reduction in the costs incurred to date and also in respect of costs hereafter. This bill and estimate seems to me to be very high and calls for tight assessment after the event.
16. Mr. Helme, who has argued the Claimant's case extremely well, accepts that any cost capping order could only be justified by the exceptional circumstances of the case. These are the result of three things:-

i) Because of the history of the Action, there has been no cost control to date by the court. For this to be the case so near the date of trial is exceptional in the modern era.

ii) The Claimant had no inkling of the size of the Second Defendant's bill and budget until very late in the day and has acted very quickly thereafter.

iii) The imbalance between the parties is obviously substantial. I have no detailed evidence as to the Claimant's means and Mr. White QC observes that the Claimant is a wealthy businessman. The Claimant, I think, agrees. There is nevertheless an imbalance between any individual and a company with the resources of the Second Defendant.

17. The above points are well made, but the Claimant could have acted more quickly than he has. An application for costs management and budgeting could have been made to Bean J, or thereafter to the court once it was appreciated that an order for a speedy trial had been made without any cost control by the court. In the result, the case comes before the court on the eve of trial and after most of the Second Defendant's costs have been incurred. I am told that since the Budget was prepared the sum incurred to date has now increased to £1.25m. This feature of the case limits the power of the court to act prospectively to ensure that costs are properly budgeted and managed.
18. For these reasons, Mr. Helme submits that I should cap the costs recoverable by the Second Defendant at £1.25m, effectively allowing it to recover no costs at all for the trial even if it wins. This is on the basis that I should be satisfied that £1.25m is more than enough for the whole case.
19. Mr. White QC makes two points in reply:-

i) That the stage of the proceedings has been reached where no costs capping order should be granted because it could only affect future costs and the bulk of the costs have already been incurred.

ii) That the threshold criterion in Rule 3.19(5)(c)(ii) cannot be overcome by the Claimant. Detailed assessment will provide effective control over the risk of the expenditure of disproportionate sums. If that is right, there is no jurisdiction to make the order sought.

20. I agree with Mr. White that his two arguments taken together defeat this application. I am anticipating that the Costs Judge on any detailed assessment will start with the same level of astonishment as I felt when reading the costs statement supplied by the Second Defendant. The sums appear to me to be so high that the detailed assessment in this case will be conducted in such a way that it will represent a real protection to the Claimant against having to pay disproportionate costs if he should lose at trial.
21. I have had two decisions of the Court of Appeal drawn to my attention. Tidal Energy Limited v. Bank of Scotland plc [2014] EWCA Civ 847, and Black & Others v. Arriva North East Ltd [2014] EWCA Civ 115. I follow and adopt the construction of the Rule adopted in those cases, but I am not able to derive any general principle which would define when detailed assessment may not be an adequate control on the risk of disproportionate expenditure. I think that cases where that part of the test is satisfied must be rare, but to define it too narrowly would deprive the Rule of any content. The risk in question, which is to be controlled, is that costs will be disproportionately incurred, not that they will be disproportionately awarded. The way in which detailed assessment operates to control that risk is to deter the party incurring that expenditure from doing so, knowing that it may not be recoverable. In a case where the party incurring the expenditure has already agreed to do so, such as the present case, detailed expenditure does not control that risk at all. It merely controls the extent to which costs can be recovered from the other party under an order for costs. Nevertheless, following the broad approach in the two cases cited, and also factoring the stage of the proceedings at which the application is made into the equation in the way which Christopher Clarke LJ did in the second of them, it appears to me that this is an application which should not succeed.
22. I therefore turn to the second away in which Mr. Helme puts his case. If he fails to secure a costs cap which allows no costs beyond the £1.25m already incurred, he says that I should grant a costs management order amending the Second Defendant's budget for costs to match the Claimant's. This is not a costs cap by another route, because the status of any such order is defined by CPR 3.18. It does not limit the costs recoverable unless varied. It is, instead, a matter to which the court on the detailed assessment will have regard and from which it will not depart unless satisfied that there is good reason to do so. By Rule 3.15, such an order must be made unless

"The court….is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without such an order being made."

23. I am far from satisfied that this litigation has been, or will be, conducted at proportionate cost by the Second Defendant. The Claimant's counsel's fees for trial and preparation amount to £98,000 for two counsel for a 5 day case. That is a very significant outlay. The Second Defendant has agreed to pay brief fees amounting for £247,000 for the same case. I therefore amend the budget put forward by the Second Defendant so that £98,000 is allowed for that item. The Second Defendant's solicitors' costs for the trial are budgeted at £237,000. The Claimant's solicitors' budget is £100,000 for the same item. Given the enormous amount of time which the Second Defendant's solicitors have already devoted to this case I find it hard to justify that amount. It appears to me that a more realistic approach would be to make an order amending that figure and substituting an allowance of £125,000. I also amend the Second Defendant's budget for dealing with the Claimant's expert report, if any. This stands at £58,618.75 for dealing with a 50 page document, but does not include any application or evidence in reply. I substitute a figure of £25,000 for that item.
24. Of course, I do not criticise the Second Defendant or its lawyers for agreeing these terms: I am concerned about what level of costs might be recoverable from the Claimant should he lose at trial, which is a different question. Large commercial organisations are free to agree whatever terms they like when they retain lawyers.
25. I should not be taken as having approved any other item on the Budget. I have adjusted three items where there seems to me to be a clear reason to do so. The stage at which this budgeting exercise has occurred has made it impossible to carry out any more detailed examination of the budget.