COSTS: PHONE HACKING AND REPUTATION: PROPORTIONALITY IS NOT JUST ABOUT THE SUMS AT STAKE

July 11, 2018 · by · in Assessment of Costs, Conduct, Costs, Proportionality

In Various Claimants (In Wave 1 of the Mirror Newspapers Hacking Litigation) v MGN Ltd [2018] EWHC B13 (Costs) Master Gordon-Saker addressed the elements of “proportionality”.

“The rule does not prevent the recovery of costs in an amount greater than the sums in issue in the proceedings. Had that been intended it could easily have been stated. Financial value is but one of the five factors and so there will be cases where, by reason of the other four factors, the costs are proportionate even though they exceed the sums in issue.”

THE CASE

The Master was assessing the costs to be payable to the claimants in “phone hacking” cases.  The primary issue at this hearing was whether the costs were “proportional”.

THIS IS NOT A PRECEDENT NOR DOES IT PROVIDE GUIDANCE

The Master set out the test of proportionality in CPR 44.3(5) he observed that guidance had not been given by the Court of appeal. In a message to all legal commentators everywhere he observed:-

  1. I must add therefore that this judgment should not be taken as any attempt at providing guidance. I say that because I know that anything said about proportionality, at whatever judicial level, is subjected to anxious scrutiny. First this is not a judgment of the Court of Appeal. Secondly the circumstances which give rise to this judgment are very unusual. These were claims for damages and other relief in respect of breach of privacy through phone hacking and therefore of an unusual nature and outwith the general run of civil litigation. Possibly more unusually, the court is asked to consider the proportionality of costs without first having carried out an item by item assessment, the parties having agreed the amount of reasonable costs.

THE SUMS IN ISSUE

The Master rejected the argument that the case was primarily about the damages.

  1. I have to disagree with Mr Carpenter’s submission that these claims were really all about damages. By comparison with some my experience of phone hacking litigation is limited and, given the nature of costs proceedings, after the event. But the impression that I have gained from what I have read over the period that I have been involved is that the Claimants were not motivated principally by their claims for damages. They were motivated principally by the desire to hold the Defendant to account.
  2. These claims were simply not just about damages. In my judgment the value of the non-monetary relief in issue in the proceedings, taken as a whole, was substantial and at least as great as the sums in issue.

THE COMPLEXITY OF THE LITIGATION

  1. By no stretch of the imagination could these claims be described as straightforward or run-of-the-mill by comparison either with civil litigation generally or privacy claims in particular. The Claimants had to piece together the evidence of wrongdoing, not only in relation to the general case of the Defendant’s involvement in phone hacking, but also in relation to their individual cases. They faced a defence of limitation. They had the difficulty of running the case in parallel with the criminal proceedings. Some of the Claimants faced the difficulty of the disclosure proceedings against the Metropolitan Police.
  2. A lazy, but arguably foolproof, way of determining the complexity of a case is to consider the amount of time which the court was willing to devote to it. The trial of the representative claims lasted 13 days in the High Court and resulted in a reserved judgment which runs for 712 paragraphs over 223 pages. Had liability not been admitted 6 months before the trial, the trial and the judgment would doubtless both have been longer.
  3. In my judgment this was complex litigation in the High Court. The Defendant instructed leading and junior counsel at the trial. That complexity existed not only in the work set out in the common costs bill and the work done for trial, but also in the work done for the individual Claimants.

ANY ADDITIONAL WORK GENERATED BY THE CONDUCT OF THE PAYING PARTY

The Master rejected the argument that “conduct” meant the conduct that gave rise to the litigation. The conduct that was being considered was the conduct of the litigation.

  1. Contrary to the Claimants’ submission, it seems to me that the conduct relied on must be conduct in the litigation rather than the conduct which gave rise to the cause of action. The conduct which caused the wrong will be compensated in damages or other relief. In my view the purpose of r.44.3(5)(d) is to enable the court to take into account that the costs may have been increased because work which would not ordinarily have been required has been required by the way in which the opponent has fought the claim.
  2. It also seems to me that the conduct relied on does not need to be misconduct. Had that been intended misconduct could easily have been substituted in the rule for conduct.
  3. In the event in my judgment there was no additional work caused by the conduct of the Defendant. That the Defendant chose to deny liability until 6 months before trial did not cause additional work. It caused the claim and the work involved in the claim. If a failure to concede by the party who eventually loses is considered of itself to cause additional work, this factor would apply in every case which did not settle within the relevant pre-action protocol period.
  4. The Defendant fought these claims vigorously and did not concede liability at the earliest opportunity. As a consequence it will have to pay a greater sum in costs than if it had not fought the claims so vigorously or had conceded liability earlier. However I am not persuaded that this stance or the matters listed in the Claimant’s written submissions caused additional work in relation to the individual claim

WIDER FACTORS

The Master then considered wider factors.

    1. It is clear from the words “such as” that reputation and public importance are examples rather than an exhaustive list of wider factors.
    2. It seems to me that there were a number of wider factors involved in these proceedings.
    3. First, they were undoubtedly of significant public importance. As Vos J (as he then was) recognised,[4] phone hacking claims attracted significant public interest. The representative claims in the Mirror Group litigation are the only phone hacking claims to have gone to trial.
    4. Secondly the reputations of the Claimants were involved. As I have already commented, many of the articles that were published cast the Claimants in a negative light, disclosing matters which were extremely personal and of no business to anybody else. It seems to me that reputation can be involved even if what was published was not defamatory or untrue.
    5. Thirdly it seems to me that it is appropriate to take into account the vindication which the Claimants obtained by pursuing these proceedings as a wider factor involved in the proceedings. The Claimants alleged serious, and indeed criminal, misconduct by a national newspaper group. The Defendant denied that misconduct and maintained that denial until shortly before trial.
    6. The Defendant’s misconduct is exemplified in these passages in the judgments of Mann J following trial and Arden LJ on appeal. I referred to them in my judgment on hourly rates, but they are worth repeating.
All this means that Mr Yentob’s phone was hacked at least twice a day, and often several times a day, for a substantial part of a period of about 7 years, though perhaps for not the whole of that 7 years.  I expect the intensity rose as more and more people got used to the technique and its usefulness.  All aspects of his personal and business life were exposed because of the nature of his use of voicemail.  This is an enormous intrusion.  In those terms this is a serious case.  To this one adds the possibility of “farming” his other contacts, the extent of which it is impossible to determine.
Indeed, so far as I can see, there were no mitigating circumstances at all. The employees of MGN instead repeatedly engaged in disgraceful actions and ransacked the respondents’ voicemail to produce in many cases demeaning articles about wholly innocent members of the public in order to create stories for MGN’s newspapers. They appear to have been totally uncaring about the real distress and damage to relationships caused by their callous actions. There are numerous examples in the articles of the disclosure of private medical information, attendance at rehabilitation clinics, domestic violence, emotional calls to partners, details of plans for meeting friends and partners, finances and details of confidential employment negotiations, which the judge found could not have been made if the information had not been obtained by hacking or some other wrongful means. The disclosures were strikingly distressing to the respondents involved.
  2. That distress was compounded in some cases by the belief that the articles published must have derived from information disclosed by friends or family members.
  3. In the face of the Defendant’s denial, the Claimants pursued difficult claims to bring the Defendant to account for its disgraceful behaviour. These claims were not about claiming compensation for an injury. They were about seeking vindication for the Claimants’ position that they were the victims of appalling breaches of privacy by a national newspaper group motivated only by commercial gain.

 

WERE THE INDIVIDUAL COSTS PROPORTIONATE?

  1. Rule 44.3(5) does not identify any of the five factors as being more important than the others. Inevitably it is easier to consider whether one sum bears a reasonable relationship to another than whether a sum bears a reasonable relationship to an abstract concept. However I cannot accept the Defendant’s submission that the sums in issue and the value of the non-monetary relief are the primary factors.
  2. The rule does not prevent the recovery of costs in an amount greater than the sums in issue in the proceedings. Had that been intended it could easily have been stated. Financial value is but one of the five factors and so there will be cases where, by reason of the other four factors, the costs are proportionate even though they exceed the sums in issue.
  3. In my judgment this is such a case. The value of the non-monetary relief and the wider factors I have sought to identify justify the conclusion that the costs can be proportionate even though they exceed the damages.
  4. Taking the holistic approach suggested by HHJ Dight in May, but having regard in particular to the value of the non-monetary relief and the wider factors in these cases, I cannot conclude that the total costs of Mr Gascoigne of £220,590 (£61,976 agreed reasonable and proportionate common costs and £158,614 agreed reasonable individual costs) are disproportionate in a claim which proceeded to a 13 day trial and resulted in an award of damages of £188,250.
  5. The costs of the other Claimants are lower and I would reach the same conclusion, even though for some the sums in issue were lower. For Mr Yentob, going to trial and seeking vindication was an important factor.
  6. Of the settled Claimants, the costs of Mr Jackson and Mr Eccleston are the highest: £71,453 reasonable individual costs for Mr Eccleston and £60,191 reasonable individual costs for Mr Jackson, plus in each case £61,976 agreed reasonable and proportionate common costs. Even though I would put the sums in issue in each case at £50,000 to £100,000, and so less than the amount of costs, in my judgment the figures for costs bear a reasonable relationship to the five factors as a whole.
  7. It follows that in my judgment none of the agreed reasonable individual costs are disproportionate, even when taking into account the appropriate share of the common costs:

 

BNM v MGN Ltd

  1. Neither the Claimants nor the Defendant relied on my decision in BNM v MGN[5] in relation to how the post-2013 test of proportionality should be applied. Insofar as may be necessary I repeat paragraphs 18 to 22 and 36 to 40 of that judgment. I remain of the view that the new test of proportionality is intended to bring about a real change in the assessment of costs.
  2. But BNM was very different to the present case. It was not itself a phone hacking case, although it was managed with the phone hacking litigation. The award of damages was always going to be modest. There had been no publication and there was no real risk of publication. It was not a claim for substantial non-monetary relief, it was not particularly complex and there were no wider factors involved. Indeed I was reminded by Mr Browne QC that in BNM Mr Carpenter had sought to contrast the disappearance of the Claimant’s mobile phone in that case with the public interest in phone hacking.
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