[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Citation Plc v Ellis Whittam Ltd [2012] EWHC 764 (QB) (28 March 2012) URL: http://www.bailii.org/ew/cases/EWHC/QB/2012/764.html Cite as: [2012] 5 Costs LR 826, [2012] EWHC 764 (QB)

[New search] [Context] [View without highlighting] [Printable RTF version] [Help]

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		28/03/2012

Mr Justice Tugendhat :

1. This judgment relates to the order for costs following the handing down of my judgment on 14 March Neutral Citation Number: [2012] EWHC 549 (QB).
2. I held that the Claimant had an arguable case that the words complained of as a slander and a malicious falsehood had been published by an employee of the Defendant, and that they had been published to more than one publishee. But I struck out the action as an abuse of process on the basis that what the Claimant

"had achieved by 13 October 2011, when it issued its claim form, and in any event by 28 October 2011, when it served its claim form, was in practice all that it could achieve which would be of any value to it in vindicating its reputation" (para [50]).

SUBMISSIONS

3. Ms Phillips submitted that costs should follow the event, and so that there should be the usual order that the Claimant pay the Defendant the costs of and incidental to the proceedings which have been struck out. She submits that they should include the costs of the correspondence exchanged pursuant to the Defamation Pre-Action Protocol.
4. Mr Price submitted that the Defendant should pay the Claimant its costs up to the date of the Claim Form, and that there should be no order for the costs of the action itself.
5. Mr Price submitted that if the Claimant had persisted in its claim for damages the court would not have struck out the action, at least at this stage. The claimant would have been permitted to take the case forward to disclosure. If it had then become apparent that there was substantial (as opposed to trivial) damage, then the claim would have proceeded in the normal way. He submitted that if the Claimant is ordered to pay all the Defendant's costs, that will in effect penalise the Claimant for adopting the reasonable stance of not pursuing its claim for damages. And other litigants in a similar position in the future will have a perverse incentive not to be so reasonable.
6. Ms Phillips submitted that the Claimant never abandoned its claim for damages. And that in any event, since the Defendant has not admitted any slander or malicious falsehood, nor any liability, it would be wrong in principle to make an order for costs adverse the Defendant.
7. Neither counsel was able to identify the basis of the court's jurisdiction to make an order for the payment of costs before the issue of a claim form. So I reserved this judgment.
8. Having then drawn the attention of the parties to McGlinn v Waltham Contractors Ltd [2005] EWHC 1419 (TCC); [2005] 3 All ER 1126 (discussed in the White Book 2012 para C1A-016), I invited such further submissions as they might wish to make. Ms Phillips made no further submissions.
9. Mr Price made further submissions in writing. He submitted that if the parties do not reach an agreement,

"it would not be an abuse of the process of the court for a claimant to decline to settle the dispute in question, notwithstanding that he had been offered all that he was entitled to by way of substantive relief, unless the offer included an acceptable offer in relation to costs. In such a situation, it would be perfectly proper for the claimant to decline the offer, commence proceedings and leave the defendant to decide whether to concede the claim for substantive relief in the context of the litigation. As has frequently been observed judicially, costs are, regrettably but in current conditions inevitably, often the most significant elements of a party's claim."

THE LAW

10. If a claim form is issued, then by CPR Part 44.3,

"(2) If the court decides to make an order about costs –

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order…

(4) In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including –

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(c) any payment into court or admissible offer to settle made by a party which is drawn to the court's attention, and which is not an offer to which costs consequences under Part 36 apply.

(5) The conduct of the parties includes –

(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction (Pre-Action Conduct) or any relevant pre-action protocol;

(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;...

(6) The orders which the court may make under this rule include an order that a party must pay –...

(c) costs from or until a certain date only;

(d) costs incurred before proceedings have begun;…".

11. If a claim form is not issued, there may in some cases still be a successful and unsuccessful party. CPR Part 44.12A provides:

"(1) This rule sets out a procedure which may be followed where – (a) the parties to a dispute have reached an agreement on all issues (including which party is to pay the costs) which is made or confirmed in writing; but (b) they have failed to agree the amount of those costs; and (c) no proceedings have been started."

12. But the present case does not come within CPR Part 44.12A, because the parties have not reached agreement on any issues.
13. Nor can the Claimant say that this is a case in which he has been "offered all that it was entitled to by way of substantive relief": that would have been so if he had been offered an undertaking to be made by the Defendant to the court in terms with which the Claimant was content. But the undertaking which the Defendant has offered to make to the court is not acceptable to the Claimant, and the Claimant issued proceedings in order to obtain an injunction in terms which are different. In the present case the Defendant did not admit the factual basis for the claim that its employee had spoken the words complained of. What it did was to satisfy me that there is no real risk that it will in future publish the words complained of.
14. The CPR does not expressly address the situation where a claimant has good grounds for intimating a claim, but there is no agreement between the parties, and before the claim form has been issued it becomes clear that whatever factual basis may originally have existed for the claimant's claim (if any), that factual basis no longer subsists.
15. In McGlinn Peter Coulson QC (as he then was) said this about the court's jurisdiction (and repeated it in Roundstone Nurseries Ltd v Stephenson Holdings Ltd [2009] EWHC 1431 (TCC) para [48]):

"5. Section 51 of the Supreme Court Act 1981 provides as follows:

(1). Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to the proceedings in … b. The High Court, … shall be in the discretion of the court.

6. Mr Stewart QC submitted that the costs incurred by a party in complying with any Pre-Action Protocol are capable of being costs "incidental to" any proceedings which are subsequently commenced if the Protocol procedure fails to lead to an early settlement. I did not understand Miss Garrett to dispute that, as a matter of principle, costs incurred during a Pre-Action Protocol procedure may be costs "incidental to" any subsequent proceedings. In my judgment, it seems clear that, as a matter of construction of Section 51, the costs so incurred are capable of being costs "incidental to" the proceedings.

7. I am fortified in this view by the decision of Sir Robert Megarry, Vice Chancellor, in the case of In re Gibson's Settlement Trusts [1981] Ch 179. In that case the Vice Chancellor decided that, on an order for the payment of costs of proceedings, costs incurred before the proceedings commenced would not be disallowed solely on that account. He said that "on an order for taxation of costs, costs that otherwise would be recoverable are not to be disallowed by reason only that they were incurred before action brought". He also made plain that the words "incidental to" extended, rather than reduced, the ambit of any order, although he said that it was important to identify what the proceedings were in any case and how and why the costs claimed were incidental to those proceedings. As to costs incurred before the proceedings commenced he said :

"Of course, if there is no litigation there are no costs of litigation. But if the dispute ripens into litigation, the question then arises how far the ambit of the costs is affected by the shape that the litigation takes".

8. As I have already noted, there is no direct authority on the question of the general recoverability of costs incurred in compliance with Pre-Action Protocols. However in Callery v Gray [2001] 1 WLR 2112, the Court of Appeal were concerned with what costs were recoverable in circumstances where claims had settled without the need for substantive proceedings. At paragraph 54 of his judgment, Lord Woolf CJ said:

"(2) Where an action is commenced and a costs order is then obtained, the costs awarded will include costs reasonably incurred before the action started, such as costs incurred in complying with a Pre-Action Protocol".

9. Accordingly, both as a matter of construction of Section 51, and by reference to In re Gibson's Settlement and to Callery v Gray, I am of the view that, as a matter of principle, the costs incurred in complying with a Pre-Action Protocol may be recoverable as costs 'incidental to' any subsequent proceedings. Whether or not a particular item of Pre-Action Protocol costs can properly be described as having been incurred 'incidental to' the proceedings will, of course, be a matter of fact and assessment on each occasion."

16. In summary I take the law to be: (1) if no claim form is issued, then there is no litigation and so there are no costs of litigation, whatever costs may have been incurred in complying with a Pre-Action Protocol; but (2) if a claim form is issued, the costs incurred in complying with a Pre-Action Protocol may be recoverable as costs 'incidental to' any subsequent proceedings.
17. The principle in Jameel v Dow Jones & Co Inc [2005] QB 946 has recently been summarised by the Court of Appeal in Lait v. Evening Standard Limited [2011] EWCA Civ 859. At para 40 Laws LJ cited a passage from the judgment of Lord Phillips MR in Jameel v Dow Jones [2005] QB 946 para 55 in which he said:

"Section 6 [of the Human Rights Act] requires a court, as a public authority, to administer the law in a manner which is compatible with Convention Rights, insofar as it is possible to do so. Keeping a proper balance between the Article 10 right of freedom of expression and the protection of individual reputation must, so it seems to us, require the court to bring to a stop as an abuse of process defamation proceedings that are not serving the legitimate purpose of protecting the claimant's reputation, which includes compensating the claimant only if that reputation has been unlawfully damaged".

18. At paras 41 and 42 Laws LJ said this:

"… Jameel was also applied by this court in Khader v Aziz [2010] EWCA Civ 716 where it was held (para 32) that the appellant 'would at best recover minimal damages at huge expense to the parties and of court time'.

42. The principle identified in Jameel consists in the need to put a stop to defamation proceedings that do not serve the legitimate purpose of protecting the claimant's reputation. Such proceedings are an abuse of the process. The focus in the cases has been on the value of the claim to the claimant; but the principle is not, in my judgment, to be categorised merely as a variety of the de minimis rule tailored for defamation actions. Its engine is not only the overriding objective of the Civil Procedure Rules but also in Lord Phillips' words, ' a need to keep a proper balance between the Article 10 right of freedom of expression and the protection of individual reputation'….".

19. At para [74] of Jameel the Court of Appeal accepted that whether or not there was a claim for damages, pursuit of a claim for an injunction alone can be a legitimate purpose for a claimant to pursue. Lord Phillips MR said:

"Where a defamatory statement has received insignificant publication in this jurisdiction, but there is a threat or a real risk of wider publication, there may well be justification for pursuing proceedings in order to obtain an injunction against republication of the libel."

DISCUSSION

20. The CPR provides a strong incentive to parties to engage in pre-action communications, with the risk to those who do not do this that they may not recover their costs, even if they bring an action in which they are the successful party.
21. Until 1999, under the old RSC, there was also a risk of non recovery of pre-action costs, as referred to in the citation from Sir Robert Megarry V-C. But the risk tended to be lower, because parties would issue writs at an earlier stage. One incentive for prospective plaintiffs to do this was to ensure that they would protect their right to recover the costs of the inter-party correspondence.
22. The requirement that the parties engage in pre-action correspondence was deliberately imposed, and I infer that that was at least in part with a view to extending the period during which each party would conduct its case on the basis that it was not incurring a liability to pay the other party's costs if no action was commenced. Cost shifting tends to increase costs, because parties feel able to incur costs in the expectation that the other party will pay them: Review of Civil Litigation Costs: Final Report, Sir Rupert Jackson, December 2009 para 3.23.
23. If Mr Price's latest submission is correct, I can see little advantage in Lord Woolf's proposal, implemented in the Pre-Action Protocols, that the parties engage in pre-action communications before the claimant issues a claim form.
24. As to Mr Price's submission that there might be a perverse incentive for a claimant to advance a speculative claim for damages, I accept that the action would not have been struck out if the Claimant had made clear that it was actively pursuing a claim for damages. But to do that would have carried risks. As I said in my judgment:

"The purpose of an award of damages in such a case as this is vindication of a claimant's reputation. Where there has been no slander to the public at large, but only to an unknown number of prospective clients, vindication in the form of a public judgment following a trial is unlikely to be necessary, or of value, since it would involve public repetition of the words complained of."

25. It is possible that on disclosure the Claimant might have found evidence to support a claim for damages that would have been of value. But it is also possible that the Claimant would have found no evidence of any further publication or damage. In the latter case, the action would have been liable to be struck out at that point on the same basis that I struck it out at this stage. But by that time the costs that had been incurred would have been greater than they are now.
26. So there was already little incentive to the Claimant to pursue such a risky claim for damages, if it is pursuing this action for the legitimate aim of vindication. The Claimant's stance in not actively pursuing a claim for damages is consistent with it taking a similar assessment of risk and benefit, and so pursuing the course that is most prudent in its own interests.
27. I accept Ms Phillips' submission that in the absence of a finding or admission of liability in this case, or an undertaking in the terms sought by the Claimant, I cannot make an order for costs against the Defendant. I also accept her submission that the Claimant should be ordered to pay the costs from the service of the claim form on the defendant on 28 October 2011.
28. As to the costs up to the service of the claim form, I make no order. If the Claimant had not commenced the proceedings (and I have held that it ought not to have commenced the proceedings) then the Defendant could not have sought an order for its costs for that period to be paid by the Claimant. The fact that the Claimant did commence proceedings in this case ought not to lead to the result that it becomes liable to pay to the Defendant costs which it would not have been liable to pay if it had not commenced proceedings.

CONCLUSION

29. So the Claimants will be ordered to pay to the Defendant the Defendant's costs of an incidental to the action as from the point at which the claim form was served. Those costs shall include the costs of the argument as to costs on 12 March, but not the costs of the correspondence exchanged pursuant to the Defamation Pre-Action Protocol.