WANT TO KNOW ABOUT ONEROUS PART 18 QUESTIONS; DISCLOSURE, COSTS CAPPING & BUDGETS: JUST GOOGLE IT

In Hegglin -v- Persons Unknown & Google Inc [2014] EWHC 3793 (QB) Mr Justice Edis considered some interesting issues of costs management and costs capping.  The short judgment is important reading in relation to the scope of Part 18 questions and disclosure. The key issue is the distinction between costs capping and costs budgeting.  The case shows that costs budgeting can (and probably should) be made at any stage, even when trial is imminent.  It is also reading the short supplementary judgment on the issue of the costs of the application itself (reproduced below).

This important issues in this case are summarised in The Google Case & Civil Procedure: Byte Sized Version

THE CASE

The claimant was bringing an action against persons unknown and Google in relation to untrue allegations that had been made against him. A speedy trial had been ordered and this is due to start on the 24th November 2014.

THE APPLICATIONS

There were three applications before the court:

(1) Google’s application that the claimant reply with Part 18 requests.

(2) Google’s application in relation to disclosure.

(3) The claimant’s application for costs capping and management.

An application from the claimant in relation to the number of searches carried out using goggle.com was not pursued when it was conceded that the number would run into millions.

THE PART 18 QUESTIONS

Google raised 38 questions of the claimant relating to factual issues about his relationship with the jurisdiction.  Google’s application that the claimant reply to these was refused. It is a reminder that general and wide ranging requests which are not necessary or proportionate are unlikely to be permitted.

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.

DISCLOSURE

Google also sought disclosure of communications between the claimant and a reputation management company and copies of deleted e-mails.   This shows the importance of considering and disclosing deleted e-mails.

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

The claimant made an application for costs capping of Google’s costs

THE JUDGE’S DUTY TO CASE MANAGE

The judge considered his duty to case manage the case.

1. 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.
2. 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.

COSTS IN THE CURRENT CASE: PROBLEMS CAUSED BY THE PLEADINGS

The judge was concerned about the costs budget but also about the way in which Google’s pleaded case was, to some extent, contradicted by its own evidence and concessions made.

1. 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.
2. 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.
3. 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.

1. 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.
2. 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.

1. 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.
2. 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.

NO COSTS CAPPING BUT SOMEWHAT ASSERTIVE COSTS MANAGEMENT

The judge considered the difficulties caused by the late application for a costs cap.

1. 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.
2. 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.

1. 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.
2. 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, andBlack & 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.
3. 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.”

1. 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.
2. 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.
3. 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.

 THE POINT TO NOTE: A COSTS BUDGET WAS PUT IN PLACE  AND NOT A COSTS CAP

The application was made to late to deter a party from incurring unnecessary costs. Rather the judge imposed a costs budget which the court was unlikely to depart from upon assessment.

COSTS OF THE APPLICATION

It is always interesting to read a judge’s decision in relation to the costs of the application itself. These are rarely reported.

1. On 6^th November 2014 I heard and decided three applications. My judgment given to the parties on that day and handed down formally today so that it enters the public domain deals with the outcome of the applications. They were as follows:-

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 3^rd November 2014.

1. In this judgment I deal with the costs of those applications. I have received written submissions on costs and N260 Statements of costs from the parties for which I am grateful.
2. THE CLAIMANT’S COSTS APPLICATION

i) The Claimant applied for a costs cap or, in the alternative, a costs management order which addressed the budget of prospective costs. The application sought a cap on the Second Defendant’s costs at the same sum as the Claimant’s estimated costs. In the Claimant’s Skeleton Argument at paragraph 38(c)(2) the claim was for a costs cap at £1.25m being the sum which, by that date, the Second Defendant had already incurred.ii) In the end, I refused the application for a costs cap, reduced the figures for three items on the Second Defendant’s budget, and made some observations about the level of costs incurred by the Second Defendant to date. It seemed to me that the stage of the proceedings prevented any cost capping order because so much had already been spent at a level of costs which made detailed assessment inevitable (if there ever is an order for costs in favour of the Second Defendant).

iii) The Claimant therefore achieved some significant costs protection in respect of future costs, and some observations from the Court about the level of costs incurred by the Second Defendant in the past which may be of benefit to him on any detailed assessment. He achieved this because he persuaded me that he was right in his principal complaint which was that the costs of the Second Defendant were disproportionate.

iv) The Claimant has therefore achieved partial success in his application which was opposed by the Second Defendant. I consider that the proper order is that he should have 75% of his costs of that application. I have reduced the level of costs by 25% because I consider that the costs cap application was optimistic and that it added somewhat to the costs of the application and of the hearing.

1. THE CLAIMANT’S PART 18 AND DISCLOSURE APPLICATION

i) This application was designed to test the assertion that google.com was not widely used in this jurisdiction. I dealt with this in paragraph 9(i) and 14(i) of my main judgment. I add that a substantial ground of opposition advanced by the Second Defendant related to the confidentiality and commercial sensitivity of the information sought. Given that the true information would have revealed that the Second Defendant’s pleading did not set out the position accurately this was not an attractive stance. Neither was it attractive to allege that there was a risk of breach of commercial confidence because the Claimant’s solicitor acts for some of the Second Defendant’s commercial competitors (see the Second Defendant’s solicitors’ letter of 31^st October 2014). This stance was sensibly modified the day before the application was due to be heard, and the Claimant immediately indicated that he withdrew the application but would seek the costs of it. This was the result of the Second Defendant’s solicitor saying that the actual number of searches using google.com in the UK was “millions” which was a small percentage of the total number of Google searches done here, but still a large enough number to falsify paragraph 12.4 of the Defence.ii) The application succeeded in obtaining clarity and an admission which will remove an issue from the trial and be conducive to the efficient conduct of the trial. In principle I consider that the facts to which I have referred above show that the Claimant should recover the costs of the application.

iii) However, I would not have made the disclosure order which is the second part of this application in the present circumstances. That was capable of producing a very large amount of material which could not possibly have been processed into a useful evidential form and dealt with during a trial starting on 24^th November 2014 and expected to take 5 days. Parties should be careful when making specific disclosure requests to make them sensible and proportionate and in my judgment this request was too wide and too late.

iv) Again therefore I consider that there should be a discount from the costs recoverable by the Claimant for this application and I order that the Second Defendant shall pay 75% of these costs.

1. THE SECOND DEFENDANT’S APPLICATION

i) This was in two parts, a Part 18 Request and an application for disclosure. The first failed entirely, but the second did result in an order for an amended disclosure statement addressing an inconsistency concerning deleted emails which was created by the Claimant himself. The application for disclosure of some concerning Digitalis Reputation Limited documents failed.ii) The Second Defendant’s application therefore failed in that I refused to order an answer to the Part 18 Requests and refused to order any disclosure. I did make an order for some relief in relation to deleted emails which was to address a problem which was the Claimant’s fault. This was not the relief actually claimed, but a form of relief suggested by counsel for the Claimant which seemed to me to be proportionate.

iii) Because the Second Defendant’s application failed the Claimant should have his costs of it, but again he should bear a penalty because of the confusion created by the different explanations about email deletion. I will therefore award him 75% of the costs of the Second Defendant’s application and make an order that he should not be permitted any costs of complying with my order for an amended Disclosure Statement if he recovers an order for costs in his favour at trial. There will be no order for the costs of that work.

1. SUMMARY ASSESSMENT

i) I agree with the Second Defendant that the Claimant should have distinguished in his Form N1260 between the different applications because had they not all resulted in the same order, summary assessment would have been very difficult. In the result, however, it is possible. This is because the exercise is to assess the costs of the three applications taken together and then to apply a 25% discount to them. I can do that with the Form N260 which I have.ii) I have had regard to the Second Defendant’s Forms N260 which do distinguish between the three applications and which do provide for representation by Leading and Junior counsel at the hearing, whereas the Claimant was represented by Junior counsel only, after advice had been received from Leading Counsel. I note that the total incurred by the Second Defendant is higher than that claimed by the Claimant.

iii) This kind of procedural application is well within the competence of experienced junior counsel. I therefore disallow the sum of £2,500 claimed for “advice/documents” in respect of the services of Leading Counsel. I also make an adjustment because I do not believe that a costs draftsman is required for matters of this kind. I do not know what the fee claimed for that service is, and make a reduction to the “Other Expenses” claim of £3,500 to £1,500. I have used the total claim advanced by the Second Defendant of £900 for the allowable elements of this claim as a yardstick.

iv) This means that I assess the total bill of costs allowable at £30,000 (rounding the figure slightly down). Applying the discount of 25% results in an order that the Second Defendant shall pay the Claimant the sum of £22,500 in respect of his costs of these three applications. This sum seems to me to be just and proportionate.