VARDY -v- ROONEY: CLAIMANT’S ARGUMENT THAT DEFENDANT HAD BEEN GUILTY OF MISCONDUCT IN COSTS ASSESSMENT FAILS TO CROSS THE LINE
In Rebekah Vardy v Coleen Rooney [2025] EWHC 851 (KB) Mr Justice Cavanagh rejected the claimant’s arguments that the defendant’s solicitors had misconducted themselves improperly and that there should consequently be a disallowance of some of the costs claimed by the defendant. The fact that the defendant had not claimed the full incurred costs in the costs budget and then criticised the claimant’s incurred costs was not wholly satisfactory, but did not amount to misconduct.
“… this case comes within the type of case in which particular deference should be shown to the first instance judge because he was an experienced judge (indeed, arguably the most experienced judge) in a specialist jurisdiction. The question whether there was unreasonable or improper conduct was being considered in the context of costs. A Costs Judge has a particular expertise in, and experience of, costs matters which will inform, in particular, the view as to whether what happened was something which permitted of a reasonable explanation and also whether it was conduct which the consensus of professional opinion would regard as improper. A Costs Judge was, therefore, particularly well-placed to make the evaluative judgment that is required in a CPR 44.11 application in this context.”
KEY PRACTICE POINT
This case highlights the ambiguity of the declaration in relation to incurred costs on Precedent H. It may be prudent, (indeed will be prudent) for litigators, in future, to clarify whether the sum set out for incurred costs represents the actual costs incurred or an estimate of the costs likely to be recoverable on a standard basis. This is doubly so if there are going to be criticisms made of you opponent’s incurred costs.
THE CASE
The claimant had been unsuccessful in defamation proceedings brought against the defendant. The claimant was ordered to pay 90% of the defendant’s costs on the indemnity basis.
THE ISSUE IN THIS APPEAL
Both parties had produced costs budgets. The defendant’s budget had given a figure for incurred costs which, as it turns out, was less than the sum incurred. The defendant then made strenuous objections to the incurred costs in the claimant’s budget. The alleged misconduct was the defendant’s objections to the claimant’s budget in circumstances where, in fact, the defendant had incurred costs that were higher than those set out in the Precedent H.
THE JUDGMENT AT FIRST INSTANCE
The costs judge was critical of the defendant’s lack of transparency in failing to make the position wholly clear. However he found that this did not amount to “misconduct”. The defendant’s solicitor had prepared the incurred phase of the costs budget on the basis of those sums which were likely to be recoverable on a standard basis, not on the basis of the entire costs incurred. This was an appropriate reading of the obligations in relation to the budget.
THE ISSUES ON APPEAL
3. The issue in the appeal is whether the Judge was wrong to decline to find that the Defendant or her solicitors had conducted themselves improperly or unreasonably for the purposes of CPR 44.11(1)(b). If the Judge had found there to be improper and/or unreasonable conduct, he would have had to go on to consider whether or not to exercise the discretion, set out in CPR 44.11(2)(a), to impose a sanction by disallowing some of the costs that would be otherwise payable to the Defendant by the Claimant.
6. The alleged improper and/or unreasonable conduct relates to the written and oral submissions that were made to Master Eastman on behalf of the Defendant and which were critical of the figures for incurred legal costs that were provided on behalf of the Claimant in her Precedents H. The Claimant contends that a misleading impression was given to Master Eastman, because the Defendant’s legal advisers had failed to make clear to the Master and to the Claimant that the figures for the Defendant’s costs in Precedent H did not set out the actual costs that she had incurred to date: rather, they were the Defendant’s solicitor’s estimate of the incurred costs that would be allowed, at the costs assessment stage, as being reasonable and proportionate for a costs award on a standard basis. This was a lower figure than the actual costs incurred to date. As a consequence, in the Precedents H, the figures for the Claimant’s incurred costs were very much higher than the figures for the Defendant’s incurred costs. If the Defendant’s Precedents H had set out the Defendant’s full incurred costs to date then those costs would not have been very much lower than the incurred costs that were set out in the Claimant’s Precedents H.
7. The Claimant does not say, in this appeal, that it is in itself necessarily improper or unreasonable for a party to set out figures for incurred costs in Precedent H which are lower than the party’s actual incurred costs to date (though this argument was advanced before the Judge). It is now accepted that this is a legitimate course of action if the party’s legal advisers do not believe that the actual figures would be regarded as reasonable and proportionate on an assessment on the standard basis. However, the Claimant submits that, in the circumstances of this case, the failure on the Defendant’s legal advisers’ part to make the position clear to the Master and the Claimant’s legal advisers amounted to unreasonable and/or improper conduct. It is submitted that they should have been transparent about what they had done, particularly in circumstances in which they made trenchant criticisms of the Claimant’s incurred costs and suggested, expressly or implicitly, that the actual costs incurred by the Claimant to date were very much greater than the actual costs that had been incurred by the Defendant to date.
THE RATIONALE OF THE COSTS JUDGE AT FIRST INSTANCE
“35. The judge did not accept that it was unreasonable or improper for the Defendant’s solicitors to interpret the statement of truth in Precedent H to mean that the incurred costs figures should be only those costs as they believed would be proportionate to incur in the litigation. He did not consider it necessary to resolve the dispute about whether a party was obliged to set out their actual incurred costs in Precedent H (as the Claimant contended), or whether a party was obliged, or at least permitted, to exercise a judgment about proportionality and then set out a figure for incurred costs which reflected the amount that the party’s legal advisers considered to be proportionate (as the Defendant contended). Since the issue does not arise on this appeal, it is not necessary or appropriate for me to say more than that I agree with the Judge that it is permissible for a party to set out, in the incurred costs column in Precedent H a figure that represents those incurred costs that the party’s legal advisers consider to be proportionate, even if that figure is lower than the figure for actual incurred costs. This was made clear by the court in the Pan-NOx case referred to below….
37. I have already set out paragraph 18 of the Judge’s judgment, at paragraph 8, above. The Judge said that, as they had embarked upon a resolute attack on the Claimant’s costs, the Defendant’s solicitors should have made clear that their own Precedents H had not set out the entirety of the Defendant’s incurred costs to date. However, on balance, and only just, and in light of the uncertainty of the wording of the statement of truth and the assumption that the Defendant’s solicitors could have made to the effect that the Claimant’s solicitors had adopted the same approach as them to the figure for incurred costs, this failure to be transparent did not mean that they had acted unreasonably or improperly for the purposes of CPR 44.11.”
THE BASIS OF THE APPEAL
Mr Justice Cavangh rejected the argument that he was not bound to show “deference” to the first instance decision. He found that this was an evaluative decision that was well within the expertise and experience of the costs judge.
“38. On behalf of the Claimant, Mr Carpenter KC submitted that this was not a case in which the appellate court should show any particular deference to the decision of the court below. There was no oral evidence and, indeed, no disputed evidence of any kind, and so, he submitted, the Judge was not better placed that this court would be to decide the matter. This was not a decision taken after a long trial, in which the first instance judge was able to obtain a “feel” for the case which would not be available to the appellate court. It was not a decision which involved the exercise of a specialist knowledge of costs. Ultimately, Mr Carpenter KC said, the requirements for a finding of misconduct are satisfied or they are not.
39. I am unable to accept these submissions. I agree with Mr Williams KC that this is a paradigm case of an appeal against an evaluative judgment. Faced with facts, which, as it happened, were not in dispute, the Judge had to decide whether the acts and/or omissions of the Defendant’s legal advisers were unreasonable or improper, as defined for the purposes of CPR 44.11. This was not a binary decision, which admits of only one answer. There will, no doubt, be some cases, perhaps many cases, in which the answer is so clear that no judge could realistically or reasonably come to any other view than that conduct did or did not amount to improper or unreasonable conduct. But there is other conduct, of which this is an example, for which the position is not so clear-cut. In such cases, it is not the role of the appellate judge simply to substitute his or her view for the view of the first-instance judge. Rather, the appellate judge should only intervene in one of three types of case. The first is where the conclusion reached by the judge is vitiated by an error of law. The second is where the conclusion is vitiated by an error in the judge’s process of reasoning. This is not the place to embark upon a detailed examination of this type of case, but, plainly, not every error in the process of reasoning will vitiate the judge’s decision. The third type of case is where the judge’s conclusion was wrong, in the sense that no reasonable judge, properly directing himself or herself on the law, and properly approaching the issue, could have come to the conclusion that was reached. The third type of case, when dealing with an evaluative judgment, is similar to the approach which appellate courts take to the exercise of a judicial discretion. …
42. Furthermore, in my judgment, this case comes within the type of case in which particular deference should be shown to the first instance judge because he was an experienced judge (indeed, arguably the most experienced judge) in a specialist jurisdiction. The question whether there was unreasonable or improper conduct was being considered in the context of costs. A Costs Judge has a particular expertise in, and experience of, costs matters which will inform, in particular, the view as to whether what happened was something which permitted of a reasonable explanation and also whether it was conduct which the consensus of professional opinion would regard as improper. A Costs Judge was, therefore, particularly well-placed to make the evaluative judgment that is required in a CPR 44.11 application in this context.
43. None of this means, of course, that an appeal must inevitably fail, but it means that I do not accept Mr Carpenter KC’s submission that the decision under appeal was a binary decision which the appellate court is as well-equipped to decide as the Judge below.
THE CLAIMANT’S UNSUCCESSFUL APPEAL
48. The unchallenged evidence was that the Defendant’s solicitor had inserted figures into Precedent H which represented his estimate of the level of incurred costs that were reasonable and proportionate and so which would be allowed on the standard basis. In the Part 18 Response at the costs assessment stage, the Defendant’s solicitor said that he did so because that is what he believed was required by CPR 3 and Precedent H. He said:
“Thus, the budget is not a statement of the actual incurred costs at the point of filing the Precedent H. …. It can be seen therefore that the Precedent H does not ask a party to set out what the actual incurred costs are. It demands that a party set out the costs which in their view it would be reasonable and proportionate to have incurred and to incur going forward.”
49. This was credible evidence. It would have been entirely understandable that a solicitor would take this approach, given the wording of the statement of truth. The wording, on an ordinary reading, requires that the budget set out in the statement of truth consists of a fair and accurate statement of the incurred costs which it would be reasonable and proportionate for the client to incur in the litigation – not a statement of the actual costs, if higher. It is true that this is not the only possible interpretation of the statement of truth: the alternatives are that a party’s solicitors are expected, though not obliged, to proceed on this basis, or that the qualification that the costs must be reasonable and proportionate applies only to the estimated future costs. Nevertheless, it would have been perfectly reasonable for the Defendant’s solicitor to interpret the statement of truth to mean that there was an obligation for each party’s figure for incurred costs in Precedent H to be the reasonable and proportionate costs.
50. Given this was so, it was also legitimate for the judge to draw the further inference that, if the Defendant’s solicitor came to the conclusion that this was what he was obliged to do, then he would, or might, assume that the Claimant’s solicitor would adopt the same interpretation of the statement of truth and so would adopt the same approach.
56. It follows, in my judgment, that there was ample material before the Judge to justify the conclusion that the Defendant’s solicitors could have made the assumption that the Claimant’s solicitors had prepared their Precedent H on a “reasonable and proportionate” basis
THE CLAIMANT DID NOT SHOW THERE WAS UNREASONABLE OR IMPROPER CONDUCT ON THE PART OF THE DEFENDANT’S TEAM
63.In my judgment, the Judge was entitled to find that that Claimants had not shown that there was unreasonable and/or improper conduct on the part of the Defendant’s legal team. I have already expressed the conclusion that it was open to the judge to find that the Defendant’s lawyers did proceed or might have proceeded on the basis that both sides were using figures for incurred costs that were prepared on the “reasonable and proportionate” and not “full-cost” basis. This means that the Judge was entitled to find that the Claimant had not proved that the Defendant had acted unreasonably or improperly by making submissions that compared apples with pears without making clear to the Judge that this is what they were doing.
64.Nevertheless, the judge was critical of the Defendant’s legal team. He criticised them for embarking upon a resolute attack on the Claimant’s incurred costs without setting out or explaining that the Defendant’s own costs budgets did not set out actual costs but, rather, set out actual costs that were then reduced on a reasonable and proportionate basis. In other words, they had not been as transparent as they might have been. The importance of transparency in this context was emphasised by Constable J and the Judge in the costs budgeting decision in Pan NOx Emissions Litigation [2024] EWHC 1728 (KB). Though the Pan NOx ruling was made some three years after the costs budgeting exercise in the present case, it should have been apparent to the Defendant’s legal advisers even in 2021 that they should have acted with transparency. Criticism of a lack transparency in the present case was a fair comment for the Judge to make in light of the evidence before him, but it does not undermine his ultimate conclusion that their behaviour had not, albeit only just had not, crossed over into unreasonable and improper behaviour.
65.The Court of Appeal in Bamrah made clear that, whilst conduct does not have to be dishonest or a breach of a professional rule in order to amount to unreasonable and improper behaviour for these purposes, it has to be something more than mistake, error of judgment, or negligence. The Court also said that the words “unreasonable” and “improper” should be given a narrow construction. It is inevitable, where a court is dealing with an evaluative judgment, that some matters will come close to the line without crossing it. In my judgment, the Judge was fully entitled to decide, on the facts of this case, that the lack of transparency on the part of the Defendant’s legal advisers did not cross the line. It was open to the Judge, on the evidence in this case, to conclude that what happened was a mistake, and an error of judgment, but was not misconduct for the purposes of CPR 44.11.
66.As I have already said, I take the view that it would have been different if there was clear evidence that the Defendant’s legal advisers had deliberately misled the Master, whether by what was said or by what was omitted. Also, I think that there would clearly have been misconduct for CPR 44.11 purposes if the Defendant’s counsel had innocently said something that was clearly misleading and her solicitors had not then stepped in to correct it. For a solicitor to mislead the Court, either by acts or omissions or by allowing or being complicit in the acts or omissions of others is professional misconduct (see paragraph 1.4 of the SRA Code of Conduct for Solicitors) and would, in my view, plainly be improper behaviour for the purposes of CPR 44.11 (see Bailey v IBC Vehicles, above). But that is not what happened in the present case. Though it would have been better for the Defendant’s legal advisers to have made clear, when mounting their attack on the Claimant’s costs budget, that their Precedent H figures did not represent the actual incurred costs but included a substantial discount from the actual costs, it was open to the Judge to decide that the observations made in writing and in submissions before the Master were not misleading, whether expressly or by implication.
67. The starting point is that the judge decided that the Claimant had not proved that the Defendant’s legal advisers knew that the Claimant’s lawyers were taking a different approach from them to incurred costs in their Precedents H. This means that the Judge could not be satisfied that they were deliberately misleading the Court by comparing apples with pears, without saying so, when making comparisons with the Claimant’s figures for incurred costs. There was, at least, a realistic possibility that the Defendant’s lawyers believed that the basis for preparing the incurred costs figures had been the same on both sides. If that were so, then there was nothing unreasonable or improper in drawing adverse comparisons in the course of submissions.
68. Moreover, none of the comments and observations relied upon by the Claimant’s legal advisers is clear evidence that the Defendant’s lawyers were covering up the fact that their incurred costs figures were less than their actual costs figures. I have set out the observations relied upon by the Claimant at paragraphs 27-34 above and so I will not repeat them here. Whilst they made comparisons which relied upon the fact that the incurred costs figures in the Claimants Precedents H were substantially higher than the incurred costs figures in the Defendant’s Precedents H, none of their comments and observations stated in terms that the Defendant’s figures were actual costs figures. Similarly, none of them suggested as much by necessary implication. The points that I have made in relation to the comments and observations in Ground 1 apply equally here. Most of the observations with which the Claimant takes issue are comments about the excessive level of the Claimant’s Precedent H figures and, once it is accepted that this is or may be a case of comparing apples with apples, any suggestion that it is misleading falls away. The fact that counsel may have been said to have engaged in hyperbole does not mean that there was unreasonable and improper behaviour.
69. Mr Carpenter KC makes the point that the figures in the Defendant’s Precedents H were exact figures, not round figures, and that this in itself implies that they were actual figures, rather than adjusted figures. I can see some force in this, but in my view it does not necessarily follow that a reduction on “reasonable and proportionate” grounds will result in round figures. If, for example, the reduction from the actual figure was done on a percentage basis, this would almost certainly result in figures that are not round figures. This is perhaps a reason why the Defendant should have erred on the side of caution by making clear that the figures were not actual figures, but it does not mean, in all the circumstances of the case, that the Judge was obliged to find that they had crossed the line into unreasonable and improper conduct.
70. The position we are left with, therefore, is that the Court was not persuaded that the Claimant had proved that the Defendant’s legal advisers had deliberately misled the Court (or the Claimant) either by things said or things not said. There had been a misjudgment in the form of a failure to be more transparent about the basis upon which the Defendant’s figures for incurred costs had been prepared, but that was as far as it went. The Judge was entitled to make the evaluative judgment that this did not amount to unreasonable or improper behaviour, especially as he was so well-placed to form a view about practice in relation to costs.
71. Accordingly, I do not accept that ground 2 is a valid ground of challenge of the Judge’s decision.