Douglas & Ors v Hello! Ltd. & Ors

This action has been before me on a number of previous occasions and, most particularly, on some 31 different days between the 3^rd February 2003 and the 11^th April 2003 and some 13 different days between the 16^th July 2003 and the 7^th November 2003. On some of those days only part of the sitting day was used. The earlier hearing ("the Liability Hearing") led to a judgment which I delivered on the 11^th April 2003 as to liability ("the Liability Judgment") and the later hearing ("the Quantum Hearing") to a judgment of the 7^th November 2003 ("the Quantum Judgment"). The outcome was that the first three named Defendants ("the Hello! Defendants) were ordered to pay £1,047,756 to the three Claimants but that the Claimants’ case against the 4^th and 5^th Defendants, the Marquesa De Varela ("the Marquesa") and her company, Neneta Overseas Ltd., was dismissed. The action is once again before me, now as to costs.

At earlier stages in the action there had, amongst other skirmishes, been a hearing before the Court of Appeal in November 2000 at which the injunction against publication by Hello! was lifted – see Douglas and Others –v- Hello! Ltd [2001] Q.B. 967 C.A. - and a hearing, with cross-examination, before the Vice-Chancellor in January 2003. In the Court of Appeal the order for costs was that the costs of the successful appeal of Hello! Ltd (then the only Defendant) should be paid by the Claimants in any event, such costs to be assessed if not agreed. Before the Vice-Chancellor the Order for costs was that the Hello! Defendants had, firstly, to pay 75% of the Claimants’ costs of the Claimants’ unsuccessful application to strike out the defences, such costs to be assessed (if not agreed) on an indemnity basis and, secondly, had also to pay all of the Claimants’ costs of the Hello! Defendants’ unsuccessful application for disclosure, those to be on the standard basis.

The 6^th Defendant, Philip Ramey, took no part in either of the earlier hearings nor in this present hearing; I shall refer briefly to his position later but it has not been the subject of any dispute before me.

I shall not attempt in this judgment to summarise the facts found in the Liability judgment or the Quantum judgment but will assume that they and the arguments covered in those judgments are in mind. I should, though, draw particular attention to some points as they were frequently brought up in the present hearing. Thus at paragraphs 96-105 of the Liability judgment I referred to the "lamentable incident" as to the Hello! Defendants’ production of a particular witness statement to the Court of Appeal, in paragraphs 106-124 to the way in which the untruthful and misleading "Marquesa’s letter" had been procured by those defendants, at paragraph 125 to a misleading statement from Sr. Sanchez Junco and at paragraphs 173-176 to the Vice-Chancellor’s severe criticisms of the conduct of the Hello! Defendants. At paragraph 198 I held that the consciences of Hello! Defendants were tainted. I had held that Sr. Sanchez Junco and Sr. Riera were not truthful witnesses – paragraphs 123 and 124. The Data Protection Act claim was dealt with at paragraphs 230-239 and at paragraphs 240-261 I dealt with the Claimants’ claims as to conspiracy (more than one) and with the claims which were called, for convenience, "the Economic torts", as to which the Claimants failed.

The Hello! Defendants and the Claimants are very far apart in their arguments as to what Orders for costs are now appropriate and both have referred me to the rules and to authorities as to the modern approach to costs and the proper conduct of litigation. I have been taken to CPR Part 44, in particular 44.3 and 44.4, and to AEI Redifusion –v- PPL [1999] C.A. 1 WLR 1507at 1522-3; Roache –v- Newsgroup Newspapers Ltd [1998] EMLR 161; Winter –v- Winter and Anor (C.A., 10^th November 2000); Johnsey Estates –v- Secretary of State for the Environment [2001] EWCA Civ 365, 11^th April 2001; Ford –v- GKR Construction Ltd and Ors [2000] 1 ALL E.R. 802; Excelsior Commercial and Industrial Holdings Ltd –v- Salisbury Hamer [2002] All E.R. (D) 39 (Jun) and Oksuzoglu –v- Kay and Anor [1998] 2 All E.R. 361. The most apposite of the passages, other than the terms of the rules themselves, which I am asked to keep in mind are three: firstly, from Ford –v- GKR supra at p. 807, per Judge L.J.:-

The second is from Chadwick L.J. in Johnsey Estates supra at paragraph 21 which, including passages relevant only to appeals, reads as follows:-

Thirdly, I am to keep in mind the passages in Oksuzoglu supra at paragraphs 55 and 58 and Roache supra pages 168-169 (both being cases under the old rules) as to the Court asking itself, where far less is recovered, either generally or under a particular issue, than had been sought by a party, as to who, as a matter of substance and reality, had truly won.

It is chiefly against that background of law that I am required to deal with 9 issues namely:-

Mr Wilson Q.C. (who, with Mr Sherborne, appears for the Claimants) asks for their costs of the Liability Hearing against the Hello! Defendants to be paid by the Hello! Defendants and to be paid on the indemnity basis.

He asserts that the Claimants recovered £1,047,756 and relies upon the general rule as to costs following the event – CPR 44.3 (2) (a). The Hello! Defendants’ behaviour generally in publishing as they did, he says, in the knowledge which they then had was such that it would be right for the Court to mark its disapproval of such conduct by an award of indemnity costs (disapproval sufficing to ground such an award). He relied, too, on the fact that the Hello! Defendants had presented a false case and one which they knew to be false to the Court of Appeal, which lifted the injunction previously granted in the Claimants’ favour. The Hello! Defendants had persisted with lies and also, as the Vice-Chancellor held, their disclosure had left a great deal to be desired. In the uncertainty thus created the Marquesa (who had been procured to lie to the Court by the Hello! Defendants) had been joined and the truth had gradually come out not from the Hello! Defendants but from her. Not unnaturally, when faced with what they thought were lies (and, it transpired, rightly thought were lies) the Claimants had prepared their case more fully than otherwise would have been necessary and framed their ways of putting their case in alternative ways that might not otherwise have been necessary. Whilst it was the case that the Claimants lost a number of issues, chiefly those referring to the Economic torts, those claims had not significantly added to the overall costs, especially as a full investigation of the evidence of the Hello! Defendants’ chief witnesses was necessary not only as to the Economic torts but also as to the conscience of the Hello! Defendants, a subject which was crucial to the claim, on which the Claimants were successful, as to confidence. The Claimants had a claim in privacy but that was not lost; rather the Court concluded at the Liability Hearing that it was unnecessary to look further into privacy as in any event the Claimants had succeeded under the law of confidence. It had been reasonable to frame the Claimants’ case in a number of ways because, by reason of the Hello! Defendants’ deceits, the Claimants could not know what would emerge as the true position on the Hello! Defendants’ side. Moreover, the Hello! Defendants had brought a full and extended hearing upon themselves; the Claimants had sought an injunction. It had been granted. Had matters been left there little if anything further would have needed to be spent. But the Hello! Defendants appealed and then chose to publish despite the evidence which had already by then been filed as to the distress publication would be likely to cause to the Claimants and the damage which would also be caused to them.

A very different result is sought by the Hello! Defendants, represented by Mr Price Q.C. and Mr Fernando. Whilst the Claimants had succeeded in breach of confidence and under the Data Protection Act they failed, emphasised Mr Price Q.C., in their claim that the Hello! Defendants had commissioned the taking of the unauthorised photographs; they failed as to their allegations of conspiracy and under the Economic torts. They failed as to exemplary and aggravated damages. If the case had been limited to the issues which the Claimants had won it would have been only, said Mr Price, a hearing of some 6-7 days. Even the victory under the Data Protection Act had only led to nominal damages. A great deal of the hearing was taken up, said Mr Price, with the Claimants going over evidential ground on which they had already succeeded, after cross-examination of the Defendants’ witnesses, before the Vice-Chancellor. It was important to look not just to the overall outcome but to issues raised; if a successful party could be confident of getting his costs of all issues, even unsuccessful ones, the tendency would be for issues to be raised unnecessarily and that had been the case here. However, to discourage that, the Court should look more closely at issues lost and to the time they had taken up. So also where only nominal damages were recovered. The Hello! Defendants could not resist being liable for the Claimants’ costs of a 6-7 day liability hearing as to breach of confidence – say 30% of the time that the Liability Hearing took up – but some 11 days of oral evidence was directed only to claims of the Claimants which had failed. Some 70-75% of the total time of the Liability Hearing was upon issues on which the Hello! Defendants succeeded. The Hello! Defendants should therefore have at least half of their costs of the Liability Hearing (to be set off against an award of 30% of the Claimants’ costs being awarded to the Claimants against the Hello! Defendants). As for the Hello! Defendants’ conduct, such as had merited disapproval had occurred, earlier, before the Court of Appeal, not in relation to or during the Liability Hearing and the disapproval of the Court as to such conduct had already sufficiently been marked by the Vice-Chancellor awarding costs in the Claimants’ favour and on the indemnity basis even though the Claimants’ then-application to the Vice-Chancellor (to strike out the Hello! Defendants’ defences) had completely failed.

Those, in summary, were the Hello! Defendants’ arguments as to the costs of the Liability Hearing.

I am unable fully to accept either side’s case as to costs. As for weaknesses in the position of the Hello! Defendants, they never conceded liability for, or directed a payment-in solely to, breach of confidence. Had they done so the Claimants would have been forced to consider whether the litigation was worth going on with; a trial of the other issues might well have been completely avoided. Nor was it unreasonable, when the Claimants could not be sure who had bought the unauthorised photographs and in what state of mind, for them to put their case in alternative ways. There could be no complaint, either, by the Hello! Defendants as to the joinder of the Marquesa, if only because the time for such complaint was when it was proposed to join her. Whilst the Claimants failed to prove that the Hello! Defendants had commissioned the taking of the unauthorised photographs, that was only one route by which there could be proved such taint upon their conscience as would justify relief under the law of confidence. That extreme form of taint was escaped but nonetheless that their conscience was sufficiently tainted was proved. It is not as if the Hello! Defendants had conceded that their conscience was sufficiently tainted for the purposes of relief under breach of confidence but had denied only that they had not become tainted by way of a commissioning of the unauthorised photographs. Although in their original pleading of May 2001 the Hello! Defendants in effect accepted that it was not the Marquesa but Senor Sanchez Junco who had bought the unauthorised photographs – paragraph 30 (v) of the original defence - they by no means then came wholly clean. At that point they were suggesting that it was only shortly before the wedding on the 18^th November 2000 that the Marquesa had told Senor Sanchez Junco that paparazzi would be likely to try to get photographs of the wedding. That made the Marquesa’s involvement seem, falsely, much closer to the relevant events. In fact, as the Hello! Defendants’ later pleading accepted, her involvement had been only in August or early September 2000. Nor did the Hello! Defendants accept at any early date that their employee, Sue Neal, had been in prior contact with the paparazzo, Mr Ramey, or that the Douglas’ wedding had been discussed with him. Despite the Hello! Defendants’ pleading, they were still asserting as late as 19^th March 2002 in correspondence that the Marquesa’s company was an independent one that had commissioned and paid for the photographs. The Hello! Defendants’ pleading, as late as the 10^th February 2003, that the Marquesa’s letter, once it had been signed by her, was such that they had no reason to think that it was misleading – paragraph 53 (10) (a) of the re-amended Defence – was little short of absurd. They knew all along that the Marquesa’s letter was false and had, indeed, procured its existence. It is no answer to say that the Claimants knew that it was false (and hence had no need to prepare or to over-prepare on the basis that it was true) as the Claimants had reason, in the light of that correspondence, not to know what position on the letter the Hello! Defendants were finally to adopt and where the truth would be found to lie, especially as Mr Ramey was asserting that he had sold the photographs to the Marquesa. Indeed, as late as the 24^th September and the 2^nd October 2002 the Hello! Defendants were asserting the accuracy of the Marquesa’s letter in correspondence. Had the Marquesa truly bought the unauthorised photographs it would have been possible that the Hello! Defendants had acquired them later, free of taint, as bona fide purchasers for value without notice, however tainted she might have been; it was thus natural enough for the Claimants to put their claims against the Hello! Defendants in alternative ways. To that extent the Hello! Defendants’ extraordinary behaviour to a large extent brought the claims in the Economic torts upon themselves.

As for re-litigation before me of issues that had already been dealt with by the Vice-Chancellor, it is accepted by all that his findings did not bind me. He says so himself at paragraph 9 of his judgment of the 27^th January 2003. Accordingly, unless the parties agreed to accept the Vice-Chancellor’s findings as if found for all the purposes of the action, the ground covered by the Vice-Chancellor was required to be covered again. I cannot see how the Hello! Defendants can complain that it was; shortly before the Liability Hearing began before me on the 3^rd February 2003 the Claimants’ Solicitors had on the 31^st January 2003 in writing invited the Hello! Defendants to make, as admissions of fact, a number of the relevant findings of the Vice-Chancellor. I am told that that part of the letter was not answered and no answer to it was shown to me. In the circumstances it was reasonable for the Claimants to go over ground already covered; the Hello! Defendants did not protest at that and, on the contrary, sought to and did improve their position by doing so.

Mr Price argues that it was right for me, for the purposes of deciding the cause of action as to breach of confidence, to test the conscience of the Hello! Defendants as at the point when they bought the unauthorised photographs and that I did so but that I did not and could not take into account, as at that point of time, the later coming into existence of the Marquesa’s letter or the circumstances around its creation. The letter and the circumstances surrounding it went, he said, only to the claims for the Economic torts, claims which the Claimants lost. The costs of the evidence and costs otherwise incidental to those Economic tort claims should thus, he argues, be paid by the Claimants. I cannot accept that in full; the fact that the Hello! Defendants procured the false Marquesa’s letter threw light on their state of mind as it had earlier been; had they been free of taint when they bought on the 19^th November 2000, they would not have felt it necessary, surely, to procure the Marquesa to create the falsehood on the 23^rd November? Moreover, as Mr Wilson urges, an examination of the circumstances surrounding the Marquesa’s letter went also to the credit generally of, in particular, Senor Sanchez Junco and Senor Riera and Senor Sanchez Junco’s state of conscience as he bought the photographs (on which the circumstances surrounding the Marquesa’s letter threw light). Such matters were relevant not only to breach of confidence as such but also to the balancing of interests under articles 8 and 10 of the Convention, a striking of which balance was important to the question of whether any (and if so what) relief should follow upon the ingredients of a cause of action in breach of confidence having been made good. It is harder for a publisher to assert his freedom of expression when he can be seen to have been engaged in the procuring of lies. Finally, whilst I accept that time was taken up with the Claimants’ claim under the Data Protection Act which was successful only as to nominal damages, I must recognise, too, that the Act is of notorious obscurity and that even less time might well have been taken up with the claim had the Hello! Defendants’ re-amended Defence not taken as many points on the claim as it did.

On the Claimants’ side, of the 13 claims I identified in paragraph 180 of the Liability judgment, they were successful in whole or in part on only 4. Some other issues were not dealt with but on 6 the Claimants plainly failed. There was undoubtedly time taken up with those failed issues both as to evidence and as to argument. The Claimants failed also in whether the unauthorised photographs had been commissioned by the Hello! Defendants (although, as I have mentioned, the Claimants succeeded nonetheless on "taint").

Whilst they lost a good many issues, I do not see it as unreasonable, in particular in the light of the Hello! Defendants’ misleading conduct, for the Claimants to have raised issues as to the Economic torts and conspiracy and as to aggravated and exemplary damages, the evidence as to which issues was by no means wholly discrete from that on other issues which the Claimants won. It was not wrong or unreasonable for them to claim under the Data Protection Act nor, in the face of the Human Rights Act and real doubts as to our domestic law on the subject, for the Claimants to claim as to privacy (which, in any event, was not a subject on which the Claimants can be seen plainly to have lost but rather a subject which did not require to be dealt with because of the Claimants’ victory under the law as to confidence). An award that simply looked at the number of issues won and lost would not fairly reflect the realities of the case. However, I accept, of course, the Hello! Defendants’ argument that the Claimants lost several issues which, although it had not been unreasonable for the Claimants to raise them, involved some element of unnecessary and disproportionate cost. Even so, I have no doubt but that (to revert to the language of Sir Thomas Bingham M.R. in Roache supra) the winners of the Liability Hearing, in substance and reality, were the Claimants.

I must reflect that time taken up on a particular issue in oral evidence does not necessarily reflect the time and money spent on it in research and in preparation and I have in mind, too, that if I make an award issue by issue there will undoubtedly be disproportionate time taken up at the assessment stage in arguing as to whether this or that preparation or evidence went wholly, in part or not at all to one issue or another. I prefer to mark the degree, which I have accepted, to which time and money was spent unnecessarily or disportionately by awarding the Claimants only a proportion of their costs of the Liability Hearing. I hold the appropriate proportion to be 75%.

As for the basis of assessment, whilst, as I have mentioned, the Hello! Defendants’ conduct was held at a number of points to have fallen well short of what is to be expected and in some respects was downright deceitful or misleading, there is some justice in Mr Price’s plea that they have already been punished enough. By the time of the Liability Hearing most of the impugned conduct was already behind them. When the Vice-Chancellor, although the Hello! Defendants had been successful before him in the sense that they had resisted the Claimants’ attempt to strike out their defence, made the Hello! Defendants pay 75% of the Claimants’ costs of that not insubstantial hearing he said:-

The Claimants, although successful, put their case in alternative ways rather than electing, as is usually required in not wholly dissimilar areas, for one basis or another. The Hello! Defendants had argued that the Claimants were obliged so to elect but I ruled – see paragraph 13 of the Quantum judgment – that it sufficed that their failing to do so could be taken into account when costs fell to be discussed. The Hello! Defendants do not resist paying 75% of the Claimants’ costs but that, in my view, effectively attributes too much time and expense to the "notional licence fee" basis on which, ultimately, no award was made. I award the Claimants 85% of their costs of and incidental to the Quantum Hearing, such to be assessed on the standard basis.

Mr Wilson adduced evidence purporting to show, during the period over which the 3^rd Claimant was kept out of the £1,033,156 down to judgment for which the Hello! Defendants have been held to be liable to it, that it was a borrower at commercial rates and that hence it should be recompensed at commercial rates. He refers to Ahmed –v- Jaura [2002] EWCA Civ 210 where at paragraph 19, Rix L.J. adopted without disapproval a passage in Chitty on Contracts 28^th Edition Vol. 1at p. 146 as to the Court awarding "Interest at a rate which broadly represents the rate at which the successful party would have had to borrow the amount recovered over the period in question". At his paragraph 26 Rix L.J. referred to the "real cost of borrowing" by the class of borrowers into which the successful claimant fell. Mr Price, though, rightly points out that whereas the Group of which the 3^rd Claimant is part may have been a borrower and at high commercial rates, because it had then only recently embarked on the purchase of The Daily Express, the evidence does not show that the 3^rd Claimant itself was a borrower at any relevant time, either at high rates or at all. Indeed, he referred to it as a geyser of cash, although no evidence was referred to on the point. Companies are commonly keen enough to play the card of their separate corporate identity when it suits and whilst I recognise the common commercial Group practice of group borrowings, I am unwilling to accept, in the absence of any evidence, that the commercial rates (but I do not say excessive rates), often 2.5% above LIBOR, which the Group paid were necessarily appropriate to the 3^rd Claimant, separately regarded from its Group. Of course, it may be that, separately so regarded, the 3^rd Claimant was not a borrower at all, in which case it could have been right to inquire into at what rate it would usefully have turned to account the £1,033,156 had only it received it earlier. Again, there is no evidence as to that. I have no wish to involve the parties in yet further expense as to further evidence and fresh computations but I shall mark my doubts as to the appropriateness of the full claim made by the 3^rd Claimants to interest (£151,968) by awarding only £120,000 on this score.

Mr Wilson draws attention to CPR 44.3 (6) (g) which provides:-

In Bim Kemie AB –v- Blackburn Chemicals Ltd [2003] EWCA Civ 889 C.A. 24^th June 2003 Waller L.J. said at p. 44 (c), of an award of interest on costs:-

This subject was discussed at the Liability Hearing - see paragraphs 266-271 of the Liability judgment - but was left over to await my findings of fact. Mr Wilson does not argue that had only the Court of Appeal known of the misconduct of Hello! at the Court of Appeal stage it would not have lifted the injunction but he does say that had the Court known of it it would not have required the Claimants to pay Hello!’s costs but, on the contrary, would have made provision for Hello! to pay or to contribute to the Claimants’ costs of the appeal and below.

As for jurisdiction, I am unimpressed by Mr Wilson’s argument that I am free to vary the Court of Appeal’s Order for costs under CPR 3.1 (7); I do not read that as enabling a Court at first instance by way of a simple invocation of that rule to vary an order of the Court of Appeal. My suggestion – see paragraph 267 of the Liability judgment – that the obvious forum for relief of such a kind was the Court of Appeal was resisted by both sides on the grounds of expense and delay and also by reference to a third possible course, a setting aside of the Order of the Court of Appeal by way of a separate action, taken to be consolidated within the main action before me. Unusually, the pleadings in the main action do justify such a view; it was pleaded in the re-re-amended Particulars of Claim of the 28^th February 2003 that Hello! had succeeded in having the injunction set aside on the basis of dishonest evidence – paragraph 32A; that the Court of Appeal’s judgment was obtained by fraud – paragraph 32A 2 – of which Particulars were fully given and that the Court of Appeal’s Order should be replaced by one for costs in the Claimants’ favour – paragraph 32A 4.1 – or that there should be a corresponding award of damages – paragraph 32A 4.2.

That there must be some remedy for the case as pleaded must be so and the parties now before me were agreed that there is a separate action before me for the setting aside of the Court of Appeal’s Order as to costs on the ground of fraud or dishonesty. Mr. Price’s objection to relief being granted now under that separate action is not that the necessary degree of dishonesty or fraud has not been proved. He would have difficulty as to that given the findings of the Vice-Chancellor and my findings, on further evidence, that were only little less critical of Hello! than had been the Vice-Chancellor’s – see my summary of the Vice-Chancellor’s findings at paragraph 174 of the Liability judgment and my holding that Hello!’s case before the Court of Appeal was a false one – paragraph 129 of that judgment. Rather Mr Price’s objection was that of the five necessary components of a successful action to set aside a judgment for fraud – see Kuwait Airways Corporation –v- Iraqi Airways Corporation [2003] 1 WLR 448 at paragraph 146, p. 467, per David Steel J. - one (but only one) was missing, namely that marked "(e)" in Steel J.’s summary namely:-

Mr Price referred me also to James –v- Williams [2001] C.P. Rep. 4, Court of Appeal transcript of the 2^nd October 2000. At paragraph 26 Lord Justice Peter Gibson, with whom Mummery and Latham L.JJ. agreed said:-

As I mentioned earlier, by consent arrangements have been made whereby the Marquesa seeks no order for costs against the Claimants. However, I understood Miss Mulcahy to tell me – Day 2, p.m., page 60 lines 4-10 – that unbeknownst to the Marquesa when that arrangement was agreed, the Claimants had, up their sleeve, an intention to make an application against her for costs up until the point at which she, as it is said, "came clean" as to the Marquesa’s letter being false. I must, however, take the Marquesa to know that there might be a further application against the Hello! Defendants for costs incurred by the Claimants in their making their unsuccessful claim against the Marquesa. Mr Wilson refutes the Marquesa’s ignorance of a possible claim against her in costs but the letter of 7^th January 2004 which he relies on mentions only an intention to keep alive a claim "at the very least" against the Hello! Defendants, hardly a clear declaration that a claim against the Marquesa was kept alive. There could well have been a failure to grasp the full import of the letter of 7^th January and I acquit the Claimants of being underhand. However, Counsel then appearing for the Claimants had explained to the Vice-Chancellor in January 2003 that the Marquesa had been joined "because we were not getting any disclosure". She was joined and there was then valuable disclosure from her but I am not satisfied that disclosure from her could not have been obtained without her being made a party to the action. Moreover, even after the disclosure had been completed, the Claimants persisted with the action against her, albeit without success. I can see good reason why the Marquesa should not have pressed for her costs as against the Claimants, as she has not pressed, but the general rule of CPR 44.3 (2) to which Mr Wilson referred me would suggest no provision in favour of the Claimants in respect of their process against the Marquesa and I see no sufficient reason to award costs either against the Marquesa or her company or against the Hello! Defendants in this respect.

I believe I have now ruled seriatim on each of the issues raised before me. Mr Sherborne is to draw up a Minute of Order to be agreed with Mr Fernando and Miss Mulcahy so as to embody my judgment. If there is difficulty the matter can be restored to me.