Arcadia Group Ltd and Others v Telegraph Media Group Ltd  1 Costs LO 169
 1 Costs LO 169
Costs budgeting in privacy action where the proportionality of costs cannot be assessed by reference to damages or other financial yardstick: hourly expense rates for budgeted work.
Online Case 8
Arcadia Group Ltd and Others
Telegraph Media Group Ltd
 1 Costs LO 169
Neutral Citation Number:  EWHC 96 (QB)
High Court of Justice, Queen’s Bench Division
23 January 2019
In privacy proceedings in which, due to an order for a speedy trial, it had been possible only to conduct an approval exercise in respect of the costs of a pre-trial review, trial preparation and trial, budgets would be approved for those phases only. In respect of the proportionality of those costs, that could not be assessed by reference to any damages claim or any financial yardstick. However, although budgeting was not the same as detailed assessment, it was almost inescapable for the court not to give some thought to hours and hourly rates for the work in question. Those rates claimed by the claimant ranged from £190 (for D grade) to £690 (for A grade). Such rates were above guideline rates and whilst an excess was justified, they would be limited to £550 for partners. Only those paragraphs relating to costs have been reproduced here.
None cited in these paragraphs.
1. A number of pre-trial applications are now before the court in this case, which has already received a good deal of publicity. It is a claim by two companies and one individual for an injunction to restrain the Telegraph Media Group from publishing information about the claimants. The claimants’ case is that the information is confidential information, received by the defendant in the knowledge that the disclosure to it was made in breach of duties of confidence owed to the claimants. The claimants are Arcadia Group Ltd, Topshop/Topman Ltd, and Sir Philip Green. I shall refer to the corporate claimants as “Arcadia” and “Topshop” or, collectively, “the Companies”, and to the third claimant as “Sir Philip”.
The Case in Summary
2. The claim was prompted by an email (“the Foggo Email”) sent on 16 July 2018 by Daniel Foggo, a journalist working for the Daily Telegraph, to Sir Philip and Neil Bennett of Arcadia’s advisers Maitland. The Foggo Email notified its addressees that the paper was preparing for publication an article containing allegations of misconduct on the part of the claimants, which had been the subject of non-disclosure agreements (“NDAs”). The Foggo Email gave details of the alleged misconduct, referring to five named individual complainants. It was said, among other things, that “there is a significant public interest in investigating and reporting on the use of NDAs in employment cases”. The email asked seven questions, asking for responses by 4 pm the following day.
3. The claimants applied for an interim injunction to restrain disclosure of the information pending trial, asserting rights of confidentiality under or by virtue of the NDAs. Haddon-Cave J (as he then was) refused the application, for reasons given in a public judgment ( EWHC 2177 (QB)), and a more extensive private judgment. But the claimants appealed. The defendant undertook not to publish pending a decision on the appeal. And after a hearing in September 2018, the Court of Appeal reversed the judge’s decision, and imposed an interim injunction to preserve the alleged confidentiality until after judgment in the action, directing a speedy trial. Again, there was a public judgment, dated 23 October 2018 ( EWCA Civ 2329), and a private one containing more detail.
4. Up to and including that stage the case had been known as ABC, DEF, and GHI v Telegraph Media Group. The claimants had all been anonymised by order of the court, from the outset. The Court of Appeal made a further anonymity order. But after the Court of Appeal decision, the third claimant was publicly identified in Parliament, and the disclosure of his identity was very widely reported. The anonymity orders became pointless. So, by consent, those orders have been discharged.
5. The Parliamentary disclosure did not include details of the underlying information, which remains protected by the interim injunction. The parties have exchanged written statements of their cases. Stated very broadly, the statements of case give rise to the following main issues:
(1) Whether the defendant came under a duty of confidence in respect of the information at issue.
(2) If so, whether the disclosure of the information is nevertheless required or justified in the public interest.
6. The trial is due to begin before me in two weeks’ time, on 4 February 2019. The parties have given disclosure of documents. Trial witness statements are yet to be exchanged.
7. The matters before me now are as follows:
(1) An application filed by the claimants on 20 December 2018, by which they seek orders requiring the defendant to identify certain of its sources of information (“the Source Disclosure Application”). This first came before me on 28 December 2018, when I directed that it should be heard on the first available date in January 2019.
(2) An application filed by the claimants on 27 December 2018, and amended on 31 December 2018, seeking orders for further and better disclosure of documents by the defendant. This (“the claimants’ Disclosure Application”) was dealt with in part by Lambert J on 3 January 2019, but some issues remain in dispute.
(3) An application filed by the defendant on 20 December 2018, seeking further disclosure from the claimants. This (“the defendants’ Disclosure Application”) was also dealt with in part by Lambert J on 3 January 2019, but she gave the defendant liberty to restore some aspects of the application, and on 11 January 2019 it served notice that it wishes to do so (the “Notice to Restore”).
(4) I was also due to deal also with an application filed by the defendant on 15 January 2019, seeking an order for disclosure against three third-party individuals (“the defendants’ Third-Party Disclosure Application”). The defendant (as it now appears, by accident) sought an immediate disposal on paper. I directed that these matters should be dealt with at this hearing. Late last Friday, the defendant withdrew the application.
(5) Costs budgeting. Directions given by the Court of Appeal’s order of 30 October 2018 provided for the filing, exchange and service of budgets and budget discussion reports, with a costs management conference scheduled for the first available date after 11 January 2019. My order of 28 December 2018 provided for any remaining disputes as to costs budgeting to be dealt with simultaneously with the Source Disclosure Application.
Privacy and Reporting Restrictions
8. In their application notice of 20 December 2018, the claimants sought an order that the hearing of the Source Disclosure Application be in private, and subject to a reporting restriction order. They also sought orders protecting the application documents from disclosure to third parties. At one stage it appeared that the parties were approaching agreement that the hearing could take place in public provided steps were taken to anonymise the complainants to whom reference had to be made, discretion was used in what was said in open court, and suitable protection was put in place for the contents of sensitive documents. In the end, however, leading counsel were agreed that it would be impossible to do justice to their clients’ cases if the hearing took place in public. After hearing argument, I was persuaded that this was so, and directed that the hearing of the disclosure applications would proceed in private, pursuant to CPR 39.2(3) (a), (c) and (g). I granted the application for reporting restrictions, and for restrictions on access to and disclosure of documents. A factor in my decision was that there would in any event be a public judgment. This is that judgment, which is not subject to any reporting restriction.
Conclusions and Orders
9. During the hearing I made the following decisions on the applications, reserving my reasons to this judgment:
(1) In the light of some further concessions by the defendant, and an undertaking on behalf of the defendant to formalise these by amendments to the defence, I decided that no order should be made on the Source Disclosure Application. But I did not dismiss it. I will keep the issue under review in the light of developments in the case. I explain this decision further in the next section of this judgment.
(2) I made no order on the claimants’ Disclosure Application. As Ms Strong conceded, it was hard to press this application given my conclusion on the Source Disclosure Application; the two were closely linked. There was some force in Ms Strong’s complaints about the inadequacy of the defendant’s Disclosure Statement, which was less than detailed. A witness statement seeking to explain and justify the extremely succinct account of the documents that were or had been in the defendant’s possession seemed to me to undermine its own point. It gave more details than the list (thus making clear that the list could have been fuller than it was) yet failed to explain why, or even to state unequivocally that, the defendant could not give yet further details of the documents or parts of documents inspection of which was objected to. Nonetheless, in the end, I was not persuaded that the time, effort and expense that would be consumed by the preparation of a further and better list of documents would be proportionate to any legitimate aim pursued by the claimants.
(3) On the defendant’s Disclosure Application, I ordered the claimants to disclose some without prejudice correspondence relating to the claims settled by NDAs, in so far as it was relevant to issues raised in Confidential Schedule B to the defence. My decisions on four other aspects of the application as presented by Mr Browne were as follows:
a) An application for disclosure of the decision letter relating to an internal appeal hearing of 19 April 2018, concerning an employee grievance. I was not satisfied that any such document existed. Ms Strong told me on instructions that the appeal was settled, so there was no hearing, and that the settlement documents had been disclosed. Mr Browne was in no position to controvert this, by evidence or otherwise.
b) Two categories of document referred to in a substantial witness statement served the night before the hearing. It was much too soon to deal with this disclosure application, which had not been formalised and to which the claimants had not had any chance to respond.
c) Metadata of certain documents. This application was outside the scope of the original application notice filed on 20 December 2018 and the Notice to Restore, and not yet ripe for decision. The claimants’ position was not only that the necessary formalities had not been observed. It was also said that there were some documents, disclosed in hard copy, of which no metadata was held. Otherwise, it was impracticable to disclose the metadata. The relevance of such disclosure was questioned. The alleged impracticability was unexplained. But the defendant’s case as to the relevance of this material, and the need for its disclosure, was heavily reliant on the very recently served evidence. Indeed, as Mr Browne made clear, the defendant intends to amend its defence in reliance on that evidence, to expand one aspect of its case. The disclosure application, properly analysed, is largely consequential on the amendments which have yet to be made, or even formulated. It was premature to pursue it on this occasion.
d) A requirement to conduct fresh electronic searches using two specified search terms, referring to an internal operation of the Companies. The claimants had already carried out searches of certain document categories using these terms, in conjunction with thirteen other search terms contained in an agreed list compiled when drawing up the order of Lambert J dated 3 January 2019. The defendant’s application was for a yet further search, using these two terms in conjunction with the 79 search terms adopted at an earlier stage of the litigation, and applying them to a broader class of documents. The argument of Mr Jonathan Price was straightforward: these were codenames which – unbeknown to the defendant – had been adopted by the claimants at an early stage and, in those circumstances, they should have been included in the original long list of search terms drawn up on the claimants’ behalf. I can see the force of that, but I noted that the shorter list of search terms had been adopted (at the instigation of Mr Price, it was said), in order to ensure that the searches in early January were proportionate. On the evidence before the court, I concluded that there was only a remote prospect that the new and more elaborate searches that were now proposed would yield anything of significance. I was not persuaded that an order would be proportionate.
As I made clear during the hearing, the defendant can pursue the matters at (b) and (c) above, if so advised, at the PTR next week. To do so, it will need to give proper notice of application and file evidence in support.
(4) The defendant’s Third-Party Disclosure Application was not pursued, and if anything remains to be dealt with it is only the matter of costs.
(5) Costs budgeting. I approved budgets for the remaining phases of this action, namely the PTR, Trial Preparation and Trial. The total sums approved for those three phases are £541,059.16 (claimants) and £495,477.38 (defendant). Further details are contained in the formal order made on the issue, and in paras – below.
10. There is one other separate and distinct matter, which was discussed in open court, and to which I shall refer: the question of whether one aspect of the dispute may engage and potentially infringe the privileges conferred on Parliament by Article 9 of the Bill of Rights 1689. I shall come to that at the end of this judgment.
34. It is unfortunate that costs budgeting in this case has only been possible two weeks before trial. That, however, is commonplace when a case begins with an urgent application for an interim injunction, and an order is made for a speedy trial. In this case there has also been the Christmas vacation, which has made it harder to get the pre-trial hearings dealt with promptly. What this means in practice is that a large proportion of the costs of the action had already been incurred by the time I came to conduct costs management. Parts of the costs of Disclosure and Witness Statements remain to be spent, but I have no figures for the split and hence I have had to treat all those costs as already incurred. For practical purposes, I have only been able to conduct an approval exercise in relation to the costs of the PTR, Trial Preparation and Trial phases. Budgeting of costs incurred by the time that costs management is undertaken is not possible: PD3E 7.4. All I can do in respect of incurred costs is make comments.
35. It is fair to note that some of the incurred costs on the claimants’ side are very high, and much higher than those incurred by the defendant. I refer in particular to the claims for witness statements, which are £472,757 which is roughly five times the defendant’s figure of £80,942.78. In the event, I do not think it helpful or fair to go further, as the time available for this part of the hearing was in the event quite short, and it was not possible to engage in any detailed examination of the reasons for such disparities or the justification for the claimants’ figures.
36. I have set approved budgets for the remaining phases of the litigation: the PTR, Trial Preparation, and Trial. I have done this on the basis of the parties’ Precedent H forms and Budget Discussion Reports coupled with (1) written summaries of their position on disputed issues, which the parties submitted last week, pursuant to my order of 28 December 2018, (2) the oral submissions of Mr Marven QC for the claimants and Mr Jonathan Price for the defendant, and (3) a helpful schedule prepared by Mr Price, setting out among other things the hourly rates claimed.
37. The schedules to the order that I am making set out in detail the approved sums, with footnotes containing explanatory comments. It is unnecessary to add much more, but I will say this. In cases like this, proportionality cannot be assessed by reference to any damages claim, or any other financial yardstick. Although budgeting is not the same as detailed assessment, it is almost inescapable for the court to give some thought to the hours and hourly rates that are justified for the work in question. The hourly rates claimed by the claimants range from £190 (for a Grade D lawyer, a trainee) to £690 (for a Grade A lawyer, a partner). Other partners’ rates claimed by the claimants are between £510 and £635 per hour. All these figures are well in excess of the guideline rates, which are £126 for Grade D to £409 for Grade A.
38. Of course, fees in excess of the guidelines can be and often are allowed, and in this case the defendant (which itself claims up to £450 per hour) and I both accept that fees above those rates are justified. But not to the extent of the differences here. I do not consider that hourly rates in excess of £550 can be justified, and proportionate reductions should be made in the lower partners’ rates. I also consider that the claimants’ estimates reflect an unnecessary degree of partner involvement, and a degree of overmanning that cannot be justified, as between the parties, whatever may be the position between solicitors and clients. I reject the claimants’ criticism of the defendant’s use of partner time. Given the nature of the issues, the tasks to be undertaken, and the relatively modest rates charged by the defendant’s solicitors, the devotion of partner time is proportionate in their case.
39. Before going into private session to deal with disclosure issues, I raised in open court a question arising from some aspects of the statements of case. In summary, the claimants’ case includes a claim for damages to compensate for the harmful consequences of the publicity that followed the naming of Sir Philip by Lord Hain. It is said that the defendant is directly or indirectly responsible for those consequences, having “directly or indirectly participated, procured, colluded in and/or facilitated the provision of the information regarding Sir Philip’s identity to Lord Hain for the purpose of it being disclosed under the cover of Parliamentary privilege, after the Court of Appeal had granted the injunction” (para 15 of the particulars of claim).
40. The defendant denies being responsible for the consequences, and asserts that para 15 “raises issues which are non-justiciable having regard to Article 9 of the Bill of Rights … [they] invite investigation of a Parliamentarian’s source for something said in proceedings in the chamber”. The claimant resists that proposition. Mr Price makes clear that the claimants intend to press on to determine, if they can, who provided Sir Philip’s identity to Lord Hain, and what role (if any) the defendant played in that disclosure.
41. Article 9 of the Bill of Rights 1689 provides, of course, that “Proceedings in Parliament ought not to be impeached or questioned in any court or place out of Parliament”.
42. After hearing from counsel, I determined that I should draw these issues to the attention of the Lord Speaker, in order to give the Parliamentary authorities an opportunity, if so advised, to make representations on questions of Parliamentary Privilege. I have therefore written to Lord Fowler accordingly. To allow proper consideration of the issues I have made a limited exception to para 3(a)(i) of the order which the Court of Appeal made on 30 October 2018, in terms agreed by the parties. That order provided that no copies of the statements of case should be made available to any non- party without further order of the court. The issue may need to be revisited at the pre-trial review next Tuesday, 29 January 2019.
James Price QC, Robert Marven QC and Chloe Strong (instructed by Schillings International LLP) appeared for the claimants.
Desmond Browne QC and Jonathan Price (instructed by Ince Gordon Dadds LLP) appeared for the defendant.