Case No: HQ14D03651
Neutral Citation Number: [2016] EWHC 883 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 19/04/2016

Before :

MR JUSTICE NICOL
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Between :

	David Axon	Claimant	
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	Ministry of Defence	Defendant	

-and-

News Group Newspapers Ltd
Third Party
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Hugh Tomlinson QC and Sara Mansoori (instructed by Carter Ruck) for the Claimant
Christina Michalos and Tom Cleaver (instructed by Government Legal Department) for the Defendant
Antony White QC and Catrin Evans QC (instructed by Wiggin LLP) for the Third Party

Hearing dates: 1st – 4th March 2016

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Judgment
Mr Justice Nicol : 
Costs Judgment

1.	I handed down judgment in this claim on 11th April 2016. I dismissed the claim by the Claimant against the Defendant. Since the Defendant was not liable to the Claimant no question of an indemnity by the Third Party (‘NGN’) arose.

2.	Prior to handing down the judgment, I had received written submissions from all parties as to the proper order as to costs. At the hand down hearing, I indicated the provisional views to which I had come, but emphasized that these were tentative and were subject to further oral submissions. I then heard from Mr Tomlinson QC for the Claimant, Ms Michalos for the Defendant and Ms Evans QC for NGN. I reserved my decision.

Costs of the claim

3.	As between the Claimant and the Defendant, there was no dispute that the Claimant should bear the Defendant’s costs. The Defendant submitted that this should be on an indemnity basis. Ms Michalos accepted that for this to be the basis of assessment (rather than the standard basis) there had to be something in the circumstances of the case or the conduct of the parties which took the case out of the norm – see for instance Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879.

4.	She submitted that was the case here. The Claimant’s claim, she submitted, was essentially for loss of reputation, but this was a reputation which he did not deserve since he had been found by the Equal Opportunities Investigation to have bullied his junior officers. At trial he had accepted that finding. He accepted that such conduct was abhorrent and shameful. This took the case out of the norm and the Defendant should get its costs assessed on an indemnity basis in consequence.

5.	I indicated my provisional view that I was not persuaded by this argument. Ms Michalos did not seek to add to her written submissions orally. It is sufficient to say that, while the features on which the Defendant relied played a part in my conclusion that the Claimant did not have a reasonable expectation of privacy in the information in question, there were also other aspects of the case to consider. Overall, the Claimant was unsuccessful, but in my judgment there was nothing sufficient in the matters on which the Defendant relied or the case and its conduct as a whole to justify the assessment of costs being on an indemnity basis.

6.	In consequence, the Claimant must pay the Defendant’s costs to be assessed, if not agreed, on the standard basis.

7.	The Defendant applied for an interim payment on account of costs and sought two thirds of its approved budget i.e. £68,570. This was not opposed by the Claimant and I will make an order in those terms.

Costs of the third party proceedings

8.	Third party proceedings are an example of an ‘additional claim’ governed by CPR Part 20. For most purposes, including the present, an additional claim is treated as if it was a claim for the purposes of the CPR – see r.20.3(1).

9.	The Defendant has not obtained relief against the Third Party. As between the Defendant and Third Party, the Third Party has therefore succeeded. By CPR r.44.2(2)(a) the general rule is that the unsuccessful party shall be ordered to pay the successful party’s costs. So if this general rule is to be followed, the Defendant would have to pay the Third Party’s costs.

10.	Of course the general rule is only the starting point for a decision as to how the Court should exercise its discretion. Rule 44.2(2)(b) says in terms that the Court can make some other order.

11.	Ms Michalos submitted that the Claimant should bear the Third Party’s costs. That could be achieved in one of two ways: either the Claimant could be ordered to bear the costs of the Third Party directly; alternatively, the Defendant could be granted an indemnity so that any costs of the Third Party which it was required to pay could be passed on to the Claimant.

12.	The Claimant had insurance against the possibility that he was required to pay the costs of his opponent or opponents. I was told that the amount of cover would be sufficient to meet both the Defendant’s and the Third Party’s costs. This is not therefore a situation where the impecuniosity of the Claimant would make a difference of substance as between Ms Michalos’s two alternatives. If and to the extent that the Claimant was required to bear the Third Party’s costs, Mr Tomlinson accepted that it would be simpler and potentially more economic for the order to provide that he should bear those costs directly (i.e. Ms Michalos’s first alternative). However, in his written submissions he resisted the proposal that the Claimant should bear any of the Third Party’s costs.

13.	Mr Tomlinson did not dispute that the Court had jurisdiction to order the Claimant to pay the Third Party’s costs. This was part of the broad discretion which the Court was given – see for instance Arkin v Borchard Lines Ltd [2005] 1 WLR 3055 at [75].

14.	The editors of the White Book 2016 say at 44.2.9 

‘Where a Defendant (D1), in order to protect his position, joins another party (D2) as an additional party, and the claimant’s claim against D1 is dismissed, with the result that D1’s claim against D2 is also dismissed, both D1 and D2 are successful parties, and, according to the general rule C would be liable for D1’s costs and D1 for D2’s costs. In all likelihood, the costs payable by D1 to D2 would be recoverable by D1 from C…’ 

The editors continue by discussing the position where C was impecunious, which, as I have said already, is not the present case. 

15.	Ms. Michalos argued that the reason why the Claimant has to bear the Third Party’s costs is because it is foreseeable that, if sued, the Defendant will take reasonable steps to protect his position and this may include seeking an indemnity from a third party. That was what the Defendant did here. The costs of the Third Party proceedings were therefore causally related to the action and, the Claimant having lost the action, should therefore bear these costs as well.

16.	In my provisional views, I said that I foresaw a difficulty with this argument succeeding. The Claimant had failed in his claim against the Defendant. He could not show that he had a reasonable expectation of privacy in the information in question. He had not sued NGN. I said at [103] of my judgment, 

“I also agree that neither the Claimant nor the MOD would have been able to prevent publication (had they learned in advance that this was planned). I have already held that the Claimant cannot show that he had a reasonable expectation of privacy in the information. That would have been fatal to his claim. I would in the alternative have held that the Sun would have succeeded in showing that any right of his under Article 8 would have to give way to the Sun’s right to publish under Article 10. I accept that (assuming it was known) the means by which the Sun came by the information would be a factor against the newspaper, but the other factors to which I have already referred in this judgment would decisively tip  the Article 8 / Article 10 balance in NGN’s favour. It is not for me to speculate as to why the Claimant has not sued NGN as well as the MOD, but a concern that the publisher’s Article 10 right would prevail would have been well-founded.”

17.	Thus there was this additional reason why the claim against NGN could not have succeeded. My provisional view was that this meant that it was not reasonable for the Defendant to join NGN as a Third Party and it would not be right for the Claimant to bear the costs of the Third Party’s participation in the proceedings.

18.	In my provisional views, I had added a qualification. There was a stage in the proceedings in the summer of 2015 when NGN applied for the Third Party proceedings to be stayed pending the resolution of the claim by the Claimant against the Defendant. The Claimant was at first neutral in relation to that application (see the letter from Carter-Ruck, the Claimant’s solicitors, of 25th April 2015). However, in a letter of 21st July 2015, the Claimant changed his position and said that it would oppose the application for a stay prior to disclosure taking place. The process of disclosure did indeed, as it happens, benefit the Claimant because it led to admissions by NGN that Ms Bettina Jordan-Barber had indeed been paid £5,000 for information about the Claimant in connection with the story about the Equal Opportunities Investigation. At [78] of my judgment, I described this evidence as critical to my conclusion that Ms Jordan-Barber disclosed the information which the Claimant alleged was private. I said in my provisional views that I considered that it would be right to require the Claimant to bear the Third Party’s costs of providing disclosure. Had NGN not been a party, the Claimant in 2015 might very well have sought third party disclosure against the publishers of the Sun. In my judgment, I said at [114] that, in 2004, such an application would very likely have been unsuccessful, but by 2013 and the police operation known as Operation Elveden the position of NGN had changed radically. It was, after all, the willingness of NGN to be open about its sources which had led to the prosecution of Ms Jordan-Barber and the Sun journalist, John Kay.

19.	At the hearing relating to costs, Ms Michalos maintained her position that the Claimant should bear all of the Third Party’s costs. She referred me to the Defendant’s skeleton argument for trial paragraphs 111-116 where the additional claim was advanced on two grounds. The first was that the essence of the Claimant’s claim was the damage caused by the publication in the Sun rather than the original disclosure by Ms Jordan-Barber to the journalist. It was the Third Party which had caused that publication and so it should indemnify the Defendant for any damages payable to the Claimant. The second alternative focused on the disclosure by Ms Jordan-Barber to the journalist. This had occurred because of the payment which NGN had given to Ms Jordan-Barber and, for that reason, NGN should indemnify the MOD. The journalist must have been aware that she was supplying this information in breach of her duties to the Crown or the MOD.

20.	In her oral submissions, Ms Michalos added that it would be just to require the Claimant to meet these foreseeable costs of his misconceived claim. It would, on the contrary, be unjust to require the MOD to bear them, the more so because it was a public body. In my judgment, I had referred to the protection which NGN would have had under Article 10, but that related to the publication of the story.  It did not follow that there would have been a public interest for a civil servant to be paid £5,000 for confidential information.

21.	Furthermore, she submitted, the Claimant had opposed the application by NGN for a stay of the Third Party proceedings. The MOD had also opposed the stay (see further on this below) and NGN had abandoned the stay application. The Claimant’s solicitors said in correspondence that they wished the Third Party proceedings to continue for the purpose of disclosure, but the Claimant did not then take the initiative to make a further application for the Third Party proceedings to be stayed once disclosure was complete.

22.	Ms Michalos’s fall-back position was that the Defendant should be able to add all of the costs of the Third Party proceedings until disclosure was completed (and not just the costs of disclosure itself) – that is until 17th November 2015 when NGN’s solicitors wrote their second letter of admission.

23.	Mr Tomlinson continued to resist the application that the Claimant should pay the Third Party’s costs. It had not been foreseeable or reasonable to join the Third Party who, as I said in my judgment, had a clear public interest defence. That would have been a defence to publication. It would also have been a defence to the preliminary stages of news gathering.

24.	Furthermore, he submitted, the MOD had joined NGN for wider purposes than the immediate action. The MOD resisted a stay on the Third Party proceedings because it wanted to establish a precedent which it could deploy in other proceedings which might arise out of the Operation Elveden disclosures. It was this argument which had led NGN to withdraw its application for a stay. Because the MOD had raised this argument at a late stage, it was ordered to pay NGN’s costs of the stay application.

25.	Mr Tomlinson also submitted that the Claimant was not a party to the Third Party proceedings and he should not be penalized for failing to take the unusual step of seeking a stay of those other proceedings after disclosure was complete. I should disregard the fact that the Claimant was covered by insurance. Insurance was a precaution against liability: it did not create a liability which would not otherwise have existed.    

26.	I am grateful to all the parties for their submissions. I bear in mind that the Senior Courts Act 1981 s.51(1) gives the court a discretion as to who should pay the costs of the proceedings. Rule 44.2 provides guidance as to the exercise of that discretion which must also be exercised in accordance with the overriding objective to deal with the case justly and at proportionate cost.

27.	I reject Ms Michalos’s primary argument that the Claimant should bear all of the Third Party’s costs. As I said in my provisional views, over and above the reasons why the Claimant was unsuccessful against the Defendant, there was a separate reason as to why any claim by him would not have succeeded against NGN. I was not persuaded by Ms Michalos’s attempt to distinguish between publication on the one hand and the news gathering methods which gave the Sun the information to publish on the other. In my judgment at [103] I had said that the means by which the Sun came by the information would be a factor against the newspaper but the other factors to which I referred in my judgment would decisively tip the Article 8/Article 10 balance in NGN’s favour. I do not think that it is relevant to my decision that (a) the MOD was a public body (since for these purposes, the MOD was to be treated in the same way as if it had been a private litigant, neither advantaged nor disadvantaged by its public status), or (b) that the insurance which the Claimant had taken out would be sufficient to cover the costs of the Third Party as well as those of the Defendant (since, as Mr Tomlinson said, insurance is a precaution against liability, not the cause of liability).

28.	I will return to the use which the Claimant made of the Third Party proceedings for disclosure. However, I do not think that it would be right to require the Claimant to bear the entirety of the costs of the Third Party because, once disclosure had been achieved, he did not take the initiative to apply for a stay of the Part 20 proceedings. He had of course been served with NGN’s application for a stay of those proceedings in the summer of 2015 and had taken a position in relation to that application. But it would be a different matter to regard him as carrying an onus to take the initiative to stay the proceedings once disclosure had been achieved. The MOD could have made such an application. It had not done so, it seems, because it wished to try to set a precedent for other proceedings in which it anticipated that both it and NGN would be involved as a result of Operation Elveden. Ms Michalos took me to the Defendant’s skeleton argument (settled by previous counsel) dated 21st July 2015 for the Costs and Case management conference which was due to take place on 22nd July to demonstrate that this was but one of the MOD’s considerations in opposing the stay. Other arguments were indeed advanced by the Defendant, but it is telling that it was the late advancement of the ‘precedent’ argument which seems to have caused the Master to order the MOD to bear the Third Party’s costs of the application for a stay, even though, on receipt of  the Defendant’s skeleton, NGN did not pursue its application for a stay.

29.	While, therefore, I reject Ms Michalos’s principal position, on reflection, I consider that there is more force in her fall-back position, namely that the Claimant should bear the Third Party’s costs up until the completion of disclosure on 17th November 2015 and not just the costs of the disclosure exercise itself.

30.	Mr Tomlinson said that the Third Party proceedings came as a surprise to the Claimant (who himself, of course, had chosen not to sue NGN).  That may be, but the Third Party claim was issued in November 2014. By 21st July 2015 the Claimant had decided that the Third Party proceedings could be turned to his advantage as an opportunity to gain disclosure.  I have observed that disclosure did in fact benefit the Claimant, although that is not strictly relevant to the present exercise.  What is relevant is that the Claimant chose to obtain disclosure by encouraging the Third Party proceedings to continue (strictly speaking, by indicating that he would oppose an application for a stay of those proceedings). Since the Claimant took that course, it does not seem to me to be just that the Claimant should be able to avoid the costs which the Third Party properly incurred in defending the Third Party proceedings up until the time that disclosure was complete. 

31.	I shall therefore order the Claimant to pay the Third Party’s costs of the proceedings up to and including 17th November 2015. The Defendant is to pay the Third Party’s costs thereafter. If the Third Party’s costs cannot be agreed they are to be assessed on the standard basis.

32.	It is right that the Claimant and the Defendant should make some interim payment on account of those costs.

33.	It was agreed at the hearing, that the starting point was the costs budget of the Third Party as approved by the Master. The Third Party’s budget had been for a total of £347,791.04, but the Master had approved a total of only £275,000. Ms Evans QC argued that, since the budget had been approved, the interim payment should be for more than the conventional two thirds. I indicated at the hearing that my provisional view was that, while some acknowledgement should be paid to this argument, (a)  the Third Party’s costs were very high; (b) part of the costs had already been incurred by the time of the Costs and Case Management Conference and, while the Master was at liberty to comment on past costs, it was not for him to approve or disapprove of them; (c) some of the costs budget was for witness statements, but NGN had not, in the end, served any witness statements. Two thirds of the approved budget would have been £183,331. I indicated that my provisional view was that the interim payment should be for £190,000.

34.	Ms Evans argued that some of the costs which had been budgeted for witness statements would have had to be incurred in considering the witness statements served by the other parties. I was not persuaded that this expense (to the extent that it was not properly treated as part of trial preparation) was sufficiently significant to alter my provisional view.

35.	Mr Tomlinson submitted that the amount in the budget on disclosure was excessive given that a great deal of the exercise would already have been undertaken for Operation Elveden. In my view, this is a matter which can be properly left to assessment (in the absence of agreement). It did not alter my view as to the overall amount which should be paid by way of interim payment.

36.	Because of the debate which took place after I had given my provisional views, the discussion as to how the interim payment of £190,000 should be divided as between the Claimant and the Third Party took place on a different premise and not on the basis that ultimate responsibility for the Third Party’s costs should be divided in the way that I have now decided should be the case. 

37.	If I look at the costs budget of the Third Party, the budgeted costs of the PTR, trial preparation and trial were £229,680 as against total costs of £347,791 i.e. about two thirds. The Master, as I have said, approved the Third Party’s budget only in a more limited sum. No one was able to tell me as to whether the Master had done more than reduce the global sum and the impression was that he had not. 

38.	If I were to apply the same proportion to the interim payment, it would mean that the Defendant should make an interim payment to the Third Party of £126,666 and the Claimant make an interim payment of £63,334. I will, however, give the parties a short opportunity to make written submissions if they wish to contend for any different interim payment. These should be made by Monday 18th April 2016 with any submissions in reply 2 days thereafter. [Following the circulation of this decision in draft, I received corrections from the parties which I have incorporated in this final version of the decision. No further submissions were made by any party as to interim payments.]

39.	No application was made for permission to appeal my substantive judgment. Any application for permission to appeal the costs decision should be made within 7 days of today.