(In this YAWS version a few editorial alterations have been made to the description of the CPR and Practice Directions, eg references to Part 3.8 have been changed to Rule 3.8, to ensure consistency with the remainder of the site.)
| This Report is referred to in: Brawley v Marczynski [11], [13], Kiam v MGN Ltd [3], [6], [6], [7], [10], [10], [12], Reid Minty v Taylor [23]. |
Royal Courts of Justice
Strand, London, WC2 A 2LL
Wednesday 20th June 2001
Before:
- and -
(1) TIMES
NEWSPAPERS LTD
(2) LIAM CLARKE
and
(3) ANDREW NEIL
Appellants
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4 A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Andrew Caldecott QC and Ms Caroline Addy (instructed by H2 O Henry
Hepworths of London WC1 N 2HH for the Appellants)
Mr James Price QC & Mr Matthew Nicklin (instructed by Bindman
& Partners of London WC1 X 8QF for the Respondent)
Judgment
As Approved by the Court
Crown Copyright ©
| CHADWICK LJ: | |||||||||||||||||||||||||||||||||||
| 1. | The underlying facts which have given rise to these proceedings are set out in the judgment of Lord Justice Simon Brown on the principal appeal. It is unnecessary for me to rehearse them. For the reasons which we gave on 12 June 2001, we dismissed the appeal of Times Newspapers Limited and others (to whom, for convenience, I will refer in this judgment collectively as "The Times" or "the defendants") against the order made by Mr Justice Eady on 31 March 2000. We have now heard argument on the claimant's cross appeal against so much of that order as dismissed his application under CPR 36.21. It is to that cross appeal that the judgment which I now give relates. | ||||||||||||||||||||||||||||||||||
| 2. | Part 36 of the Civil Procedure Rules 1998 contains rules about offers to settle and the consequences - in particular, the consequences in relation to costs - where an offer to settle is made in accordance with its provisions. CPR 36.21 is in these terms: | ||||||||||||||||||||||||||||||||||
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| In that context - and for the purposes of paragraphs (2) and (3) of the rule - "the latest date [on which/when] the defendant could have accepted the offer without needing the permission of the court" is prescribed by CPR 36.12. Where the offer is made not less than 21 days before the start of the trial, it means the date not later than 21 days after the offer was made. | |||||||||||||||||||||||||||||||||||
| 3. | It follows that, in a case where the claimant who has made a Part 36 offer (which has not been accepted) is successful at trial, the court is required to consider whether the defendant has been held liable for more than the amount for which the claimant has offered to settle, or whether the judgment against the defendant is more advantageous to the claimant than the proposals contained in the offer to settle. If the outcome of the trial is that - to adopt the phrase commonly used in this context - the claimant has `beaten' his own Part 36 offer, then CPR 36.21 applies and the court is required to make an order for the payment of interest under paragraph (2), and for the payment of costs under paragraph (3), unless it considers it unjust to do so - see paragraph (4). | ||||||||||||||||||||||||||||||||||
| 4. | The offer relied upon by the claimant in the present case is contained in a letter dated 21 December 1999 which was sent by his solicitors to the solicitors acting for The Times. The terms of settlement proposed in that letter were as follows: | ||||||||||||||||||||||||||||||||||
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| The letter concluded with a statement that those proposals were intended as a Part 36 offer; that the offer would remain open for acceptance for a period of 21 days; and that the offer related to the whole of the claim in the action. The period of 21 days from 21 December 1999 came to an end on 11 January 2000. | |||||||||||||||||||||||||||||||||||
| 5. | CPR 36.5 sets out the requirements, as to form and content, which must be satisfied if proposals are to be treated as comprised in a Part 36 offer for the purposes, inter alia of CPR 36.21. It was not suggested before the judge - and it has not been submitted in this Court - that those requirements were not satisfied. Nor has it been suggested that the other requirements in paragraph (1) of CPR 36.21 were not satisfied. It is accepted that the fact that the claimant was awarded £145,000 by the jury in respect of general damages - as against the amount (£50,000) which he had offered to accept in the letter of 21 December 1999 - suffices to satisfy sub-paragraph (a) of that paragraph. It is unnecessary, therefore, to consider whether the judgment was more advantageous to the claimant than, for example, the lesser amount of general damages coupled with a retraction and an apology would have been. This is not a case in which it is said that sub-paragraph (b) of paragraph (1) of CPR 36.21 has any relevance. | ||||||||||||||||||||||||||||||||||
| 6. | It follows, therefore, that the judge was required to make orders under paragraphs (2) and (3) of CPR 36.21 unless satisfied that it was unjust to do so. The judge was satisfied that it would be unjust to make an order under paragraph (2) for the payment of interest on the general damages awarded by the jury. He explained why he took that view in a short passage at page 6, lines 19-28, of the judgment which he gave on 30 March 2000: | ||||||||||||||||||||||||||||||||||
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| He was satisfied, also, that it would be unjust to make an order under paragraph (3) of CPR 36.21 for indemnity costs. He referred to "the unique circumstances of this case". He expressed doubt whether, as a matter of construction, there was power under sub-paragraph (b) of paragraph (3) to make an order for the payment of interest on costs unless the costs themselves were the subject of an order under sub-paragraph (a) of that paragraph. But, if there were power to do so - that is to say, power to order the payment of interest on costs which were to be assessed on the standard basis - he did not think it appropriate to exercise that power. | |||||||||||||||||||||||||||||||||||
| 7. | There is no doubt that the question whether or not it was unjust to make orders under paragraphs (2) and (3) of CPR 36.21 was a question for the judge to determine in the exercise of his discretion. In exercising that discretion he was obliged to take into account all the circumstances of the case; including, in particular, the specific matters referred to in paragraph (5) of the rule. If the judge took into account the matters which he ought to have taken into account, and left out of account matters which ought not to have taken into account, it would be wrong in principle for this Court to interfere with his decision. It could only do so if satisfied that the decision was so perverse that the judge must have fallen into error. This Court must respect the judge's exercise of the discretion which has been entrusted to him. The Court must resist the temptation to substitute its own view for that of the judge unless satisfied that his discretion has been exercised on a basis which is wrong in law; or that the conclusion which he has reached is so plainly wrong that his exercise of the discretion entrusted to him must be regarded as flawed. | ||||||||||||||||||||||||||||||||||
| 8. | I turn, then to examine the basis upon which the judge reached his conclusion that it would be unjust to make any order under paragraphs (2) and (3) of CPR 36.21. He identified four reasons which may be summarised as follows: (i) the proximity of the trial when the offer was made; (ii) the fact that the defendants were funding the preparations for trial of the claimant's action - in particular, in connection with the compilation and copying of the trial bundles; (iii) what the judge described as "an unusual public interest element" - in that the defendants were taking on the burden of proving that the committee of alleged conspirators did not exist; and (iv) the fact, described by the judge as being "of great significance", that the Part 36 offer, contained in the letter of 21 December 1999, required the defendants to publish a retraction and apology in their newspaper and also to join in a statement in open court. But, having identified, and elaborated upon, those reasons, the judge said this, at page 5 line 26 to page 6 line 3 in the transcript of his judgment: | ||||||||||||||||||||||||||||||||||
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| 9. | In my view the judge was wrong to take into account - as, plainly, he did - his belief that an order for the payment of costs on the indemnity basis made under CPR 36.21(3) implied disapproval by the court of a defendant's conduct; carried some stigma; or could properly be regarded as punitive. It is, to my mind, clear from the structure and language of CPR 36.21 - and, in particular, from paragraph (4) of that rule - that an order for the payment of costs on an indemnity basis (from the latest date when the defendant could have accepted the offer without needing the permission of the court) is the order which the court can be expected to make in a case where a claimant who has made a Part 36 offer is, nevertheless, obliged to proceed to trial - because the defendant does not accept the offer - and then beats his own offer at trial. In those circumstances, it is only where the court considers that such an order would be unjust that it is permitted to refuse an order for the payment of costs on an indemnity basis. To make the order carries no implied disapproval of the defendant's conduct; nor any stigma. Properly understood, the making of such an order in a case to which CPR 36.21 applies indicates only that the court, when addressing the task which it is set by that rule, has not considered it unjust to make the order for indemnity costs for which the rule provides. | ||||||||||||||||||||||||||||||||||
| 10. |
In | ||||||||||||||||||||||||||||||||||
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| The guidance contained in those paragraphs was not available until the end of May 2000; in particular, it was not available to Mr Justice Eady on 30 March 2000, when he made his order in the present case. | |||||||||||||||||||||||||||||||||||
| 11. | It follows that this is a case in which the basis on which the judge exercised his discretion can now be seen to have been flawed. The judge thought, wrongly, that the order for indemnity costs which he was invited to make under CPR 36.21 was punitive in nature; and would be seen as indicating some measure of disapproval of the defendants' conduct which he did not regard as merited and which he did not intend. Those considerations were unfounded and should have been left out of account. This, then, is a case in which this Court is entitled - indeed, bound - to set aside the view reached by the judge; and to form its own view on the question whether it would be unjust to make the orders for which paragraphs (2) and (3) of CPR 36.21 provide. | ||||||||||||||||||||||||||||||||||
| 12. | The Times - as respondents to this cross-appeal - rely on the factors identified by the judge and to which I have already referred. First, it is said that the Part 36 offer was made at a very late stage in the proceedings. It was, in fact, made just 21 days before the trial was due to begin (on 11 January 2000); although, in the event, the commencement of the trial was postponed, for other reasons, until 25 January 2000. It is plain that the stage of the proceedings at which a Part 36 offer is made is a factor which a court must take into account - see paragraph (5)(b) of CPR 36.21. But, as it seems to me, the fact that the offer is made in the month before the trial cannot, of itself and without more, be a reason for holding that it is unjust to make orders under paragraphs (2) and (3) of that rule. It is important to keep in mind that the orders for which those paragraphs provide have effect only from the latest date when the defendant could have accepted the offer without needing the permission of the court. So, in a case (such as the present) where the Part 36 offer is made more than 21 days before the start of the trial, orders under paragraphs (2) and (3) cannot relate to costs incurred or interest accruing before 12 January 2000. They cannot relate to any period before the offer was made; and they allow, necessarily, for a period of at least 21 days following the offer, during which The Times had the opportunity to consider whether or not accept the offer or to seek clarification of its terms. It is not difficult to imagine circumstances in which it would be unjust to make orders under paragraphs (2) and (3) of CPR 36.21 because the offer was made so late that a defendant had no proper opportunity to consider it; but, making due allowance for the intervention of the Christmas holidays and millennium celebrations, I am not persuaded that that was the position in the present case. Nor is it difficult to imagine circumstances in which it might be unjust to make orders under those paragraphs because the offer was made so late that the costs already incurred were (in proportion to the costs yet to be incurred) such that there was little to be saved by bringing the proceedings to an end at that stage. But, again, that is not this case. In my view, the fact that the offer was made at a late stage in the proceedings - although a factor which the court must take into account - does not support the conclusion, in the present case, that it would be unjust to make orders under paragraphs (2) and (3) of CPR 36.21. | ||||||||||||||||||||||||||||||||||
| 13. | Second, it is said that it was unjust to make orders under CPR 36.21 in the circumstances that the defendants' solicitors had taken upon themselves the burden of preparing the bundles for trial. For my part - although we were told that there was a limited concession below that the point had some relevance - I find that submission difficult to understand. It was not pressed in argument before us; and I need say little about it. It is sufficient, I think, to point out that, because the defendants' solicitors took upon themselves the burden of preparing bundles for trial, there can be little or no element in the claimant's costs (whether assessed on the standard or on the indemnity basis) which can relate to the preparation of bundles; and that, if the defendants' solicitors had not taken that burden upon themselves, then an amount equivalent to the costs which they incurred in carrying out that exercise would have been incurred by the claimant's solicitors and would have been recoverable from the defendants under an order for costs in the event (which happened) that the claimant succeeded in the action. The most that can be said, as it seems to me, is that The Times have had to pay their own solicitors, sooner and on an "own client" basis, for work for which they would otherwise have had to reimburse the claimant, later and on a standard basis. I cannot think that that factor should lead to the conclusion that it would be unjust to make orders under paragraphs (2) and (3) of CPR 36.21. | ||||||||||||||||||||||||||||||||||
| 14. | Third, The Times rely upon what they describe as " public interest and the problems of acceptance". Their submissions elide what the judge regarded as distinct points: (a) that there was an unusual public interest element in the sense that the Times were taking on the burden of proving that the supposed committee of conspirators referred to in the programme and in the claimant's book did not exist and (b) that the offer in the letter of 21 December 1999 required The Times to publish a retraction and apology, and to join in a statement in open court. In relation to those points the judge said this (at page 5 lines 8-17 of his judgment): | ||||||||||||||||||||||||||||||||||
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| 15. | It is necessary to have in mind that the Part 36 offer was made at a time when the claimant was seeking - by means of the Part 14 notice which was served on the same day - to litigate his defamation claim on the basis that he did not challenge the assertion, in paragraph 10A of The Times' particulars of justification, that the supposed committee did not exist. At the pre-trial review on 21 December 1999 the claimant sought an order that the alleged members of the committee should not be called to give evidence; on the basis that there was no longer an issue to which their evidence could relate. In those circumstances, as it seems to me, the claimant could not have insisted on any published retraction or apology, or on any statement in open court, which did not, in terms, make it clear that - far from the supposed members of the committee being unwilling to face their accuser (as the judge put it) - it was the claimant who did not wish to challenge the evidence which they were expected to give. I accept, of course, that if the claimant had sought to insist on a retraction and apology - or on a statement in open court - which did not make that clear, then it might well have been unjust to make orders under paragraphs (2) and (3) of Part 36.21 on the basis that the offer was one which (with hindsight) should have been accepted. But the terms of the retraction and apology which the claimant sought, or would have been prepared to accept, were never explored. Those matters were never explored because The Times chose not to respond to the offer letter of 21 December 1999. It was unreal to expect that Mr McPhilemy would, himself, make a statement withdrawing the allegations which he had made; and, in those circumstances, The Times was determined to have a decision on the question whether or not the supposed committee did exist. Had the terms of the retraction and apology which the claimant would have been prepared to accept (or could have been prevailed upon to accept) in order to settle these proceedings been explored, the position might now appear in a different light. But the opportunity to expose the offer as one which The Times could not, in fairness to the alleged members of the committee, accept was not taken; and, in those circumstances, I am not persuaded that the compromise of this defamation action which was on offer on 21 December 1999 could not have been presented to interested and informed observers in such a way as to make it clear that any inference that the alleged committee members were unwilling to face the claimant in court would be wholly unfounded. | ||||||||||||||||||||||||||||||||||
| 16. | Nor am I persuaded that there was any public interest to be served in insisting on a trial in order to have "a full and open resolution of these issues". To take the view that a defamation action between a journalist and a newspaper, in which the real issue was whether the journalist had acted honestly and responsibly on the basis of the information which he claimed to have received from his sources, and to which the alleged committee members were not parties, was a suitable vehicle for "a full and open resolution" of the question whether there was, in Northern Ireland at the relevant time, something approaching an institutional conspiracy amongst so-called loyalists to assassinate republicans was, as it seems to me, misconceived from the outset. In making that observation I intend no criticism of the decision to permit the issue to be raised by The Times as an element in the defence of justification. I do no more than point out that, whatever decision the jury reached if the issue was left to them, it was never likely that there would have been "a full and open resolution", of matters which were never capable of being fully resolved in private litigation of this nature. | ||||||||||||||||||||||||||||||||||
| 17. |
There is, however, force in the final point advanced on behalf of The
Times; that is to say, that it is established practice, in defamation cases,
for the court to refuse to direct the payment of interest, in respect of any
period prior to the date of the award, on the amount of the jury's award. The
justification for that practice is that the amount of the jury's award takes
account of everything down to the date of the award, including, in particular,
the strain and distress caused to the claimant by the conduct of the trial and
the fact that the claimant has had to wait for payment of the compensation to
which he has ultimately been held entitled. It is said that it would be unjust
to order the payment of interest, under paragraph (2) of CPR 36.21, on any part
of the jury's award in the present case - at least in respect of any period
prior to the date of the award - because it has to be assumed: (i) that the
award itself includes an element which reflects the loss to the claimant
equivalent to the actual or notional cost of being kept out of the monetary
compensation, which (on the hypothesis that the libel had been established) he
should have had immediately after the libel was published, by the delay
occasioned by legal proceedings and a trial; and (ii) that the award itself
takes account of the anxiety and distress of the proceedings and trial to which
Lord Woolf, Master of the Rolls, referred in the | ||||||||||||||||||||||||||||||||||
| 18. | I find that final point persuasive. In order to explain why, it is necessary, I think, to return to an examination of the purposes for which the powers in paragraphs (2) and (3) of CPR 36.21 have been conferred. | ||||||||||||||||||||||||||||||||||
| 19. |
It is plain, as Lord Woolf, Master of the Rolls, pointed out in the
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| 20. |
Two of those elements, which many would regard as obviously unfair, were
identified by Lord Woolf, Master of the Rolls, in the | ||||||||||||||||||||||||||||||||||
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| 21. | I conclude, therefore, that the power to award interest under paragraph (2) of CPR 36.21 at an enhanced rate - that is to say, at a rate higher than the rate (if any) which would otherwise be chosen under section 35A of the 1981 Act - is conferred in order to enable the court, in a case to which CPR 36.21 applies, to redress the element of perceived unfairness, otherwise inherent in the legal process, which arises from the fact that damages, costs (even costs on an indemnity basis) and statutory interest will not compensate the successful claimant for the inconvenience, anxiety and distress of having to resort to and pursue proceedings which he had sought to avoid by an offer to settle on terms which (as events turned out) were less advantageous to him than the judgment which he achieved. But, if that is the purpose for which the power has been conferred, then it should not be used to award interest in a case where it must be assumed that the anxiety, inconvenience and distress of defamation proceedings have already been taken into account by the jury in reaching their award. To order the payment of interest on the amount of the award - in respect of any period prior to the date of the award - would be to risk introducing an element of double compensation. It would be to risk crossing the boundary which separates compensation from punishment. | ||||||||||||||||||||||||||||||||||
| 22. | An order, under paragraph (3) of CPR 36.21, for the payment of costs on an indemnity basis does not give rise to a risk of double compensation. The purpose for which the power to order the payment of costs on an indemnity basis is conferred, as it seems to me, is to enable the court, in a case to which CPR 36.21 applies, to address the element of perceived unfairness which arises from the fact that an award of costs on the standard basis will, almost invariably, lead to the successful claimant recovering less than the costs which he has to pay to his solicitor. The jury, in reaching their award of damages, are not concerned with costs; and there is no reason to think that their award takes any account of the probable shortfall if costs are subsequently ordered on the standard basis. In my view, therefore, there is no injustice in making an order, under paragraph (3)(a) of CPR 36.21, that the claimant is entitled to his costs on the indemnity basis from the latest date when The Times could have accepted his Part 36 offer without needing the permission of the court. In the present case that date is 11 January 2000. | ||||||||||||||||||||||||||||||||||
| 23. |
Nor do I see any injustice, in principle, in an order under paragraph
(3)(b) of CPR 36.21 for the payment of interest on the costs which are the
subject of the order which I would make under paragraph (3)(a). The purpose for
which the power to order interest on costs under that paragraph is conferred
is, I think, plain. It is to redress, in a case to which CPR 36.21 applies, the
element of perceived unfairness which arises from the general rule that
interest is not allowed on costs paid before judgment - see | ||||||||||||||||||||||||||||||||||
| 24. |
I have not yet addressed the question whether it would be right to order
interest after judgment, either (i) under paragraph (2) of CPR 36.21, on the
award of damages or (ii) under paragraph (3)(b) of the rule, on the costs which
I would make the subject of an order under paragraph (3)(a). In my view
paragraphs (2) and (3)(b) of CPR 36.21 are not intended to confer on the court
powers to vary the rate at which interest is payable on a judgment debt
pursuant to section 17 of the Judgments Act 1838Acts. An order for costs is a
judgment debt for the purposes of the 1838 Act - see | ||||||||||||||||||||||||||||||||||
| 25. | It follows, therefore, that I would allow the cross-appeal to the extent which I have indicated. I would direct that the claimant is entitled to his costs on the indemnity basis from 12 January 2000 (which is the date for which he contends); and to interest on those costs at the rate of 4% above base rate from the date upon which the work was done or liability for a disbursement was incurred until the 30 March 2000 - that being the date of judgment. Interest thereafter, on damages and costs, will be payable at the judgment rate, under section 17 of the Judgments Act 1838Acts, in the ordinary course. | ||||||||||||||||||||||||||||||||||
| 26. | I should add that I have had the advantage of reading, in advance, the judgment which Lord Justice Simon Brown is to hand down. I agree with him, for the reason which he gives, that the costs of the principal appeal should be paid by The Times on the indemnity basis. | ||||||||||||||||||||||||||||||||||
| LORD JUSTICE LONGMORE: | |||||||||||||||||||||||||||||||||||
| 27. | I agree with the judgments of both the other members of the Court. | ||||||||||||||||||||||||||||||||||
| LORD JUSTICE SIMON BROWN: | |||||||||||||||||||||||||||||||||||
| 28. |
I agree with all that Chadwick LJ has said with regard to the respondent's
cross-appeal and with the order he proposes. The Judge below, without the
benefit of this Court's judgment in | ||||||||||||||||||||||||||||||||||
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| 29. |
When dismissing the principal appeal, we left over for decision whether The
Times should pay the respondent's costs of that appeal on a standard or an
indemnity basis. Clearly rather more of a stigma attaches to an indemnity
costs order made in this context than in the context of a Part 36.21 offer -
although even then no moral condemnation of the appellants' lawyers is
necessarily implied - see | ||||||||||||||||||||||||||||||||||
| ORDER: | |||||||||||||||||||||||||||||||||||
| The appellant's appeal be dismissed. The appellant to pay the respondent's costs of the appeal on the indemnity basis, to be assessed if not agreed. The respond's cross appeal be allowed in part, and the order below modified as follows: | |||||||||||||||||||||||||||||||||||
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| (Order does not form part of approved Judgment) | |||||||||||||||||||||||||||||||||||