Reference:  EWHC 769 (QB)
Court: Queen's Bench Division
Judge: Eady J
Date of judgment: 8 Apr 2009
Summary: Defamation – Libel – Costs capping order – Conditional fee agreement – After the event insurance – New costs capping rules - Whether a costs cap should be ordered
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Adam Wolanski QC (Defendant)
Adam Speker (Claimant)
Instructing Solicitors: Carter-Ruck for the Claimant; Davenport Lyons for the Defendant
The Claimant sued for libel in respect of allegations of domestic violence made by his former wife in an article in the Defendant’s newspaper. His case was funded under a CFA with ATE insurance. The Defendant applied for an order that there be a costs cap which would exclude provision for the cost of instructing leading counsel at any stage. The Defendant argued that unless the costs were capped there was a realistic possibility that, if it lost at trial, it would be faced with a costs liability (not including its own costs) of around £800,000 taking into account CFA uplift, ATE premiums and VAT. The Claimant opposed the application on the basis that new rules relating to cost capping applied and there were no exceptional circumstances in this case to justify making an order.
(1) Was there a risk of extravagance or disproportionate escalation of costs on the part of the Claimant?
(2) Could that risk effectively be countered by ordinary case management decisions?
(3) Could that risk effectively be countered by the retrospective process of detailed costs assessment?
Dismissing the application for a costs cap:
(1) There was a risk of extravagance or disproportionate escalation of costs. This conclusion was reached by reference to the matter of the hourly rates charged by the Claimant’s solicitors and the proposal to instruct leading counsel. For the Defendant to find itself facing a liability for total costs of over £1 million case would be manifestly absurd given the straightforward facts in issue and the potential level of damages the Claimant might recover.
(2) There was no scope for controlling the risk of incurring disproportionate costs by case management directions or orders.
(3) There were no exceptional circumstances in this case and the issues of the reasonableness or otherwise of city hourly rates and of instructing leading counsel could be adequately addressed retrospectively on detailed assessment.
This is the first case to address the new rules on cost capping which came into force on 6 April 2009. The judge made clear that, were it not for the new rules, he would have been strongly inclined to order a costs cap and specifically would have excluded the costs of instructing leading counsel. He referred to the government’s consultation paper on controlling costs in defamation cases, which proposes changes to the new rules in defamation cases including the mandatory application of costs caps, and said that we are moving inexorably towards some form of restriction on the costs incurred in libel cases.