Optical Express Ltd and Others v Associated Newspapers Ltd

Hearing date: 24 October 2017

Judgment Approved

Introduction

The claimants in this action are companies involved in the operation of the well-known high street business, Optical Express. One of Optical Express's services is refractive eye surgery, involving a lens implant. The claimants sued for damages and an injunction in respect of alleged libel and/or malicious falsehood in an article published by the defendant in the Mail Online on 4 January 2015 and in the Daily Mail on 5 January 2015. The article was entitled " Blindness fear over eye surgery at High Street Clinic: Patients left with worse sight after lens implant". On 21 February 2017, the claimants accepted a Part 36 Offer which the defendant had made on 27 May 2016. That brought the action to an end, subject to costs. Each side now applies for the court's determination of issues as to costs.

The claimants seek what the Civil Procedure Rules refer to as the "prescribed orders" following acceptance of a Part 36 payment out of time, as set out in CPR 36.13 (4)(b) and (5). They say that the ordinary or default consequences of late acceptance should follow: they should be awarded their costs on the standard basis up to the date when "the relevant period" expired, with the defendant recovering its costs on the standard basis from that date to the date when the offer was accepted. The defendant resists the claimants' application, contending that it would be unjust to make the prescribed orders. The defendant has issued an application of its own, seeking different orders.

Issues

The defendant's application raises two main issues: should the court depart from the default position by

(1) awarding the defendant its costs from 5 February 2015 (the date when it made an Offer of Amends pursuant to the Defamation Act 1996) to 17 June 2016 (the end of the "relevant period") ("The Pre-Offer Issue") or alternatively making no order as to the costs incurred in that period, or reducing the claimants' default entitlement to a proportion of their costs; and/or

(2) ordering that the costs to which the defendant is admittedly entitled from 18 June 2016 be assessed on the indemnity basis ("The Indemnity Costs Issue").

Thirdly, the defendant seeks a direction that the costs due to the defendant, whatever they may be, should be set off against the claimants' entitlement to costs and damages.

The defendant's application seeks four further orders, concerning the apportionment of costs as between various claims advanced by the claimants, and the costs budgeting process in the action. The claimants resist all these aspects of the application, on the grounds that this Court does not have jurisdiction to entertain them or, if it does, it should rule against the defendant. By agreement, I shall deal with those other aspects of the application if and to the extent they remain effective in the light of my conclusions on the three issues I have identified above.

Procedural chronology

It is possible to summarise the chief features of the chronology quite shortly.

(1) The claim form was issued on 23 January 2015, seeking damages "including special damages."

(2) On 5 February 2015, the defendant made a qualified Offer of Amends in respect of the libel claims. At the same time, it made a Without Prejudice Save as to Costs ("Calderbank") offer on damages in the sum of £25,000. The open letter with the Offer of Amends made clear that the defendant did not at that stage accept that the claimants had any right to recover special damages. Later, it was spelled out that the money offer was in respect of general damages. The Offer of Amends was promptly accepted. On 2 March 2015, an apology was published on page 2 of the Daily Mail and from that date on the Mail Online website. On 24 March 2015, a statement was read out in open court before me.

(3) The defendant's Calderbank offer was not accepted. The claim for damages proceeded. The malicious falsehood claim also continued, as the Offer of Amends procedure is not available for that tort.

(4) The Particulars of Claim, served on 24 February 2015, alleged that the claimants had suffered serious financial loss as a result of a "dramatic collapse in business following the widespread dissemination of the defendant's allegations." A Confidential Schedule set out calculations to support a claim that in January 2015 alone the claimants had sustained a total loss of revenue from refractive eye operations of some £3.7 million, with consequent lost profits amounting to £2.89 million. These were said to be the best particulars that the claimants could provide at the time. The Particulars alleged that there was further and continuing loss, details of which would be "provided once it has crystallised."

(5) On 6 May 2015, the defendant served a Defence, which was amended on 1 April 2016. This denied the claimants' entitlement to any damages for financial loss, asserting that the claim was misconceived in various respects. It further complained that the Particulars of Claim impermissibly sought "to impose on the defendant responsibility for a general downturn in the claimants' business", despite widespread negative publicity affecting Optical Express resulting from entirely independent events.

(6) On 29 October 2015, the defendant served a request for further information about the claim, seeking details of the further and continuing financial loss alleged to have been suffered.

(7) At the first CCMC on 10 November 2015, Master Leslie imposed a stay of 3 months "save for negotiations concerning costs and case management" and preparation for an adjourned CCMC on 17 February 2016.

(8) Some further information was provided on 8 March 2016, but not the details of financial loss requested in October 2015. An Amended Reply was filed on 26 April 2016. A third set of Further Information was provided by the claimants on 3 May 2016, in response to the request made over 6 months earlier. The claim, as set out in this document, had risen to some £21.5 million.

(9) On 27 May 2016, the defendant made a Part 36 offer in the sum of £125,000. Of this sum, £100,000 was attributed to the special damages claim. £25,000 was attributed to the claim for general damages.

(10) On 17 June 2016, the claimant's solicitors responded that the offer was "wholly derisory" and rejected, in view of the special damage claim for £21.5 million based on "proper forensic analysis of the losses caused by your client's publications". The "relevant period" for accepting the defendant's Part 36 Offer expired that day. The matter continued. The offer was not withdrawn.

(11) On 7 October 2016, by consent, the third claimant discontinued all its claims, the second claimant discontinued its claim in defamation, and those two claimants were ordered to pay the defendants' costs of the abandoned claims.

(12) The remaining claims proceeded. The action was listed for trial over 5 weeks commencing on 12 June 2017. Disclosure was given, and on 12 December 2017 forensic accountancy evidence was served. This calculated the claim at £17m, though the Particulars were not amended.

(13) On 21 February 2017, the first and second claimants served and filed notice of acceptance of the defendant's Part 36 Offer.

(14) Since then, the issues about costs which I have identified above have emerged. The claimants applied for the prescribed orders by application notice dated 21 April 2017. The defendants filed their cross-application on 18 August 2017.

Evidence

The defendant's application is supported by a 27 page witness statement of 18 August 2017 from Keith Mathieson, a partner at its solicitors, RPC. The exhibit runs to 112 pages. The claimants did not respond to that evidence until Thursday 19 October 2017, when they served a statement from Charlotte Watson of their solicitors, Schillings, running to 76 paragraphs accompanied by an exhibit of some 218 pages. This was 2 working days before the hearing, and one day before skeleton arguments were due. It is understandable that the statement in reply from Rupert Cowper-Coles of RPC did not reach me until the day of the hearing.

In the event this flurry of late evidence, though administratively inconvenient, has not derailed the hearing. I would add that the heated atmosphere which evidently characterised earlier phases of this litigation has not carried over to the present hearing. I am grateful to all the legal representatives for their calm and careful assistance.

The sums at stake

Details of the parties' relevant costs were exchanged on 7 September 2017. The claimants' pre-offer costs, that is to say their costs up to and including 17 June 2016, are stated to be £549,070.24. The defendant's costs from 18 June 2016 to the date of acceptance are said to be £498,456.48.

The Pre-Offer Issue

Applicable principles

The costs consequences of late acceptance of a Part 36 offer are governed by CPR 36.13(4)(b) and (5) which provide as follows:

"(4) Where—

…

(b) a Part 36 offer which relates to the whole of the claim is accepted after expiry of the relevant period; …

… the liability for costs must be determined by the court unless the parties have agreed the costs.

(5) Where paragraph (4)(b) applies but the parties cannot agree the liability for costs, the court must, unless it considers it unjust to do so, order that—

(a) the claimant be awarded costs up to the date on...