Modi v Clarke

Costs budgeting is concerned with managing future estimated costs, intended activities and proposed procedural steps. It is not a detailed assessment of costs already incurred. In reviewing budgets, the court should not investigate without-prejudice negotiations or Part 36 offers to decide whether a party is acting unreasonably in pursuing the claim. That question is ordinarily better left to the later assessment of costs. In defamation proceedings, proportionality may require regard to the value of the claim, the reputational issues at stake, the seriousness of the meaning and the importance of vindication. A costs-management review does not require the court to determine meaning in every case. There is no necessary conflict between PD 51D para 5.6 and the rules governing assessment on the indemnity basis.

Two libel actions were brought against the chairman of the England and Wales Cricket Board by Lalit Modi and International Management Group (UK) Ltd. The claims concerned an email and, in IMG’s case, a substantially identical letter sent to senior cricket administrators.

The actions were listed for a jury trial. At an interim hearing, the court considered competing costs budgets under the costs-management scheme in PD 51D. The parties disagreed about whether the court could examine witness evidence, without-prejudice correspondence and a Part 36 offer when assessing the proportionality of budgeted costs.

The central issues were the scope of the budgeting review, the relevance of reputational issues in defamation proceedings, and the relationship between the budgeting provisions and the rules governing standard and indemnity costs.

1. The court could not complete the full review because the figures had changed, but it determined the governing principle arising from the dispute about proportionality.

2. The purpose of the costs-management scheme is to control future costs. The review concerns estimates of future base costs, intended activities and proposed procedural steps. It is not an assessment of costs already incurred. The scheme would defeat its purpose if the review became a substantial and costly inquiry of its own.

3. In defamation proceedings, the court may consider the value of the claim and the reputational issues at stake. Those issues may extend beyond the monetary value of damages and may include the seriousness of the meaning and the importance of vindication. The court need not rule on meaning in every costs-management review, although a meaning ruling may sometimes assist case management and reduce costs. The approach to vindication in Clarke v Bain [2008] EWHC 2636 (QB) was relevant to that analysis.

4. The court should not, when reviewing an unagreed budget, attempt to decide whether a party is acting unreasonably by continuing the claim despite settlement offers. Witness statements, without-prejudice correspondence and Part 36 offers may be relevant to the later assessment of costs, but they should not ordinarily be examined for this purpose. Williams v Boag [1941] 1 KB 1 concerned a materially different interlocutory situation and did not require a different conclusion.

5. There was no need to decide the relationship between PD 51D para 5.6 and CPR 44.4(3). If the point arose, however, an award of indemnity costs would make proportionality irrelevant to the subsequent assessment, so costs exceeding the last approved budget would not be objectionable merely for that reason.

First-instance decision on the scope of costs budgeting in two pending libel actions. The judgment did not finally determine the merits of the libel claims.