This is our fourth e-bulletin on this fascinating and hard fought action. In our April 2003 e-bulletin we reported the judgment of Mr Justice Lindsay on the issue of liability, and in November 2003 we reported on the assessment of damages. On 23 January 2004 Mr Justice Lindsay handed down judgment on the issue of who should bear the substantial costs of the action.
The Douglases and OK magazine won their actions for breach of confidence against Hello!magazine and its publishers, despite adjudications on some aspects of the claims in the defendants’ favour. However, a complex series of questions fell to be determined by the judge on the appropriate orders for costs based on his previous judgments both as to liability and quantum.
The judge specifically took into account the judicial findings of misconduct against Hello!,referring to the “lamentable incident” whereby an “untruthful and misleading” letter had been procured by those defendants. A number of harsh criticisms by the judge of the behaviour of Hello! in his judgment on the issue of costs clearly had an impact on his various awards.
The judge considered that an award that merely looked at the number of issues won respectively by the claimants and the defendants would not fairly reflect the realities of the case. Overall, the claimants had clearly won the liability hearing, and he considered therefore that the appropriate proportion of their costs which the defendants should pay was 75%. He assessed this on the “standard” basis because he considered that the award of “indemnity” costs at an earlier hearing where the misconduct by Hello! was exposed constituted sufficient punishment. (Indemnity costs represent a higher proportion of actual costs than costs on the standard basis, and can be used by the courts to penalise misconduct.)
The judge awarded the claimants 85% of their costs for the hearing on quantum and he ordered that these too should be assessed on the standard basis. He went on to order £120,000 interest on the award of over £1 million made to OK in the action.
Finally, the judge ruled that the manner in which both parties had set out their pleadings permitted him to revisit the order of the Court of Appeal on the issue of costs for the hearing on the issue of an interim injunction. Bearing in mind the severe findings of misconduct made by the Court of Appeal against Hello!, the judge concluded that the right order in all the circumstances was that there should be no order as to costs for that hearing.
These orders will make a big dent in the very substantial award of damages made to OK (slightly in excess of £1 million), and swallow up many times over the modest damages recovered by Michael Douglas and Catherine Zeta Jones (£7,000). It will, however, mean that the legal costs payable by Hello! magazine (subject to the appeals which have now being lodged) will be a substantial seven figure sum. This is a very high price for what the courts found were its tainted conscience both before and during the litigation.
Our headline calls this the “Last Battle” but adds a question mark. That is because both sides have launched appeals, on which we will report on in a future e-bulletin.