England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE No FC3 98/5279/ CMS1

IN THE COURT OF APPEAL (CIVIL DIVISION) QBENI 97/0567 CMS1

Royal Courts of Justice

Strand

London WC2

Friday, 13th February 1998

B e f o r e:

LORD JUSTICE HENRY

LORD JUSTICE ALDOUS

SIR CHRISTOPHER STAUGHTON

DAVID ROSS CAMPBELL WALLACE

and

CAROLE LOUISE WALLACE

Respondents

- v -

BRIAN GALE & ASSOCIATES (a Firm)

Appellants

(Computer Aided Transcript of the Palantype Notes of

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

MR A CHOO-CHOY (Instructed by Messrs Attersolls of Reigate) appeared on behalf of the Appellant

MR C JOSEPH (Instructed by Messrs Copley Clark & Bennett of Sutton) appeared on behalf of the Respondents

J U D G M E N T

(As Approved by the Court )

(Crown Copyright)

SIR CHRISTOPHER STAUGHTON: Mr and Mrs Wallace, in May 1992, bought a house in Merstham, Surrey. Before doing so they applied to borrow money from the Cheltenham & Gloucester Building Society on the security of the house. The building society required a report and valuation from Brian Gale & Associates, a firm of surveyors comprising John McQuillan and Brian Gale. In reliance on their report the building society lent them money, and Mr and Mrs Wallace bought the house. Almost immediately Mr and Mrs Wallace complained that the house was defective. On 28th March 1994 they issued a writ against the firm of surveyors. In due course both parties were legally aided, or so it appears. It also must have occurred to them that the cost of fighting the action could amount to more than the house was worth. That would have been a misfortune for the legal aid fund. There came a time when it also caused concern to the parties, perhaps because of the charge which the legal aid fund has on property recovered or preserved in assisted proceedings. At all events, the parties arrived at a settlement. That was effected by an order of Judge Humphrey Lloyd QC dated 7th July 1995. The judge's order stated:

"1. All further proceedings in this action be stayed upon the terms of settlement agreed between the parties set out in the Schedule herein except for the purpose of carrying the said terms into effect and that there be liberty to apply for the said purpose.

.....

3. There be Legal Aid taxation of the Plaintiffs' costs from 31st October 1994 and of the Defendant's costs under [two numbered and dated certificates] and it is further ordered that paragraph 6 of the Schedule shall apply as an order of the court."

That is a familiar form of order which is frequently known by the name of the judge who invented it, in contrast to other forms of

order which are known after the case in which they were first used.

The schedule contained elaborate provision for Mr McQuillan and Mr Gale to procure that Mr and Mrs Wallace's property be repaired at some future date while they were provided with alternative accommodation and their possessions were removed and stored. There were provisions for an engineer to supervise the work and for a certificate to be given that the property was structurally stable when the work was completed. The first four paragraphs of the schedule all contain express provision as to who is to bear the cost of the things to be done. In paragraph 1 the defendants are to bear the costs of the works; in paragraph 2 they are to bear the cost of accommodation for Mr and Mrs Wallace and for the

removal and storage of their goods; in paragraph 3 they have to

bear the costs of the appointment of a supervisor of the works; in paragraph 4 they are, at their own expense, to procure a

certificate that the work has been properly done. Paragraph 6 of the schedule dealt with the costs of the action as follows:

"6.1 The Defendant agrees to pay the Plaintiffs' costs of the action to be taxed if not agreed subject to the provision set out hereunder.

6.2 The provision at 6.1 above is not to be enforced without the leave of the court save in the event that a finding of liability is made by the court in the proposed proceedings mentioned in paragraph 6.3 hereunder, and also subject to paragraph 6.5 hereunder."

Paragraph 6.3 explained that the proposed proceedings were to be an action brought by Mr McQuillan and Mr Gale against their professional indemnity insurers seeking indemnity. Paragraph 6.4 limited any obligation which they might have to pay the costs of Mr and Mrs Wallace in the event of such proceedings succeeding to the amount recovered in such proceedings. Paragraph 6.5 I can omit.

So there were, on the face of the schedule, two circumstances in which Mr and Mrs Wallace might recover their costs from Mr McQuillan and or Mr Gale. The first was if the court granted

leave. The second was if and to the extent that Mr McQuillan and Mr Gale recovered money from their professional indemnity insurers.

There followed a period during which the defendants procured or purported to procure that the work required by the schedule was carried out. But there was a good deal of dispute between the

parties and more correspondence was carried out on behalf of Mr and Mrs Wallace by the solicitors. At the end of the day two questions arose. The first was whether the cost of the work done after the settlement agreement on behalf of Mr and Mrs Wallace was part of the costs of the action within paragraph 6.1 of the schedule to the compromise order. In other words, were those costs which the defendants had agreed to pay subject to the limit on the circumstances on which the order could be enforced against them? That question was stated for the opinion of Judge Humphrey LLoyd in a summons which asked for a declaration -

"that the Plaintiffs' costs of and concerned with the implementation of the order of His Honour Judge Humphrey Lloyd QC dated 7th July 1995 including the matters set forth in the schedule thereto to be borne as set out at paragraph 6 thereof."

The judge granted the order sought. It was declared

"that the plaintiffs costs of and concerned with the implementation of that order including the matters set forth in the schedule were to be borne as set forth in paragraph 6."

From that order Mr Gale appeals; Mr McQuillan does not.

The second question that arose was this. The legal aid certificate of Brian Gale, at some time after the consent order, was revoked. That prompted Mr and Mrs Wallace to apply to Judge Humphrey Lloyd

QC under paragraph 6.1 for leave to enforce the order for costs that he made against Mr Gale. The judge granted leave. I should add that Mr McQuillan still had a legal aid certificate and no such application was made against him. That raises the second question which comes before us on appeal.

The first question as to the extent of paragraph 6.1 in the schedule of the order is one purely of interpretation, what is meant by the costs of the action. In order to discover what we are determining one needs to find out what the costs are that have been incurred up to the date of the settlement order. Apparently the official referee made no inquiry as to that, or perhaps he was told but did not mention it. Mr Choo-Choy for Mr Gale says that in his understanding they are costs incurred by Mr and Mrs Wallace's solicitors overseeing the carrying out of the work and making sure that deadlines were met, chasing the defendants and communicating with others, professional architects, surveyors and engineers. Mr Joseph, who appears for Mr and Mrs Wallace and might be expected to have more information, has not been able to produce written documents telling us what the costs are. He says that they are solicitors' fees for trying to enforce the Tomlin order and that one of the disbursements was an expert's report to ascertain the state of the property towards the end of the project. There was apparently a dispute about a crack in the screed, and it was agreed that the floor would be relaid. He told us that the total amount of costs was between £3,000-£3,500 and that the fee for the expert's report was, I think, £382 and VAT.

There are a number of authorities which have some bearing on the question, but for myself I find them of very little help. What we are required to do is to interpret the words "costs of the action" as used by these parties in the order to which they agreed in July

1995. Before the judge reference was made to Copeland v Houlton [1955] 1 WLR 1072. That was decided in the days of the Legal Aid and Advice Act 1949 which provided:

"Legal aid shall consist of representation, on the terms provided for by this Part of this Act, by a solicitor and so far as necessary by counsel (including all such assistance as is usually given by solicitor or counsel in the steps preliminary or incidental to any proceedings or in arriving at or giving effect to a compromise to avoid or to bring to an end any proceedings."

The same wording is now to be found in Section 2 (4) of the current Legal Aid Act.

It is suggested that since Mr and Mrs Wallace could recover from the Legal Aid Fund the costs of giving effect to a compromise it would therefore be good sense that an order for costs in their favour against Mr Gale should also cover costs of giving effect to the compromise. There may be some force in that point, but I do not think it is conclusive. After all, we are trying to determine the meaning of the agreement which these parties made. It is notable that express provision was made for some costs in paragraphs 1, 2 3 and 4 of the schedule; and that express provision did not cover what we are dealing with today. In my judgment, the fees of Mr and Mrs Wallace's solicitors reasonably incurred in procuring that the settlement be carried out can fairly be described as being part of the costs of the action. It seems to me an unnecessary complication to say that they would have to be recovered, if at all, as damages or costs in some other action. But I do not see that that should cover disbursements, such as hiring the additional expert to grant a certificate. That does not, in my judgment, form part of the costs of the action in the context of this order. I say that particularly because the other paragraphs of the schedule to the consent order expressly deal with those matters. For my part, I would leave the judge's order to stand but I would convey to the taxing master my view that disbursements, including in particular the expert's additional report, are not part of the costs of the action.

The second issue today is quite a separate point. Was the judge

right to give leave to enforce the order for costs against Mr Gale? It is suggested that what the parties had in mind as a circumstance in which leave would be given to enforce the order was, for example, if Mr Gale won the football pools or the lottery or, as expressly said in the schedule, his action against his professional indemnity insurance succeeded. It is said that the parties were not contemplating the mere circumstance that a legal aid certificate might be revoked. I do not suppose they did contemplate that in the sense of having their minds directed to it. But had they been asked they might well have said, If that happens of course the judge will give leave to enforce the order. They

plainly used the wording of the order with legal aid in mind; and

any circumstances which brought about an end to a legal aid situation would have been one of those things for which they wished to provide. In my judgment, the judge was entirely right to refuse leave to enforce the order as things stood at the time they came before him.

But there have been subsequent events, one might almost say, of Byzantine complexity. The revocation of Mr Gale's legal aid certificate has in itself been revoked. But there has also been a new revocation of his certificate. Furthermore, as Mr Joseph is

at pains to point out, that was only dealing with an emergency certificate, after some 3 or 4 years. There was also an application for a full legal aid certificate. That has been refused in the first instance. But there is an appeal pending. Mr Joseph says that that appeal will not succeed, and that even if it did succeed it would be pointless because the grant of a new full certificate would necessarily not be retrospective and therefore could only apply from the date when the new certificate was granted. If that really be the case, it reveals a situation which is quite astonishing. Mr Gale, throughout the proceedings, had an emergency legal aid certificate. True it said, on its face, that it might be revoked. Eventually it was revoked after he had incurred all the costs that he did. If a full legal aid certificate were now granted, having been applied for presumably before the costs were incurred, yet it is said that it could not relate to those costs and could only apply to non-existent costs

which will be incurred after today. If that be the law, Mr Bumble was right. But it is for others to decide.

What I would do in the circumstances is to impose a short stay on the order that Mr and Mrs Wallace can recover their costs from Mr Gale, in order to see what happens about the legal aid certificate. If it is not renewed at all then Mr and Mrs Wallace can go ahead and recover their costs. If it is renewed retrospectively which is, according to Mr Joseph, an impossible situation, then I would say that the leave which the judge granted has to be rescinded.

If some legal aid certificate is now granted and it is arguable that it ought to be given some effect, at any rate in the exercise of the judge's discretion, then the matter must go back to him. It may well be arguable that in the exercise of his discretion he ought to take account of the fact, if it be true, that Mr Gale ought all along to have had a legal aid certificate and owing to some quirk or misunderstanding has not had one. I hope I have made plain what my views are. My Lord points out that these are illustrative observations of mine rather than a comprehensive regime of what should happen. That should be borne in mind by the judge if the matter comes back to him.

I would grant a stay of the leave granted by the judge for a period of 3 months, but would otherwise dismiss this appeal.

LORD JUSTICE ALDOUS: I agree.

LORD JUSTICE HENRY: I also agree.

Order: First appeal dismissed with costs. On the second appeal there is no order save (1) a stay on enforcement, (2) liberty to Mr Gale to apply to official referee, (3) costs of second appeal to be the plaintiff's

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