England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CCRTF 97/1380 CMS2

(MR ASSISTANT RECORDER WULWIK )

Royal Courts of Justice

Strand

London WC2

Tuesday, 5 May 1998

B e f o r e:

LORD JUSTICE THORPE

LORD JUSTICE MANTELL

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STEPHEN HAISELDEN

Plaintiff/Appellant

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P & O PROPERTIES LIMITED

Defendant/Respondent

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(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)

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MR F MORAES (Instructed by G L Hockfield & Co., London, SE11 4PQ) appeared on behalf of the Appellant

MR R VINEY (Instructed by Messrs Lawrence Graham, London, WC2R 15N) appeared on behalf of the Respondent

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J U D G M E N T

(As approved by the Court )

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©Crown Copyright

LORD JUSTICE THORPE: On 23 February 1996 Steven Haiselden suffered an injury to his knee whilst descending the stairs at his place of work at 37 Fitzroy Square in Central London.

He decided to bring a claim for damages for personal injuries and he sought the aid of a friend who had had limited experience of County Court litigation some years previously in collecting small claims.

He, with the aid of his friend, issued a County Court summons in the Lambeth County Court and he made it plain that he claimed from P & O Properties Ltd for personal injury.

The County Court summons requires the completion of boxes at its foot. The first poses the question, "My claim is worth £5,000 or less"; alternatively, "over £5,000". Mr Haiselden ticked the box that signified £5,000 or less. There is then an option for the litigant where the total claim exceeds £3,000 and/or damages for personal injury claims over £1,000. There the box option is for either trial or arbitration. Both boxes were appropriately left blank since the attached Particulars of Claim made it abundantly clear that this personal injury claim did not exceed £1,000.

The pleading, dated 7 October 1996, and signed by Mr Haiselden as a litigant in person, ends with these words:

"AND THE PLAINTIFF CLAIMS damages not exceeding £1,000.00 comprised as follows:

1. £750.00 for pain, shock, suffering and amenity loss;

2. £50.00 for loss of enjoyment of the cancelled holiday;

3. £25.00 for the loss of the insurance policy excess;

4. £50.00 for administrative costs including correspondence, faxes and telephone calls" etc.

Paragraphs 5 and 6 referred to an issuing fee and interest pursuant to section 69. Accordingly, it should have been plain to both the defendant and the court that this plaintiff sought a specific sum of £875, inclusive of his costs.

The defendants filed a defence on 4 November which put all in issue and furthermore raised a plea of contributory negligence. What should have happened at that stage is determined by Order 19 of the County Court Rules. That rule is made pursuant to section 64 of the County Court Act 1984 which was the genesis of the arbitration procedure. Order 19 provides for automatic reference of small claims. Order 19(3) provides:

"Any proceedings [except those mentioned in paragraph 1(a)] in which the sum claimed or amount involved does not exceed £1,000 (leaving out of account the sum claimed or amount involved in any counterclaim) shall stand referred for arbitration by the district judge upon the receipt by the court of a defence to the claim."

Paragraph 1(a) excepts proceedings which include a claim for possession of land and a claim for damages for personal injuries which exceeds £1,000. Thus it is abundantly plain in this case the effect of the filing of the defence was that the proceedings, and I take the words again, "shall stand referred for arbitration."

Unfortunately, as a result of a fundamental error in the court, on 6 November an automatic directions notice was issued. Plainly whoever took that step had reached the erroneous conclusion that these were proceedings destined to proceed down the trial track. Thereafter the plaintiff, as a litigant in person and not understanding the nature of the court's error or its consequences, duly provided listing information in February and in March was constrained to pay a setting down fee of £100. The defendants, not in ignorance, but deliberately, themselves endorsed and magnified the court's error by requesting Further and Better Particulars on 20 March which were promptly furnished on 23rd.

Two days later the court put the papers before a judge with a form headed: "Request to judge for listing directions". The judge, who we have been told was His Honour Judge Cox, clearly looked at the papers, considered the plaintiff's time estimate of four hours and marked the form "List for half day". Below that he wrote some words which he subsequently deleted and it is difficult in those circumstances to speculate as to why he wrote the words or why he made the deletion. But it seems that the deleted words read: "But why is this case not an arbitration". Following that direction from the judge the court on 1 April made an order said to be of its own motion, that the action be listed for trial on 3 June before the Circuit Judge at the court.

There was correspondence between the parties immediately prior to the trial in which there was reference to the costs of the impending trial, but I do not, for my part, think that that exchange of letters throws any particular light on the questions which we must decide.

On 3 June the case was listed before Assistant Recorder Wulwik who invited the parties to consider whether they might agree quantum. Mr Viney, who represented the defendants on that day as he does today in this court, agreed with Mr Haiselden that his claim was worth £825 subject to liability.

The liability trial then ensued and at its conclusion the judge found for the defendants. He dismissed the plaintiff's claim.

What happened thereafter is described by Mr Haiselden in his affidavit and that description is adopted by Mr Viney. He says in paragraph 12 of his affidavit:

"I record that the Judge then asked Mr Viney whether the Defendant was pursuing a claim for costs. Mr Viney responded that he was seeking costs on Scale 1. I did not understand the significance of this. I recall that Mr Viney then said that he did not know why the case had not gone to arbitration. The Judge responded that that question had occurred to him over lunch. I recall the Judge then remarking that one would probably not want to say why the matter had not been dealt with by arbitration. By this I understood him to mean that it appeared that there had been an error by the Court. I submitted that the claim should have been dealt with by way of arbitration and asked the Judge not to order costs as to do so would be to financially penalise me for what appeared to be a failure by the Court to refer the matter to arbitration. I requested that the costs be limited to those applicable to arbitration and asked that the Judge use his discretion to offset my expert witness costs against the expert witness costs of the Defendant. I recall that Mr Viney mentioned the case of ´Afzal'.

The Judge ordered that I pay the Defendant's costs on Scale 1 ... At the same time he congratulated ... me on ... courteous behaviour in Court and confirmed that my claim was a genuine one brought in good faith."

The appeal to this court proceeds with leave granted by Roch LJ and the original Notice of Appeal has recently been amended in response to a Respondent's Notice.

Mr Moraes, who appears for Mr Haiselden in this court, relies strongly on the fact that the intention and effect of Order 19 is that the reference of small claims to arbitration is an automatic step that requires no judicial or executive action. In support of that proposition he relies upon a recent decision of this court in Greg Middleton v Denderowicz [1997] 4 All ER 181 and particularly the passage in paragraph 6.11 of that judgment where it is made plain:

"The words ´shall stand for arbitration' make it clear that provided the proceedings fall within the stipulated description, the matter will be arbitrated by the district judge without the need for an order to that effect, unless the district judge refers the proceedings to another arbitrator. In other words, in such cases the reference to arbitration is automatic, although later parts of Ord 19, r 2 (as it then was) made provision for such a reference to be rescinded in certain circumstances."

So, says Mr Moraes, the reference to arbitration occurred automatically on 4 November; the issue of the purported notice, indicating the application of automatic directions, was a nullity and in all the circumstances the judge simply had no power to condemn his client in Scale 1 costs at the conclusion of the trial on 3 June.

In response to my Lord, Mr Moraes agreed that whatever happened on 3 June was not to be treated as a nullity. It seems to me that that concession reflects credit on the plaintiff since it would have been open to him to assert that all steps taken on and after 6 November were null since they were steps only appropriate to proceedings for trial and quite inappropriate to proceedings for arbitration. He, however, faced the difficulty that if he accepted that the proceedings on 3 June were not a nullity it is difficult for him persuasively to assert that they were an arbitration in the guise of a trial. Manifestly anybody would have seen that all that occurred on 3 June bore all the hallmarks of a trial and none of the hallmarks of arbitration. If then the proceeding on 3 June was neither a nullity nor an arbitration, it is hard for Mr Moraes to submit that the judge conducting that trial did not have at the least a discretion to order Scale 1 costs. Mr Moraes' alternative submission of course is that if the judge did have that discretion he erred in its exercise and we should exercise the discretion afresh. In substantiating that alternative submission, he points to the judgment of the Assistant Recorder which having referred in paragraph 1 to the nature of the claim continued in its second paragraph:

"There had been no application before me prior to the commencement of the trial for the action to be referred to arbitration. Both parties proceeded on the basis that the action should be tried in Court. There was no suggestion during the trial and prior to judgment that the action should have been referred to arbitration or that the parties were other than agreed that the action should be tried in Court."

As Mr Moraes would say, that suggests that the judge had either not sufficiently investigated the history or had not sufficiently understood the history to exercise his discretion justly.

Mr Viney for the defendants sought to argue that Mr Haiselden's claim had never been referred to arbitration. Despite the decision in Greg Middleton v Denderowicz , which I hasten to say was not available to Mr Viney and the Assistant Recorder on 3 June last, an essential step to the preceding reference is some executive notice or direction to that effect. The submission is, in my judgment, hopeless. The whole point and purpose of the arbitration procedure is that it should be uncomplicated and not unduly burdened with bureaucracy and paperwork. Even were the decision in Greg Middleton v Denderowicz not available for our guidance, I would have reached the clear conclusion on the words of the rule that the reference is automatic and does not require any administrative act on the part of any member of the court service.

Mr Viney then submits that even if there had been an automatic reference to arbitration that was overridden by the order of the Circuit Judge of 1 April. That submission is much more persuasive, although, for my part, I do not attach so much significance to the order of 1 April as to the issue on 6 November of the notice that automatic directions applied since this was effectively the step that switched the points and transferred the proceedings on to the trial rails. Everything that happened thereafter was entirely appropriate had this been a proceeding destined for trial. So I, for my part, would accept that since there is a general acceptance that proceedings on 3 June were not a nullity it must follow that the judge had a discretion to determine whether he should allow the defendant Scale 1 costs, as urged by Mr Viney, or fixed costs appropriate for arbitration, as submitted by Mr Haiselden.

Mr Viney has very creditably and candidly informed us that at all stages the defendants perceived the advantage to themselves of the error of the court service on and after 6 November. They thought that they would win on liability; they did not want an arbitration determination; they wanted determination by trial so that they had the prospect of recovering the costs of their defence. Accordingly, they took advantage of the judicial error and felt able to do so since at that stage they considered that it was still arguable that some administrative notice of reference to arbitration needed to be issued. They comforted themselves by saying, "If and when such a notice is issued we will then apply to the judge inter partes for a ruling rescinding the reference to arbitration".

In my judgment it is very important that if a litigant in person decides to invoke the arbitration procedure in the County Court in order to avoid the risk of incurring liability for the defendant's costs he is not to be deprived of that protection unless there has been an inter partes determination of an application for rescission of the reference. Mr Viney tells us that his instruction was that the plaintiff had deliberately depressed the value of his claim below its true worth and accordingly the defendants had confidence in the merit of an embryonic application for rescission. There is no evidence in these proceedings to substantiate that speculation. It seems that Mr Haiselden advanced his claim in a very straightforward manner throughout and indeed the judge, although it is not recorded in his judgment, apparently recognised the genuineness of the claim. It does seem to me, although no doubt the position in law was not as clear then as it now is, that faced with a plaintiff in person the defendants had some obligation to draw to his attention and/or to the attention of the court the error that had been made on 6 November and particularly to draw to the attention of the plaintiff the beneficial consequence which the defendants intended to harvest from the error. I doubt whether the Assistant Recorder had all these considerations drawn to his attention. After all Mr Haiselden only learnt of the significance of a trial as against arbitration, only perceived that it was a trial and not an arbitration that he had experienced, at an extremely late stage in the proceedings and he seems to have reacted to that discovery with commendable speed and adaptability, but I am in no doubt that the Assistant Recorder erred in the exercise of his discretion; I am in no doubt that it is open to this court to exercise the discretion afresh and in my mind there is absolutely no doubt that the justice of the case demands that Mr Haiselden's liability to the defendants should be limited to such costs as would have been recoverable had the determination of 3 June been a determination by the arbitrator. I also think that the extraction of a fee of £100 from Mr Haiselden by the court on 16 March was erroneous and no doubt Mr Haiselden will be pressing the court service for the return of that fee. Since the fundamental error is the error of the court it may be that the defendants will be able to address some claim to the court service, although it may be more difficult for them since they had a perception of the error at an early stage and choose to perpetuate the error, as they perceived it to their own advantage.

However, for my part, I would allow this appeal and substitute the alternative basis of costs.

LORD JUSTICE MANTELL: I agree and would add nothing save to notice that under Order 19, rule 3, paragraph 2 it is open to the District Judge to order a trial in circumstances which would otherwise require arbitration, subject always to the right of the parties to be heard.

Order: Appeal dismissed with costs. ( This order does not form part of the approved judgment )