England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Holland J

		Royal Courts of Justice Strand, London, WC2A 2LL Monday 22nd October 2001

LORD JUSTICE BROOKE : .

1. This is an appeal by the first defendant Gary Roy Holland against so much of the order of Holland J which was made on 28th November 2000 and sealed on 14th December 2000 as directed him to pay the claimant its costs of this action. He also appeals against the decision of the judge on about 13th December 2000 to the effect that he would not allow him to be heard on the question of costs. The judge took the view that he had already made a final order in the matter two weeks earlier.
2. Mr Holland invites us to set aside the judge's order and to substitute an order of our own, alternatively to remit the question of costs to the judge for decision. The claimant is content for the judge's order to be set aside, but asserts that we ought to treat this appeal as an abuse of process and let the judge consider the matter afresh. Alternatively we should make an order on this appeal remitting the matter to the judge. In the further alternative it contends that we should reject the first defendant's complaints about the substance of the judge's order and decide that we ought not interfere with that order on the merits.
3. There is also an appeal pending in this court, due to be heard in the near future, in which the claimant is challenging the judge's order at the trial of the action, by which its claim against the second and third defendants was dismissed. We are not concerned with the issues on that appeal, and the second and third defendants, who were awarded their costs of the action as against the claimant, are not parties to the present appeal. On the other hand, the claimant suggested it was inappropriate for us to make any order of our own as to the costs of the action because we do not know what will happen on that appeal, to which the first defendant is not a party.
4. At the beginning of this judgment I can set out the issues between the parties quite briefly. In October 1994 Mr Williams, who is the driving force behind the claimant company in this litigation, agreed with Mr Holland that they should carry on a financial consultancy business together through the claimant company which was formed for this purpose. They were to be the two directors of the company, in which Mr Williams was to hold 80% of the shares and Mr Holland 20%.
5. In October 1996 they fell out. Mr Holland resigned his directorship, sold his shares in the company to Mr Williams and severed all connection with the company. Unfortunately there were a few minor matters arising from these events on which they were unable to reach agreement, and on 24th March 1997 the claimant issued a writ in the High Court claiming a liquidated sum of £30,503,41, together with interest.
6. This claim was made up as follows:

i) Unauthorised use of credit card £475

ii) Unauthorised use of cheque to pay tax assessment £890.95

iii) Breach of duty by waiver of fee due to claimants £26,000

iv) Unauthorised use of company funds £1,950

v) Unauthorised use of credit card (Anderson Ross) £1,187.56

£30,503.41

7. On 22nd April 1997 the first defendant served a defence and counterclaim. His counterclaim was made up as follows:

i) Unpaid Salary £4,654

ii) Agreed termination payments £6,000

iii) Further agreed fee £250

£10,904

8. The reply and defence to counterclaim, served on 30th April 1997, joined issue with the first defendant's contentions. The claimant did not advance any positive case as to the claim for unpaid salary and simply denied that an agreement had been reached between the parties that payment of three amounts of £2,000 would be made on 10th November and 10th December 1996 and 10th January 1997.
9. Witness statements were exchanged, one on each side, in September 1997, after some delay on the first defendant's part. It appears from the facts set out in a statement by the first defendant's solicitor, which are not disputed in this respect, that if the claimant had not been very slow in making proper discovery, the action could have been tried during 1998. In July 1998 the claimant's solicitor served a second witness statement unilaterally, long after the time allowed by a Master's order had expired.
10. On 3rd November 1998 the first defendant's solicitors suggested that the action should be set down for trial. The claimant's solicitors did not reply until 22nd June 1999, over seven and a half months later. They then took a step which delayed the trial for another year and greatly increased the cost of the litigation. They now evinced their intention to join the second and third defendants, from whom the claimant was now claiming directly the sum mentioned in paragraph 6(iii) above ("the Adler fee claim"). The claimant also added two further claims against the first defendant:

vi) Damages for misrepresentation (Anderson Ross) £4,000

vii) Overpayment of salary £4,750

£8,750

11. The claimant obtained permission to make these amendments on 1st July 1999. The new claim for overpaid salary was based on a contention that between October 1995 and October 1996 the First Defendant had drawn sums on account of his salary and the salary of his wife totalling £21,500, whereas they had only been entitled to £16,750 over this period. In the Amended Defence, served on 29th July 1999, this contention was denied, and no positive case was put forward other than that already pleaded by way of counterclaim, in which the first defendant had contended that he had been entitled to receive £23,354 over this period and had received only £18,700. The second and third defendants served their defence on 27th August 1999.
12. Mr Holland's solicitor has said that up to this point her client had been in receipt of legal aid. Legal aid was now withdrawn, because when he had sold his house and moved to a smaller house for financial reasons he had failed to disclose to the legal aid authorities the fact that he had retained a sum of £6,000 to pay for his living expenses. She said – and this is evidenced by a contemporaneous attendance note – that her object thereafter was to defend her client's case but to keep his costs to a minimum.
13. It is necessary to set out here the course the proceedings then took between 27th August 1999 and 15th July 2000, the first day of the trial. Because only two days had originally been asked for, there was only enough time for the judge to receive opening submissions and to hear the evidence on that day and the next two days. He then directed that the defendants should file and serve their submissions by 4th August, the claimant by 11th August, and the defendants any submissions on the law (if needed in reply) by 18th August.
14. Counsel for the second and third defendants complied with this direction. By an administrative mishap counsel for the first defendant did not. Although she completed the work in time, her submissions were not sent by her chambers staff to the court, to the other parties or even to her own solicitor. Through a series of accidents and misunderstandings, her submissions were not received by counsel for the claimant until 9th October, and he had in the meantime decided, without any application to the court, that he was entitled to await their arrival before preparing his own submissions. It is unnecessary to record the reasons why the judge was persuaded to extend the timetable for the receipt of submissions until 30th October and why the claimant's submissions did not reach him until just before this extended deadline expired. By now the judge was conducting a long criminal trial in Manchester.
15. On 31st October the judge's clerk sent a copy of the judgment to all three counsel for publication to their respective clients. The judge allowed claims (i) and (ii). He dismissed claim (iii) and the claim against the second and third defendants for the same amount. He dismissed claim (vi) and also claim (v) which was linked with it. He considered claims (iv) and (vii) and the three counterclaims together and decided that there was a net balance due to the claimant of £1,200 on those items.
16. The judgment ended in these terms:

"In the overall result there must be judgment for the claimant against the first defendant for £475 plus £890.85 plus £1,200, £2,565.85. Further there must be judgment for the second and third defendants against the claimant. I leave interest and costs to the parties: failing agreement the matter can be brought back before me.

As foreshadowed earlier in this judgment, I have regretfully to express strong criticism of the way in which this litigation has been conducted. Essentially the prosecution of this matter in the High Court has amounted to an absurd waste of the respective clients' funds – not least when all the issues save the Adler fee claim were relatively trivial and potentially susceptible to resolution by agreement following upon reasonable investigation. Further, the Adler fee claim was plainly one for the County Court. That waste has been compounded, first by inadequate investigation and preparation (as already pointed out in this judgment) and second, by profligate photocopying without regard for cost or relevance. If any party had the beneft of an Advice on Evidence there is nothing to show for it. Finally I resent having to delay delivery of this judgment until today's date in order to accommodate belated delivery of written submissions. The parties and I have respectively been let down.

My clerk is sending copies of this judgment simultaneously to all three counsel for publication to their respective clients. I thereby regard the judgment as 'handed down'. I trust that there will be no delay before I receive a draft order alternatively intimation that a further hearing is required."

17. On 9th November 2000 the claimant's solicitors proffered to the first defendant's solicitors a draft order which included a provision that the first defendant pay the claimant's costs of the action. The first defendant's counsel was abroad on holiday at this time. On 10th November the first defendant's solicitor wrote to the judge (with copies to the other parties) inviting him to reconsider the terms of his judgment in one respect. On 14th November the judge sent to counsel for the parties a revision of his judgment in which he corrected two typographical errors and added a postscript. In the first part of this postscript he declined to revise his judgment in the manner suggested by the first defendant's solicitor. In the second part he absolved the second and third defendants' lawyers from the strictures he had made at the end of his judgment. In a covering letter he wrote:

"I still await the draft of an agreed order alternatively a request for a further hearing. Having regard to my experience with respect to submissions, I give notice that unless I hear further from the parties by Friday 24th November 2000 then I shall of my own motion list the case for mention in Manchester before the end of Term."

18. On 15th November 2000 counsel for the claimant wrote a long letter to the judge in which he sought to exculpate himself and his solicitors from the criticisms made by the judge. So far as the draft order was concerned he said that he regretfully believed that a further hearing was now inevitable. He had discussed the draft order with counsel for the second and third defendants but had not yet heard from counsel for the first defendant.
19. On 20th November the first defendant's solicitors wrote to the claimant's solicitors (but not to the judge) explaining why they did not agree the terms of the draft order. They suggested, for the reasons set out in their letter, that their client should be paid all his costs by the claimant. They reached this conclusion by suggesting that the claimant had lost the claim in relation to the Adler fee of £26,000 (which, the judge said, lay at the heart of the litigation), and the sums which it had recovered could have been recovered under the small claims procedure in which there was no provision for the recovery of costs.
20. On 21st November the judge responded to the letter from the claimant's counsel. He sent a copy of his letter to the other counsel and solicitors who were affected by it. So far as is relevant, he said:

"If a further oral hearing is necessary, so be it. However it will have to be here in Manchester at a time convenient to my present long criminal trial.

For my part I am not seeking any such hearing, merely (and quite reasonably, as I think) an early end to this ludicrously protracted matter.

As to this aim, first, I am at a loss to understand why there should be any delay in submitting to me in the post a draft of the presumably simple order needed to give effect to my judgment. Having regard to the history of events since July 2000 I should have thought that the parties would be tumbling over themselves to do something with despatch. As it is, nearly three weeks have passed since it was handed down."

21. On 22nd November counsel for the claimant responded to the judge's letter, again with a copy to the affected parties. So far as is relevant, he said:

"So far as the draft order is concerned I have received a copy of a letter from [the first defendant's solicitors] which states that the first defendant seeks an order that its costs be paid by the claimant in any event.

The order is agreed as between myself and counsel for the second and third defendants.

I therefore enclose a draft order which, whilst not agreed, makes clear the differences between the parties."

22. In the draft order which he enclosed he appended a note that the first defendant did not agree to paying the claimant's costs but instead sought an order that the claimant should pay his costs. He did not send to the judge a copy of the first defendant's solicitors' letter in which they had set out in some detail the reasons why they were seeking this order.
23. On 23rd November counsel for the first defendant sent to the judge a copy of a letter she had sent that day to counsel for the claimant, the contents of which she felt were self-explanatory. So far as is relevant, that letter contained the following passage:

"As for the draft order itself, having returned from my holiday and discussed the matter with my instructing solicitor I can confirm that the interest figure which you have calculated as £830.63 is agreed. There has apparently been no order as yet for a legal aid assessment of the first defendant's costs down to 14th July 1999, and we would like such an order to be inserted, perhaps as paragraph 5 in your draft.

The proposal on costs is that the claimant should pay a percentage of the first defendant's costs to reflect the extent to which the first defendant succeeded in his defence and counterclaim. I would hope that we can agree an appropriate figure as between ourselves without the need to trouble the court further."

24. On 24th November the judge initialled, for despatch by fax to the parties, a short message which read:

"Having regard to the communications received from, respectively, [the second and third defendants' solicitors] and [counsel for the first defendant] I am prepared to make the enclosed order – and will do so unless I hear to the contrary by 1600hrs 28th November 2000."

25. Neither the first defendant's solicitors nor counsel received a copy of this fax message, and this deadline passed without any further action on their part, notwithstanding the fact that the order the judge enclosed directed their client to pay the claimant's costs of the action.
26. Having received no further submissions, on 28th November the judge sent to the parties an order which he initialled and dated himself. His direction that the first defendant pay the claimant's costs of the action on the standard basis was, not unnaturally, in the same terms as the draft order sent four days earlier.
27. On 4th December the first defendant's solicitors formally applied to the court for a 90 minute hearing before the judge so that he could reconsider his draft order of 28th November. They were seeking to challenge the costs order against their client. The grounds for their application were that the judge had failed to take into account sufficiently or at all the extent to which the first defendant had succeeded in this case both in terms of the issues and the financial value of the claims.
28. On 11th December the judge's clerk responded in these terms:

"Your Application Notice of 4th December 2000 has been shown to the judge. He asks me to point out that his Order of 28th November is not 'draft' but final, he having given ample notice that he would make such if, as was the case, he did not receive submissions to the contrary on or before 24th November 2000. In such circumstances he is not prepared to vary its terms – and doubts whether he has power to do so."

29. On 23rd January 2001 the judge refused both the claimant's and the first defendant's applications for permission to appeal. So far as is relevant he said:

"At the conclusion of the July 2000 hearing I was prevailed upon to forego final speeches and to receive the respective submissions in writing. Those from the defending parties were to be lodged first; that for the claimant by a subsequent date.

In the event the submission of the first defendant was not lodged by the due date and only got to me some weeks later. Meanwhile counsel for the claimants had apparently decided that he was under no obligation to provide me with his submission until he had had sight of the first defendant's submission. Yet further, so soon as he did have sight he sought further time, being by then too busy to reciprocate.

In the overall result I was unable to provide a judgment for over three months (I had to offer an explanation to the Judge in charge of the Non Jury list!) and only completed such after imposing a time limit for the receipt of submissions.

Having handed down a judgment (by posting simultaneously to the three counsel) I asked for an agreed draft order. After further delay one such arrived (I was by then at Manchester) with a provision for leave to appeal included. There being no basis for such put before me, I substituted a refusal. By this stage (it being in November) I was losing patience and intimated that if I received no further representations by 24th November I would forthwith make the order final. Having waited until 28th November I did just that.

Turning to the respective applications for leave to appeal:

The First Defendant. I have no recollection of receiving any grounds but in any event my judgment essentially reflected fact and discretion."

30. The first defendant promptly sought permission to appeal. His solicitors complained that the judge's order for costs had been made in the knowledge that the draft order proffered by the claimant to the judge was not agreed by the first defendant, and that notwithstanding this knowledge, and previous indications that in the absence of agreement a hearing would be required, the judge had proceeded to make the order sought by the claimant without giving the first defendant an opportunity to be heard. They did not refer to the judge's letter of 24th November 2000 because neither they nor counsel had ever received it. The confusion was compounded by the fact that in the letter dated 11th December 2000 from the judge's clerk (see para 28 above) the date "24th November" wrongly appeared instead of "28th November" so that the first defendant's advisers were given no indication that the judge might have sent them a letter which they never received. This mistake was perpetuated in the fourth paragraph of the judge's reasons set out in paragraph 29 above.
31. On 8th February 2001 Waller LJ granted permission to appeal. He observed:

"It seems possible that the judge made what he thought was an agreed order. It was clearly not agreed that the first defendant should pay the claimant's costs. There would seem merit in the first defendant's contention that he should not do so."

32. Unfortunately the claimant's solicitors did not draw the judge's letter of 24th November to the first defendant's solicitors' attention when they received the Notice of Appeal. Instead a skeleton argument dated 27th February was settled by counsel which set out the text of that letter and suggested that if it had not been placed before the single lord justice there had been material non-disclosure. On 24th April 2001 the first defendant's solicitors told the claimant's solicitors that they had never received the letter. A situation then developed in which the claimant's solicitors were suggesting that if this was the case the matter should be restored before Holland J, who was by now on leave and then away on circuit again, while the first defendant's solicitors maintained that this court was now seized of the matter and that they wished their appeal to be listed for hearing. Notwithstanding the terms of CPR PD 52 para 7.8, the claimant's skeleton argument did not address the first defendant's challenge to the merits of the judge's order, or the points made in paragraphs 17-20 of the first defendant's skeleton argument, at all.
33. It is noteworthy that it was not until 3rd October, only four working days before the hearing of this appeal, that the claimant's solicitors suggested for the first time that a consent order should be made on the appeal and the matter remitted for what they described as a short appointment before Holland J, to whom the costs of the appeal should be reserved. An earlier suggestion on their part, contained in a letter dated 22nd May 2001, had been that the matter should be re-listed for a short appointment before Holland J. They were at this stage ignoring the fact that this court by now had jurisdiction over the appeal. The judge, who was by now sitting in Newcastle-upon-Tyne, said unsurprisingly that although he was willing to have the matter mentioned before him he saw no advantage in this course.
34. It was not easy to understand Mr Downes's first submission to us, which was to the effect that the first defendant's appeal was an abuse of process and that this court should stand by (as if permission to appeal had never been given) and allow the judge to reconsider his order for costs. He founded this submission on one case, and one case only.
35. In WEA Records Ltd v Visions Channel 4 Limited [1983] 1 WLR 721 a Chancery judge had made an ex parte Anton Piller order and an ex parte order prohibiting the defendants from carrying on certain activities for eight days or until further order. The defendants complied with these orders but resisted an application for an extension of the restraining order and applied for the discharge of the original Anton Piller order. After a different Chancery judge had spent a day hearing these applications, he was told that whichever way he decided the matter there would be an appeal to this court. He thereupon made no order but granted leave to appeal.
36. This court was wholly unsympathetic to the defendants' appeal. Sir John Donaldson MR said at p 727 that the Anton Piller order was spent in the sense that it had been executed, and he robustly rejected the defendants' suggestion that the Court of Appeal should set it aside and order the return of the affidavits to the two personal defendants and the seized material to their solicitors. He said he regarded this as wholly absurd, and pointed out that the courts were concerned with the administration of justice, not with playing a game of snakes and ladders. While he accepted that there could be no doubt that the Court of Appeal could hear an appeal from an order made by the High Court upon an ex parte application, there was equally no doubt that the High Court had power to review and to discharge or vary any order which had been made ex parte, and that this was the appropriate course to have been taken on the facts of that case.
37. I find this case no authority for the proposition that the appeal to this court in the present case constituted an abuse of process. It is of course true that if it had come to Holland J's attention soon after the event that he had made his order of 28th November in ignorance of the fact that the first defendant's solicitors and counsel had never received his letter dated 24th November, then he would have had power pursuant to CPR 3.10 to remedy the error of procedure and direct that his order be set aside and the matter listed for an oral hearing.
38. CPR 3.10 reads:

"Where there has been an error of procedure such as a failure to comply with a rule or practice direction –

(a) the error does not invalidate any step taken in the proceeding unless the court so orders; and

(b) the court may make an order to remedy the error."

39. Mr Downes suggested that this rule should be read restrictively and was not apt to include a situation in which a judge had made it clear that there would be an oral hearing before he made an order and then proceeded to make an order without a hearing in the mistaken belief that the party affected had received a later direction negating the effect of his earlier indication.
40. I do not see why the rule should not be given its natural and ordinary meaning. The judge had in the events that occurred made an error of procedure in making an order without giving one party the oral hearing it had been promised, and he had power under CPR 3.10 to remedy that error. Mr Downes submitted that the judge's order should be treated as if it was an order made on his own initiative pursuant to CPR 3(4) and that the first defendant should have applied under CPR 3(5)(a) to have the order set aside. This appears to me to be very tortuous, and I am sure that Holland J would have been surprised to have been told that he was making his directions from Manchester in relation to the timetable for submissions on costs, following his judgment, pursuant to his CPR Part 3 case management powers. His order did not contain the statement required by CPR 3(5)(b), and the first defendant had no opportunity to make an application pursuant to CPR 3(5)(a) within the time prescribed by CPR 3(6) because the judge did not specify a period within which to make such an application, and as the first defendant was never served with the judge's order dated 24th November (if that is the right way to describe his letter of that date) he could not very well comply with CPR 3(b).
41. It may be that I have misunderstood this submission, which was not included in Mr Downes's skeleton argument, but I do not understand how the judge's costs order of 28th November could be treated as an order made of the court's own initiative within the meaning of CPR 3(4).
42. I am satisfied that this court does have jurisdiction to hear the appeal for which Waller LJ has granted permission. It may be that if the claimant's solicitors had made the suggestion contained in their letter dated 3rd October six months ago, the appropriate course would have been to remit the matter by consent to the judge, leaving him to determine where the costs of the appeal should lie, but this suggestion was made so very late, and its acceptance would have involved yet more expense and delay, that we decided to proceed with the hearing of the appeal for which most of a day had been set aside.
43. The dilemma we then faced was to decide whether it would be possible for us to determine on the merits what order for costs should have been made – because it was common ground that the judge's order could not stand, without reconsideration, in the light of the events that had happened – or whether it would be necessary for us to expose the parties to the further expense and delay involved in remitting the matter to the judge on the grounds that he would be in a better position than we are to adjudicate fairly on the matter. In this context we did have the advantage of having a very long statement by the first defendant's solicitor dated 25th January 2001. The claimant's solicitors had more than eight months in which to serve a witness statement in answer to this statement which they eventually served just before the hearing in this court. This allowed the first defendant's solicitor only a short time in which to make brief written comments in response.
44. Our first task was to understand the nature of the issues the judge had to decide. They can be divided into three parts: minor items of claim and counter-claim following the breakdown of relationships in October 1996, the Anderson Ross issues, and the Adler fee claim.
45. Mr Holland won on the Adler fee claim (£26,000). He won on the Anderson Ross issues (£5,187.56). He lost, by a narrow margin, on the minor items of claim and counter-claim (he had to pay a net balance of £2,565.85: see paragraph 16 above).
46. What happened in relation to these minor items bears closer study. The claimant won on the two very small items I have called claims (i) and (ii) (see paragraph 6 above). Mr Holland won on the second item of his counterclaim (£6,000 for agreed termination payments), less the cheque for £1,950 (claim (iv)) which he drew in favour of himself on his departure. The judge dismissed the third item of the counterclaim (£250) on the basis that it could not stand if the agreed termination payments were allowed. Thus far, there was a balance of nearly £2,800 in favour of Mr Holland. What was left was the first item of the counterclaim (£4,654) as against claim (vii) (£4,750), which had been belatedly added by amendment over two years after the action commenced.
47. I have already described in paragraph 11 above the tiny amount of light which was thrown on these issues in the pleadings. Mr Holland was contending that between October 1995 and October 1996 he had received £18,700 whereas he had been entitled to received £23,354 while the claimant's figures were completely different: it said that Mr Holland had received £21,500 and had only been entitled to receive £16,750. It was on this aspect of claim and counter-claim that the judge expressed himself in the most forceful terms in his judgment. After summarising the issues, the judge said (at para 11):

"Notwithstanding that well before trial Mr Phillips [the claimant's accountant] had already produced a statement of the loan account as he understood it to be constituted, I learned at the outset of the trial – and to my appalled consternation – that those respectively advising WCF and Mr Holland had wholly failed to investigate this aspect of the case, in particular so as to ascertain what true discrepancies there were and why. It was only on the second day of the hearing that at my request a bemused Mr Phillips met with the respective solicitors with a view to identifying agreement and disagreement; and it was only on the third day, that the first schedule emerged. I said a lot at the hearing in vociferous terms."

48. The judge then adopted Mr Phillips's figures, which showed a net balance due to the claimant of £1,200, after taking into account the items of £6,000 and £1,950 I have mentioned in paragraph 46 above. What swung the case in the claimant's favour was the fact that for the four months between December 1995 and March 1996 Mr Phillips's figures appeared to show that Mr Holland was only entitled to a salary of £250 per month, instead of the £2,000 which was his usual monthly entitlement. The judge described this oddity in these terms:

"I draw attention to the substantially reduced salary entitlement for the months of October, December, January, February and March. That reduced entitlement appears on the exhibited loan account as produced by Mr Phillips. In the witness box he explained to me that all figures with respect to 'entitlement' came from payroll entries provided monthly by WCF under the supervision of Mr Holland as the director responsible for this part of the company's activities. Before me there was no attempt to challenge this part of the loan account until I forced attention to it. At that stage WCF urged me to accept such and surmised that this apparent absence of salary entitlement reflected Mr Holland's own attempt to offset indebtedness to WCF arising from receipt in July 1995 of £22,000, such moneys being diverted from Mr Williams's former company to him. Mr Holland said he was taken by surprise by all aspects of the matter but did suggest that the reduced entries for these months might be a mistake. For my part I think that it is far too late now to impugn the basis for these entries as made by Mr Phillips whether or no such have anything to do with the July 1995 payment. Both parties have had ample opportunity (and every reason) to investigate this crucial loan account. Inevitably there comes a time when it is too late to look further into it. If either party has any complaint it is with their respective advisers."

49. It was in relation to this aspect of the judgment that Mr Holland's solicitor felt so much concern that she wrote to the judge, in counsel's absence on holiday, in these terms:

"This letter is confined to one matter in the judgment, which is Mr Holland's salary entitlement. As you say in your judgment, the discrepancies over this point should have been investigated and clarified before the start of the trial. I am concerned that in the process of producing a schedule at trial some of the figures may have been confused. It is because of this confusion that I felt compelled to write to you in the absence of being able to consult Counsel as to how to proceed.

In paragraph 11 of your judgment, you set out a table with the first column of figures relating to the payments which Mr Holland was owed by Williams Corporate Finance Plc and a second column of figures relating to the payments made to Mr Holland from Williams Corporate Finance Plc. However, on the evidence of Mr Phillips at trial, the first column of figures in the table relates to figures taken from the accounts as the amounts credited to Mr Holland's loan account. I believe that there should also be a third column, which relates to Mr Holland's salary entitlement, which was £2,000 a month. It was Mr Holland's case throughout that he was entitled to £2,000 per month and both Mr Williams (paragraph 4 of his witness statement, page 81 of the bundle) and Mr Phillips (paragraph 4 of his witness statement, page 164 of the bundle) state in their witness statements that Mr Holland was entitled to a salary of £2,000 per month net. This means that the first column in the schedule would be headed 'Mr Holland's loan account' and a new, third column would appear with the heading 'owed', which would record £2,000 for each month."

50. The judge replied quite briefly that he was quite unable to give any effect to these submissions. He had made his finding, and there it was, subject only to revision by the Court of Appeal.
51. A further flavour of the difficulties that emerged at the trial can be obtained from paragraphs 30 and 36 of the first defendant's closing submissions. It was said here that the claimant's case depended on the acceptance of Mr Williams's new evidence that there had been a substantial payment to Mr Holland from a third party which it was agreed should be treated as payment of his salary (although not that attributed to his wife) for the four months in question.
52. Complaint was made that this suggestion was sprung on Mr Holland for the first time whilst he was giving evidence. After he had made efforts by telephone to check the position, his response was to the effect that it seemed that he had indeed received money from the third party, but that other large sums had immediately been paid out from the same account, possibly to or on behalf of the claimant; that it may well have been an equalising payment to reflect monies clearly taken out of the claimant company by Mr Williams; and that he was sure it had never been agreed that this money should be accepted in lieu of some unspecified future salary entitlement. He had also observed that he was owed a considerable amount for the time which he had spent on matters concerning Mr Williams's previous business, of which this third party had been a client before he began to work for the claimant.
53. Counsel for Mr Holland sought in her closing submissions to make a distinction between Mr Holland's ready acceptance that he might well have received such a payment, and the gradual manner in which his recollection of these events had returned, and Mr Williams's failure to mention the "mysterious" £22,000 in the claimant's pleaded case or in either of his witness statements, or to disclose any documents relating to it, coupled with the way in which the point seemed to have occurred to him suddenly in the middle of Mr Holland's evidence. The only reference to this payment of £22,000 had been made in a letter seen by Mr Holland for the first time while giving evidence.
54. It was also observed that in spite of the assertion that Mr Holland had received £22,000 against future salary, there had been no suggestion at any time, even during the acrimonious discussions in October and November 1996 following Mr Holland's resignation from the company, that the alleged payment on account had occurred. It was suggested that if Mr Williams's case was correct it was inconceivable that when the two directors parted company he would not have demanded repayment of the balance of £15,000, let alone agreed to pay Mr Holland a further £6,000 by way of severance pay.
55. The judge did not refer to these arguments in his judgment. He appears to have been so disillusioned by the parties' failure to investigate these issues properly before the trial started that he was content simply to rely on Mr Phillips's figures for the reasons he gave.
56. I have already described how at the end of his judgment he categorised all the issues in the case save the Adler fee claim as being relatively trivial and potentially susceptible to resolution by agreement following upon reasonable investigation.
57. The claimant, therefore, lost on its major claim, lost on one of its minor claims and only recovered on the cross-accounting claims a sum of just over £2,500 (which would not have attracted an award of costs in the small claims track), on which it succeeded only because of an issue not mentioned in its pleadings, or in Mr Williams's evidence, which arose for the first time in Mr Holland's cross-examination. Although no money was paid into court, it appears to me to be wholly unjust that Mr Holland should have to pay the claimant's costs of the action in these circumstances.
58. I do not consider it is necessary to read CPR 44.3(2) or (4)(a) and (b) into this judgment, although they are clearly relevant to the way that discretion as to costs should be exercised in a case like this. Nor do I consider that it is necessary to make any specific findings about the claimant's conduct of this litigation, although if only half of what the first defendant's solicitor complains of is correct, his lawyers do not seem to have been very forward in honouring their obligations under CPR 1.3 to help the court to further the objective of saving expense, dealing with the case in a way which was proportionate to the amount of money involved, and ensuring that it was dealt with expeditiously. It is sufficient, in my judgment, to conclude that justice requires that the effect of the claimant's small success (won in the circumstances I have described) should be set against the first defendant's success in the major issues in the case. The appropriate order, therefore, in my judgment, is that as between the claimant and Mr Holland before the judge there should have been no order as to costs. I consider that Mercutio's dying words in Romeo and Juliet, Act 3, Scene 1 more properly reflect the justice of the case than the order made by the judge.
59. We received a number of oral submissions from Mr Downes of which he had given no notice to the court or to the appellant. Given the very clear terms in which CPR PD 52 paras 7.8 and 5.10-5.11 are phrased, we would have been entitled to pay no notice of submissions of this kind. It is sufficient to say that I have considered them, and found them unpersuasive.
60. He complained, for instance, that he had been wrong-footed by the judge's peremptory direction to the effect that his closing submission should reach him before 4pm on 30th October. He complained that when the judge sent out his judgment the following day, he had evidently not taken into account some of Mr Downes's submissions. He also suggested that until we knew what order another division of this court is going to make on the Adler fee claim issue, it would be wrong for us to determine for ourselves what order the judge should have made at first instance, even though the first defendant is not a party to the pending appeal.
61. These complaints are symptomatic of the manner in which this litigation had been conducted on the claimant's side. Again and again it appears from the first defendant's solicitor's narrative that the claimant's lawyers left matters to the last moment or did not comply with what they had been ordered to do. I have described how the action, as already constituted, could have been tried in 1998. The first defendant's solicitor describes the difficulties caused by the claimant's lawyers and the costs orders which were made against their client in any event, in her statement at paragraphs 7 (costs order), 9, 10, 12, 13, 20 (two costs orders), 22, 23, 24, 26, 29 (three costs orders), 30, 33, 38-39, 40-41 (costs order), and 44.
62. When difficulties arose in August and September 2000, while it is correct that at solicitor level reiterated complaint was being made about the non-arrival of the first defendant's submissions in August, and other efforts were made, by "chasing" telephone calls at counsels' clerks' level, to expedite the delivery of the first defendant's submissions, nothing effective was done at counsel level, as the judge observed, even though it appears that as early as 10th August Miss Benbow's clerk told Mr Downes's clerk that the submissions had been prepared. I share the judge's regret that the problem that arose could not have been identified and resolved by businesslike exchanges between counsel, in writing if necessary, long before Mr Downes found himself squeezed for time at the end of October. The lesson to be learned from this unhappy saga seems to be that "chasing" telephone calls and chance meetings in the street are no substitute for a letter from counsel to counsel which sets out in clear terms what the problem is. If that had been done, Miss Benbow would have had a letter on her desk which would have made it clear to her that although she had settled her submissions in due time, they had got stuck within her chambers' administrative systems, so that neither the judge nor the other parties had ever received them.
63. If the claimant felt that it had some winning arguments on the merits of its claims which the judge ignored, then it was open to it to consider raising them, by an appropriate notice, on this appeal. If the claimant felt that its prospects of success against the other two defendants on the Adler fee issue were such that they would have an effect on the judge's order for costs as against the first defendant which this court was being invited to review, then it was open to it to apply speedily for the two appeals to be heard together, and for consideration to be given, if necessary, to joining the first defendant to that appeal. Instead, matters were allowed to drift, and it was less than seven days before the appeal was due to be heard that a witness statement in answer to the first defendant's statement first surfaced and the letter suggesting a consent order remitting the matter back to the judge was sent. I have already commented on the absence of any skeleton argument mentioning the matters Mr Downes sought to argue on the appeal.
64. For all these reasons I am satisfied that this appeal should be allowed, that the judge's order for costs against the first defendant should be set aside and that there should be substituted a direction that as between the claimant and the first defendant there should be no order for costs in the court below.

LADY JUSTICE HALE

65. I agree.
Order: Appeal allowed with costs in the sum of £9,000. Claimant to have the costs of the application for security for costs in the sum of £2,500. (Order does not form part of the approved judgment)