England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
COMPANIES COURT
(Mr Justice Patten)

		Royal Courts of Justice Strand London WC2 Friday, 27th April 2001

Friday, 27th April 2001

1. LORD JUSTICE JONATHAN PARKER: Before the court are two renewed applications for permission to appeal made by Mr Patrick Harrington, in his capacity as liquidator of Chelmsford City Football Club (1980) Limited. I will refer to Mr Harrington as "the liquidator" and to the company in liquidation as "the Company". I refused both these applications on the papers on 15th March 2001.
2. The liquidator appears on these applications by Mr Vincent Nelson QC.
3. Both the applications arise out of proceedings taken by the liquidator against a Mr Dennis Wakeling seeking the setting aside of a charge granted by the company as security for a purported indebtedness of some £76,000 allegedly owed by the company to Mr Wakeling. In the proceedings, the liquidator also contended that the charge (if valid) constituted a preference of Mr Wakeling over other creditors of the company. It was Mr Wakeling's case that the indebtedness secured by the charge represented the balance of costs incurred by him in proceedings which he took, and took successfully, for the removal of an administrator of the Company. Mr Wakeling alleged that the liability for those costs had been assumed by the Company by way of indemnity, and that the Company had agreed to execute the charge to secure that liability.
4. In the course, it appears, of the interlocutory stages of the proceedings, the liquidator applied for a wasted costs order against Mr Wakeling's solicitors, pursuant to section 51 of the Supreme Court Act 1981. In the event, the wasted costs application was compromised prior to the hearing of the substantive proceedings, and the judge, Patten J, was invited to make an order by consent that the application be dismissed with costs, such costs to be assessed on an indemnity basis. Mr Michael Todd QC (appearing for the solicitors) asked the judge to make a summary assessment of the costs, rather than direct a detailed assessment of them. There followed, as Mr Nelson has told me, some two and a half hours of argument by Mr Todd (for the solicitors) and by Mr Arden (appearing for the liquidator) on the detailed items in the solicitors' statement of costs.
5. The judge gave a judgment dealing with this matter, the judgment being given on 16th October 2000. In his judgment, the judge reviewed the relevant provisions of the Civil Procedure Rules and concluded, in the exercise of his discretion, that it was appropriate in the circumstances that the costs be summarily assessed, and he proceeded to carry out a summary assessment.
6. The liquidator seeks permission to appeal against the decision summarily to assess the costs and against the assessment itself. That is the first application which is before me this morning.
7. The substantive proceedings duly came on for hearing, but after the liquidator's evidence had been led (and before Mr Wakeling had given his evidence), those proceedings too were compromised, in the sense that Mr Wakeling effectively capitulated and, it appears, no longer opposed the relief sought. Two matters were, however, left for the judge to determine: first, whether the liquidator should have his costs of the proceedings on an indemnity basis or on the standard basis and, second, whether an interim payment should be made. I am not concerned with the question of an interim payment.
8. In his judgment on these issues, delivered on 8th November 2000, the judge awarded the liquidator his costs on the standard basis. The liquidator seeks permission to appeal against that decision. That is the second of the two applications before me this morning.
9. I turn first to the application for permission to appeal in relation to the summary assessment of costs carried out on the wasted costs application.
10. The grounds of appeal in section 7 of the standard form of appellant's notice contain two paragraphs. The first reads as follows:

"The Judge was wrong to summarily assess the costs having said in his judgment that he did not have the materials to summarily assess the costs."

11. I say straight away, and Mr Nelson has very frankly accepted, that there is nothing in the judgment to support that proposed ground of appeal.
12. Paragraph 2 of the grounds of appeal contends that the judge, in assessing the costs under the summary assessment, failed to do so appropriately in a number of detailed respects which are listed in that paragraph.
13. Mr Nelson in his helpful oral submissions supplementing a very full and careful written skeleton argument, submits that the mere fact that there was some two and a half hours of argument on the question of summary assessment and on the summary assessment itself indicates that substantial issues arose in relation to those matters, and he submits that the judge ought to have directed a detailed assessment and that in failing to do so the judge made a decision, albeit in his discretion, which either erred in principle or, alternatively, was clearly wrong.
14. Despite Mr Nelson's submissions, I can for myself see no basis whatever for an appeal against the judge's decision in relation to summary assessment or, for that matter, in relation to the summary assessment itself. These were, as it seems to me, entirely matters for the judge's discretion, and I can see no basis upon which an appeal could succeed. When refusing permission to appeal on the papers, I said this:

"I can see no arguable grounds for the proposed appeal. The judge's decision to assess the costs summarily and the ensuing assessment fell well within the ambit of his discretion."

15. Despite Mr Nelson's submissions, I remain firmly of that view. I therefore dismiss that application.
16. I turn then to the other application relating to indemnity costs of the substantive proceedings. In essence, as I read his judgment, the judge's reason for not awarding costs on an indemnity basis was simply that the proceedings having been compromised at a relatively early stage and before Mr Wakeling had given oral evidence and been cross-examined on it, the judge could not be satisfied that it was an appropriate case for indemnity costs. In so deciding, he rejected an application by Mr Arden (for the liquidator) that it was implicit in the fact that Mr Wakeling had agreed, in effect, to capitulate that there never had been any genuine defence to the proceedings. The judge declined to draw that inference.
17. In the course of his judgment the judge said this:

"An order for assessment on an indemnity" [it should in include the word "basis"] "is commonly made where the judge hearing the matter in question decides that the conduct of the proceedings on the part of the party against whom the order for costs is sought has, to use words in some of the authorities, been `disgraceful or deserving of moral condemnation'. That includes the case where the defence, or conversely the claim, has been put forward with no honest belief in its success."

18. Then, after referring to a decision by Miss Belinda Bucknall QC, sitting as a Deputy High Court Judge, in Cooper v P & 0 Stena Line Ltd, the judge continued:

"In the present matter before me, the compromise of these proceedings has occurred after the case has been opened by Mr. Arden on behalf of the liquidator and after I have heard approximately half a day's evidence from the liquidator himself. Although, during the course of the opening of necessity, I was able to form at least a provisional and interlocutory view on the question of solvency, I was not able to, nor would it have been appropriate for me to do so, form any view as to the other issues that need to be canvassed in deciding these proceedings, namely whether or not the transactions in question had been ones at an undervalue; or alternatively, constituted a preference; or alternatively, were entered into in breach of the respondent director's fiduciary duties to the company.

Those issues would have required me to have taken a view about Mr. Wakeling's evidence, which is in the form of affidavits, which would only have been possible, in my judgment, had Mr. Wakeling gone into the witness box and been cross-examined in the usual way.

Although it is plainly open to Mr. Arden to submit to me, as he does, that I can infer from the fact that Mr. Wakeling has agreed to compromise these proceedings on the basis that the charge and the underlying agreement are set aside...",

and I think some words must have been omitted, but the transcript goes on,

"...it is not, in my judgment, open to me to infer that that compromise has been brought about by a late acceptance that the defence is hopeless; and what is more, which in my judgment would be necessary for me to make an order for indemnity costs, that there has never been any proper basis on which that defence could be put forward in answer to this application.

In those circumstances, it is not, I am afraid, possible for me to make the necessary finding in order to allow me to exercise my jurisdiction to award costs on an indemnity basis, and I will therefore direct that the award of costs should be assessed in this case on the usual standard basis of taxation."

19. Mr Nelson submits that the judge exercised his discretion on a wrong basis, in that the absence of any proper basis for defending the proceedings is not the entirety of the test when considering whether in any particular case it is appropriate to award indemnity costs. Mr Nelson submits that such cases may include cases where a party has been forced to litigate unnecessarily or where a party has no honest belief in the case being put forward on his behalf. He submits that it may be possible to identify such a case independently of any evidence which may or may not have been given in the course of the hearing, and he submits that the instant case is a case in which that can readily be seen. He submits that it is apparent from the contemporary documents that Mr Wakeling behaved in a disgraceful manner in the instant case, and that it is a reasonable inference that Mr Wakeling was conducting, in effect, a sham defence and never had any answers to the charges made by the liquidator. In such circumstances, submits Mr Nelson, the judge was wrong to conclude that he had, as he put it in his written skeleton, no jurisdiction to award indemnity costs.
20. In his skeleton, which Mr Nelson adopted in his oral submissions, there are detailed submissions on the substantive issues in the proceedings.
21. In my judgment the application for permission to appeal against the judge's decision not to award indemnity costs stands no real prospect of success. In particular, the suggestion that the judge concluded that he had no jurisdiction to award indemnity costs seems to me to be based on a misconception. The judge did not, as I read his judgment, hold that he had no jurisdiction to do so. His conclusion was that in the circumstances he was not in a position to conclude that it was a suitable case in which to make such an award. As he said at the conclusion of the judgment in the passage which I quoted earlier, and which I quote again:

"...it is not, I am afraid, possible for me to make the necessary finding in order to allow me to exercise my jurisdiction to award costs on an indemnity basis..."

22. That in my judgment was a view which the judge was fully entitled to take; and there is no basis upon which that view could be challenged in the Court of Appeal.
23. Nor in my judgment is there any substance in Mr Nelson's submission that the judge adopted too narrow a test in relation to the award of indemnity costs. As I read his judgment, the judge was not concerned to identify all the types of case in which an order for indemnity costs might be appropriate. Rather, he was concerned to explain that he found himself unable at that stage in the proceedings to conclude that the instant case merited such an award. Once again, that was in my judgment a decision which the judge was fully entitled to reach and one which did not involve any error of law or principle.
24. Accordingly, I adhere to the view which I expressed on the papers that the judge was fully entitled in the exercise of his discretion to decline to award indemnity costs for the reasons which he gave. I therefore dismiss both applications
Order: Applications dismissed.