England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
MR ANTHONY MANN QC (SITTING AS A
DEPUTY JUDGE OF THE CHANCERY DIVISION)

		Royal Courts of Justice Strand, London, WC2A 2LL Friday 22nd June 2001

ALDOUS LJ:

1. With permission of this Court, Dr Chohan appeals against the order of Mr Anthony Mann QC, sitting as a Deputy Judge of the Chancery Division. That order dismissed the appellant's appeal against an order of Mr Registrar Baister of 22nd June 2000 which granted a bankruptcy order against the appellant on a petition presented by Times Newspapers Ltd (TNL), the respondents to this appeal.
2. The background has been set out in a number of judgments, and I will curtail my account to the essential facts needed to decide the appeal.
3. In 1986 Dr Chohan sued TNL for defamation. The action was settled on TNL's agreement to pay £12,000 and Dr Chohan's costs to be taxed if not agreed. In November 1992 the solicitors, then acting for Dr Chohan, filed a bill of costs claiming £1.05 million. There followed a chain of litigation to resolve the actual sum to be paid. That resulted in three orders for costs in favour of TNL. The first was an order of Master Rogers dated 19th April 1993. The second was an order of Morland J of 30th June 1993 and the third was another order of Master Rogers, this time dated 20th December 1993. Those orders ordered that the costs be paid, such costs to be taxed if not agreed. After a taxation, the relevant certificate was first issued on 8th November 1994. It was subsequently amended. The result was that Dr Chohan owed with interest just over £37,000 to TNL. TNL served a statutory demand on 11th January 2000 and on 18th February 2000 they issued the petition. That resulted in the bankruptcy order to which I have referred.
4. The sole issue that was pressed at the hearing before us was the submission that the petition could not be sustained as it was statute barred pursuant to section 24 of the Limitation Act 1980. That provides:

"24.(1) An action shall not be brought upon any judgment after the expiration of 6 years from the date on which the judgment became enforceable.

(2) No arrears of interest in respect of any judgment debt shall be recovered after the expiration of 6 years from the date on which the interest became due."

5. TNL concede that if the relevant date is the date when the costs orders were pronounced (1993), then the petition is statute barred. They contend and the judge held that the relevant date when the judgments for costs "became enforceable" was the date of the certification (1994). If that be right, Dr Chohan concedes that the petition is not statute barred. It is also accepted that the petition is "an action … brought upon any judgment …" having regard to the definition of action in section 38 of the 1980 Act. Thus the question for determination is – were the orders for costs to be taxed that were made in 1993 enforceable on the date when they were made or did they only become enforceable when the amount had been certified?
6. Mr Lamacraft who appeared for Dr Chohan submitted that the orders for costs became enforceable when they were made. The form of the orders gave rise to an immediate right to payment of the costs albeit that the sum due was unascertained. That right could be enforced by action. The process of taxation was part of the enforcement process and the requirement for taxation did not mean that the orders when made were not enforceable at the date when they were made in 1993. His submissions were based upon a number of cases to which I shall have to refer.
7. Mr Morgan supported the conclusion and reasoning of the judge. The judge said:

"12. ……. At the date of an order for taxation of costs there is an order for the payment of costs which, for some purposes, will take effect as at the date it is pronounced. For example, that date will be the starting date for the computation of time limits for the ensuing taxation (RSC Ord 62 r 29, in the case of the old rules). However, that does not mean that the judgment is enforceable as at that date for the purposes of section 24 of the 1980 Act. I think that the order becomes enforceable for those purposes only when the costs are quantified and certified by the process of taxation. The order is, in effect (and sometimes, in my experience, in its actual wording) an order for the payment of such costs as are found

proper and due on taxation. If there were a money judgment which provided for payment of £x in, say, 14 days time, I do not consider that an action on the judgment could be commenced before the expiry of that period of 14 days. The normal costs order has a similar effect, albeit without an express reference to actual payment at a future date. The situation is analogous to a contract for the sale of property at a price to be determined by a third party. Until the third party has certified the amount there is no contractual obligation to pay that price, and no action could be brought on the contract to claim that price. Mr Lamacraft agreed that that was the case whilst denying the analogy was apt. I think that it is apt. While the costs order gives rise to rights, it does not give rise to an obligation to pay any sum until the costs are certified. It is only at that point that the obligation becomes enforceable for the purposes of section 24 in any meaningful sense. In the course of argument I asked Mr Lamacraft what the prayer in the Particulars of Claim would look like if an action were brought on a costs order before quantification. He said that it would contain a claim for the payment of costs to be quantified. I do not consider that any Particulars like that would disclose a cause of action. The beneficiary of a costs order has a right to have the costs taxed in the action in which the order is made; there is no meaningful relief that could be granted in an action on the bare costs order, any more than there would be any meaningful claim that could be brought on a claim to pay a sum to be determined by valuation before that valuation was completed (absent some claim for breach)."

8. I shall come to the detailed submission of the parties, but before doing so I will deal with two cases decided in the House of Lords on when interest becomes payable. They are Hunt v R.M. Douglas (Roofing) Ltd [1990] 1 AC 398 and Thomas v Bunn [1991] 1 AC 362.
9. In Hunt the plaintiff's action had been settled on 1st November 1984 with an agreed order which provided that the plaintiff's costs should be paid by the defendants to be taxed if not agreed. The costs were taxed on 4th June 1986 at just over £17,000. The dispute between the parties concerned the payment of interest. Should the requirement to pay interest run from 1st November 1984, the date of the order, or from 4th June, the date when the amount of costs was certified. That depended upon section 17 of the Judgments Act 1838 which stated:

"17. …. Every judgment shall carry interest at the rate of 4% per annum from the time of entering up the judgment … until the same shall be satisfied, and such interest may be levied under a writ of execution on such judgment."

10. The House of Lords held that the order for payment of costs to be taxed was a judgment debt within the meaning of those words in section 17 of the 1838 Act and therefore interest ran from the date of the order. Lord Ackner who gave the leading speech said at page 415:

"I respectfully agree with the observations of the Court of Appeal that a satisfactory result cannot be achieved in every case, but in my judgment the balance of justice favours the incipitur rule for following reasons. 1. It is the unsuccessful party to the litigation who ex hypothesi, has caused the costs unnecessarily to be incurred. Hence the order made against him. Since interest is not awarded on costs incurred and paid by the successful party before judgment, why should he suffer the added lost of interest on costs incurred and paid after judgment but before the taxing master gives his certificate? 2. Since as the Court of Appeal rightly said in the Erven Warnink case [1982] 3 All ER 312 payments of costs are likely nowadays to be made to lawyers prior to taxation, then the application of the allocatur rule would generally speaking do greater injustice than the operation of the incipitur rule. Moreover the incipitur rule provides a further necessary stimulus for payments to be made on account of costs and disbursements prior to taxation, for costs to be more readily agreed and for taxation when necessary, to be expedited, all of which are desirable developments. Barristers, solicitors and expert witnesses should not be expected to finance their clients' litigation until it is completed and the taxing master's certificate obtained."

11. He went on at page 416:

"For the sake of completeness I should add that Mr Goldblatt strongly argued that an order for payment of costs to be taxed cannot be a judgment debt within section 17 of the Act of 1838 because until taxation has been completed, there is no sum for which execution can be levied. This point appears to have been raised in the Erven Warnink case and disposed of at the end of the judgment on the basis that the courts have accepted since its enactment, that section 17 does apply to such a judgment and accordingly the law has gone too far for that argument. I agree. This acceptance is because a judgment for costs to be taxed is to be treated in the same way as a judgment for damages to be assessed, where the amount ultimately ascertained is to be treated as if it was mentioned in the judgment – no further order being required. A judgment debt can therefore in my judgment be construed for the purpose of section 17 as covering an order for payment of costs to be taxed."

12. Of course, the issue in Hunt was different to that in this case. There the question was whether there was a judgment debt which carried interest from the date of the order requiring payment of costs. That as Lord Ackner said was decided in the appellant's favour as "a judgment debt can … be construed for the purpose of section 17 as covering an order for payment of costs to be taxed."
13. The equivalence of an order for costs to be taxed if not agreed to an order for damages to be assessed was the issue in Thomas. There damages had been awarded in three actions with the actual amounts to be assessed and the House of Lords had to decide whether interest ran from the date of the judgments or the date of the assessments. The respondents argued that since it was accepted on all sides that Hunt had established that the liability to pay interest on costs did not have to await the quantification of those costs, but dated back to the date of the judgment awarding the costs, the same principle should apply to damages. If quantification was not necessary for the completion of the obligation to pay costs, the same principles should apply to damages. Section 17 of the 1838 Act made no distinction between costs and damages.
14. Lord Ackner came to consider that submission at page 380. He said:

"I accept that it is an anomaly that an order for payment of costs to be taxed is construed for the purposes of section 17 as a judgment debt, even though, before taxation has been completed, there is no sum for which execution can be levied. However the courts have accepted since its enactment that section 17 does apply to such an order and, for the reasons set out in my speech in Hunt's case [1990] 1 AC 398, the balance of justice favours continuing so to treat such an order. The short question is – was I right in concluding that this acceptance is because 'a judgment for costs to be taxed is to be treated in the same way as a judgment for damages to be assessed, where the amount ultimately ascertained is to be treated as if it was mentioned in the judgment – no further order being required.' The answer is in the negative.

The wording of section 17 clearly envisages a single judgment which constitutes the 'judgment debt'. This 'judgment debt' can only arise where the judgment itself quantifies the sum which the judgment debtor owes to his judgment creditor. The language of the section does not envisage an interlocutory judgment, but only a final judgment."

15. Having cited a passage from the judgment of Kindersley VC in Garner v Briggs (1858) 27 LJ Ch 483, Lord Ackner continued at page 381F:

"I accordingly take the view that the judgment referred to in section 17 of the Judgments Act 1838 does not relate to an interlocutory or interim order or judgment establishing only the defendant's liability. The judgment contemplated by that section is the judgment which quantifies the defendant's liability, the judgment which has been referred to in the course of these appeals as 'the damages judgment'. The artificial distinction drawn in the Borthwick case [1905] 2 KB 516 based on the precise terms in which damages are ordered to be assessed can no longer stand."

16. The wording of section 17 of the Judgments Act 1838 is different to that of section 24 of the Limitation Act. Hunt decided that an order for costs provides a judgment debt, as those words are used in section 17 of the 1838 Act, and therefore it carried interest from the date the order was made. However an award for damages to be assessed was not a judgment debt, but only a judgment on liability with the actual debt to be decided later. It is important to note that Lord Ackner in accepting that an order for costs to be taxed created a judgment debt, pointed out that there was no sum for which execution could be levied.
17. Mr Lamacraft submitted that the words "the judgment became enforceable" in section 24 of the 1980 Act limited the avenue of enforcement to enforcement by action on the judgment. He relied for that submission upon a statement of Brandon J in Berliner Industriebank Aktiengesellschaft v Jost [1971] 1 QB 270 at page 293:

"In my view the word 'enforceable' in section 24(1) of the Limitation Act, 1939, does not have the meaning which this argument ascribes to it. I think it means 'enforceable by action on the judgment' and not 'enforceable by execution on the judgment'."

18. The statement as to the meaning of the word "enforceable" of Brandon J is understandable in the context of the facts of that case, but is in my view too restrictive. I can see no reason for giving that word a restrictive meaning. Thus time will run from the date when the judgment became enforceable whether by action or otherwise. Lowsley v Forbes [1999] 1 AC 329 does not suggest the contrary. It decided that the words "an action shall not be brought …." referred to a fresh action upon a judgment and did not include proceedings by way of execution.
19. Mr Lamacraft submitted that an order for payment of costs to be taxed was enforceable by action prior to the amount of the costs being ascertained by taxations. Further as decided in Hunt it was a judgment debt which could be enforced in the same way. He relied for support on Nichols Advanced Vehicles Systems Inc. v Reece, Oliver & Ors [1985] RPC 445. He submitted that the judgments in that action impliedly held that an action to enforce such an order could be brought even though the amount was not ascertained. Nichols in my view does not support such a submission. In fact it suggests the contrary.
20. In Nichols the court had ordered an enquiry as to damages. The plaintiff delayed in the prosecution of that enquiry and the defendants applied to have it struck out for want of prosecution or to be stayed under the inherent jurisdiction of the court. The Court of Appeal held that there had been inordinate delay, but dismissed the appeal as they found that the delay had not prejudiced the defendants.
21. The observations relied on by Mr Lamacraft are those made by the judges of the Court of Appeal on the submissions of the parties as to whether or not the limitation period had expired. Two submissions were made. First it was submitted that as the limitation period had not expired a fresh action could be brought if the enquiry was struck out. That was rejected. As O'Connor LJ said at page 453:

"The judgment is binding and Nichols have no power to issue a fresh writ for breach of copyright. If they did so, and tried to proceed on it, it would be struck out as being an abuse of the process of the court."

The next question was whether Nichols could sue on the judgment.

22. O'Connor LJ said at page 454:

"In the present case, when one looks at the judgment of Templeman J, he ordered an inquiry, and it seems to me that there is no possible purpose in suing on that judgment and asking for an inquiry again – there is no need for it, the remedy has been granted. It is for the party who has obtained an order for an inquiry to pursue it; it would be an abuse of the process of the court if he tried to sue on that judgment, asking for the very order which he has already obtained, without being able to show any juridical advantage in so doing.

I am satisfied that no further proceeding could be brought within the limitation period running from the judgment."

Slade LJ gave a judgment to the same effect.

23. Mr Lamacraft submitted that in the passage just quoted, O'Connor LJ was accepting that Nichols could sue on the judgment, but it would be struck out as abusive. It followed by analogy that an order for costs to be paid, subject to taxation, could be enforced by action, with perhaps the action being stayed pending completion of taxation.
24. The judgments in Nichols do not accept that an action can be brought on a judgment for damages to be assessed. That question did not arise for decision. In any case the law must be that stated by the House of Lords in Thomas, namely that such an order does not create a judgment debt as there is no ascertained sum. Such an order is in its nature interim as it only decides liability. The inference to be drawn from the judgments in Nichols is that Nichols could not sue on the judgment. The question posed by O'Connor LJ at page 453 – "Can Nichols sue on the judgment?" - was answered in the negative in the passage I have quoted.
25. Mr Lamacraft also relied on the judgment of Brandon J in Berliner for the proposition that the substantive right to sue on an English judgment did not depend on the existence of a procedural right to issue execution. That I accept as the facts in the Berliner case demonstrated.
26. In that case there was a valid German judgment for a particular sum of money which, due to German bankruptcy law, was not enforceable in Germany. But the plaintiffs had a right to bring an action in this country to enforce the judgment debt. That was made clear by the Court of Appeal ([1971] 2 QB 463) which by a majority dismissed the appeal. They pointed out that there was a judgment for a liquidated sum which was due and payable in 1958. It could not be recovered in Germany due to German law, but as Salmon LJ said at page 471:

"If the bank had chosen to bring their action in, say, 1959, the debt would have been due and payable and they could accordingly have obtained judgment. The English courts might or might not have granted a stay of the bank's right to levy execution on the defendant's property until the termination of the German bankruptcy, but they could not have refused to enter judgment against the defendant since he could have had not defence to an action brought by the bank on the German judgment which was final, conclusive and unappealable."

27. If the Berliner judgment is considered in context, it is not an authority which supports the proposition that an action can be brought to enforce payment of an order for costs to be taxed, prior to the taxation being completed. That is so, even if it is accepted that the order created a judgment debt within the meaning of those words in the Judgments Act 1838.
28. Mr Morgan, counsel for TNL, submitted that in practice it was impossible for TNL to enforce the order for costs against Dr Chohan until a certificate had been issued. That being so, it would be odd if the Limitation Act, when it used the word "enforceable", covered a period when there were no practical steps that could be taken to enforce the order. That was particularly pertinent to this case as TNL had not been guilty of delay. If so, an order for costs to be taxed could not be enforceable until the debt was quantified.
29. Mr Lamacraft sought to rebut that submission using the conclusion reached in Coburn v Colledge (1897) QBD 702. In that case the Court of Appeal concluded that the cause of action accrued when the solicitor did his work even though he could not bill the client for a month. In my view Coburn is a case decided on its facts. It does not throw light on the meaning to be given to the word "enforceable" in section 24 of the Limitation Act.
30. Mr Morgan relied on a number of old cases to support his submission that enforcement of the debt was only possible when the amount of the costs had been certified. First Stumm v Dickson (1889) 22 QBD 529. In that case Lord Esher MR pointed out that the practice at that time required that the amount of costs, when taxed, should be inserted in the in the original judgment and that was the final judgment. That is no longer the practice and to equate the present practice to that conclusion could produce a result contrary to Hunt, where, as I have pointed out, the House of Lords held that when an order was made for costs to be taxed if not agreed, a judgment debt arose at the date of the order even though taxation had not been completed. In my view Re: Crump (1891) 64 LT (NS) 799 adds nothing to Stumm. Both cases are consistent with Mr Morgan's submission but I have not found them helpful.
31. The judge placed reliance on In re A Debtor: Ex parte Scott and the Official Receiver [1954] 1 WLR 1190. In that case it was held that at the date of the order for costs, the amount of costs was not a liquidated debt as the amount had not been ascertained by taxation. Again that case is consistent with that advanced by Mr Morgan, but does not deal with the submission of Mr Lamacraft that the order for costs to be paid was enforceable by action.

Conclusion

32. Section 24 of the Limitation Act prohibits an action being brought on a judgment, after 6 years from the date when the judgment became enforceable. It is therefore relevant to ask how and when the orders for costs made in these proceedings became enforceable prior to the amounts being certified. Mr Lamacraft's submission was that they became enforceable by action as of the date when the debt became due. The relief sought in that action, he submitted, would be the same as that already ordered, namely an order for costs to be paid when taxed.
33. I cannot believe that our law contemplates such a stupid action which of course would be struck out as an abuse. The word "enforceable" must mean enforceable in a practical way according to law. There cannot be a right to bring an action which would amount to an abuse of process. Further, in the present case there was nothing to enforce until the amount of costs had been certified. It was at that stage that the order for costs became enforceable by action. That did not occur until 1994. The orders made required payment of costs, the amount to be ascertained by taxation. Payment cannot be enforced without knowledge of what should be paid. As in Nichols, no further proceedings could be brought on the judgment prior to the sum payable being ascertained.
34. In my view the judge came to the right conclusion. This appeal should be dismissed.

ROBERT WALKER LJ:

35. I agree.

JONATHAN PARKER LJ:

36. I also agree.
ORDER: Appeal dismissed; the debtor to pay the petitioning creditor's costs of the appeal; the debtor's liability for costs to be determined pursuant to Regulation 9 (2) (a) of the Community Legal Services (Costs) Regulations at nil; detailed assessment of the petitioning creditor's costs; debtor's costs of the appeal to be subject to a detailed assessment pursuant to the Access to Justice Act 1999; permission to appeal to the House of Lords refused.
(Order does not form part of approved Judgment)