England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM TUNBRIDGE WELLS COUNTY COURT
(MR RECORDER GERREY)

		Royal Courts of Justice Strand London WC2 Thursday, 25th July 2002

Thursday, 25th July 2002

1. LORD JUSTICE CHADWICK: Lord Justice Keene will give the first judgment.
2. LORD JUSTICE KEENE: This unhappily is yet another appeal about costs. It is a defendant's appeal against a costs order made by Mr Recorder Gerrey at Tunbridge Wells County Court on 9th January 2002. The appellant trades as Park Street Garage. The respondent is the owner of an E-type Jaguar which he purchased in November 1989. In July 1995 the car suffered some damage, and the parties agreed that the appellant would carry out the necessary repairs as well as some additional works, including a full respray. Subsequently, a dispute arose about the amount due to the appellant for carrying out this work.
3. As at April 1998 before any proceedings had started the appellant was claiming £8,577.69 and the respondent was offering £3,000 while seeking delivery up of the car which the appellant still retained. It seems that that offer was increased to £4,000 in June 2002, conditional on inspection by an expert; but no agreement was reached to settle the dispute. In June of that year the appellant acting on his own behalf had written to the respondent suggesting that if his charges were not agreed it would be sensible to take the invoices to an independent garage and ask them how much they would charge for the work which had been carried out.
4. The respondent, after sending a letter before action, began proceedings on 15th September 1998. In the claim as it originally stood the respondent sought delivery up of the car or the payment of £43,500 as its value, together with damages for conversion, plus interest. The appellant filed a defence and counterclaim for the money which he said was due. On 18th January 1999 District Judge Latham ordered first, that the respondent pay into court the £8,577.69 plus costs within 14 days to await the outcome of the case; secondly, that the appellant deliver up the car within 21 days thereafter to the respondent. The car was duly delivered up to the respondent on 15th February 1999.
5. On 5th July 2000 the respondent made a Part 36 offer which in effect withdrew the earlier offer of £4,000 and proposed a hands-off solution with each side withdrawing its claims but with the appellant paying 50 per cent of the respondent's costs. As at that date there remained a general unparticularised claim by the respondent for damages for conversion, plus interest, but the principal outstanding matter at that moment was the appellant's counterclaim. However, in about August 2000 the respondent amended his particulars of claim with leave of the court so as to add two new causes of action, namely a claim for damages for misrepresentation and one for breach of contract. The former related to alleged events in 1989 when the respondent bought the car, the latter to an allegation that the appellant had failed to complete the works to the car in a proper and workmanlike manner. A Scott schedule gave particulars of that second allegation. The damages claimed for the alleged misrepresentation in 1989 were put at £18,500 and those for the poor workmanship at around £3,300.
6. On 26th July 2001 the trial was listed to begin on 9th January 2002. Immediately prior to the start of trial the state of play was this. The respondent was claiming £18,500 as damages for misrepresentation, and about £3,300 for the alleged poor workmanship to the car, while the appellant was claiming £8,577 as the balance of the sum due for the repairs. In fact, on the first day of trial the case was settled by the parties on the basis that there would be judgment for the appellant for £5,000 plus interest in the sum of £400. It should be noted that that settlement figure apparently reflected an allowance of about £971 in respect of defective work carried out to the car by the appellant. But the respondent had, in effect, abandoned his claim for £18,500 for misrepresentation.
7. Costs, however, were not agreed and the learned recorder heard argument on that particular issue. As a result he ordered that the appellant pay the respondent's costs in full up to the date when the car was delivered up to the respondent (15th February 1999) and pay one-third of the respondent's costs thereafter. The recorder's reasons can largely be discerned from the transcript of the judgment before him, but very sensibly after he had made his order counsel sought from him a note of his reasons. That course of action avoids the sort of problems referred to in Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377, and again by this court in English v Emery Reimbold and Strick Ltd 2002 EWCA, Civ 605, and it is a course of action which, for my part, I would commend in any case where the parties are not sure of the reasons for the judge's decision on costs.
8. The note of reasons signed by the recorder is brief, since is only purports to be a summary of his reasons. It reads as follows:

"The Judgment in favour of the Defendant for £5,000 meant the Defendant had not done significantly better than the offer made by the Claimant (on 18th June 1998 before the commencement of proceedings) in the sum of £4,000. Had such a sum been accepted, this litigation would never have commenced. In light of the Claimant being obliged to issue proceedings for the return of the Jaguar and the Claimant's offer, he should have the costs until the return of the Jaguar on 15th February 1999. In respect of the subsequent costs the defendant's judgment had been reduced in light of the claimant's claim for damages. That claim had succeeded approximately to the extent of one-third. No allowance was made in respect of the claimant's claim for misrepresentation. In the circumstances one-third of the costs after the return of the Jaguar should be the claimant's and payable by the defendant."

9. The learned recorder's reference to the claimant's claim for damages succeeding approximately to the extent of one-third is clearly a reference to the claim for damages for the poor workmanship alleged in respect of the vehicle.
10. The recorder's reasons are now challenged by the appellant. Two main arguments are advanced by Mr Butler on behalf of the appellant. First, it is said that the costs order did not reflect the fact that the respondent had abandoned various claims, in particular the claim for misrepresentation, on the day fixed for trial when the appellant had incurred costs in preparing to defend on those issues.
11. As part of this submission it was said in the appellant's skeleton, and said initially in oral argument before us, that he was having to defend against the claim for £43,500 for misrepresentation. That, I say straightaway, is clearly a misinterpretation of the particulars of claim. They claimed £43,500 as the alternative to the delivery up of the car which in fact had been delivered up in February 1999. On any sensible reading of the pleadings the claim for misrepresentation was one for £18,500.
12. It is emphasised on behalf of the appellant that he faced that claim on the opening day of the trial and that that was abandoned on that day. Mr Butler indeed suggests that but for this claim the case would, after 8th January 1999, have been capable of being a fast-track claim since it involved claims not exceeding £15,000; whereas it had to be a multi-track claim once the misrepresentation cause of action was added by amendment. In any event it is submitted that the appellant had inevitably run up additional costs in preparing to meet that further claim. That was something, says Mr Butler, which simply was not taken into account by the recorder in the order made by him in respect of costs.
13. Secondly, the appellant contends that it was wrong for there to be a costs order in favour of the respondent when the judgment entered had been for the appellant on the counterclaim. Emphasis is placed on CPR 44.3(2)(a) whereby the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party. Here, it is said, the appellant was the successful party, particularly when it is borne in mind that the offer by the respondent to pay £4,000 had been withdrawn back in July 2000. The point is also made by Mr Butler that the appellant had been entitled to a lien on the car until this invoice had been paid. In the event he succeeded in obtaining an amount in excess of the original offer, £4,000, which had been on the table when the proceedings had started. Consequently on that basis Mr Butler says that the first part of the costs order is unjustified and unsound.
14. On behalf of the respondent Mr Cavender submits that the wide discretion enjoyed by a judge on costs was not exceeded in this case. He draws attention in his skeleton to CPR 52.11(3)(a) whereby an appellate court would only allow an appeal where the decision of the lower court is "wrong", which in cases of a discretionary power means one which has "exceeded the general ambit within which a reasonable disagreement is possible." See G v G [1985] 1 WLR 647 at 652, cited by this court in the well-known case of Tanfern Limited v Cameron MacDonald [2000] 1 WLR 1311 at paragraph 32. Mr Cavender emphasises that this was a reasoned decision made by the recorder on costs. It is contended that there is no error in principle to be found here in the judge's reasoning. He had noted that the appellants only exceeded the June 1990 offer for £4,000 to a limited degree. It follows that it was disproportionate for the matter to have proceeded after that offer had been made.
15. It is said that that part of the costs order relating to the period up to delivery of the car was justified because the respondent had had to begin proceedings to recover the vehicle. As for the costs after delivery up, the respondent had in fact succeeded to a degree on his claim for damages for poor workmanship. The judge was entitled to take the view, says Mr Cavender, that the respondent had in broad terms been successful to an extent and that justified at any rate a partial award of his costs.
16. For my part I fully accept the points made by Mr Cavender about the limited scope for intervention by an appeal court where the decision below is a discretionary one. This court will always be slow to interfere with the exercise of a discretion on costs, particularly where there has been a trial which puts the trial judge in an excellent position to exercise that discretion.
17. I bear in mind that here there had not in fact been a trial. Nonetheless the principle to be applied in costs appeals are well established. In AEI Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507 at 1523, Lord Woolf, MR, reaffirmed that the approach of the Court of Appeal to costs appeals was as had been stated by Stuart Smith LJ in Roache v News Group Newspapers Limited [1998] EMLR 161, 172:

"Before the court can interfere it must be shown that the judge has either erred in principle in his approach, or has left out of account, or taken into account, some feature that he should, or should not, have considered, or that his decision is wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale."

18. Bearing those principles in mind I, for my part, can see nothing wrong in the part of this costs order which relates to the period up to the delivery up of the car. True, there was a dispute between the parties about the amount properly due for repairs which could properly give rise to a lien; but before proceedings began the respondent had offered £4,000 in June 1998. In the event the appellant only exceeded that by a modest amount. The respondent's offer came nearer to the figure ultimately agreed. The appellant took a risk in exercising the lien in the way which he did, and he never offered to accept anything less than the £8,500 claimed as a basis for releasing the car. He could have made such an offer at any time. Thus, in my judgment, the recorder was entitled to take the view that the respondent was justified in commencing proceedings in order to recover his car from the appellant.
19. I turn then to the other part of the costs order, whereby the appellant was ordered to pay one-third of the respondent's costs after delivery of the car. The recorder's reasoning was plainly based on the fact that the respondent had succeeded in his claim for damages for poor workmanship to the extent of one-third. That is true. However, in the settlement arrived at, no allowance was made by the parties in respect of the respondent's substantial claim for damages for misrepresentation. This in fact was, from August 2000 onwards, the largest amount claimed by either party in this litigation. Given the nature of the allegation it must have led to some material increase in the costs of both parties, yet it was dropped on the first day of trial in its entirety.
20. That is something which clearly comes within the ambit of CPR 44.3.4.(a) "the conduct of the parties", to which the court must have regard. "Conduct", according to CPR 44.3(5), includes whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue. The respondent did not succeed at all on that issue, the major part of his claim in financial terms by this stage in the proceedings. Yet the recorder does not seem to have reflected that in his order, which was based on the fact, as I have indicated, that the respondent had succeeded to the extent of one-third (£972) on his claim for poor workmanship.
21. The omission of that factor, the abandonment of the misrepresentation claim, justifies this court interfering with the second part of the costs order. Looking at the realities of the broad picture, one has to bear in mind that the offer of £4,000 by the respondent was not on the table after July 2000. The respondent did succeed to the extent of nearly £1,000 on his claim, but that was a very small fraction of the total amount he was claiming which, on the day before trial, had stood at about £21,800. The appellant recovered £5,000, a substantial part of the £8,577 which he had claimed. In those circumstances it does not seem to me that justice has been done by the order made by the learned recorder in respect of the period after 15th February 1999.
22. In my view, if one seeks to bear in mind the approach enshrined in CPR 44.3, the proper result which reflects the circumstances to which I have referred in this case would be an order that the respondent be required to pay half of the appellant's costs after 15th February 1999.
23. To that extent I would allow this appeal and vary the order in the manner which I have indicated.
24. LORD JUSTICE CHADWICK: I agree with the order proposed by my Lord.
25. This dispute about costs comes before us with the permission of the judge. We are therefore required to decide whether the judge applied the correct principles in reaching the conclusion reflected in the order for costs which he made. It is only if we are satisfied that he did not that we can be justified in varying his order.
26. The principles to be applied are those set out in CPR 44.3. The judge was plainly correct, in my view, to approach his task on the basis that the costs incurred before the redelivery of the vehicle on 15th February 1999 should be treated in a manner which differed from the treatment of the costs incurred after that date. A split order was therefore appropriate.
27. The judge held that the costs incurred before 15th February 1999 should be paid by the defendant. In my view he was entitled to reach that conclusion. The claimant's claim in conversion could be resisted by the defendant only on the basis of the repairer's lien which he asserted. The lien asserted was to secure a counterclaim for some £8,500 said to be the balance of amounts due under invoices rendered in respect of parts and labour.
28. The defendant made a proper effort to obtain some form of alternative dispute resolution by suggesting that the invoices be referred to an independent third-party for a view as to the amounts sought to be charged; but he did not respond to the offer made by the plaintiff's solicitors in their letter of 18th June 1998. In particular he did not make any counter-offer to accept a figure of less than £8,500 in satisfaction of the lien with which he claimed. He has not established a counterclaim for £8,500 - indeed, he has had to accept that that amount was overstated. In those circumstances the claimant was entitled to commence proceedings, and then pursue them until the vehicle was returned on 15th February 1999. There are no grounds for interfering with that part of the costs order.
29. Thereafter there was little or no action until an offer letter was sent by the claimant's solicitors on 5th July 2000. That was followed by an amendment of pleadings on 26th July 2000. From 5th July 2000, if not from a date considerably before that, the offer of the claimant to pay £4,000 in full and final settlement - contained in the letter of 18th June 1998 - was no longer available for acceptance.
30. As from the amendment the claimant was claiming an amount of £22,000 or thereabouts - that is to say £18,500 for misrepresentation and the balance in respect of the costs of remedial works which the claimant asserted he had had to do. The defendant was still counterclaiming for the £8,500 balance due on the invoices. So the position remained until the trial in January 2002.
31. At an early stage of the trial the claimant effectively abandoned the claim for misrepresentation and the parties settled on the basis of a judgment for the defendant of £5,000. As Keene LJ has explained that represents, more or less, an acceptance of the defendant's counterclaim in an amount of £6,000, subject to set-off of about £1,000 in respect of the claim for remedial works. On any ordinary assessment of the position the defendant had won in respect of the litigation since February 1999.
32. The judge's order has the effect of denying the defendant any costs of the litigation since February 1999; and, further, of requiring him to pay one-third of the claimant's costs from that date. That is, to my mind, a remarkable outcome in the circumstances that the defendant had already been ordered to pay the whole of the claimant's costs up to February 1999; that is to say the whole of the costs attributable to his reliance on a repairer's lien. The judge's order fails to recognise, to any extent at all, that the defendant was the overall winner in respect of the issues which remained the subject of litigation after February 1999.
33. What reasons did the judge give for his conclusion that that was the correct result? He said this:

"In respect of the subsequent costs, the Defendant's judgment had been reduced in light of the Claimant's claim for damages."

34. That is a reference to the defendant's success, to the extent of £6,000 on his counterclaim, being reduced by £1,000 in respect of the claim for remedial works. The judge went on:

"That claim [in respect of remedial works] had succeeded approximately to the extent of one-third."

35. That is a reference to £1,000 being about one-third of the £3,300 that was being claimed by the claimant in respect of remedial works. The judge continued:

"No allowance was made in respect of the Claimant's claim for misrepresentation."

36. But, it may be asked, why not? On the basis of that reasoning the judge thought it right to deny the defendants any costs after February 1999 and to order him to pay one-third of the claimant's costs after that date.
37. The effect of that order is to penalise the defendant by denying him any costs of the counterclaim, on which he had substantially succeeded, after the vehicle had been returned to the claimant. Had the lien never been exercised it could not have been right to deny the defendant any part of the costs incurred on the counterclaim. Why should the position be so different in a case where the lien has been released by returning the car to the claimant. Was it to reject the fact that the price of release had been payment of money into court? Secondly, the claimant had recovered, in effect, £1,000 out of a claim of £21,000. Why should that entitle him to one-third of all costs since February 1999? In my view the judge failed to weigh these matters properly or at all. He was, no doubt, understandably anxious to dispose expeditiously of a dispute about costs at the end of what must have been a long and busy day. But because he has failed to weigh those matters we are entitled, and indeed bound, to interfere.
38. I agree that an order which leaves the position up to 15th February 1999 unaltered but requires the claimant to pay one-half of the defendant's costs from 15th February 1999 meets the justice of the case.
(Appeal allowed; Respondent's costs assessed summarily in the sum of £3,270 including VAT (VAT amount to be deducted if VAT registered).