England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
CIVIL DIVISION
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
ADMINISTRATIVE COURT LIST

		The Civil Justice Centre Park Street Cardiff Wednesday 30 January 2002

Wednesday 30 January 2002

1. LADY JUSTICE ARDEN: This is an appeal with the permission of Robert Walker LJ from the order of His Honour Judge Moseley QC dated 19 September 2001 in respect of the costs of these proceedings.
2. The order declared that the claimants had a right of way over the land at the east side of Horrocks Close. The claimants (the appellants on this appeal) contended that they had this right of way without being under any obligation to repair it. In their claim form, issued on 7 December 2000, the claimants claimed the right of way. The defendants in their defence initially disputed the right of way. However, in July 2001 they accepted that there was such a right of way and the only issue outstanding in the litigation was whether the claimants were under any obligation to contribute to that repair. I refer to July 2001 as that is the month in which Judge Case made an order in this matter which records that acceptance.
3. The claimants contended that there was no obligation to contribute to the repair. The defendants contended that there was such an obligation and the judge found in favour of the claimants. That decision brought these proceedings to an end and the judge then had to resolve the question of costs. With respect to costs, the judge ordered that there should be no order save that the claimants should pay the defendants their costs on a standard basis after 3 May 2001.
4. In reaching his decision, the judge first held that the claimants were the successful party. This was because they had succeeded in showing that they were under no obligation to contribute to the maintenance of the right of way. However, he held that a Part 36 offer made by the defendants on 12 April 2001 gave the claimants more than they ultimately achieved in the action. Under the terms of this offer the claimants were to contribute 50 per cent of the costs of repairing the lane over which they claimed a right of way. By implication, the defendants were to pay the remaining 50 per cent. The judge also held that the action had been started precipitately. The proceedings had been ongoing for some thirteen years. There were previous proceedings in the High Court. Before the present proceedings were commenced the claimants gave the defendants a copy of the particulars of claim but issued the particulars of claim only three weeks later.
5. Prior to the hearing before the judge, the parties had agreed that if the claimants were under an obligation to contribute to the cost of the repair of the road over which they claimed a right of way, they would contribute 45 per cent of that cost. That agreement is recorded in the order of Her Honour Judge Case of July 2001.
6. On this appeal Mr Williams appears for the appellants, the former claimants. He submits that the claimants did not act precipitately. Negotiations between the parties with respect to the right of way had broken down on two previous occasions, first in May 1996 when the defendants brought the negotiations to a halt and then again in September 1999 when there had been correspondence but a letter from the claimants' solicitors of September 1999 was left unanswered. So, submits Mr Williams, proceedings were inevitable. The result of the intransigence of the defendants was that the property of the claimants was unmarketable. It would have been marketable if they had had a paper easement. It was unmortgagable as well as unmarketable because it was not possible for a party to obtain a mortgage on the property because there was no paper easement.
7. Mr Williams then turned to the position after 3 May 2001. So far as this period is concerned, he submits that the appellants had succeeded in improving on the Part 36 offer made by the respondents in showing that they were under no obligation to contribute to the costs of the repair with the result, on their submission, that the respondents are 100 per cent liable for those costs. Mr Williams submits that the judge made no order as to costs in respect of the period down to 3 May 2001 -- that is the first period -- on the basis that the Part 36 offer was made within a reasonable time. On this point I agree with counsel for the respondents that that was not the basis of the judge's decision. As explained above, the judge was not applying some new principle but rather an old one, namely that a party should not recover the costs of unnecessary litigation.
8. For the respondents Mr Gwydion Hughes submits, first, that there has never been any dispute as to the existence of a right of way, at least in principle; second, that the proceedings were precipitate and when the respondents had had an opportunity of considering the material they conceded the right of way. Mr Hughes submits that the appellants would have been better off if there had been a 50/50 arrangement for sharing the costs of repair. The main issue was who should bear the substantial legal costs which the appellants had incurred by June 2001. The position under the Part 36 offer was a better one so far as the appellants were concerned since, as matters now stand, the appellants would have to carry out the repairs at their own expense.
9. I now turn to my conclusions. The advocates in this case agree that the appropriate division for the purposes of analysis is between the costs before 3 May 2001, being the last date for the acceptance of the defendant's Part 36 offer, and the costs incurred after that date, and I am content to deal with the matter on that basis. I accept Mr Hughes' submissions that the judge's decision on costs involved the exercise of his discretion and that the Court of Appeal should not interfere unless his decision was perverse or wrong in principle or took account of matters which ought not to have been taken into account or, conversely, took no account of matters which ought to have been taken into consideration.
10. So I turn first to the costs down to 3 May 2001. The judge's view was that these costs were incurred precipitately. On the other hand, if the defendants had wished to stop the issue of proceedings and felt that the issue had been precipitate, they could have responded to the letter which was sent to them enclosing the draft particulars of claim before the proceedings were commenced. Alternatively, they could have asked the claimants' solicitors for more time or more information if that is what they wanted. As it was, the proceedings were begun. The defence did not admit the case. The defence instead made a number of material non-admissions. Until these non-admissions were withdrawn, the question of the existence of the right of way was in issue between the parties in these proceedings. This was no mere accident. These matters were put in issue advisedly. Counsel explained to us that it was necessary to put in the defence of these non-admissions so as to buy time. It was necessary to buy time because there had been only one previous fleeting reference in June 1999 to the legal basis on which the right of way was now being put, namely the rule in Wheeldon v Burrows (1879) 12 ChD 31 CA, so the defendants needed time to consider whether the basis of the claim was a good one. Mr Hughes indeed submits that beginning the action without allowing this time was a breach of the spirit of the Civil Procedure Rules; for instance, it did not fulfil the parties' obligations to cooperate one with another. In addition, by serving a defence in this form the defendants bought time in order to obtain, or try to obtain, concessions from the claimants.
11. So this is not a case where, if proceedings had not been started, they could have been avoided altogether. This is a case where the defendants were not yet prepared to admit the existence of the right of way. If they had wanted to stop the proceedings they could have applied to the court for a stay of the proceedings to permit negotiations for settlement: see, for example, Civil Procedure Rule 26.4 and the practice direction supplementing that rule.
12. In my judgment the judge was wrong in principle to say that there was inadequate notice in bringing proceedings in these circumstances, as at the time the defendants had no intention of conceding the right of way until it was fully proved and there was no impetus upon them, as their past conduct had shown, to come to a final settlement without litigation. As I have said, they could have taken steps themselves to reduce the costs by asking for a stay, but they never took that course.
13. The position is that the claimants ultimately won on the issue of the right of way because it was conceded and, as I see it, the judge was wrong in principle not to award the claimants their costs down to the date of the last date for acceptance of the Part 36 offer, namely 3 May 2001, on the footing that they had by admission been shown to be the successful party on that issue down to that date.
14. I now turn to the costs after 3 May 2001. The judge was clearly very concerned, and understandably concerned, about the practical consequences of his order. The position was that neither party was bound to spend any money on maintaining the right of way unless the law of tort intervened so that, viewing the matter holistically, the disputes were not fully resolved between the parties. But in my judgment such an approach discloses an error of principle. The claimants had by this point succeeded on another issue, the only outstanding issue now, namely the question as to whether they were under an obligation to contribute. They had won that issue. It was a victory, even though it was a Pyrrhic victory. The issue which the court had to decide was whether the claimants had an obligation to contribute. The claimants contended they had no such obligation. The defendants contended that they had. The claimants won and were successful. They had also improved their position on the Part 36 offer. They were freed from any obligation to contribute.
15. There are, as I see it, some points which need to be considered in this connection. First, it may be that in practice the appellants are forced to contribute to the repair or to do the repairs themselves at their own expense in order to be able to use the right of way. However, in my judgment those are matters, so far as the court is concerned, which are matters of speculation and the court cannot properly speculate on that matter when deciding the important issue of costs as a result of the decision in this litigation. Secondly, it is arguable that the conduct of the appellants was unreasonable. But the only conduct which on analysis can be said to be unreasonable is their failure to concede the issue of the obligation to contribute. Yet on that issue they were correct in law and therefore it does not seem to me to be possible for the court to conclude that their conduct in failing to concede that issue was such as could be categorised as unreasonable and so justify an order for costs against them. Thirdly, even if the appellants had been wrong on the issue they would have been liable to contribute only 45 per cent, because of the terms of the order of Judge Case, whereas the Part 36 offer would have required them to contribute 50 per cent.
16. Finally I would add that we were told that the issue before the judge was one which the respondents would have conceded if the appellants had been prepared to negotiate on costs. There were counter offers between the parties. The appellants were insisting on their costs being paid, the respondents wanted no order as to costs. In my judgment, if court time is used in this way a party must expect that he will be liable to reap what he has sown and must take the consequences if he loses the issue which he has chosen to fight. Accordingly, in my judgment, the judge was wrong in principle to order the appellants to pay the costs of the respondents for the period after 3 May 2001. In my judgment he should not have awarded those costs to the respondents and for those reasons I would allow the appeal in those terms.
17. LORD JUSTICE JUDGE: I agree. As we are differing from the views of a very experienced and highly-respected judge on the costs issue I shall add a few words of my own.
18. In my view the judge misdirected himself. In this litigation the claimants successfully established the existence of a right of way. To achieve that important objective this litigation was necessary. They also successfully resisted the contention that they were legally obliged to contribute to its maintenance. In short, therefore, the claimants won on both issues. If they had accepted the Part 36 offer, they would not have ended the litigation in as favourable a position as they did. The judge was persuaded not to give the weight that he should have done to these facts. If he had given them their due weight he would not have made the order that he did. Accordingly I agree that this appeal should be allowed.
ORDER: Appeal allowed with costs of the appeal and of the action, such costs to be subject to a detailed assessment. (Order not part of approved judgment)