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
(Mr Justice Lightman)

		The Royal Courts of Justice The Strand London Thursday 23 May 2002

Thursday 23 May 2002

1. LORD JUSTICE WALLER: This is an application for permission to appeal. The basic point which is sought to be appealed is an order that the judge ultimately made in relation to costs. The background is in essence that there was a partnership of doctors and Dr Sahota fell out with his partners in acrimonious circumstances. There thus had to be the taking of an account to deal with what claim Dr Sahota should have. Dr Sahota was the claimant and there were three respondents to the claim: Dr Moore, Dr Poskitt and Dr Agbaje.
2. There is no doubt that the claim started, and directions were originally given, on the basis that clause 22 of the partnership agreement would apply. It was on that basis that issues were joined. But it is equally clear that, at the commencement of the inquiry that ultimately took place before Master Bowles, it was made clear on the claimant's behalf that there was some doubt as to whether clause 22 of the partnership was the appropriate clause. The argument in relation to that aspect was to be that the words of that clause did not apply to a situation in which there had been a repudiation of the partnership agreement and the argument was that if there had been a repudiation the partnership should be treated as being dissolved, which would involve an assessment of all the assets of the partnership and the distribution thereof. If the matter had proceeded simply on the basis of clause 22, there would have been an argument for saying that the partnership should continue and that the only inquiry to be undertaken was an inquiry as to what Dr Sahota had brought in and what he should then take out.
3. Dr Agbaje was at all times a respondent to this inquiry because one of the issues, whether there would be a dissolution or whether clause 22 was going to apply, was whether he was an equity partner at the time when Dr Sahota no longer worked in the partnership. It furthermore seems, at least from the papers, as though the action on the respondents' side was really being run by Dr Agbaje, because it is he that puts in witness statements. That is likely to have flowed from the fact that the other two respondents at some stage left this partnership and thus Dr Agbaje was the real person interested. Indeed, there was an assertion, apparently made by Dr Sahota or his advisers, that at some stage Dr Agbaje had provided some form of indemnity to the other two respondents. I understand from what I have been told today that there is an issue as to that, but certainly that was an impression that Lightman J had, as will appear.
4. In any event, the matter was tried out by Master Bowles on the basis of a dissolution. He formed the view, first of all, that Dr Agbaje was not an equity partner at the relevant moment. That, of course, was relevant to the percentage to which Dr Sahota was entitled. Master Bowles also ruled on a very important issue, relating to assets of the partnership that had been purchased through funds supplied by the National Health Authority, as to whether those should be considered partnership assets at all.
5. The whole matter was appealed to Lightman J. He delivered seven, I think, separate judgments on all the various issues that arose. Mr Ogubiyi, who has represented Dr Agbaje throughout, represented Dr Agbaje again on that appeal before Lightman J and has appeared here again today, and indeed he represented all the respondents at all times. Again that reflects the position of Dr Agbaje in that, if there really was a dispute as to whether Dr Agbaje was an equity partner at the time, there might well be a conflict as between the three respondents, but it was certainly treated as if there were no such conflict.
6. The point taken before Lightman J related to the basis on which the matter had been tried before Master Bowles. The point taken was that the direction given by agreement was that this was to be an assessment by reference to clause 22, but Lightman J, in the first judgment he gave, went through the history and formed the view that the basis on which the assessment was to be done -- that is, by reference to a dissolution rather than clause 22 -- was made clear by the claimant's counsel; that no objection was taken to it on behalf of the respondents; and that that was therefore clearly the basis on which matters proceeded. He was critical of the claimant for not pleading the matter differently, but he made clear that at the end of the day, because the respondents had not objected to that being the basis on which an assessment had been made, it was not open to them to make that objection now.
7. Then the judge dealt with the various other important issues, including whether Dr Agbaje was an equity partner at the relevant time, that making a difference to the percentage, and whether the assets of the partnership included assets purchased with the funds supplied by the NHS. The final judgment related to what the judge described as a point being taken late in the day. He started that judgment with:

"I turn now to the question which the defendants wish to raise on this appeal, which they have not raised at any time previously. The action has at all times proceeded on the basis that the claimant is entitled to the payment of his share of the partnership assets by each of the defendants.

One issue raised at the hearing and on the appeal was whether Dr Agbaje was an equity or only a salaried partner. If he was an equity partner, the claimant would be entitled to a quarter share of the value of the partnership assets; but if he was merely a salaried partner with no share of the equity, the claimant was entitled to a full one third share. The Master held that Dr Agbaje was only a salaried partner and accordingly that the claimant was entitled to a one-third share and I have affirmed that decision.

In the light of that holding, the defendants contend that no order for payment of the value of the claimant's share of the partnership practice can or should be ordered against Dr Agbaje. As a matter of law it is common ground that if the defendants are allowed to raise that point, that point of law is correct and the order for payment can only be made against the two full equity partners.

The claimant, however, maintains that I should not allow this point to be raised now for the first time. The ground is that to do so would unfairly prejudice the claimant who has incurred the enormous costs of the proceedings on the basis that he could look to Dr Agbaje for payment, since he had grounds for believing that there might be problems with regard to enforcement against the two equity partners.

The question raised, as it seems to me, is whether it is just to allow the defendants to raise a new line of defence and, if so, on what terms. I deplore the failure of the defendants to raise this defence earlier but, since it is a pure question of law and not one on which there is any dispute, I think that justice requires me to allow the defendants to do so; but the price of that indulgence must be that the defendants' success on this issue should in no way affect the claimant's entitlement to costs against Dr Agbaje either in respect of the hearing before the Master or before me. It is sufficient at this stage therefore to hold that the claimant's entitlement to payment of the sum due in respect of his share in the partnership is recoverable only against Dr Moore and Dr [Poskitt]."

8. The judge then referred to the possibility that the practical significance of the limitation may not be that great:

"... since (as I am informed, though I have not seen the document) Dr Agbaje has given an indemnity to Dr Moore and Dr [Poskitt]."

9. He then pointed out that, if that is so, then through claiming against Dr Moore and Dr Poskitt, and if they were declared bankrupt, Dr Sahota may have a claim on that indemnity.
10. The first point to make is that clearly in essence this is a decision of the Master with an appeal to the judge, and if all matters were being brought to the Court of Appeal that could not be done without permission of the Court of Appeal because it is a second appeal; and, as the single Lord Justice said when refusing permission on paper:

"No point of principle or practice has been identified and there is no compelling reason identified as to why this matter should come before the Court of Appeal."

11. But what Dr Agbaje seeks to do is to limit his appeal to one point, that which relates to costs. The submission is that because that is, as it were, the first decision by a judge, this is not a second appeal. He seeks to argue that a different order in relation to the costs should have been made. The order which is suggested is that at least Dr Agbaje should have his costs up until the time that the clause 22 issue was altered and became a general dissolution issue; or, alternatively, that there should be no order as to costs against Dr Agbaje at all.
12. The principle applicable to costs orders has recently been considered by the Court of Appeal. What the court made clear on that occasion was that, where one was looking at a second appeal, albeit it was technically right that a costs order made by the judge hearing the appeal would not be considered to be in effect a second appeal point, it would be in rare cases that the costs point alone could be brought to the Court of Appeal. In my view, when what the judge can be seen to have done is to grant indulgence on a basis that the position in costs would not be altered, it is difficult to see that there is any basis on which an attack could be made in this court on the exercise of that discretion. Certainly, it does not involve a matter of principle or practice, and it seems to me this should not be one of those rare cases where that aspect alone should come to the Court of Appeal.
13. Two other points are taken in the grounds of appeal and I should just deal with them shortly. The first relates to the judge being wrong to suggest that the respondent could seek to enforce the judgment through an indemnity. The position is that the judge has not made any ruling. There is no order binding on anybody that either there is an indemnity or that someone could proceed to enforce via that indemnity. The question whether an indemnity exists will simply remain to be tested at some later stage, so there is no basis for giving permission to appeal on ground 2.
14. Ground 3 relates to an award of costs, as I understand it not by this judge but by a different judge, relating to the stay application. Again I can see no basis on which a costs order by a judge on such an application should be something for the Court of Appeal to consider. It is very rare indeed for the Court of Appeal to entertain any appeal by reference to costs alone. They are peculiarly matters within the discretion of the judges who make the orders, and it is very rare for the Court of Appeal to entertain appeals from it. Thus the application for permission to appeal is refused.
ORDER: Application refused