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
(MR DAVID OLIVER, Sitting as a Deputy High Court Judge)

		Royal Courts of Justice Strand London, WC2
		20 January 2003

Monday, 20 January 2003
1. LORD JUSTICE SCHIEMANN: Before the court is an appeal by leave of Arden LJ in relation to a costs matter. It concerns an application for costs made against a firm of solicitors by the winning side in a dispute. The original application listed no less than 20 matters in respect of which permission was sought to have an award of costs made against them. The matter came before Mr David Oliver QC, sitting as a Deputy Judge. He refused to award costs in respect of any of the 20 items sought. Arden LJ gave permission in relation to one of those 20 heads of claim, which in turn related to three matters to which I shall come in a moment.
2. There was a hint by Mr Phillip Noble in the course of his address to us that he wished to raise some other matters in respect of which no permission had been granted by Arden LJ. He had given no warning of such an application to the other side. No formal application has been made in front of us and I propose to deal with the matter entirely on the basis of the permission which has been granted by Arden LJ.
3. The underlying dispute in the case is not something which I need set out. It has, I think I am right in saying, gone all the way up to their Lordships' House, and concerns a bitter family dispute which perhaps is what has coloured this application in relation to what is now a mere matter of £1,200.
4. The grounds of complaint made against the solicitors are set out in a statement of Tanya Jamal. She there sets out a series of matters in respect of which it is said, and on the face of it plausibly, that in relation to the three matters for which permission has been granted there was great delay by the solicitors who are being attacked.
5. The three matters relate to three applications. One of them, dated 11 September 1997, is an application on the part of the plaintiff for an order that unless a list of documents be served within a certain number of days the defence be struck out and judgment be entered for the claimants with costs. The second concerns an application of 20 November, which was for another "unless order", but this time in respect of statements. The third relates to an application of 12 February 1998, which again is another application to strike out another "unless order" and that relates to discovery once more.
6. Mrs Jamal, in her statement, sets out why it is that these various orders were made. At the time of the orders, orders were made in relation to costs but not in relation to any wasted costs. The reason for that was that no application in respect of any wasted costs concerning those three interlocutory applications was made at the time or indeed before the hearing of the action.
7. The judge dealt with the matter very briefly. He said in relation to the September 1997 matter that he was told that no order was made even as to costs, and no indication was given at the time that any wasted costs order might be sought. In relation to the second order costs were sought and awarded against the defendants in any event, and again no intimation of an application for a wasted costs order appears to have been given. Similarly, no such intimation was given in relation to the third application. In these circumstances it would be inappropriate now to re-open the question of costs in these applications, and so he dismissed the application.
8. The principles which govern applications of this kind at first instance are set out in the Practice Direction in Part 48. At paragraph 53.6, the following is stated:

"As a general rule the court will consider whether to make a wasted costs order in two stages:

(1) At the first stage the court must be satisfied:

(a) that it has before it evidence or other material which, if unanswered, would be likely to lead to a wasted costs order being made; and

(b) the wasted costs proceedings are justified, notwithstanding the likely costs involved.

(2) At the second stage (even if the court is satisfied under paragraph (1)) the court will consider, after giving the legal representative an opportunity to give reasons why the court should not make a wasted costs order, whether it is appropriate to make a wasted costs order in accordance with paragraph 53.4 above."

That paragraph reads:

"It is appropriate for the court to make a wasted costs order against a legal representative only if:

(1) The legal representative has acted improperly, unreasonably or negligently.

(2) His conduct has caused a party to incur considerably unnecessary costs.

(3) It is just in all the circumstances to order him to compensate that party for the whole or part of those costs."

9. We are only concerned with what the Practice Direction describes as the first stage. For my part if I had been trying this case at first instance I would have had considerable difficulty in being satisfied that the wasted costs proceedings were justified, notwithstanding the likely costs involved. These were three relatively small, relatively routine applications. It is fair to point out that the learned judge did not seem to concentrate on this aspect of the matter. He was more concerned with the question that no audible warning of approach had been given at all in relation to such an application at the time, and it was now a good deal later.
10. The leading case in this court in 1994 in relation to this type of costs application is Ridehalgh v Horsefield. (There are a number of other similar cases which were considered at the same time, reported in [1994] Ch 205). Sir Thomas Bingham, MR, handing down the judgment of the court, said this (at page 237) under the heading "Threats to apply for wasted costs orders":

"We entirely agree with the view expressed by this court in Orchard v South Eastern Electricity Board [1987] QB 565 that the threat of proposed applications should not be used as a means of intimidation. On the other hand, if one side considers that the conduct of the other is improper, unreasonable or negligent and likely to cause a waste of costs we do not consider it objectionable to alert the other side to that view; the other side can then consider its position and perhaps mend its ways. Drawing the distinction between unacceptable intimidation and acceptable notice must depend on the professional judgment of those involved."

And under the heading "The timing of the application", the MR said:

"In Filmlab Systems International Ltd v Pennington, ([1994] 4 All England, Chancery Division 673) Aldous J expressed the opinion that wasted costs orders should not, save in exceptional circumstances, be sought until after trial. He highlighted a number of dangers if applications were made at an interlocutory stage, among them the risk that a party's advisers might feel they could no longer act, so that the party could in effect be deprived of the advisers of his choice. It is impossible to lay down rules of universal application, and sometimes an interlocutory battle resolves the real dispute between the parties. But speaking generally we agree that in the ordinary way applications for wasted costs are best left until after the end of the trial."

11. Those are the principles which should have governed the approach of the learned judge. He decided on the facts of this case that it would have been appropriate to give a warning at the earlier time. That is clearly something which does have certain advantages. The master or the judge who is dealing with a small application is on top of the facts, and the clients on each side will know who is going to pay and so can assess more easily whether these interlocutory costs have to be taken into account by them in considering settlement. But it also has disadvantages which everyone accepts.
12. I would have been reluctant, and indeed am reluctant, to interfere with the discretion of the judge exercised on that basis. But adding to it my views on the question of proportionality in the present case, it seems to me that the case for the appellant ought to be decisively rejected. He is here dealing with £1,200 or so in relation to the first stage of something which will then require infinitely more than £1,200 quite possibly to investigate further. This is just the type of satellite litigation which in general should be discouraged, certainly at this level, and I would have thought at the level of the court below. So I would dismiss this appeal.
13. LORD JUSTICE MUMMERY: I agree.
14. LORD JUSTICE DYSON: I also agree. I add a few words of my own. The starting point is that this is an appeal against an exercise of discretion under section 51(6) of the Supreme Court Act 1981. The reasons given by the judge for refusing to make a wasted costs order were exiguous. In my judgment, the fact that no indication was given at the time that a wasted costs order would be sought is rarely likely to be a sufficient reason for refusing to accede to a subsequent application for such an order. I refer to the passage cited by Schiemann LJ from the decision of this court in Ridehalgh at 238A:

"On the other hand, if one side considers that the conduct of the other is improper, unreasonable or negligent and likely to cause a waste of costs we do not consider it objectionable to alert the other side to that view."

15. It is hardly consistent with that observation that a failure to alert the other side is likely to be sufficient on its own to justify refusing to make a wasted costs order if an application is subsequently made. On the other hand, it seems to me that the fact that, as between the parties, the orders made as to costs are either "costs in the case" or "no order as to costs", is a highly material factor that can properly be taken into account in reaching a decision not to make a wasted cost order.
16. In the present case the judge was entitled, therefore, to take into account the fact that the summons issued on 11 September 1997 led to an order which included a provision that there be no order as to costs, and that the summons issued on 20 November 1997 was withdrawn by consent with costs in the cause. On the other hand, it is true that the summons issued on 12 February 1998 led to a consent order, one of whose provisions was that the costs of the application be borne by the defendants in any event. However it seems to me that, overriding all of these considerations, is the fact (again emphasised by Schiemann LJ) that the costs incurred by the claimants in respect of these three applications in total was of the order of £1,200. One of the considerations identified in the Practice Direction at PD 53.6(1)(b) is that wasted costs proceedings must be justified notwithstanding the likely costs involved. In this case, the disproportionate cost of wasted costs proceedings was an overwhelming reason why it was right for the judge to refuse to accede to the application for wasted costs orders in respect of the three applications.
17. I would dismiss this appeal.

(Appeal dismissed; the Appellant do pay the Respondent's costs of and occasioned by this appeal, such costs to be subject to detailed assessment under section 11 of the Access to Justice Act).