England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY COURT
(MR JUSTICE PETER SMITH)

		Royal Courts of Justice The Strand London WC2A 2LL
		30 September 2004

Thursday 30 September 2004

LORD JUSTICE PILL: I will ask Lord Justice Chadwick to give the first judgment.

LORD JUSTICE CHADWICK:

1. On 21 July 2004, this court handed down judgments in appeals from a number of orders made in litigation brought by Mr Asgar Sabir Raja, representing the estate of the late Mohammed Sabir Raja, against Mr Nicholas Van Hoogstraten. The court indicated, in agreement with paragraphs 115-117 of my judgment, which appeals would be allowed and what other orders made. In particular, the court ordered, on 21 July 2000, that the writ of sequestration issued on 12 December 2002 be set aside and that the sequestrators be discharged. But, at the request of the parties, other consequential matters and the final settlement of the order were stood over for a later hearing with argument. That later hearing has now taken place before us today.
2. In preparation for today's hearing counsel for the appellants has very helpfully provided a draft order -- extending, on revision, to fourteen paragraphs -- which has largely been agreed. In particular there is now no dispute about paragraphs 1-9, 11 and 13 of that draft. The areas of dispute are encompassed within paragraphs 10, 12 and 14. This judgment will be more readily understood if read in conjunction with that draft order.
3. Paragraph 10 concerns the costs, first, of the appeals and, second, of the proceedings below, subsequent to an order made on 27 August 2002. Paragraph 12 seeks an interim payment order on account of costs. And paragraph 14 is directed to the discrete question: what order, if any, should be made on appeals 2003/1704 and 2003/0581?
4. It is convenient to deal with paragraph 14 first. That concerns an appeal by Tombstone Ltd from an order made by Peter Smith J in June 2003 refusing Tombstone permission to intervene in the proceedings. Tombstone were given permission by this court to appeal from that order on the basis that that appeal would come on with the substantive appeal for which permission had already been obtained by Mr Van Hoogstraten, and that, if Tombstone were successful and so permitted to intervene, its intervention in the proceedings would be confined to argument on the substantive appeal.
5. The basis of Tombstone's application to intervene in these proceedings -- albeit and application made at a very late stage -- was that the effect of findings that the judge had made, or was thought to have made, in relation to the ownership of assets, was that there would be a contest between the case advanced on behalf of the claimant, Mr Raja, on the one hand, that Tombstone's assets were beneficially owned by Mr Van Hoogstraten and the case advanced on behalf of Mr Van Hoogstraten and Tombstone, on the other hand, that Tombstone's assets were beneficially owned by Tombstone. If that dispute was to be resolved in this court, then there appeared (at least prima facie) to be good reason why Tombstone should take part in, and be bound by, whatever decision this court should make on that issue.
6. In the event this court did not find it necessary to consider that question. It reached the conclusion that the writ of sequestration should be set aside and that the appeal from the order allowing the issue of that writ should itself be allowed. Accordingly, it never became necessary to decide whether the relevant assets were beneficially owned by Tombstone Ltd or were held by Tombstone on behalf of Mr Van Hoogstraten, because, whichever was the case, the assets were not the subject of any sequestration. Accordingly, because it was never going to be necessary to decide that question, it was never necessary to decide whether Tombstone Ltd should be allowed to intervene and no order was made on its appeal against the refusal to allow it to do so. That left in the air the question whether any order in relation to the costs of that application for permission to appeal, and the appeal, should be made. In my view, the only sensible order to make on 2003/1704 and 0581 is "no further order". That is the order for which the draft put before us provided at paragraph 14.
7. I return, therefore, to the more substantive question: what order should be made in relation to the costs in 2003/0537, 0579 and 0580? The starting point is that Mr Van Hoogstraten, as appellant, has been successful in those appeals for the reasons set out in our judgments of 21 July 2004. As counsel for Mr Raja has acknowledged, the usual order is that a party who has been successful is awarded the costs of his success. However, it is said in this case that there should be no order for costs at this stage; and, further, that if an order for costs were made at this stage, then it should be made on term that no costs should be payable under that order until the final determination of the issues in the action.
8. It is convenient to deal separately with the costs of the appeals and the costs of the proceedings in the court below. In my view, there is no reason to deprive the successful appellant of the usual order that the respondent pay the costs of the appeals. In the event the appeals turned on the question whether or not the judge was right to find, as he did in October 2003, that Mr Van Hoogstraten was in contempt of court; and whether he was right, in the light of that finding, to strike out Mr Van Hoogstraten's defence and make a sequestration order, as he did in December 2002. The court held that he was wrong to hold that Mr Van Hoogstraten was in contempt. It followed that in those circumstances he was also wrong to strike out the defence on the basis of what he perceived to be a continuing contempt and to make a sequestration order by way of enforcement of the fines which he had imposed for the contempt.
9. That question did not involve any consideration of the alternative basis upon which the judge had struck out the defence in December. That alternate, or additional, basis was founded on Mr Van Hoogstraten's conviction for the manslaughter of Mr Mohammed Sabir Raja. The killing of the ...., as the judge held, was to be regarded as a serious abuse of process justifying the striking out of the defence.
10. The appeal did not address that alternative basis for striking out because, by the time the matter reached this court, the conviction had been quashed and it had become clear that there would be no retrial. The appeal, therefore, turned solely on the question whether or not the finding of contempt should have been made; with the consequences that flowed from that. The finding of contempt was based on a failure to comply with disclosure obligations in the freezing order which the claimant had obtained; and followed the claimant's determination to enforce that order. In the circumstances that the court held that the process of enforcement was seriously flawed, the appeal succeeded. I can see no reason in principle why the costs of the appeal should not follow that event.
11. It is said on behalf of the claimant that there is still the possibility that it will be held on some future application that Mr Van Hoogstraten was implicated in the killing of Mr Mohammed Raja; and that his motive for instigating that killing, or encouraging others to embark on a course which led to that killing even if he had not foreseen it, was to stifle the claim in this action by making it impossible for the claimant to rely on the evidence of Mr Mohammed Raja.
12. Whether or not such an application is made and whether or not it succeeds, it does not seem to me that the costs of the appeal ought to turn on that future event. It is said that, if the court were ultimately to hold that Mr Van Hoogstraten had abused its process, he should be denied the benefit of any exercise of the court's discretion, including the discretion to award the costs of the appeals. That conclusion does not seem to me to follow from that premise. The appeal, as it was argued, turned on a discrete issue arising not directly from the death of Mr Raja or on any participation alleged on the part of Mr Van Hoogstraten in his death, but from the claimant's decision to seek a freezing order, and thereafter to seek to enforce the disclosure obligations in it in the way that he did. Accordingly, I am not persuaded that there is any reason to depart from the usual order in relation to the costs of the appeals.
13. It is said that the position is different in relation to the costs below. But, insofar as the costs below are costs associated with the attempt to enforce the disclosure obligations in the freezing order of 27 August 2002, it seems to me that the same considerations apply. All those costs were incurred, not as the result of any alleged abuse in the conduct of Mr Van Hoogstraten relating to the death of Mr Mohammed Raja, but in seeking to enforce disclosure obligations in a freezing order sought and obtained some three years after the death of Mr Mohammed Raja.
14. Insofar as costs were incurred in relation to the second limb of the application to strike out the application based on an abuse arising from Mr Van Hoogstraten's alleged involvement in Mr Mohammed Raja's death, different considerations apply. It is said that abuse is still a live issue in the sense that, although the claimant is no longer able to rely on the conviction in the criminal proceedings, he will seek to bring forward a case based upon an allegation of encouragement to harm or intimidate Mr Mohammed Raja for the reason which I have already indicated: namely Mr Van Hoogstraten's wish to stifle these proceedings by removing the essential witness on the claimant's side.
15. I am not persuaded that those different considerations should lead to a different conclusion. First, it seems to me that the costs capable of being identified as attributable only to that second limb of the application are likely to be relatively small. The allegation that Mr Van Hoogstraten was in abuse of process turned on the fact of his conviction, which was not a matter about which there could be any argument in December 2002; and on the question whether that conviction, and the conduct on the part of Mr Van Hoogstraten which it was said to evidence, led to the conclusion that there had been an abuse of process. The latter point seems to have occupied very little time in argument before the lower court.
16. Second, the fact that it may in the future -- and this is wholly speculative -- be alleged and established that Mr Van Hoogstraten had any involvement in the death of Mr Raja is no longer capable of being based on a conviction. Any such finding will have to be established in a new trial with new evidence which may be more or less compelling than (but is likely to be different from) that which was before the criminal court.
17. I am not persuaded that, in those circumstances, it would be right to seek to separate out the discrete costs relating to the allegation based on conviction for the purpose of making an exception to the order that would otherwise follow -- namely that, the appeal having been allowed, the appellant should have his costs not only of the appeal but also of the proceedings below which led to the need for the appeal.
18. I would hold, therefore, that this is a case where the usual order should follow. The appellant should have his costs in this court and below.
19. The second question is whether those costs should be paid before the final determination of the issues in the action. It is said that an order for payment of costs forthwith would deprive the claimant, Mr Raja, of the ability to set off those costs against the costs and damages which he confidently expects to obtain in the action; either following a successful application to strike out on the grounds of abuse, as I have indicated, or at the end of a trial when the real issues in the action have been determined.
20. That approach, as it seems to me, fails to recognise the change which has followed Lord Woolf's report on Access to Justice and the introduction of the Civil Procedure Rules. Prior to that change it was the practice to leave payment and assessment, or taxation, of costs until the end of the litigation. That achieved two objectives. First, it avoided interim taxation of costs; and, second, it allowed for the setting off of costs awarded to one party on one interlocutory application against costs awarded to the other party on other interlocutory applications or at the trial. But that approach has been replaced by what may loosely be described as a "pay as you go" approach. On each occasion that a matter is before a court and resolved, the court will make an order for costs, which usually requires the unsuccessful party to pay the costs of the successful party attributable to that application. The perceived advantage of that change is that it concentrates the minds of the parties on the costs that are being incurred in the litigation, as the litigation proceeds. But, of course, it has the effect not only that there may need to be a series of interim assessments, but also that costs may be paid without being set off, and have to be repaid later on when some other order is made on a subsequent application. That is now the normal approach. It is necessary to ask, therefore, whether there is some good reason in the present case for departing from the approach.
21. It is necessary to have in mind, in the present case, that Mr Van Hoogstraten continues to be under the constraints imposed by the freezing order made on 27 August 2002. The effect of that freezing order, as intended, is that Mr Van Hoogstraten will not be able to dissipate his assets -- within the prescribed limit -- prior to the final determination of the issues in the action. He will, of course, be able to use his assets for funding the costs of litigation and for other proper expenses in accordance with the terms of the order. Insofar as the claimant fears dissipation, the proper safeguard is provided by the order. If the order as made does not provide sufficient safeguards, then it is open to the claimant to seek to vary it. Equally, it is open to Mr Van Hoogstraten to pursue the application already made as long ago as September 2002 to have that order set aside. The matters can be debated in that context.
22. It is not appropriate for this court to put in place further provisions as a safeguard against dissipation. Nor, as I understand it, is that what the court is being asked to do. The court is being asked to make an order which will have the effect of providing security. But there is no reason to provide security which takes this case out of the ordinary run of cases of this nature. Mr Van Hoogstraten is being pursued for a substantial sum of money on the basis that he has substantial assets. If the claim succeeds, there will no doubt be many claims on those assets, amongst which will be the claims as to the costs to be incurred in this litigation. But there is no reason why the costs of this appeal which, as the court has held, have been incurred as a result of the way in which the claimant has chosen to conduct this litigation should stand as security for those claims.
23. I should make it clear that it was accepted by counsel for the claimant that he did not suggest that the claimant's ability to pursue the claims in this litigation would be stifled that he pay costs forthwith. He pointed out that the estate had managed to fund the litigation so far -- at what must have been very considerable cost indeed -- and that it intended to continue to do so. Therefore this is not a case in which requiring the claimant to make a payment for costs at this stage is said to be likely to prevent him from continuing to proceed with the litigation. Nor is it put, on the other side, that, unless Mr Van Hoogstraten receives payment of costs at this stage, he will be unable to defend that litigation. Those submissions are not made. The history of this litigation suggests that if they had been they might well have been regarded as fanciful. This is litigation which, if the experience to date is any guide to the future is unlikely to be brought to an end by reason of costs considerations on either side. Therefore, there seems to me no reason to depart from the ordinary practice. There is no reason to defer payment until the ultimate outcome of the action. Nor is there any reason to direct that payment be put into a blocked bank account to provide security.
24. The third matter is that raised by paragraph 12: should the claimant be directed to make an interim payment to the defendant on account of his costs? The schedule of costs that has been put before us relates only to those costs incurred since the solicitors at present instructed by Mr Van Hoogstraten have been involved. I use that phrase rather than "on the record" because the schedule includes a small item (£3,875) incurred in attending in this court at a time before those solicitors formally came on the record. The amount of those costs is some £137,750 -- a figure which covers a four to five day hearing in this court, and the preparation for that hearing at relatively short notice. The lion's share of that amount (about 60%) is for counsel's fees, the amount of which is not attacked as excessive. The schedule does not include costs which will have been incurred by or on behalf of Mr Van Hoogstraten before the involvement of his present solicitors in April 2004; and, in particular, does not include what are likely to be the substantial costs of the hearing in this court at which Mr Van Hoogstraten was represented by leading counsel (not the counsel who appeared on his behalf on the appeal itself) at which permission to appeal was obtained. Therefore the figure of £137,000 does not represent the totality of the costs which the claimant is ordered to pay under paragraph 10 of the order. With that in mind, we are asked to order an interim payment of two-thirds -- or (to round down) £90,000 -- and to direct that that sum be paid within a period of one month.
25. In my view, given the likely need to raise funds through the sale of properties, one month is unreasonably short; but two months for payment should be enough. I would regard £90,000 as a safe estimate of the minimum which the appellant is likely to recover by way of costs under the order for costs which I would make in the terms of paragraph 10.
26. Accordingly the order that I would make follows the draft, including paragraphs 10, 12 and 14 as drawn with the insertion in paragraph 12 of the figure £90,000 and the addition of the words "to be paid within two months of today".
27. There is some issue between the parties as to whether the order made by the judge for payment of costs on 27 November 2002 falls within paragraph 10, but it is accepted that that issue can be determined by the Costs Judge under the formula for which paragraph 11 provides.
28. LORD JUSTICE PILL: I agree. I mention only two procedural points. The first is that the court has sat as a two judge court. That constitution has existed with the consent of the parties expressed when judgment was handed down in July.
29. The second is that paragraph 13 was the subject of a separate application this morning by Mr Walton for the sequestrators. The court acceded to his submission that the sequestrators' costs in any event be paid from the sequestrated assets on an indemnity basis.
30. Are the parties content with what my Lord has said about 27 November or do you want to address us further?
31. MR DAVIDSON: I had jotted something down, but in fact -- I would like to think about it -- it may well be that it is covered by paragraph 11 anyway.
32. Can I mention that I was minded to add, after the word "arose" in paragraph 11, the word either "directly" or "solely" because you could say that the application to strike out in one sense arose from the freezing injunction. I am sure my learned friend would not take a bad point like that, but just to cover it I was minded to --
33. LORD JUSTICE PILL: It is rather late to be making that application.
34. MR DAVIDSON: There was some discussion about it during my friend's submissions and my Lord, Chadwick LJ, floated the idea that perhaps the wording could be tightened. That is why I mention it.
35. MR IRVIN: I am happy with "directly" or "solely".
36. LORD JUSTICE CHADWICK: I think that was accepted in the course of argument, but if you want that word in and nobody objects to it, I do not see why it should not be in.
37. LORD JUSTICE PILL: Which word, "directly" or "solely"?
38. MR DAVIDSON: Solely.
39. LORD JUSTICE PILL: Very well. "Solely" will be inserted after "arose".
40. MR DAVIDSON: My Lord, could we think about this question of the 27th November order and lodge something if it is necessary?
41. LORD JUSTICE CHADWICK: Yes, if paragraph 11 is going do it -- and it seems to me that it can -- one could add some words like "the Costs Judge to determine whether such costs include the costs ordered on 27 November", or "such portion to extend to the costs ordered on 27 November" -- something like that, if you want it.
42. MR DAVIDSON: Yes, my Lord. We may add something along those lines.
43. LORD JUSTICE CHADWICK:If you cannot agree the words, the matter can be sent to me.
44. LORD JUSTICE PILL: A draft will be prepared and sent to Chadwick LJ.
45. MR DAVIDSON: My Lord, I would of course ask for the costs of today, but I think they are already included in paragraph 10. So no further order would be necessary.
46. LORD JUSTICE PILL: Yes, that includes today's costs.

____________________________________