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 HIGH COURT
CHANCERY DIVISION
(MR JUSTICE LEWISON)

		Royal Courts of Justice Strand London, WC2
		7 October 2004

1. LORD JUSTICE WALLER: On 24 July 2003 Mr Justice Lewison handed down a judgment in litigation between the 9th Earl of Macclesfield ("the Earl") and Beechwood Estates Company ("the company"). There was also a Part 20 defendant, which was effectively the Earl's company, Fentville Ltd, but for today's purposes I need make no further reference to them. The litigation concerned the Earl's right to occupy Shirburn Castle, built in the 14th century but occupied by the Earl's forebears since the early 18th century. During the 20th century, for reasons which do not matter, the castle was transferred to the company in which the family were the shareholders. By the time the 9th Earl came to occupy the castle in 1993 the shareholders were his cousins as well as his brother and nephew. One cousin, Mr Robert Parker, was a major shareholder and it seems, on reading the judgment of the judge, that he and the Earl effectively fell out. It is Mr Robert Parker of whom the judge was highly critical in his judgment so far as his position as a witness was concerned.
2. The contest before the judge was as to whether the company, as they contended, had let the premises to the Earl on a tenancy at will allowing for termination on four weeks' notice. The company had served such a notice on the Earl prior to the proceedings. The Earl was contending that by virtue of proprietary estoppel he had a right to live in the castle for life, and the judge ultimately held that the Earl occupied the castle on a contractual licence under which the company were bound to give two years' notice. In his main judgment the judge made criticisms of the company in relation to disclosure of documents. For example, in paragraph 16 he refers to the very regrettable late disclosure of a substantial quantity of highly relevant documents and the judge said:

"I am not often impressed by complaints about non- disclosure of documents but in this case I consider that the complaints are fully justified. Whether the complaints are properly levelled at the company and its officers or at the company solicitors is not something that I can decide."

He also made a further criticism in paragraph 41 which possibly relates not to a failure to disclose under the Civil Procedure Rules, but to the fact that documents were produced by the company as part of their case during the trial. But when producing such documents they did not produce all the relevant or material documents.

3. At the end of the trial the judge had to rule on costs. He was aware that the Earl's costs were over £1m and that the company's costs were much less at about £350,000 or a little more than that. He ruled that there should be no order as to costs. In so doing he dealt with various points. One point was whether the company had made a Part 36 offer. He ruled that it had not. But he also made clear in the judgment that he would take the offer into account as he took into account counter-offers made by the Earl. He then continued in paragraph 14 of the judgment in the following terms:

"14 One of the matters which I am required to take into account is the manner in which the claim has been conducted. As I mentioned in my judgment, I think that there were fully justified complaints about non-disclosure of documents by the company, and there was in my view exaggeration (particularly by Mr Robert Parker) of the company's case. That is something which, in my view, I am entitled to take into account.

15 It is also right to say that the company took a number of points which were ultimately abandoned, but then on the other side so did Lord Macclesfield [the Earl]. I think those balance each other out."

The final paragraph states:

"16 It seems to me that if I look in the round at who has achieved what in these proceedings, how they have been conducted and the offers to settle that have been made the balance comes down in letting costs lie where they fall. It seems to me that although the company has done marginally better than Lord Macclesfield, there are sufficient countervailing considerations in terms of an unwillingness to negotiate a settlement and, in particular, the late disclosure of documents which would have justified me in depriving the company of such modest proportion of costs as I might otherwise award it. In my judgment the right order is no order as to costs."

4. An application was evidently made by the Earl to the judge for permission to appeal the main judgment. That was refused. An application was made by the company to the judge to appeal that costs order. It appears that the application to the judge at that stage was on the basis that he was wrong about his construction of Part 36 and thus wrong in taking the view that no Part 36 offer had been made. In any event, the judge refused permission. No application was then made to this court either for permission to appeal the main judgment or the costs judgment. That was in July 2003.
5. The criticism that the judge had made in relation to disclosure of documents led the Earl to make an application for a wasted costs order against the solicitors acting for the company and, in particular, Mr Fairburn. That application came before the judge in February 2004. That application failed. I would comment that whether it ever had any prospects of success I do not know, but that move by the Earl was sadly typical of the moves made in this litigation. Its failure produced an application to appeal Mr Justice Lewison's costs order out of time. Within 14 days of that decision the application for permission was filed and, of course, it included an application for an extension of time.
6. What the application made clear was that it was launched on the basis that the judge had demonstrated a totally different view in relation to disclosure of documents in his wasted costs judgment than he had formed at the end of the trial and when he reached his decision on costs. If one looks at the skeleton argument that supported the application and provided the basis on which permission to appeal out of time should be granted, it recognised the application as being made seven months after the costs order in July, although of course only 14 days are allowed in normal circumstances. The skeleton argument in paragraph 1.1 (a) directed attention to the fact that it is said that the wasted costs judgment was inconsistent with the costs judgment. It suggested that the appeal had been made promptly because it had been made within 14 days of not the original judgment, but the wasted costs judgment. In considering whether the failure to comply with the 14 days was intentional, it is said clearly not because the wasted costs judgment transformed the prospects of a successful appeal. In answer to the question whether there was a good explanation for the failure, the answer was "clearly yes" for the same reason. So it was the wasted costs judgment which was the firm plank on which permission was being sought for an extension of time.
7. Lord Justice Mummery gave permission to appeal on all grounds and he extended time. Skeleton arguments were exchanged dealing with all matters.
8. Ultimately there was put in by Mr Kosmin QC and Miss Hutton, who act for the Earl, a skeleton argument which took effectively a preliminary point. The submission was essentially this, that the only basis for extending time related to the effect of the wasted costs order on the judge's view on the late disclosure of documents. But there could be, he submitted, no excuse at all for not attacking the exercise of discretion on any of the other grounds raised. So his submission was that the appeal should be limited to the one point i.e. the late disclosure of documtns aspect. There was force in that submission, but, as we indicated at the commencement of the hearing, if there was any substance in the point on documents then it would be unreal to attempt to revisit the exercise of discretion without regard to the other points. But equally as we indicated, if we were to conclude that there was no force in the documents point, it would hardly seem right that the company should, out of time, be allowed to argue all the other points. We indicated therefore that we wished to have argued the documents aspect first. We indicated that it seemed to us that if that point was shown to have substance then all points would be argued, but if it did not that should be the end of the appeal.
9. There was some debate between the court and Mr Hinks as to whether that was a direction we could give at this stage. He took us to Ord.52.9 and he referred us to the authorities dealing with applications to set aside permission to appeal. Those authorities are united in discouraging, to say the least, applications to set aside the grant of permission, emphasis being placed on the provision of Ord.52.9 (2) which says that the court will only exercise its power to set aside permission where there is "compelling" reason.
10. We ultimately indicated that we were of the view that the appeal should go ahead on the basis that we had first indicated. We were inclined to think that where a substantial extension of time had been granted and where the arguments for not granting an extension are, or seem, powerful and seem not to have been fully explored before the single judge, the court should not, particularly in complex litigation, be so averse to reconsidering the extension aspect. In any event, each case must depend on its own particular circumstances. In the particular circumstances of this case, where permission was granted by reference to one change in circumstance, it seemed to us there was a compelling reason to direct the appeal to take place on the basis that if there was substance in that one circumstance i.e. the documents point, permission to argue all points should remain and an extension to argue all points should continue. But if, after argument, there was no substance in the documents point then the appeal on that point should be dismissed and the order extending time for arguing the other points should be set aside. We ruled thus that that was the way the appeal should be conducted.
11. We accordingly heard Mr Hinks on the documents point. He showed us the passages in the main judgment (paragraphs 16 to 41 to which I have referred) and where the judge was critical of the company in relation to the late disclosure of documents. He then took us to the judgment, ruling that there should be no order as to costs, and I have quoted the relevant paragraphs. He took us to the judgment dealing with wasted costs which he submitted showed a fundamental change in the judge's view about the disclosure of documents.
12. Mr Hinks' submission, in essence, was that when arguing the matter on 24 July at the end of the trial he had urged that the judge should not be critical of the company in relation to disclosure of documents on the basis that the documents that the company were said not to have disclosed did not fall within the obligation to disclose under the Civil Procedure Rules. He had argued before the judge that the duty to disclose was somewhat narrower under the CPR than it had been under the previous Rules, but, he said, that submission was rejected by the judge at that stage. He submitted that when one looks at the wasted costs judgment one can see that his original submission has been accepted, and he says that, on taking a narrower view, the judge in the wasted costs order had formed the view that many of the documents were not discloseable and thus his original criticism was unfair. On that basis he submitted that there was an inconsistency between the wasted costs judgment and the judgment on costs and that it was wrong for there to be two inconsistent judgments in the same litigation.
13. The wasted costs judgment in paragraph 2 refers expressly to the previous criticism that the judge had made. He said in the wasted costs judgment, after referring to the fact that he dealt with costs at the end of the trial:

"In the course of my judgment on the main issue I was critical of disclosure of documents by the defendant Beechwood Estates Company and I took that into account in reaching my decision on the costs."

He then refers to the fact that the wasted costs application had been made. The judge had clearly in mind the criticisms he had made in his main judgment and the view he formed on the costs judgment.

14. I say at the outset that in my view it is of some significance that despite that reference he never said that the impression he had as reflected in the main judgment and the impression he had as reflected in the costs judgment had been altered by the argument on wasted costs.
15. He was, on the wasted costs application, concerned with whether there had been negligence, that is to say, a breach of duty by Mr Fairburn the solicitor, and, if so, whether that had caused costs to be wasted. In that context he did certainly consider the duty under the CPR, and he recognised certainly that so far as standard disclosure is concerned the duty was narrower than the duty under the previous rules. It was in that context that he said (paragraphs 16 to 18):

"16 In the present case I am satisfied that Mr Fairburn exercised a judgment based upon the guidance given in the Notes ..... he accepts that his judgment was not a perfect one. There are two documents which he accepts, with the benefit of hindsight, he ought to have disclosed. They are documents which I found of assistance in reaching my judgment, especially on the credibility of witnesses.

17 The majority of documents which it is said that Mr Fairburn ought to have disclosed are, in my view, documents the necessity for which was not foreshadowed either by the formal statements of case or indeed the witness statements. The need for those documents arose during the course of the trial, and the trial evolved in the way in which anyone familiar with complex litigation knows that trials do evolve.

18 It seems to me, therefore, that with one or two exceptions Mr Fairburn's conduct in disclosure, even if he reached what I might regard as having been the wrong decision, is not a decision which I can categorise as being negligent. I add also that the claimant has not been able to point with conviction to any individualised costs which have been unnecessarily incurred as a result of late disclosure. Mr Fairburn has meticulously analysed my judgment, closing submissions and cross-examinations, and has demonstrated to my mind that I should not rely on a general assertion that the length of the trial has been increased, without the claimant being able to point to any particular passage in the evidence which would not have been gone through if disclosure had been earlier."

16. Mr Hinks submitted that the judge was concluding that it was only the two documents which should have been disclosed. In my view that is not right. The judge is making clear in paragraph 17 that two documents had not been disclosed in relation to which Mr Fairburn was negligent. He was furthermore clearly emphasising the importance of those two documents having regard to the effect they had in assisting him in dealing with the credibility of witnesses. But he was also concluding in paragraph 8 that the likelihood was that there were others that should have been disclosed. I accept that he was not saying there were many files of documents undisclosed which should have been.
17. The first question is whether the judge was taking a different view from that which he took on 24 July. We were taken helpfully to the submissions that were being made to the judge on 24 July. The transcript of that day (in file 3 tab 13) contains some important passages from page 324 to 326. At page 324 Mr Hinks is recorded as submitting the following:

"MR HINKS: So far as disclosure is concerned, my Lord, I have made some submissions on that. I repeat that standard disclosure is considerably narrower than the discovery under the Rules of the Supreme Court. The sort of disclosure we will effectively be forced to give during the course of this trial is what is called now special disclosure. It went beyond what we were required to do under the terms of the Master's order and under the rules of the Court.

MR JUSTICE LEWISON: Not entirely, for instance (?) the two annotated letters which went to the question of when did Lady Macclesfield move to the Castle were highly relevant to a hotly contested factual issue.

MR HINKS: I cannot pretend that there are not some documents, but what is put against me is this huge raft of seven volumes of documents.

MR JUSTICE LEWISON: I take the seven volumes with a pinch of salt, but I think there were quite a number of documents which I personally found of the greatest assistance in helping me to resolve some of the factual issues which were disclosed during the course of the trial.

MR HINKS: My Lord, a lot of the most significant ones were disclosed albeit late on 10 June. There were the notebooks which were highly material; they were pre-trial. I accept there were some additional documents."

Mr Hinks then refers to the balance of costs and is emphasising that any late disclosure did not go to increasing costs. Mr Justice Lewison then said in response to that point:

"That is not really the point, is it? The point about late disclosure is not that it increases costs but at that it is unfair. That is the point."

18. That interchange, in my view, demonstrates three things. First, at the forefront of the judge's mind on failure to disclose was the two documents. They assisted him in coming to a conclusion about credibility. He obviously viewed the failure to disclose those documents as a very material breach of duty and it was in relation to those documents that he ultimately found Mr Fairburn to be negligent. Secondly, the judge was not thinking that the seven files, the mass of documentation, were all discloseable documents. He records that he took that with a pinch of salt. Thirdly, clearly the failure to disclose was not simply limited to the two documents. There were additional documents that went beyond those two.
19. To my mind that state of mind very much equates with the state of mind reflected in paragraph 18 of the wasted costs judgment. I do not therefore think that there has been any fundamental change in the judge's thinking in relation to the disclosure of documents as between the time he ruled at the end of the trial and the time he ruled on wasted costs.
20. I also have to say this: I am not clear in my own mind that even if some change in thinking was demonstrated that that would make his earlier ruling subject to attack in this court. It has to be remembered that on 24 July he had just tried the case and he had just delivered a very substantial judgment, and he ruled on costs by reference to the impression he had at that time. Some seven months later, in a further interlocutory battle, he is concerned with whether a solicitor was negligent and whether costs had been caused by that negligence. If that produced a slightly different impression, I pose this question: would there be a basis for disturbing the original exercise of discretion by the judge? I think not. The point however does not arise because I do not detect any material difference in the judge's view in relation to disclosure.
21. In my view, no change having been demonstrated or certainly no change which is so material that it should affect or enable this court to interfere with the exercise of discretion having been shown, the appeal on this ground should be dismissed. That being my view in relation to this ground of appeal, I would also vary Lord Justice Mummery's order so as to refuse an extension of time to argue any of the other points.
22. LADY JUSTICE ARDEN: I agree. Mr Hinks has made a further submission that he accepts that his statement recorded in the transcript of the costs hearing efore the judge which reads "I accept there was some additional documents" was intended to be a reference only to the two documents in relation to which Mr Fairburn was ultimately found by the judge to have been negligent for not disclosing them by way of standard disclosure. I accept what Mr Hinks says, but that is not clear from the words actually used and one could not fault the judge from taking a wider view of what Mr Hinks there accepted.
23. I agree with my Lord's judgment that there was no or no significant change of view by the judge in his later judgment. Further, even if there had been, this would have been because the judge heard further submissions. In my judgment there could be no appeal against the judge's exercise of discretion on the basis of the submissions heard by him at an earlier point simply because he had heard further submissions and had come to a very different conclusion on a later date.
24. For these additional reasons and for the reasons given by my Lord, I would make the order my Lord proposes.
25. LORD JUSTICE JACOB: I agree with both judgments.
RULING RE COSTS
26. LORD JUSTICE WALLER: We now have to rule on the question of costs on this appeal. I would emphasise straightaway that costs are a serious matter and not always an easy matter. I would also say that I think all three of us have been struck by the very substantial bills of costs that have been put in in this case. At the end of the day that will be a matter for the costs judge assessing what are the right charges. What we have to rule on is whether the successful respondents should have their costs or whether they should simply have a proportion of their costs. What has troubled us is that the way in which this appeal was ultimately organised meant that one point was argued and none of the others were argued, and that was following a supplemental skeleton argument put in by the respondents quite late in the day.
27. The first question is whether an application made earlier might have produced a substantial saving in costs. What is clear is that if an application had been made earlier in the day and the appeal process had developed in the way that it has now some costs would have been incurred by the respondents and the respondents would have been the winners and therefore there could be no reason to deprive the respondents of such costs as they would have incurred anyway.
28. We do however think that this was a case which raised a number of points where if the respondents were going to put in their respondents' notice, they should (as was they ultimately clearly did) have made some application to see whether some costs could be saved by trying to organise the appeal in a way that did not lead to all the points being prepared and argued at the same time.
29. The question is how one reflects that in an order for costs. At the end of the day we think the right order is that the respondents should get 50 per cent of their costs of the appeal but that should only run until 28 September 2004. On any view, there was an offer made to the appellants by letter of 24 September 2004 which offered to the appellants that if they withdrew their appeal there would be no order for costs at all and, as it seems to us, that was an offer was one which, it is now quite clear, the appellants should have accepted. On that basis the respondents should have 100 per cent of their costs from 28 September 2004. We have considered whether that should be on an indemnity basis and we think it should not be on an indemnity basis. It is simply 100 per cent of their costs.

Order: Appeal dismissed. Respondents to have 50% of their costs up to 28 September 2004 and 100% thereafter on a standard basis.