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 CENTRAL LONDON COUNTY COURT
(HER HONOUR JUDGE FABER)

		Royal Courts of Justice Strand London, WC2
		7 November 2005

1. LORD JUSTICE BROOKE: This is an appeal by the defendants from an order made by Her Honour Judge Faber at the Central London County Court on 16th March 2005 whereby she refused to grant an application by the defendants with the consent of the claimants for an adjournment of the trial of their counterclaim on the day fixed for trial. The parties had agreed on the previous day that judgment should be entered for the claimants on their claim for an unpaid service charge on their flat. The judge, therefore, on refusing the adjournment and on hearing that the defendants had no evidence to support their counterclaim, directed that by consent judgment be entered for the claimants in the sum of £4,820.77 plus interest in full and final settlement of their claim; that the counterclaim should be dismissed; and that the defendants should pay the claimants their costs, to be subject to detailed assessment if not agreed.
2. The claimants sued as the reversioners of a long lease of flat premises in Ovington Gardens, Kensington. Their claim for unpaid service charges related to the balance of their unpaid bills for service charges for the period between 1st April 2002 and 31st March 2003. The dispute between the parties arose out of the matters set out at paragraphs 5 and 6 of the counterclaim. In these paragraphs the defendants averred that since the claimants withdrew their provision of central heating for the demised premises in about 1995, they had tried to obtain the claimants' agreement to the routing of a flue for a gas fire boiler on the premises, but such agreement had unreasonably not been forthcoming in breach of the claimants' implied obligation in this respect. As a result the defendants had been unable to install a gas fire boiler, and they complained that they had been unable to let the demised premises at all, or alternatively had only managed to let them from time to time at a lower rent than they would have achieved if such a boiler had been installed. They therefore counterclaimed damages to be assessed.
3. We do not have the witness statements or any of the documents in the case or the expert engineer's report, but Miss Shea tells us, and Mr Howells does not dispute it, that the issue between the parties arose out of a consensual variation of the lease towards the end of 1995 whereby the appellants covenanted to deal with the central heating themselves. The claimants consistently maintained that there was no reason why the defendants should not install the appropriate venting without interfering with the parts of the building retained by the claimants. Miss Shea told us that the jointly instructed engineer in due course suggested three options for the venting, one of which would have complied with the claimants' approach to the problem. It would have been a matter for the judge to decide as a matter of liability whether this would have been a reasonable option.
4. However that may be, the proceedings were issued on 15th July 2003. On 8th April 2004 District Judge Madge allocated the action to multitrack and gave extensive case management directions. The trial window was set between 4th and 22nd October 2004 with a time estimate of one-and-a-half days.
5. On 27th September 2004 District Judge Wright made a further order. Nothing seems to have been advanced much since District Judge Madge's order. No problems arose out of District Judge Wright's direction that an expert heating engineer should be jointly instructed or that witness statements should be exchanged (although the timetable slipped in each case), and a new trial window was set between 24th January and 11th February 2005. Difficulties, however, arose over the implementation of his order that the parties should agree the identity of a jointly instructed valuer by 1st October 2004 who was to report as to the rental value of the premises between the relevant dates. This valuer was to serve his report by 4pm on 15th October, with questions to be served by 22nd October and replies by 5th November. On 13th January 2005 the court notified the parties that the trial date was now set for 16th March, one day now being provided for the trial. The parties did not indicate to the court that they might not be ready for trial.
6. There is before us a large bundle of correspondence between the parties which set out clearly for our benefit the problems that arose out of the identification and instruction of an appropriate valuer. To put it quite briefly, from the papers we have now seen two possible valuers had been identified and agreed by 8th October. One of them was selected by the defendants' solicitors who instructed him on 5th November, but he declined instructions three days later on the basis that the suggested task was not within his expertise. In due course the other valuer was approached shortly before Christmas, and he, too, could not help. The timetable was now running into January. There was an attempt to instruct a third valuer who would not have been available on 16th March and who would be charging quite a substantial fee. There was then a suggestion that a fourth valuer identified by the claimants' solicitors would be willing to act, but the defendants objected to him on the grounds that it was contemplated that he might in future assist the claimants in the management of the building for them.
7. Eventually, after the defendants' solicitors had written to 12 different firms of valuers asking if they were willing to act and to attend court on 16th March, a fifth valuer was identified. He made it clear at the outset that he would not be able to attend court on 16th March, but he would do his best to prepare a report before that time. In the event, he did not inspect the flat until 7th March and he told the parties on 8th March that he would not be able to get his report available until 18th March at the earliest.
8. It was at that stage that the defendants' solicitors raised the possibility of an application to the court on a joint basis for the case to be adjourned to the first available date after 1st April. The claimants' solicitors replied on 9th March to the effect that they could see no reason why the trial should not proceed on 16th March. In the event that liability was established on the counterclaim, damages could be assessed at a later date.
9. The defendants' solicitors thereupon made a unilateral application to the court for an adjournment of the trial on the basis they had suggested. They set out the history of the problems they had encountered by way of evidence in support of their application. The evidence does not identify one side being more to blame than the other for the difficulties that had been encountered.
10. On 10th March, Judge Collins CBE refused the application on the papers, stating that the expert should be told to produce his report before the trial. On the same day the defendants' solicitors told the claimants' solicitors that they did not agree that the issue of damages to be assessed could be dealt with at a later date. They said that the question whether or not lack of heating in the flat affected the renting of the same on the rents available was fundamental to their clients' counterclaim, and it was not simply an issue of assessing damages. They also heard that day from the valuer who repeated that his report would not be available by 16th March and said that he was under pressure as it was to complete it by 18th March when he was due to go on holiday, so that Judge Collins' suggestion could not be implemented.
11. Settlement negotiations in respect of the claim started on 14th March, and on 15th March the parties agreed that judgment should be entered on the claim for an agreed sum together with interest and costs, and that the trial of the counterclaim should be adjourned to the first available date after 1st May. The court, however, was not willing to make an order over the telephone from adjournment of the counterclaim, so that the parties attended before Judge Faber to seek the order on a consensual basis. They both attended by counsel, but neither side had procured their witnesses to attend court, and the heating engineer was also laid off.
12. Judge Faber refused to make the order for the adjournment. In her judgment she summarised the history of the matter in so far as it appeared from the witness statement on the back of the application. She was critical of the fact that throughout the period when the parties were trying to identify a surveyor, the court was not informed of the difficulties, and no attempt was made by either party to obtain a different hearing date, despite the fact that it was apparent that there were significant difficulties in finding the single joint expert, and the exchange between the parties in late January took place more than three months after the date when the report had been ordered to be produced, namely 15th October.
13. She also commented adversely on the fact that although the fifth and final valuer had said when he was instructed that he would not be available to attend court for the trial on 16th March, neither of the parties came to the court at that point to ask for the trial date to be vacated. She noted that the claim for the service charge had now been settled. She also noted that counsel for the defendants said he had been told by his instructing solicitor that the expert had been contacted but there was no date for his report to be forthcoming. (In fact it was delivered on 18th March, as had been envisaged by him 10 days earlier, and on the face of his report, in which he estimated that the flat would have been about 15 per cent less valuable if there was no provision for central heating in it, there was the potential for a counterclaim in excess of £20,000, subject of course to liability and disputes about the valuer's approach) Judge Faber then said, and I read paragraphs 10 to 13 of her short judgment:

"The overriding objective requires the court to deal with the matter proportionately, ensuring the parties are on an equal footing by saving expense, ensuring it is dealt with expeditiously and fairly and (paragraph 1.1 sub-paragraph 2(e)) allotting to it an appropriate share of the court's resources while taking into account the need to allot resources to other cases.

Paragraph 7.4 of the Practice Direction to Part 29 sub-paragraph 1 states:

'The court will not allow a failure to comply with directions to lead to the postponement of the trial unless the circumstances are exceptional.'

In this case, it seems to me, the parties are exceptionally culpable in dealing with the preparation of this expert's report.

The difficulties in finding an expert were apparent last year within a couple of weeks of the date by which the report should have been prepared and nobody came to this court asking for an extension of the time within which the single joint expert was to prepare his report. Nobody came to the court, or mentioned to the court when a hearing date was sent out in January, that there had been non-compliance with District Judge Wright's order.

Instead the parties have left it to the very last minute when this court has set aside a day to hear this case to apply for this adjournment. There are no exceptional circumstances militating in favour of this adjournment, in fact, to the contrary, as I already said. The exceptional circumstances seem to me exceptionally poor conduct on the part of the parties in failing to notify the court at an earlier stage of the difficulties in arranging for this expert and this application is refused."

14. She was then told that the defendants had brought no evidence to court in support of the counterclaim, if only on liability, and she then dismissed the counterclaim. She later refused permission to appeal, citing paragraph 7.4(1) of the Practice Direction to CPR Part 29. She added that the parties already knew they were in breach of the order relating to a single joint expert at the time the notice of the trial date was given in January.
15. The judge therefore made two orders in the exercise of her discretion. The first was the order refusing any adjournment and the second was the order giving judgment in favour of the claimants on the counterclaim.
16. So far as the judge's approach to the question of adjournment was concerned, in my judgment this was a decision being taken by the trial judge on the day that the trial started when without any effective pretrial application (apart from the unilateral application made on 10th March) she was being asked to adjourn the trial. I see no value in a detailed textual analysis of section 7 of the Practice Direction to Part 29 which is essentially directed to the resolution of disputes before the trial. In Moy v Pettman Smith [2005] UKHL 7 @ [61]-[62]; [2005] 1 WLR 581, Lord Carswell made it clear that a trial judge possessed an overriding discretion to decide what was fair and whether an adjournment should be granted. In my judgment section 7 of the Practice Direction to Part 29 should inform the way that the trial judge exercises discretion whether or not to grant an adjournment on the day of the trial, but it does not dictate it, and if and insofar as the trial judge took the view that circumstances ought to be exceptional before she was willing to adjourn the case, I would be willing to accept that that was an appropriate approach.
17. The Civil Procedure Rules, with their tough rules in relation to requiring compliance with court orders, were introduced to extinguish the lax practices which existed before those rules were introduced whereby parties' solicitors often regarded directions given by the court as so much waste paper, extended time unilaterally without approaching the court, reached agreements allowing each other plenty of time without approaching the court, and made it virtually impossible for courts to organise their lists effectively. The Civil Procedure Rules now require the parties to help the court to further the overriding objective (CPR 1.3), and in my judgment Judge Faber was entirely justified to hold that both parties were exceptionally culpable, given that the problems arose over a jointly appointed expert, in not informing the court of the problems which were bound to lead to delay on the trial on the assessment of damages on the counterclaim because they knew perfectly well that they did not have a valuer who was capable of attending court on 16th March, and they had known that for all practical purposes ever since the trial date was identified. First, the third valuer was laid off and in any event was not able to attend on that day; then the fourth valuer was not acceptable; and finally the fifth valuer made it clear from the outset that he would not be available on 16th March.
18. The question then arises should the court interfere with Judge Faber's order or did it fall within the wide ambit of the discretion which was available to her? In my judgment this court should do everything in its power to support the authority of the judges at the coal face who are using their professional skills and the authority that they possess to ensure that litigation solicitors do not go back to the bad old days that existed before the Woolf reforms were introduced. There are already plenty of indications that there is now a tendency for solicitors to go back to those bad old days when they ignored the timetables and directions of the court, forgetting that these are orders of the court which are there to be obeyed. For my part I would be very slow to interfere with the discretion of a judge exercising her discretion in these circumstances unless I was satisfied that there were any material matters which she had failed to take into account.
19. In my judgment there was one important matter which she failed to take into account, perhaps because it had not been pinpointed clearly enough. The defendants had been resisting the payment of the service charge on the basis that they had a substantial counterclaim. The effect of the agreement that they reached was that they agreed to submit to a judgment of the court for the amount of the service charge, with interest and costs, which could be enforced immediately. In other words they were bargaining away their right to a set off which could delay the date of payment until such time as the counterclaim was tried. The judge did not take this into account, and in my judgment this was a matter which should have tipped the scales.
20. I am not surprised that the judge was infuriated that the parties had treated the court so badly, but if she had analysed the matter in this way she would have seen that the defendant had agreed to give up something valuable on the basis that the counterclaim would be adjourned. In my judgment, given that the judge found both parties exceptionally culpable, it was then a wrong exercise of discretion to order the defendants to pay the costs of the counterclaim. There was nothing at all to stop the defendants resurrecting the issues on the counterclaim in new proceedings, so long as they paid what they were ordered to pay in relation to the former proceedings. There would be no question of res judicata, and in my judgment it was unjust for them to be required to pay the costs of the counterclaim in those circumstances given that the judge had found both parties equally and exceptionally culpable.
21. Miss Shea has suggested that the defendants were taking a risk that the court might not grant the counterclaim on the 16th March, and that they were taking a risk in laying off their witnesses. In my judgment, if the judge had considered the matter in the way she should have, she would have adjourned the counterclaim on the basis that she was being invited to enter a judgment on the claim which the claimants could go ahead and enforce, and she would not have been critical of the parties not having an expensive engineer waiting to give evidence at court.
22. If we allow the judge's order to stand it would be an unjust order because it is unjust for the defendants in these circumstances to have to pay all the costs incurred by the claimant in relation to the counterclaim before they can start new proceedings on the counterclaim which they regard as a matter of value. In my judgment the just course should be to allow this appeal, to substitute for paragraph 2 of the judge's order a direction that the trial of the counterclaim be adjourned to a date to be fixed, and substitute for paragraph 3 an order that the claimants' costs of the claim be paid by the defendants, such costs to be subject to detailed assessment if not agreed. If the amount of the claim and costs and interest have not yet been paid, then there is no reason at all, arising out of this varied order, why the claimant should not proceed immediately to enforcement of the judgment, which is not stayed. The counterclaim will remain alive as envisaged in the parties' agreement.
23. LORD JUSTICE DYSON: I agree.
24. LORD JUSTICE CARNWATH: I agree. I would only add in fairness to Judge Faber that she does not appear to have been given much help by the parties. Neither seems to have contemplated the possibility that the agreed application for an adjournment would fail, and thus no real thought was given to what should happen in those circumstances or as to the practical implications of any particular order. However, in the light of the fuller discussion we have been able to have in this court, I agree that it is right for us to allow the appeal and to make the order proposed by Brooke LJ.