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 SHOREDITCH COUNTY COURT
(HIS HONOUR JUDGE COTRAN)

		Royal Courts of Justice Strand London, WC2
		28th April 2005

1. LORD JUSTICE JUDGE: I shall ask Arden LJ to give the first judgment.
2. LADY JUSTICE ARDEN: This is an appeal against the order, dated 28th April 2004, of His Honour Judge Cotran sitting in the Shoreditch County Court. The appeal is against his order, in so far as he awarded the second defendant, Mr Lawrence Campbell, his costs of his defence and counterclaim in the proceedings. The proceedings were proceedings for the possession of Flat D, 43 Upper Clapton Road, London E5. I will call that property "the property". The proceedings were brought against the first defendant, the mother of Mr Lawrence Campbell, and against Mr Lawrence Campbell and against others, with whom we are not concerned.
3. The principal defence to the possession proceedings was that Mrs Campbell, who had a tenancy of the property, had exercised her right to buy. That she had exercised a right to buy was common ground. But the London Borough of Hackney, the claimant in the proceedings, and the appellant in this court, which I shall call Hackney, claimed that Mrs Campbell had ceased to be tenant and was therefore no longer entitled to exercise the right to buy. There had been considerable delay in the implementation of that right, but we are not concerned with those details today.
4. The judge rejected Hackney's contention, as regards the right to buy, and instead upheld Mrs Campbell's right to buy. Following judgment the judge made an order, which appears at page 89 of the bundle. In paragraph 1 the claim for possession was dismissed. Paragraph 2 stated that the counterclaim in relation to the right to buy was upheld. Paragraph 3 of the order contained an injunction for the execution of the transfer of the property in which Hackney had only a leasehold interest. The fourth part of the order was for an account of rent. The fifth part of the order dealt with costs and the sixth and seventh dealt with consequential matters.
5. It is to be noted that the only reference in the order to the counterclaim is in relation to the counterclaim in relation to the right to buy. There had been a substantial counterclaim in these proceedings filed by Mr Campbell. It was treated at the trial as a counterclaim filed on behalf of both himself and his mother. Essentially there were five elements to the counterclaim. The first related to the right to buy. Mr Lawrence Campbell contended that he too was a tenant of the property and claimed to be entitled therefore to a tenancy and to exercise the right to buy. Secondly, Mr Lawrence Campbell raised, on his own account, issues as to breaches of the repairing obligations. Thirdly, he raised an issue as to interference with their subsisting contract. Counsel, Mr Montague Palfrey, who appeared at the trial and appears today, submitted that he was not able to follow the substantive content of this part of the counterclaim and submitted to us that it was doomed to fail. The fourth part of the counterclaim was a claim for damages for nuisance and harassment. That too was brought by Mr Campbell on his own account. Fifthly, there was a claim to rely on human rights and, in particular, a claim that a transfer by Hackney of the leasehold interest in the property to a housing association was in breach of his rights under the Human Rights Act.
6. In the course of the hearing the judge made it clear that he did not consider there was substance in the counterclaim. In the course of his opening counsel went through the second defendant's counterclaim and submitted that there was no substance in it. The judge made certain observations in the course of the first day. It is sufficient, for my purposes, to turn to a passage at page 30 of the transcript for day one, to which Mr Lawrence Campbell referred us. The judge there said to Mr Campbell:

"Do you accept that the real big issues are their claim for possession and your counterclaim basically on the right to buy - not yours but your mother's?

MR CAMPBELL: My mum's, right.

JUDGE COTRAN: And the others are peripheral matters. You accept that?

MR CAMPBELL: Yes, your Honour."

7. So the trial proceeded on the basis that the principal issues were the right to buy and the claim of Hackney to possession.
8. The judge gave judgment at the end of the two-and-a-half day trial, so it was not a reserved judgment. In the course of his judgment he referred to the fact that before the possession proceedings were started Mr Lawrence Campbell had started proceedings seeking an injunction. The position was that the application came before His Honour Judge Cotran. He gave directions for the issues raised by those proceedings to be dealt with by way of defence and counterclaim to Hackney's proceedings for possession, which had by then just been issued. It appears that he also gave a direction that the issues in Mr Campbell's proceedings should be heard at the same time as the possession proceedings.
9. The judge, at page 22 of the transcript, summarised the counterclaim and he went through it item by item. He said:

"He then gives his defence to the notice to quit and he basically asks for a mandatory injunction by way of counterclaim. He says in the counterclaim that this delay is ongoing about the right to buy and it has been going on for seven years. He says that the property is not fit for human habitation and is in serious disrepair. He says that he wants the presiding judge to grant a mandatory injunction unless they comply with their obligations under the right to buy legislation. He complains of disrepair and no central heating for many years. He says that he has a spinal injury and he is on benefits. He has been harassed. He wants the claimant not only to recognise and complete the right to buy, but also reimbursement for rent he had paid and he wants damages for that. He has a defence of interference with subsisting contract issues. He repeats the matters about Mr Bulpinder Singh and the heating and the dampness in the premises. He says that he has another claim for nuisance and harassment against the London Borough of Hackney, and he has, finally, a claim raising human rights issues."

10. I should add that Hackney took the view that there was no substance in the repair claims as a matter of fact. Indeed they pointed out to the judge, for instance, that no complaint had been made to Hackney about the matters relied on.
11. So the judge was well aware of the contents of the counterclaim and of the claims being made by Mr Lawrence Campbell. At paragraph 24 of his judgment, appearing on page 36 of his transcript, the judge dealt with the counterclaim in this way:

"24. I now come to the counterclaim. As I have said, several matters were raised, but the most important two are the question of disrepair and the question of the right to buy. The question of disrepair as to the heating I need not deal with, but of course disrepair is relevant to the question of right to buy because it goes with it. The price was given at that time and it was reduced to £12,000."

I need not read further.

12. That is all the judge says about the counterclaim, but it is clear that he has addressed his mind to each of the elements of the counterclaim and considered that the only two important questions were the question of disrepair and the right to buy. He had upheld the right to buy as vested in Mrs Campbell and hence did not need to deal with that. In an exchange with counsel in the course of the trial he had identified the important question of repair to be the question of repair as to heating and he is saying in this passage that he does not have to deal with that. He does not give further details. No doubt it would have been helpful if he had dealt with each item of the counterclaim that he was not upholding in turn, but his meaning is quite clear that he did not consider that he should uphold any part of the counterclaim.
13. At the end of the judge's judgment there was a discussion between the parties and the judge. One of the issues of course was the issue as to costs. The judge heard argument and then gave the following ruling appearing at page 41 of the transcript before us. The judge said:

"On the issue of costs, Mr Palfrey submits that, whereas he would be prepared to consider the costs incurred by Mrs Campbell in relation to the proceedings (that is her costs as a private litigant), Mr Lawrence, who had no case, he says, should pay his costs. I thoroughly disagree. I think that Mr Lawrence had a case all along. I think if one looks at the conduct of this case, Hackney - I need not go into the details, but the way that they have dealt with this matter (two different departments not knowing what the other is doing) was, to say the least, not the way that a responsible borough should behave in the light of all the letters written to all the people high up, and in the light of all that bring proceedings for abandonment and then switching course to something else. For those reasons I would award the costs of Mrs Burley Campbell and Mr Lawrence Campbell as both private litigants in these proceedings and these will go to a detailed assessment to a district judge."

14. So those are the reasons which the judge gave for the orders he made as to costs. The appeal before us is solely as to the order for costs made in Lawrence Campbell's favour. It is clear from the passage I have just read that the judge had two particular reasons: first, he considered that Mr Lawrence Campbell had a case all along and ,second, he made the order because of the conduct of Hackney, who he considered had not acted in a responsible fashion.
15. Mr Palfrey makes the following submissions: first, he submits that the judge was in error in saying that the second defendant, Mr Lawrence Campbell, had had a case all along. It was clear from the way the judge had dealt with the case that he did not think there was any substance in the counterclaim, and indeed said as much in his judgment.
16. Mr Palfrey submits that as to the Judge's second reason: the conduct of Hackney, that related to the right to buy and not to the claims, the subject of the counterclaim. Thirdly, Mr Palfrey submits that in deciding the question of costs the judge failed to take into account the several claims raised by the second defendant in his counterclaim, none of which had succeeded. Fourthly, Mr Palfrey submits that Hackney should get its costs as having won on the counterclaim issues. Mr Palfrey accepts that the counterclaim issue did not take the time of the judge at trial, but he informs us that Mr Lawrence Campbell had served five lever arch file documents and Hackney had had to prepare and answer to Mr Lawrence Campbell's points. However, Mr Palfrey did not submit that it was possible to put a percentage on the overall costs of trial to the court of the counterclaim issues. Indeed he said it was not possible to put a percentage on those costs. As a matter of law, Mr Palfrey submitted that the modern view, under the Civil Procedure Rules, is that the court should award costs on an issues basis recognising those on which a party had won and those on which he had lost. There had been some success on Mr Lawrence Campbell's part because he had resisted the order for possession, but on most issues in the counterclaim he had failed.
17. Mr Lawrence Campbell has made submissions. He has appeared before the court with the assistance of his McKenzie friend, Mr Reed. Mr Lawrence Campbell's submissions may be summarised as follows: first, he submits that the judge upheld his claim to adverse possession. This was a claim that he had raised in the proceedings for an injunction which he had started and referred to in the judge's judgment. Those proceedings he understood were being tried alongside Hackney's claim for possession. He contends that he had occupied the property and that he had done so for the period of limitation necessary to establish adverse possession. Alternatively he relied on lost modern grant. Indeed, in his respondent's notice (the skeleton argument filed for today's purposes) Mr Campbell had set out that claim at some length and exhibited a number of the authorities on that point.
18. The difficulty, and I will deal with this point now, about this submission, as the court endeavoured to explain to Mr Lawrence Campbell, is that the claim is against the person described in the skeleton argument as the first freeholder. Hackney was only a leaseholder which had a 99-year lease. The first freeholder was a Mr Cooke (?) and he had assigned the lease to a Mr Bulpinder Singh who gave evidence at the trial of these proceedings. So Hackney was only a leaseholder and this claim was against a person who was not a party to the proceedings.
19. Mr Campbell seeks to meet that point by submitting to us that Hackney must have had a duty to bring in Mr Singh, and that, in any event, Mr Singh was a witness in the proceedings. As to the first point, Mr Campbell points out that Hackney are described as the Mayor and Burgesses of the London Borough of Hackney and Mr Singh would be a Burgess of the borough council. Mr Campbell submits that he had a right to have the adverse possession proceedings adjudicated upon, a right to bring the claim and that in effect if the right parties were not before the court it was Hackney's responsibility to see that they were brought before the court.
20. I will take these points now. The fact is that the right parties were not before the court. As I explained, Mr Singh, the current freeholder, was a witness but he was not a party; neither was Mr Cooke. So far as the title of the proceedings are concerned, the expression "Mayor and Burgesses of the London Borough of Hackney" is a reference to the title of the statutory corporation represented by the appellant. That is a separate legal person from Mr Singh and from Mr Cooke, the original leaseholder. In those circumstances, in my judgment, it is quite clear that neither the first freeholder nor the second freeholder was before the court.
21. In addition, when the order of the judge is examined it is quite clear that the judge made no order in relation to this claim on adverse possession. The only orders he can be taken to have made are those set out in the order of 28th April, which I summarised earlier in this judgment.
22. Mr Campbell also submits that the judge upheld his counterclaim. The order only upholds the counterclaim in relation to the right to buy. In my judgment the correct position is that all the claims in the counterclaim were dismissed other than the right to buy. Mr Campbell then submits that all the issues in the counterclaim were all part of his mother's successful defence and cannot be separated out. Therefore he should have all the costs of his counterclaim, but in my judgment the issues which he was raising, for instance, as to harassment and repair, were quite easily separable from the right to buy. They were separate, identifiable issues and if the practice referred to by Mr Palfrey had been followed an order for costs could have been made which reflected success on the individual issues.
23. Those are the principal submissions and I must now turn to my conclusions. Costs are a matter for the discretion of the judge who hears the application or trial on which he has given judgment and out of which the application for costs arise. The principal responsibility for determining costs was that of the judge and it was principally a matter of his discretion. It is well-established that the Court of Appeal can only interfere in the exercise by the judge of his discretion as to costs if he was wrong in principle. There are many reasons for this, but one very good reason is that it is after all the judge who has heard all the issues and who is fully familiar with what happened at trial. Although we have had helpful submissions from Mr Palfrey and Mr Campbell, we have only a comparatively minor familiarity with the issues and so this court will only interfere if it is clear that the judge was wrong in principle in the order which he made.
24. The Civil Procedure Rules contain rules concerning costs. CPR 44.3 provides, in paragraph 1, that the court has a discretion as to whether costs are payable at all and as to the amount of costs and when they are to be paid. Paragraph 2 of that order states:

"If the court decides to make an order about costs-

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of a successful party; but

(b) the court may make a different order."

So the basic rule is that costs follow the event. The successful party will be entitled to his costs.

25. In this case the judge did not follow that basic approach. He seems to have treated Mr Campbell as in exactly the same position as Mrs Burley Campbell, but in fact their positions were legally very distinct. Mrs Campbell was the tenant. She was entitled to the right to buy. Mr Campbell had claimed that he was also a tenant, but had failed in that. Therefore he failed to establish that he had any right to buy and he likewise failed to establish that he was entitled to relief on any of the matters in his counterclaim. Because the judge was mistaken in this approach to the question of the incidents of costs, in my judgment the right course is for his order as to costs to be set aside. It would follow from that that this court must re-exercise the discretion as to costs, so far as Mr Lawrence Campbell is concerned.
26. Mr Palfrey has submitted that there should be an order for Mr Lawrence Campbell to pay to Hackney all the costs which it incurred on Mr Lawrence Campbell's counterclaim. Mr Palfrey, as I have mentioned, submits that these days the courts will generally seek to make orders as to costs which reflect success, and although Mr Lawrence Campbell can properly say that he succeeded in resisting an order for possession, nonetheless on all the other issues he lost.
27. While I accept that the court should these days endeavour to reflect successful failure on individual issues which are identifiable, that does not mean that the court must necessarily make an order in Hackney's favour in this case. The position is that there were a number of separate issues, but Mr Palfrey has properly accepted that he is not able to place a percentage of the overall costs on the costs which were attributable to the counterclaim.
28. This is a significant matter because, although the court seeks to reflect success or failure on issues, it does this by apportioning costs, not by ordering costs related to particular issues. The reason for this was made clear in the judgment of this court in English v Emery Reimbold & Strick Ltd [2002] 1 WLR 2409. At paragraph 115 the court said this:

"We are in no position to express a view as to whether we would have made the same order as Neuberger J did in Harrison v Bloom Camillin. However, we would emphasise that the Civil Procedure Rules requires that an order which allows or disallows costs by reference to certain issues should be made only if other forms of order cannot be made which significantly reflect the justice of the case: see rule 44.3(7), above. In our view there are good reasons for this rule. An order which allows or disallows costs of certain issues creates difficulties at the stage of the assessment of costs because the costs judge will have to master the issue in detail to understand what costs were properly incurred in dealing with it and then analyse the work done by the receiving party's legal advisers to determine whether or not it was attributable to the issue the costs of which had been disallowed. All this adds to the costs of assessment and to the amount of time absorbed in dealing with costs on this basis. The costs incurred on assessment may thus be disproportionate to the benefit gained. In all the circumstances, contrary to what might be thought to be the case, a 'percentage' order under, rule 44.3(6)(a), made by the judge who heard the application will often produce a fairer result than an 'issues based' order under rule 44.3(6)(f). Moreover such an order is consistent with the overriding objective of the Civil Procedure Rules."

29. It follows from that that, if the court is to reflect success or failure on individual issues, then it should do so, if at all possible, by expressing a success or failure in the form of a proportion of costs. As I have said, it is really impossible to form a view as to the proportion of the costs of the trial absorbed by the issues on the counterclaim on which Mr Lawrence Campbell failed. Those issues featured little in the trial itself. Had it been possible to define the proportion of costs I would have been minded to make an order for costs against Mr Campbell. Mr Campbell must be aware that if he makes claims in proceedings before courts which do not succeed, the court may well make an order that he pays the costs of those issues. This rule applies not only in this court but also in the county court, or on an assessment of costs before the District Judge. Because in this case it is not possible to reach a view as to an appropriate amount, and there are obviously matters going both ways, the appropriate order, in my judgment, would be no order.
30. I appreciate that Hackney has had to incur the costs of preparing for trial and that it received a substantial quantity of documentation, but many of those matters would, I suspect, have been matters which counsel would take in his or her stride. I also bear in mind that on the fundamental issue of possession Hackney failed to establish that Mr Campbell was indeed a trespasser. In my judgment it does justice to the case if the order as to costs as between Hackney and Mr Campbell is that there be no order as to the costs of either Mr Campbell's defence or his counterclaim. In my judgment that order reflects the justice of this case and I allow the appeal on that basis.
31. LORD JUSTICE JUDGE: Though we are interfering with the exercise of the judge's discretion on costs, an issue which is pre-eminently a matter for the exercise of the judge's discretion, I cannot usefully add anything to the comprehensive judgment given by my lady. I share her view both that the exercise of the judge's discretion here was flawed, sufficient to justify us interfering with it, and that the just outcome of the case is as she has said that it should be.
32. Accordingly, the appeal will be allowed and we shall interfere with the order. In place of the order that Hackney should pay Mr Campbell's costs, there will be an order of no costs on the defence and counterclaim.

Order: Appeal allowed. No costs on defence or counterclaim. No costs of appeal.