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 ETHERTON)

		Royal Courts of Justice Strand London, WC2
		11 May 2005

1. LORD JUSTICE NEUBERGER: This hearing has been necessitated because Mr John Garratt has been maintaining an application for permission to appeal a decision of Etherton J in relation to proceedings brought by Ashborder BV, Cedarbase Limited and Greenpark Energy Limited ("the claimants"), represented today by Mr Gabriel Moss QC, against Green Gas Power Limited, E&P Production Limited and Cabot Energy Limited ("the defendants"), two of whom are, and have been at all material times, in provisional liquidation, and the third, E&P, were in provisional liquidation but now have been compulsorily wound up. The defendants are represented by Mr Lloyd Tamlyn.
2. It is, I think, unnecessary to go into the merits of the matter. The application for permission to appeal, maintained by Mr Garratt over the objection of the provisional liquidators and the claimants who contended that he had no authority to maintain it, is now sought to be withdrawn on the basis that any appeal had been compromised. In those circumstances, the first question is whether I should dismiss the application for permission to appeal or permit Mr Garratt to withdraw it. The second question is what, if anything, should be done about the costs.
3. The first issue does not seem to be controversial. Mr Moss, with Mr Tamlyn's tacit support, contends that I should dismiss the application so that it undoubtedly is at an end, rather than permit Mr Garratt to withdraw it. On the face of it, that seems to me to be right, without making any adverse findings about Mr Garratt's conduct, which it would be unfair to him if I were to make and I am in no position to make. It appears to me to be desirable that a quietus is put to this, and as firm and complete a quietus as possible. In any event, Mr Garratt has not submitted otherwise. It may make very little difference whether I permit it to be withdrawn or whether I dismiss it, but I think that it is only fair on the claimants and the defendants, and the provisional liquidators in particular, if I dismiss it. So the application for permission to appeal is finally dismissed.
4. So far as costs are concerned, both the claimants and the provisional liquidators contend that the costs of the application for permission to appeal should effectively be visited on Mr Garratt. The provisional liquidators seek £8,886.94, which they say represents their costs, and I have a schedule from 28th January. The claimants ask for £16,775, being all their costs of the application; alternatively, £11,455, their costs from 14th December; further alternatively, their costs from 28th January, £9,947.
5. On the face of it, the applications for costs seem to me to be well founded. Once the provisional liquidators were appointed it seems plain that Mr Garratt had no authority, and could have no authority -- save if he were given it by the provisional liquidators, which he most certainly was not, and he does not suggest he was -- to pursue, or even to make, the application for permission to appeal or indeed to do anything else on behalf of the defendants -- see the discussion in the judgment of Moore-Bick J in Pacific & General Insurance Company Limited v Hazell [1997] BCC 400. Where a solicitor purports to act for a company in circumstances where he has no authority, then, absent special circumstances, the court will effectively routinely order the solicitor to pay any other party's costs and indeed will normally order it on an indemnity basis.
6. Originally Mr Garratt had instructed solicitors to act, effectively on his behalf, and purportedly on behalf of the defendants, and in particular Green Gas Power, and those solicitors, Messrs Landau Zeffertt Weir, had instructed counsel and indeed they appeared before the judge below. They withdrew on or about 21st January, having received a clear warning that an order for costs would or might be sought against them on this basis, and I have been referred to a letter from Landau's, dated 20th January 2005, which makes that clear and indeed mentions the case to which I have made reference.
7. On the face of it, therefore, there is a good claim for costs against Mr Garratt. However, costs are very much in the discretion of the court and, while one would expect a solicitor to know the law, the position can be said not to be so clear when it comes to a lay person, even a lay person with commercial experience and access to legal advice. Indeed, in one of the leading cases on costs against third parties, Symphony Group Plc v Hodgson, Balcombe LJ made the point that an early warning ought to be given, to a person against whom a wasted costs order would be sought, of that very possible possibility. However, as with virtually any rule on costs, as Mr Moss says, that is not a firm rule. In other words, Balcombe LJ was not saying, nor could he say, that unless such a warning was given the court had no jurisdiction to make a third party costs order.
8. There is a very substantial degree of dispute between the parties as to Mr Garratt's motivation and as to the history. Mr Garratt has portrayed himself, on the face of it very attractively, as a person doing his best in difficult circumstances and acting honestly and reasonably and not being given information which he should have been given. Mr Moss and Mr Tamlyn have both indicated, although they have not gone into any detail in light of my strong discouragement, that Mr Garratt in fact has not portrayed either the facts or his attitude or his lack of personal interest in this matter at all honestly.
9. It would, as I have already indicated, be quite unfair on Mr Garratt if I were to make adverse findings about the disputed facts again him, or if I were to make adverse findings as to his motivation. Equally, it would be unfair on the claimants and on the provisional liquidators if I were to make findings which were favourable to him.
10. However, I think it is fair to proceed on the assumption generally that he has told me the truth, and in general terms his attitude is and has been as he has described. I think one would have to give -- on an interlocutory basis, where there has been no cross-examination and, indeed, no detailed consideration of the facts -- the benefit of the doubt in favour of a litigant in person against whom an order for costs is being sought. Having said that, I have to approach the matter in a principled and fair way and not simply let my sympathy run away with me.
11. In my view it would be quite wrong not to make an order for costs against Mr Garratt. The only question is how much. It was made clear to him, at least from 20th January, (a) that nobody other than persons given such by the provisional liquidators had authority to act for the company; (b) that orders for costs could be sought against those acting, or purporting to act, for the company without such authority. It does not follow that he as a layman necessarily would have appreciated that he was at risk on costs. But I have to say that he ought to have done because he not only had lawyers acting for him at the time, although they withdrew from the case, but, as he himself has said, he plainly has had lawyers giving him informal advice -- I have no idea whether they have been paid or not; that is none of my business -- and indeed the excellent skeleton argument that he has provided for today has clearly -- as he very fairly accepts -- been prepared with legal advice.
12. While it is conceivable that he could have been completely unaware of the risk of costs up to the end of January, it seems to me that it would be wholly unfair on the claimants and on the provisional liquidators if I were to hold in those circumstances that he should be treated as somebody for whom an application for costs comes completely out of the blue. Unlikely as it seems to me, it may come out of the blue so far as he is concerned, or he may not have been aware of the possibility at the end of January, but I think, viewed from the claimants' and provisional liquidators' point of view, bearing in mind that they had raised the point on 20th January, that he was legally advised at that time and that he has continued to have access to legal advice since then, it would be quite wrong for me not to make an order for costs against him.
13. Additionally, since the end of January there have been applications for costs against him, references to his potential liability for costs during hearings in February and March in front of David Richards J, and indeed most recently in front of Laddie J, when an order for costs was made against him. In my judgment it would therefore be a denial of justice to the claimants and the provisional liquidators if I was not to make an order for costs against Mr Garratt.
14. The point is reinforced when one looks at his reason for abandoning the application for permission to appeal. In a witness statement made on 10th May, yesterday, he says this in paragraph 19:

"If the Appeal has been settled between the Petitioners and the [provisional liquidators] then it is only right to withdraw the Appeal."

He goes on to explain why, contrary to my conclusion, it is right to withdraw rather than dismiss the appeal, not a point he has maintained in argument but, even if he had, it would not have altered my view on that point. To my mind, the fact that any appeal had been settled was known to him quite plainly by 22nd February at the latest because he wrote a letter recording that fact. Indeed, in argument he does not deny that, although he denies having been told it by the claimants or the provisional liquidators. I have to say I find that a very surprising submission. It must have been implicit in a number of letters and other documents he received. But at any event he knew it by the end of January.

15. There is force in Mr Moss's submission that I should grasp the whole of the nettle I am offered -- if that is not a mixed metaphor -- and order Mr Garratt to pay the whole of the costs incurred by the claimants on this application of £16,775. But I think if I were to do that I would not be having regard to any of the mitigating circumstances on which Mr Garratt relies. I think the attitude taken by the provisional liquidators is the one which reflects the justice of the situation, namely that he should pay the costs from 28th January. That is a sensible date because it is the date on or around which in my view he knew that the appeal had been settled, the very ground upon which he now seeks at this very late stage to justify the withdrawal of the application. It is a date a little after the question of liability for costs in the 20th January letter had specifically been raised.
16. I have looked at the schedule. It is a bitter pill for Mr Garratt to swallow but, in light of what is involved in this case, I can see no good reason for reducing the figures. I have to bear in mind, as Mr Moss and Mr Tamlyn both rightly point out, that any shortfall in costs which their clients do not recover from Mr Garratt will have to be recovered from plainly innocent creditors of the company.
17. I also am impressed by the fact that Mr Garratt has spent some time today outlining complaints about the actions of the provisional liquidators which I suspect motivated him on maintaining this application and, whether right or wrong -- and I make no findings on that -- were wholly inappropriate for the purpose of justifying the application. That is another reason to my mind why it would be wrong not to make him pay a substantial part of the costs of the two other parties.
18. I therefore decided that the order this court should make is, first, that the application for permission to appeal is dismissed; secondly, that the claimants have their costs of this application paid by Mr Garratt in the sum of £9,947; thirdly, that the provisional liquidators have their costs of this application paid by Mr Garratt in the sum of £8,086. I am rounding off a few pennies in each case.

Order: application dismissed. The applicant to pay the costs of the claimants in the sum of £9,947. The applicant to pay the costs of the provisional liquidators in the sum of £8,086.