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 DIVISION
(MR GABRIEL MOSS QC)
[2007] EWHC 828 (Ch)

		Royal Courts of Justice Strand, London, WC2A 2LL
		15th November 2007

Lord Justice Lloyd:

1. The litigation between the parties before us was about rights to light, but this appeal is about costs. On 9 March 2007 Mr Gabriel Moss QC, sitting as a deputy judge of the Chancery Division, ordered the defendant to pay three-quarters of the claimant's costs of the claim up to 4 September 2006, and the whole of the claimant's costs after that date.

2. The defendant does not challenge the order in respect of the latter period, but submits that for the first of those two periods there should have been either no order for costs or an order for the defendant to pay no more than one-quarter of the claimant's costs. The significance of the date is that it was then that the judge gave his first judgment in the case. In that judgment he had to decide, in relation to each of four windows, whether the claimant had a right to light, whether the defendant's proposed development would create an actionable infringement of any right to light so established, and whether, if so, the appropriate remedy was an injunction, or rather damages.

3. He held (see Tamares (Vincent Square) Ltd v Fairpoint Properties (Vincent Square) Ltd [2006] EWHC 3589 (Ch)) that a right to light existed in respect to two windows (those to the basement staircase) but not to the other two (the entrance lobby windows). He held that there would be an actionable injury in respect of the basement staircase windows, and that there would not have been for the entrance lobby windows, even if a right to light had existed in relation to those windows. Lastly, he held that it was not a case for    an     injunction, but for damages in lieu in line with Shelfer v City of London Electric Lighting Company [1895] 1 Ch 287. In the course of his judgment, he said this at paragraph 32, which I quote because of reliance placed on it in the submissions to us:

"I must also emphasise that I have come down on the side of 'real injury' in the context of these two windows and on the basis of the rather artificial test I am required to apply: in the context of the entire building and the real world situation in which the stairs should probably, for safety reasons, be properly lit by electric light at all times, the complaint is a trivial one which one would expect reasonable people to settle without litigation."

4. The judge's second judgment given on 8 February 2007 (see [2007] EWHC 212 Ch) decided the amount of damages payable and fixed it at £50,000. An argument about costs followed, on which he gave his third reserved judgment, namely that under appeal (see [2007] EWHC 828 Ch, though I note that the text as currently made available to the public appears to be different from, and shorter than, the text provided to us, and perhaps incomplete).

5. In the course of that judgment, guided by CPR Rule 44.3(2)(a), the judge sought to identify the "winner" as regards costs for the period up to his first judgment. He held that although the claimant had failed to establish a right to light for two of the four windows, and had failed to obtain an injunction, which was its primary claim and would have been the most valuable to it, it was nevertheless the winner. The general rule being that the loser should pay the winner's costs, he then addressed the question of whether he should make a different order and if so, what it should be. He referred to a number of factors relevant to this at paragraphs 14 to 17 of his judgment, including the failure to obtain an injunction, the claim for which he considered to be unreasonable, and a number of offers under part 36 or by way of Calderbank offers.

6. He discounted the effect of a particular part 36 offer for the fact that the claimant only succeeded by virtue of oral evidence given by way of factual evidence, as much as anything else, by the claimant's only witness who was in fact a right to light expert, that particular evidence being given at trial and not foreshadowed in any expert report. He expressed his conclusion at paragraph 18 of his judgment as follows:

"Bearing in mind the above factors and, in particular, that the Claimant was the 'winner', that it had to bring and continue the litigation to its end in order to vindicate its rights, that the Part 36 and other offers were not accepted by the Defendant and that the eventual award of damages was not matched by any counter-offer, I consider that the Claimant must have most of its costs despite having lost most of the arguments and despite having pursued relief which it would have been oppressive to grant. However, in the light of the very special features in this case the Claimant should certainly not have all its costs and should not have any of them on the indemnity basis as sought by it. In particular, there needs to be an incentive on Claimants to moderate the relief that they seek when the facts show that the granting of such relief would be oppressive to the other side."

7. He applied this reasoning so as to discount the claimant's costs otherwise recoverable up to the date of the first judgment by 25 percent.

8. The defendant's appeal, brought by permission granted (as it happens) by myself on the papers, challenges the judge's identification of the claimant as the winner. It is said that the judge could not properly disregard the defendant's success (a) as regards to the entrance lobby windows altogether and (b) as regards to the other windows, in defeating a claim to an injunction. It is said that the judge should have borne in mind the trivial nature of the infringement established. Either the winner should have been identified separately in relation to each of the three issues, which would lead to a view of the case as being a kind of draw, or the claimant should not have been found to be the overall winner. Whether that leads to the conclusion that the defendant is the winner seems improbable, but I suppose it might be said there was no overall winner.

9. Miss Harrison for the defendant, appellant in this court, submitted that the judge's approach to identifying the winner was in error because he treated the case as being all about money, despite the fact that the principal claim was to an injunction and not to money at all. Further, she says that if the claimant had shown any open interest in money at that stage of the litigation, the claim to an injunction would have fallen to the ground at once. In practice, no doubt, the claimant was really interested in money, and the value of an injunction would have been in strengthening its hand hugely, but this could not be admitted openly.

10. The judge referred to the various offers that had been made, some of them under part 36, without giving detail. We have been shown the sequence of offers, which is as follows up to 4 September. Starting on 2 June 2006, some 6 or 7 weeks before the trial, after all disclosure had taken place and the expert reports had been exchanged, and with an issue of security for costs outstanding, the defendant made a Calderbank offer, expressing itself willing to accept payment of its costs less £5,000. Three weeks later, on 23 June, 4 weeks before the trial, the claimant made what is expressed as a part 36 offer to accept £50,000 inclusive of interest and its costs. On 11 July, the defendant improved its Calderbank offer to one under which there would be no order for costs, and it would pay the claimant £10,000. On the following day the claimant reduced its Part 36 offer so as to be willing to accept £25,000 and its costs. On 14 July, the defendant improved its offer to one under which it would pay £50,000, including costs. The defendant did not make any offer which the claimant failed to beat in monetary terms, unless, in respect of the 14 July offer, the claimant ought to get no costs at all up to that date.

11. The claimant's offers did not strictly comply with Part 36 in respect of costs, but the discrepancy was rightly regarded by the judge as immaterial. If the judge suspected on 4 September that the claimant's interest in an injunction was not for its own sake, but to reinforce with an unbeatable trump card its negotiations vis-a-vis the defendant, that would have been confirmed after the event, once he knew, as he did by the time he came to the judgment on costs, of the claimant's offers pre-dating the trial on liability.

12. An order for costs is a paradigm case where the judge making the order has a discretion as to what order should be made and where accordingly an appellate court is limited as to the circumstances in which it can set aside the judge's order. One of the classic statements of the position is that of Stuart-Smith LJ in Roache v News Group Newspapers Ltd [1998] EMLR 161, page 172 as follows:

"This being an appeal on costs with the leave of the judge, the ordinary rules as to review of the judge's discretion apply. The court must not be tempted to interfere with the judge's order merely because we would have exercised the discretion differently from the way in which the judge did. Before the court can interfere it must be shown that the judge has either erred in principle in his approach, or has left out of account, or taken into account, some feature that he should, or should not, have considered, or that his decision is wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale."

13. The position has not changed in that respect since the introduction of the Civil Procedure Rules, although, when considering what order to make with regard to costs, those rules provide judges with more guidance and more flexibility than had the rules of the Supreme Court.

14. To broadly similar effect to those words of Stuart-Smith LJ is a passage in the judgment of Chadwick LJ in Summit Property Limited v Pitmans (a firm) [2002] 2 CPLR 97 (26) at page 109 of the report, as follows:

"The first question for this court is not whether it would have made the order which the judge made. The first question is whether this court is satisfied that the basis upon which the judge reached the conclusion that he did has been shown to be flawed. It is only if that question is answered in the affirmative that this court can properly interfere with the exercise of the judge's discretion entrusted to him. It is only then that this court will go on to consider what order it will make in the exercise of its own discretion."

15. In the present case, the judge relied on a passage of Longmore LJ in A L Barnes v Time talk UK Limited [2003] EWCA Civ 402. The passage as quoted includes these words:

"In what may be generally called commercial litigation … the disputes are ultimately about money. In deciding who is the successful party the most important thing is to identify the party who is to pay money to the other. That is the surest indication of success and failure."

16. Miss Harrison criticises the judge on this because Longmore LJ spoke expressly in relation to commercial litigation as the instance where the dispute is ultimately about money. She submits that with a serious, even if unreasonable, claim for specific relief such as an injunction, (specific performance could be another) the dispute is not, while that claim is live, correctly described as about money. She also points out correctly that since the introduction of the Civil Procedure Rules the courts are more open and more ready to make an order which reflects success or otherwise on separate issues, though not usually by an order directly related to the costs attributable to the various discrete issues: see Lord Woolf, MR in AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507 at 1523.

17. Miss Harrison cannot argue that the judge failed to consider any relevant point. In considering which party should be regarded as the winner, he recited fairly the defendant's contentions, and he referred later in his judgment, particularly at paragraph 14(3), to the unreasonable conduct of the claimant in pressing for an injunction. In paragraph 14(4) he referred to the option for the claimant to drop its claim for the injunction, especially on seeing the defendant's evidence. He also referred to the claim for the injunction being fundamental to the conduct of the litigation. The judge took into account the history of the various offers, which are undoubtedly relevant, even though not determinative, even to the extent that a part 36 offer can be.

18. Miss Harrison submits that the consequence of the claimant not dropping its claim to an injunction was more substantial than might at first appear. Not only would the first trial have taken less time, but a split trial would probably not have taken place at all, so there would only have been a single hearing on the matters of substance of one or two days, instead of two hearings, one of four and the other of two days. The judge accepted that this course would have made the trial considerably shorter and cheaper. He did not deal with the matter in any further detail, but it seems to me that he cannot be said to have misdirected himself in any respect on that score.

19. The claim for an injunction is a feature which distinguishes this case from others where only monetary relief is at issue. However, it seems to me that it may be legitimate to draw a distinction between cases where the injunction or other specific remedy really is sought for its own sake: for example, if the claimant is a private purchaser seeking specific performance of a contract to buy a house that he wants to live in, or seeking an injunction to prevent the blocking up of windows to a living room, which would be significantly affected, on the one hand; and on the other hand, cases where it is in truth a commercial issue capable ultimately of being expressed either way in monetary terms.

20. At any rate, it seems to me that the judge was not manifestly wrong to treat the present case as in the category of commercial litigation, even though it included a claim for specific relief. The parties are the owners of two adjoining commercial property sites. The claimant has an office building which was not in current use at the date of the trial, and the defendant has a development site. Each is interested in its site for the economic return that it can provide. Clearly, that can be affected by factors such as amenities to which rights of light, like other easements, may be relevant, but it does not seem to me that in this case the judge can be described as misdirecting himself by applying to the case principles relevant to commercial litigation. That might not be true of all cases where an injunction or other specific remedy is sought.

21. On the test as to who was the successful party, the judge also referred to the case of Day v Day [2006] EWCA Civ 415, and to the judgment of Ward LJ, who enunciated the simple test of who has to write the cheque at the end of the case. That was in paragraph 17 of Ward LJ's judgment. In the previous paragraph, he had cited from a judgment of Lightman J in BCCI v Ali (No 3) [1999] IRLR 508, where that judge said this:

"For the purposes of the CPR, success is not a technical term, but a result in real life and the question as to who has succeeded is a matter for the exercise of common sense."

22. We were also shown the judgment of the Court of Appeal in The Kastor Too, (Kastor Navigation Co Ltd v AGF MAT) [2004] EWCA Civ 277, [2004] 2 Lloyd's Rep 119, where at paragraph 143, construing CPR Rule 44.3(2)(a), Rix LJ said the rule must mean the party successful in the litigation, rather than the party successful on any particular issue within the litigation.

23. As I have said, the extent of the discretion afforded to the court under the CPR as regards costs is such that the court can, if it thinks it appropriate, adopt an issue-based approach. In The Kastor Too the judge had done so, and the Court of Appeal did not disapprove of that as such, although it did hold that the particular result arrived at by the judge, under which the successful claimant had to pay 70 percent of the defendant's costs, was wrong and it substituted no order for costs. Summit, to which I have referred, was also an example of an issue-based order producing an apparently striking result, but which the Court of Appeal upheld.

24. Miss Harrison accepts that the judge referred to all that was relevant to his discretion and did not refer to or rely on anything not legally relevant. She submitted that he misdirected himself, not in asking who was the successful party, but in applying Barnes v Time Talk and Day v Day so as to conclude that the claimant had to be regarded as the successful party because the defendant had to pay £50,000 and interest at the end of the day. I have dealt with that argument to some extent already.

25. Alternatively, she submitted, the result, even though reached after asking the right questions and considering all, and only, relevant matters, was plainly wrong and showed that the 75 percent order cannot be based on a fair balancing of the relevant factors. In support of that, she relied on what the judge had said about the defendant's attitude to the claimant's part 36 offer made before the trial, at paragraph 17 of his judgment, as follows:

"The defendant at no time accepted this offer or ever itself made an offer which came to being really close to it. Whilst I am obliged to take account of the Part 36 offer and the other offers, the defendant does have the benefit of the special mitigating features mentioned above in refusing to take the Part 36 offer. At the time of the Part 36 offer the defendant could feel reasonably confident that it was going to succeed on all points on the evidence that was available. Moreover, even if it had felt some risk in relation to the windows illuminating the basement stairs, it could justifiably have felt that paying 100% of the costs of the proceedings, which would have related mostly or at least very largely to other issues, would have been excessive. In these circumstances I feel I should give the Part 36 offer less weight than would normally be the case. "

26. Of course, if the defendant had not been reasonable in refusing the Part 36 offer, the consequence could well have been that it would have had to have paid all of the claimant's costs up to the date of the offer. I do not see that the judge can be criticised for the way that he dealt with the Part 36 offer, or what he said about it. Indeed, Miss Harrison does not seek to do so. She says that the view there expressed, as to the defendant's likely attitude to the offer, made shortly before trial, and to having to pay all of the claimant's costs, is incompatible with regarding 25 percent to be a sufficient discount off the claimant's costs to reflect the points on which it did not succeed. She said that to award the claimant 75 percent is equivalent in broad terms to awarding the claimant seven-eighths and the defendant one-eighth of the costs up to that stage. That, she submitted, would plainly be insufficient to reflect the respective success and failure as at 4 September 2006.

27. Mr Wonnacott, for the respondent, showed us that the judge had had some information to the costs incurred at the time that he had to decide the costs. This information, derived from the application for security for costs, showed that the defendant had incurred some £77,000 worth of costs up to 23 April 2006, and that it then anticipated incurring a further £75,000 in costs. We were told that in the event the defendant incurred £165,500 worth of costs up to 4 September, so it turned out to be rather more than had been anticipated.

28. Mr Wonnacott based a submission on the premise that, in broad terms, the pattern of incurring the claimant's costs was likely to have been similar, so that about half of the claimant's costs of the period up to trial would have been incurred by late April 2006, which was the stage as from which the judge considered it reasonable for the claimant to pursue its claim to an injunction. On that footing he submitted that the judge's order could be seen as disallowing one-half of the claimant's costs incurred after that date, and that that was certainly not a plainly unreasonable approach. The judge did not mention this feature in the course of his judgment, but he was no doubt aware of it from the submissions made to him. More generally, he was aware of the course of the litigation, which he had tried in the circumstances that I have mentioned, giving him, as the cases recognise, an important advantage over any appellate court.

29. If the judge had expressed his reasoning for a 25% discount on that basis alone, he might have been open to criticism for allowing for the respect in which the claimant's conduct of the claim was unreasonable, but not for the other factors, including that the injunction claim, even though at one stage not unreasonably asserted, was unsuccessful.

30. It seems to me, looking at the case as a whole, that the task facing the judge as regards to costs up to 4 September 2006 was by no means straightforward. There was quite a wide range of orders as to the costs of that hearing that could have been reached by the proper application of the law to the relevant facts.

31. For my part, while the position might be otherwise in a different case in which a claim to an injunction or other specific remedy is sought, I do not regard the judge as having misdirected himself by treating this dispute as commercial litigation, ultimately about money, to which the observations in Time Talk v Barnes and Day v Day were relevant. In that I bear in mind in particular the fact that the defendant could at any stage have protected itself in full as regards costs for the future by paying £50,000 into court.

32. As I have said, the judge asked himself the right questions and in answering them took account of all that was put to him as relevant and nothing that could be said to have been irrelevant. Accordingly, the defendant can only succeed, in my judgment, by showing that the decision is wholly wrong, or perverse, and has therefore to be understood as having been based on an unfair balancing of the various factors.

33. As I said, the task of the judge in balancing those factors in the particular circumstances in this case, and perhaps particularly so looking back as he had to, was by no means an easy one. It was one that a different judge might have undertaken with a different result. With the benefit of the able submissions both in writing and orally from both counsel, while I have no second thoughts about having granted permission to appeal, I have come to the conclusion that in the course of his clear and carefully considered judgment, the judge did have proper regard for, and balanced in a legitimate manner, all the relevant factors. His judgment therefore seems to me to provide a proper basis for the conclusion to which he came, discounting the claimant's costs at the first stage of 25 percent. Accordingly I would dismiss this appeal.

Lord Justice Rix

34. I agree. I merely observe that in theory judges may make an error in binding themselves into the straitjacket of adopting too rigorously either a winner takes all (or nearly all) approach on the one hand, or too mathematical an issue by issue approach on the other hand (see for instance The Kastor Too at paragraphs 149 and 153). After all, the Civil Procedure Rules by Part 44.3 clearly indicate that judges should be ready to take a flexible approach to the question of costs, for after providing in sub-rule 3(2) concerning the general rule that the unsuccessful party will be ordered to pay the costs of the successful party, it goes on to provide in sub-rule 3(4) that in deciding what order, if any, to make about costs: "The court must have regard to all the circumstances" which it then proceeds to list or illustrate.

35. In the present case, however, in his careful judgment, the judge took account of all factors which he should have taken into account, and it is not suggested he did otherwise, and in his paragraph 18, expressing his conclusion which my Lord has cited, he balanced all those factors in arriving at his resulting order. In those circumstances, I agree that this appeal must be dismissed.

The Chancellor of the High Court:

36. I also agree that this appeal must be dismissed, for the reasons given by both of my Lords.

Order: Appeal dismissed