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Cite as: [2008] EWCA Civ 1626

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		Neutral Citation Number: [2008] EWCA Civ 1626
		Case No: CHY06098

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
His Honour Judge Levy QC
Case No: CHY06098

Royal Courts of Justice
Strand, London, WC2A 2LL

11/12/2008

B e f o r e :

LORD JUSTICE RIX
LORD JUSTICE WILSON
And
LORD JUSTICE RIMER
____________________

Between:

	DR ALICK CYRIL ELITHORN	Appellant
	- and -
	(1) ALAN GRAHAM POULTER (2) ANTHONY CHRISTOPHER ETTLINGER (3) MICHAEL DAVID SMITH	Respondent

____________________

(DAR transcript of WordWave International Limited
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____________________

The Appellant, Dr Elithorn, appeared in person
Miss Caroline Hutton (instructed by Manches LLP ) appeared for the Respondents
Hearing date: 15 July 2008
____________________

HTML VERSION OF JUDGMENT
____________________

Lord Justice Rix:

This is the judgment of the court. We have heard detailed submissions on costs from both Miss Hutton, on behalf of the respondents, and Dr Elithorn, on his own behalf. The position is certainly a complicated one because, although Dr Elithorn has in the event succeeded in overturning the judgment at trial below and in vindicating to himself a 50% beneficial interest in the property, the litigation has taken a very serpentine route.

In particular, Miss Hutton relies upon an offer made before trial to Dr Elithorn, made on 22 September 2006, some two weeks before the trial, which began on 2 October 2006, to this essential effect: that, on an assumed valuation of £500,000 for the property with vacant possession, and taking account of a loan to Dr Elithorn -- although disputed in the litigation, taken at that time at £117,500 -- the offer was that, going forward, the property would be agreed to be owned beneficially as to 75% by the executors and as to 25% as to Dr Elithorn. Very approximately, that offer was, on the premise of Dr Elithorn's 50% interest in a property assumed to be worth £500,000, the repayment of the loan to him of £117,500 would leave him with a beneficial interest in 25% of such a property.

Dr Elithorn's counter-offer, six days later on 28 September 2005, was very different. It was that, first of all, from the assumed value of the property should be deducted his loan of £125,000, and then the remaining value of the house should be split as to three-quarters to the benefit of Dr Elithorn and one-quarter to the benefit of the executors.

We consider that that was not a proper engagement with the offer that was made and was unreasonable in the circumstances. It reflected Dr Elithorn's sometime submissions that, although he was entitled to at least a 50% beneficial interest, there were arguments for saying that he was entitled to a 100% beneficial interest. We set those arguments at nought and consider them to have been unreasonably advanced, and we therefore consider that Dr Elithorn had not engaged properly with what was a reasonable offer. We say "a reasonable offer" but it was nevertheless subject to two difficulties if Miss Hutton was to found on it a winning argument that thereafter -- and for the purposes of the trial which then ensued -- the executives should win their costs despite the decision of this court against them.

The two difficulties were first of all that the offer was premised upon a valuation of £500,000. We have no evidence other than the assertion that a desk valuation of some kind of £500,000 was taken. That is Miss Hutton's first difficulty. Her second difficulty is that it assumes that the loan, which for the purposes of this offer it was assumed that Dr Elithorn had been given, was repayable on demand. It was only if the loan was repayable on demand that the executors could reasonably request, as a fair settlement, that, going forward, they should have not half but three-quarters of the equity in the house.

Therefore there is something to be said for this offer as being a reasonable offer, but it cannot be said to amount to a clear improvement on or even to the matching of this court's judgment in the outcome of this litigation; but, on the other hand, we feel that Dr Elithorn did not engage reasonably and properly with what was a fair first stab at a settlement. It may be that if Dr Elithorn had made a reasonable response and the parties had engaged on a negotiation, then the whole of this litigation thereafter would have been unnecessary. We could wish that that was so. We express our regret that the parties have not been able to avoid both unnecessary expenditure in the conduct of this litigation and also, as it has turned out, the continuation of their dispute into a time when the property market is much more difficult than it once was. That was the risk that they were undertaking by failing to settle their dispute.

Coming forward to this appeal, there was a further offer or series of offers from the executors to Dr Elithorn, based essentially upon the logic of the offer before trial. I should have pointed out, both for the purposes of the offer before trial and for the purpose of its repetition in its essential logic at a time between trial and appeal, that it was also offered to Dr Elithorn that he should remain in possession of the property until death unless he wished to vacate it earlier. But the difficulty for Miss Hutton, in respect of the repetition of the essentials of that offer before appeal was that, as one of the terms of that offer, the executors wanted a payment on account of costs.

The offers came forward in various forms and the term as to costs came forward in various forms: sometimes it was a request in respect of the investigation of Dr Elithorn's claim, in a figure as low as £25,000; sometimes it was a discounted figure of £75,000 or even, I think, speaking from memory, £60,000 in respect of the costs down to and including trial; at other times a total figure to reflect the executors' costs of £94,000 was mentioned. But, whichever was the figure under discussion at any particular moment, some reflection of the executors' costs was demanded in their offers to Dr Elithorn as a price of settling this litigation. In that respect, at any rate, it is clear that those offers did not match the outcome of our decision on appeal.

It also has to be said that on this occasion Dr Elithorn did engage more constructively with the executors in response to their offer. It is clear in the documentation put before us that there was real engagement: meetings between the parties as well as correspondence in which, essentially, the parties were agreed on the basic package: namely that going forward there would be, on this occasion, a split in beneficial interest of 50% and, starting from there, an allowance having to be made for the repayment of the loan and a licence to Dr Elithorn to remain in the property for the rest of his life.

We have to take account of all these matters for the purposes of coming to some fair allocation of the costs in this case. That is indeed a difficult matter because in some respects the issues between the parties have not yet been litigated to conclusion. For instance there is no decision as to the terms of the loan and as to when it was repayable. We hope that it will not be necessary to litigate those matters in future. But certainly one of the difficulties for us is that those issues have not been resolved. Indeed they have not been argued before us.

Doing the best we can with the facts that we have mentioned and the fact that, on the one hand, there are the understandably significant costs incurred by the executors who have instructed solicitors and counsel to assist them in their litigation and, on the other, there are the very much more modest costs of Dr Elithorn as a litigant in person -- even if he has instructed counsel through solicitors to assist him at any rate in the drafting of grounds of appeal, for which he is entitled to be grateful -- the fairest balance that we think we can achieve is to say that there should be no order for costs overall. Essentially we arrive at that decision by considering that, on the one hand, the reasonableness of the offer made to Dr Elithorn and the unreasonableness of his response to that offer and his lack of engagement with it should be reflected, to some degree, in some allowance in costs in favour of the executors at any rate over the period of trial -- not of course before the offer was made -- and, on the other hand, we have taken into account that Dr Elithorn should be compensated for his personal costs, in which respect we understand that he must have spent many hundreds of hours in preparation of a difficult case.

The fairest outcome is to say that there should be no order for costs here or below. That also reflects our view that, other things being equal, Dr Elithorn would have been entitled to his costs on appeal.