England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)

		Royal Courts of Justice Strand, London, WC2A 2LL
		10/06/2009

LORD JUSTICE ELIAS :

1. Mr Blackmore, the respondent to this appeal, successfully obtained relief under section 459 of the Companies Act 1985 following a fifteen day trial before His Honour Wyn Williams (as he then was). By an order dated 24 March 2005 the judge awarded costs in his favour and ordered an interim payment on account of costs in the sum of £100,000.00. The appellants are two of the defendants named in the costs order; there are two other defendants, with whom we are not directly concerned, who are also subject to that order.
2. Subsequently, some twenty nine months after the order by HH Judge Wyn Williams had been made, Mr Blackmore served a bill of costs which amounted to almost £500,000.00. This was higher than the estimate which had been placed before His Honour Judge Wyn Williams. At that stage the costs had been estimated at £382,000.00., The appellants failed to serve points of dispute within the appropriate time as required by CPR 47.9 and Mr Blackmore obtained a default costs' certificate. That certificate was set aside by District Judge Carson on 11 January 2008. He directed service of points of dispute.
3. Mr Blackmore requested a further payment on account of costs and indeed contended that making such a payment ought to be a condition of discharging the costs' certificate. The application was made under CPR 44.3(8) which simply provides that where an order for costs has been made, the court may order an amount to be paid on account pending detailed assessment. Applications for a further payment on account of costs can also be made under CPR 47.15 which provides that after the receiving party has filed a request for a detailed assessment, the court may issue an interim costs certificate in such sum as it thinks appropriate. That provision was not applicable because no request had been filed, but it was conceded that in practice the District Judge had virtually the same material before him as he would have had if such an application had been made.
4. That application for a further payment on account was adjourned until 22 April 2008 when the costs judge, District Judge Carson, declined to make the Order sought. This was notwithstanding the fact that he did by then have the detailed bill of costs and the points of dispute before him. His decision was appealed to His Honour Graham Jones. He gave judgment on 5 September 2008, in which he upheld the appeal. He remitted the matter back to District Judge Carson to make a further interim payment on account of costs in favour of Mr Blackmore, provided that the judge was satisfied that he could be reasonably certain that the sums he ordered would ultimately be payable by way of costs to Mr Blackmore.
5. The appellants now challenge that Order. They submit that His Honour Graham Jones erred in law in a number of respects in his judgment and was not entitled to interfere with the District Judge's decision.
6. Permission to appeal was granted by Lord Justice Dyson, notwithstanding that it was a second appeal. He considered a point of principle was involved.

The authorities.

7. Two cases have figured significantly in the appeal. They are Mars (UK) Ltd v Technology Ltd [2000] FSR Volume 27, page 138, a decision of Mr Justice Jacob (as he then was), and Dyson v Hoover [2000] EWAC 624 a decision of Laddie J. In the Mars case Jacob J was considering the situation where the judge who had conducted the trial and had awarded costs was considering an application for a payment on account. The judge said this :

"I now turn to the second issue, whether or not there should be an order for interim payment. The first thing to do is to consider what the general rule should be, interim payment or not. There is no guidance given in the rules other than that the Court may order a payment on account. There is no guidance in the Practice Direction. So I approach the matter as a question of principle. Where a party has won and has got an order for costs, the only reason that he does not get the money straightaway is because of the need for a detailed assessment. Nobody knows how much it should be. If the detailed assessment were carried out instantly, he would get the order instantly. So the successful party is entitled to the money. In principle, he ought to get it as soon as possible. It does not seem to me to be a good reason for keeping him out of some of his costs that you need time to work out the total amount. A payment of some lesser amount which he will almost certainly collect is a closer approximation to justice. So I hold that where a party is successful, the Court should, on a rough and ready basis, also normally order an amount to be paid on account; the amount being a lesser sum than the likely full amount."

8. Jacob J pointed out that there were significant practical advantages in ordering a payment. It will tend to discourage the paying party from seeking to drag out the assessment, and will minimise the amount still in dispute, thereby encouraging a settlement. He went on to emphasise, however, that although he started from the proposition that a payment on account should be made, the court has a discretion and it has to be exercised in the light of all the particular circumstances. He gave as examples of relevant factors to be considered the need to act justly in accordance with the overriding objective, the relative wealth of the parties, and the likelihood of a possibly successful appeal.
9. In Dyson Mr Justice Laddie distinguished the approach adopted by Mr Justice Jacob in the circumstances before him. Jacob J had been dealing with an application for an interim order when made to the judge who has heard the full trial. By contrast, Mr Justice Laddie was concerned with an application for interim payment in relation to a trial over which he had not presided. His Lordship was of the view that in those circumstances there was no presumption at all, either for making an interim order or for not doing so. He said this (paras 30-31). :

"…It seems to me that in this type of case CPR 44.3(8) should be taken simply at face value. There is no presumption that an order for interim payment should be made. On the other hand, I do not accept the suggestion I think inherent in Mr Purvis's argument there is a presumption against ordering such an interim payment because of the interest provisions, to which I have already referred. It seems to me that the interest provisions are merely factors which the Court can take into account in deciding whether, in the particular circumstances, the proper exercise of the discretion should be in favour of making an order.

'It seems to me that the Court should simply consider an application for an order for interim payment on its own merits. Because the receiving party is asking the Court to exercise the discretion in its favour, it will need to justify the Court doing so, but save in this respect I do not think that there is any particular norm which applies. So what should the Court do when faced with an application like this? What are the factors that it should take into account? Once again, I think it is useful to go back to what was said in Mars.'"

10. Laddie J did, however, also distinguish his situation from that of a costs judge asked to order an interim certificate under CPR 47.15. The costs' judge would typically have a significant amount of information available to him and would, like the trial judge, be in a position to make an informed and reliable decision. Therefore the approach adumbrated in Mars should apply in such a case.
11. It is pertinent to note that in the Dyson case Laddie J decided not to make any award on account because he thought that he was ill equipped to do so - "it would look more like playing roulette, than making an informed and reasoned assessment" was how he put it - and because any relatively small sum which he might feel confident enough to order would not have the practical advantages of discouraging delay and encouraging settlement.

The hearing before District Judge Carson.

12. District Judge Carson noted that His Honour Judge Wyn Williams, when making the original order on account for a payment of costs, was fully cognisant of the relevant facts since he had been the trial judge. By contrast, the judge had very limited understanding of the issues in the case. He referred to the Dyson case which he treated as establishing that there was neither a presumption in favour of making an interim payment, nor a presumption against it. All the circumstances had to be considered in determining whether the discretion should be exercised.
13. The judge then identified certain factors which he weighed in the balance when determining whether or not to make an order. He noted that the claimant was not in such a difficult financial position as would point in favour of making a payment on account; that the defendants would ultimately be able to meet any payment, together with interest, which a court was likely to make; that there was plainly a genuine dispute of substance as to the appropriate costs that should be awarded; that there had been a delay of some two years before the claimant had commenced the detailed assessment proceedings; and significantly, and particularly importantly, that the judge who he considered was in the better position to determine the appropriate order, had already fixed the appropriate sum at £100,000.00.

The appeal before His Honour Graham Jones.

14. The judge analysed the two cases of Mars and Dyson. He eschewed any resort to presumptions, and interpreted Dyson as a case where on the facts the judge felt unable to make an assessment because of lack of knowledge of the case and the paucity of the information available to him. Here the district judge had detailed information. In these circumstances HH Graham Jones considered that the proper approach should be as follows:

"…There is an order for costs in favour of the claimant in this case. He is entitled to the fruits of that order for costs. I cannot identify what the amount will be until there has been a detailed assessment but is there some amount which he will almost certainly collect? If I think that there is such amount, then I should order that amount. I can only do it at present on a rough and ready basis. But if the situation before me is such that I can make the assessment, on a rough and ready basis, of an amount which the claimant (the appellant in the case before me) will almost certainly collect, then I should do it."

15. He considered that District Judge Carson had not approached the matter in that way and had placed too much emphasis on the fact that His Honour Judge Wyn Williams had already ordered a payment on account. HH Graham Jones pointed out that the situation had changed since the judge had made his ruling. For example, the judge had indicated that there might be an appeal, and in fact there was an unsuccessful appeal. Also, the district judge had before him a detailed bill of costs and a statement in support of the costs, as well as points of dispute.
16. His Honour Graham Jones considered that in the circumstances it was necessary for the District Judge to ask himself whether there was any sum in excess of the £100,000.00 which he felt it was almost certain would be awarded ultimately by way of costs to Mr Blackmore. If so, then the judge should have made an order in that sum. Since he was not able to make a determination of that question, he sent the matter back for the district judge to ask himself that question in the light of all the material.

Grounds of appeal.

17. The principle ground of appeal is that His Honour Graham Jones' analysis requires in effect asking only one question. It obliges the court simply to determine what sum it considers would almost certainly be awarded by way of costs and, provided the court considers that it can properly identify such a sum, to order payment of that sum.
18. Mr Friston, counsel for the appellants, submits that this is too narrow an approach. There may be very good reasons why no order should be made even where the court considers that it is almost certain that some additional sum will be paid. For example, it may be that the assessment hearing will be heard in the very near future and it is not then in accordance with the overriding objecting to incur the additional costs of an application of this nature.
19. Furthermore, the district judge will frequently not be in a position to make a realistic assessment. He is not in the same position as a costs' judge in the midst of a detailed assessment hearing, and he has not had the benefit of hearing the case, as has the trial judge. To that extent, any presumption which might sensibly be applied when the trial judge is determining whether to make an interim order may be quite inappropriate when applied to an application made to the district judge. The fact that the judge might find that it is extremely difficult to predict with any certainty what costs will be recoverable is itself a reason for not laying down any clear presumption that a top up payment should be made.
20. This consideration is reinforced where, as here, there is a significant delay in making the application for detailed assessment. Further events in the litigation may affect the overall balance of costs.
21. Mr Blackwood, counsel for Mr Blackmore contends that the approach of His Honour Graham Jones was plainly appropriate. It is wrong to characterise his approach as adopting a one-stage test: on the contrary, he emphasised that the first issue is to consider whether or not the judge can determine with reasonable certainty that the party will, in fact, recover an amount which exceeds the sum ordered by the judge at the trial. That of itself requires the judge to have regard to a range of factors. This is a sensible approach since it is quite unjustified that the delay in the determination of costs following a detailed assessment should deprive a party of the benefit of the costs order. Only once that issue is determined does the second issue of quantum come into play.
22. The same test should be adopted in every case, whichever court is considering the question of costs. It is the approach identified by Jacob J in Mars, and the judgment of HH Graham Jones was consistent with that. Of course a court may feel that it simply cannot with confidence make any order at all, which was the position facing Laddie J in the Dyson case. That does not, however, affect the basic principle that in the normal way a payment should be made if the judge is reasonably certain that a further sum will have to be paid following a detailed assessment.

Discussion.

23. I agree with Jacob J that in determining whether or not to make an order on account under CPR 44.3(8) or, I would add, an interim costs order under CPR 47.15, it is an important consideration that a party should not be kept out of the moneys which will almost certainly be demonstrated to be due longer than is necessary. I would certainly not, however, give this the status of a presumption and nor did Jacob J. It is simply a factor which one would expect, in the normal way, to carry significant weight with a judge. It will, however, have to be considered along with all the other material factors, and they will vary from case to case. There is a wide discretion afforded by both CPR 44(3)(8) and CPR 47.15 to be exercised in the circumstances of the particular case, and all material factors have to be weighed in the balance. These will include those identified by Jacob J in the Mars case.
24. Even assuming that the judge considers that he could with some certainty fix an appropriate sum - and the scope for that is plainly going to be more limited where there is already a substantial sum on account ordered by the trial judge - there may still be good reason why the judge thinks it inappropriate to anticipate the outcome of the detailed assessment. For example, pursuing the interim application itself involves the parties incurring further costs which the court may think was not justified, particularly if a detailed assessment is shortly anticipated or any additional sum ordered is likely to be relatively small.
25. In addition, the delay in making application for detailed assessment is, in my view, a proper consideration for the judge to take into account. There is always some risk that even the judge's conservative assessment may turn out to be wrong, and the fact that the successful party has not been actively pursuing matters is a proper factor to which the judge can give weight. This is particularly so where, as in this case, the court is satisfied that the paying party will ultimately be good for any sums, together with interest, which are likely to be awarded. The receiving party is not then significantly prejudiced by the delay in payment.
26. Accordingly, I do not think that the principle expressed by HH Graham Jones was correct. Although he denied that he was applying a presumption, I respectfully think that this was the effect of his analysis. Indeed, his approach comes close to identifying a single test applicable in all circumstances. I do not, therefore, accept that District Judge Carson erred for the reasons given by the Circuit judge.
27. The question we still need to ask, however, is whether District Judge Carson erred in his approach. In my judgment he did not. He was right to say that he should not start off with a presumption one way or the other. It is true that he did so, on the assumption that he should adopt the approach of Laddie J in Dyson, rather than follow the guidance of Jacob J in Mars, whereas Laddie J had made it clear that a costs judge with relevant costs information was in essentially the same position as the trial judge. Nevertheless, he was right not to adopt any presumption. I also recognise that he did not in terms refer, even as a factor to be weighed in the balance, to the fact that it may be desirable for the judge to make an award if he is reasonably certain that an additional sum will be paid.
28. However, reading his judgment as a whole, it is plain that he felt uneasy about fixing any further sum because he was not confident what, if any, additional sums should be paid. He did not have the detailed feel for the case that HH Wyn Williams would have acquired, and although he did have more detailed information about how the costs had been incurred, there was a substantial dispute about the bill of costs. I would add that in addition the appellants had been awarded indemnity costs in the litigation with respect to one aspect of the case, and it was far from clear what impact a set-off of that amount might have on order in favour of Mr Blackmore. He was satisfied that the defendants would be good for any costs award made in due course and that Mr Blackmore would not suffer any real prejudice resulting from any delay in payment. He also had regard to the significant delay in pursuing a detailed assessment.
29. In my judgment, the district judge gave such weight as he thought appropriate to these matters and concluded that it would be inappropriate to make any further interim order. This was a sustainable decision which identified no error of law.
30. I recognise of course that other costs judges may have come to a different view and may have ordered a further interim payment. That is merely to state that the judge was exercising a discretion and like all discretions, it may be exercised in different ways without any decision involving an error of law.
31. I should add that nothing in this judgment is intended in any way to discourage costs judges from making interim payments. On the contrary, in an appropriate case it is to be encouraged not least for the practical benefits it provides, as identified by Jacob J in the Mars case. But ultimately the discretion afforded to the judge is a wide one, and cannot readily be challenged on appeal.

Disposal

32. I consider that the appeal should be allowed on the basis that the district judge did not err in law and came to a conclusion that he was entitled to reach on the material before him.