England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM EXETER COUNTY COURT
(Mr. Recorder Hollington Q.C.)
8EX00567

		Royal Courts of Justice Strand, London, WC2A 2LL
		19 April 2011

Lord Justice Moore-Bick :

1. This appeal concerns the meaning and effect of an agreement to compromise a dispute relating to two parcels of agricultural land known as Higher Gooseford and Kings Meadow, together with some associated buildings, situated near Okehampton in Devon. In February 2008 the appellant, acting as her mother's personal representative, brought proceedings in the Exeter County Court to recover possession of the land from the defendants, who claimed a right to occupy it under an agricultural tenancy. For convenience I shall continue to refer to the appellant as "the claimant" and the respondents as "the defendants".
2. In her particulars of claim the claimant sought possession of the land and buildings, an injunction to restrain the first defendant from abstracting water from the springs in Kings Meadow and damages for use and occupation of the land and buildings. Near the buildings there is a farmhouse, but that was not occupied by the defendants and so did not form part of the claim for possession. There was nothing in the body of the particulars of claim or in the prayer to suggest that the claimant had suffered any loss in relation to the farmhouse as a result of the defendants' occupation of the land and buildings.
3. The trial of the action was fixed for 23^rd February 2009. On 19^th December 2008 the claimant's solicitors, Burges Salmon LLP, wrote to the defendants' solicitors, Clarke Willmott, informing them that they intended to instruct a rural surveyor to quantify the mesne profits claimed in respect of the defendants' use and occupation of the land. They also indicated that they intended to consult an handwriting expert in relation to a dispute over the authenticity of certain documents on which the defendants relied. That was followed on 13^th January 2009 by a letter inviting Clarke Willmott to agree to an order for directions which included permission to call both a rural surveyor and a handwriting expert. Clarke Willmott declined to do so, complaining that it was too late to be making an application to call expert evidence, the trial being only six weeks away.
4. On 15^th January 2009 Burges Salmon on behalf of the claimant made what was stated to be a Part 36 offer to settle the claim. The proposed terms of settlement included the following:

"Higher Gooseford

. . .

3 The Defendants do pay the Claimant damages for trespass in relation to their unlawful occupation of Higher Gooseford limited to the period from 1 December 2006 until vacant possession is given up.

The date of 1 December 2006 is chosen because no payments have been made since Mrs. Warden [the claimant's mother and freehold owner of the land until her death in February 2007] was admitted to hospital in November 2006.

As to fixing the damages for trespass, that shall be determined by a rural chartered surveyor acting as an expert . . .

. . .

6 The Claimant and the Defendants shall bear their respective costs of the proceedings."

5. In a letter dated 19^th January 2009 Clarke Willmott rejected that offer and put forward a counter-offer on behalf of the defendants. However, on 3^rd February 2009 they wrote to Burges Salmon accepting the offer contained in the letter of 15^th January 2009 expressly without any admission of liability. On the same date they wrote a separate letter marked "Without prejudice, save as to costs" reiterating that, although the defendants had not admitted liability, they had accepted the claimant's offer. They offered to pay £50 per acre in respect of the damages which the defendants had agreed to pay in order to obviate the need to instruct a surveyor.
6. Shortly afterwards a dispute arose between the parties over whether they had in fact entered into a binding agreement to settle the claim. At about the same time, or quite soon after, a second dispute began to emerge over the meaning of the expression "damages for trespass" in Burges Salmon's letter of 15^th January. The claimant's position was that, having unequivocally rejected her offer, the defendants could not subsequently accept it and in any event had not done so. However, she said that if she were wrong about that, they had agreed to pay damages for trespass at large, including, in particular, the loss she had suffered as a result of being unable to sell the farmhouse while the defendants remained in occupation of the land and buildings. The defendants said that the claimant's offer, having been made under Part 36 of the Civil Procedure Rules and not having been withdrawn, remained open for acceptance, that they had accepted it, and that the expression "damages for trespass" meant damages for use and occupation only.
7. On 18^th February 2009 the matter came before His Honour Judge Griggs on an application for directions. Although the defendants had not made any formal application for a stay of the proceedings or other relief effectively bringing them to a close, everyone was aware that they were maintaining that the claim had been settled and the hearing appears to have been treated by all concerned, including the judge, as a convenient opportunity to resolve that question. At the hearing the claimant was represented by her solicitor, who appeared by telephone, and the defendants by counsel. After hearing argument the judge held that, despite Clarke Willmott's rejection of the offer contained in Burges Salmon's letter of 15^th January 2009, it remained capable of acceptance because it had been made under CPR Part 36 and had not been formally withdrawn, thus anticipating the decision of this court in Gibbon v Manchester City Council [2010] EWCA Civ 726, [2010] 1 WLR 2081. Accordingly, the claim had been compromised on the terms set out in that letter. The judge was not asked to rule on the meaning of the expression "damages for trespass", although the point was touched on briefly in the course of argument, a matter to which I shall have to return in due course.
8. In order to give effect to his decision the judge made an order declaring that the claim had been settled and staying the proceedings generally, save for the purposes of implementing the terms of settlement. The dispute about the meaning of the expression "damages for trespass" had not gone away, however, and on 2^nd April 2009 Burges Salmon wrote to Clarke Willmott making it clear that the claimant considered that she was entitled to recover damages at large for trespass, including the fall in the value of the farmhouse, which she put at £85,000. Her total claim, insofar as it had by then been quantified, came to over £120,000. That was followed by some inconclusive correspondence.
9. Eventually, on 9^th July 2009, the defendants asked the court to give directions for the determination of the meaning of the settlement agreement. Directions were given and as a result on 15^th December 2009 the matter came on for trial before Mr. Recorder Hollington Q.C. Having heard argument, he gave a judgment in which he held that the expression "damages for trespass" meant damages for use and occupation only. However, in the course of the hearing counsel who then appeared for the claimant sought to raise a new argument, namely, that as a result of certain statements made by Judge Griggs in the course of the proceedings before him, the defendants were not entitled to contend that the expression had such a limited meaning. The point had been raised too late for the defendants to have had a proper opportunity to consider it and many judges would have excluded it for that reason. However, the Recorder was sufficiently troubled by it to adjourn the hearing in order to give the claimant an opportunity to file a supplementary skeleton argument and further evidence in support.
10. The trial resumed on 7^th May 2010, when counsel for the claimant submitted that in the course of the hearing before him Judge Griggs had decided that the expression "damages for trespass" meant damages at large and that his decision gave rise to an issue estoppel. Alternatively, he submitted that it was an abuse of process for the defendants to contend otherwise. The Recorder rejected that submission. He held that the meaning of the agreement did not arise for decision in the course of the hearing before Judge Griggs and that he had not in fact decided it. He therefore granted the defendants a declaration that damages for trespass were to be assessed on the basis of mesne profits only, that is, that they were limited to damages for use and occupation of the land and buildings. He ordered the claimant to pay two thirds of the defendants' costs up to and including the first hearing before him on 15^th December 2009 (apart from some specific items) and the whole of their costs thereafter.
11. The claimant, now represented by Mr. Stephen Jourdan Q.C. (who did not appear on her behalf below), appeals against the various orders made by the Recorder and also seeks permission to amend her notice of appeal in order to challenge the order made by Judge Griggs. It is convenient to deal with that application first.
12. The question Judge Griggs had to decide was whether the parties had agreed to compromise the claim. If they had, the proceedings could not continue; they had to be disposed of by one means or another. If they had not, the proceedings would continue. It is clear, therefore, that this was not a case in which the judge's decision would have finally determined the entire proceedings whichever way he had decided the issues before him. Nor was it a decision made at the conclusion of part of a hearing or trial which had been split into parts. It follows that the decision of Judge Griggs was not a final decision within the meaning of paragraph 1(2)(c) of the Access to Justice (Destination of Appeals) Order 2000, nor was it to be treated as a final decision under paragraph 1(3) of that Order. Therefore, being a decision of a county court, an appeal lay to the High Court. In my view this court has no jurisdiction to entertain an appeal against the order of Judge Griggs and for that reason alone the application must be dismissed.
13. However, even if an appeal had lain to this court, I would not have been willing to give the claimant permission to amend her notice of appeal. Judge Griggs made his order in February 2009. He gave permission to appeal, but no attempt was made at that stage to challenge his order. On the basis of his decision there have been two further hearings at considerable expense to the parties. The only explanation for the claimant's change of heart is that there have been recent decisions of the High Court which are said to undermine the parties' assumption that Burges Salmon's letter of 15^th January 2009 complied with the requirements of Part 36. That may or may not be so, but if the point is a good one, it was open to the claimant to take it at the time. In my view it is far too late to seek to overturn the basis on which the parties have conducted this litigation over the intervening two years.
14. I turn next to the grounds on which the claimant challenges the decision made by the Recorder in his first judgment delivered on 15^th December 2009. The settlement agreement provided that damages for trespass were to be determined by a rural chartered surveyor acting as an expert. Mr. Jourdan submitted that in this case it was for the expert, not the court, to decide what was meant by the expression "damages for trespass"; alternatively, if the court did have jurisdiction to determine that question, the Recorder should have declined to do so until the expert had carried out his task. Finally, he submitted that the Recorder's decision on the meaning of that expression was wrong.
15. It was common ground that the principles governing the respective roles of the court and an expert appointed to conduct a valuation are correctly set out in the dissenting judgment of Hoffman L.J. in Mercury Communications Ltd v Director General of Telecommunications [1994] C.L.C. 1125 at page 1139. He pointed out that two separate questions are involved. If the parties have not established the principles which the expert is to apply when making his valuation, the court will not intervene to decide how he should carry out his task. That is a matter which the parties have left to the expert and they are bound by his decision. If, on the other hand, the parties have agreed on the principles the expert is to apply, the court can and will intervene to set aside a valuation made contrary to those principles, because in failing to apply them the expert has acted outside his authority. However, the court will not usually intervene before the valuer has completed his task, even if one or other party fears that he may go wrong, because, unless there are strong grounds for thinking that he is likely to do so, such intervention is likely to result in a waste of time and the incurring of unnecessary costs. However, whether to intervene at an early stage is ultimately a matter for the discretion of the judge.
16. The principles derived from that decision and certain earlier decisions to which Hoffmann L.J. also referred were summarised and re-stated by Lightman J. in British Shipbuilders v VSEL Consortium Plc [1997] 1 Lloyd's Rep 106 as follows:

"(1) Questions as to the role of the expert, the ambit of his remit (or jurisdiction) and the character of his remit (whether exclusive or concurrent with a like jurisdiction vested in the Court) are to be determined as a matter of construction of the agreement.

(2) If the agreement confers upon the expert the exclusive remit to determine a question, (subject to (3) and (4) below) the jurisdiction of the Court to determine that question is excluded because (as a matter of substantive law) for the purposes of ascertaining the rights and duties of the parties under the agreement the determination of the expert alone is relevant and any determination by the Court is irrelevant. It is irrelevant whether the Court would have reached a different conclusion or whether the Court considers that the expert's decision is wrong, for the parties have in either event agreed to abide by the decision of the expert.

(3) If the expert in making his determination goes outside his remit e.g. by determining a different question from that remitted to him or in his determination fails to comply with any conditions which the agreement requires him to comply with in making his determination, the Court may intervene and set his decision aside. Such a determination by the expert as a matter of construction of the agreement is not a determination which the parties agreed should affect the rights and duties of the parties, and the Court will say so.

(4) Likewise the Court may set aside a decision of the expert where (as in this case) the agreement so provides if his determination discloses a manifest error.

(5) The Court has jurisdiction ahead of a determination by the expert to determine a question as to the limits of his remit or the conditions which the expert must comply with in making his determination, but (as a rule of procedural convenience) will (save in exceptional circumstances) decline to do so. This is because the question is ordinarily merely hypothetical, only proving live if, after seeing the decision of the expert, one party considers that the expert got it wrong. To apply to the Court in anticipation of his decision (and before it is clear that he has got it wrong) is likely to prove wasteful of time and costs, the saving of which may be presumed to have been the, or at least one of the, objectives of the parties in agreeing to the determination by the expert."

17. That summary was in turn approved by Mummery L.J. giving the leading judgment in this court in National Grid Co Plc v M25 Group Ltd [1998] EWCA Civ 1968, [1999] 1 EGLR 65.
18. Applying those principles, the first question for decision is whether this is a case in which the parties had established the principles which the surveyor should apply when assessing damages, or whether they had left it to him to decide what principles he should apply when carrying out his task. The Recorder held that the parties had by their agreement determined the basis on which the expert should carry out his task and had not left that question to him. He reached that conclusion in part because the order giving effect to the agreement expressly contemplated that an application might be made to the court for the purposes of implementing the settlement.
19. Mr. Jourdan submitted that on the true construction of the agreement the parties had left it to the surveyor to assess damages for trespass as he thought appropriate without imposing any constraints on the manner in which he should go about his task and without limiting the heads of loss which he could take into account. It was therefore for him, and him alone, to decide what to take into account in determining the claimant's loss.
20. It may well be that in some cases it would be right to construe a broadly worded agreement of this kind in that way, but in my view it would not be right to do so in this case. I do not think that any significance can be attached to the terms of the order, which was made some time after the agreement for the purposes of giving effect to the decision of Judge Griggs, but the expression "damages for trespass" in the letter of 15^th January 2009 has to be understood in the context of the proceedings as they then stood and the previous exchanges between the parties. If, as the defendants contend, it is to be given a more restricted meaning than it might otherwise bear, that is a matter which would have a direct bearing on the expert's instructions and on the nature and scope of his task. The meaning of the agreement is a matter to which I shall return in a moment, but, in the absence of any clear indication to that effect, it is difficult to believe that the parties intended to entrust the resolution of such a question to a surveyor, who could scarcely be expected to have professional expertise in determining matters of that kind. I am satisfied that the Recorder was right to hold that the court had jurisdiction to determine the meaning of the agreement and thereby the scope of the expert's instructions.
21. The next question for consideration is whether the Recorder was right to hold that it was appropriate in this case for the court to determine that issue before the expert had produced his assessment. Mr. Jourdan submitted that the court should intervene at such an early stage only in exceptional cases, of which this was not one. The expert, he said, should first have been allowed to produce his assessment, which could be challenged only if it could be clearly demonstrated that he had proceeded on an incorrect basis. That might well not be the case, he submitted, if, as is a common practice, he rendered a non-speaking decision, and the parties would be spared a great deal of expense. That was, he said, a particularly powerful consideration in this case, given that the agreement contemplated a cost-free procedure for assessing damages.
22. Whether to determine the scope of the expert's instructions in advance of his determination is ultimately a matter of procedural convenience and as such the decision ultimately lies within the discretion of the judge. The accepted view, as appears clearly from the authorities to which I have referred, is that the court should not do so, save in exceptional cases, in order to avoid unnecessary litigation with its attendant waste of time and costs. However, there are some circumstances, of which the Mercury case provides an example, in which it is clear for one reason or another that it would be in the interests of the parties to define the position before the expert begins his task. The Recorder thought this was such a case and I think he was right. The parties had made their respective positions clear and because the financial consequences of adopting one view rather than the other were likely to differ greatly, one or other of them could be expected to challenge the determination on the grounds that the expert had clearly misinterpreted the agreement. Whether successful or not, that could only be productive of costly litigation. Moreover, there was no application to strike out or stay the proceedings on the grounds that they were premature and, in my view, once the matter was before the Recorder for trial it was in both parties' interests for him to decide the question. Certainly, I can see no grounds for saying that in the circumstances he exercised his discretion wrongly in deciding to do so.
23. This brings me to the meaning of the expression "damages for trespass" in Burges Salmon's letter of 15^th January 2009. General words of that kind inevitably take their colour from the context in which they are used, so it is necessary to consider the way in which the proceedings had developed and the terms of the previous exchanges between the parties.
24. Amended particulars of claim were served on 28^th February 2008. In them the claimant alleged that the defendants had been permitted by her mother to use the land under a grazing licence and did not hold it under an agricultural tenancy. They were permitted to make intermittent use of the buildings. They had no security of tenure, but refused to give vacant possession. The claimant sought possession of the land and buildings and damages for use and occupation of the land and buildings. There was no suggestion that she had suffered any loss other than the loss of use of the land and buildings.
25. On 25^th April 2008 the defendants served a defence in which they asserted that they occupied the land and buildings under an agricultural tenancy and were therefore entitled to remain in possession. There were no subsequent amendments to the pleadings and so by the beginning of January 2009 the basis on which the claim was proceeding to trial had been established. Burges Salmon's letter of 13^th January 2009 only tended to confirm that the claim for damages was limited to damages for use and occupation. There had been no suggestion in correspondence that the claimant intended to seek damages for the loss of value of the farmhouse or any of the other heads of damage that were later to be advanced; nor had there been any application for permission to amend the particulars of claim or to call expert evidence of a kind that would have been necessary to support a claim for loss of value.
26. In those circumstances when Burges Salmon included in their letter of 15^th January 2009 a proposal that the defendants should pay the claimant "damages for trespass in relation to their unlawful occupation of Higher Gooseford" I do not think that, viewed objectively, they can reasonably have been understood to mean anything other than damages sufficient to compensate the claimant for the loss of use of the land and buildings. That represented the limit of her claim in the proceedings and was loss of a kind eminently suitable for expert determination by a rural surveyor. I agree that the use of the expression "mesne profits" in Burges Salmon's letters of 19^th December 2008 and 13^th January 2009 is of little significance in itself and that its use in later correspondence is of no relevance. Nor, however, is it of any significance, in my view, that the period in respect of which damages were to be assessed in accordance with the offer differed from that pleaded in the particulars of claim. The explanation for that was contained in the letter itself and had nothing to do with any additional heads of damage. The Recorder held that the defendants' case succeeded on the true construction of the agreement and in that I agree with him. It is unnecessary to consider the other bases on which he would, if necessary, have upheld their claim.
27. That brings me to the claimant's argument that, because of the way in which the matter proceeded before Judge Griggs, the defendants were no longer entitled to put forward their construction of the settlement agreement. The claimant's argument was based on the principles of issue estoppel and abuse of process, but in each case rested on a relatively brief observation by the judge in the course of argument.
28. By the time the matter came before Judge Griggs the dispute over the construction of the agreement had surfaced. In the course of addressing the judge on the question whether the defendants had accepted the claimant's offer her solicitor made the following submission:

"The tenant, the defendant, has been in occupation of both the land and the buildings, and in the course of occupying the buildings has prevented a sale of the farmhouse because of its proximity, and that's why the claimant says there hasn't been an unconditional acceptance because there are substantial damages to be assessed which are vastly more than £50 an acre to include the use of the buildings and the damage that's been done to the claimant being able to sell the farmhouse on what I think is a . . . "

29. The judge responded in the following terms:

"The defendants are paying damages for trespass in relation to the unlawful occupation of Higher Gooseford from 1^st December until vacant possession is given. I mean, doesn't that, and they've written a Calderbank type letter in relation to seeking to resolve that issue which you choose not to accept, as you're certainly entitled to, but there is a – in your original offer you contained, you set out a mechanism whereby that amount can be calculated, which would include, no doubt, such consequential losses as you may claim you have suffered."

30. As I understand it, the claimant's submission was that there had been no unconditional acceptance by the defendants of the offer contained in the letter of 15^th January 2009, either because the defendants had purported to accept it without admission of liability, or because they had made it clear in Clarke Willmott's second ("without prejudice") letter of the same date, in which they offered to pay £50 an acre, that they were willing to accept only a limited liability for damages based on use and occupation, which was inconsistent with the broader expression "damages for trespass" used in Burges Salmon's letter. At any rate, before the Recorder the claimant submitted that the exchange mentioned above contained a decision on the part of Judge Griggs that, if the parties had entered into a binding agreement, it was open to the claimant to recover damages at large. The Recorder rejected that submission because he took the view that the only question the judge had been asked to decide was whether the claim had been compromised. It had not been necessary for him to decide the meaning of any agreement that the parties had entered into and he had not purported to do so.
31. Mr. Jourdan submitted that, contrary to the view of the Recorder, it was necessary for Judge Griggs to determine the meaning of the offer contained in Burges Salmon's letter of 15^th January 2009 in order to decide whether it had been unconditionally accepted, but in my view that is not correct. Whether the parties had entered into an agreement depended entirely on the terms of the correspondence. It is clear from the transcript of the proceedings before Judge Griggs, as well as from the order which he eventually made, that the argument before him was directed solely to the question whether the claim had been settled. He was not asked to decide the effect of any agreement that the parties might have reached, nor was it necessary for him to do so. The exchange quoted above contains nothing more than a recognition on the part of the judge that, if the claimant's argument about the meaning of the letter were correct, it would be open to her to pursue her claim for damages at large under the settlement agreement. It did not amount to a determination of any kind, either of the question before the court, or of an issue that had to be decided in order to determine the question before the court. In those circumstances, as Mr. Jourdan was forced to concede, it cannot have given rise to an issue estoppel.
32. It is said in the alternative, however, that in the light of that exchange it was an abuse of process for the defendants to argue before the Recorder that the claimant was entitled to recover nothing more than damages for use and occupation. That was said to follow from an application of the principles in Henderson v Henderson (1843) 3 Hare 100 as explained and applied in Johnson v Gore Wood & Co [2000] UKHL 65, [2002] 2 AC 1.
33. The Recorder rejected that argument on the grounds that the meaning of the agreement had not been in issue before the judge and that the defendants could not therefore be said to have made a conscious decision on that occasion not to advance the arguments on which they sought to rely before him. The claimant says that in reaching that decision the Recorder misunderstood the relevant principles of law and should have held that it was an abuse of process for the defendants to challenge the judge's decision, even though it was not essential to his decision on whether the claim had been settled.
34. In my view the Recorder was right to reject the claimant's argument. For the reasons I have given I am unable to accept that the judge was asked to make any decision about the meaning of the agreement or that he needed to do so and therefore there was no reason for the defendants to put forward their case on its meaning. In some circumstances a party who fails to advance an argument that is relevant to the issues before the court will be prevented from raising it on a subsequent occasion, but in this case there is nothing that could have that effect. The dispute about the meaning of the agreement had come to light only shortly before the hearing; it was not the issue that the judge had been asked to decide and neither party had come to court prepared to argue it. It cannot possibly be said that the defendants were abusing the process of the court by putting forward their construction of the agreement before the Recorder.
35. Finally, there is the matter of costs. Although the Recorder recognised that the defendants, as the successful parties, had a claim to recover the whole of their costs, he took the view that part of the costs of the proceedings before him could have been avoided if the parties had taken the necessary steps to obtain a decision on both questions at the same time. That would probably have resulted in an adjournment of the hearing before Judge Griggs to enable the necessary evidence to be filed, but ought to have resulted in a significant saving of costs overall. The claimant submitted that the Recorder should deprive the defendants of the whole of their costs, on the grounds that they should have made their position clear at a much earlier stage. The Recorder thought that the defendants were at fault to some extent in failing to appreciate the claimant's position sooner than they did, but he took the view that the claimant was mainly to blame for what had happened and awarded the defendants two thirds their costs up to and including 15^th December 2009 and the whole of their costs thereafter.
36. In the skeleton argument prepared by counsel who represented the claimant below the submission was made that the Recorder erred in the exercise of his discretion, but Mr. Jourdan did not press that argument, in my view quite rightly. The fact is that the defendants were successful on all the issues argued before him and were not in any way to blame for the adjournment which led to the second hearing. The Recorder deprived them of part of their costs to reflect the fact that they bore some of the blame for the failure to deal with the dispute more economically and in my view he was entitled to deal with the matter in that way. Mr. Jourdan did submit, however, that the Recorder ought to have included in his order a direction to the costs judge that the defendants' costs were out of all proportion to the amount in issue and that, since he failed to do so, we should take that step ourselves.
37. Whether to make an order disallowing part of the receiving party's costs on the grounds that they are disproportionate to the value of what is in issue is usually a matter best left for consideration by the costs judge. Once a detailed assessment has been made the position will usually become clearer and it will then be easier to tell whether there is any force in the submission. In my view it cannot be said that in declining to give directions of that kind to the costs judge the Recorder erred in the exercise of his discretion and I do not think that there are grounds for interfering with his order.
38. For all these reasons I would dismiss the appeal.

Sir Henry Brooke:

39. I agree.

Lady Justice Smith:

40. I also agree.