England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BIRMINGHAM DISTRICT REGISTRY
HHJ PURLE QC (SITTING AS A JUDGE OF THE HIGH COURT)
[2009] EWHC 3219 (Ch)

		Royal Courts of Justice Strand, London, WC2A 2LL
		10/02/11

Lady Justice Arden :

1. This appeal by Mr Mark Buddha Singh concerns the costs order made by HHJ Purle QC on 19 March 2010 following the trial of proceedings brought by Miss Moira Walsh, his former fiancée. The two had lived together for some eight years. There were a number of items of property which each party claimed as against the other. These included claims on Miss Walsh's side to a half-interest in a property known as Vale Cottages, and other land (a 37 acre holding and a paddock) at Leire, Leicestershire under a constructive trust or proprietary estoppel, to absolute ownership of a property registered in their joint names in Italy and to an order for the return of two rings, one being an engagement ring. In addition, Miss Walsh claimed in support of her constructive trust claim that two payments (£7,500 and £25,000) made by her to Mr Singh represented investments for the purchase of the Leire property. Mr Singh counterclaimed for various relief, including payments totalling nearly £35,000, made for Miss Walsh's maintenance after the date of separation, a declaration that he owned the Italian property absolutely and a declaration that Miss Walsh was jointly and severally liable to contribute to the losses of about £80,000 of an equestrian business which Miss Walsh ran (but said Mr Singh owned) at the property in Leire. Other issues, mainly relating to the ownership of a flat which Miss Walsh had owned before she met Mr Singh, and of horses and tack, had also originally been contained in Mr Singh's counterclaim but he had abandoned these claims before the trial.
2. The parties are represented in this court by counsel who appeared at the trial: Mr Michael Roberts for the appellant and Mr John Brennan for the respondent.
3. The judge dealt with the issues at trial in a detailed judgment given on 15 December 2009. Miss Walsh lost the Leire property claim but obtained declaration that the two sums of £7,500 and £25,000 were repayable, not on the basis pleaded but on the basis that they were loans, as asserted by Mr Singh. Both parties lost their claims to sole ownership of the Italian property. Miss Walsh won her claim to the rings and successfully resisted the counterclaim.
4. When the judge came to deal with costs, Mr Singh relied on the fact that he had made a Part 36 offer on 23 January 2009, which Miss Walsh had not accepted. This would have given her the sum of £85,000 in cash and all her costs down to the date of acceptance. But she did not accept it and as a result both parties continued to incur costs. The judgment of 15 December 2009 makes it clear that on several matters the judge had not accepted the evidence of Miss Walsh or that of her witnesses. But it also contains criticisms of Mr Singh's conduct of the proceedings and states that the judge found the evidence of Mr Singh much less satisfactory than that of Miss Walsh.
5. The significance of making an offer under Part 36 for present purposes is set out in CPR 36.14, which so far as material provides:

"Rule 36.14 Costs consequences following judgment

36.14 Costs consequences following judgment

(1) This rule applies where upon judgment being entered-

(a) a claimant fails to obtain a judgment more advantageous than a defendant's Part 36 offer; …

(2) Subject to paragraph (6), where rule 36.14(1)(a) applies, the court will, unless it considers it unjust to do so, order that the defendant is entitled to-

(a) his costs from the date on which the relevant period expired; and

(b) interest on those costs.

(3)…

(4) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3) above, the court will take into account all the circumstances of the case including-

(a) the terms of any Part 36 offer;

(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;

(c) the information available to the parties at the time when the Part 36 offer was made; and

(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated."

6. In applying these provisions, the court must bear in mind the purpose of CPR 36, which is to motivate parties to make, and to accept, appropriate offers of settlement. An order of costs in favour of the party making the offer follows unless the paying party overcomes the hurdle of showing that it is unjust that the usual consequences of an unbeaten Part 36 offer should follow. It is not enough for him to show that he would have obtained an order for the subsequent costs at the trial. Cases in which the losing party succeeds in overcoming this hurdle will depend on their own facts but there are reported cases where this has happened: see, for example, Widlake v BAA Ltd [2010] PIQR P4, where the successful party had caused substantial extra cost by deliberately concealing details of her prior medical history and her conduct in exaggerating her claim.
7. The judge held (and this has rightly not been challenged on this appeal) that CPR 44.3(4) provided further guidance as to the type of circumstances the court should take into account, and this provides:

"(4) In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including-

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(c) any payment into court or admissible offer to settle made by a party which is drawn to the court's attention, and which is not an offer to which costs consequences under Part 36 apply."

8. How then did the judge resolve the question of the liability for the costs of the action, including the counterclaim? He first considered whether Miss Walsh had beaten the offer. He found that the aggregate value of her claims was about £61,500. Clearly, Mr Singh was in those circumstances entitled to his costs from 21 days after the date of his Part 36 offer ("the offer expiration date") unless the judge was satisfied that, as was submitted to him by Mr Brennan, it was unjust to make that order. Mr Roberts submitted that he should have his costs not only after the offer expiration date, but also down to that date.
9. The judge then considered whether it was unjust to order Miss Walsh to pay the costs of the action and counterclaim. He considered the parties' respective success and failures. He also considered the way in which the proceedings had been conducted. He noted that Mr Singh had effectively challenged whether the parties were ever properly engaged to be married. He had alleged that Miss Walsh was living in a fantasy world and buttressed this argument with a suggestion that she was mentally unstable and had obtained disclosure of her medical records, of which there was "a pointless examination". The judge regarded Mr Singh`s conduct of the action as deserving of the criticisms which Mr Brennan "heaped" on him, including the fact that he lost no opportunity to belittle or discredit Miss Walsh, an approach which was likely to be damaging to her given her professional status as a member of the Bar.
10. The judge noted that Mr Singh had sought to rely upon material that he had obtained by the use of spyware on a laptop used by Miss Walsh. This revealed among other things privileged material. The judge noted that Counsel for Mr Singh had sought to cross-examine on the material until stopped by the judge. The judge noted that this material had caused obvious and visible distress to Miss Walsh. In addition, much of the cross-examination, no doubt on instructions, had been calculated to belittle and discredit Miss Walsh, portraying her as a silly woman who lived in a fantasy world. The judge noted that he had had to stop cross-examination which could only be described as bullying Miss Walsh. There had been an attempt to issue a witness summons against Miss Walsh`s new boyfriend when that had no relevance to the issues. Miss Walsh had given evidence under the threat that her boyfriend would be called. The judge held Mr Singh had acted in a manner which was ungentlemanly, to put it at its lowest.
11. Before the judge, Mr Roberts contended that Miss Walsh had exaggerated her claims but the judge noted that he had not found her as unsatisfactory a witness as Mr Singh. The judge did not consider that she had at any stage consciously told lies. The judge did not think that any of her witnesses consciously told untruths. The judge held that he was quite satisfied that Mr Singh knowingly did not tell the truth about the rings. He held that Miss Walsh brought her claim in good faith and failed whereas Mr Singh chose to embellish his evidence with untruths and hurtful cross-examination, which was not necessary and raised the temperature of an already emotional case much higher than it need have been.
12. The judge considered it would be quite unjust if that was not reflected in some way in his order on costs. He held that a well-judged Part 36 offer did not give full licence to conduct a trial thereafter in whatever way without fear of costs reprisals.
13. The judge then considered what weight should be given to the costs which had been incurred down to the offer expiration date, including the costs of the abandoned counterclaim. He took into account the rough and ready information as to the costs thrown away by the abandonment which Mr Brennan had provided to him and concluded:

"27. From the very rough and ready figures that I have seen, the costs incurred down to the abandonment of the counterclaim are substantial, and at least equal to and probably exceed the costs that Mr Singh incurred after the Part 36 offer. Not all the costs incurred down to October 2008 would, of course, be referable to the abandoned counterclaim, but I am satisfied that a substantial part of them would be. As to the reformulated counterclaim which remained for determination at trial, Mr Singh was wholly unsuccessful in relation to his claim for recovery of maintenance payments or damages and would ordinarily have to pay the costs of that counterclaim (subject to the Part 36 offer). He lost also on his claim for contributions to losses and expenditure, which remained free-standing claims (not dependent on success in his defence) through most of the trial. Though successful in his defence to the claim for the Leire properties, he was unsuccessful on one quite important issue which required me to consider two different versions of events, and some documentary evidence – namely whether the £7,500 had been repaid. Neither side won as regards the Italian property. Given also Mr Singh's defeat on the issues of the engagement and ring, which took up a disproportionate amount of the hearing, and required evidence to be given from a number of sources to prove what should never have been in issue, it seems to me that were it not for the Part 36 offer, Mr Singh might have ended up paying, in respect of his defeat on the ring claim, his abandonment of the original counterclaim, his defeat on other parts of the counterclaim, and other issues upon which he lost, rather more than he would recover by way of costs in respect of his successful defence of Miss Walsh's main claims."

14. The final sentence of paragraph 27 is difficult to follow. The issue was whether it was unjust for Miss Walsh to have to pay the costs after the offer expiration date, and the judge comes back to that issue in the first sentence of the next paragraph (see the next paragraph of this judgment). Mr Roberts did not argue that the last sentence of paragraph 27 amounted to a misdirection. It suggests that the judge was comparing the position if there had been no Part 36 offer, which would not have been a relevant consideration. But the last sentence cannot detract from the fact that the judge found in the first sentence of paragraph 27 that the costs of the abandoned counterclaim were significant and that the judge looked at the matter, first on the basis that those costs (due to Miss Walsh) exceeded the post-offer expiration costs (due to Mr Singh) (see the first sentence of paragraph 27) and then in paragraph 28 (set out below) on the opposite assumption. Those were undoubtedly correct directions, and the latter, which is the most favourable to Mr Singh, appears in the paragraph in which he comes to his conclusion, to which I now turn.
15. In paragraph 28 of his judgment, the judge proceeded to add up the factors on either side of "the balance sheet". The final paragraph of his judgment, in which the judge strikes the balance, reads:

"28. When I add to that the disgraceful behaviour in relation to the spyware, the unjustified attempts to portray Miss Walsh as mentally unstable, and Mr Singh's general conduct of the trial as already summarised, it seems to me that it would be unjust (notwithstanding the Part 36 offer) to order Miss Walsh to pay costs and interest from the date of the Part 36 offer, even assuming, as I do for argument's sake, that they would exceed the costs which Mr Singh could have been called upon to pay down to that date. Equally, in the light of that offer, it would not be right for Mr Singh to pay any part of Miss Walsh's costs. In all the circumstances of the case, justice would be done by making no order as to costs one way or the other. That is my order, and I shall now hear counsel upon any other matters that may arise on the form of order."

16. Accordingly, the judge concluded that the right order was no order as to costs, whether before or after the offer expiration date. It would be unjust to make any other order in respect of Mr Singh's costs after that date.
17. On this appeal, Mr Roberts submits that the judge had to balance the factors going either way on the issue of whether it was unjust that the usual cost consequences of failure to beat a part 36 offer should follow. He submits that the judge was perverse in sending Mr Singh away "empty-handed". On Mr Roberts's submission, the judge failed to have regard to Miss Walsh's conduct in bringing the claims and orchestrating a raft of evidence against Mr Singh, which was rejected. Indeed Mr Roberts submits that her claims based on quantum meruit and breach of trust were an abuse of process. Mr Roberts submits that the judge could not find that Miss Walsh was simply misguided. In support of this submission, he particularly relied on that holding in relation to her claim that, when the Leire property was re-mortgaged in 2004, a conversation took place between her and Mr Singh whereby her approval was sought to the re-mortgage and she told the defendant that she would not object provided it came out of his share. Her case was that she was entitled as a result of this to invoke the equity of exoneration in relation to this mortgage.
18. Mr Roberts submits this was a very important part of her claim to a beneficial interest in the Leire property, and that was a claim which (if genuine) would have been raised at the start at the start of the proceedings. Miss Walsh had alleged a very specific conversation, yet the judge went no further than to say he could not accept her evidence:

"55. …there was an occasion in 2004 when Mr Singh remortgaged Vale Cottages to release capital. He discussed this with Miss Walsh and (according to her) assured her that the surplus over the existing mortgage would be out of his share. Miss Walsh claims in these proceedings (as regards any surplus) an equity of exoneration against Mr Singh's share. If of course Miss Walsh (as I find) had no share, no equity of exoneration could arise. However, the importance of the point in the present context is that, if Mr Singh raised the matter in the way related by Miss Walsh, that would have been very significant, as he clearly recognised and acknowledged her existing share. However, the point was not mentioned at all in her first witness statement as it had (she explained) slipped her mind. I find it difficult to accept that a conversation of such significance could have slipped her mind so readily, and it is equally surprising that, if the conversation was as significant as she said it was, there was no written record of it, signed by Mr Singh. In the circumstances, I do not accept that there was a significant conversation on the point, though I am prepared to accept Miss Walsh's evidence to the extent that that Mr Singh mentioned the remortgage, and got her to witness his signature."

19. Mr Roberts submits that, standing back from this case, this was by any standards a substantial, premeditated and carefully directed attack on the property and assets of Mr Singh and that Miss Walsh had made a broad range of factual allegations against him and sought to extract a very large "bounty". Mr Roberts submits that it is important that this perspective on the case is not marginalised or minimised. The fact that the parties had entered into a "gentleman's agreement" in 2006 agreeing to the payment to her of a sum of money was, as the judge recognised, a contra-indication of the beneficial interest Miss Walsh claimed in the Leire property. On Mr Roberts' submission, it also showed that she did not have any genuine claims to a property interest in the Leire property.
20. As to the time spent on the engagement issue, Mr Roberts submits that the judge was wrong on this point. He points out that many claims had been added, for instance, the claim for quantum meruit, which were hopeless. Miss Walsh had lied about whether the sums of £7,500 and £25,000 had been loans or not. Miss Walsh's only success was in respect of the rings.
21. As to the costs of the abandoned counterclaim, Mr Roberts submits that there was no proper evidence that there had been substantial costs thrown away. As to the counterclaim for contribution in relation to the losses of the equestrian centre, on Mr Roberts' submission, this was conditional on Miss Walsh succeeding in showing that the equestrian business was a joint venture on her case.
22. He submits that what the judge should have done was to order Miss Walsh to pay the costs of the action, less the costs of the abandoned counterclaim. Alternatively he should have ordered Miss Walsh to pay (say) 75% of the costs, with the deduction of 25% being made to account for the aspects of Mr Singh's conduct that had provoked criticism from the judge.
23. Mr Brennan submits that the judge's order should be upheld for the reasons given in his judgment, and so, without intending any discourtesy to him, I need not rehearse his submissions at length. He correctly addressed the standard of review on appeal. I would record my indebtedness to him for the fair and helpful way in which he explained the intricacies of what had happened in this case and how the trial had proceeded. I note that at the costs hearing before the judge on 19 March 2010 he and his solicitor were acting pro bono.

Discussion and conclusions

24. It is well-established that, in deciding what order as to costs to make, a trial judge has a generous ambit of discretion and this court does not interfere simply because it would itself have made some other order. It has to be shown that the judge's order was in effect perverse or that he misdirected himself. In exercising his discretion as to costs, he is obliged to take into account all the circumstances of the case. If the judge takes into account matters which he ought to have left out of account, and leaves out of account matters which he ought to have taken into account, this court should interfere with his decision. It should also do so if satisfied that the decision was so perverse that the judge must have fallen into error. Subject to that, this court must respect the judge's exercise of the discretion which has been entrusted to him. The court must resist the temptation to substitute its own view for that of the judge.
25. Mr Roberts' submission is that a judge must balance the factors on either side. I accept that this must be so, in relation, that is, to factors relevant to the issue of costs. In the main this will be conduct which is causative of a waste of costs (such as a failure to make proper disclosure) but there are occasions when it may be appropriate for the court to mark its disapproval of a party's conduct by making a particular order as to costs, relevantly for the purpose of this case by disallowing costs, even if the conduct was not causative of any or any significant waste of costs. I would, however, accept that any such disallowance must be proportionate to the conduct in question. I note that proportionality was in effect the reason why Patten LJ gave permission to appeal in this case on a renewed application.
26. The judge's judgment certainly goes through issues on either side, as is clear from the summary that I have given above of his judgment. Counsel have not suggested that there was any significant matter that he left out of this balancing exercise.
27. The first point made by Mr Roberts is that the judge was wrong not to find that Miss Walsh was lying in relation to her claim to the Leire property and the loans. This submission recognises, as is clearly the case, that there is a clear distinction in the degree of culpability between the giving of evidence which the court finds was known to be untruthful and the giving of evidence which the court does not accept, but which it considers to be merely wrong or misguided. In this case, the judge put the evidence given by Mr Singh about the engagement ring into the former category and the evidence given by Miss Walsh and her witnesses into the latter category.
28. There was a substantial amount of cross-examination at trial of Miss Walsh. It was, said Mr Brennan, conducted at "full throttle". In her evidence in chief on the exoneration claim, for instance, Miss Walsh relied on specific conversations which she recalled about her having an interest in the properties which she claimed. Nonetheless, the judge held that her recollection of these conversations must have been mistaken, not that her evidence was untruthful. Mr Roberts submits that we should set aside this finding. However, to do that we would need to be satisfied that the judge was clearly wrong. There is no contemporaneous written evidence which would show that she was knowingly not telling the truth. Certainly her evidence was disputed by Mr Singh, but the judge was not satisfied that his evidence was wholly satisfactory. The judge had the advantage of hearing Miss Walsh and the other witnesses in person. We do not have that advantage. In those circumstances, on established principle, this court cannot interfere with the judge's conclusion. Nor can we (as was at one point submitted) revisit his decision because we have a transcript of the evidence and he did not when he came to deal with the costs application.
29. As to the spyware, Mr Roberts submits that Miss Walsh knew about the spyware. I do not consider that this is established. The mere fact that she knew (if she did) that Mr Singh put this on computers to check the use of computers made by employees at the equestrian centre does not mean that she knew about, or consented to, him using the spyware to commit a gross breach of her privacy and to spy on her. Mr Roberts was constrained to accept that the use of the material obtained by use of the spyware was "unedifying", but it goes further than this, even though this court when reviewing the judge's order as to costs is, and can only be, concerned with conduct which has an effect on the action.
30. While the judge made no finding about Miss Walsh's knowledge of the spyware, his criticism of the spyware is consistent only with her not having known about its use against her. Moreover, Miss Walsh's evidence is that she did not know about the spyware being used against herself as opposed to its being used to check employees' use of computers. Mr Roberts submits that the effect of the documents obtained in this way on the trial was very limited. The judge made it clear to Mr Roberts that he took a dim view of the use of the material to cross-examine Miss Walsh. Moreover, the material was clearly voluminous. It had been disclosed to Miss Walsh's solicitors by delivery of a CD Rom and Mr Brennan informed the judge, without objection from Mr Roberts, that the CD Rom appeared to have some 9,000 images on it, and that it was too costly for her lawyers to print out or study them, even if they could open the files.
31. The exact extent of the material and its contribution to the incurring of costs is in my judgment immaterial. The fact remains that Mr Roberts sought to deploy it at trial. It is quite clear that Miss Walsh was very upset about the disclosure of private information to Mr Singh in this way, and this is apparent from the transcript of her cross-examination. An attempt was even made to cross-examine Miss Walsh on a statement she had made in a note for her counsel which had been extracted by use of the spyware, though no objection was taken by Mr Brennan to this cross-examination. (As far as I can see no very profound point was actually being made about this note). While the argument before us was addressed only to a small part of the transcript of the cross-examination, I consider that the cross-examination of Miss Walsh was well capable of justifying a disallowance of costs.
32. The only issue then is whether the disallowance of costs on account of Mr Singh's conduct of the action was disproportionate, and should have been restricted to say 25% of the costs. This court is not in a position to say that the judge's assessment of this was wrong since the judge was in a far better position than this court to evaluate the extent of the various conduct of Mr Singh which the judge determined should be taken into account.
33. Mr Roberts submits that the information before the judge as to the costs thrown away by Mr Singh's abandonment of part of his counterclaim was unsatisfactory. The judge called it a rough and ready assessment. Mr Roberts was offered an adjournment but did not avail himself of this opportunity. We have seen the information as to costs. It was very rough and ready since it is simply the unsubstantiated assertion by the solicitor acting for Miss Walsh as to the amount of time spent on the abandoned parts of the counterclaim prior to the date of the Part 36 offer. But the judge considered that he could take it into account and reach a conclusion that substantial costs had been incurred on those parts of the counterclaim. His decision to take this course was a case management decision with which this court cannot interfere unless it is satisfied it was clearly wrong. Given the judge's superior knowledge of the pleadings and procedural steps in this case, it cannot be said that he was wrong to take this course. It is obvious from the opening part of paragraph 27 of his judgment that the judge did consider what order he would otherwise have made in respect of the costs down to the Part 36 offer. He would have to deal with those costs whether or not CPR 36.14 applied, and he concluded that the costs thrown away by the abandonment of the counterclaim would be substantial. An order that there be no order as to the costs of the action or counterclaim would thus confer a significant benefit on Mr Singh.
34. The judge does not expressly refer to the basis on which costs would have been ordered if an order for costs had been made. Mr Brennan thought that he might have made an application for the payment of the costs down to the date of the Part 36 offer on an indemnity basis but the judge had no recollection of being asked to make an order on this basis when asked recently. We cannot therefore take it into account. What is clear, however, is that there was no right to payment of the subsequent costs on an indemnity basis by virtue of making a Part 36 offer which was not accepted and which was not beaten at trial.
35. Mr Roberts submits that the judge could have made another order, namely an order giving Mr Singh a proportion of his costs from the date of the offer. I accept that this was a course open to the judge but it was not one suggested to him. What is clear is that the judge went through the process of calculating the likely entitlement to costs on either side. In all the circumstances it cannot be said that his conclusion that it was unjust to make an order for costs in Mr Singh's favour following the Part 36 offer is one which was clearly wrong.
36. I do not consider that there is anything in the point that the counterclaim for a contribution to the loss of the equestrian business was conditional on Miss Walsh's claim to a share of the Leire property. There was nothing in the pleading to show that it was conditional in this sense. It was a substantial claim involving about £80,000. It is no answer to the use of the medical records in cross-examination (as Mr Roberts sought to persuade us) that Mr Singh had obtained an order for these to be disclosed, when acting in person.
37. The judge found that the time spent on the engagement issue was substantial. This court again is in no position to say that he was clearly wrong. Likewise this court is in no position to know whether the claimant gave her evidence in a way that added to the costs because she was, as Mr Roberts suggested "strident" or "bombastic".
38. Mr Brennan sought to make a submission to us, with which Mr Roberts disagreed, that Mr Singh's offer did not in fact fulfil the requirements of Part 36 in the light of the recent decision of Warren J in C v D [2010] EWHC Ch 2940, but it is not necessary to deal with this point.
39. In those circumstances, I would dismiss this appeal.

Lady Justice Black:

40. I agree.

Mr Justice David Richards:

41. I also agree.