England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
(HHJ MARSHALL QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		20th May 2011

Lady Justice Arden:

1. This is an appeal against the order dated 11 August 2010 of HHJ Marshall QC sitting in the Central London County Court whereby she made no order as to costs consequent on the trial of an action. The action in question was a road traffic accident. The appellant was driving in his motor car, and at a junction there was a collision between his motor car and that of the respondent. In the end result, the judge held that the appellant was entitled to damages but that they ought to be reduced by 75% on account of contributory negligence. There was a claim for a credit hire of a substitute motor vehicle, because the claimant's motor vehicle had been written off in the accident. The claimant is the appellant. That claim was for £48,000. The period of hire was from the accident in June 2008 until December 2009. In the course of the trial, the claimant accepted that he would have been able to finance a substitute vehicle, so the judge reduced the claim for recovery of the hire charges to six months. In the event, as Mr Benjamin Williams, who appears today for the appellant, put it at the start of the action, the damages were reduced to one-sixth of those claimed. The credit hire expenses recovered were only £8,600.
2. The appellant seeks to appeal from this order. The grounds of appeal point out that the appellant was the successful party; that liability had been denied and the appellant succeeded in establishing liability; no offer had been made; and moreover the issues on which the appellant lost at trial were not causative of significant extra costs and there was in the appellant's grounds of appeal no finding of serious misconduct.
3. The judge gave a substantial extempore judgment on the issue of costs, on which argument was heard on the date following the handing down of judgment. The judge had adjourned the matter and no doubt it was hoped that the parties would be able to come to some agreement. Nothing turns on that. They did not come to an agreement, and the matter had to be the subject of a separate period. The judge explained the nature of the accident and had attached importance to the cost of the hire. The judge was critical of the approach of the hire company, which she said was driving the litigation. That is a finding of fact against which there is no appeal and indeed none of her findings of fact in this costs judgment are the subject of appeal.
4. The appellant had through the conduct of the litigation, driven as I say by the hire company, pursued a claim which the judge described in paragraph 6 of her judgment as "grossly exaggerated". She pointed out that, at the end of her judgment on liability, and dealing with quantum, she had expressed a provisional view that on the judgment on liability the appellant should pay 50 per cent of the defendant's costs, but having heard argument she fairly accepted that the appellant was the winner and that he should not be ordered to pay costs, and she referred also to the decision of this court in Parkes v Martin CAP [2009] EWCA 883 in which this court held that, in determining the incidence of costs, it was wrong to award simply that percentage of costs which was equivalent to the percentage of the total claim for damages which had succeeded. In addition, the judge took into account that there had been no offer by the defendant, that is, the respondent in this court.
5. The respondent, indeed, argued that he was the winner and that he had only lost on the question of driving too fast, resulting in a 35 per cent share of liability, and that he should be treated as if he had put in a counterclaim. The judge accepted that the defendant should be treated as if he had put in a counterclaim. The judge went on to say and to hold that the appellant should have realised that the claim was grossly exaggerated and that, if the claim had not been grossly exaggerated, the case could have been dealt with on the fast track.
6. The judge held that, while this case was similar to Parkes v Martin, in that case there was no criticism of the conduct of the claimant and, as I have said, she held that it would be artificial to treat the absence of the counterclaim as making a critical difference. The determining factor, in the judgment of the judge, was that the litigation had been run as a commercial enterprise by the hire company. The hire company had failed properly to scrutinise the claim. The relevant paragraph of the judgment is paragraph 26 on page 37 of the appeal bundle:

"At the end of the day, though, the fact is that I have formed the clear view that the prosecution of this case by the claimant – in reality, as Mr McTague submits, this is by the credit hire company – has been conducted with an attitude which is that of a commercial enterprise, seeing the conduct of litigation as a revenue earning exercise and with a readiness to take its chances on that basis rather than with a more dispassionate and responsible attitude to the the principles of the correct conduct of litigation. I find that this was the reason why there was really no attempt made, either to mitigate the losses supposedly accruing to Mr Abbottt, or, indeed to give a rigorous consideration to the soundness of his claim for credit hire charges, and whether, and in what amount, this should be pursued against the defendant, as opposed to being conducted rather in the credit hire company's commercial interests, and applying the commercial considerations of opportunity exploitation to its pursuit. That strikes me as a very significant matter of conduct in cases of this kind, because it is obviously heavily to be discouraged that issues of mitigation of damages should be approached without due regard for principle and only on the latter kind of basis. This can only tend to increase litigation and to put unfair and unreasonable pressure to opposing litigants."

7. The judge set out her overall conclusion at paragraph 28:

"The overall conclusion I have come to therefore, on hearing the arguments on both sides, is that the order I should make in these circumstances is that there be no order as to costs. I do so particularly because of the balance between the following two principal considerations. On the one hand Mr Williams points out that once it was accepted by Ms McTague that in fact, there would at least have had to be a fast track trial in any event, and where his client has made some recovery as a result, it is extremely difficult to justify any order requiring Mr Abbott to pay any costs to Mr Long. On the other hand, owing to the way in which the matter has been conducted on the part of Mr Abbott, without, as I see it, any proper regard for Mr Abbot's duty to seek to mitigate his loss or to keep his expenses to an appropriate level for someone spending his own money rather than someone else's, and where the defendant has had a significant measure of success both in resisting that last point in particular, and also establishing a measure of liability which shows that Mr Abbott was vulnerable to a potential cross claim, I also do not consider it right that Mr Long should pay any costs to Mr Abbott."

8. In substance, the judge found that there were three factors: firstly, there had to be a trial because there was no offer; secondly, the conduct of the claimant had failed to show proper regard for the duty to mitigate and to keep expenses to an appropriate level; and thirdly, the defendant had had a significant measure of success both in resisting the claim for credit hire and also in establishing a division of liability, which shows that Mr Abbott was vulnerable to a cross-claim. So the order made by the judge was that there should be no order as to costs.
9. The respondent has put in a skeleton argument, but we have not called on Mr Clarke, who appears for the respondent. The respondent made an application to put in fresh evidence, which we have not heard, and on which we will make no order. The starting point must of course be CPR 44.3. Subrule (1) says that the court has a discretion as to whether costs are payable by one party to another and as to the amount of those costs, and when they are to be paid. Then subparagraph (2) of the rule states that, if the court decides to make an order as to costs, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but that the court may make a different order. Then at subrule (4) there appears the following rule:

"(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.

(5) The conduct of the parties includes –

(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction (Pre-Action Conduct) or any relevant pre-action protocol;

(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(c) the manner in which a party has pursued or defended his case or a particular allegation or issue; and

(d) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim."

10. We of course are looking at this matter as the Appeal Court, and in this court, as Mr Williams has plainly accepted, he has to show that the judge, in making that decision that there should be no order as to costs, erred in principle or was perverse. As Wilson LJ put it in SCT Finance v Bolton, in a passage cited by Mr Clarke in his skeleton argument at page 55 of the appeal bundle:

"This is an appeal...in relation to costs. As such it is overcast, from start to finish, by the heavy burden faced by any appellant in establishing that the judge's decision falls outside the discretion in relation to costs... For reasons of general policy, namely that it is undesirable for further costs to be incurred in arguing about the costs, this court discourages such appeals by interpreting such discretion very widely."

The respondent has also cited in his skeleton argument a passage from the judgment of Waller LJ in Straker v Turner Rose on the practice of this court in relation to interfering with discretion:

"It is well known that this court will be loath to interfere with the discretion exercised by the judge in any area, but so far as costs are concerned that principle has a special significance. The judge has the feel of a case after the trial, which the Court of Appeal cannot hope to replicate, and the judge must have gone seriously wrong if this court is to interfere."

As I have already indicated, the issues at trial were liability. But it is not now contested that the respondent should pay 25 per cent of the damages. There was no offer by the respondent. There was an issue as to whether the appellant had properly mitigated his loss at the trial, and that is dealt with in the way that I have indicated.

11. On this appeal, Mr Williams has said that the starting point was that his client was the winner, and that therefore he was entitled to his costs. He quoted a passage from Longmore LJ's judgment, which is cited in Widlake v BAA [2009] EWHC Civ 1256, that the court should look to see who has to pay as a result of the judgment and undoubtedly that was going to be the defendant. He also submits that this is a case where there was always going to be a trial, because there was no offer and that was a point which the judge accepted: see paragraph 28 of her judgment set out above.
12. In addition, Mr Williams submits that this was a case where the exercise of discretion by the judge would have been unassailable if it was a case of reducing the entitlement to costs, because of the issue on mitigation which the appellant had lost. He submits that no reduction should have been made on the grounds of contributory negligence, because that caused no distinct costs on the particular facts of this case.
13. On that latter point, I am prepared to proceed on the basis that the contributory negligence issue caused no distinct costs and that any reduction there would have been would have been of the most minimal kind on account of contributory negligence. There is no general rule that there can be no reduction in any circumstances where there has been a claim for contributory negligence. It must all turn on the facts. But the principal ground which there would have been in this case for reducing the costs of the appellant at the trial below were undoubtedly the fact that a claim had been made for credit hire of £48,000, which in the course of the trial was reduced by the concession that a replacement car could have been purchased in the course of the hearing from June 2008 to December 2009, thus severely reducing that claim; and that I take to be the principal ground, and really the only relevant ground, of a reduction in the entitlement as to costs.
14. Going on from that, Mr Williams submits that this is a case where that reduction in costs was simply a result of a forensic misjudgement. There was a concession in the course of the trial, as I have explained. This is not a case, therefore, where there was dishonesty or a concocted claim. At this point, Mr Williams took us to Widlake v BAA Limited, a case referred to already, at paragraph 41, where Ward LJ, with whom Smith and Wilson LJJ agreed, on an appeal as to costs where the claim had been greatly exaggerated, and indeed an offer had been made, Ward LJ held this:

"In addition to looking at it in terms of costs consequences, the court is entitled in an appropriate case to say that the misconduct is so egregious that a penalty should be imposed upon the offending party. One can, therefore, deprive a party of costs by way of punitive sanction. Given the judge's findings of dishonesty in this case, that may be appropriate here. I sound a word of caution: lies are told in litigation every day up and down the country and quite rightly do not lead to a penalty being imposed in respect of them. There is a considerable difference between a concocted claim and an exaggerated claim and judges must be astute to measure how reprehensible the conduct is."

15. Taking up the invitation of Ward LJ there, it seems to me important that this court should consider what the judge said about the reprehensible nature of the conduct and to what extent the judge was saying it was reprehensible. Going back to paragraph 26, which I have set out above, the kernel of the judge's point as it seems to me was that this was a hirer who was a serial litigant, who ought to have systems in place to ensure that claims which are only properly capable of succeeding are pursued. Of course that is not the same as dishonesty and Mr Williams is quite right to make a submission that it is not. But it is still blameworthy conduct or, to use Ward LJ's term, it is still conduct which the judge is capable of finding to be reprehensible. To take a further argument advanced by Mr Williams, he submits that the nature of that conduct has been fully taken into account in the order made at trial for the payment of damages. But if that were so, that would turn the costs jurisdiction on its head and of course it has been taken in account in relation to damages, but it may also be taken into account in relation to costs as well.
16. That leads to the next point. As I see it, therefore, the criticisms made by the judge of the conduct of the appellant were well outside that of a misjudgement. It amounted to a finding of blameworthy conduct in relation to the conduct of the litigation. To that, Mr Williams submits that the judge has to be satisfied that it is proportionate to deprive a party of costs which it cannot be said were caused by its conduct; in this case, as I have already explained, if the judge was entitled to make the reduction of costs in relation to the failure on duty to mitigate. But on the question of a deprival of costs on the grounds of misconduct, there is undoubtedly jurisdiction: see, for example, paragraph 41 of the judgment of Ward LJ in Widlake v BAA See also paragraph 25 of my judgment in Walsh v Singh [2011] EWHC Civ 80:

"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."

In that passage, I make it clear that if the court is going to deprive a party of costs on the grounds of misconduct which has not been causative of a waste of costs, it should be satisfied that that sanction is a proportionate sanction.

17. I now return to paragraph 28 of the judge's judgment, and as I see it the judge took a basket of factors in making her decision on no order. She accepted the point that there had been no offer and that was a point undoubtedly in the appellant's favour that there had to be a trial, so that in the normal course of events, had there been nothing further to take into account, the appellant would have obtained his costs. As it was, it was open to the judge to reduce them on account of the inflated claim of credit hire car charges, and that is the point which the judge thirdly recognises in paragraph 28. But the second point is the way the matter was conducted by Mr Abbott, without, as she says, proper regard to Mr Abbott's duty to mitigate his loss or to keep his expenses to an appropriate level for someone spending his own money rather than someone else's. That brings in all that she has said in the earlier part of her judgment by way of strongly-worded criticism of the conduct of the claim. She had said that the claim was grossly inflated, and in paragraph 26 had gone into some detail why she considered that the conduct of the claim was reprehensible.
18. In those circumstances, I do not consider that the appellant can overcome the standard that is required on a costs appeal of showing that the judge was not entitled to reach this conclusion. It is a carefully reasoned judgment. There are a basket of factors, and she was undoubtedly entitled to take into account the conduct which she had carefully described and of which she had marked her clear disapproval. In those circumstances, in my judgment, there is no basis for saying that this order was disproportionate. She was clearly only dealing with a proportion of the costs on the pleaded basis, and that proportion cannot in my judgment be said to have been a disproportionate sanction to which the judge was not entitled to impose.
19. For all those reasons, I would dismiss this appeal.

Lord Justice Patten:

20. I agree.

Lord Justice Sullivan:


21. I also agree.

Order: Appeal dismissed.