England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BIRMINGHAM CIVIL JUSTICE CENTRE
(HIS HONOUR JUDGE PLUNKETT)

		Royal Courts of Justice Strand, London, WC2A 2LL
		11th October 2012

Lord Justice Lewison:

1. On 7 April 2011 HHJ Plunkett gave judgment dismissing Mr Edginton's claim against Mr and Mrs Sekhon for professional fees arising out of his retainer as their solicitors. The number of that action ended in 667, and that is how I shall refer to it.
2. The Sekhons had retained Mr Edginton to deal with the grant of a lease by them to a Mr Davis. Unknown to them, Mr Edginton was also advising Mr Davis; and it was that conflict of interest which the judge found disentitled him from recovering his fees. The defence to the claim had pleaded, amongst other things, as follows:

"8. Without the consent of the Defendants and in breach of his retainer, the Claimant proceeded to act also for Mr and Mrs Davis in the transaction. Mr and Mrs Davis were not existing clients of the Claimant. They had moved to Birmingham from Cornwall.

9. In the premises there was a clear and actual conflict of interest in the Claimant acting for the Defendants and acting for Mr and Mrs Davis in the matter of the proposed lease of the premises. In so doing the Claimant was in breach of his fiduciary duty to the Defendants in addition to being in breach of his professional obligations under the Solicitors Practice Rules."

3. The defence went on to allege in paragraph 13 that:

"In breach of implied terms…and/or negligently the Claimant failed to carry out the Defendants' instructions as a result of which there was a delay in completing the lease of three months costing the Defendants over £13,000 in lost rent."

4. In his judgment on liability the judge was very critical of Mr Edginton's record-keeping. He said in paragraph 3 of his judgment:

"a. One of the surprising features of this case is the dearth of file notes, memoranda, or confirmatory correspondence (that is, correspondence confirming conversations between client and solicitor) in Mr Edginton's file.

b. The result has been that all involved have been trying to recollect events of some eight years ago, significantly unassisted by the sort of material one might usually expect to exist in such circumstances. Mr Edginton told me, at the conclusion of his evidence that he 'found it very difficult to know what took place where and when' and that, consequently, he had 'to look at things and form a view' as to what had happened."

5. The claim was originally allocated to the small track, but during the course of its progress through the system a trial estimate of one-and-a-half days was given to it, which would suggest that it was no longer on the small track; but ultimately it was re-allocated to the multi-track in October 2010. At that point the pleadings were amended to introduce a counterclaim against Mr Edginton. That counterclaim simply repeated the defence and then introduced some particulars of loss and damage.
6. The parties were required to make disclosure of documents, and we have seen the disclosure statements produced by each party. Mr Edginton did not disclose the lease. Mr and Mrs Sekhon did disclose it, in the sense that they revealed its existence, but they said that they were awaiting a copy of the lease from Mr Edginton. What seems to have happened is that Mr Davis, the tenant who had been required to appear to give evidence in response to a witness summons, produced a draft lease at the trial itself; and it was as a result of seeing that draft lease that the counterclaim was abandoned on the morning of the trial. The judge was understandably critical of Mr Edginton who he said did not have a copy of the lease.
7. When the judge came to consider the question of costs there were three other actions that he was invited to take into account. These actions also arose out of the Sekhons' retainer of Mr Edginton as their solicitors. Two of them related to dealings of 25 Wildmore Lane. Mr Edginton had acted for the Sekhons between 2000 and 2003, although he did not deliver a bill until 3 October 2008. In response to that bill, the Sekhons began two actions. The first, referred to as 164, was an application under Section 70 of the Solicitors Act 1974 for the bill to be taxed. That action was begun on 7 November 2008. The second, referred to as 262, was a claim by the Sekhons against Mr Edginton for professional negligence arising out of the same transaction. That action was begun on 11 March 2009. One of the matters pleaded by Mr Edginton in his defence to that action was that the Sekhons' claim was statute barred. Mr Edginton had also acted for the Sekhons in relation to a dispute with a Mr Baines. Again Mr Edginton had performed his retainer between 2000 and 2003 and again did not deliver his bill until 3 October 2008.
8. The third action was another application under Section 70 of the Solicitors' Act 1974 for the bill to be taxed. This application was referred to as 165. At some stage 164 and 165 were consolidated and proceeded together.
9. On 11 April 2011, after the judge had given judgment in claim 667, the Sekhons discontinued the remaining claims. The final background fact that must be mentioned is an offer of settlement made by the Sekhons' solicitors, Thomas Horton LLP, on the 17 March 2009. It was headed "Part 36 offer without prejudice save as to costs". The letter summarised the then current position. First, there was an outstanding costs order against Mr Edginton in the sum of £2,562.43. Second, there was an outstanding costs order in favour of Mr Edginton, the net effect of which was that Mr Edginton owed the Sekhons £1,637.47 in outstanding costs. Third, there had been a default judgment for £3,600.25, but that default judgment was in 667 and was ultimately set aside resulting in the judge's dismissal of the action, which I have mentioned.
10. The letter also referred to another claim relating to 25 Wildmore Lane claiming £9,475 and pointed out that the claim in relation to costs on the Baines matter, that is 165, was statute barred. The letter continued:

"Notwithstanding the undoubted merit of our client's position as against you, we are instructed that in order to bring all these matters to conclusion our clients are prepared to accept the drop hands settlement. All the proceedings between our clients and you at the present time are to be discontinued by consent with each party paying their own costs and the matter resolving itself in this way. By proceedings we mean the Section 70 Solicitors' Act application currently before the Birmingham County Court under number 8 BN 90165, the proceedings under number 9 BN 00667 in the Birmingham County Court, the proceedings under number 9 RDOO 262 in the Redditch County Court. This is an offer within the meaning of Part 36 of the Civil Procedure Rules and is open for acceptance by you for a period of 21 days from its receipt by you."

Mr Edginton's response to that letter, some two days later, was to insist that the judgment be satisfied and was a refusal to negotiate.

11. This court held in Mitchell v James [2002] EWCA Civ 997 [2004] 1 WLR 158 that an offer to settle which sets out its own costs consequences could not be a Part 36 offer. Nevertheless, it remains a valid offer to settle which the court must take into account, although it does not carry with it the special costs consequences of Part 36.
12. The judge was exercising his discretion under the Civil Procedure Rules. He was concerned both with the action that he tried and also with the claims that had been discontinued. The general rules about costs are to be found in CPR Part 44.3, which provide, so far as relevant:

"(1) The court has discretion as to –

(a) whether costs are payable by one party to another;

(b) the amount of those costs; and

(c) when they are to be paid.

(2) If the court decides to make an order about costs–

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order."

13. CPR Part 44.3 sets out cases to which the principles do not apply and then continues in sub rule 4:

"(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; an

(c) any payment into court or admissible offer to settle made by a party which is drawn to the court's attention (whether or not made in accordance with Part 36). (Part 36 contains further provisions about how the court's discretion is to be exercised where a payment into court or an offer to settle is made under that Part)

(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 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."

14. Special rules apply to cases where proceedings have been discontinued. Those are to be found in CPR Part 38.6, of which sub-rule (1) provides:

"Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant."

That rule also applies to the discontinuance of a counterclaim as is made clear by CPR Part 20.2(2)(b).

15. The judge's reasoning can I think be summarised as follows. First, the normal position was that Mr Edginton, having failed in his action, should pay the Sekhons' costs. Second, the position was complicated by the counterclaim which the Sekhons had abandoned at the start of the hearing. However, the reason they did that was that the three months' rent free period had been raised as a new and unpleaded point, and if Mr Edginton had kept adequate records the position would have been clear eight years earlier, rather than having become clear at the door of the court. The judge continued:

"In the circumstances it seems to me, given that I have a broad discretion, albeit one to be exercised judicially, that it would be wrong to award Mr Edginton his costs in respect of the counterclaim."

Pausing there, the judge does not go on to say that he was awarding the Sekhons their costs of the counterclaim. The order he in fact made was that Mr Edginton shall pay Mr and Mrs Sekhons' costs "in relation to 667", but the recitals to the order refer only to the trial of the claim and the dismissal of the claim. One is entitled to take into account the judge's reasons in interpreting the order made pursuant to those reasons, and in my judgment, as a matter of interpretation of the order, the judge was not awarding the Sekhons their costs in the counterclaim He was simply refusing to award Mr Edginton his costs of the counterclaim.

16. The judge continued, fourth, that so far as the discontinued claims were concerned the normal rule would require the Sekhons to pay Mr Edginton's costs, but because Mr Edginton's bills were delivered more than six years, or at any rate not less than five years after his cause of action accrued, the Sekhons' challenge to those bills was entirely justifiable. The litigation, said the judge, was in significant part caused by Mr Edginton's failure to keep proper records and not delivering a bill in due time. Having regard to the offer to settle which the Sekhons had made, they should have their costs of 164, 165 and 667, but there should be no order for costs on claim 262 which had been discontinued.
17. With the permission of Elias LJ, Mr Edginton appeals. His appeal has been very skilfully argued by Ms Philippa Daniels, who came into the case at very short notice and has said everything that could be said on his behalf. There is no doubt that the judge began his consideration on the question of costs from the two correct starting points, both in relation to the costs of the case that he tried and also the discontinued proceedings. The real question is whether he was entitled to depart from those starting points.
18. We must also remember that an order for costs is a discretionary decision. The question is not whether we ourselves would have made the same order as the judge but whether the judge's order was outside the permissible band of discretionary decisions.
19. I begin by considering the offer to settle. As mentioned, it was an offer of a drop hands settlement of all proceedings between Mr Edginton and the Sekhons. Although it did not refer to 164 expressly, that is clearly because that action had already been consolidated with 165. If Mr Edginton has not done better than that offer, then in my judgment the judge would have been entitled to place heavy reliance on that in deciding what order to make and would have been justified in making the order that he did. In the written skeleton argument prepared by Mr Altaras on behalf of Mr Edginton, it was said that it was impossible to say that Mr Edginton had failed to meet the offer because it was still open to Mr Edginton to sue for his fees on two of the bills covered by that offer. Ms Daniels also made that point orally and, in response to a question about the effect of limitation, said that that would have been a matter to be raised by way of defence. It would not have precluded Mr Edginton from starting an action.
20. Mr Brennan appearing for the Sekhons referred us, in his skeleton argument, to the cases of Coburn v College [1897] 1 QB 702. In that case, solicitors carried out work which was completed in May 1889. They sent in a bill in June 1889, but because the client had gone to Australia it did not reach him until 1891. The client returned to England in 1896 and the solicitors began an action against him in June 1896. This court held that the action was statute barred. The solicitors had argued two points: first, that time did not begin to run delivery of the bill; and, second, that if a cause of action accrued on completion of the work time was suspended until a month after the expiration of a reasonable period for delivery of the bill. This court held that the cause of action accrued on completion of the work and that that cause of action became statute barred six years later whether or not the solicitors had delivered a bill.
21. In the present case, when one looks at the bills which are in the trial bundle they show that the work in each case was completed in 2003. Mr Edginton has still not begun an action to recover his fees, and we are now in October 2012. On any view, Mr Edginton's claim for those fees is statute barred, and would have become statute barred by the beginning of 2010 at the latest. During the course of the proceedings the court directed that a preliminary issue be tried. The preliminary issue was whether an action for recovery of the claimed fees would be statute barred. It is plain to my mind that had that issue been determined in those actions it would have been determined in the Sekhons' favour, but in fact the issue has subsequently been determined by HHJ Purle QC on an application to set aside a statutory demand. There is no doubt, therefore, that in 164 and 165 there was no live bill to be investigated. In my judgment, therefore, the judge was entitled to take the view that Mr Edginton had not done better than the offer of a drop hands settlement and that all the proceedings since his refusal of that offer had been a waste of time. He was also entitled to take into account Mr Edginton's conduct. That conduct included not having disclosed the lease which he should have done, not having pleaded the three month rent free period in his defence to counterclaim, and having delayed substantially in delivering his bills. All those factors pointed away from the judge's starting point and were capable of leading him to the decision that he reached.
22. The final point Ms Daniels took was that the existence of a counterclaim caused the case to be re-allocated from the small claims track to the multi-track with the result that the costs regime of the small track ceased to be applicable. Mr Brennan has cast serious doubt on that as a question of fact, looking at the chronology of the overall case; but the fact is that it was not a point taken before the judge, it is not a point taken in the grounds of appeal, and in my judgment, despite the ingenuity with which it was put forward, it is not a ground on which this appeal should be allowed.
23. I consider therefore that the judge's decision on costs was within the permissible bounds of judicial discretion. I would dismiss the appeal.

Lord Justice Rix:

24. I agree. In dismissing the appeal we make it clear that the judge's order is not to the effect of awarding the Sekhons the costs of their counterclaim in 667 but that the effect of the order is that there is no order as to costs of the counterclaim. What effect that may have on the overall costs and on the taxation of the claim remains to be seen, and I hope that after all this litigation the parties will be able to agree any further matters which are best dealt with by agreement rather than by further litigation.

Order: Appeal dismissed