England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL ( CIVIL DIVISION )
ON APPEAL FROM BIRMINGHAM DISTRICT REGISTRY
(HIS HONOUR JUDGE BARKER QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		15th February 2012

Lord Neuberger:

1. This is an appeal brought by the defendant, Mr Likoth Ali, in relation to two orders made by HHJ Barker QC, sitting as a judge in the High Court in the Chancery Division in the Birmingham District Registry on 3 August 2011. The order arose out of two hearings which had taken place about a number of issues connected with a partnership dispute between Mr Ali and the claimant, Shamsul Hoque. Mr Hoque's action was for an account on the dissolution of a partnership between the parties which had been established since November 2003 for the purpose of owning and running an Indian restaurant in Kingswinford.
2. The existence, terms and determination of the partnership were originally all matters of dispute between the parties but those issues were compromised by a settlement in November 2007. Following the settlement, directions were given in December 2008 for taking accounts. What then happened was a series of procedural disputes resulting in, according to the judge, applications to the court on average every six weeks. Eventually the case came for full hearing before HHJ Cooke, sitting as a deputy judge, on 9 August. After a four-day hearing he gave a full and careful judgment on 17 August. We have been provided with a copy, although it does not really bear very much on the very limited issues which we have to decide because today's appeal concerns an order made by HHJ Barker six days before the appeal came on.
3. Para 1 of that order relates to an application dated 7 June 2011 by the claimant to strike out the defence on the grounds that the defendant had not complied with an order for disclosure. HHJ Barker gave a direction which is reflected in paragraph 1 of the order drawn up the next day. Para 1(1) of the order gave the defendant "a final opportunity to disclose documents", which was to be effected by the claimant serving a list of all further documents which he contended should have been disclosed by the defendant, by close of business on 4 August; by close of business on 5 August, the defendant was to reply. HHJ Barker further ordered in para 1(2) that any failure on the part of the defendant would result in adverse inferences against him. The defendant's first, and less heavily pressed point, was that para 1(1) of the order was inappropriate.
4. The main dispute between the parties concerns the order for costs HHJ Barker made in that connection. Paragraph 1(3) of the order was in these terms:

"the costs of the Claimant's application up to and including the hearing on 3 August 2011 are to be the Claimant's costs in the case [and the costs of compliance were to be the claimant's in any event]'.

5. I interpose to make one point. If that order stands, so that the costs to the claimant of preparing and serving a notice listing all documents are to be the claimant's in any event, any assessment must be made taking account the overriding requirement of reasonableness. I mention that because the defendant says that the claimant served a list which was completely disproportionate, far too long and referring to many documents which, if he had bothered to check, had already been disclosed. I make no findings as to whether there is anything in that, but it is only right to mention that, if the order for costs stands, then it is of course subject to the overriding requirement of reasonableness. No doubt, if the costs cannot be agreed (and the chances are that they cannot, because nothing has been agreed in this case), that is something which the costs judge would have to take into account.
6. Be that as it may, it is said by the defendant that the Judge's order for costs was inappropriate, in that it was too generous to the claimant. Mr Duddridge, who has made his submissions economically and clearly, contends that the order for costs should either have been in the defendant's favour or, at least, the judge should have made no order for costs. His first reason is that the application was unreasonable, because, if the claimant had checked, he would have seen that the great majority of documents had been disclosed already. Four rounds of disclosure were effected by the defendant, the most recent being on 16 June and 6 July, both after the claimant's application had been issued.
7. Secondly, he says that the application was far too aggressive, in that it was completely unreasonable to seek to debar the defendant from defending. Thirdly, he says that it was premature because the claimant had written to the defendant giving the defendant until 16 June to give disclosure, and it was on 16 June that the third list was provided: this, he contends, means that the application should not have been issued on 7 June as it was. Fourthly, he says that the defendant had been adopting a reasonable approach and a co-operative approach to disclosure, which also underlines the unreasonableness of the application.
8. There is obviously some force in all these points and, no doubt, insofar as they were put to the judge, he would have had them in mind. It is fair to say that he did not refer to all of them in his judgment, but, particularly in an interlocutory application, it is unsurprising if the judge does not refer to every point that weighs with him.
9. The approach the Judge adopted, according to his judgment, was to take as his starting point the fact that the defendant had adopted an attitude to disclosure which did not comply with the CPR or the court's directions, explaining that the defendant had not provided a proper disclosure list and that, even after a second list of documents had been provided, the defendant was still in breach of his obligations. That breach resulted in the third list of 16 June; the documents in that list being disclosed late because they had been with a joint expert appointed by the court. As the Judge said, that does not mean that, as between the defendant and the claimant, the defendant was not to blame. Furthermore it appears that there was some fault in this connection on the part of these defendants' accountants.
10. In all those circumstances the Judge said that "but for one twist" the outcome of the application would be straightforward. The twist, as he explained, was a point I have already mentioned, namely that the claimant had written aletter apparently giving the defendant until 16 June to give disclosure, but then had issued the application on 7 June.
11. The Judge considered various grounds that were put forward to justify this. The first ground he described as "putting matters too high", which implies to me that he thought there was something in it but not much. The second ground he said has "no great substance", which conveys the same message. As to the third ground, he said it could be overcome, so he did not think much of that ground either. But he then went on to say, there was the point that there were some documents which had not been provided by the defendant. We were told by Mr Duddridge, that the documents specifically referred to by the Judge, a life insurance policy and a pension policy, had in fact been disclosed. However, it does appear clear from the fact that further disclosure was given on 6 July, that, even after 16 June, there were some documents that were missing. So the judge did not make a mistake of substance, even if the specific documents he mentioned were not in point. It also appears quite clear from HHJ Cooke's judgment that there were a lot of documents which were in fact not disclosed by the defendant, which had either disappeared or been kept back (see paragraphs 54 to 57 of the judgment).
12. In all those circumstances the Judge said that, although the application was premature, it:

"fairly reflects the difficulties experienced by the claimant in relation to disclosure as ordered by me, the point of which was to establish the extent and reliability of the record keeping of the partnership under the control of the defendant and the later business carried on by the defendant so that the Trial Judge could make findings in relation thereto"

He therefore concluded that:

"...whilst premature, nevertheless it was not entirely unreasonable for the claimant, bearing in mind the imminence of the trial, to have sought to accelerate and bring to an end the issues over disclosure."

13. He therefore made the order which I have referred to and concluded on the issue of costs :

"...the claimant should never have been at risk of having to pay the defendant the costs of this application or the disclosure that is given consequent upon the application, and therefore the appropriate order will be the claimant's costs in the case in relation to this."

14. So he did not give the claimants their costs unreservedly. He gave them their costs in the case, i.e. if they won the case they got those costs, and if they lost the case, they would not get those costs. In the event HHJ Cooke gave the claimant a third of his costs and Mr Duddridge suggests that the consequences are that they will get a third of the costs referred to in the passage I have just read from the judgment of HH Judge Barker. We have not heard on this point from Mr Uddin. But it seems to me to be correct as the costs order made by Judge Cooke prima facie, at least reflected the claimant's degree of success.
15. I would hold that HHJ Barker's orders (i) as to disclosure and (ii) as to costs were both within the ambit of his discretion. The order for disclosure in para 1(1) of the order was not only within the ambit of his powers, but its appropriateness was borne out by the subsequent history – disclosure of fresh documents on 16 June and again on 6 July, and adverse findings n the defendant's disclosure by HHJ Cooke at trial.
16. As to the costs allocation in para 1(3) of the order, judicial views may legitimately differ as to what costs order to make on difficult questions relating to a disclosure application shortly before trial, and such an order seems to me to be pre-eminently a matter for the judge hearing the application. While I see the force of Mr Duddridge's argument, and it could be said that the Judge's costs order was somewhat harsh on the defendant, the order that he made well within the ambit of his discretionary powers. He was faced with a case that was clearly in danger of being derailed shortly before trial. He was faced with a case where the defendant had not given full disclosure as a matter of fact, and where the defendant had not properly complied over a significant period with his disclosure obligations, a view amply supported by HHJ Cooke's judgment after hearing the case for four days. It seems to me that in those circumstances it was not inappropriate to make the order that he did in relation to disclosure or the order for costs that he made.
17. It frequently happens that an order for costs made by one judge in certain circumstances is different from the order another judge would make in the same circumstances. That is because costs often involve balancing various factors, and forming a value judgment. Further, the judge has been involved in the case, and therefore knows much more about it and the nuances of the case than an appellate tribunal. Also, the judge is often in a position where he has to give an ex tempore judgment under some pressure, so it is particularly hard for him to refer to all the factors that weighed with him. An appellate court should therefore be particularly slow before interfering with any such order. Of course, there comes a point where this court has a duty to interfere, but it should only do so where the judge has plainly gone wrong in principle. In this case, as I say, the furthest one can go is to say that other judges might have taken a more generous view of the defendant than this judge did but that is no ground for an appeal succeeding.
18. I would therefore dismiss the first two grounds of appeal which relate to paragraph 1 of the order made by HHJ Barker, the first ground in relation to the disclosure, the second ground in relation to the costs order.
19. The third and final ground of appeal relates to paragraph 2 of the order, by which the judge ordered that, in relation to an application which he had heard on 28 April 2011, the costs which he had reserved at that hearing "are to be the defendant's costs in the case". In relation to that Mr Duddridge contends that the costs should have been the defendant's costs outright. It appears clear what the Judge's reasoning was in relation to the costs. He said that the defendant was contending that:

"19. ...the claimant pays the costs of the hearing before me on 28 April, which costs I had to reserve on that day because I think we ran out of time... In my judgment, that hearing was largely caused by the claimant's failure to prepare and attempt to agree the hearing index for the hearing on 9 May within the time constraints that had been set...

20. In my judgment, the claimant cannot blame the defendant for non-cooperation. However, I should not overlook the fact that on that day the defendant was himself in default of a costs order for payment of costs I summarily assessed on 25 March and ordered to be paid by 24 April. [I think it is common ground that should be a reference to 21 April]"

The Judge continued:

"That breach of an order should in my judgment in some way sound in this order and therefore the order I make is that the defendant's costs of the application of 28 April should be the defendant's costs in the case"

20. What the judge was saying was this. First, that, but for one factor he would have ordered the costs of the hearing of the 28 April to be paid by the claimant to the defendant. Second, he was in fact going to make a less generous order to the defendant, namely defendant's costs in the case (so that, in the event, he would not get these costs as he was treated as the loser in the case). Thirdly, the reason the Judge was in effect penalising the defendant in this way was because the defendant had failed to pay in time costs in relation to a different application. Those costs, we are told, were about £1,150, which the defendant had been ordered on 25 March to pay by 21 April, and they were in fact paid on 27 April. So in other words the judge was penalising the defendant in relation to the costs of the hearing on 28 April, because the defendant had paid costs in relation to a different application six days late, involving a loss of interest to the claimant in the region of £1 or £2.
21. Although, as I have said, this court should be very slow to interfere with the exercise of a judge's discretion in relation to costs, this was not a proper exercise of his discretion, arguably for two reasons. First, and most clearly, a judge has a very wide discretion as to when it comes to awarding costs, and wide case management powers and powers of sanction. However, it seems to me wrong in principle (save perhaps in the most exceptional case, and I find it difficult to think what they would be) for a judge to penalise one party in costs in relation to a particular application because that party has been late in paying costs in relation to a quite separate application. I am anxious, on this occasion anyway, to stand by the principle of "Never say never", but I do find it difficult to see how as a matter of principle that is right. There is simply no real relationship between the two issues.
22. Secondly, in any event, if there could be circumstances in which such an order was appropriate, it seems to me it was simply disproportionate to have made such an order in the present case. The costs of the 28 April hearing must run into thousands of pounds - we were told the defendant's costs weren the region of £9,000. To justify a coats order which might well have deprived the defendant of, say, £5,000 costs, simply because he had paid £1,150 later than ordered, albeit only six days late, seems to me to require some very special facts. The special facts of this case appear to me to be (i) both parties were in breach of various orders (ii) both parties had frequently brought matters before the court, and (iii) the amount of costs and court time devoted to this case was completely disproportionate (not I am afraid unknown in partnership cases). None of those facts justify the order the Judge made.
23. If the judge was to justify taking the course he did on the grounds of proportionality it really would have required more reasoning, by reference to other specific facts, than that which he gave in the present case. I am very reluctant to impose on judges, particularly on difficult hearings on busy days, a burdensome duty to explain their reasoning. However, but if the Judge in this case was going potentially to deprive a party of some £5,000 costs because of a very small failure in relation to a different matter, it required him to give some clear and cogent reasons to explain why that was justified. No explanation was given by the Judge. Mr Uddin, save for saying that this was a matter of discretion, has not explained or justified the decision.
24. In those circumstances, with some reluctance, I conclude that Mr Duddridge has made out his case on para 2 of the Judge's order, and to that extent I think this appeal should be allowed.

Lord Justice Carnwath:

25. I agree.

Lord Justice McFarlane:

26. I also agree.

Order: Appeal allowed in part.