England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(HIS HONOUR JUDGE DAVID COOKE)

		Royal Courts of Justice Strand, London, WC2A 2LL
		22nd February 2013

Lord Justice Patten:

1. This is a renewed application for permission to appeal against a costs order made by Master Haworth on 24 June 2010 as part of a detailed assessment of the costs of some earlier proceedings between the Official Receiver and Mr Rangos. In those proceedings Mr Rangos was successful, and the judge ordered the Official Receiver to pay his costs of the trial, which Mr Rangos estimated were some £139,889. The costs were ordered to be the subject of a detailed assessment. The draft bill of costs in the amount I mentioned was served on the Official Receiver on 1 May 2009, but on 1 July the Official Receiver made an offer to settle the detailed assessment in the sum of £85,000. That offer was an all-in figure to include not only the Official Receiver's costs liability, but also any sums which Mr Rangos was due to be awarded in respect of interest and VAT and his costs of the assessment itself. As far as the costs of the assessment are concerned, Mr Rangos's evidence is that between the commencement of the detailed assessment and the 1 July he had incurred costs of some £23,974.62, which were broken down into legal fees of some £10,985 plus VAT and a cost draftsman's fee for preparing the draft bill of £9,862.50 plus VAT.
2. The costs judge decided at the conclusion of the detailed assessment that it was not reasonable for the Official Receiver to bear all the costs of the detailed assessment notwithstanding that, taking into account interest, Mr Rangos had beaten the offer of 1 July by some £1,176. The costs judge held that it was unreasonable for Mr Rangos not to have accepted the offer because by not doing so there had been a hearing of five days in the assessment proceedings, as a result of which he had achieved no more than some £1,100. As part of the judge's reasoning, he referred in terms to a decision of this court in Carver v BAA Plc [2008] EWCA Civ 412 in which, in the context of CPR Part 36, this court decided, under the terms of the provisions of CPR 36 as they then stood, that the fact that the receiving party had beaten the offer by a relatively small amount should not be regarded as the last word and that it was not automatic that in those circumstances the court would treat the beating of the offer as being a better and more advantageous outcome than the acceptance of the offer would have been. That decision has proved to be controversial, and in a subsequent decision of this court in Gibbon v Manchester City Council [2010] EWCA Civ 726, Moore-Bick LJ has said, again in the context of Part 36, that:

"In a case where the offer has been beaten by a very small amount and there is clear evidence that the successful party has suffered serious adverse consequences as a result of pursuing the case to judgment those factors may be sufficient to outweigh success in pure financial terms, but in my view such cases are likely to be rare. In most cases obtaining judgment for an amount greater than the offer is likely to outweigh all other factors."

3. The first appeal against the costs judge's decision came before HHJ Cooke, sitting as a judge of the Chancery Division on 24 April 2012, when the judge upheld the costs judge's decision on the basis that it fell within the ambit of his discretion under the relevant rules which in this case the case of a detailed assessment are not Part 36 but CPR rules 47.18 and 47.19. Those rules make it clear that the receiving party is entitled to the costs of the detailed assessment except where the court makes some other order in relation to all or part of the costs of the detailed assessment proceedings (see CPR 47.18(1)(b). CPR 47.18(2) states that:

"In deciding whether to make some other order, the court must have regard to all the circumstances, including –

(a) the conduct of all the parties;

(b) the amount, if any, by which the bill of costs has been reduced; and

(c) whether it was reasonable for a party to claim the costs of a particular item or to dispute that item."

CPR 47.19 provides in terms that:

"Where –

(a) a party … makes a written offer to settle the costs of the proceedings which gave rise to the assessment proceedings; and

(b) the offer is expressed to be without prejudice save as to the costs of the detailed assessment proceedings, the court will take the offer into account in deciding who should pay the costs of those proceedings."

4. There is no doubt that the costs judge was entitled to take into account the fact that the Official Receiver had made the offer of 1 July and the fact that, as a result of the reduction in the amount of the claim for the costs of the underlying proceedings to some £86,176, Mr Rangos had beaten that offer by only a relatively small amount. But the difficulty about the costs judge's judgment and reasoning is that he states in terms that he was going to, as he puts it, apply the principles of Carver v BAA. There is no reference in his judgment to the subsequent decision of this court in Gibbon v Manchester City Council and it is not clear to me that he was in fact referred to it.
5. What is more, the costs judge does not, at least in terms in considering the various factors that he refers to as part of the exercise of his discretion under CPR 47.18 and 47.19, refer to the fact that, in deciding whether or not the £85,000 was a reasonable offer, it was necessary to factor in not merely whether it was a reasonable offer in relation to the costs of the underlying proceedings (i.e. the £139,889), but also whether it was a reasonable offer, having regard to the fact that it was intended to include the costs of the detailed assessment itself which by then were already in excess of £20,000. Not only does the costs judge not appear to take that into account, but there is no reference to it in the judgment of HHJ Cooke upholding the costs judge's decision notwithstanding that the point is taken as a part of Mr Rangos' Grounds of Appeal.
6. Lewison LJ refused permission on the papers because he said that, on a fair reading of the costs judge's decision, the judge had done no more than to take the decision in Carver into account. And I think it is at least arguable on a fair reading of that judgment that the costs judge did rather more than that and that it was not appropriate for him to have relied on that decision without also taking into account what this court subsequently said in Gibbon. Moreover, the existence of the £23,000 worth of costs which even after assessment were payable in the sum of some £10,000 seems to me to take this case outside the principles of Carver and also to be something that was highly material to the question of whether or not Mr Rangos could be said to have acted unreasonably in refusing to accept the offer.
7. For those reasons, it seems to me that there is here a prospective appeal which has some real prospect of success. That, of course, is not the end of Mr Rangos's difficulties because I also have to be satisfied, bearing in mind that this is a second appeal, that this is a case which raises either a point of principle or some compelling reason why permission should be granted. But, in this particular case, I think it does raise a point of principle in the context of CPR 47 as to what is the correct approach where an offer is made but beaten in these sort of circumstances, and in any case I think the apparent failure of the courts below to take into account the approved offer of costs in relation to whether it was reasonable to accept the offer does provide a compelling reason in itself why permission should be granted.
8. So, for those reasons, I will grant permission to appeal.

Order: Application granted.