England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BRADFORD COUNTY COURT
HIS HONOUR JUDGE GOSNELL
3YJ68926

		Royal Courts of Justice Strand, London, WC2A 2LL
		26th February 2015

Lord Justice Kitchin:

1. This is an appeal by the claimant, Mrs Conlon, against the order made by His Honour Judge Gosnell on 11 July 2014 in the County Court at Bradford upon her appeal against the order made by Deputy District Judge Greenwood on 7 February 2014. There is also before the court an application by Mrs Conlon for an order that this case be re-allocated from the small claims track to the multi-track. As I shall explain, the only live issue between the parties concerns the costs of the proceedings, and it is Mrs Conlon's desire to recover her costs that lies behind her re-allocation application.

The background

2. In February 2014 Mrs Conlon was driving her Mini motor car when, through no fault of her own, she was involved in a motor accident. She hired a replacement car on credit hire terms from Accident Exchange Limited ("AEL") for period of 87 days at a daily rate of £72 (excluding VAT) while her own vehicle was being repaired. In these proceedings she sought to recover the costs of that hire, amounting in total to £7,660.80, from the defendant, Royal and Sun Alliance Insurance plc ("RSA"), the insurer of the driver at fault.
3. In the course of the hearing before the deputy district judge it emerged that Mrs Conlon was comprehensively insured at the relevant time. It seems that at this point the deputy district judge formed the opinion that she ought to have made a claim on her own insurance policy and that by failing to do so she had failed to mitigate her loss. He considered this significantly reduced the period of hire for which she was entitled to recover and expressed the view that a reasonable period of hire was 28 days rather than the 87 days in respect of which the claim was made. Having expressed this view, he invited the parties to try and agree a daily hire rate properly recoverable by Mrs Conlon by way of damages. When it was intimated to him that no such rate could be agreed, he invited counsel for each of the parties to propose a figure. They duly did so, with counsel for Mrs Conlon proposing a daily rate of £65, and counsel for RSA proposing a daily rate of £55 (both including VAT). He then split the difference between them and so awarded Mrs Conlon damages based upon a daily rate of £60 (including VAT) for the hire period of 28 days at which he had earlier arrived.
4. On appeal to Judge Gosnell it was argued on behalf of Mrs Conlon that the deputy district judge had erred in principle both in his approach to mitigation and as to the appropriate daily hire rate. The judge agreed. He found that the deputy district judge had fallen into error in saying that Mrs Colon had failed to mitigate her loss by failing to claim on her own insurance policy, and that she was entitled to recover damages in respect of the whole 87 day hire period. He also held the deputy district judge had fallen into error in calculating the recoverable basic hire rate ("BHR") because he had failed to apply the principles explained by this court in Pattni v First Leicester Buses Ltd; Bent v Highways and Utilities Construction Ltd and anor [2011] EWCA Civ 1384, [2012] Lloyd's Rep IR 577. He then proceeded to determine the appropriate BHR for himself and arrived at a figure of £56.15 (including VAT), that is to say a rate just a little higher than that proposed by counsel for RSA before the deputy district judge.
5. Mrs Conlon thereupon sought permission to appeal to this court against the judgment and order of Judge Gosnell on the grounds that he too had erred in principle and that he ought to have found that RSA had failed to discharge the burden of showing that the BHR was lower than the contractually agreed credit hire rate. Permission to appeal was granted by Lewison LJ on the papers by order dated 27 October 2014.
6. In about mid-December 2014 the parties were notified that this appeal had been listed for hearing in January 2015 together with the appeal in Case B2/2014/1166 Karl Stevens v Equity Syndicate Management Ltd, for they both raised issues concerning the approach to be adopted to the determination of the BHR. Then, on 19 December 2014, Mrs Conlon issued an application for an order pursuant to CPR Rule 26.10 that these proceedings be re-allocated from the small claims track to the multi-track and that such re-allocation be backdated to the commencement of the appeal.
7. At about the same time, by letter from its solicitors dated 23 December 2014, RSA notified Mrs Conlon that it had decided that it did not wish to contest the appeal in light of the costs involved and the fact that the appeal in Stevens was progressing to a full hearing in any event. It therefore offered to settle the proceedings on the basis that it would pay in full the sum sought by Mrs Conlon in her claim but that there should be no order as to costs.
8. Negotiations ensued and by letter of 19 January 2015, RSA again reiterated that it was prepared to submit to judgment in respect of the claim but that it did not agree to pay the costs incurred by Mrs Conlon either below or before this court. This was not acceptable to Mrs Conlon and so the appeal and the application for re-allocation came on for hearing before us. At the hearing it was agreed between the parties, as foreshadowed in the correspondence, that the order of Judge Gosnell should be set aside and judgment entered for Mrs Conlon for the sum claimed. Accordingly the only issue which remains to be decided is which party should bear the costs of the proceedings, including this appeal.

Costs and the application for re-allocation

9. Upon this appeal and application Mrs Conlon has been represented by Mr Christopher Butcher QC and Mr Guy Vickers. RSA has been represented by Mr Steven Turner.
10. CPR rule 27.14 provides that, once a claim has been allocated to the small claims track, the court may not order a party to pay a sum to another party in respect of that other party's costs, fees and expenses, including those relating to an appeal, save (so far as relevant to this appeal) such costs as the court may assess by the summary procedure and order to be paid by a party who has behaved unreasonably.
11. Mr Butcher also drew our attention to the decision of this court of 8 July 2014 in Akhtar v Boland [2014] EWCA Civ 943 which makes it absolutely clear that rule 27.14 applies to second appeals. I recognise that, prior to this decision, it may have been generally understood that the rule applied only to first appeals, and the notes to the Supreme Court Practice appear to have supported that understanding. But, since 8 July, that is to say a few days before the decision of Judge Gosnell and some weeks before the filing of the notice of appeal, there can have been no doubt as to the correct position.
12. It follows, and Mr Butcher accepts for the purposes of this appeal, that we cannot make an order for costs on this appeal unless we decide that RSA's behaviour has been unreasonable or we re-allocate the claim to the multi-track pursuant to CPR 26.10. He invites us to find that RSA's behaviour has indeed been unreasonable. He also invites us to make an order for re-allocation and to backdate it to the commencement of the appeal or at least to the date of the application.
13. Mr Butcher's submissions in relation to RSA's behaviour are commendably concise and may be summarised as follows. RSA has failed properly to engage in the appeal process at any point. It chose to argue the claim on both the rate and period issues; it obliged Mrs Conlon (and, in reality, AEL) to pursue a first appeal to overturn an unsustainable decision on the period issue; and then it put Mrs Conlon to the trouble of issuing a further notice of appeal on the rate issue and pursuing all of the steps of a second appeal. At this late stage it has conceded on the issue of liability, yet it seeks to avoid responsibility for all of the costs and expenses Mrs Conlon has incurred. Further, it failed to comply with the court's directions by failing to serve a skeleton or list of authorities by 19 January 2015 and failed even to inform Mrs Conlon's solicitors who would be representing it at the appeal until after 20 January 2015, this being the date set by the court for counsel to produce an agreed bundle of authorities.
14. As for re-allocation, Mr Butcher argues that the need for this only became apparent after the decision in Akhtar. Further, it is appropriate that the case should be re-allocated because this is a highly contentious area of law; RSA deployed a series of unsustainable defences and did so, at least in part, because it thought it would not be at risk as to costs; and both AEL and RSA are substantial companies and the points raised in the appeal were of general importance to both of them and to other companies operating in this field. He continues that, in all these circumstances, it is appropriate that the losing party, here RSA, should bear the costs of the appeal.
15. I find myself unable to accept these submissions, attractively presented though they have been. First, I see nothing unreasonable about RSA's behaviour. The claim was properly allocated to the small claims track and RSA defended it as it was entitled to do. The deputy district judge had a wide discretion as to how he dealt with the hearing and, in accordance with the rules, conducted it in a relatively informal way, no doubt in an attempt to arrive at a just decision but at proportionate cost.
16. Thereafter, Mrs Conlon, supported by AEL, appealed against the deputy district judge's order but at that stage there was no suggestion the appeal was being treated as a test case. Both sides were represented on the appeal by junior counsel and Judge Gosnell appears to have derived a good deal of assistance from the submissions each of them made to him. I certainly detect no criticism of the behaviour of either side in his judgment. As I have indicated, he found that the deputy district judge had fallen into error both in relation to the BHR and the period for which it was recoverable and the effect of his order was to reduce the former but increase the latter.
17. Only Mrs Conlon sought to appeal against Judge Gosnell's order. Permission to appeal was granted by Lewison LJ in late October 2014 and not long thereafter the parties were told that this appeal was to be listed for hearing with that in Stevens. At that point it became clear that this was being treated as a test case. But, as Mr Turner has emphasised, that is not a designation which RSA ever sought. Until that time it had treated the claim in just the same way that it would have treated any other low value claim proceeding in the small claims track. After consideration of its position, it decided that it had no wish to incur the associated costs of engaging further with the substantive issues arising on the appeal and so made the offers to which I have referred. I am satisfied that was a perfectly reasonable and responsible course for it to have taken and I do not believe it can be criticised for so doing. I am prepared to accept that RSA failed to serve a skeleton or list of authorities by 19 January 2015 and failed to inform Mrs Conlon's solicitors who would be representing it at the appeal until after 20 January 2015, but it seems to me that these failures must be seen in the light of the offers it had made and the clear indication it had given that it did not wish to oppose the appeal. In these circumstances the failures, such as they were, do not merit a special award of costs.
18. I turn then to re-allocation. CPR rule 26.10 provides that a court may subsequently re-allocate a claim from one track to another. The costs position following re-allocation is addressed by CPR rule 46.13. This reads:

"(1) Any costs orders made before a claim is allocated will not be affected by allocation.

(2) Where –

(a) claim is allocated to a track; and

(b) the court subsequently re-allocates that claim to a different track,

then unless the court orders otherwise, any special rules about costs applying –

(i) to the first track, will apply to the claim up to the date of re-allocation; and

(ii) to the second track, will apply from the date of re-allocation.

(3) Where the court is assessing costs on the standard basis of a claim which concluded without being allocated to a track, it may restrict those costs to costs that would have been allowed on the track to which the claim would have been allocated if allocation had taken place."

19. I therefore accept that this court has the power to re-allocate this claim from the small claims track to the multi-track. It is also clear that, were we to make that order, any special rules applying to costs of claims proceeding in the small claims track would continue to apply to the claim up to the date of re-allocation, unless we were to order otherwise. It is, I think, implicit in rule 46.13 that the court has the power to order otherwise and so, effectively, backdate the re-allocation for costs purposes, though any court contemplating making such an order would need to be satisfied that there are good reasons for doing so.
20. Nevertheless, in my judgment it is now far too late to make an order for re-allocation in this case. As I have explained, the application for re-allocation was not made until 19 December 2014, some four months after the filing of the notice of appeal. I accept that both AEL and RSA have substantial businesses. But up to that point RSA was entitled to assume that the special costs rule set out in rule 27.14 applied to the claim, including this appeal. It behaved entirely reasonably in conducting its defence as it did and it had no reason to suppose a special order would be made against it. Just a few days later, it indicated that that it did not wish to contest the appeal and, as I have indicated, it has now agreed that the judgment of Judge Gosnell should be set aside and judgment entered against it. Again, it cannot be criticised for taking that course. In all these circumstances Mr Butcher has failed to persuade me that it is appropriate to re-allocate this claim to the multi-track or make a costs order against RSA in respect of the whole or any part of Mrs Conlon's costs of this appeal.
21. I would therefore dismiss the application for re-allocation and make no order in respect of the costs of the claim, including the costs of this appeal.

Lord Justice Floyd:

22. I agree.

Lord Justice Jackson:

23. I also agree.