England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		23/2/2006

Mr. Justice Evans-Lombe :


 


1. This is an appeal from the order of Chief Registrar Baister in which he ordered that the application of Mr Kevin Rebond ("the Debtor") to set aside a Statutory Demand dated the 14^th October 2005 for the sum of £5,010.66 be dismissed and that the Debtor should pay to Mr John McLinden ("the Creditor") at whose instance the statutory demand was served, £1,000 as a contribution towards the respondent's [the Creditor's] costs". The Appellant is the Creditor who challenges the order for costs. Accordingly it is accepted that he requires permission to appeal. I have come to the conclusion that I should give permission.
2. The background facts of the case are these: The Debtor is a businessman one of whose areas of operation is to act as an intermediary between those wishing to purchase new motor cars and dealers in those motor cars. It seems he has a reputation of being able, by some unspecified means, to procure for those for whom he acts a better deal than they could obtain for themselves. In May 2005 he was approached by the Creditor with a view to acquiring a Mercedes car. The arrangement that was made as to the payment of the negotiated price of the motor car in question was that the Creditor would pay to the Debtor £5,200 from which the Debtor would deduct his agreed commission and apply the balance of £4,540.66 in payment to the dealer of the balance of the deposit required by the dealer as a condition of procuring delivery of the motor car. The balance of the purchase price, rather more than £40,000, was to be paid directly by the Creditor to the dealer on delivery of the car.
3. When the date for delivery of the car, the 8^th October, arrived it was represented to the Creditor by the Debtor that it could not be delivered because of difficulties with the DVLA resulting from a failure of that organisation's computer system. That representation was untrue. The block on delivery was caused by the failure of the Debtor to pay the balance of the deposit which the Creditor had paid to him for that purpose.
4. The balance of the debt shown on the statutory demand of £470 arose from the Debtor's agreement to pay to the Creditor his costs of hiring a car to replace the car being bought as a result of the failure to deliver. The case in no way turns on the failure to pay this sum of £470 but rather upon the failure to pay the balance of the deposit of £4,540.66 ("the Amount"). That sum became repayable by the Debtor to the Creditor because, in order to obtain delivery of his car, the Creditor was ultimately driven to pay the balance of the deposit to the dealer himself.
5. The application by the Debtor to set aside the statutory demand is dated the 27^th October. The ground upon which it was pressed by the Debtor was that he had repaid the Amount to the Creditor, initially, as suggested in his first handwritten witness statement in support of his application, on the 26^th October. In fact he had not repaid it on that date and it was never repaid prior to the hearing before the Chief Registrar although a cheque for £4,540.66 was sent to the Creditor on the day before the hearing which it was impossible to clear before the hearing actually took place.
6. The Creditor is a practicing member of the Bar. He appeared in person in support of his appeal before me. Before the Chief Registrar on the 2^nd December counsel, Mr Fuller, appeared on his behalf instructed by solicitors Messrs Salans although neither a representative of that firm nor the Creditor was present at that hearing. The Debtor appeared in person.
7. In the course of supporting his appeal Mr McLinden took me through the evidence and the extensive inter-solicitor correspondence leading up to the hearing. An analysis of that evidence and of the correspondence demonstrates that the Debtor's case in support of his application to set aside the statutory demand was dishonest. The amount was never repaid to Mr McLinden and no attempt was ever made to repay him prior to his being sent a cheque by the Debtor on the day before the hearing.
8. The hearing of this appeal has been handicapped by the fact that the only record of the reasons given by the Chief Registrar for arriving at the costs order that he made is contained in a e-mail letter of the 7^th February of this year, from Mr Fuller to the Creditor albeit apparently based on counsel's personal recollection and a note that he compiled shortly after the hearing. No transcript is available and no attempt has been made to obtain the Chief Registrar's confirmation that this letter is a fair record of what took place. I draw attention to Practice Direction 52 PD.23(2) and(3) particularly (3) where is set out the duties of an advocate where the judgment under appeal is not or has not been officially recorded and the other party appeared in person. However Miss Greenwood who appeared for the Debtor did not challenge any part of the letter as giving a misleading impression of the course of the hearing before the Chief Registrar. Insofar as it can be relied on it appears that the following points emerge from that description of the proceedings:-

i) The Chief Registrar, early in the hearing, suggested that Mr McLinden's claim was one for un-liquidated damages and as such would not support a petition with the result that the statutory demand should be set aside. He was, however, dissuaded from this course.

ii) The Chief Registrar was concerned at the costs incurred on the Creditor's side in meeting the application to set aside the statutory demand estimated at £5,236.39 inclusive of VAT. At one stage the Chief Registrar indicated that he was not prepared to allow the Creditor any costs of his successful defence of the application.

iii) The Chief Registrar fixed the amount of the Creditors costs recoverable from the Debtor at £1,000 as being the appropriate sum in the circumstances. He stated that he regarded the issue on the application as being a simple one and that the amounts shown on the Creditor's cost schedule was disproportionate for the trial of such a simple issue.

iv) The letter does not record the Chief Registrar considering each item or group of items on the Creditor's cost schedule in arriving at the figure of £1,000 as being the appropriate order for costs.

v) No application was made by counsel for the Creditor that costs should be awarded on an indemnity basis.

9. Mr McLinden, very properly, drew my attention to the passage in the judgment of Lord Justice Stuart Smith in the case of Roache v Newsgroup Papers Ltd [1998] EMLR at page 172 where he said in relation to an appeal against a costs order:-

"Before the court can interfere it must be shown that the judge has either erred in principle in his approach, or has left out of account, or taken into account, some feature that he should, or should not, have considered, or that his decision is wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale. See per Griffiths L.J. in [Alltrans Express Ltd v. CVA Holdings Ltd [1984] 1 All E.R. 685, [1984] 1 W.L.R. 394 at 403G]"

10. This approach to an appeal on costs has been approved in subsequent authority to which Mr McLinden also drew my attention.
11. In the judgment of Lord Chief Justice Woolf in Lownds v The Home Office [2002] 1 WLR 2450 at page 2455 Lord Woolf considered the proper approach of the court to the assessment of costs on the standard basis. Having drawn attention to paragraph 11.2 of the Costs Practice Direction as follows:-

"11.2 In any proceedings there will be costs which will inevitably be incurred and which are necessary for the successful conduct of the case. Solicitors are not required to conduct litigation at rates which are uneconomic. Thus in a modest claim the proportion of costs is likely to be higher than in a large claim, and may even equal or possibly exceed the amount in dispute"

12. Then having referred to certain advice by the senior costs judge Lord Woolf continued at paragraph 31:-

"31 In other words what is required is a two-stage approach. There has to be a global approach and an item by item approach. The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which CPR r 44.5(3) states are relevant. If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the cost for that item should be reasonable. If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable. If, because of lack of planning or due to other causes, the global costs are disproportionately high, then the requirement that the costs should be proportionate means that no more should be payable than would have been payable if the litigation had been conducted in a proportionate manner. This in turn means that reasonable costs will only be recovered for the items which were necessary if the litigation had been conducted in a proportionate manner.

32 The fact that the litigation has been conducted in an insufficiently rigorous manner to meet the requirement of proportionality does not mean that no costs are recoverable. It means that only those costs which would have been recoverable if the litigation had been appropriately conducted will be recovered. No greater sum can be recovered than that which would have been recoverable item by item if the litigation had been conducted proportionately."

Lord Woolf then cited a passage from the judgment of Lord Justice Jonathan Parker in the case of Flowers Inc v Phonenames Ltd:-

"31 In my judgment, it is of the essence of a summary assessment of costs that the court should focus on the detailed breakdown of costs actually incurred by the party in question, as shown in its statement of costs; and that it should carry out the assessment by reference to the items appearing in that statement.… In the instant case, the judge does not appear to have focused at all on the detailed items in the opponent's statement of costs. Rather, having concluded that the total of the detailed items was unreasonably high he then proceeded to apply his own tariff--a tariff, moreover, which appears to have been derived primarily from a case in which the opponent had not been involved and about which it and its advisers knew nothing. In my judgment the jurisdiction to assess costs summarily is not to be used as a vehicle for the introduction of a scale of judicial tariffs for different categories of case."

Lord Woolf then continued:-

"35 Although Jonathan Parker LJ did not refer specifically to the need for the costs to be necessarily incurred if they would be otherwise disproportionate, his approach of looking again at each item "if the court considered the total sum to be unreasonable or disproportionate" is very much in accord with the two-stage approach we commend."

13. As I have said this court is considerably handicapped in consideration of this appeal by the absence of a transcript of the hearing before the Chief Registrar or of a confirmed note of his reasons for the ruling under appeal. The Debtor was unrepresented at the hearing. However it does not appear from such record as we have of the proceedings that the Chief Registrar based his summary assessment of the Creditor's costs "on the detailed breakdown of costs actually incurred by [him] as shown in [his] statement of costs…" rather, having concluded that the total of the detailed items was unreasonably high he then proceeded to apply his own tariff…." In my judgment, therefore, such material as this court has to judge what took place at the hearing, leads to the conclusion that the Chief Registrar's approach to the assessment of costs was contrary to authority and therefore wrong in law. It follows that the appeal must be allowed and the discretion of the Chief Registrar devolves to me to exercise in his place.
14. Earlier in his judgment in the Lownds case at page 2452 Lord Woolf drew attention to the contrast between standard and indemnity costs and that the requirement that costs should be proportionate to the scale of the litigation in which they are ordered is confined to standard costs and does not apply to indemnity costs. Mr McLinden urged me, in the event that I allowed the appeal, to summarily assess the costs of the hearing before the Chief Registrar. He drew attention to the course taken by Mr Justice Neuberger, as he then was, when he allowed an appeal as to costs in the unreported case of MacDonald v Tare Holdings Ltd decided on 7^th December 2000. In that case having drawn attention to a passage at paragraph 235-240 in the Butterworth's Costs Service manual saying that in those circumstances "the only option is to order detailed assessment of all the costs which the Appeal Court does not deal with" the judge went on to say this:-

" No doubt, very often the approach embodied in that paragraph is appropriate. However, it seems to me that in many cases it would be wrong – and I think that this case is one – for this court not to assess the costs below. First, my decision on costs puts an end to whole case because Mr McDonald succeeded in setting aside the statutory demand (the only relief he sought apart from costs) and at this stage he is getting his costs so that is the end of the matter. For things to be drawn out further by a detailed assessment of the costs seems undesirable if it can be avoided."

15. Mr McLinden also urged me to assess his costs before the Chief Registrar on an indemnity basis because of the dishonest manner in which the Debtor prosecuted his application to set aside the statutory demand. He submitted that I should do so, notwithstanding that no application for indemnity costs was made by Mr Fuller before the Chief Registrar, because it is understandable, having regard to the Chief Registrar's apparent attitude to the Creditor's application for costs even on a standard basis, that no such application was made.
16. I have come to the conclusion that, like Mr Justice Neuberger, I should summarily assess the costs before the Chief Registrar and, in allowing the appeal, substitute my assessment for his assessment of the Creditor's costs but I should not do so on an indemnity basis. It seems to me to be inherently wrong in the circumstances to order indemnity costs however much I may disapprove of the Debtor's misrepresentations in the course of the case. Particularly is this so where I am unsure of the course of the proceedings before the Chief Registrar.
17. I turn, therefore, to a summary assessment of the Creditor's costs before the Chief Registrar. My primary criticism of Messrs Salans bill arises from the charges, amounting to £1,395.50 for conducting correspondence with the Debtors solicitors. It seems to me that it should have occurred to the Creditor's solicitors, particularly, after the Debtor's admission that his representation about the failure of the DVLA computer was a lie and, having confidence in the accuracy of their client's instructions, that they were not going to get from the Debtor a description of how he was suggesting that he had made repayment to the Creditor and that they should have confined themselves, in such correspondence with the Debtor's solicitors as they thought necessary to pursue, to simple and repeated statements that their client had not been repaid and that all statements to the contrary were simply further lies. Lengthy letters seeking to extract from their opponents an admission that the Debtors application was based on a tissue of lies were pointless. It was easy for a combination of the Creditor and Messrs Salans to ensure that a payment had not been made by the Debtor in a manner which had not come to the attention of the Creditor or his bankers. Messrs Salans 7 page letter of the 16^th November 2005 is a classic example of this. Accordingly I propose to halve the charges for correspondence.
18. In what was, in my view, a case where the issue was of the simplest, I can see no reason for charges under the head of "consulting with colleagues".
19. I was informed, at the conclusion of the hearing, that this was not a case where VAT was chargeable to the client.
20. In the result I would reduce the Creditors solicitors bill to £2,863.75.