England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM
SUPREME COURT COSTS OFFICE

		Royal Courts of Justice Strand, London, WC2A 2LL
		24/02/2006

Mr Justice Lindsay:

A. INTRODUCTION

1. Mr Ioannis Frangos and his fellow defendants ("the Receiving Parties" or "RPs") had a Costs Order made in their favour against the 3 Claimants ("the Paying Parties" or "PPs") by the Court of Appeal on the 31st March 1999 ("the 1999 Order"). The Receiving Parties should have commenced detailed assessment proceedings in respect of those costs by the 30^th June 1999. In circumstances we shall need to explain more fully, they did not commence such proceedings until the 1^st July 2004. On the 9^th September 2005 the PPs applied to Court asking that some proportion of the RPs' costs should be disallowed on the basis that the Notice of Commencement was 5 years out of time. On the 26^th September 2005 Master Seager Berry, Costs Judge, dismissed the PPs' application in a full and reasoned judgment ("the Costs Judgment"). His Final Costs Certificate of the 12^th October 2005 orders the PPs to pay £326,996.48 to the RPs within 14 days, with interest to run from the 1^st April 2004. Nothing has been paid. The PPs now appeal. There is nothing before us by way of challenge to the Costs Judge's Assessment as such; the appeal is solely directed to his failure to disallow a proportion of the RPs' costs on account of the delay in commencement.

2. I sat in this matter with the two Assessors above-named. This judgment is my judgment but as it has generated only agreement from the Assessors and as I have benefited from their guidance and experience it seems right for the judgment to be described as "ours" rather than as mine. I shall thus speak throughout of "us", "we" and "our".

3. Before turning to the applicable rules or to the Costs Judge's judgment, we will first briefly summarise the course of the proceedings in which the Court of Appeal came to make the 1999 Order.

   B THE PROCEDURAL HISTORY

4. Mr Loucas Haji-Ioannou, first-named of the PPs as claimants, who, on unchallenged evidence, is a rich man, began proceedings on the 19^th September 1997 against the RPs in relation to an alleged fund of some $49m said to have been advanced to the defendant-RPs for the purpose of acquiring vessels. The PPs (and there is no need for our purposes to distinguish between them) procured the arrest of 4 vessels. The RPs (and, again, there is no need to distinguish between them) denied liability and by Notice of Motion moved in the Chancery Division for, inter alia, the release of the vessels. There was a 3 day hearing in November 1997 before Neuberger J who stayed the PPs' proceedings and ordered the arrested ships to be released. There was then both an appeal by the PPs and a cross-appeal by the RPs to the Court of Appeal. On the 31^st March 1999 the RPs largely succeeded in resisting the appeal and the Court of Appeal by the 1999 Order ordered that the PPs should pay the RPs' costs of the appeal, 25% of the costs of the RPs'cross-appeal and 75% of the RPs' costs of the hearing before Neuberger J. Leave to appeal to the House of Lords was refused. The PPs then petitioned for that leave. On the 5^th May 1999 the RPs' solicitors turned to the subject of costs, inviting the PPs to make a substantial payment on account. The next day (as the Costs Judge notes in the Costs Judgment) the PPs' solicitors wrote a letter which, inter alia, said:-

   "If our clients' appeal to the House of Lords is successful the current Costs Orders would almost certainly be varied. What therefore is the point of taxing your costs if they may not ultimately be recoverable? This surely is a waste of time and expense."

5. On the 23^rd February 2000 the House of Lords refused the PPs permission to appeal. Costs in the House of Lords are, of course, the subject of quite different provisions than the CPR and have their own tight timetable. The PPs by their solicitors offered £1542.08 in satisfaction of the RPs' recoverable costs in the House of Lords. It seems that that sum was agreed but it has not been paid. On the 30^th June 2000 the PPs' solicitors wrote, as follows:-

   "The refusal of the House of Lords to grant leave to appeal means that the proceedings have effectively been transferred to Greece. According to the Greek Supreme Court and the Court of Appeal Panel Judges, considerable sums are due from your clients to ours and some mechanism needs to be agreed for securing sums paid by our clients in respect of the cost of the English proceedings in the House of Lords, Court of Appeal and at first instance. May we have your proposals?"

   There is no evidence before us of any response to that letter from the RPs. Indeed, there is then, as it seems, silence on both sides until the 1^st July 2004 when the RPs served Notice of Commencement – see CPR 47.6 (1) (a) – with a Bill of Costs. At the request of the PPs an extension of time was granted for serving Points of Dispute which were then served on the 29^th October 2004. The RPs served their response on the 11^th March 2005. The PPs' Points of Dispute foreshadowed the launching of an application for a disallowance of part of the Bill of Costs on the grounds of substantial delay in commencing the assessment proceedings and on the 9^th September 2005 an application was served by the PPs asking that pursuant to CPR 47.8 and/or CPR 44.14 the Court should "disallow a proportion of the RPs' costs being assessed including and/or part of the costs of the assessment process ….. and/or all or part of the interest otherwise payable under section 17 of the Judgments Act 1838 because the Defendant or his legal representatives have failed to comply with a rule and/or practice direction in failing to commence proceedings for detailed assessment within the period required by CPR 47.7. The order for costs in this matter was made on the 31^st March 1999. Notice of Commencement was served on the 1^st July 2004 and was 5 years out of time".

6. The application was supported by a witness statement from Mr S.J. Loftus, a partner in the PPs' solicitors. As the Costs Judge notes in his Costs Judgment, that witness statement made no reference to any prejudice suffered by the PPs. Indeed, no prejudice is said to have been suffered by the PPs by Mr Bacon, who has represented the PPs at the hearing before us.

7. On the 19^th September 2005 the RPs served a witness statement in reply. As the Costs Judge notes in the Costs Judgment:-

   "In the final paragraph [the RPs] conceded that interest would not be claimed between the 31^st March 1999 (the date of the Court of Appeal judgment) to 1^st April 2004 (3 months prior to the service of the Notice of Commencement). The concession therefore excluded the initial 3 months within which Notice of Commencement should be served. At the conclusion of his submissions Mr Morgan [Mr Morgan Q.C., who appeared both below and before us for the RPs] explained that the concession on interest amounted to some £180,000 or 30% of the bill and was made up of interest at 8% namely £36,000 for 5 years."

   Because the RPs bill was taxed down the concession (as is not challenged) can now be seen to be of some £123,000 if computed in that way. We now turn to the relevant provisions of the CPR and , in the first place, we shall so do without regard to such authority as there is on their construction.

   C THE RELEVANT CPR

8. A detailed assessment of the kind required by the 1999 Order is to be begun by the receiving party serving on the paying party a Notice of Commencement in the relevant practice form and a copy of the Bill of Costs – CPR 47.6. The prescribed time within which that is to be done is 3 months after the date of the judgment – CPR 47.7. That is the period within which "Detailed Assessment proceedings must be commenced".

9. Under the heading "Sanction for failure to commence in time" CPR 47.8, so far as here relevant, provides as follows:-

   (1) Where the receiving party fails to commence Detailed Assessment Proceedings within the period specified –

   (a) in rule 47.7;

   (b) ……

   the paying party may apply for an order requiring the receiving party to commence Detailed Assessment Proceedings within such time as the Court may specify.

   (2) On application under paragraph (1), the Court may direct that, unless the receiving party commences Detailed Assessment Proceedings within the time specified by the Court, all or part of the costs to which the receiving party would otherwise be entitled will be disallowed.

   It is important to note that if the receiving party does dally then the paying party has a remedy in its own hands, one that, by way of an "Unless" Order, may carry with it a very powerful sanction. Moreover, as Mr Morgan points out, parties are, under CPR 1.3, required to help the Court to further the overriding objective of, inter alia, ensuring that a case is dealt with expeditiously. A paying party who sits on his hands whilst the receiving party dallies is thus not himself wholly free of blame. To continue with 47.8, it provides also:-

   "(3) If –

   (a) the paying party has not made an application in accordance with paragraph (1); and

   (b) the receiving party commences the proceedings later than the period specified in 47.7,

   the Court may disallow all or part of the interest otherwise payable to the receiving party under –

   (a) section 17 of the Judgments Act 1838; or

   (b) section 74 of the County Courts Act 1984;

   but must not impose any other sanction except in accordance with rule 44.14 (powers in relation to misconduct)."

10. It is convenient to speak of those last words of 47.8 (3) – "but must not impose" onwards – as "the Proviso", a term used by both sides during the hearing. Before we go on to look at the CPR 44.14 referred to, it is as well to pause to consider the terms of 47.8. The power to disallow which it confers is exclusively as to one or other of the two kinds of interest to which it refers; it does not permit any disallowance of costs. But the sanctions available under 44.14 to which the Proviso refers relate (as we shall come on to) exclusively to costs and not to interest. The Proviso thus does not operate as a true proviso; it does not operate to exclude some sanction which, but for the Proviso, would have been capable of application under the body of the rule. Instead its serves to emphasise to the Court the boundary – the disallowance of interest only – of the sanction available under 47.8 (3). There cannot, in such a case, for example, be anything deducted from the amount of any sum of principal awarded to the receiving party in any judgment in his favour nor, say, can there be some qualifying of the terms of any declaration or other relief which he had obtained. It cannot sensibly be said where the pre-conditions of 47.8 (3)(a) or (b) are met and there is a disallowance of interest, that no other sanction can then ever be imposed as that would be to stop at the words "but must not impose any other sanction" without paying regard to the remaining words "except in accordance with rule 44.14" (our emphasis).

11. Section 18 of the 1838 Act makes an order for costs a judgment debt within the meaning of section 17 of the same Act – see Powell –v- Herefordshire HA [2003] 3 All ER 253 at 255 paragraph 8. In the case at hand the Court of Appeal, had it paused until the CPR came into effect, could have provided for interest on costs to have run from some date other than the date of their award – see CPR 40.8 and 44.3 (6) (g) – but as at 31^st March 1999 no such power existed and the 1999 Order thus could not make any such special provision as to interest on costs. Accordingly interest on costs runs from the date of the 1999 Order. It runs from that date and not from either the beginning or the end of the assessment process. By delaying his commencement, the receiving party, at any rate where the paying party does not intervene under 47.8 (1), thus, in the absence of a disallowance or concession as to interest, prolongs the period in respect of which the paying party would be required to pay interest. But the paying party has the remedy of 47.8 (1) in his hands and could, of course, further or alternatively reduce his liability as to interest by making a payment on account. Where the receiving party suffers a disallowance of interest or makes a concession to the same effect there is a corresponding benefit to the paying party who, in any event, by reason of the receiving party's delay, has the benefit of having still in his hands such principal monies as, had the receiving party acted more promptly, would have had to be paid over to that receiving party. Delay on a receiving party's part can in such circumstances thus represent a self-inflicted wound on the receiving party and something of a gratuitous windfall to the paying party.

12. Turning then to 44.14, it has the heading "Court's powers in relation to misconduct". It provides, so far as here relevant, as follows:-

    "(1) The Court may make an order under this rule where –

    (a) a party or his legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or Court Order; or

    (b) it appears to the Court that the conduct of a party or his legal representative, before or during the proceedings which gave rise to the assessment proceedings, was unreasonable or improper.

    (2) Where paragraph (1) applies, the Court may –

    (a) disallow all or part of the costs which are being assessed; or

    (b) order the party at fault or his legal representative to pay costs which he has caused any other party to incur.

    (3) …….."

    Little is to be made of the word "misconduct" in the heading. It does not appear in the body of the rule. Moreover, it is very easy to imagine circumstances falling within 44.14 (1) (a) where nothing fairly describable as "misconduct" has occurred. One would hardly describe as involving "misconduct" the case of, say, a litigant in person whose failure to comply with a rule is demonstrated to have been wholly referable to serious illness or serious accident and injury.

13. It is plain from its terms and it is common ground before us that 44.14 includes no provision for disallowance of either of the two classes of interest disallowable under 47.8; 44.14, so far as concerns disallowance under 44.14 (2) (a) , provides only for disallowance of costs.

14. It has been suggested in argument that 47.8 and 44.14 are in conflict with each other or, at lowest, inconsistent. We see no such conflict or inconsistency; one relates to disallowance of interest and the other to disallowance of costs but the former makes it clear that the possibility or fact of disallowance of interest does not of itself preclude the disallowance of costs. Mr Morgan submitted that the reference in 44.14 (2) (b) to "costs which he has caused any other party to incur" required some corresponding causative link to be required before costs could properly be disallowed under 44.14 (2) (a). If we understood the argument it was that before there could be a disallowance by reason of the receiving parties having failed, within 44.14 (1) (a), to comply with a rule, practice or Court Order, it would have to be shown that such failure had caused some identifiable tranche of costs to the paying party and that it was only that tranche which then could be disallowed. We reject any such requirement; there may be other answers to the submission but we confine ourselves to pointing out that there is no express reference to any causative connection being required in 44.14 (2) (a), that there is, as far as we can see, no necessity to imply any such requirement, that the draftsman shows, from the nature of the provisions he makes in 44.14 (2) (b), that when he intends a causative link he knows how to provide one and that the expressio unius canon of construction therefore suggests that no causative link was intended under 44.14 (2) (a).

15. It has also been argued that such is the inter-relationship of 44.7, 47.8 and 44.14 that where the only rule which the receiving party has failed to comply with is the 3-month time limit of 44.7 then the only possible sanction is a disallowance of interest under 47.8 and not any disallowance of costs under 44.14. That cannot be; had that been intended the Proviso would have stopped at the words "but not impose any other sanction" whereas, as we have already noted, they do not stop there but rather go on to refer to 44.14 sanctions being available. The concluding words of the Proviso would hardly have referred to 44.14 sanctions were they to be unavailable in all circumstances.

16. It is also argued that where there is a disallowance by the Court of interest under 47.8 then as a matter of jurisdiction it is only in exceptional circumstances that there can be a disallowance of costs under 44.14. Had that been intended one could reasonably have expected to see the Proviso concluding with words such as "….. save, and only in exceptional circumstances, in accordance with rule 44.14" and to find some proviso in 44.14 (1) (a) excluding its applicability, save in exceptional circumstances, where interest had been already or was to be disallowed by order of the Court under 47.8. Nothing such is to be found expressed in either rule and, as we find no inconsistency between the two rules, we see no need to make any implications in order to avoid it. We add that had exceptional circumstances been intended to be required then one might also have expected some amplification as to what circumstances were to be regarded as exceptional and yet further provisions might have been needed so that a party could not escape the need for showing exceptional circumstances by a timely concession as to interest such as might preclude a formal disallowance by the Court under 47.8 (3). Perhaps also provision would have been needed so that a disallowance of only a trivial amount of interest under 47.8 (3) would not of itself and in the absence of exceptional circumstances bar the applicability of 44.14.

    D THE AUTHORITIES CITED

17. Thus far, as we have mentioned, we have arrived at conclusions on construction without regard to authority. Does such regard require us to alter our conclusions? Before we go to the authorities put before us we make some preliminary observations. Firstly, there is no authority binding upon us that establishes that as a matter of jurisdiction disallowance of costs under 44.14 is not possible or is possible only in exceptional or specified circumstances where there has been disallowance of interest under 47.8 or where the only rule not complied with is that of the time limit as to commencement provided for by 47.7. Secondly, when one is considering an unfettered discretion such as that in 44.14 (2) (a) (and, although the skeleton prepared for the hearing by another Counsel may have aspired further, it is only the (2) (a) limb which Mr Bacon relies upon) there is no warrant for any Court to write in jurisdictional requirements that the rule in question does not contain. If the body to whom the legislature has delegated rule-making has chosen not to put in such a requirement then it is not for any Court to do so, Gardner –v- Jay (1883) 29 Ch D 50 CA at 58 per Bowen L.J.. Thirdly, so far as any authority illustrates how the conferred discretion has been exercised at another time, by another Court and on different facts, it is at best only an unbinding guide, one that can be adopted, shaped to fit or not followed. Whilst, plainly, some consistency of application is desirable, there is no formal need to distinguish an earlier authority where or to the extent that it is only such a guide to the exercise of a discretion. Fourthly, it is well established that it is very rarely appropriate, in construing the CPR, to embark on a comparison and contrast with such provisions as were made in the corresponding area under the superseded RSC. Fifthly, although there occasionally can be an illuminating shaft of light thrown on what is the proper exercise of a discretion under one rule or statute by examining authorities as to how a not dissimilar discretion is exercised under a different rule or statute, far more commonly no help will be derived from such an attempt because the discretion under the one statute or rule is likely to have a different purpose than has, and is likely to require to be exercised in a different context than is, the other.

18. With those general observations behind us we now turn to the authorities cited to us. Mr Bacon took us first to Re Home Assured plc [2002] Costs L.R. 71. A solicitor entitled to recover an assisted person's costs from the Legal Aid Board might under the rules find his recovery reduced or disallowed where he had without good reason delayed putting in his bill for taxation. One solicitor put in his bill 4 years late. Notwithstanding that the Board had suffered no prejudice thereby, the Deputy Costs Judge had disallowed all that solicitor's profit costs. On appeal, Park J. sitting with assessors, emphasised that there was no prejudice to the Board by reason of the delay but emphasised also that there was real (albeit self-caused) prejudice to the solicitors. He stated, by way of comment on an earlier case under the RSC, one of delay in an inter-partes taxation of costs, that the difference between such a taxation and a Legal Aid taxation was very important – paragraph 26 and see paragraph 18. The Learned Judge said:-

    "The Deputy Costs Judge's decision amounts to fining the firm £29,000 for a bad failure to meet a time limit. They deserved some penalty, but surely not so severe one as that."

19. He reduced the disallowance to one of only 30% of the profit costs. But the context there was very different and it is both fruitless and, indeed, impossible to attempt, on the grounds of a spurious consistency, to seek to find the equivalent of a disallowance of 30% of £29,000 (i.e. £8,700 or £2175 per annum of default) being appropriate to mark delay over 4 years in a Legal Aid case to what would have been appropriate in the case before us. Before us there was, as we have mentioned, by way of concession, a self-inflicted penalty upon the RPs which was of some £123,000 (8% p.a. on the assessed costs of almost £327,000 over the conceded period). Although we recognise that such a computation is not the only and perhaps not the most appropriate way of computing the disadvantage suffered by way of the concession, that would be a "penalty" of £24,600 per annum of default, almost three times the rate in Homes Assured. We are far from saying that such an arithmetical approach is appropriate. Plainly it is not but, were it to be so, it would, if anything, suggest that no penalty beyond the self-inflicted concession would here be appropriate.

20. Next we were taken to Biguzzi –v- Rank Leisure plc [1999] 1 WLR 1926 CA. A claim for damages for personal injury had been struck out by the Deputy District Judge where there had been a failure to give disclosure on time, punctually to prepare trial bundles, to set the case down as had been ordered and to prepare a calculation of special damages. The Circuit Judge on appeal restored the claim on the basis that there had been delay on both sides and because, notwithstanding that delay, a fair hearing was still achievable. The Court of Appeal upheld the Circuit Judge's decision. Lord Woolf spoke of the importance (which we would have accepted with or without authority) of the then-recent CPR Rules as to time and time-keeping being observed and of the CPR representing a different regime to that of the RSC. But the case does not materially help us in the very different context before us where the cunctator's delay stands to inflict a penalty or disadvantage on himself and a benefit on the other side and where, in any event, the other side has had open to it a convenient and inexpensive mechanism (47.8 (1)) by which to counter delay but where that other side has not used it.

21. Next we were taken to McGuigan –v- Tarmac, of which a brief note appears in CLY ref 03/324. A defendant was awarded costs. He served a schedule detailing costs of £58,000 but failed to request a hearing date within the 3 months provided by CPR 47.7. Presumably the paying party had served Points of Dispute but the receiving party had then failed to file a request for a Detailed Assessment hearing. The matter came on before H.H. Judge Collins in the Central London County Court. The Current Law note, not said to be approved by the Judge, records a decision which attempts a "reconciliation" between rule 44.14 and 47.14 (5) and is summarised as concluding that the proper reconciliation of the rules "Was that 44.14 was not, in this context, triggered by mere delay but by delay sufficiently beyond that sometimes encountered as to amount to misconduct". The District Judge had reduced costs under 44.14 by 60% to mark delay of over 2 years but the Learned County Court Judge reduced the disallowance to 25%, the receiving party having, both below and before the Circuit Judge, conceded not only that no award for interest on costs could be asked for but also that some further sanction would be appropriate. Although a reconciliation between 44.14 and 47.14 is not quite the same as one between 44.14 and 47.8 (as under the former the receiving party has already served a bill and the paying party has already identified a dispute) they are not wholly dissimilar but, for the reasons we have already given, we do not find there is any need to "reconcile" 47.8 and 44.14 and even if we did find such a need, we would not have found that 44.14 could only be triggered upon satisfaction of so unexpressed and vague a test such that 44.14 was not triggered by "mere delay" but only by delay "sufficiently beyond that sometimes encountered as to amount to misconduct". It is a pre-condition of an implication that what it is that is to be implied is clear; it cannot be that so vague a test could be implied. It may be that the brief note does not do justice to the Learned Judge's reasoning but it does not in any event bind us and for the reasons we have given we do not accept that 44.14 is fettered in the way that the note suggests.

22. Then Mr Bacon took us to the now-superseded RSC Order 62 rule 10 (1) and rule 28. We shall not take up time listing the many ways in which those earlier provisions differ materially from those we now have to consider. Had the RSC and the CPR been to the same effect then citing the RSC would have added nothing; as they are very different one can only conclude that the difference was intended. Either way a study of the RSC does not help us.

23. Next we went to Botham –v- Khan and Lamb –v- Khan, [2004] EWHC 2602 (QB); [2005] Costs LR 259 per Richards J.. At the end of lengthy trials Costs Orders were made in favour of the defendants but, either in respect of earlier or simultaneous orders for costs, there were Costs Orders going the other way in both actions. Both claimants lodged appeals in the actions. 7 years elapsed before Notice of Commencement had been served by the defendants as receiving parties. The claimants argued, inter alia, that the defendant's costs of both actions should be disallowed under CPR 44.14. Richards J. set out the convoluted history of the matter, which included a "without prejudice" letter from the receiving party that appeared to extend time for the lodging of bills of costs but provided also that either side could bring the extension to an end by serving 14 days notice. Such notice was not given. As in our case, the receiving party did not claim interest – paragraph 36. Richards J. had no need to consider in detail the construction of CPR 47.8 or 44.14 as to the jurisdictions thereby conferred and did not do so; the case represents no other than an exercise of the 44.14 discretion on its own particular facts. It was, as the Learned Judge held – paragraph 37 – far from being a case as to which blame lay on only one side. At paragraph 44 the Learned Judge said:-

    "The conclusion I reach on this issue is that the delay, although deeply regrettable, ought not in the circumstances to cause me to impose any greater sanction than that already conceded by the defendant in the form of disallowance of interest."

    The case says nothing as to jurisdiction and, so far as concerns discretion, does nothing to suggest that any costs should have been or must now be disallowed in the case before us.

24. Last of Mr Bacon's authorities is Less and others –v- Benedict [2005] EWHC 1643 (Ch) per Warren J.. In February 2001 a Costs Order had been made in the defendant's favour against all claimants. Notice of Commencement was attempted or thought to have been served by the defendants within the CPR 47.7 limit – paragraph 12. But some wrong addresses were used in that process and, save as to the third claimant, there was a dispute as to whether the Notice had been duly served. Points of Dispute had been served by the third claimant by May 2001 but no further steps were taken by any paying party until July 2004. In December 2004 the Master ordered fresh service of Notices of Commencement on all claimants – paragraph 21 – and that order was complied with. On the 11^th March 2005 the claimants applied under various headings, one of which, relevant to us, was that the Court should impose a sanction for delay under CPR 3.4 ("power to strike out Statement of Case") or under 44.14. Master O'Hare rejected that and the claimants appealed. The Master had not expressly dealt with CPR 44.14 in his written judgment but, as Warren J. indicated in his paragraph 54:-

    "The Master did not deal with the question of imposing a sanction under that rule (CPR 44.14) in his written judgment. He did, however, add a rider to it dismissing the application for such a sanction. The only sanction he applied was the disallowance of interest between the 21^st May 2001 and the 14^th December 2004, his power to do so being contained in CPR 47.14 (5). That sub-rule provides for the disallowance of interest where the receiving party has failed to request a Detailed Assessment hearing within the time-limits referred to in CPR 47.14 (2). But any other sanction for failure to request a hearing is expressly prohibited other than in accordance with CPR 44.14. "

25. It was argued before Warren J. that where there was nothing that could be complained of save delay, the provisions of CPR 47.14 (5) (very similar, mutatis mutandis, to those of 47.8 and, like 47.8, including those words which, in 47.8, we have described as the Proviso) precluded any disallowance save of interest and hence precluded a disallowance of costs under CPR 44.14. At his paragraph 60 Warren J. continued:-

    "However, reading CPR 44.14 together with CPR 47.8 and 47.14 I agree that CPR 44.14 (1) (a) must be intended to cover the case of a breach of rules, practice direction or Court Order which go [sic] beyond the mere non-compliance with a time-limit under CPR 47 (perhaps including even one laid down in a Court Order save where it is in the form of an "unless" order). But I am reluctant to decide, and do not do so, that this is because there is no jurisdiction to apply such a sanction other than in serious cases. Rather, I consider that the issue is one of the proper exercise of the discretion and that it would only be in the most exceptional case (which it is not easy to envisage) that mere delay could result in an exercise of the power; I would not want, however, wholly to rule out that possibility."

    He said that he would turn to that subject later in the judgment. He did return, at paragraph 71, where one finds:-

    71. It is true that if D did not in fact serve his Notice of Commencement on all Cs within the time-limit under CPR 47.7 he was in breach of the rules. However, the consequence is not automatic that costs must be disallowed either in whole or in part. The primary sanction is disallowance of interest and, indeed, any other sanction is prohibited save by the application of CPR 44.14. For reasons already given, I do not consider that CPR 47.8 was unavailable to those Cs (if any) who were not served in April 2001.

    72. The Master by his order of the 2^nd December 2004 took steps to cure the doubt which he had about service in April 2001. At the full hearing on the 8^th March 2005 he refused to impose a sanction under CPR 44.14. It is not clear whether he did so because he considered that he had no jurisdiction or because he refused, in his discretion, to exercise that jurisdiction. In the latter case I see no reason to interfere with his discretion. In the former case (assuming that I am correct in holding that there is in fact jurisdiction) it is open to me to exercise the discretion afresh. In my judgment, no sanction should be imposed under CPR 44.14 taking into account all the factors which have been identified in this judgment (including those referred to by the Master in his judgment). The Master acted sensibly and well within his discretion in ordering re-service in order to allow the detailed assessment to continue.

    Mr Morgan asserts that the passages as to CPR 44.14 are ratio, that the decision is right and that it should therefore be that only in the "most exceptional" case should there be a disallowance of costs under 44.14 where there is only "mere delay" (namely nothing but delay and, in particular, no prejudice to the paying party). Mr Bacon says that the passages as to CPR 44.14 are obiter and, if not obiter, are wrong. Certainly, he says, Less does not help the Receiving Party. It was not a case such as the one at hand, where there was delay only in commencement of the assessment process.

26. To revert to Warren J.'s paragraph 60, he first says, as is irresistible, that 44.14 (1) (a) must be intended to cover cases "Which go beyond mere non-compliance with a time-limit under CPR 47 ……..". But, conspicuously, he does not there say that the rule is intended to cover only such cases as thus "go beyond". He then makes it clear that so far as concerns jurisdiction he does not hold that there is no jurisdiction under 44.14 "other than in serious cases". Nothing in his judgment thus bars there being jurisdiction under 44.14 where there is nothing that can be complained of other than delay in commencement beyond the 3 months allowed by 47.7.

27. We would accept that the Learned Judge's remarks as to the discretion (which he did not exclude as having been conferred as a matter of jurisdiction even in "mere delay" cases) require detailed attention. He took the view that in "mere delay" cases the discretion would only be exercised "in the most exceptional case". Firstly, as we have already indicated, neither 47.8 or 44.14 has any express requirement as to the 44.14 discretion ever being exercisable only in exceptional cases. Secondly, as we have shown, we do not see there to be some conflict or inconsistency between the two rules such that any such limitation on the discretion has to be implied. Yet no other ground for the implication is asserted. Thirdly, as, again, we have already mentioned, where, as a matter of jurisdiction, a discretion is conferred in unfettered terms so far as express provision is concerned and where there is no necessity for implying a fetter, it is not open to any Court to restrain its operation save by reference only to the universal implication that it should be judicially exercised – Gardner –v- Jay supra. Fourthly, when in his paragraph 72, Warren J. decided by way of exercise of a discretion (albeit an assumed one) to impose no sanction under 44.14, he did not indicate that there was an absence of whatever factors would have made the case "most exceptional" or the presence only of factors that made it run-of-the-mill. Fifthly, his observation as to the exercise of the discretion in the latter part of paragraph 60 is not, it seems, limited to those cases where there has been a disallowance of or concession as to interest under 47.8 (3). In such other cases there would be no conceivable inconsistency or need to regulate any inter-action between 44.14 and 47.8 and the need to read them together, the very thing which generated the observation, would in such cases would thus fall away. Properly understood the last sentence of Warren J.'s paragraph 60 is intended by him, in our view, to be no more than a tentative view as to the existence of an unexpressed but arguable fetter on how the discretion, accepted as conferred as a matter of jurisdiction even in non-serious cases, might commonly be exercised. If that is right, then the sentence does not constrain us even at the level of comity and we have no need to say, as Mr Bacon would have us do, that the sentence is wrong as we are entirely free to take a different view.

28. As to the far from easy question as to whether paragraph 60 was obiter or not, if (as is one familiar test of whether a matter is or is not ratio) one looks to see whether the Learned Judge could have come to the same conclusion even had the relevant passage, here paragraph 60, been deleted, he plainly could have done. Ultimately, he deals with jurisdiction as a matter of assumption; he takes himself to be open to exercise the discretion under 44.14 afresh and then exercises it not simply by disallowing costs because of the absence of factors making the case "most exceptional" but by reference to "all the factors which had been identified in this judgment (including those referred to by the Master in his judgment".

29. In reply, Mr Bacon referred us to Mainwaring and Anor –v- Goldtech Investments Ltd (No 2) [1997] 4 All ER 16 and, in turn, Mr Morgan was entitled to and did add comments on that case but it was a case under the RSC, it was dealing with very different facts and was, in any event, reversed by the Court of Appeal, at [1999] 1 All ER 456 CA. In Mainwaring Robert Walker J. said at p. 26 b-c that delay longer than two years:-

    "….. will in most cases be wholly inexcusable and deserving of more drastic action than a mere disallowance of interest …."

    But even leaving aside that the Learned Judge was there considering a different rule and different facts, the extent of disadvantage or "penalty" represented by a disallowance of interest can only fairly be assessed by reference to the size of the principal sum on which interest would otherwise have been paid and the generosity or otherwise to the putative recipient of the rate of interest which is foregone. There cannot be (and CPR 44.14 does not attempt to impose) some rule that after two years or, indeed, any other specific period, a disallowance of interest must be taken not to suffice to penalise the receiving party. In the case at hand, the principal sum was large – almost £327,000 – and the rate of interest – 8% p.a. - so generous that a disallowance of interest, be it volunteered or imposed, represented a considerable sanction even were one to look at a period a good deal shorter than a full five years.

30. So far we have found nothing in the authorities to require us to take a different view of the construction of the relevant provisions to that which we had formed without authority nor, indeed, anything that suggests that the Costs Judge's conclusion must have been wrong in law as to jurisdiction. Was he, then, wrong in some way on the facts or in his application of the law to the facts such that his discretion might be overturned? We need to return to the Costs Judge's judgment.

    E THE EXERCISE OF A DISCRETION BY THE COSTS JUDGE

31. The Costs Judge, after setting out the provisions of the CPR and going through the procedural history, then continued with some background material which we shall cite as it affected his conclusions. At his paragraph 15 he said:-

    "It is necessary briefly to set out some background information. A bitter family feud had been waged between the First Claimant and the First Defendant. The First Defendant had married the daughter of the First Claimant. Sadly the marriage did not last and after some three years the parties separated. In addition to the litigation which had been instituted in England, there had also been proceedings in Greece. In 1994 the Claimant had brought proceedings against the First Defendant in the Piraeus Court for embezzlement. Those proceedings were dismissed in 1996 and in 1998 the appeal by the Claimant had been dismissed. In May 1995 the First Defendant brought proceedings against the Claimant for perjury, false accusations and aggravated damages. Those proceedings were concluded in June 2000. In 1999 the Claimant brought fresh civil proceedings before the Multi Member First Instance Court in Piraeus based on alleged failure by the Defendant to repay some US $49,000,000. Proceedings were continuing in the Piraeus County Court and a hearing was due to take place on 20 January 2006. The proceedings are estimated to take some two to three years and there are likely to be further appeals. The present proceedings were commenced in 1997 and served on the First Defendant during a visit to England. Thereafter four ships had been arrested in South Africa, Netherlands, The Netherlands Antilles and Teesside (England)."

32. The Costs Judge accepted – his paragraph 46 – "that the test to be applied is that set out in para 60 of the judgment of Warren J." in Less. He did not indicate what he understood to be that "test" but presumably he was taking the view that the discretion conferred by CPR 44.14 was reserved exclusively for cases where, if nothing other than a failure to comply with CPR 47.7 was shown (nothing, in other words, beyond "mere delay") the case could fairly be described as "most exceptional". If that was what the Costs Judge had in mind as a pre-condition of the exercise of the discretion then, for the reasons we have given, he was in our view wrong.

33. After going through the authorities the Costs Judge recorded that the PPs had not said that a fair hearing of the assessment proceedings was not possible and that they did not allege that they had suffered any prejudice. He pointed out that the PPs themselves had delayed; they had served Points of Dispute on the 29^th October 2004 but did not serve the CPR 44.14 application until the 9^th September 2005. He pointed out that throughout the period the PPs had continued to have the use of such money as a timely assessment would have required them to have paid to the RPs. Of course, as he said, the RPs had also sat back and allowed time to pass by. He regarded McGuigan supra as distinguishable; for the reasons that we have given he was right in our judgment not to regard it as a reliable guide. He then turned to Botham supra and cited Richards J. there holding that in that case there had been an agreed extension of time on agreed terms between the parties, terminable on 14 days' notice. The Costs Judge then continued:-

    "In the present case a similar approach has been adopted …."

    and later (his paragraph 44) he held:-

    "There has been a tacit agreement by conduct for the continued extension of time for the commencement of the assessment proceedings in England while the bitter family feud continues to be waged in Greece and South Africa."

    see also his paragraph 46. Mr Bacon attacks that finding and Mr Morgan does not defend it.

34. There was obviously, given the PPs' Solicitor's letter of the 6^th May 1999 supra, reason for the RPs to fear that to attempt assessment before the House of Lords had ruled on the Permission Application would be quite fruitless. That letter makes it at least hypocritical on the PP's part to complain of delay prior to the House of Lords refusal of leave on the 23^rd February 2000. The PP's Solicitor's later letter of 30^th June 2000 would be likely to have given rise to some pessimism on the RPs' part as to recovery of costs before other, foreign and protracted proceedings were concluded. But there is nothing in the facts that justifies the finding by the Costs Judge that there had been an agreement, tacit or otherwise, as to the extension of time. A further difficulty in the way of the RPs asserting that there had been some form of agreement that both sides would tolerate delay is that nothing can be identified as having occurred so to have terminated the supposed agreement that the RPs were free to serve their Notice of Commencement. The absence of any end to the supposed agreement assists in a finding that it had no beginning.

35. That mistaken view of the facts entitles the PPs to say, as Mr Bacon does say, that in exercising his discretion the Costs Judge took into account a matter which he should not have done and that his exercise of the discretion is thus to be set aside. We do not say that there was no other material which, had it stood alone, would not have enabled the Costs Judge to conclude as he did. His emphasis on the lack of any prejudice to the PPs, to the benefit they had had in the continued use of the money during the period of delay and the substantial self-inflicted "penalty" represented by the RPs' concession as to interest could, on their own, have led, in our view, to an invulnerable conclusion, as the Costs Judge did conclude, that there was no need for any further imposition upon the RPs.

    F CONCLUSION

36. However, as the Costs Judge's exercise of the discretion was flawed, it falls to us to exercise the discretion conferred by 44.14 afresh. We see force in Mr Bacon's submission that delay was here so prolonged, so unexplained and so unexcused that it would be wrong for the Court not to mark it with clear disapproval.

37. Some disapproval is appropriate even in the case where the chance of an assessment leading to any early recovery was likely to be thin. The PPs, as we have mentioned, have not paid the sum they agreed as to costs in the House of Lords and although, by this application, only 25%-40% of the RPs' costs have been sought to be disallowed, the remaining 60%-75% has not been paid. But we cannot ignore the very substantial disadvantage which the RPs have voluntarily accepted by way of their concession as to interest. Even if the disadvantage were taken to be the interest at 8% p.a. on some £327,000 not over the full period but only over such shorter period as would have been likely to have been taken up had there been a timely commencement, the disadvantage could not be ignored. The likelihood would have been the assessment would have been stalled until the House of Lords refused the PPs permission to appeal in February 2000. Extensions of time would be likely to be sought by the PPs. Unable to complain of the RPs' delay, the PPs could well instead have embarked on a close contest of the assessment. History does not suggest that payment to the RPs of the sum eventually found due would have been prompt. Interest at 8% over the period, even with a timely start, would still have been substantial. Had such a disadvantage been imposed by the Court under 47.8 it would have represented a very substantial mark of disapproval by the Court but we do not see that the RPs should be in a worse position because the "penalty" has been conceded from the outset. If anything, their willingness to accept the medicine without argument should be a factor in their favour. Nor is it that by conceding interest the RPs are conceding something which they could never have recovered; it is accepted that for our immediate purposes we should approach the question of interest on the basis that, to the extent that the PPs would have been held liable to pay it, it would have been paid.

38. If our reasons for setting aside the Costs Judge's exercise of his discretion are themselves flawed then we see no good reason for disturbing his conclusion; it was a conclusion, in our view, at which a Costs Judge, properly directing himself, could reasonably have arrived on the correct view (as we see it) that, even in the absence of exceptional circumstances, there can be a disallowance of costs where the complaint cannot be of anything but delay upon a failure to comply with CPR 47.7 and even if (as was the case) there had been no agreement between the parties, tacit or otherwise, to accept or condone delay.

39. If, however, our conclusion that the discretion as exercised below should be set aside is correct then it falls to us to exercise the discretion afresh and in so doing we reach the same conclusion as did the Costs Judge; there is, in our judgment, no case for imposing on the RPs the further sanction of disallowance of any part of their costs under CPR 44.14. It has not been said that the RPs' delay was wilful, deliberate or contumelious. As Mr Morgan argues, it is hard to think of any other area of civil litigation where, in the absence of prejudice, so substantial a "penalty" would be imposed as is here represented by the RPs' concession as to interest. That there has also been a related benefit to the PPs, despite their not themselves being models of cooperative expedition, only serves to underline that further sanction would be disproportionate and is not needed. The Costs Judge had refused permission to appeal. We granted that permission at the conclusion of argument before us but, as we announced at the end of the hearing, the PPs' appeal is dismissed.-