England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice, Strand, London WC2A 2LL
		9 March 2007

Introduction

1. This matter is already the subject of two reserved judgments, respectively of the 4^th September 2006 (reported at (2006) 41 EG 226), on the question of liability, and 8^th February 2007 on the question of assessment of damages in lieu of injunction.
2. The handing down of the second judgment was followed by a lengthy and detailed argument on costs. I make no criticism of this, since I was much assisted by the argument and it seems that the costs are greater than the amount I have awarded by way of damages and are, therefore, more important to the parties.

Costs of the assessment

3. There is no dispute that the Defendant has to pay the Claimant's costs of the assessment of damages. The difficulty arises in relation to the costs prior to and during the trial on the merits.

Who is the "winner"?

4. The correct starting point on the question of costs appears to be to identify the "winner", since the "winner" should not be lightly deprived of his costs.
5. In AL Barnes Limited v Time Talk (UK) Limited [2003] EWCA Civ 402, Longrnore LJ stated at paragraph 28:-

"It does seem to me that the judge has, with the greatest respect, fallen into an error of principle. In what may generally be called commercial litigation ... the disputes are ultimately about money. In deciding who is the successful party the most important thing is to identify the party who is to pay money to the other. That is the surest indication of success and failure. ... It is not normally right to segregate a large element of the costs and thereafter to decide who the successful party is. It needs to be decided at the outset".

6. In Day v Day [2006] EWCA Civ 415, Ward LJ stated at paragraph 17:-

"... in a case like this, the question of who is the unsuccessful party can easily be determined by deciding who has to write the cheque at the end of the case

The Defendant's argument

7. Summarising the approach of the Defendant in the present case, its suggested first step is to identify the different elements in the proceedings. Thus, it can be said that the proceedings concerned rights to light to different sets of windows, out of which the Claimant only succeeded on one and lost or abandoned their claim on the others. Moreover, the Claimant pressed throughout for an injunction which would have involved the demolition of a part of the Defendant's building or, depending on the exact stage of progress, a halt to and redesign of building works which would have incurred considerable difficulty and expense. The Claimant hoped in this litigation to obtain an immensely strong bargaining position against the Defendant and to obtain a sum of money far greater than the £50,000 that I have awarded. Indeed, the costs of these proceedings are out of proportion on each side to the award of £50,000 but would not necessarily be out of proportion to the much greater sum obtainable by use of the Claimant's bargaining power, had it obtained an injunction, particularly one which required a partial demolition.
8. Much of the argument at trial concerned the entrance lobby windows to which the Claimant failed to establish a right to light. Much of it concerned the claim to an injunction and whether the Defendant was able to establish special circumstances which enabled it to escape with damages in lieu. On every point argued, except the existence of the right to light in the basement stairs windows and the fact that the interference was serious enough to amount to a nuisance, the Claimant lost. The Defendant suggests, and it is probably right, that if costs orders were made in each direction by reference to points won or lost, the Defendant would come out ahead.
9. I have some sympathy with the Defendant's suggestion that where commercial parties such as the Claimant, seeking to put the Defendant in an impossible position in order to extract the maximum amount of money from it, chooses to pursue a number of points which it might win or lose, the Claimant's litigation gamble ought to be treated in such a way that it only receives the costs of those parts of the gamble which pay off and suffer the costs of those points which it runs simply for money but loses. However, it would be an odd result if the Claimant, having got damages in vindication of its rights, ended up paying costs to the Defendant. More importantly, it does not seem to me that the approach laid down by the Court of Appeal allows me to take the Defendant's analysis as the starting point. The correct starting point in accordance with the Court of Appeal authorities appears to be to identify the "winner". On that basis, I can only identify the Claimant as the winner, because the Defendant has to pay them £50,000 plus interest.
10. The significance of identifying the "winner" is that it is a general rule that the unsuccessful party has to pay the costs of the successful party: CPR 44.3(2)(a), although the court has power in its discretion to make a different order: CPR 44.3(2)(b).
11. Having started with the identification of the Claimant as the "winner" and having identified the general rule as being that the Defendant here must pay the Claimant's costs, the question then is whether there are reasons which would lead me in the exercise of my discretion under CPR 44.3(1) to make some order other than that the Defendant pay the Claimant's costs.

The exercise of the discretion

12. There are three factors which under CPR 44.3(4) I am required to have regard to:-

"(a) the conduct of all the parties;

(b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(c) any payment into court or admissible offer to settle made by a party which is drawn to the court's attention (whether or not made in accordance with Part 36)".

13. Under the heading of "Conduct" I am directed by CPR 44.3(5) to look inter alia at:-

"(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;"

14. It seems to me that there are a number of special features of these proceedings:-

(1) The key evidence which led the Claimant to succeed only appeared in the oral evidence of its right to light expert at the trial. Prior to that, the Defendant could reasonably have thought that it was going to succeed on all the issues, although, of course, any proceeding involves a risk of something turning up at the trial.

(2) The Defendant succeeded on all the points argued except the infringement of the right to light to the basement stairs windows.

(3) The Claimant pressed for an injunction prior to and throughout the trial. On the facts known to it by the time of trial, it would have been oppressive for the Court to grant an injunction at the trial and to that extent their pressing for an injunction was unreasonable. That conduct made the trial longer and more complex.

(4) The very substantial costs of the proceedings could only be justified as being proportional to the outcome if the Claimant were able to obtain an injunction and, effectively, hold the Defendant to ransom. I do not accept the submission of Mr Wonnacott for the Claimant to the effect that it was simply putting the Defendant to proof of special circumstances. To my mind, the claim to an injunction was fundamental to the conduct of the litigation. The Claimant could at any point, particularly after it saw the Defendant's evidence, have stated that it was not pressing for an injunction but would be content with damages in lieu. Such a step would have made the trial considerably shorter and cheaper. Mr. Wonnacott says that the Claimant had a right to test the Defendants' evidence on special circumstances at trial. So it had, but in exercising that right they took

Conclusion

15. Bearing in mind the above factors and, in particular, that the Claimant was the "winner", that it had to bring and continue the litigation to its end in order to vindicate its rights, that the Part 36 and other offers were not accepted by the Defendant and that the eventual award of damages was not matched by any counter-offer, I consider that the Claimant must have most of its costs despite having lost most of the arguments and despite having pursued relief which would have been oppressive to grant. However, in the light of the very special features in this case the Claimant should certainly not have all its costs and should not have any of them on the indemnity basis as sought by it. In particular, there needs to be an incentive on Claimants to moderate the relief that they seek when the facts show that the granting of such relief would be oppressive to the other side.
16. Overall, I consider that justice will be done if the Claimant receives 75% of its costs up to and including the trial and handing down of judgment on the merits. They will, of course, have the whole of their costs in relation to the assessment. Costs will, unless agreed, be subject to detailed assessment on the standard basis.
17. Provided the parties can agree this without a further hearing, I would provisionally be minded, subject to any further argument, to order that interest on the costs relating to the trial and the assessment respectfully run at the rate of 6½% from the dates upon which judgment was handed down in each of those two stages. Again, subject to any further argument, I would be minded to order the Defendant pays within 28 days of the handing down of this judgment a sum of £45,000 by way of interim payment in respect of costs. This sum is equal to 75% of the security for costs of £60,000 lodged by the Claimant. Although I appreciate that the Claimant's costs may end up being lower than those of the Defendant, it seems to me obvious that the total costs on each side will in any event considerably exceed £60,000. £45,000 therefore appears to be a reasonable sum for an interim payment. These tentative views on interest and interim payment are expressed solely in the interests of trying to save the need for attendance at a further hearing, but if either side wishes to argue for some other result then a further hearing must take place at which I will listen to full argument and make a decision based upon that. Similarly, if either side wishes to raise any other further point there will be a further oral hearing in any event.

This is the official judgment of the court and I direct that no further note or transcript be made.