England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		18/03/2009

Mr Justice Norris:

1. On 13^th February 2009 I handed down judgment and concluded (in paragraphs 37 to 42) with provisional costs orders. At the request of the parties I am reconsidering the question of costs afresh in the light of written submissions.
2. I hold that the Claimants are entitled (insofar as the costs are not otherwise recoverable from another party) to their costs assessed (if not approved by a meeting of the Estate Residents) on the indemnity basis out of the assets subject to their control as trustees or out of the assets of the Company. This follows from the Order of Master Moncaster dated 10^th May 2006 and accords with CPR 48.4. The Seventh Claimant is not (unlike the First to Sixth) a trustee of any shares: but he is a director of the Eighth Claimant. I hold that this is not a ground for treating him distinctively The costs of the Claimants should be assessed as an entirety and recovered as an entirety out of trust assets (if any) or out of the Company's assets.
3. If the Claimants resort to Company funds they should first charge the costs against unallocated accumulations, then against allocated accumulations, and lastly against the endowment reserve fund.
4. Trustees and other fiduciaries are entitled to an indemnity almost as of right only so long as they preserve a neutral position as between beneficiaries and only so long as they incur expense for the benefit of the trust fund and not for their personal benefit (e.g to defend or vindicate their personal reputations). The terms of some of the submissions on costs caused me to review whether that principle had been breached . But I decided that it had not.
5. I hold that the Third Defendant Mr Roberts is entitled to the costs incurred by him in acting as a representative defendant pursuant to the Order of Master Teverson dated 18^th December 2007. Those costs are payable on the same basis, out of the same assets as those to which the Claimants can look and in the same manner.
6. The Fourth Defendant Mr Cullinan was not a representative defendant (his application to be joined as such having been rejected by Master Teverson on 21^st May 2008). There is no question of him obtaining costs out of the fund. He joined as an individual defendant. The costs of his application to be so joined (which had to be adjourned) were reserved to me as the trial judge.
7. The position he took in his written evidence (two pages in length) was that the Claimants had acted in an improper way ("tantamount to negligence"), that the relief they were seeking in relation to what he called "the putative Trust Deed of 1963" was misconceived and that (notwithstanding the Order of Master Moncaster dated 10^th May 2006) the Claimants were not entitled to be indemnified in respect of their proper costs. The Claim Form in the proceedings had asked the Court (in the event that upon the true construction of the Deed it was impossible or impracticable to convene a quorate meeting) to give directions enabling such a meeting to be held and that "further or alternatively" to direct that the provisions of the Deed should be amended to incorporate a scheme for the entry of restrictions upon the titles of Estate Residents. This further or alternative form of relief was not in the event pursued at the hearing. But Mr Cullinan was much exercised by the claim for it: and it was the only matter on which he addressed me at trial, and he then did so briefly.
8. Mr Cullinan's evidence was responded to by Mr Grender in a witness statement dated 10^th July 2008. It said that most of the issues and points raised by Mr Cullinan had already been dealt with comprehensively in the existing evidence (as was indeed the case): and it dealt "shortly" with three points (taking one page to do so, and exhibiting two recent documents).
9. The Claimants submit that Mr Cullinan has throughout treated this as hostile litigation and that it is neither fair nor just that the general body of Estate Residents should bear the Claimants' costs of his joinder and of responding to his evidence. They submit a schedule of costs in the sum of £7429 in respect of the adjourned and effective joinder hearings. Mr Cullinan submits that his application to be joined as a party succeeded (albeit in a personal and not a representative capacity); and that it only became clear at the hearing itself that the Claimants did not intend to ask the Court to approve an amendment to the Deed providing for restrictions to be entered upon title (contrary to what had been indicated in paragraph 12.3 of the Claimants' Skeleton Argument).
10. I hold that Mr Cullinan should pay 50% of the Claimants' costs of the joinder application which I assess in the sum of £3000.
11. I do not consider that Mr Cullinan's joinder should of itself have occasioned any significant additional costs. The general points he made had already been addressed in evidence filed. The three new points he made were covered in a page of evidence.
12. The application to be joined is different. Mr Cullinan wanted to be joined as a representative of some 31 (or 34) alleged dissidents. That application failed; and although Mr Cullinan was allowed to become an individual party, the Claimants were substantially successful. The general rule in CPR 44.3(2)(a) is engaged. But I must consider all the circumstances, including conduct of the parties. One of the key drivers behind Mr Cullinan's opposition was the part of the Claim Form which invited the Court to direct amendment of the Trust Deed even in the absence of approval by the Estate Residents. The Claimants decided not to pursue that. By seeking relief they did not in the event pursue they invited opposition unnecessarily (including the application for joinder by Mr Cullinan). That ought to be reflected in any costs order. It is reflected in depriving them of half of their costs of the joinder application. So in principle Mr Cullinan will pay half the costs of the joinder issue.
13. The Schedule itself is assessed (on the standard basis) at £6000 because (a) not all of the costs of attendance on 11^th March 2008 can be attributable to the joinder application (b) it is not reasonable both to involve senior Chancery Counsel for advice and representation and to involve a senior solicitor in attendance at hearings (with associated travel and waiting time costs) (c) a rate of £250 per hour is significantly above the guideline rate.
14. I will order Mr Cullinan to pay £3000 to the Claimants in respect of their costs.
15. I turn to consider the position of the First and Second Defendants. I must first deal with some reserved costs, namely, the costs reserved by Mann J to the trial judge when dismissing the application by these Defendants for the immediate trial of a preliminary issue as to the status of the Claimants as trustees of the Deed. This application failed, and would appear always to have been bound to fail. The Claimants were acting under the protection of the Order of Master Moncaster of 10^th May 2006 in pursuing the present proceedings (an order in respect of which the First and Second Defendants had had the opportunity to seek a review, but had declined to do so). There could therefore be no challenge to the propriety of the proceedings irrespective of the technical status of the Claimants. The proceedings themselves sought relief as to the technical status of the Claimants: the issue was therefore already before the Court. Master Teverson had on 12^th December 2007 struck out a purported counterclaim by Mr and Mrs Dresden for declarations as to the status of the Claimants. The trial window itself opened within 4 weeks of the application for the preliminary issue. It would never have been possible to compress both the application for an order for the trial of a preliminary issue and the actual trial of that issue into a single hearing. Nothing that happened at the hearing before me cast any new light on this apparent position.
16. The application by these Defendants before Mann J failed. The Claimants succeeded, and under the general rule are entitled to their costs. There are no circumstances which warrant a departure from that general rule. In particular I reject the argument that Counsel for the Claimants owed these Defendants a duty not to incur anything other than the absolute minimum of expense because he should have seen that their application was hopeless. There is no such duty. I also reject the argument that these Defendants ought to be protected from the normal consequences attendant upon the failure of their application because if it had succeeded other householders would have benefited. Mr and Mrs Dresden were individual (not representative) Defendants.
17. I therefore hold that Mr and Mrs Dresden must pay to the Claimants their costs of and incidental to the application heard by Mann J. I consider that the application departed sufficiently from the normal conduct of litigation (if the attention of the Court was directed to the relevant considerations the application was bound to fail) to warrant an order that the costs be assessed on the indemnity basis.
18. The Claimants ask for these to be assessed summarily at the figure of £8742.38 and paid within 28 days (affording to Mr and Mrs Dresden an extension of the period provided by CPR 44.8). It is curious to be asked to make a summary assessment of these costs on the indemnity basis since my findings and holdings would inevitably impact on the detailed assessment to be carried out on the indemnity basis under paragraphs 2 and 5 of this judgment. It is not possible to say that (in relation to these costs) the indemnity basis produces one result where the paying parties are Mr and Mrs Dresden but another result where the paying party is the trust fund or the Company. Thus if I took the view on this application that even on the indemnity basis £250 per hour was an unreasonable hourly rate, this would limit not only the costs recoverable by the Claimants from Mr and Mrs Dresden but also the costs recoverable by the Claimants from the trust fund or the Company in relation to the preliminary issue application and to the rest of the proceedings wherever that rate was used. I do not think I can justly dispose of the summary application having regard to these wider considerations. I decline to make a summary assessment and direct a detailed assessment of these costs.
19. This leaves the rest of the costs of the action. Where proceedings are brought by trustees to have the guidance of the Court on the construction of the trust deed or on some question arising in the administration of the trust, the costs of all parties are usually treated as incurred for the benefit of the trust fund and ordered to be paid out of it: see Lewin on Trusts (18^th ed.) para 21-79. The Claimants say that this general practice should not be followed and that the Court should order Mr and Mrs Dresden to pay all of the Claimants' costs of the action (assessed on the indemnity basis) incurred from and after 1^st March 2007.
20. I regard this submission as unsustainable. Indeed, it gave me pause to consider whether the Claimants were not in some measure putting at risk their entitlement to an indemnity from the trust fund in respect of some of the costs.
21. The 1^st March 2007 was the date upon which Mr and Mrs Dresden filed their Acknowledgements of Service in the present proceedings. Irrespective of any step Mr and Mrs Dresden thereafter took it would still have been necessary for the Claimants to identify and to join to the action a representative Defendant, to consider and respond to the evidence he filed (including certain inaccuracies in the survey he conducted), to deal with Mr Cullinan's freestanding application to be joined and any evidence he filed, and to appear at trial and place the questions for determination before the Court (including advancing any proper arguments not promoted by the representative defendant). The Claimants say that Mr and Mrs Dresden should pay these costs. That is tantamount to saying that they should personally pay the costs of sorting out the muddle which everyone agreed had been created by the Deed (the Claimants' evidence says that intervention by the Court is an "absolute necessity"), and that none of the other estate residents should contribute. That is not sustainable.
22. My assessment is as follows:-

(a) The application for a protective costs order was made because some of the estate residents raised a doubt about the standing of the Claimants as trustees (in the light of the acknowledged failure to adhere to the terms of the Deed) and because the Claimants had been advised that upon one construction of the Deed they might not have power to use estate money to resolve doubts about the meaning of the Deed. The Dresdens do not bear sole responsibility for the issue or prosecution of such proceedings (see the letter signed by 14 residents on 14 July 2006 following the grant of permission). The evidence the Dresdens filed on this application was (rightly) not answered (though it must have been read).

(b) When Master Moncaster ordered that the costs of the protective costs application should be "dealt with in the same way as the intended proceedings" he meant that they should be treated as part of the costs of the substantive proceedings.

(c) Mr and Mrs Dresden do not seek any costs in respect of their participation in the protective costs proceedings: there is no reason to order them to pay any part of the Claimants' costs of those proceedings. The costs of those proceedings will therefore be treated in accordance with paragraph 2 above.

(d) In the circumstances obtaining (and irrespective of the attitude of Mr and Mrs Dresden) an application (by the main proceedings) for the intervention of the Court was an absolute necessity.

(e) Mr and Mrs Dresden chose to become parties to that application in an individual capacity. The fact that they saw themselves as discharging a social or civic duty (or as acting vicariously) is irrelevant. They were not representative defendants and were not so appointed by the Court.

(f) The fact that they are litigants in person is only marginally relevant: CPR 1.3 requires "the parties" (including litigants in person) to help the Court to deal with the case justly and with an eye to saving expense.

(g) There is a reason to depart from the general rule as to costs on such a construction and trust administration application as this. It is that Mr and Mrs Dresden used the present action as a vehicle for raising many issues not germane to the questions before the Court, but upon which they had campaigned for years, thereby adding to expense. They must pay the costs incurred by the Claimants in reading, considering and responding to this material.

(h) CPR 44.3(7) discourages me from making a costs order in relation to part only of the proceedings if a just alternative exists.

(i) A just alternative involves me weighing in a broad way what impact the Dresden's excesses had on the proceedings. I emphasise "on the proceedings". I do not consider it legitimate to make a costs order influenced by what would be advantageous to the personal circumstances of Claimants who have lent money to the Company, or conducive to good relations between the Claimants and other residents, or with an eye to how easy it will be to raise future frontage charges. No doubt if the Dresdens could be made the scapegoats and ordered to fund the entire action personally everyone else would be very happy. But that would not be just exercise of the power to award costs.

(j) The evidence filed by the Dresdens did not in fact prompt substantial amounts of evidence to be filed by the Claimants. Mr Grender's Third Witness Statement was 8 pages in length. (His Fourth dealt with Mr Robert's evidence and his Fifth with Mr Cullinan's, for neither of which are Mr and Mrs Dresden responsible; his Sixth dealt with the application for a preliminary issue on which I have already made an order).

(k) Looking only at the quantity of evidence filed in response to that of the Dresdens is not a fair measure since its represents a distillation of the reading and consideration of a much more substantial volume. Further, it takes no account of the costs involved in collating and copying the material for trial and in Counsel's preparation.

(l) Significant time at trial was spent on the pursuit of these irrelevant issues which were so closely intertwined with Mr Dresden's (few) submissions on relevant matters as to be inseparable.

23. Weighing these matters I consider that Mr and Mrs Dresden should pay 40% of the Claimants costs of the proceedings (save for those costs which have already been the subject of consideration and orders by Master Teverson on 18^th December 2007 (the strike out application) and by me in paragraph 17 above (the preliminary issue application)). I should make clear that by "the costs of the proceedings" I mean just that, and not "the costs of the proceedings other than those expended in dealing with D3 and D4". I have taken account of that factor in fixing upon 40%.
24. In my judgment those costs should be assessed on the indemnity basis. That happens to be convenient (since that is the basis of the main assessment in paragraph 2 and the discrete assessment in paragraph 17 above). But I do not adopt it on the grounds of convenience. I accept Mr Studer's submission that it is the proper and condign basis in a case where a party's conduct of proceedings has been disgraceful or deserving of moral condemnation, as that of Mr and Mrs Dresden has been (both in respect of the personal attacks on individuals and on the selection of issues to evidence and argue).
25. That leaves the trust fund (or the assets of the Company) to bear the whole of the costs of the protective costs application and 60% of the costs of the main application (save for the preliminary issue application, the whole of which Mr and Mrs Dresden must bear).
26. I consider it just to order an interim payment on account of those costs pending agreement or assessment on the indemnity basis. I do not have sufficient material to make the informed estimate of the ultimately recoverable costs which is suggested in Mars UK v Teknowledge [2000] FSR 138. But I regard it as vital that the Claimants are put in funds to enable them to bring the remaining issues to a conclusion. The recoverable costs are likely significantly to exceed £17,500. I will order Mr and Mrs Dresden to pay £17,500 to the Claimants on or before 1^st May 2009 on account of the costs I have ordered them to pay.

Mr Justice Norris………………………………………………………18.3. 2009