England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		10/04/2013

Mr Justice Warren :

1. Following my judgment on the substantive appeal ("the Judgment") handed down on 15 February 2013, I now need to deal with (a) the appeal by MML from the costs order made by the Judge below (b) if the Judge's costs order is to be set aside, the costs below and (c) the costs of the appeal before me. This judgment should be read together with that Judgment. I adopt the definitions in the Judgment without repetition.
2. As to the first of those matters, my interpretation of the Lease is different from that of the Judge and has led to rejection of the summary judgment application so far as concerns 2003. I also reached a different conclusion from him in relation to 2007. It seems to me, therefore, that I must determine the costs of the hearing below in the exercise of my own discretion since the Judge reached the conclusion which he did on the basis of a different result. That is not to say that, had I agreed with him on interpretation and in relation to 2007, the costs appeal would have succeeded. But that is a question which I do not need to address.
3. As to the exercise of my discretion in relation to the costs below and the costs of the appeal, Mr Johnson seeks to uphold the substance of the Judge's order below: he asks for an order for costs in MPL's favour and for an order for summary assessment in the figure assessed by the Judge. He also seeks MPL's costs of the appeal. Mr Seitler, taking a pragmatic approach as he would have it, submits that the appropriate course is to make no order as to costs at all. At the outset, I should say that I do not see any reason on the particular facts of the case to treat the costs below and the costs of the appeal differently. Neither party seriously suggested that I should do so although some submissions were directed at one set of costs rather than the other.
4. There are two preliminary points I wish to make. The first is that MPL is seeking only the costs of the summary judgment application (and the appeal). It does not, at this stage at least, seek the costs of the action. On that basis, Mr Johnson says that, in addressing the conduct of the parties in the context of his application for costs, it is conduct in relation to the application which is important. Conduct in relation to the action generally is not relevant if it is not conduct which has any impact on the application. The issue, as he would have it, is whether the application was properly and reasonably brought at the time when it was brought in the light of the circumstances obtaining at that time and conduct thereafter. I agree with that approach.
5. The second preliminary point is that MPL has succeeded in obtaining summary judgment in relation to the years 2004 to 2006, but not for the years 2003 and 2007. The reasons for that appear in the Judgment. The impact of this only partial success for MPL in the end result in relation to costs is a matter which I will consider in more detail later in this judgment.
6. In order to determine the incidence of costs, it is necessary to say something about the history of this matter, leading up to the issue of proceedings and then the making of the summary judgment application. It is necessary to do so in order to understand whether MPL was acting reasonably in bringing the summary judgment application at the time when it did.
7. I have set out the background in [8] to [15] of the Judgment. It is to be noted that MPL had been provided with certain information in the years prior to the commencement of proceedings on 27 February 2008. Mr Seitler has drawn my attention to a number of notices served pursuant to the provisions of section 20B(2) Landlord and Tenant Act 1985 containing details of costs incurred by MML in relation to service charge expenses. They relate to the calendar years 2003 (notice dated 30 June 2004), 2004 (notice dated 1 July 2005) and 2005 (notice dated 1 July 2006). Each notice stated in accordance with the subsection that the costs set out in an attached schedule had been incurred and "further, that you will be required under the terms of your lease to contribute to them by the payment of a service charge".
8. The notices to which I have just referred set out a number of expenses which, it is to be assumed, were "incurred" in each year within the meaning of section 20B. The extent to which such expenses are recoverable pursuant to the service charge provisions of the Lease, and the timing of such recovery, depends on the true interpretation of the Lease which was the subject matter of the Judgment. The notices served together with their schedules, even though they provide some information, were clearly not the certified account required by paragraph 4. This is for two reasons. First, the schedules are expressed to be unaudited statements and contain no certificate of the sort required by paragraph 4. Secondly, apart from that formality, the schedules may not comply with the requirements of paragraph 4 in that they may not provide an account of the Expenses for the relevant year. I say "may not" because, as I understand it, the schedules provide a list of expenses which have been "incurred" using the word "incurred" in the sense that an expense has either been paid or has fallen due for payment in a given year (with an expense incurred in a prior year having fallen due for payment but remaining unpaid not being repeated as an expense in the following year when actually paid). But, following the Judgment, it can be seen that an expense which has been incurred in that sense may, as the result of a proper allocation under the definition of "Expenses" in Schedule 4 to the Lease, not be an Expense for the year in which it is the subject of a section 20B notice.
9. It is clear that MML did not regard a section 20B notice as an account for the year in question for the purposes of paragraph 4. This is apparent from a letter dated 9 November 2005 (to give one example) from MML to a Mr Beirne, relating to a request pursuant to section 21 of the 1985 Act by another tenant, Mr di Marco, for a summary of relevant costs of the year 2004. This section relates to the provision of information about service charges. In that letter, MML made clear that it was unable to provide the section 21 information because of the defaults of the Manager which I mentioned in the Judgment. The letter contains this passage in relation to 2003:

"First, we do not consider the document provided to Mr. di Marco under cover of our letter to him dated 30 June 2004 to be a 'Summary of Relevant Costs' (whether audited or otherwise) within the meaning stipulated in the Landlord and Tenant Act 1985. The schedule of expenses was intended only to provide the tenants with an indication of the maximum amount to which they would later be asked to contribute by way of service charge pursuant to a lawful Notice given under S.20B(2) of the said Act as set out in the company's covering letter."

10. It is reasonable to assume – and I do so – that the letter dated 30 June 2004 together with its accompanying schedule were in the same form as the letter and schedule sent to MPL on the same date. Of course, at that stage MML considered that paragraph 4 required the provision of Full Accounts; the schedule provided pursuant to section 20B could not be described as Full Accounts. But even on my interpretation of the Lease, the schedule would not be the account under paragraph 4 and was certainly not intended by MML as being such an account.
11. What was MPL seeking when it launched its claim? Prior to the appointment of the Manager, the lessees had been provided with Full Accounts. As I understand it, service charges had been levied and paid in accordance with those accounts and no lessee (including MPL) had complained that some other account was required which might show a different amount owing by way of service charge. That is consistent with the letter dated 1 November 2007 from Mr O'Boyle of MPL to Mr Wismayer. In that letter Mr O'Boyle wrote as follows:

"I have been asking you for audited service charge accounts for years. Under the leases you are required to produce these as soon as practicable after the end of each accounting year.

……..

Since then we have received from you only one page, dated 30 June 2004, and entitled "Unaudited Summary of Relevant Costs (Statement of Service Charge Expenses"……

When are you going to release the audited accounts to us presumably including a balance sheet) for the four years, 2003, 2004, 2005 and 2006?

If you have not or cannot produce the audited accounts then would you please explain why and what you are doing to rectify the matter?"

12. It can be seen from that letter that Mr O'Boyle was expecting audited accounts containing a balance sheet. The reference to the one page document is curious. It is clearly a reference to the schedule attached to the letter dated 24 June 2004 being the schedule of expenses for 2003. But that was not the last document which MPL had received. As already mentioned, it also received section 20B notices for 2004 and 2005. It has not been suggested by Mr Johnson that MPL did not in fact receive those later notices.
13. Not having received an account under paragraph 4 in any form, the proceedings were commenced. The Particulars of Claim set out the parties (paragraphs 1 and 2) and material provisions of the Lease (paragraphs 3 to 9). Paragraph 4 of the 4^th Schedule is set out in full; but the pleading does not set out MPL's contentions about what the account should provide or its interpretation of the definitions of the Expenses and the Service Charge. Particulars of Breach are set out in paragraph 9 in the following terms (to repeat [16] of the Judgment):

"[MML] has failed to provide [MPL] with a certified account of the Expenses and Service Charge for the years 2003, 2004, 2005, 2006 and 2007."

14. The Defence, dated 28 April 2008, admits paragraphs 1 to 8 of the Particulars of Claim. So far as paragraph 9 is concerned, I repeat [18] of the Judgment. I need to add one comment, however. It is that paragraph 6 of the Defence alleged that it had not been practicable to produce "the said accounts". The said accounts were the "accounts of the Expenses and Service Charge". Thereafter, reference is made to service charge accounts, without drawing any distinction between Expenses and Service Charge. In the Judgment, I considered and rejected arguments on behalf of MML that the requirement to ascertain "the Service Charge" meant that Full Accounts were required. In fact they were not, in my judgment, required and the Service Charge was simply the stated percentage of the Expenses. Had I found in favour of MML, then Full Accounts would have been needed to ascertain the Service Charge; but equally they would have been necessary in order to ascertain the Expenses (as a defined term): there is and could never be any escape from the conclusion that the Service Charge was simply the stated percentage of the Expenses. This is important, because it was not suggested by MML until late in the day (as will be seen) that although it had provided an account of the Expenses (for some years) it had somehow not provided an account of the Service Charge other than by a trivial failure to apply a percentage figure to the Expenses.
15. Paragraphs 7 to 22 of the Defence set out MML's reasons for saying that it had not been practicable to produce the required accounts but, as with the Particulars of Claim, the Defence does not expressly set out MML's contentions about what the account should provide or its interpretation of the definitions of the Expenses and the Service Charge. Much of the Defence is concerned with the failures of the Manager; the way in which some at least of those failures are referred to makes sense only on the basis that MML was identifying difficulties in producing Full Accounts so that it was not practicable to produce such accounts. In that context, paragraph 14 provides an example, referring as it does to (a) differences in closing and opening balances for 31 December 2001 and 1 January 2002 (b) a purported balance sheet for 2002 and (c) the absence of an actual balance sheet for that year. Paragraph 16, referring to proceedings in the Magistrates Court relating to an alleged failure to provide the statement required by section 21 Landlord and Tenant Act 1985, also seems to be based on the proposition that MML was required to provide Full Accounts. Finally, in paragraph 25, it is stated that MML estimated (as of the date of the pleading, 28 April 2008) that "it will be ready to publish fully audited service charge accounts for all years from 2000 to 2007 by the end of May 2008". By fully audited accounts, MML can only have meant Full Accounts; it is clear that the defence was based on an inability to provide Full Accounts.
16. That Defence was not met with any reply, for instance to the effect that MML was proceeding on the wrong basis and that what was required was not Full Accounts but something far less onerous – either the List which the Judge considered was required or the account which I have held is required. It was not until 2010 that matters progressed in any way relevant to the current dispute about costs.
17. In his witness statement dated 14 April 2011 in support of MPL's application, Mr Jarret Brown of MPL's solicitors, Mishcon de Reya ("MdeR") sets out passages from two emails dated 27 August 2010. The first email to which I refer was from Mr David Wismayer to Mr O'Boyle in which Mr Wismayer said this:

"Apropos the accounts of service charge expenditure, you are apparently too ignorant to understand that you've already had them."

18. Ignoring the rudeness of that communication, the message is that MPL has had all the information which it had asked for. This email came more than 2 years after commencement of proceedings and might be thought to be a surprising response given that the Defence pleaded that it was not possible to provide the accounts required by paragraph 4 of the 4^th Schedule. Now, MML might say that MPL had had the information which the accounts would provide so that it was a storm in a teacup, as it would have it, that MPL had not received a certified document. It is not clear that that was what Mr Wismayer was actually saying. It was entirely unsurprising, to my mind at least, that Mr O'Boyle was puzzled and concerned about precisely what MML was in fact saying.
19. Accordingly, on the same day he emailed Mr Wismayer seeking clarification:

"Would you please send me copies of the "accounts of service charge expenditure" which you say you have provided. I am copying this to [MPL]'s solicitors since it might be relevant to the CLCC case referred to [that was a reference to the present action]."

20. Mr Wismayer responded on the same day with the following:

"As I've advised many times, your opinion carries no weight.  As your track record in litigation demonstrates, you're just not competent to have a view worth considering. Quite apart from that, you're not in possession of the relevant facts and your inability to resist the temptation to jump to conclusions simply wastes time.

Not that I would expect you to understand their significance in the context of your extant proceedings, I can confirm that the relevant documents have been duly served on Mactra at the appropriate times.  I'm not going to provide them again - you can waste your own time finding them.  You could start on the [the Defendant's] website though I doubt that you'll understand what you find there.  I haven't forgotten your puerile demands for a breakdown of the balances standing to the debit of Mactra's accounts with MML despite the fact that such breakdowns were staring you in the face.  You're innumerate at a basic level and there's very little to be done about that. Unfortunately, so are most solicitors.

I'll explain it all when we get in front of a Judge."

21. It is unfortunate, to use a neutral word, that Mr Wismayer's two emails of 27 August 2010 used such intemperate and offensive language. He has, through MML's counsel, apologised to this Court for it. However, if one strips away the language, the (inoffensive) message conveyed is that the "relevant documents" had already been served; in the context of the action, and the reference to it (ie "the extant proceedings") MPL would be entitled to think that MML's case was that the accounts sought in the action had already been provided. That is to say, that MPL had already received an account of the Expenses and Service Charge.
22. The next communications to which I need to refer are (i) an email dated 14 October 2010 from MML to its shareholders attaching the 2009 Schedule and (ii) a letter dated 17 November 2010 from MdeR to MML's solicitors, Wismayers, the solicitor's practice of Mr Clive Wismayer, brother of Mr David Wismayer.
23. That letter is a long letter. I do not need to refer to most of it. For present purposes, its particular relevance is that it sought an explanation from Wismayers of what Mr David Wismayer had said. Before coming to that, I note that reference is made to the 2009 Schedule (which had been recently received). MdeR observed that the 2009 Schedule was described as being "Pursuant to paragraphs 1(c) and 4 of the 4^th Schedule to the leases" from which they took it, as they stated, to be MML's position that the 2009 Schedule complied with those paragraphs. If it was possible to supply the relevant account under the Lease for 2009, it was questioned why accounts for the other years could not also be provided. Coming to the explanation sought, after referring to the communications on 27 August 2010, they observed "what David Wismayer seems to be alleging is that the certified service charge accounts have been provided to our client".
24. MdeR regarded this as "very serious indeed" saying this:

"As we have pointed out above, MML has defended and continues to defend the Existing Proceedings on the clear and express basis that (i) MML admits that it has not provided the relevant service charge accounts, but that (ii) it has not been practicable to do so…….

If your client is now saying that the relevant service charge accounts have been produced, we will require an explanation, and the Court will require an explanation of how it is that MML has managed to plead and pursue a case that it has not provided the relevant service charge accounts, but it has not been practicable to do so, in circumstances where the sole director of MML (David Wismayer) is saying that the relevant service charge accounts have been produced. If this is the position, we will also want to know, and the Court will also want to know how Clive Wismayer, a solicitor and the brother of David Wismayer, signed off a Statement of Truth, confirming the truth of MML's pleaded case, and then pursued that case on behalf of his client, in circumstances where his brother was saying that the relevant service charge accounts had been produced."

25. It is clear that MdeR were using the phrase "service charge accounts" to refer to the account for each missing year of the Expenses and Service Charge required by paragraph 4. Neither they nor MPL would have had any idea that MML might seek to draw a distinction of substance between an account of the Expenses and an account of the Service Charge: the latter was simply a stated percentage of the former. In order to obtain clarity, MdeR asked a number of questions which they stated were to be treated as a request for further information under CPR Part 18. The first, and most important question for present purposes, was whether MML was alleging that it had already "provided certified service charge accounts to [MPL] pursuant to MML's obligations under paragraph 4 of the 4^th Schedule" for all or any of the accounting years 2003 to 2008.
26. Wismayers replied on 1 December 2010. They referred to a letter which they had written dated 14 July 2010 which, in essence, had asserted that no account was required to be provided for 2008 or 2009 for the reason that no service charge was being levied for those years, the amounts required having been collected from the shareholders (who are also lessees) pursuant to their obligations under MML's constitution. It is worthy of note that Wismayers referred to MPL's request as being "for a certified account of expenses". That to my mind shows that not even Wismayers drew a distinction at that stage between the information which was needed to provide an account of Expenses and an account of Service Charge as defined in Schedule 4.
27. It is not, in any case, easy to see how the fact that no service charge was being levied for the years in question (because the cost was being recouped through the obligation of shareholders under MML's constitution) excused MML from complying with its obligations under the Lease; that obligation was to provide an account of (i) the Expenses and (ii) the Service Charge payable. If it chose not to collect the Service Charge, that was up to it; but I find it difficult to see how the making of that choice dispenses with the provision of an account of the Expenses. Be that as it may, Wismayers' response to the request from MdeR was as follows:

i) For 2009, it was said that the 2009 Schedule complied with the requirements of the Lease to provide an account of the expenses. That could only be taken as an acknowledgement that paragraph 4 of the 4^th Schedule obliged MML to provide an account of the Expenses;

ii) MML did not consider itself obliged to furnish an account of the service charge since no charges would be levied. I have already commented about how the Expenses and the Service Charge are linked by a simple arithmetical percentage, with the latter being no more and no less than the relevant percentage of the former. There is no justification for the view that an account of Expenses and an account of the Service Charge should be prepared on different bases. Accordingly, if an account of the Expenses is provided, an account of the Service Charge is easily obtained by applying the percentage: if MML was able to provide the former it was able to provide the latter. Conversely, if the Service Charge could not be ascertained because, contrary to the Judgment, Full Accounts had been required, then neither could the Expenses be ascertained because they, too, could be ascertained only by the provision of Full Accounts.

iii) For 2008, the position was said to be the same as in relation to 2009 except that a more informative schedule had been prepared in accordance with section 21 Landlord and Tenant Act 1985. The summary had been certified by an accountant as complying with the section. All that would be achieved by strict compliance with the Lease would be provision of the same information in a slightly different form with a slightly different certificate. It is difficult to see how that can be taken as anything other than a statement that all the information necessary to produce an account complying with the Lease – that is to say an account of the Expenses and Service Charge – had been provided and that MPL's complaint could only be about the form of the account and the absence of the correct form of certificate. That, of course, is not the position subsequently taken by MML before the Judge and before me when it was said that the Lease envisaged Full Accounts. I have rejected that although it must not be overlooked that the account which I consider the Lease requires to be provided differs from the account required by section 21 not only in form but in substance.

28. In relation to 2003 to 2007 the answer to the question posed by MdeR was "No". In other words, it was not contended that MML had supplied the required account for any of those years. MML's pleaded case in relation to that was that it was not able to do so because of the defalcations of the Manager. But, as explained, the whole basis of that case as presented to the Judge and to me was based on the proposition that the Lease required the provision of Full Accounts. It has never been suggested by MML, so far as I am aware, that the defalcations of the Manager would have prevented the provision of the same form of account for each of the years 2003 to 2007 (or for 2008) as was in fact provided for 2009 by the 2009 Schedule. Further, the basis of my own decision was that, at least by the time when the summary judgment application was launched, MML was well able to provide the accounts in the form which I have decided were required for 2004 to 2007.
29. In their letter, Wismayers also said this:

"Mr Wismayer did not mean to suggest in his e-mail to Mr O'Boyle that accounts of the expenses and service charge had been rendered in respect of the years 2003 -2007. In each case that has yet to occur and work in the preparation of those documents is continuing."

30. As to that, I note that there was no material before me and so far as I know none before the Judge to suggest that Mr David Wismayer was working on accounts for those years other than Full Accounts: in other words, there was nothing to suggest that he was working on an account for each year in the form of the 2009 Schedule. It would be surprising if he had been, given that MML's whole case before the Judge and before me was based on the need for Full Accounts. It is fair to note, however, that Wismayers added that copious information had been provided including statutory summaries as well as comprehensive company accounts in each case covering 2006 and 2007. In relation to that, Wismayers stated as follows:

"The said summaries covered the years 2006 and 2007 and, save only as to a slight and entirely immaterial difference in the wording of the accountant's certificate, discharged our client's duties under paragraph [4] of the 4^th Schedule, no service charges having been levied in either period."

31. Again, that is an acceptance that the Lease required something notwithstanding that, in Wismayers' view, no service charge was payable. Even if it had been correct that an account of the Service Charge was not required (because no service charge was in fact being levied), it was still necessary to provide an account of the Expenses under paragraph 4; accordingly, taking this quotation in isolation, it would appear that Wismayers were, in effect, saying that an account of the Expenses had been provided. Since MdeR and MPL would have had no reason to think that the Service Charge was other than the stated percentage of the Expenses (as I have held to be correct), it followed that an acceptance by Wismayers that all of the information necessary to create an account of the Expenses had been provided also entailed that an account of the Service Charge could be provided too. Mr Brown defines the passage I have just quoted as "the Admission".
32. Whether the emails referred to can in fact be read other than in the sense I have just described I do not need to decide. I would doubt that they can have another meaning, but what is clear is that MdeR could perfectly sensibly have read them in that sense and were reasonable in taking the stance which they did.
33. MdeR responded to that letter on 23 December 2010. They made the point (which is perhaps a different way of making the point which I have just made) that if the account for each of 2008 and 2009 could be produced and if, as appeared to be accepted, the account for 2006 and 2007 could be produced, then there was no reason to think that the account for each of 2003, 2004 and 2005 could not be produced also. What is clear from this, I consider, is that MPL would have regarded the provision of a certified account in the form of the 2009 Schedule as satisfying the requirements of paragraph 4 of the 4^th Schedule to the Lease. That this limited information, in contrast with Full Accounts, would be sufficient is confirmed in the same letter where MdeR wrote this:

"We note your admission that the summary of costs published for 2008 pursuant to Section 21(5) of the Landlord and Tenant Act 1985 contains the same information, so far as the Expenses are concerned, as should be contained in the service charge account for 2008. This admission is of course consistent with the parallel admission, quoted above, which you have made for 2006 and 2007"

34. MPL's application for summary judgment/strike-out was dated 14 April 2011. It followed on from the correspondence which I have just mentioned. MML instructed their present solicitors, Payne Hicks Beach ("PHB"); Mr Spring of that firm produced a witness statement dated 12 September 2011 (for the hearing on 29 September) in reply to that of Mr Brown. The essence of Mr Spring's witness statement (to a great extent, it is argument rather than evidence but that is beside the point for present purposes) is that MPL had made "a simple and fundamental mistake in equating the provision of details of expenditure with the provision of full service charge accounts"; and that MPL was trying to make far too much of what Mr Brown had described as the Admission. He ran, to a large extent, the argument which was run before the Judge and before me about the form of the account which is required by paragraph 4. Mr Spring referred to Mr Brown as having admitted that "the format of the 2009 schedule of expenditure constitutes a service charge account under the lease service charge mechanism". He stated that MML did not wish to take advantage of that admission because it disagreed with Mr Brown's contention.
35. That, however, is an inaccurate representation of what Mr Brown had said: Mr Brown had simply referred to MdeR's letter dated 23 December 2010 where he had said (not unreasonably) that it had been taken from the 2009 Schedule that it was MML's position that the 2009 Schedule complied with the requirements of the Lease. MML did not respond to that by saying that MdeR had got it wrong and that it was not the case that the 2009 Schedule did comply. Indeed, the 2009 Schedule was dealt with in Wismayers' letter dated 1 December 2010 as explained above where it was expressly stated that the "schedule of expenses" ie the 2009 Schedule complied with the requirements of paragraph 4 given that no account of the service charge was required. That, as I have explained, would properly be taken by the reader as meaning that an account of the Expenses had been given.
36. Mr Spring then went on to say this:

"Regardless of the form of presentation, so far as [MML] is concerned the [2009 Schedule] simply sets out expenditure for that year (as per its title), but it certainly does not equate to a service charge account so as to constitute or form the basis of a demand for a sum payable by a tenant as service charge for the year. And certainly not where liability for previous years is still to be properly determined."

37. This, of course, conveniently ignores the fact that on its face the 2009 Schedule describes itself as "[Pursuant to paragraphs 1(c) and 4 of the 4^th Schedule to the leases]". It hints at something which becomes clearer later in the witness statement that a distinction is being drawn between Expenses and Service Charge other than the simple fact that the latter is a percentage of the former. The hint is that it is possible to provide an account of the Expenses within paragraph 4 even though it is not possible to provide an account of the Service Charge. I have rejected such a proposition in the Judgment. I did not, and cannot now, see even the remotest argument to justify such a distinction (which is not to say that there were not arguments that Full Accounts were required, but only to say that they apply equally to ascertainment of the Expenses as they do to ascertainment of the Service Charge). Until Mr Spring's witness statement, MPL would have had no reason at all to think that such a distinction was being drawn or that it was in any way material to its claim against MML.
38. Mr Spring does, however, make clear what was not clear before namely that MML did consider that Full Accounts were required by paragraph 4 in order to provide a service charge. Mr Spring would no doubt have it that that position was made clear long before. He stated in his witness statement immediately after the paragraph just quoted:

"As much was explained by [MML's] former solicitors in the same letter as contained the alleged "Admission" but which has been overlooked by Mr Brown."

39. That was a reference to Wismayer's letter dated 1 December 2010 at paragraphs 1 and 2 on page 2. Mr Spring read that as stating the 2009 Schedule was "(at numbered paragraph 1) a schedule of expenses limited to compliance with that part of the Schedule 4 Provision to furnish 'an account of expenses' and (at numbered paragraph 2) was not a service charge account". I have already referred to that letter (paragraphs 1 and 2 corresponding to paragraphs 26 i) and ii) above). So he highlighted the distinction between an account of the Expenses and an account of the Service Charge as did Wismayers. Importantly, he did not suggest that the defalcations of the Manager had prevented the provision of an account of the Expenses for 2009 (or for 2008 by parity of reasoning). He did not gainsay Wismayers' statement in their letter of 1 December 2009 that the 2009 Schedule was indeed a compliance with the provisions of the Lease requiring an account of the Expenses; and he asserts that an account of the Service Charge is not required only in reliance on the (erroneous as I have held) proposition that the absence of a demand for a service charge eliminates the need for the provision of an account of the Service Charge.
40. Mr Spring then went on to make what, to my mind, is a startling proposition namely that MPL's summary judgment application relies wholly on the Admission. I say startling, because the Admission was only part of the story. An equally, if not more important part of the case, was the 2009 Schedule which MdeR had expressly raised with Wismayers, obtaining the responses (which I have already referred to at length) in paragraphs 1 and 2 of the 1 December 2010 letter.
41. I have gone into the history in some detail because it is important, when considering the costs of the application, to consider whether the application was properly made. In my judgment, MPL was perfectly justified in launching its summary judgment application when it did in the light of the correspondence as it stood at that time. At that time, it had no reason to think that any distinction was being drawn between the provision of an account of the Expenses and an account of the Service Charge (other than the application of simple percentage calculation). MML's pleaded case went as much to the difficulty of providing an account of the Expenses as the Service Charge: as I have already said, paragraph 6 of the Defence pleaded that it had not been practicable to produce the "said accounts" that is to say the accounts referred to in paragraph 4, namely accounts of the Expenses and Service Charge. Inconsistently with that, Mr David Wismayer and Wismayers had maintained on more than one occasion that the 2009 Schedule complied with MML's obligations to provide an account of the expenses and it was likewise asserted for some earlier years that all the relevant information had been given and was simply in a different form. There was nothing to suggest that an account of the Expenses for each of the years from and including 2003, in the same form as the 2009 Schedule could not be provided. Requests for clarification of the apparent inconsistency between the pleaded case and what MPL was told were met with the replies which I have recorded and which to my mind should not have been expected to lead MPL to understand that an account of the Expenses (and thus so far as the objective bystander would understand matters, the Service Charge) could not be provided for all years.
42. If MML was seeking to raise a defence that, although an account of the Expenses could be provided, an account of the Service Charge could not be, that was not a defence which was even hinted at before Mr Spring's witness statement (other than the point, ultimately held by me to be a bad point) that the absence of the need for a demand for a service charge excused non-provision of an account of the Service Charge. And even if it had been raised, it would not have been a defence to the provision of an account of the Expenses for each year; and yet MML refused to provide such accounts. The only defence to the claim for an account of the Expenses for years before expenditure was recovered through the company constitution route could have been because such an account required a Full Account, something which the defalcations of the Manager precluded. But that line of defence could not be maintained consistently with what Mr David Wismayer and Wismayers had said in correspondence.
43. By the time the summary judgment application came on for hearing, Mr Spring's witness statement had been served (although quite late in the day) and skeleton arguments had, I assume, been exchanged. I have been provided with a copy of Mr Johnson's skeleton argument dated 27 September having received Mr Spring's evidence, evidence which, I note, was produced only as the result of an opposed, but successful, application by MPL made in August 2011 that MML serve its evidence in reply. In that skeleton argument, under the heading "The Admission", Mr Johnson rehearsed the same correspondence as I have dealt with above. It is perfectly clear from that skeleton argument that the case which was to be presented was that the Lease required the provision of accounts in a simple form; and that although Mr David Wismayer may have been engaged in the difficult task of preparing Full Accounts, these were not what was required by the Lease. Although the issue was essentially one of construction – and that is how it was in the event approached at the trial – it was the Admission coupled with the 2009 Schedule which had triggered the application for summary judgment in the first place. The Admission had not triggered the action – indeed, it had not even been made when proceedings were commenced – but it had led to justifiable bafflement on the part of MPL about precisely what MML's position was. MPL sought, through MdeR, to understand how MML could say on the one hand that the defalcations of the Manager prevented it from providing the accounts required by the Lease and yet, on the other hand, was able (i) to produce the 2009 Schedule and assert that the 2009 Schedule was compliance with its obligation to provide an account of expenses; (ii) produce the figures for 2008 which would comply with that obligation if put into the appropriate form with a slightly different certificate and (iii) do very much the same thing for 2006 and 2007.
44. But MPL was never told, until Mr Spring's evidence hinted at it, that MML perceived a difference (a wrong perception as I held) between the form of account required for Service Charge (Full Accounts) and the form of account for the Expenses (the form of the 2009 Schedule).
45. By the time of the hearing, MML itself had changed its position, not from its pleaded case but from what MPL had expressly been told by Mr David Wismayer, confirmed by Wismayers, that the 2009 Schedule complied with the obligation to provide an account for 2009, and with parallel assertions that the information had been provided for 2006 to 2008. By the time of the hearing, MML was saying that it did not have to provide an account at all, the argument being that paragraph 4 required Full Accounts for the purpose of ascertaining the Expenses and for the purpose of ascertaining the Service Charge but that Full Accounts could not be provided because of the defalcations of the Manager. It would follow from that stance that the 2009 Schedule did not in fact satisfy the requirements of paragraph 4 of the 4^th Schedule; indeed, given my conclusions about the correct form of account, it may be that the 2009 Schedule does not in fact comply – but that will depend on if and how MML adopts a different allocation of expenses between different years from that reflected in the 2009 Schedule itself.
46. It is wholly unfair to describe, as has been done by MML on more than one occasion, Mr Johnson as having unceremoniously abandoned his case based on the Admission. First of all, it was never based in the Admission alone but relied also on what was stated in the 2009 Schedule. Secondly, he did not abandon it. It was because of the Admission and what was said in the 2009 Schedule that MPL reasonably understood, until Mr Spring's evidence, that MML accepted that the 2009 Account complied with its obligations in relation to the Expenses and the Service Charge. The Admission and the contents of the 2009 Schedule were consistent only with an acceptance by MML that the requirement to provide an account of Expenses had been complied with for 2009 and could be complied with for 2006 to 2008, with a good argument for MPL therefore to say that there was every reason to think that it could be complied with for 2003 to 2005. MPL had no reason to think that MML's defence based on the difficulty of providing accounts because of the Manager's defalcations was any stronger in relation to the Service Charge than the Expenses. Accordingly, the Admission and the provision of the Service Charge provided every justification for launching the summary judgment application in the absence of a clear explanation from MML of its position.
47. By the time the matter came on for hearing, the significance of the point of construction was appreciated by both sides. If MML had been correct about the need for Full Accounts, then it would show that the 2009 Schedule was not, contrary to what it said on its face, an account which complied with the requirements of the Lease; equally, what Mr David Wismayer and Wismayers had said about the account of expenses for 2006 to 2008 would have been in error. Mr Johnson, no doubt pragmatically and sensibly, and quite probably legally correctly, recognised that he would not be on the strongest of grounds to assert, at least on a summary judgment application, that the Admission and what was said in the 2009 Schedule, entitled MPL to the accounts in the form of the 2009 Accounts even if that was not what the Lease required. But to say that he abandoned the Admission is quite wrong. It formed an essential background to the application and was central to the opposition to Mr Seitler's submissions on costs.
48. The ordinary rule is that the successful party in an application of this sort should recover the costs of the application. Who, then, has won the summary judgment application and the appeal? In relation to 2004 to 2006, MPL is the clear winner. It has succeeded, as the result of the Judgment, in obtaining an order for summary judgment for 2004 to 2006, that is to say for the provision forthwith of the accounts required by the Lease, albeit that those accounts may (depending on how MML implements its power to allocate expenses to different years) be in a form different in some respects from those which the Judge ordered. I have rejected entirely the proposition that Full Accounts are required; and yet a requirement for Full Accounts was the only basis put forward by MML to justify the alleged inability to provide any accounts at all. The central point is that MML contended that MPL was entitled to nothing and has failed; although MPL has got something different from that which it eventually obtained, it was undoubtedly the successful party.
49. So far as 2007 is concerned, MPL failed to obtain summary judgment because it claimed them too soon. But the additional cost of this claim must be de minimis. It raised no discrete issue (other than having been raised too soon) and by the time the summary judgment application had been made, there was no remaining argument that, assuming MPL were to be successful in relation to the earlier years, it would not also be entitled to an account for 2007. MPL could have issued a further claim well before the summary judgment application for provision of accounts and brought on a separate summary judgment application at the same time. One might think that that would not have been a proportionate way of spending time and money. I do not consider that MPL's failure to obtain summary judgment in relation to 2007 should be reflected by a reduction in the costs (if any) which it would otherwise be entitled to recover.
50. As to 2003, MPL has failed to obtain summary judgment in the light of the construction of the Lease which I have adopted. The reason why that construction led to a refusal of summary judgment was possible uncertainty about what items should feature in the 2003 account as explained in the Judgment. Although I expressed the view that MML's defence was weak, it was sufficient to stave off summary judgment.
51. In reality, consideration of 2003 added nothing, so far as I can see, to the costs of the summary judgment application. In the end, the argument was principally about construction, an argument which would have had to be resolved even if 2003 had never featured at all. If the application had been only about 2004 to 2006, MPL would have been wholly successful in obtaining summary judgment, albeit on the basis of a different construction of the Lease from that which I have held to be correct. It would not be possible, in my judgment, to contend in those circumstances that MPL should be able to recover only a proportion of its costs on the basis that, although Full Accounts were rejected as the requirement of the Lease, so too the List was rejected, as if this gave rise to a no-score draw on the issue of construction.
52. MPL's case on costs can then be put this way. The inclusion of 2003 in the summary application did not affect the argument or the costs incurred in any way. There was no argument advanced and no evidence produced which suggested any distinction on the parties' separate cases between 2003 and 2004 to 2006. It was only my construction which resulted in that distinction being drawn. MPL deployed, and needed to deploy, the arguments which it did to succeed in relation to 2004 to 2006 and, having been successful in relation to those years, it should be entitled to its costs.
53. Mr Seitler challenges that line of argument arguing that precisely the same line of reasoning applies in reverse. In other words, it was necessary for MPL to deploy its arguments on construction and to adduce all of its evidence in order to resist summary judgment in relation to 2003 which it has successfully done. Although the construction for which he contended has been rejected by me, so too has the construction for which Mr Johnson contended. He submits the overall result should be that I should make no order for costs; or failing that, it should reflect that MML has won 2 out of the 5 years (ie 2003 and 2007) entitling MML to 2/5^th of its costs as against an entitlement of MPL to 3/5^th of its costs.
54. I reject entirely the "no costs" approach. It would simply not be fair to MPL. On Mr Seitler's alternative approach, the fractions would be ¼ and ¾ in my view, given what I have said about 2007. However, I reject that approach too since I do not accept the suggested symmetry between the positions which Mr Seitler relies on. MPL, in order to obtain any relief, had to make its application: neither side incurred any additional cost as a result of including 2003 in the application as well as 2004 to 2006. MML, for its part, chose to resist the application for all years and, like MPL, incurred no cost in resisting 2003 which it would not have incurred in relation to 2004 to 2006. The position would have been different, of course, had 2003 required, counterfactually, the deployment of additional evidence or additional arguments by MPL, or if MML had agreed to provide the accounts for 2004 to 2006, leaving MPL to fight, and lose, 2003. But that is not what happened. So the difference between the positions of MPL and MML – the asymmetry as I would put it – is that to get any relief, MPL had to bring its application and in including 2003 caused no additional cost to either party; in contrast, it was not necessary for MML to defend 2004 to 2006 in order to obtain its relief in relation to 2003.
55. That is not to say that some other percentage reduction should not be applied to MPL's costs. Suppose, for instance, that the difficulties in providing the figures for 2002 and 2003 had flowed through to difficulties in providing accounts up to 2005 with the result that MPL would have succeeded only in relation to 2006. It might be thought to be a surprising result – I would find it surprising – if MPL could nonetheless successfully contend that, having won on one year and lost on four, it should nonetheless have all of its costs.
56. In my judgment, it is right that MML's success in relation to 2003 should be reflected in a percentage reduction in the costs to which MPL would otherwise be entitled to recover. I consider that the correct percentage reduction in all the circumstances is 10%. That figure might be said to be arbitrary. I would say that it is not arbitrary but is a figure within the permissible range designed to achieve justice between the parties. There is no arithmetic or scientific process by which the appropriate reduction can be reached on the facts of the present case. The apportionment approach suggested by Mr Seitler gives far too much to MML. The absence of any reduction as suggested by Mr Johnson does not, in my view, reflect a fair outcome to MML. There is no uniquely correct figure. It is my function to adopt what I perceive as a fair reduction, and that is what I have attempted to do.
57. Mr Seitler also submits MML was justified in disputing MPL's claim before the Judge and, even more so, in pursuing its appeal since it has wider concerns than this particular dispute. This, he says, should be reflected in my costs order. He submits that MML's concern on the appeal has only ever been that the job – that is to say the job of providing meaningful accounts – should be done correctly and to see that the obligations of the lease should be given a clear and workable interpretation. It is no doubt true that MML did want to know what the Lease required. Whether or not it wishes to produce Full Accounts is one thing, something which it is able to do if it wishes. What is it obliged to do is to produce accounts in accordance with the Lease. I have decided in the Judgment what the Lease does require. My interpretation is, I hope, clear and workable: it is not, in any case, open to MML to assert in the context of the present argument about costs that it is not, and Mr Seitler has not sought to do so. Even if in the Judge's view the conclusion was not clear and workable – I am not to be taken as suggesting that it was not either clear or workable – that does not justify depriving MPL of an order for costs to which it would otherwise be entitled.
58. Finally, I add that there is nothing, in my judgment, in the conduct of MPL which should be reflected in my costs order. I reject Mr Seitler's submission based on the proposition that MPL was provided with all the information it needed and that its complaint could only be about the absence of that information being in proper form and the need for a slightly different certificate. I reject it for two reasons. First, if what Mr Seitler says is correct, it would have been a simple task for MML to perform to put the information into proper form and to provide the necessary certificate: that was its contractual obligation and it cannot throw the blame onto MPL for the absence of what MPL was entitled to receive. Secondly, it is far from clear that MPL did have all the information which will eventually find its way into the account which MML should provide following the Judgment. Furthermore, there has clearly been inadequate certification which is not a matter of mere formality but may be of real concern, for instance when it comes to satisfying a purchaser about the state of the service charge account.
59. Since I am not asked to deal with the costs of the action – which in theory continues but in practice I hope will not – I do not need to say anything about conduct in relation to the action in contrast with the application since, whatever criticisms might be made of either party, no such conduct has been drawn to my attention which ought, I consider, to be reflected in the costs of this application and appeal rather than in the costs of the action.
60. In relation to the costs of the application, there is nothing in the conduct of MPL which would justify any reduction in the costs order in its favour which I would otherwise make. So far as the conduct of MML and Mr David Wismayer, Mr Johnson has been highly critical. Mr David Wismayer refers to the intemperate nature of some of the comments made by Mr David Wismayer (for which he has apologised); he submits that MML may not have engaged as co-operatively as it might in the procedure of the application (although he puts it rather more strongly than that); and he objects to what he sees as repeated and unjustified suggestions that he unceremoniously abandoned reliance on the Admission when he did not. These factors have no impact. None of those factors persuade me that I should reduce the percentage reduction in MPL's costs which I have mentioned above.
61. Accordingly, the end result is that MML is to pay to MPL 90% of MPL's costs of the application and of the appeal, including the costs of the application for costs before me. Formally, the order for costs made by the Judge is discharged. I decline to assess any of the costs summarily. They are to be subject to a detailed assessment, if not agreed, on the standard basis. I will be willing to make an order for payment on account of costs. I hope, probably against experience, that the parties will be able to agree a figure. If not, I will deal with the matter on paper. Mr Johnson should go first, saying what he claims and Mr Seitler can respond.