England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE Claim No. 5BT04008
CHANCERY DIVISION

		Royal Courts of Justice Strand London WC2A 2LL
		16th April 2014

MR JUSTICE SALES:

1. This is an application brought by the claimant, Paratus AMC Limited (Paratus), a mortgage company, to vary an order made by Mr Justice Norris on 24^th February 2014 requiring the payment into court by Paratus of £181,461.46, representing the surplus proceeds of sale of 69 [inaudible] Road, London, N11 (the Property).
2. The background to the proceedings is that there was a repossession of the Property, which was owned by Mr Lewis, but subject to a mortgage in favour of Paratus. Under the terms of the mortgage, Paratus was entitled to recoup out of the proceeds of sale of the Property, as covered by its security, the sums loaned to Mr Lewis, interest and costs associated with the realisation of the security down to the date of the sale, which was 20^th November 2013.
3. I am satisfied on the evidence that has been placed before the court, that in presenting the position to Mr Justice Norris in February 2014, Paratus – or, more accurately, the solicitors acting on its behalf - made an error, in that they did not deduct from the balance of the proceeds of sale of the Property certain sums in respect of costs incurred in realisation of the security, in the amounts of £2,460 and £6,060.60. Had they not made that mistake, it is clear that Paratus would have had the entitlement to deduct and retain those sums before paying the balance of the proceeds of sale into court. In other words, Paratus had a contractual right to protection in respect of recoupment of those costs out of the security held by them over the Property. By mistake, those additional sums were not brought into account at the time when the matter was before Mr Justice Norris on 24^th February of 2014 and he made the order I have referred to.
4. Paratus, however, did not comply with his order. I am told that on about 13^th March it paid into court only the sum of £168,726.66. Apparently, that was done at a time when it had come to be appreciated that the further costs that I have referred to had not been brought into account. But it should be noted that, even if they were brought into account, the sum to be paid into court should have been £4,281 higher than the sum that actually was paid into court by Paratus.
5. Since Paratus was subject to an order of the court and had not made any application at that time to vary the order that had been made against them (let alone made an application which had been granted), Paratus had no proper justification for failing to pay into court the full sum of £181,461.46 that it was ordered to pay in by Mr Justice Norris. The appropriate course for it should have been either to apply for a variation of his order in good time before it came into effect or, having failed to do that, to pay the sum it had been ordered to pay into court and then to apply back to the court for a variation of his order and a payment out of part of that sum back to it. It did neither of these things. Instead, it took it upon itself, in breach of the order and in contempt of court, to pay the lesser sum of £168,726.66 into court. As I have indicated, even on Paratus's own arithmetic and correcting for the mistakes which had been made, that sum was inadequate.
6. Mr Lewis came before this court on 10^th April to point out that although by that stage Paratus had issued the present application notice dated 9^th April 2014 seeking a variation of Mr Justice Norris's order, it had not complied with that order. Mr Lewis applied to me sitting in the interim applications court and, even though notice had not been given to Paratus, it appeared to me, as it still does, that he had an unanswerable point that Paratus was in breach of the order of Mr Justice Norris by having failed to pay the proper sum ordered by him into court. Accordingly, on 10^th April I issued a further order requiring Paratus to comply with the relevant part of Mr Justice Norris's order by paying the balance of £12,734.80 into court forthwith, i.e. in advance of the hearing of its own application notice.
7. Paratus breached that order as well. It failed to pay the sum required into court. Instead, it has proceeded to bring forward its application notice of 9^th April 2014, supported by a witness statement of Samantha Edge, a paralegal in the employment of Moore Blatch LLP, the solicitors for Paratus. Miss Edge does not offer any apology or explanation for the contempt of court by Paratus in failing to comply with the order of Mr Justice Norris of 24^th February 2014 and my further order of 10^th April 2014.
8. The court deprecates the blasé attitude demonstrated by Moore Blatch LLP and Paratus in relation to ignoring two binding orders of the court made against Paratus. It is not for an individual litigant, even if convinced that the court has made a mistake, simply to ignore repeated orders of the court that they should do a particular thing, as Paratus was ordered to pay the full required sum into court. I am bound to say that I find it very surprising indeed that no one on behalf of Moore Blatch LLP thought it appropriate even to apologise to the court for the repeated breaches of court orders by Paratus through the agency of Moore Blatch LLP.
9. On the present application, Mr Lewis opposes the application now made by Paratus for variation of the order of Mr Justice Norris. He has had the benefit of representation by Mr Lewison under the Chancery Litigants in Person Scheme. I am grateful to Mr Lewison for his assistance in this matter and for his submissions.
10. Mr Lewison submits that Paratus has offered no explanation of how the error in calculation occurred and has offered no explanation or apology for the breaches of the court's orders by Paratus. He criticises Paratus for failing to come back to court promptly once it was appreciated, as appears was the case at the end of January 2014, for variation of Mr Justice Norris's order. He also submits that the present application is made for an underlying wrongful purpose, simply to provide for security for the solicitors' costs and disbursements in relation to this matter out of the proceeds of sale of the Property. He submits that the appropriate way forward in the circumstances of this case and, in particular, against the backdrop of repeated contempts of court by Paratus is for the court to decline to vary the order made by Mr Justice Norris, to require payment into court of the balance of the £181,461.46 ordered to be paid into court by him and simply to leave Paratus to whatever personal claims it might have against Mr Lewis in respect of the further costs of £2,460 and £6,060.60, which have not been brought into account in the figure ordered to be paid into court by Mr Justice Norris.
11. I am bound to say that I consider that there is considerable force in each of the points made by Mr Lewison for Mr Lewis. Very late in the day, counsel appearing for Paratus today, Mr Cutting, has tendered an apology on behalf of Paratus for its breach of the orders of the court. It was less than satisfactory, to put it no higher, that that apology was tendered so late in the day and not at an earlier stage and in a witness statement on behalf of Paratus.
12. However, the question remains, whether it would be right for this court, by reason of the failures by Paratus and its contempt of court, to refuse the relief now sought and to vary the order of Mr Justice Norris in the way claimed by Paratus to correct the errors of calculation it reflects. The position, as I have indicated, is that Paratus clearly had a contractual right to deduct these additional sums from the proceeds of sale of the Property, under its security. Is Paratus's conduct so serious as to warrant the court depriving it of its contractual right to deduct these expenses from the proceeds of sale as it was entitled to do under the security held by it, in effect as a penalty for its contempt of court?
13. In my judgment, it would not be just or appropriate to impose such a penalty upon Paratus in the circumstances of this case. Although Paratus has acted in a woeful manner and is deserving of strong criticism by the court, as appears in this judgment, I consider that it would be a step too far and would be contrary to just resolution of issues between Paratus and Mr Lewis for the court to decline to rectify what clearly was an error made in the calculation that was presented to Mr Justice Norris and was reflected in his order of 24^th February. In my view, the just outcome on this application is that Mr Justice Norris's order should be varied so as to substitute the sum to be paid into court of £173,007.66, reflecting the deduction of the further costs which were by mistake left out of account and the addition of the further element which Paratus accepts should be included in the calculation. The just approach, notwithstanding Paratus's conduct, is that its contractual rights should be given effect in the circumstances of this case.
14. Accordingly, I vary Mr Justice Norris's order to replace the figure required to be paid into court by the lesser sum that I have indicated. The balance of the monies representing the difference between the sum of £168,726.66, which has been paid into court, and £173,007.66, which on the corrected calculation ought to be paid into court, must be paid into court by Paratus forthwith.

THE JUDGE: Yes?

MR CUTTING: I am grateful, my lord. Obviously, I can prepare an order in that regard. You will notice from my draft order, which is behind tab 3, which will need to be amended in light of your judgment, at paragraph 4 we were not seeking any costs order in respect of this.

THE JUDGE: No.

MR CUTTING: This was Paratus's mistake and, therefore, they should—

THE JUDGE: Mistake and contempt of court, yes.

MR CUTTING: Exactly and, therefore, they should not be entitled to their costs.

THE JUDGE: Yes, very well. Mr Lewison?

MR LEWISON: My lord, I have two applications, one of which is that your lordship make a pro bono costs order under rule 46.7 and the second is to invite your lordship to consider whether a transcript of the judgment ought to be prepared at Paratus's expense and published on the BAILII website.

THE JUDGE: Yes.

MR LEWISON: I will deal first with the costs.

THE JUDGE: Yes.

MR LEWISON: I accept, of course, that the general principle is that successful parties get their costs and unsuccessful ones do not and Mr Lewis has not been successful on this application. Nonetheless, this was an application that contained very serious defects and which was based on very serious breaches of court orders. Mr Lewis might or might not have been able to make those points himself, but nonetheless those points have been made for him on his behalf under the CLIPS scheme and so I would invite your lordship to make an order that the costs of this hearing be paid by Paratus.

THE JUDGE: I am looking at CPR part 46.7 now. What order do I make? What does it say?

MR LEWISON: As I understand it, the court has to direct that the paying party make a payment to the prescribed charity.

THE JUDGE: Is there a prescribed charity or do I prescribe—

MR LEWISON: There is a prescribed charity. I cannot immediately tell your lordship what that charity is, but in any event that is the order that is made.

THE JUDGE: What costs are ordered to be paid?

MR LEWISON: Well, the costs that are ordered to be paid are in fact not costs, they are a sum equivalent—

THE JUDGE: Yes, quite.

MR LEWISON: —to the costs that would have been incurred for the representation that was actually made. So, they would effectively be my time in this hearing of an hour and ten minutes, plus an hour with Mr Lewis beforehand.

THE JUDGE: I am just trying to see how it works.

'The court may order the payment to the prescribed charity of a sum no greater than the costs specified in part 45 to which the party with pro bono representation would have been entitled in accordance with that part.'

MR LEWISON: Yes, so part 45 is fixed costs, which we say do not apply. So, it is 46.7(1)(b)—

THE JUDGE: Oh, I see, sorry.

MR LEWISON: —so that your lordship is effectively—

THE JUDGE:

'The court may determine the amount of the payment (other than a sum equivalent to fixed costs) to be made by the paying party to the prescribed charity…'

So, how does it work then, do I make some estimate of if you were here being paid by Mr Lewis of what costs would have been recoverable—

MR LEWISON: Yes.

THE JUDGE: —by Mr Lewis under the indemnity principle—

MR LEWISON: Yes.

THE JUDGE: —[inaudible]

MR LEWISON: It is for the work that is done rather than the work that would have been done, so it is just two hours' worth of my time.

THE JUDGE: All right.

MR LEWISON: So, it does not include notional solicitors' costs, notional preparation time or anything like that.

THE JUDGE: So, in actual amount, how much would you be asking for?

MR LEWISON: Mr Hall is advising me to ask for £750. In fact, my hourly rate is £200 so I would invite your lordship to make an order for £400.

THE JUDGE: Yes.

MR LEWISON: The second was an invitation to your lordship to consider whether a transcript should be prepared at Paratus's expense given that they have been in such flagrant breach of court orders—

THE JUDGE: Yes.

MR LEWISON: —and whether that should be published on BAILII.

THE JUDGE: Yes.

MR LEWISON: Beyond drawing that to the court's attention, I will not take it any further.

THE JUDGE: Yes. Mr Cutting, do you want to say anything to those?

MR CUTTING: Yes, my lord. Obviously, the usual costs order is that the loser pays the winner's costs. This application—

THE JUDGE: There are two observations I would make about that. This is Paratus repairing an error that it committed previously and against the backdrop of contempts of court by it, which in my view certainly justified Mr Lewis coming here to argue about whether it should have the relief it sought.

MR CUTTING: But he has come to court and not been successful in respect of that, despite the fact that it was considered that this is a flagrant breach. Of course it is a flagrant breach, they have failed to comply with court orders, but it was put in such a way that they should be deprived of their contractual entitlement and your lordship has adjudicated that that is not the just and appropriate order in these particular circumstances. So, it would be my submission that the appropriate costs order would be no costs order rather than a pro bono costs order. If you are not with me on that, with regards to the costs order under the 46.7(1)(b), we have obviously heard from my learned friend that his hourly rate is normally £200 per hour. My hourly rate is £150 per hour and so I would be saying that you should be adopting the hourly rate of myself as opposed to the hourly rate of my learned friend if you are going to make an order in that regard. Other than that, I cannot really deal further with the issue of costs. Regarding the transcript, that is a highly unusual order to ask this court to make and whilst it is fully accepted that Paratus have breached and been in contempt of court on two occasions, that will obviously be reported back to them when I provide them with a note of your judgment. What it would appear that Mr Lewis is attempting to do is to publicise to the wider world the breach of Paratus and I do not think that that—

THE JUDGE: Quite. Yes, he is.

MR CUTTING: Absolutely and in my submission I do not think that is an appropriate way for matters to be dealt with. It is certainly not something that I think is appropriate in the circumstances of this application and this particular breach, but, as I say, I have nothing further I can really say on that because it is a highly unusual request, but it is certainly something that is within your authority to order if you so wish.

THE JUDGE: Yes, thank you. I do not need to hear further from you, Mr Lewison.

15. THE JUDGE: Mr Lewison on behalf of Mr Lewis asks for two consequential orders. The first is that the court make a pro bono costs order under CPR part 46.7(1)(b). In my judgment, it is appropriate to make a pro bono costs order reflecting the pro bono services provided by Mr Lewison on the present application, which has been two hours of work. I summarily assess the costs to be ordered to be paid in the sum of £400.
16. In my judgment, this was a case where Paratus came to court seeking to put right its own mistake in the presentation of its case to Mr Justice Norris. Paratus had acted in repeated contempt of court in the way that I have described in my ruling and I consider that Mr Lewis was fully entitled in the circumstances to come to court to contest Paratus's application on that basis. In substantial part, Mr Lewis was successful in his contentions, in that he has demonstrated that Paratus has acted in contempt of court and acted without promptitude in seeking to rectify its previous mistake. In my judgment, the just and appropriate order in the circumstances is that Paratus should be ordered to pay the element of costs I have indicated under a pro bono costs order.
17. The second application that Mr Lewison makes is that the court should order that a transcript of the ruling should be prepared at Paratus's expense and published on the BAILII website. I consider that it is appropriate to include this provision in the order. Paratus has acted in contempt of court. Although at the end of the day I thought it right to vary the order made by Mr Justice Norris on the application made to me by Paratus, I consider that Paratus's clear and repeated contempt of court should attract proper sanction in the form of publicity for what it and Moore Blatch LLP have done and how they have treated the orders made by the court. It seems to me that the appropriate way to do that is by giving publicity to the ruling of the court on this occasion, which exposes their serious failures to respect the orders made by the court against them. Accordingly, I consider that it is appropriate to include this in the order which is made.

THE JUDGE: So, Mr Cutting, can I give you then the carriage of drawing up the minute of the order which will [inaudible]

MR CUTTING: Yes, my lord. Just in respect of the transcript, it is the first time I have had to deal with something requiring BAILII to publish it. Obviously, we do not have control—

THE JUDGE: I think perhaps what the order should say is that a transcript be drawn up at Paratus's expense—

MR CUTTING: Expense and a copy be sent to BAILII?

THE JUDGE: Well, so that Paratus need to be required to give instructions to the transcript writers—

MR CUTTING: Yes.

THE JUDGE: —to draw up the transcript, with Paratus assuming responsibility for their fees for doing so.

MR CUTTING: Yes.

THE JUDGE: I do not think that the order needs to do more than that because if a transcript is drawn up, it will come to me, I will correct it—

MR CUTTING: Yes.

THE JUDGE: —in the usual way and I will take responsibility for putting it on BAILII [inaudible]

MR CUTTING: I am grateful.

THE JUDGE: Mr Lewison, do you have any difficulties with us proceeding in that way?

MR LEWISON: No, not at all, my lord.

THE JUDGE: All right, very well. Well, thank you very much. Thank you, Mr Lewison, in particular, for your assistance under the CLIPS scheme. Thank you very much. I will rise.

[Court adjourns]