England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Bristol Civil Justice Centre 2 Redcliff Street, Bristol, BS1 6GR
		28/10/2014

Mr Justice Morgan :

1. This judgment deals with various matters which have been raised by the parties following the judgment which I handed down in this case on 21 August 2014. The matters arising concern the following:

(1) the costs incurred by the parties following discontinuance of the claim on 18 June 2014 and prior to judgment;

(2) payment on account of costs;

(3) permission to appeal;

(4) the costs incurred by the parties following judgment on 21 August 2014.

2. As in my earlier judgment, I will refer to the Claimant as the Bank and the Defendant as Mr Phillips. I have received detailed written submissions on the above matters from the Bank and from Mr Phillips.
3. For the purpose of determining the question as to the costs incurred by the parties following discontinuance and before judgment on 21 August 2014, I have considered the material which was before me on the 14 and 25 July 2014, including the written and oral submissions for the parties on those dates and the further written submissions and the correspondence relied upon in the course of the further submissions.
4. The principal issues which were considered at the hearings on 14 and 25 July 2014 were: (1) the allegation that the Bank's purpose in bringing possession proceedings was an improper purpose and/or that the proceedings were an abuse of process; (2) whether the Bank could add its costs (including the costs which it was obliged to pay to Mr Phillips) to the security; and (3) whether the Bank could set off its liability in relation to costs against sums due from Mr Phillips to the Bank. In relation to these three issues, much more than 50% of the time at the hearings was taken up with the first issue. It also seems likely that in the course of preparing for the hearings, much more than 50% of the time was taken up with the first issue. The Bank succeeded on the first issue and Mr Phillips succeeded on the second and third issues.
5. Mr Phillips criticised the conduct of the Bank in the period after the discontinuance of its claim and before the hearing on 14 July 2014. It is correct that the Bank failed to provide substantive replies to letters and failed to instruct counsel until very late with the result that the skeleton argument from counsel for the Bank was only served on the morning of 14 July 2014. Mr Phillips also relied on the fact that the Bank had refused to concede the issue as to set off and the Bank lost on that issue.
6. The Bank criticised Mr Phillips for not providing information as to his costs; it was said that this information was necessary to enable the Bank to consider whether it was worthwhile to contest Mr Phillips' claim to indemnity costs (which turned on the first issue referred to above).
7. Much of the criticism of the parties' behaviour before 14 July 2014 is overtaken by the ultimate outcome on the various issues. For example, the Bank's failure to concede the set off point or even to indicate its position is overtaken by the fact that the Bank lost this point and Mr Phillips' success on that point will be reflected in the order I make. Conversely, in so far as Mr Phillips is to be criticised for not being more forthcoming about the level of his costs (and I make no finding about that matter), in the event, the Bank succeeded on the issue of indemnity costs and that element of success will be reflected in the Bank's favour whether or not the criticism is a good one.
8. Mr Phillips contended that the Bank's failure to reply to letters and the late instruction of counsel led to the hearing taking place on two dates and not being completed on 14 July 2014. I consider that the real reason that the matter went into a second day was that I was unable to sit to deal with this case until 2.00 pm on 14 July 2014 instead of 10.30 am as expected. I can well understand the frustration felt on Mr Phillips' side by the Bank's lack of communication and the late delivery of the Bank's counsel's skeleton argument but I do not consider that those matters had a major impact on the costs which were incurred by Mr Phillips.
9. Mr Phillips also relied on two letters dated 15 July 2014 written by his solicitors to the Bank's solicitors. One of these letters was open and the other was expressed to be without prejudice save as to costs. In the open letter, Mr Phillips's solicitors referred to his position in relation to the issues as to adding the costs to the security and as to set off. The letter also stated that an appropriate payment on account of costs was £40,000. Finally, the letter proposed that the Bank concede the position on adding the costs to the security, set off and payment on account and allow the issue as to indemnity costs (by reason of the alleged improper purpose and/or abuse of process) to be dealt with by further written submissions and without an oral hearing on 25 July 2014. The Bank did not accept that proposal. I do not consider that the Bank was unreasonable in declining to agree that the matter should be dealt with by written submissions.
10. The second letter of 15 July 2014 was without prejudice save as to costs. Mr Phillips' solicitors stated that Mr Phillips was prepared to agree to the costs being on the standard basis if the Bank agreed with him in relation to adding costs to the security, set off and a payment on account of £40,000. Now that the result of this dispute has been determined by my judgment of 21 August 2014, it has emerged that the only possible difference between Mr Philips' proposal and the actual result relates to the amount of the payment on account, on which I have not yet reached a conclusion. I take into account the fact that on 15 July 2014, Mr Phillips' solicitors had not provided a Statement of Costs (that was subsequently provided on 24 July 2014) although they had provided a witness statement (dated 14 July 2014) which expressed the view that the costs would be in excess of £60,000 plus VAT. Further, even if the offer had been accepted, it would have remained necessary for the court to decide what order for costs to make in relation to the period following discontinuance. It is always difficult to compare the result arrived at by the court before the court decides costs with an offer to settle which includes a proposal as to costs as a term of the offer. If I had been told on 15 July 2014 that the parties had agreed the position in relation to adding costs to the security, set off and standard basis costs, I would probably then have reached the same conclusion as to costs as I will proceed to do in this judgment.
11. I consider that the dominant considerations in relation to the costs following discontinuance is the degree of success and failure of the parties in relation to the three issues identified in paragraph 4 above. The Bank won the first of these points and Mr Phillips won the other two. The first point took much more than 50% of the time and is likely to have involved much more than 50% of the costs of both parties. I consider that I should either give the Bank a small percentage of its costs or make no order as to costs. I have concluded that I should give the Bank a small percentage of its costs to reflect the fact that it succeeded on the issue which took much more than 50% of the time. I will order Mr Phillips to pay 20% of the Bank's costs from discontinuance up to judgment. Those costs are to be assessed on the standard basis, if not agreed. I do not consider that it is appropriate for me to attempt a summary assessment of the Bank's costs.
12. The result in relation to costs up to judgment is that the Bank is to pay Mr Phillips' costs of the Bank's claim up to discontinuance and Mr Phillips is to pay 20% of the Bank's costs from discontinuance to judgment. All these costs are on the standard basis. I will assume (without deciding the point in the absence of argument to the contrary) that one set of costs may be set off against the other.
13. Mr Phillips has asked for an order that the Bank make a payment to him on account of the costs payable to him by the Bank. I have been provided with a Statement of Costs showing figures which total some £84,000 excluding VAT. This Statement has been subjected to very detailed analysis by counsel for the Bank and her submission is that Mr Phillips' costs on the standard basis are unlikely to exceed £24,300 (excluding VAT). It can also be said that the Bank is now entitled to 20% of its costs of the proceedings from discontinuance until judgment. The Bank's Statement of Costs in relation to that period has a total of some £15,000 excluding VAT. I consider that the appropriate figure to order the Bank to pay to Mr Phillips on account of his entitlement to costs is £25,000 inclusive of VAT.
14. Mr Phillips has applied for permission to appeal against my decision that Mr Phillips' costs of the action up to the time of discontinuance should be on the standard basis and not on the indemnity basis. In particular, Mr Phillips wishes to appeal on the grounds that I ought to have held, on the facts, that it was not the Bank's purpose in bringing possession proceedings against Mr Phillips to put pressure on him and, further, that I was wrong in law to hold that such a purpose was a proper purpose and not an abuse of the process of the court. I decline to grant Mr Philips permission to appeal. I consider that his grounds of appeal do not have a real prospect of success.
15. The Bank has applied for permission to appeal against my decision that Mr Phillips had satisfied the burden on him of showing that the costs incurred by the Bank (both its own costs and the costs it is obliged to pay to Mr Phillips) were unreasonably incurred by the Bank because the proceedings were a waste of the Bank's time and expense. I decline to grant the Bank permission to appeal. I consider that the Bank's grounds of appeal do not have a real prospect of success.
16. In view of the positions adopted by the parties in relation to these consequential matters and in the light of the rulings in this judgment, I direct that each party should bear its own costs of these consequential matters following judgment on 21 August 2014.
17. The parties should now draw up a Minute of Order to give effect to the decisions which I have made and other matters which have been agreed (such as directions in relation to the Part 20 Claim).