England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY

		Manchester Civil Justice Centre, 1 Bridge Street West Manchester M60 9DJ
		9th February 2017

1. JUDGE HODGE QC: On 19^th December 2016 I delivered my substantive judgment following the trial of a Part 7 claim and an unfair prejudice petition brought and presented by Mr Jack Wyatt Eden (as claimant and petitioner) against Mr Barry Martin Parker (as defendant and first respondent). This extemporary judgment, which is primarily directed to the issue of costs, should be viewed as a sequel to, and should be read in conjunction with, that substantive judgment, which bears the neutral citation number [2016] EWHC 3302 Ch
2. At the conclusion of my judgment, I recorded that it had been agreed that the hearing on 19^th December should be limited to the delivery of the judgment, with further argument as to the full terms of my resulting order and as to costs being deferred to a later date. Paragraph 1 of my order of 19^th December therefore provided that all consequential matters arising from the judgment, including costs, should be adjourned to be heard on Wednesday 8^th February 2016 at 10 am.
3. Yesterday I heard oral submissions from trial counsel, Mr Stephen Connolly for the claimant and petitioner, and Mr Malcolm McEwan for the defendant and first respondent. I had previously read detailed written skeleton arguments from each of them.
4. The first issue I need to resolve is the rate of interest that Mr Parker should pay on sums ordered to be paid to the LLP. Paragraph 52 of my substantive judgment referred to Mr Connolly's submission that as Mr Parker was in a fiduciary position, when accounting back to the LLP he should also be required to pay interest on a compound basis to ensure that any benefit he had received was stripped away from him. Mr Connolly's submission was that 8% per annum compounded quarterly would be a reasonable rate. No doubt that rate was taken because it is the rate under the Judgment Act. I indicated in my substantive judgment that unless Mr Parker could demonstrate that he had been in a position to borrow monies during the relevant period at a lesser rate of interest then I would accept Mr Connolly's submission.
5. For Mr Parker, Mr McEwan submits that Mr Parker has produced evidence from NatWest Bank, as invited by the court, that he has been able to borrow monies at a rate of between 2.25 and 2.5%. Although that rate of interest was apparently applicable to secured loans, Mr McEwan submits that essentially Mr Eden was himself effectively secured at all times because he would have had first call on the not inconsiderable assets of the LLP to secure effective payment from Mr Parker's share in the LLP.
6. The evidence relied upon by Mr McEwan is in the form of a letter from NatWest dated 24^th January 2017 and an email from Mr Parker's solicitor to the claimant dated 30^th January 2017. In that email it is pointed out that in addition to the examples of rates of interest charged to Mr Parker by NatWest, on Mr Eden's own case he had frequently lent substantial sums to Mr Parker, albeit upon an informal basis, at a rate of 2.5% over RBS base rate compounded quarterly. That was said to be significantly lower than the 8% compounded quarterly submitted by Mr Connolly and proposed by me. The email concludes by inviting Mr Eden to agree that the appropriate rate of interest to be applied to the relevant sums to be paid into the LLP should be 2.25% simple interest.
7. In the course of his submissions, Mr McEwan asserted that the effective loan interest rates of 2.25 to 2.5% were on secured loans but that all of Mr Parker's borrowings had always been on a secured basis. There were no other interest rates to show to the court. Mr Eden had always had the first right to call on the assets of the LLP for repayment of any monies out of Mr Parker's share so Mr Eden was effectively a secured creditor. Mr McEwan pointed to the very dramatic effect of adopting an 8% interest rate compounded quarterly.
8. In response Mr Connolly submitted that the test to be applied was what rate of interest was required in order to strip away any benefit to Mr Parker from the retention of monies properly belonging to the LLP, of which he was one of the two equal members. The test was not whether Mr Eden had been secured in relation to the monies required to be paid by Mr Parker to the LLP. Mr Connolly also pointed out that Mr Parker had been asked about the interest payable on Mr Parker's overdraft but those interest rates had never been forthcoming. Mr McEwan pointed out that that request had only been made the previous Friday.
9. Those were the submissions on the interest issue. I am satisfied that Mr Parker has demonstrated that he could borrow monies on a secured basis at interest rates of between 2.25% and, in relation to his own personal mortgage, 3.45%.
10. In my judgment, the appropriate course is to award Mr Eden, or more precisely the LLP, to whom the monies are to be paid by Mr Parker, interest at the rate of 2.5% over base rate. That is to say 3% up to 4^th August 2016 and 2.75% thereafter. That is slightly more than the rate of interest that was payable to NatWest on two of the three loans but slightly less than the interest that was payable on the personal mortgage. It also corresponds to the rate of interest that Mr Eden had been prepared to charge on monies lent to Mr Parker. Those rates of interest will be compounded quarterly in the way that Mr Eden had done during the lifetime of loans to Mr Parker. That seems to me to be the appropriate way of stripping out any benefit that Mr Parker might have enjoyed from having the benefit of monies properly belonging to the LLP.
11. In summary, the appropriate rate of interest will be 3% up to the change in the base rate on 4^th August 2016 and 2.75 thereafter, compounded quarterly. Had Mr Parker borrowed the monies from NatWest then he would of course have been having to service the interest on them, hence the compounding of interest.
12. The next matter I have to address is the claim for repayment to the LLP of some £1,275 by way of late-filing fees imposed by Companies House on the returns and accounts for the LLP over a number of years.
13. I delivered my judgment orally on 19^th December on the basis of a draft written judgment which I had not then proof-read. I sent out the final and proof-read version of the judgment later that afternoon. On the following day, 20^th December, Mr Connolly emailed me, pointing out that a claim for the Companies House late-filing fees appeared not to have been referred to in the judgment, although it had certainly been put to Mr Parker in cross-examination. I responded on the same day, pointing out that the claim for late-filing fees had not been addressed in either counsel's closing skeleton. It would therefore have to be the subject of a further judgment following the hearing on 8^th February.
14. Mr Connolly submits that the LLP had incurred late-filing fees with Companies House totalling £1,275. That is said to have been solely on account of Mr Parker's failure to provide information to the accountants on time and Mr Eden therefore seeks judgment for the benefit of the LLP for that sum. Mr Connolly points out that Mr Parker's evidence in response to cross-examination on this issue was that the responsibility to file accounts and annual reports had been a joint responsibility of the two members of the LLP, Mr Eden and Mr Parker. Mr McEwan posed the question whether Mr Parker's delay in providing information for the filing of accounts amounted to a breach of duty owed by one member of the LLP to another. He asked whether the failure should be laid at the door of one member of the LLP rather than both of them. Mr Connolly pointed out that the breach of duty was owed to the LLP and that any order for compensation would involve payment of the late-filing fees back by Mr Parker to the LLP.
15. I am satisfied on the evidence that the claimant, Mr Eden, has made out the LLP's claim to recovery of the fees that were paid as a result of the late filing of accounts. The evidence on the issue is contained within paragraph 9 of Mr Veeder's witness statement, paragraph 24 of Miss Whitehurst's witness statement and paragraphs 62 to 63 and paragraphs 67 and following of Mr Eden's witness statement at the trial. I am satisfied that the late-filing fees were incurred, that they represented a loss to the LLP and that the cause of that loss was the failure to provide information by Mr Parker. I will therefore order the payment by Mr Parker to the LLP of £1,275 plus interest.
16. The next outstanding matter is the identity of the managing agents to be appointed in relation to the LLP's properties. Paragraph 6 of the draft minute of order requires Mr Parker to co-operate with Mr Eden and to take all such steps as are necessary to facilitate the appointment by Mr Eden on behalf of the LLP of Hyde Estate and Lettings of an address in Prestwich as agents for the letting and the management of the Howe Street property. The draft presently envisages that the parties have liberty to apply back to the court on 48 hours' notice in the event of there being any difficulties experienced in relation to the appointment. Mr Parker has apparently suggested the appointment of a different firm of managing agents.
17. I do not feel that I am in a position to decide between the two present candidates. In my judgment, the appropriate way of dealing with this is to provide for the appointment of a firm of managing agents to be agreed by the parties and, in default of agreement, the identification of the managing agents shall be determined by the district judge at the case management conference provided for by paragraph 5 of the minute of order.
18. I turn now to the principal area of dispute at yesterday's hearing which is that of costs. I do not propose to rehearse counsel's submissions, written or oral, in detail in this extemporary judgment but I make it clear that I have had regard to all of those submissions in arriving at my decision.
19. The first issue I have to determine is whether there should be a single costs order to cover both sets of proceedings: the Part 7 claim and the unfair prejudice petition. Mr Connolly's submission is that, whilst there are two actions, they have been case managed from close of pleadings onwards together. They have been tried together and they have employed a single combined costs budget. For all intents and purposes therefore Mr Connolly submits that the two proceedings have been treated as a single action and that should be reflected in a single costs order being made. Mr McEwan submitted that the fact that the two sets of proceedings had been case managed together and then had been tried together does not mean that they should be treated as a single action for the purpose of determining costs.
20. On this issue, I prefer Mr McEwan's submission. Although I acknowledge that there is an overlap in the evidence in terms of the issue of the reliability and credibility of witnesses, particularly Mr Eden and Mr Parker, the Part 7 claim and the unfair prejudice petition were, in my judgment, essentially discrete claims which were both conceptually and factually distinct. The Part 7 claim was very much a claim in fraud involving extremely serious allegations of deliberate or reckless misrepresentation on the part of Mr Parker. I accept Mr McEwan's submission, contrary to that of Mr Connolly, that the claim in respect of the Mount Pleasant properties was really a minor sideshow. In the case of both aspects of the Part 7 claim the alleged victim of Mr Parker's conduct was Mr Eden. By contrast, the unfair prejudice petition involved a considerable number of allegations of breach of duty owed by Mr Parker to the LLP. Those breaches of duty were factually quite separate from those alleged in the Part 7 claim.
21. In my judgment, having conducted the trial of this claim over a period of some ten days, and also having regard to the outcome of both sets of proceedings, as reflected in my substantive judgment, it would not be just to either party to treat the costs as those of a single action. That would be particularly so if I were to accept Mr Connolly's submissions that the primary question, when determining the incidence of success, is to identify the person who is writing the cheque at the end of the case.
22. I am satisfied that the costs of the Part 7 claim and the unfair prejudice petition should be severed. So far as the pre-trial costs are concerned, the attribution of those costs to each of the two sets of proceedings will be a matter for the skill and judgment of the costs judge who undertakes the detailed assessment of costs. However, it is, I think, common ground, and if it is not I consider that it would be helpful for the costs judge, if I were to indicate an apportionment of the costs of trial – and I stress the costs of trial – between the two sets of proceedings save in relation to those costs which are to be the subject of any special costs orders because provision has or will be made separately for them such as the costs of the first hour and a half, I think, of the trial (relating to the late admission of witness evidence by Mr Parker) or because the parties have agreed that certain expert witness costs should await the outcome of an account that is to be ordered.
23. I am satisfied that I can and should apportion the trial costs between the Part 7 claim and the unfair prejudice petition. Mr McEwan originally suggested a split of two thirds to the Part 7 claim and one third to the petition, although he also appeared to accept an alternative approach of a 60/40 split. Mr Connolly favoured the latter apportionment. In my judgment, a 60/40 split would be a fair and just approach given the overlapping issues of reliability and credibility common to both sets of proceedings. For the purposes of the trial costs therefore I would adopt an apportionment of 60% as representing the costs of the Part 7 claim and 40% as representing the costs of the unfair prejudice petition.
24. On the Part 7 claim Mr Connolly submits that whilst Mr Eden did not succeed on the guarantee or misrepresentation claim, he did succeed on the Mount Pleasant claim which, whilst smaller in size than the guarantee claim, was by no means a makeweight and, until trial, had been contested by Mr Parker on no less than seven grounds. It was only at trial that the claim was conceded, initially in the defendant's skeleton, although that appeared thereafter to be withdrawn, only to be reinstated in closing. Thus, whilst Mr Connolly accepts that the Mount Pleasant claim took up little time at trial, pre-trial it had taken up significantly more time and had been a fully contested issue.
25. Mr Connolly also submits that for commercial litigation, such as the present proceedings, the primary question to ask when determining the incidence of success is who is writing the cheque at the end of the case. He has referred me to the notes at paragraph 44x.3.6 of the current (2016) edition of Civil Procedure Volume 1 at pages 1476-7. I have borne those observations firmly in mind. They do, in my judgment, support the proposition that where a money claim is brought and the claimant recovers more money by pressing the litigation than it would have been able to recover without doing so, then that claimant is the successful party. Prima facie that claimant will be entitled to its costs, but subject always to the court's power to modify that outcome if that is what the justice of the case demands.
26. Mr Connolly relies upon the fact that Mr Parker will be writing a cheque for the balance outstanding in respect of the Mount Pleasant property which formed part of the Part 7 claim. Mr Connolly also submits that in deciding what order to make about costs, the court is obliged to have regard to all the circumstances of the case, which includes issues of conduct and whether a claim has been wholly or partially successful. Mr Connolly recognises that Mr Eden did not succeed on the issue of the guarantee or the issue of the internal inspection representation. However, he submits that that alone does not warrant Mr Eden having his costs either reduced or negated. To do so would be to ignore entirely, and to justify, the grossly unsatisfactory and serially dishonest evidence of Mr Parker.
27. Mr Connolly refers me to my analysis of the defendant as a witness at paragraph 20 of my substantive judgment. He reminds me of the repeated and material lies that Mr Parker told which led me to conclude that he was willing to say anything which he thought might support his defence. In his oral submissions, Mr Connolly reminded me of Mr Parker's false evidence as to whether it had been envisaged that the Howe Street properties would be developed into seven rather than six houses. Mr Connolly relies upon the allegations of dishonesty that Mr Parker threw around about professional men, including not only the claimant, Mr Eden, but also the accountant, Mr Veeder, and the solicitor, Mr Greenwood.
28. Mr Connolly submits that the performance of the defendant in the witness box, and the lies and the slanders that he maintained and repeated, appreciably prolonged the trial. He submits that that maintenance and repetition in a complex commercial case like the present was insidious and entirely warrants and justifies a serious sanction being made against the defendant. He has referred me to passages in the judgment of Lord Justice Longmore in Sulaman v AXA Insurance Plc & Another [2009] EWCA Civ 1331 reported at [2010] 3 Costs Law Reports 391. In particular he took me to paragraphs 16 to 18 of Lord Justice Longmore's judgment with which Lord Justice Aiken expressly agreed, although there was a partial dissent from Lord Justice Sedley. Mr Connolly relies upon the statement that lies maintained and repeated in a complex case are insidious. He relies upon the acceptance by the majority that the trial judge in that case had undoubtedly been entitled to express his disapproval of the claimant's lies, quite apart from their precise effect on the trial process. Lord Justice Longmore observed that it would be odd if the judge in charge of the trial process could not express his disapproval in that way. There was no need for the judge to apportion different parts of his order between lies which prolonged the trial process and lies of which he merely disapproved.
29. On the basis of that authority, Mr Connolly invited me to deprive the defendant, Mr Parker, of any reduction in Mr Eden's costs that he might otherwise have been entitled to argue for. In so far as the guarantee claim was concerned, Mr Parker's success should not be rewarded in costs on account of his appalling conduct at trial. Mr Parker should not only be deprived of his costs on the issue but he should also be ordered to pay the costs of Mr Eden. In the alternative, Mr Parker should at the very least be deprived of any costs order in his favour, even if he was not required to pay the claimant's costs. Mr Connolly invited the court to test that proposition by asking the question of whether the defendant should get his costs in circumstances where he had committed perjury on a wholesale scale, where his evidence had been based on a tissue of lies and baseless allegations and had been roundly rejected, and where he had shown no regard for, and had abused, the process of the court. Mr Connolly submits that the answer to that question is plainly and obviously no.
30. In relation to the unfair prejudice petition, Mr Connolly submits that it is Mr Eden who is the successful party and he should be awarded the costs of the petition without any reduction. Mr Connolly acknowledges that, in accordance with the consent terms agreed between the parties on 27^th November, those costs will not include the expert evidence costs associated with the cost of the renovation of the Howe Street properties or the costs of taking the account of those renovation costs, both of which are to be reserved. Mr McEwan appears to accept that point at paragraph 17 of his written skeleton.
31. Mr Connolly points out that Mr Eden will recover a principal amount in excess of £92,000 on the petition, together with interest. Cheque writing apart, he identifies further areas of substantial success enjoyed by Mr Eden on the unfair prejudice petition at paragraph 8 of Mr Connolly's written skeleton. Although Mr Eden lost in relation to Ryan Parker's salary, that is said to be a minor point in the scheme of the litigation as a whole and, whilst Mr Eden lost on that minor and discrete point, it is said not to warrant any reduction in the claimant's costs.
32. Mr Connolly addresses the VAT issue at paragraphs 13 through to 16 of his skeleton. His essential point is that the VAT issue only surfaced because of Mr Parker's failure to respond to Mr Eden's correspondence on the issue dating back to May 2013. It was his failure to do so that resulted in the VAT issue being raised within the unfair prejudice petition. It was only shortly before the trial that Mr Parker provided Mr Eden with the explanation which the latter had been seeking pre-action and, in the light of that explanation, the issue had then been dropped by Mr Eden. Mr Parker is said to be the author of his own misfortune in relation to the VAT issue and, far from being entitled to his costs of that issue, he should bear the claimant's costs in relation thereto.
33. Indeed, Mr Connolly extends that point in relation to VAT to Mr Parker's pre-action conduct more generally. He submits that Mr Parker's failure to engage with Mr Eden in relation to the latter's attempts to establish the actual cost of the Howe Street properties and the income and expenditure position in relation to the same, his lack of any (or any adequate) response to pre-action correspondence, and his willingness to throw around baseless allegations against the claimant should all result in an order that Mr Parker pay the claimant's costs of the Part 7 claim and also of the petition on a standard basis, subject to detailed assessment if not agreed. Mr Connolly expressly recognised that Mr Eden's failure on the internal inspection representation, and on the guarantee point, meant that Mr Connolly could not pursue the application he might otherwise have wished to make for costs against Mr Parker to be assessed on the indemnity basis.
34. In the course of his oral submissions, Mr Connolly submitted that the unfair prejudice petition had been driven entirely by a lack of engagement on the part of Mr Parker. Even if an independent accountant had been appointed, Mr Connolly submitted that the unfair prejudice petition would have been necessary to address defaults on the part of Mr Parker, about which no independent accountant could have been in any position to make a determination. Mr Connolly also submitted that Mr Parker should have recognised at the very outset that relief by way of an account would be granted. Mr Connolly submitted that that had been recognised by Mr Parker's solicitors, Linder Myers, on 5^th August 2015 in the letter at bundle E56.
35. Despite that, there had been an outright denial of any entitlement to an account in Mr Parker's defence to the petition. Mr Connolly submitted that, at least by the time of the expert evidence, Mr Parker should have consented to an order for an account. Mr Eden has been put to the cost of obtaining an order for an account when Mr Parker should have recognised his entitlement to it. Mr Connolly submitted that, properly analysed, even if Mr Eden had read the schedules being produced for him on Mr Parker's behalf, this litigation would not have been avoided. It would not have been avoided because of Mr Parker's lack of engagement in producing documents.
36. Mr Connolly also submitted that one would not know for sure whether there had been any dishonest diversion of monies from the LLP to Mr Parker's own personal business ventures until the account had been taken. Mr Connolly also emphasised that there had been no concession in relation to the appointment of independent managing agents for the Howe Street properties until July 2016. There had been a denial of any liability to pay rent, and there had been a persistent failure to account for the payment of rent in respect of the Howe Street properties. Moreover, Mr Parker had maintained to the bitter end the assertion that there had been no agreement as to the payment of interest to Mr Eden.
37. For Mr Parker, Mr McEwan submitted that the Part 7 claim had failed in so far as its principal thrust, directed to the renovation of the Howe Street properties, was concerned and that Mr Parker should be entitled to his costs of the Part 7 claim, apart from any costs attributable to the Mount Pleasant issue, which had had little or no bearing upon the time and expense incurred in these proceedings and which, in oral submissions, Mr McEwan described as a "minor sideshow." Moreover, Mr McEwan submits that as the Part 7 claim was one formed and pursued in fraud, the sauce for the goose principle raises the prospect of the costs awarded to Mr Parker being assessed on the indemnity rather than the standard basis.
38. In identifying the real winner of the Part 7 claim, Mr McEwan submits that there can be no question but that it is Mr Parker and no question either but that the central core and major feature of the Part 7 claim had been the £80,000 misrepresentation and breach of contract claim, which had totally failed, and that falling with it were the time and the expense taken with issues of negligence, valuation, causation and damages. Mr McEwan invites the court to award Mr Parker his costs of and incidental to the Part 7 claim, apart from any relating to Mount Pleasant, to be assessed if not agreed on the indemnity basis.
39. On the claim for indemnity costs, Mr Connolly took me to the commentary at paragraph 44x.4.3 at page 1503 of Volume I of the White Book. He also took me to the first full paragraph at page 1505 where it is said that a judge had been wrong to award costs on the indemnity basis against a claimant who had not acted improperly in availing themselves of the opportunity presented by statute to apply to the court. There the Court of Appeal had found that the claimant had not acted improperly and that the costs should be on the standard rather than the indemnity basis. Mr Connolly submitted that it would be wholly inappropriate to make any award of costs on the indemnity basis against Mr Eden in the present case; there was nothing to take the present case out of the norm of cases of the present kind; there had been no unreasonable conduct to a high degree on the part of Mr Eden.
40. In relation to the costs of the petition, Mr McEwan reminded me that at paragraph 42 of my substantive judgment I had observed that had Mr Eden troubled to read the spreadsheets with which Joe Oliver had been providing him on a regular basis, and had he raised any queries at the time in relation, for example, to Ryan Parker's wages, the present litigation might have been avoided. I also observed that it was not only Mr Parker's poor management techniques and accounting deficiencies that had led to the present unfortunate litigation. Mr McEwan submits that whilst the court has been involved on paper in a series of individual issues, some of which now require payment of monies by Mr Parker into the LLP, the court should not lose sight of what he submits had really provoked and fuelled the unfair prejudice petition proceedings.
41. Mr Parker's solicitors had taken up a proposal initiated by Mr Eden that the accounting matters about which he was concerned should be submitted to an independent accountant to resolve in Linder Myers' letter of 5^th August 2015 (previously cited). Mr McEwan acknowledges that when the proposal had first been ventilated by Mr Eden it had been rejected by Lopian Wagner, as Mr Parker's original solicitors. When he came to instruct his present solicitors, Linder Myers, however, the proposal had immediately been taken up by them on Mr Parker's behalf as the obviously sensible and reasonable way forward in addressing Mr Eden's concerns.
42. The point had been made that in any proceedings there was a real likelihood of the need for accounts or enquiries in any event and the input of professional accountancy advice and if, ultimately, there was a surviving concern requiring the attention of the court, only then should proceedings follow. Having first suggested this course of action Mr McEwan says that Mr Eden then rejected it, requiring that the matters raised by him in his correspondence be answered, even though the very problems of missing invoices and the like were the very matter any such independent investigation would have addressed. The petition is said to have duly followed given Mr Eden's flat refusal to accept what Mr Parker was telling him to the effect that there had been no underhand activities or misapplication of funds.
43. In his oral submissions, Mr McEwan made the valid point that Mr Parker had not known that Mr Eden had not been reading the schedules that Mr Oliver had been supplying him with and, as a result, Mr Parker had not known what Mr Eden was really concerned about. According to Mr McEwan, the real thrust of the petition was the allegation that Mr Parker had taken monies sought from Mr Eden for the renovation project and had applied substantial monies, running into six figures, for his own benefit on his own home or other projects. In other words, that there had been a dishonest diversion of monies for Mr Parker's own purposes. Mr Eden had very much supported that point of view in the witness box. The accusation was that Mr Parker had, in Mr McEwan's words, been diddling Mr Eden. That approach, it is said, can be seen throughout the petition; for example, in connection with the since abandoned and always totally misconceived notion that Mr Parker had pocketed a substantial slice of VAT refund properly due to the LLP.
44. These were said to be basically allegations of systematic, deliberate and dishonest conduct which underpinned, and were said to justify the need for the presentation of, the petition and those allegations have been rejected by the court. Mr McEwan directed my attention to paragraphs 39 to 43 of my substantive judgment. Mr McEwan submits that the balance of issues have either been dismissed by the court (such as Ryan's wages), abandoned by Mr Eden (such as the VAT issue), or could have been resolved by the intervention of an independent accountant since in most cases liability has been essentially accepted throughout by Mr Parker, subject to timing and amount, or where his ability or failure to substantiate his agreement with paperwork would have resolved the matter one way or the other.
45. In those overall circumstances, and for those reasons, despite the orders which will be made for payment or accounting to the LLP by Mr Parker, Mr McEwan submits that there should be no order for costs in favour of Mr Eden but rather an order in favour of Mr Parker, either wholly or proportionately, to reflect his success in rejecting allegations of wrongdoing and/or in relation to those issues on which he has been successful (which Mr McEwan identifies at paragraph 16 of his skeleton).
46. In relation to the time-consuming and important issue of the invoices, where the court has found that, so far as the evidence in this trial shows, any discrepancy is due to human error, it has been agreed that these, and the associated issues such as credit cards and petty cash, will be submitted to an account. The costs of the experts have been agreed to be dealt with after the taking of the account. Mr McEwan submits that the costs incurred thus far in the proceedings in relation to these issues, in addition to the experts, may either be dealt with now by an order in favour of Mr Parker or may all be dealt with after taking the account, at which point the findings in the judgment will no doubt be of great assistance. Mr McEwan submits that the idea that, having obtained an order by consent to save court time for an account, Mr Eden should be entitled to any costs, runs contrary to the reality that the real object of pursuing this matter was the allegation of deliberate wrongdoing and not the presence of human-error discrepancies. Mr Eden is said to be hanging on to his account where, from a proportionate viewpoint, he might sensibly abandon its further pursuit.
47. Those were the submissions. Mr McEwan's essential point was that Mr Eden had been pursuing entirely serious allegations with considerable antipathy towards Mr Parker which he had entirely failed to make out in either set of proceedings. As I say those were the submissions.
48. I have to approach the issue of costs with the provisions of CPR 44.2 firmly in mind. The court has a discretion as to whether costs are payable by one party to another and as to the amount of those costs. However, if the court decides to make an order about costs, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, although the court may make a different order. In deciding what order, if any, to make about costs, the court is required to have regard to all the circumstances, including the conduct of the parties, and whether a party has succeeded on part of its case even if that party has not been wholly successful. I have not been taken to any admissible offers to settle made by either party. I must bear in mind CPR 44.5 as to what the conduct of the parties includes. I must also bear in mind that the court has a number of orders which it can make, as set out in CPR 44.2(6); but that before the court considers making an order relating only to a distinct part of the proceedings, it should consider whether it is practicable to make an order for payment of a proportion of another party's costs instead. I must also bear in mind the overriding objective of the Civil Procedure Rules.
49. As I have indicated, I accept Mr Connolly's submissions as to the way in which one identifies who is the successful party. Where a money claim is brought, and the claimant recovers more money by pursuing the litigation than it would have been able to recover without doing so, then the claimant is to be treated as the successful party and prima facie will be entitled to its costs, although subject always to the court's power to modify that outcome if that is what the justice of the case demands.
50. In the present case, however, it seems to me that Mr Connolly's approach is too simplistic in the context of the particular circumstances of this Part 7 claim. This is a case in which, in the Part 7 claim, Mr Eden was effectively asking Mr Parker to write two cheques and not just one. Claims were advanced in support of each cheque, one for the misrepresentation and guarantee claim and the other for Mount Pleasant. Each of those claims was factually and conceptually discrete and separate. In one instance, Mr Eden has failed to secure the substantial cheque for which he was asking. In the other he has secured a cheque which was not really resisted and which even Mr Connolly accepts took up very little time at trial.
51. I accept Mr McEwan's submission that the Part 7 claim was effectively a stand-alone claim in fraud which failed and that the claim in relation to Mount Pleasant was very much a minor sideshow. So far as the Part 7 claim was concerned, this trial was all about whether the representation and guarantee claims would succeed or not. In the event, they failed. Mr McEwan responded to Mr Connolly's invocation of the Sulaman v AXA Insurance case by taking me to paragraphs 11 and 12. In the former paragraph, Lord Justice Longmore strongly discouraged elaborate judgments on costs. In the latter paragraph, he also deprecated excessive reliance on authorities, pointing out that occasionally one could find a useful statement of principle but that it was not permissible to conclude that, because a defendant had lied in one case and forfeited some of his costs, so it should happen in another. Lord Justice Longmore emphasised that it was not usually helpful to compare factual details in one case with factual details in another.
52. Mr McEwan submitted that the matter should not be driven by authority but was one for the court's discretion. He also made the point that in the present case, an award of costs in Mr Eden's favour would result in a false accuser, rather than an innocent insurer, becoming the beneficiary of any costs order against Mr Parker. He also referred me to Lord Justice Sedley's partial dissent and his conclusion that, for his part, and contrary to the view of the majority, he would have allowed the appeal to the extent of increasing the award of costs to the appellant from one third to two thirds rather than dismissing the appeal.
53. In my judgment, the Sulaman v AXA Insurance case is authority for nothing more than the proposition that it is open to a trial judge, in the exercise of his or her discretion, and depending very much on all the circumstances of the case, to disallow a successful party part - even as much as two thirds - of his or her costs because that party has lied to the court, and without having regard to the need to apportion different parts of the costs order between lies which prolong the trial process and lies of which the trial judge merely disapprove. The Sulaman v AXA Insurance case provides me with no more assistance than that. The matter is essentially one for the exercise of my judgment based upon my knowledge of the case and the way in which the trial proceeded and the exercise of my principal discretion.
54. In my judgment, Mr Eden's success on the Mount Pleasant claim is far outweighed by his failure on the misrepresentation and guarantee aspects of the Part 7 claim. I have no hesitation in finding that on the Part 7 claim it is Mr Parker, and not Mr Eden, who is the successful party. However, there should be a discount for the manner of Mr Parker's evidence and case, and its content, which undoubtedly made the trial of the Part 7 claim more complex and protracted than would have been the case had his evidence and attitude been otherwise.
55. In my judgment, and in the exercise of my discretion, it seems to me that the appropriate order in relation to the Part 7 claim, which takes up 60% of the trial costs, although it may be different in so far as the costs of the proceedings generally are concerned, is to award Mr Parker 75% of his costs, which, by my arithmetic, will amount to 45% of the trial costs. Those costs should, however, be assessed on the standard rather than the indemnity basis. I accept Mr Connolly's submissions that there is absolutely no justification for departing from the standard basis of assessment.
56. In that regard, I remind myself that in paragraph 26 of my substantive judgment I concluded that Mr Eden had been doing his best to assist the court, although he had also, and understandably, been seeking to advance his own case, and that the tensions thereby produced had, albeit unconsciously, led him to recount matters which had not in fact been said but which he now genuinely believed to be true. I also considered it likely that Mr Eden's false recollection had influenced and infected the recollection of his son, James. That, it seems to me, does not merit an assessment of costs on the indemnity basis.
57. I turn then to the costs of the petition. I accept Mr Connolly's submissions that there had been a serious lack of engagement on the part of Mr Parker in providing explanations for Mr Eden. As against that, however, Mr Eden had contributed to the difficulties by not reading the spreadsheets with which he had been provided on a regular basis and by not raising queries at the time, in particular in relation to matters such as Ryan Parker's wages. I also bear in mind that Mr Parker could not be expected to have known of those omissions on the part of Mr Eden and that no doubt that had also coloured Mr Parker's attitude.
58. Mr Eden had suggested that an independent account should be appointed, although, having rejected that initially, when Linder Myers came onto the scene they had indicated that Mr Parker would, in principle, agree to the appointment of an independent third party expert accountant, at the initial cost of the LLP, to review its books and records. Mr Eden had rejected that proposal, instead requiring an answer to his earlier queries. Linder Myers' response for Mr Parker was that the instruction of an independent expert, as originally proposed by Mr Eden, would be a sensible and reasonable way forward and that they did not see what Mr Eden would achieve by issuing proceedings as it was likely that a court would require expert evidence of the nature envisaged in any event. They also pointed out that Mr Eden would not be prejudiced by agreeing that proposal as, if matters could not then be resolved after such expert evidence, Mr Eden could issue proceedings at that stage.
59. When proceedings were eventually issued, there was considerable focus upon the allegation, which on the evidence before me I have held to be unfounded, that there had been a deliberate diversion of LLP monies away from the LLP to Mr Parker for his personal ends. On the other hand, the pursuit of these proceedings has resulted in money orders against Mr Parker in favour of the LLP which could have been avoided by Mr Parker conceding matters at an earlier stage and without them having to be fought through to trial. There could have been open concessions; there could have been admissible offers to settle. Instead there was not.
60. In my judgment, and applying the cheque book test, on the unfair prejudice petition it is Mr Eden who is the successful party, although there should be a considerable discount from any award of costs in his favour to reflect the issues that have been fought and on which he has been unsuccessful. In my judgment, and in the exercise of my discretion, it seems to me that the appropriate order for the costs of the unfair prejudice petition is one whereby Mr Eden recovers half of his costs of the petition in terms of the trial costs. That will be half of the 40%. In other words, 20% of the costs of trial. There will, of course, be the usual provision for mutual set-off of costs orders. The practical effect will be that Mr Parker's 45% of the costs of trial will be set off against Mr Eden's 20% of the costs of trial.
61. In summary, for those reasons, I award Mr Parker 75% of the costs of the Part 7 claim and Mr Eden 50% of the costs of the unfair prejudice petition.
(End of judgment)