England and Wales High Court (Senior Courts Costs Office) Decisions

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URL: http://www.bailii.org/ew/cases/EWHC/Costs/2002/9040.html
Cite as: [2002] EWHC 9040 (Costs)

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This judgment has been obtained from the Supreme Court Costs Office pages on the HM Courts Service web site. The citation used by BAILII is not an officially approved citation.

		BAILII Citation Number: [2002] EWHC 9040 (Costs)
		Claim no: HQ0101419

SUPREME COURT COSTS OFFICE

Royal Courts of Justice
Strand, London, WC2A 2LL

22 August 2002

B e f o r e :

____________________

	TOYOTA FINANCIAL SERVICES (UK) PLC (1) TOYOTA (GB) PLC (2)	Claimants
	-and-
	SHIV KUMAR SHARMA (1) GEETA SHARMA (2)	Defendants

____________________

COST JUDGE'S WRITTEN REASONS
FOR REFUSING PERMISSION TO APPEAL
____________________

HTML VERSION OF JUDGMENT
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BACKGROUND

The first Defendant Shiv Kumar Sharma was at all relevant times a director of Bridge House Motors Limited, which held a dealership from the Claimants for the display and sale of their vehicles in their showroom in the West Midlands. They received financial assistance in connection with the obtaining of vehicles from the first Claimants, the vehicles themselves being supplied by the second Claimants. As part of the arrangement made, the first Defendant entered into certain guarantees with the Claimants.

It was his alleged default in respect of those agreements that led to meetings in 2000 to re-arrange the finance of the company, but, here again, there were alleged defaults by the first Defendant, as a result of which proceedings were begun. That led to the hearing before Master Leslie in October of last year, which is the subject matter of the assessment of costs in respect of which these written reasons are written.

The second Defendant is the first Defendant's wife. She entered into one guarantee only at a later stage, limited to £71,500, whereas the claim against the first Defendant was around £353,000. The exact amount was never crystallised, but that plays no part in these proceedings. A much fuller account of the dealings between the parties is to be found in the transcript of the judgment of Master Leslie, to which any appeal Judge will doubtless be directed.

As can be seen from Master Leslie's judgment, there were, in fact, two quite separate proceedings before him on that occasion. The first was an application for summary judgment against the first Defendant on the basis that, although he had served a defence, there was, in truth, no real defence to the claim. The second Defendant had, it was said, due to inadvertence, allowed a default judgment to be obtained against her. The second application before Master Leslie was, on her behalf, to set aside that judgment and to be allowed to defend the proceedings, as the first Defendant also hoped to be allowed to defend them. Although, perhaps, different procedural considerations might apply, as is again clear from Master Leslie's judgment, all parties were content to deal with the matter on the basis that there were no material differences.

At the end of a full-day hearing lasting some 6 hours, Master Leslie found in favour of the Claimants in respect of both matters; in other words, he granted the Claimants summary judgment and he refused to set aside the judgment in default against the second Defendant. He also awarded the Claimants their costs against both Defendants on the standard basis and refused permission to appeal.

The first Defendant did seek to appeal part of Master Leslie's judgment, but, although permission to appeal was granted, I was told that the appeal was subsequently dismissed and the costs of that appeal were summarily assessed by the Court and were not before me at this hearing.

CLAIMANTS' BILL

The bill which came before me for detailed assessment was divided into 3 parts. The first part claimed common costs against both Defendants; the second part was restricted to costs payable by the first Defendant only and the third part dealt with costs payable by the second Defendant only. The figures were for part 1, £118.961.34*; for part 2, £28,538.77; and for part 3, £2,896.25.

Lengthy but not particularly informative Points of Dispute were put in on behalf of both Defendants, who, at that stage, were separately represented, although at the formal detailed assessment hearing before me, they were represented jointly by Mr Deepak, a partner in Shakespeares, on behalf of the first Defendant, and Mr Faquir, a cost draftsman instructed by him, but also representing the second Defendant. These Points of Dispute were met with a massive document dealing in considerable detail, with the points raised, running to no less than 61 pages.

THE DETAILED ASSESSMENT PROCEEDINGS

The matter was balloted to me and listed for hearing on Wednesday 7th and Thursday 8th August, when the Defendants were represented as already indicated and the Claimants by Mr Smyth, an assistant solicitor, who had been intimately involved in the underlying proceedings, and Mr Bean, an experienced costs draftsman. After a hearing lasting one and a half days, I assessed the costs payable by the first Defendant in the sum of £58,304.74, with interest, down to 8th August, of £3,693.16, and against the second Defendant in the sum of £39,867.72, with interest, down to 8th August, of £2,525.31. In view of the considerable reduction that these figures represented on the amounts claimed, and notwithstanding that the recovered sums were, in fact, greater than a late offer made on behalf of the Defendants, I awarded the Claimants only half their costs of the detailed assessment.

THE MATTERS IN RESPECT OF WHICH PERMISSION TO APPEAL WAS SOUGHT

At the conclusion of the assessment, I asked both parties if they wanted permission to appeal. The Defendants did not seek permission to appeal, but the Claimants did seek permission to appeal in respect of both my decision on proportionality and on some of the hourly rates which I allowed. To assist the Judge deciding whether to grant permission and, if permission is granted, the Judge hearing the appeal, it seemed to me helpful to set out the reasons for my decisions on those two points, in some detail,.

PROPORTIONALITY

In the forefront of the Defendants' argument was the fact that the costs as claimed, in a total sum of £150,396.16, were disproportionate and I ought to so find and then conduct the detailed assessment in accordance with that ruling.

I was, of course, referred to the still recent but by now increasingly familiar Court of Appeal judgment in the case of Home Office v Lownds, reported at [2002] 2 Costs LR, 279, a minor clinical negligence case that settled for £3,000, but the costs of which were claimed at £17,126.78.

The judgment of the Court was given by Lord Woolf CJ. It seems appropriate for me to quote extensively from the relevant parts of that judgment, which starts at paragraph 21, which in this report is at the bottom of page 286.

"The approach Required by the CPR

21. In view of the impact of the transitional provisions we do not consider that we should interfere with the conclusions as to the amount of the bill reached by the District Judge which were endorsed by His Honour Judge Lightfoot. If, however, the entire bill had related to expenditure which occurred after 26 April 1999 we would have taken a significantly different view. To do otherwise would have bene to negate the changes in the approach to litigation which the CPR are intended to bring about. Although this does not affect the result of this appeal we have had the benefit of full argument by counsel on the issues and we are grateful for their assistance.

22. We consider that the importance of applying the new approach is illustrated by the figures for costs in this case. Although we recognise that clinical negligence cases are usually complex we do not consider that on any approach the amount of costs assessed in this case can be regarded as being proportionate. They are not ...

23. In our judgment what cases of this sort call out for is a recognition at the outset that the case could easily result in disproportionate costs being incurred. The nature of the claims required the parties conducting the litigation to plan how it should be carried out so as to minimise expense ...

24. Based on his experience, the Senior costs Judge considered that, normally, a Costs Judge could be reasonably satisfied that the costs for conducting this litigation up to the stage when the proceedings were settled, instead of amounting to over £15,000, were in the region of £6,500 to £7,000 there would be no significant issue as to proportionality. To this sum there would have to be added some additional cost to reflect the fact that the claimant was in prison which would make it more difficult to take instructions.

25. Under Part 44.5 the court is required to have regard to 'the conduct of all the parties'. In this case neither side paid proper attention to the clinical negligence protocol ... There should have been offers to settle by both sides.

26. Of course the protocols require a considerable amount of work to be done and the claimant is entitled to be paid proportionately for this. Here the Costs Practice Direction is relevant. We refer to paragraphs 11.1 and 11.2. They provide:

'11.1 In applying the test of proportionality the court will have regard to rule 1.1(2)(c). The relationship between the total of the costs incurred and the financial value of the claim may not be a reliable guide. A fixed percentage cannot be applied in all cases to the value of the claim in order to ascertain whether or not the costs are proportionate.

11.2 In any proceedings there will be costs which will inevitably be incurred and which are necessary for the successful conduct of the case. Solicitors are not required to conduct litigation at rates which are uneconomic. Thus in a modest claim the proportion of costs is likely to be higher than in a large claim, and may even equal or possibly exceed the amount in dispute.'

27. ...

28. The reference in 11.2 to costs 'which are necessary' is the key to how judges in assessing costs should give effect to the requirement of proportionality. If the appropriate conduct of the proceedings makes costs necessary then the requirement of proportionality does not prevent all the costs being recovered either on an item by item approach or on a global approach. The need to consider what costs are necessary is not a novel requirement. It was reflected by the former provisions of RSC order 62 which applied to the taxation of costs prior to 1986. Rule 28(2) dealt with costs on a party and party basis and stated:

' ... there shall be allowed all such costs as were necessary or proper for the attainment of justice ...'

29. In assessing costs judges should have no difficulty in deciding whether, in order to conduct the litigation successfully, it was necessary to incur each item of costs. When an item of costs is necessarily incurred then a reasonable amount for the item should normally be allowed. Any item that was not necessary should be disallowed.

30. In his advice the Senior Costs Judge drew attention to the problems that can arise from 'double jeopardy'; in other words from making a deduction when considering the bill item by item and then looking again at the situation as a whole and making a further global deduction. This danger will be avoided if a party receives at least a reasonable sum for the items of costs which were necessarily incurred.

31. In other words what is required is a two-stage approach. There has to be a global approach and an item by item approach. The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which Part 44.5(3) states are relevant. If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the cost for that item should be reasonable. If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable. If, because of lack of planning or due to other causes, the global costs are disproportionately high, then the requirement that the costs should be proportionate means that no more should be payable than would have been payable if the litigation had been conducted in a proportionate manner. This in turn means that reasonable costs will only be recovered for the items which were necessary if the litigation had been conducted in a proportionate manner."