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

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Cite as: [2003] EWHC 9012 (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: [2003] EWHC 9012 (Costs)
		Case Nos: PR 0303383; PR 0302856

IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE

Supreme Courts Cost Office
Clifford Inn
Fetter Lane
London
EC4A 1DQ

6 October 2003

B e f o r e :

MASTER ROGERS, COSTS JUDGE
____________________

Between:

	N G BAILEY & CO LTD	Claimant
	- and -
	AMEC DESIGN & MANAGEMENT LTD	Defendant

____________________

Mr Paul Shenton (instructed by Eversheds) for the Claimant
Mr Ben Patten (instructed by Masons) for the Defendant
Hearing dates : 22 September 2003
____________________

HTML VERSION OF JUDGMENT
____________________

Master Rogers

Master Rogers

THE BACKGROUND

Following protracted and strongly contested arbitration proceedings conducted by Mr John Uff QC in relation to a building dispute concerning the works carried out on Sun Life building at Bristol by the Claimants as the sub contractors for the Respondents the learned Arbitrator made an award in favour of the Claimants later agreed at £1,100,000 in respect of Part A of their claim, with two thirds of its costs "subject to any costs orders previously made in relation to these proceedings".

By his seventh award the Arbitrator awarded the Claimants interest of £137,150.41 on the award in respect of Part A, and in addition the costs of and relating to the hearing on 30 November 2001, and of the seventh award. The Arbitrator also by his seventh award granted the Claimants a payment on account of those costs of £40,000. Later the Respondent paid the Applicant an additional £850,000 on account of the costs of both Part A and Part B of the arbitration.

Finally he directed that the costs should be assessed on the standard basis if not agreed.

It is clear from the chronology in the bundle of documents placed before me at the hearing that this arbitration was for very substantial sums, and related to work going back to the beginning of January 1995.

It is necessary, and important, to note from the chronology that in addition to these arbitration proceedings High Court proceedings were issued by a company called Andover Controls (Europe) Ltd, against the Claimants who were their sub-contractors in relation to this contract, seeking the sum of £1,588,000 on a quantum meruit basis. A few months later QSM were appointed by the Claimants to be their experts in relation to this contract, and on 9 August 1996 QSM raised an invoice for work done on behalf of the Claimant since 27 July 1996 with the job description "Andover Controls Ltd v M G Bailey Sun Life Bristol".

A further 14 invoices were raised by QSM to the Claimant between 9 August 1996 and 28 February 1997, and all of these bore the same job reference and description "Andover Controls Ltd v M G Bailey Sun Life Bristol".

The notice of arbitration was served by the Claimant against the Respondent on 6 March 1997 and John Uff QC was appointed as arbitrator exactly two months later, on 6 May 1997.

Part A of the arbitration was settled on 2 November 1999, and, as already indicated, on 12 May 2000 the arbitrator made his fifth award in relation to the costs of Part A of the arbitration.

THE DETAILED ASSESSMENT PROCEEDINGS

These were started by notice of commencement served by Messrs Eversheds, solicitors for the Claimant, on 15 October 2002, attached to which was a bill seeking payment of a total of £1,857,889.60. Following the service of detailed points of dispute on behalf of the Respondents a request for a detailed assessment hearing was lodged with the Supreme Court Costs Office on 20 March 2003 by Messrs Eversheds with a time estimate of ten days. That matter was balloted to me.

It was obvious from my perusal of the papers lodged with the request for a detailed assessment hearing that there would need to be an early case management conference, particularly as in their covering letter seeking a date Messrs Eversheds said:

"Due to the nature of the costs disputes we will be requiring that a number of witnesses are in attendance to justify elements of the claim. Our enquiries as to availability suggests that the earliest date by which all the relevant parties would be available is 22 October 2003 and we request that the matter not be listed before this date."

Accordingly on 4 April 2003 I caused to be sent out by the Office a notice of hearing of a preliminary nature to take place before me on 16 April 2003.

On that occasion both parties were represented by costs draftsmen, and I made the following order:

"1. The case management conference be adjourned to Wednesday 18 June 2003 at 10.30 am.
2. The Claimant to file and serve points in reply by 4.30 pm on Friday 30 May 2003.

3. Before the adjourned hearing, the parties' solicitors are to try and formulate any preliminary issues which they will seek the court to resolve.

4. Before 6 June 2003, the Claimants solicitors are to indicate, both to the court and to the Respondent's solicitors which witnesses they wish to call and why.

5. Costs in the case.

6. Liberty to apply."

It was indicated at that hearing that the Respondents required the Claimant to give further and better discovery than they had received in respect of two aspects of the claim, and the Claimants desire to call oral evidence might be dependent on whether or not such an application was made, and whether or not it succeeded. I had indicated at the hearing that although oral evidence can be taken at detailed assessment proceedings, it is not the norm and there have to be careful safeguards in place to prevent it spiralling out of control. In particular I would normally insist that any party wishing to call witnesses to give oral evidence should first produce witness statements from those witnesses, and then tender them for cross–examination at the hearing.

In addition the calling of oral evidence almost inevitably lengthens the hearing time at the detailed assessment, and I noted that in this particular case that it was estimated by the Claimant and agreed by the receiving party's solicitors that the hearing would, without even considering the possibility of oral evidence, extend over a total of ten days.

The case management conference was accordingly adjourned until 18 June 2003, by which time certain matters had become clearer, not least because the Claimants solicitors had served points of reply pursuant to my order made in April.

I gave detailed directions at the hearing on 18 June, the most significant of which were that the actual hearing of the detailed assessment would take place between Monday 1 and Friday 5 and Monday 15 and Friday 19 December 2003, that is to say the ten days requested by the Claimants solicitors, and agreed to by the Defendant's solicitors, with a gap in the middle to enable the parties to "take stock". I also directed that the case management conference should be adjourned until 22 September.

I also ordered that if the Respondents wished to pursue their application for discovery, then they had to issue such an application by 2 July, setting out in detail in respect of which documents they should disclosure and/or inspection, and that such application should be supported by a witness statement.

Since the Claimants would probably wish to dispute the claim I further directed that they could respond by witness statement within 14 days after receipt of the application and supporting evidence, but bearing in mind that if, as seemed likely from the exchanges on 18 June, privilege was the, or one of the issues, in dispute then it would be helpful, in addition to receiving a witness statement from the solicitor, that a director of the Claimant company should make a witness statement indicating his or her stance in regard to privilege, since of course it is the client's and not the solicitor's privilege which is in issue.

I also ordered the Respondents to serve a rejoinder, if they thought it appropriate, within 28 days. As a result of that order I have been supplied with a folder set out in Scott Schedule form, and running to no less than 307 pages, setting out the Respondent's main observations and points of dispute, the Claimant's comments and points of reply and the Respondent's rejoinder.

In addition to this application I was faced, on 22 September, with an application by the Claimant's solicitors for further and better particulars of the rejoinder, or an amended rejoinder, but, since to have pursued that application would have taken a disproportionate amount of time, at the conclusion of the submissions in respect of this application the representatives sensibly agreed to try to resolve that matter, with liberty to restore before me if they were unsuccessful.

THE RESPONDENTS' DISCOVERY APPLICATION

By their application dated 2 July 2003 the Respondents sought an order:

"That the Claimant shall:
1. elect whether to rely upon any documentation in relation to the costs claimed in respect of Quantum Solutions/Monde and Trett Consulting and notify the court and the Respondent, by 4.30 pm on 29 September 2003 of its decision;

2. in the event that it elects to rely upon any such documentation, disclose by 6 October 2003, and allow inspection, on three days' notice of the documents set out in the attached draft order; and

3. in any event by 6 October 2003, provide a list of the documents it intends to rely upon in relation to the costs claimed in respect of Quantum Solution/Monde and Trett consulting at the substantive hearing of the detailed assessment;

and the costs of and incidental to this application be reserved."

This application was supported by a witness statement by Stuart Roy Murphy, a solicitor with Masons the Respondents solicitors, and it deals separately with the relief sought in respect of Quantum Solution/Monde (paragraphs 6 to 14) and Trett consulting (paragraphs 15 to 19).

So far as the claim in respect of Quantum Solution/Monde (hereinafter referred to as QSM) is concerned Mr Murphy, by paragraph 10 of his witness statement, says this:

"10. That there is significant doubt as to whether the costs claimed by the Claimant for QSM are costs in the Andover proceedings or in the arbitration proceedings is also demonstrated by:
10.1 the "job reference and description" on all QSM's invoices (save for their final invoice dated 14 April 2000) is "Andover Controls Ltd v N G Bailey", the Andover proceedings (see Point of Dispute 12(2);

10.2 the total claimed in the Claimant's Bill of Costs for QSM's fees in the arbitration is £214,305.15, of which £63,950.00 is claimed to relate to invoices raised between 9 August 1996 and 11 April 1997, a period after the commencement of the Andover proceedings, but before the appointment of the Arbitrator in the arbitration proceedings; and

10.3 the Claimant has now submitted in its Points of Reply that the fees to be claimed should be substantially increased, for example, by increasing the pre 11 April 1997 costs by approximately £33,000.

11. The Order for disclosure and inspection is sought by the Respondent in the interests of fairness, openness and to ensure that the parties are on an equal footing in the assessment proceedings. If no Order for disclosure is made, not only would the material by which the Claimant will have to prove the validity of the apportionment it has made of QSM's fees be unavailable to the Respondent, but the Court may not have sight of all documents relating to the work done by QSM on the Andover proceedings on which to make its decision as to whether the costs claimed are properly costs of the arbitration proceedings or of the Andover proceedings."

So far as the Trett Consulting claim is concerned, the claim is put in this way in Mr Murphy's supporting witness statement:

"15. In contrast to the application in relation to Quantum, the Respondent's application for disclosure in relation to Trett is limited to those documents which record the terms and scope of the instructions given to Trett and any changes to those instructions during the course of the arbitration proceedings.
16. Again in the interests of fairness, openness and to ensure the parties are on an equal footing, the disclosure and inspection sought by the Respondent is in order for the Claimant to satisfy its burden of proof as to whether the costs claimed for Trett are properly and reasonably recoverable and for the Respondent to have the opportunity to challenge the recoverability of those costs on the bases set out in the Points of Dispute and for the court to assess the costs."

The Respondents put in a skeleton argument, settled by their Counsel Mr Patten, as I had given them leave to do, but the Claimants relied on Mr Shenton's witness statement, and no point was taken on that.

THE HEARING BEFORE ME ON 22 SEPTEMBER 2003

As already indicated the parties were represented by Mr Paul Shenton from Eversheds for the Claimant, and Mr Ben Patten of Counsel for the Respondents instructed by Messrs Masons. I am very grateful to both advocates for the clear way in which they presented their arguments, and it was particularly helpful to be provided by Messrs Masons with two bundles, one containing the relevant documents and the other a smaller but still significant bundle of legal authorities.

At the outset Mr Patten conceded on behalf of the Respondents that I could not, on the state of the authorities, order Mr Shenton and his clients to disclose any documents to the Respondents or their advisors. The most that I could do was to put Mr Shenton to his election, under CPD 40.14, either to disclose (if necessary suitably redacted) to the other side any document which I had previously seen, on which he sought to rely, or to seek to prove his case in some other way.

Nevertheless, Mr Patten contended that I did have power to put Mr Shenton to his election at this stage, and to order him to disclose to the Respondents solicitors a list of documents upon which they sought to rely at the forthcoming full hearing in the assessment proceedings.

Mr Patten also accepted that to get as far as that he had to satisfy me that there was a genuine issue which needed to be resolved, and that he was not simply making a fishing expedition.

So far as the QSM claim was concerned he said that this was clear from the way that the documents which he had seen were worded, namely all in favour of Andover or headed "Andover Controls (Europe) Ltd v N G Bailey & Co Ltd Sun Life Bristol", which at least raised in his mind a doubt as to whether the work in respect of which those invoices had been raised related to this arbitration at all, but rather related to the preceding and now settled High Court proceedings by Baileys against Andover.

I have already quoted paragraphs 15 and 16 of Mr Murphy's witness statement, which sets out the more limited claim in respect of discovery in relation to the Trett Consulting documents. Mr Patten also referred me to some correspondence between the solicitors relating to the issue, and drew my attention to particular parts of the letters.

Mr Patten also took me through a number of the authorities, of which there were seven, which he said supported his contention. These start with the judgment of Mr Justice Hobhouse (as he then was) in Pamplin v Express Newspapers Ltd [1985] 1 WLR 689 and continue through other cases which are familiar in this field, namely Goldman v Hesper [1988] 1 WLR 1238; Bailey v IBC Vehicles Ltd [1998] 3 All ER 570; Bourns Inc v Raychem Corp & Anor [1999] 3 All ER 154; South Coast Shipping v Havent BC and Dickinson v Rushmer [2002] 1 Costs LR 95; [2002] 1 Costs LR 128 both decided in late 2001.

These cases, he submitted, highlighted the tension which arose between two competing interests, that of the receiving party to maintain legal professional privilege over their documents and that of a paying party to be entitled to see documents on which a paying party sought to rely. The South Coast Shipping Company case of Mr Justice Pumfrey deals with the European aspect of this field in some detail, but the point in issue is perhaps put more clearly by Mr Justice Rimer in Dickinson v Rushmer, particularly in paragraphs 32 and 33 of his judgment, which read as follows:

"32. The situation was, therefore, one in which a problem arose at the detailed assessment of precisely the type that Hobhouse J had referred to in the Pamplin case at [1985] 1 WLR 696. It was one which involved an issue of fact which the costs judge had to decide. It appears to me to be obvious that as soon as it became clear that the claimant was proposing to support his own case on the point by reference to documents which he was not willing to disclose to the defendant, the costs judge should have considered whether that course was consistent with one of the most basic principles of natural justice, namely the right of each side to know what the other party's case is and to see the documentary material that he is relying on so that he can make his own comments on it. The point is comprehensively explained by Hobhouse J in the Pamplin case, and I regard his views as being just as valid now as they were then. In his judgment, Hobhouse J made suggestions as to how the court might approach a problem such as came before the judge in the present case. But it is not apparent that the judge had those guidelines in mind. He was content to decide the matter by reference, amongst other things, to a consideration of documents which the claimant provided only to him and kept from the eyes of the defendant. Moreover, in his written reasons the judge referred to his decision on the point as being by reference to what he had "seen and heard" and the inference must be that these documents played a part in his decision.
33. In my view, the procedure adopted by the costs judge was unfair. ...."

Interestingly, there is an additional case included in the bundle of authorities supplied by Masons, namely a decision of District Judge Harrison in a Donald McCreery v Massey Plastic Fabrications Ltd, apparently decided on 23 January 2003. Significantly, in my opinion, Mr Patten did not seek to rely on that case, which he accepted was not binding on me in any event, although he did suggest that the general principles, as enunciated by the learned District Judge, were valid and perfectly proper to be followed by me.

It is I think fair to say that that judgment goes much further in respect of discovery than has heretofore been accepted by Costs Judges and District Judges as to their powers in relation to discovery of documents in detailed assessment proceedings, and, as Mr Shenton suggested, if it were to be followed could radically alter the whole shape and practice of the conduct of detailed assessments.

In the case of Hollins v Russell and related appeals [2003] 3 Costs LR 423 the Court of Appeal was concerned with a number of issues relating to CFAs and the extent to which paying parties should be entitled to see documents, such as the CFA itself and other documents which would have been brought into existence in connection with it. These were leading cases in an important and developing field, and after a week of submissions the Court of Appeal understandably reserved judgment. After that judgment had been reserved their attention was drawn to the decision in McCreery, which was initially thought to have been a decision of a High Court Judge, Mr Justice Harrison. They did not invite further submissions from the parties before them in that case, but did touch on the McCreery case in paragraph 85 of their judgment, which reads as follows:

"85. Since the hearing we have read the judgment of District Judge Harrison in McCreery v Massey Plastic Fabrications Ltd [LTL 21/3/2003]. We note that the District Judge has given permission to appeal, but as the appeal is not before us it is not appropriate for us to comment in detail on the judgment. We note, however, that the District Judge has advocated changes in the practice regarding disclosure of CFAs and risk assessments which go beyond the practice we have laid down in this judgment."

Neither of the advocates before me could tell me whether or not the McCreery case has in fact gone to appeal, though bearing in mind its potential importance it seems inconceivable if it had been to appeal it would not by now have been reported.

THE CLAIMANT'S ARGUMENTS

Mr Shenton in his able argument firstly, and at the forefront of his argument, submitted that there was no genuine factual dispute that could be resolved by reference to documents that had been identified. He further indicated that if I were to order disclosure of any further documents these would be technical documents emanating from, or written to, the experts, and it would be necessary, not simply to disclose the documents, but to call the experts in question to explain what they meant. This would be undesirable, could lengthen the hearing of the detailed assessment proceedings and was, in his opinion, an attempt by the Respondent paying party to make life difficult for his clients.

He dealt with the situation regarding QSM as follows. He accepted that the invoices all referred to Andover and not to this dispute, but he said that this was a simple administrative error, in that the first invoice had been raised in relation to the Andover dispute because that was in respect of which the expert had first been instructed, and that heading having got onto the computer was naturally repeated on all future invoices. There was nothing sinister about it, and no documents would assist me or the other side in taking the matter any further. The only way that the court would be assisted would be by evidence from the expert about this administrative error.

He acknowledged that some of the QSM invoices did relate to a period prior to the service of the notice of arbitration, but again he said there was nothing improper or sinister about that. From the outset it was clear that there was a major dispute relating to this contract involving not just Andover but also their Respondents and it was necessary for the expert to analyse the relevant papers and other documents in order to be able to advise, not only in relation to the Andover dispute, but also as to the strengths and weaknesses of any potential arbitration claim against the Respondents, and naturally some of that work would be done, and properly done, prior to the service of the notice of arbitration.

Finally, as to the increase in the apportionment, again he suggested that there was nothing sinister about this at all. When initially asked, the expert in question had said that he thought a fair apportionment of the invoices was 50/50 between Andover and this arbitration. When, however by their points of dispute the Respondents contested this, then what he described in his witness statement as a "more detailed forensic exercise" was undertaken, and it turned out that this initial, rather rough and ready assessment, was too favourable to these Respondents and that accounted for the increase to £33,000 referred to earlier in this judgment. In response to a suggestion from me he agreed that this was analogous to the solicitor whose lump sum bill is challenged and then produces a breakdown prepared by his costs draftsman which claims a higher sum than the original bill. All that that indicates is that perhaps the solicitor undercharged the client in the first instance.

Turning to the Trett claim Mr Shenton drew my attention to the limited nature of the claim so far as that was concerned, and pointed out that most of the arguments seemed to relate to the change of software used in connection with moving the dispute forward. It had been suggested on behalf of the Respondents that the software system used by the Claimants was "dumped" in favour of that being used by the Respondents, and that there could be revealing documents which would indicate that this was the case.

Mr Shenton however said that this was not factually what had happened. The arbitrator had appointed an arbitration expert who had directed the technical aspects of the case, and who had suggested that the parties should use the same software package for obvious reasons, and that ultimately it was the Respondents package which was chosen. Mr Shenton further said that in fact both packages had been used by the Claimants at varying stages in the contract.

Mr Shenton acknowledged that this was a factual dispute, but that it could only be resolved, if at all, by calling the arbitration expert, and both parties agreed that it was probably beyond my powers to order him to attend, not least because he apparently is resident in Canada.

Mr Shenton dealt with the authorities in less detail than Mr Patten had done, because he did not want to repeat what Mr Patten had already said, but he did make the point, which seems to me a very valid one, that to a very large extent the reported cases relate to either the question of whether there was a retainer between the receiving party and his solicitors, or the terms of a CFA. Both those issues are of course of vital importance to a paying party, but in this particular case much wider discovery, and indeed indeterminate discovery was being sought, and that the authority of the case as cited by Mr Patten therefore was not so great.

MY CONCLUSION

Having carefully weighed the competing arguments I have come to the clear conclusion that those of the Claimant, as enunciated by Mr Shenton, are to be preferred. I am not satisfied that disclosure of any of the documents sought by the Respondents would assist them in clarifying the issues, and they do not fall into the same category as the reported cases relating to CFAs and the indemnity principle for that reason.

I am also of the opinion that if I were to order discovery it would inevitably provoke a subsequent application by the Claimants for leave to call oral evidence. In my judgment this case is already complicated enough, with a document running to 307 pages in Scott Schedule form setting out the parties contentions on a substantial number of the items in the Claimant's bill, and, to make it even more complicated, by ordering discovery and perhaps, inevitably, subsequently allowing oral evidence, would not be reasonable.

I also feel that if I were to accede to this application I would effectively be opening the floodgates, and following the decision of District Judge Harrison in the McCreery case with which, regretfully, I do not concur. If the law is to be moved forward in the way suggested by District Judge Harrison then I think that it must be done at Court of Appeal level and not by a Costs Judge.

CONCLUSION

It follows from the foregoing that this application fails and is hereby dismissed. At the end of the oral hearing before me the advocates agreed that the costs of the application should be reserved irrespective of the outcome. It is not therefore necessary for either party to attend before me when this judgment is formally handed down unless permission to appeal is to be sought. [END OF JUDGMENT]