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Cite as: [2005] EWHC 90005 (Costs)

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		Neutral Citation Number: [2005] EWHC 90005 (Costs)
		Case No: 05/A/255

IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE

Clifford's Inn Fetter Lane
London EC4A 1DQ

3 May 2005

B e f o r e :

MASTER CAMPBELL, COSTS JUDGE
____________________

Between:

	BOTTIN (INTERNATIONAL) INVESTMENTS LIMITED	Appellant/ Claimant
	- and -
	(1) VENSON GROUP PLC (2) GRANT SCRIVEN (3) CLIVE LAWSON-SMITH	Respondent/ Defendant

____________________

Simon Serota of (Wallace & Co) for the Respondent/Defendant
Hearing date : 31 March 2005
____________________

HTML VERSION OF JUDGMENT
____________________

Master Campbell

The application before the court was issued on 14 March 2005 by the First Defendant ("Venson") in detailed assessment proceedings and seeks determination of the following issue:

"Pursuant to Section 28.1(4)(a) of the Practice Direction to CPR 47, whether the Claimant is entitled to commence detailed assessment proceedings."

The reference to CPR 47 is to rule 47 of the Civil Procedure Rules ("CPR") which provides as follows:

"Time when detailed assessment may be carried out

47.1 The general rule is that the costs of any proceedings or any part of the proceedings are not to be assessed by the detailed procedure until the conclusion of proceedings but the court may order them to be assessed immediately.

(The Costs Practice Direction gives further guidance about when proceedings are concluded for the purpose of this rule)."

The Reference to Section 28.1(4)(a) of the Practice Direction is to the Costs Practice Direction ("CPD"). This provides as follows:

"(1) For the purposes of rule 47.1 proceedings are concluded when the court has finally determined the matters in issue in the claim, whether or not there is an appeal …

(4) (a) A party who is served with a notice of commencement (see paragraph 32.3 below) may apply to a Costs Judge or a District Judge to determine whether the party who served it is entitled to commence detailed assessment proceedings.

(b) On hearing such an application the orders which the court may make include: an order allowing the detailed assessment proceedings to continue, or an order setting aside the notice of commencement."

At the hearing of the application Mr Simon Serota represented Venson. He contended that as the proceedings between the Claimant ("Bottin") and Venson had yet to be concluded, Bottin was not entitled to commence the detailed assessment proceedings which accordingly should be set aside. Mr Levey, Counsel for Bottin, agreed that the proceedings had not been concluded but submitted that the court should exercise its discretion to allow the detailed assessment proceedings to continue.

The material before the court included a witness statement made by Mr Serota on 14 March 2005 (together with four exhibits), a witness statement in reply by Nicholas Dean Marsh, Bottin's solicitor, and a skeleton argument lodged by Mr Levey. At the conclusion of the hearing I reserved judgment.

BACKGROUND

On 19 March 2003 Bottin issued proceedings against all three Defendants for breach of warranty, misrepresentation and negligent mis-statement arising out of a share purchase agreement dated 22 December 1999. By an application notice dated 3 June 2003 the Defendants applied to strike out the particulars of claim. That application (together with various other applications and cross applications with which I am not concerned) was heard by Peter Smith J on 13, 14 and 15 January 2004. The learned Judge reserved judgment until 3 February 2004 when he ordered ("the February Order") (inter alia) that the claim for breach of warranty be struck out (paragraph 1), that four applications made by Venson (referred to in the preamble to the order) be dismissed (paragraphs 2 and 3), and that the claim for misrepresentation/negligent mis-statement be re-pleaded (paragraph 4) upon the Defendants' providing disclosure of various specific classes of documents (paragraph 5).

The February Order then said this:

"8. The Claimant is to pay the Defendants:

(i) their costs of and occasioned by the Claimants' applications,

(ii) their costs of and occasioned by the Defendants' application,

(iii) their costs of and occasioned by the adjournment of the Claimant's Duplicate application and reserved to this court by Order of Master Moncaster dated 15 December 2003; and

(iv) their costs thrown away by reason of the order made in paragraph 1 of this Order …

9. The Claimant is to pay the Second Defendant his costs of and occasioned by

(i) the Claimant's appeal;

(ii) preparation for the trial of the Preliminary Issue; and

(iii) his costs of his application therefore dated 1^st October 2003 and reserved to this Court by Order of Master Moncaster dated 4^th November 2003.

10. The costs to be paid by the Claimant to the Defendants as ordered in paragraphs 8 and 9 of this Order are, in the absence of agreement between the parties, to be the subject of any detailed assessment and are to be assessed on the standard basis.

11. Pursuant to CPR 44.3(8) the Claimant is to pay the Defendants on account of the costs referred to in paragraph 10 of this Order the sum of £175,000 by no later than 4 pm on 3 March 2004.

12. The Claimant is to pay the First Defendant its costs of making the disclosure referred to in paragraph 5 of this Order such costs to be paid within 14 days of their amount being agreed between the parties or, in the absence of such agreement, their detailed assessment by the court on the standard basis."

On 28 July 2004 a case management conference took place before Peter Smith J, when the learned Judge ordered ("the July Order") (inter alia) the following:

"(1) The case management conference be adjourned until the first available date after a ruling is given in the pending appeal …

(6) The Claimant do pay the First Defendant the costs of and occasioned and thrown away by the abandonment of the claim for a Declaration of Entitlement to appoint an independent consultant such costs to be the subject of a detailed assessment on the standard basis and to be assessed at the same time as the assessment of costs and ordered to be paid under paragraph 10 of the order [viz the February order]."

The reference to "the pending appeal" was to an appeal by Bottin against the February Order to the Court of Appeal (Peter Gibson Longmore LJJ, Lindsay J).

On 22 October 2004 the Court of Appeal handed down its judgment. By its Order of that date, as amended on 22 November 2004 under the Slip Rule ("the October Order"), the Court allowed the appeal (ie, reinstating the claim for breach of warranty) and dismissed Venson's cross appeal. The Court further ordered as follows:

"3. The costs of the appeal and cross-appeal be as follows:

3.1 The First Defendant is to pay 85% of the Claimant's costs of the appeal.

3.2 The Claimant is to pay the Second and Third Defendants costs of the appeal.

3.3 The First Defendant is to pay the Claimant's costs of the cross-appeal.

4. Costs below be as follows, and to the extent necessary, paragraph 8, 10, 11 and 12 of the Order in the court below are accordingly revoked or varied:

4.1 The First Defendant to pay 50% of the Claimant's costs of the following applications, such costs to be the subject of a detailed assessment on standard basis if not agreed [my emphasis].

4.3 The costs of the disclosure exercise referred to in paragraph 5 of the Order below are to be costs in the case."

The reference to "the following applications" was (inter alia) to:

o Vensons' strike out application before Peter Smith J

o Bottin's application to amend its particulars of claim

o Repayment of the interim payment of £175,000

On 24 February 2005 Venson served a Notice of Commencement under CPR 47.6 for assessment of its costs under the orders made in its favour, to which was annexed a Bill of Costs totalling £237,077.76. Part One related to the costs of the applications referred to in paragraph 4(1) of the October Order under which Bottin was entitled to 50% of its costs amounting to approximately £120,000. Part Two concerned the appeal in which Bottin was awarded 85% of its costs under paragraph 3.1 of the October Order, amounting to approximately £103,000. The balance of approximately £15,000 related to the costs of the assessment.

Following receipt of the Notice of Commencement, Venson challenged Bottin's entitlement to commence detailed assessment proceedings under CPR 47.6. Venson's solicitor's letter dated 25 February 2005 said this:

"Dear Sirs

Re: Bottin (International) Investments Ltd –v- Venson Group Plc & Others

As requested we write to acknowledge receipt of your letter dated 24^th February and the Notice of Commencement of Detailed Assessment proceedings and accompanying Bill enclosed therewith.

Neither the Order of the Court of Appeal nor the Order of the 3^rd February 2004 as varied by the Court of Appeal provided for an immediate assessment of your client company's costs. In these circumstances we should be grateful if you could let us know the basis upon which you have felt able to serve Notice of Commencement of Assessment before the proceedings themselves have been concluded.

Yours faithfully

Wallace LLP"

On 3^rd March 2005, Bottin's solicitor replied in these terms:

"Our client is entitled to commence detailed assessment proceedings before the main action is concluded for the reasons set out below.

1. The Court of Appeal proceedings were separate and distinct proceedings in their own right which dealt with technical and discrete issues from the substance of the main action and which were not dependent on the conclusion of the main action. Those proceedings are now concluded and a final order by the Court of Appeal was made on 22 October 2004 awarding our client, inter alia, 85% of its costs of appeal and 50% of its costs of defending your clients application for strike out/summary judgment, thereby revoking or varying paragraphs 8, 10, 11 and 12 (which dealt with costs) of the Order of 3 February 2004 ("the February Order").

2. On the basis, therefore, that the Court of Appeal proceedings were a separate action which has now concluded, and in which a final order has been made, our client is entitled to initiate detailed assessment proceedings. That entitlement is not prohibited by the provisions of Part 47.1 of the CPR.

3. It is our position that on the basis that our client is able to seek the immediate assessment of its costs of the Court of Appeal it is also entitled to seek the immediate assessment of its costs in the Court below. This is on the grounds that the relevant parts of the February Order were subject to and/or superseded by the Court of Appeal Order which revoked and varied the lower Court's findings on costs. Our client's costs in the Court below should not, in any event, fall for assessment at the conclusion of the main action as they arise from discrete and technical issues separate from the substance of the main proceedings. We would also add that, prior to our client's successful appeal, you believed that your clients were entitled to assess forthwith the costs awarded to them in the February Order. We are surprised that you now seek to argue to the contrary simply because the costs orders have been, in part, reversed …

Yours faithfully

DLA"

Further correspondence failed to break the impasse. Accordingly, on 14 March 2005 Venson issued its application for determination of the issue set out in paragraph 1 of this judgment.

THE LAW

The starting point is CPR 47.1 and CPD s28.1 (see paragraphs 2 – 3 ante). Further guidance about the application of the rule can be found in the Notes at CPR 47.1.1 (the White Book, volume 1, page 1155). This says:

"The Court of Appeal has held that, although the CPR provides for payment of costs as the case goes along for policy reasons, the normal approach is as set out in the rule."

Two cases referred to in the Notes are relevant to the issue to be determined (the third case involved security for costs and is not). In Morris v Bank of America National Trust (appeal against striking out) [2001] 1 All ER 954 Morritt LJ said this:

"It is certainly the practice, as I understand it, in this court that where the appeal is a discrete matter the costs are ordered there and then and do not wait for the conclusion of the proceedings as a whole. That practice precedes the new rules."

The Court went on to dismiss the appeal with costs to be assessed and paid forthwith.

In Hicks v Russell Jones & Walker [2001] CP Rep.25 CA Robert Walker LJ refused an order for immediate detailed assessment on the ground that it would be unfair to the solicitors in an ongoing professional negligence case to order such an assessment since the claimant was legally aided and there was a potential set off should the Claimant be unsuccessful at trial.

No other cases were cited before me and in fairness to Mr Levey, who helpfully provided a transcript of the costs argument in Morris, he did not rely on that decision.

For completeness it is appropriate to mention that the decision in Hicks accords with the practice followed in the line of pre CPR cases under RSC Order 62 rule 8(1), the predecessor to CPR 47.1. Industrie Chimiche Italia Centrale & Anor v Alexandra GT Savlaris Maritime Co & Ors (13 July 1992 CA, unreported, Parker, Glidewell LJJ, Sir Christopher Slade) was authority for the proposition that, absent a specific order for an earlier assessment, the costs on the trial of preliminary issues did not fall to be assessed until "the conclusion of the cause or matter" under Order 62 rule 8(1)). That decision can be contrasted with Molnlycke AB v Procter & Gamble Ltd, Morritt J (1993, Fleet Street Reports, page 154) in which the action had been tried and the court had given final judgment which included the reservation of certain enquiries to future hearings. Since the original cause of action had merged in the judgment, the action was concluded and accordingly the costs were required to be assessed immediately, notwithstanding that those certain enquiries would require judicial consideration at some later point.

I interpose here to make the observation that in the case before me there has been no final judgment; only various interlocutory issues have been concluded. Moreover, the proceedings themselves are continuing.

VENSONS' SUBMISSIONS

In Mr Serota's submission, the time when the detailed assessment could be carried out had not arisen because:

i. the proceedings were not concluded (so much was common ground); and

ii. the Court of Appeal did not order the costs to be assessed immediately.

Mr Serota accepted that on an application under CPR 47.1 and Section 28.1(4) CPD, the Court could allow the detailed assessment proceedings to continue but in his submission, I should exercise my discretion against Bottin in the present case.

Mr Serota deployed the following arguments to make good his submission.

i. The Second and Third Defendants had the benefit of two substantial costs orders in their favour (the February Order paragraph 9 and the October Order paragraph 3.2).

ii. Those costs were estimated to be in the region of £50,000 to £100,000 and it could not be right to allow Bottin to assess its costs now but to compel those Defendants to await the conclusion of the proceedings before carrying out the assessment of their costs.

iii. The Court of Appeal had not been asked to make a "forthwith" costs order still less had this Court been told the reason for that omission. If I permitted the assessment to continue, this would open the floodgates for all successful parties to serve Notice of Commencement and then to submit to the Costs Judge that "I do not have an order which enables me to have an immediate assessment but I am asking for your discretion to allow the detailed assessment proceedings I have commenced without authority to continue".

iv. In any event, it was desirable that all costs issues should be dealt with by the same Costs Judge at the same time. That would not happen if I carried out an immediate assessment of Bottin's costs.

BOTTIN'S SUBMISSIONS

Mr Levey accepted that neither the February Order nor the October order expressly directed that the costs be assessed prior to the conclusion of the proceedings, but in his submission the court should exercise its discretion to allow the detailed assessment to continue (see skeleton argument paragraph 9(1)). So far as the costs of the appeal itself were concerned (as distinct from the costs before Peter Smith J) those proceedings were concluded and there ought in any event to be a detailed assessment in respect of Part 2 of the bill (the appeal costs).

Mr Levey advanced the following as reasons why I should exercise my discretion in his client's favour:

i. The costs arising out of the strike out application, namely Bottin's application to amend its particulars of claim and the subsequent appeal, involved separate and discrete procedural issues which were wholly distinct from the allegations made in the proceedings themselves. The October Order concluded those issues in their entirety (there being no appeal to the House of Lords).

ii. Venson was liable to pay those costs in any event regardless of the outcome of the proceedings as a whole. The issues before Peter Smith J and the appeals to the Court of Appeal had come to a conclusion. Accordingly, the costs arising therefrom should be quantified now.

iii. The costs involved were substantial (over £200,000). Bottin should not be forced to wait until the conclusion of the proceedings (possibly several years hence) for payment.

iv. The CPR introduced a "pay-as-you-go" philosophy in contrast to the situation which pertained under the Rules of the Supreme Court when in general costs were not paid until the end of the case. Immediate assessment of Bottin's costs was in keeping with that philosophy.

v. The costs and time involved in assessing the costs before Peter Smith J and in the Court of Appeal would not materially increase if assessment took place immediately since they concerned distinct issues.

vi. Venson itself had initially considered that the costs awarded in its favour by Clause 6 of the July Order were to be dealt with forthwith – this was plain from Wallace's letter to DLA dated 24 August 2004, which said this:

"As indicated we are unable to agree the Order as drafted by you because it fails to include the Order by Mr Justice Peter Smith in respect of the costs of your clients claim for the declaration it was entitled to appoint an independent consultant under clause 8 of the Share Purchase Agreement.

We would suggest that the following be added as paragraph 6 of the Order:

6. The Claimant do pay the First Defendant the costs of and occasioned and thrown away by the abandonment of the claim for a Declaration of Entitlement to appoint an independent consultant such costs to be subject of a detailed assessment on the standard basis and to be assessed forthwith at the same time as the assessment of the costs ordered to be paid by the Order dated 3 February 2004."

vii. Bottin's current position was a classic case of a party who had had the benefit of a costs order in its favour and then lost it, changing his mind when a subsequent costs order went against him.

viii. The costs orders in favour of the Second and Third Defendants were not capable of set off against Bottin. That said, should a Notice of Commencement be forthcoming, it was possible that his clients would not object to such an assessment continuing under CPD s.28.1(4)(b).

DECISION

Two issues require determination. Does the October Order entitle Bottin to an immediate assessment of its costs? If not, should the court's discretion be exercised under CPD s28 to permit the existing detailed assessment to continue? It is convenient to deal with each in turn.

In my judgment the arguments about Rule 47.1 advanced by DLA in their letter of 3 March 2005 are wrong. I take issue with paragraphs 2 and 3, which, for convenience, I repeat:

"On the basis, therefore, that the Court of Appeal proceedings were a separate action which has now concluded, and in which a final order has been made, our client is entitled to initiate detailed assessment proceedings. That entitlement is not prohibited by the provisions of Part 47.1 of the CPR …

Our client's costs in the Court below should not, in any event, fall for assessment at the conclusion of the main action as they arise from discrete and technical issues separate from the substance of the main proceedings."

Mr Levey accepted during the course of argument that when this letter was written his instructing solicitors believed the October Order enabled Bottin to assess their costs immediately, but Bottin had now conceded on advice that the Court of Appeal had not made a "forthwith order", indeed no such an order had been requested at the conclusion of the appeal. In view of this concession Mr Levey now put Bottin's case on the basis that although the October Order did not provide for the costs to be assessed prior to the conclusion of the proceedings, the Court nevertheless should make an order allowing the detailed assessment proceedings to proceed (see paragraphs 9 and 10 of his skeleton argument).

That concession, if it be such, must be correct. Rule 47.1 is clear that "the costs of the proceedings or any part of the proceedings" (emphasis added) are not to be assessed by detailed assessment until the conclusion of the proceedings. In my view, this means the costs of the preliminary issues (being part of the proceedings as a whole) cannot be assessed immediately unless the court orders that they should; here it is common ground the court did not do so.

The Notes to Rule 47.1 also support Mr Serota's submission that an order of the Court of Appeal does not confer a right to immediate assessment unless it provides for the costs to be assessed and paid forthwith. Whilst it is true that Morritt LJ said in Morris that it was the practice of the Court that where the appeal involved a discrete matter "the costs are ordered there and then and do not wait for the conclusion of the proceedings as a whole", it is plain from the transcript that Leading Counsel had asked for and been given an order for "an immediate detailed assessment" and for payment "forthwith" (see transcript paragraphs 13 and 71). That is to be contrasted with the situation before me, in which it is common ground that the order does not provide for an immediate assessment, still less was the Court of Appeal asked to make such an order. In these circumstances, I consider the absence in the October order of words such as "immediate" or "forthwith" is fatal to the submission originally advanced by Bottin in DLA's letter of 3 March 2005.

That conclusion is also consistent with Hicks. At paragraph 8 of the judgment Leading Counsel for the receiving party advanced similar arguments to those deployed before me, namely that:

"…the allowing of the appeal marks the end of a distinct (and I would add substantial) part of the litigation and that neither the claimants nor the Legal Services Commission should have to accept a long wait for the costs to be assessed and paid …"

That submission did not find favour with Robert Walker LJ. At paragraph 12 (et seq) he said this:

"Although Mr Ullstein has, in an attractive argument, sought to persuade me otherwise, it seems to me that the combined effect of these provisions, if I were to order immediate detailed assessment and payment of the Claimant's costs and the costs were assessed and paid before trial, might work a substantial injustice on the Defendants.

…

13. On the whole, therefore, I think that the overriding objective would be best served in this case by following the normal practice under Rule 47.7 of the Civil Procedure Rules and ordering detailed assessment but not assessment forthwith."

Mr Levey sought to distinguish Hicks on the grounds that the judgment was given shortly after the implementation of the CPR and in terms of the "pay as you go" philosophy, matters have now moved on significantly. He submitted that a further distinguishing feature in Hicks was that it was unlikely that either the legally aided claimant or the Legal Services Commission would be ordered to pay the costs of the proceedings if the Defendants were ultimately successful.

These are not persuasive points; if "pay as you go" is now the norm, then it is all the more likely that the Court of Appeal would have ordered an immediate assessment had Bottin asked the Court to make such an order, but in contrast to Hicks, it is agreed that no such application was made. In common parlance it was a case of "didn't ask so didn't get".

A further point is this – if it is right that an order of the Court of Appeal which disposes of a preliminary issue carries with it the right to an immediate assessment of costs, then there would have been no reason for Leading Counsel in Hicks to have applied for a "forthwith" costs order. That counsel did so unsuccessfully is persuasive that an order of the Court of Appeal which resolves a discrete issue, does not entitle the successful party to an immediate assessment of his costs unless that order expressly permits him to do so, as happened in Morris.

It follows that in my judgment Mr Serota's submission is correct, that Bottin was not entitled to commence detailed assessment proceedings in respect of the costs arising under the October Order because the order did not expressly permit it to do so and the proceedings have yet to be concluded. The first issue for determination in this application is therefore decided in favour of Venson.

Should the Court exercise its jurisdiction and order that the detailed assessment proceedings be permitted to continue under CPD s28.1(4)(b)?

Having weighed up the parties' competing submissions I am in no doubt that it would be wrong to exercise the Court's discretion in Bottin's favour. In the first place, it is common ground that the Court of Appeal was not asked to make an order for immediate assessment. That adds weight to Mr Serota's "floodgates" argument that to exercise the court's discretion to Bottin's benefit would enable a receiving party, who omitted to ask for an order for costs to be assessed and paid forthwith, simply to serve a Notice of Commencement and then to apply to the Costs Judge under Section 28.1(4) to allow the assessment to continue. In my judgment, having failed to make use of its opportunity to ask the Court of Appeal for such an order, it would be unjust to give Bottin a second chance under s28.1(4).

I also consider there is force in the argument that a significant unfairness would be done to the Second and Third Defendants if Bottin's costs were assessed now but theirs were not. Whilst it is correct that set off here does not apply, to my mind it would be an injustice for Bottin to receive its costs straight away, but to compel the Second and Third Defendants to await the conclusion of the proceedings for assessment of their costs, when they are entitled in any event to certain of their costs of the appeal and below. In my view, all such assessments should await the conclusion of the proceedings.

Less persuasive, but a fair point, is that in so far as possible all the costs in these proceedings should be assessed at the same time. Having one assessment is likely to lead to a saving in costs and will avoid the parties (and indeed the Costs Judge) having to work up the case more than once.

Much was made of the suggestion that Venson had undertaken a volte face when the Court of Appeal reversed the costs order in its favour, but this is not a point which has weighed heavily with me. The issue is whether Bottin did (or did not) have an entitlement to immediate assessment of its costs. The fact that there may be a dispute between Mr Marsh for Bottin and Mr Serota for Venson about whether the February Order in its original form permitted Venson's costs to be assessed and paid forthwith, does not assist me either way in deciding whether Bottin had a similar entitlement under a different order, namely the October Order. Neither Deponent was cross-examined on his witness statement and the point was not persuasive or determinative either way.

CONCLUSION

For the reasons I have given, absent an order of the Court of Appeal that there should be an immediate assessment, Bottin had no entitlement to commence detailed assessment proceedings on 25 February 2005. In my judgment the overriding objective in CPR 1 would not be furthered if these proceedings continued. It follows that the Notice of Commencement will be set aside and Bottin must wait until the proceedings are concluded before its costs can be quantified by detailed assessment.

Mr Levey did not appear in the Court of Appeal and it is unfortunate that his predecessors did not have in mind the guidance of Sir Mervyn Davies given in Harrods (Buenes Aires) Ltd (10 March 1993) (albeit when considering Order 62 rule 8 not CPR 47.1) that:

"When there is doubt as to whether or not an order results in the "conclusion or the cause or matter" the wise course is to ask the court (whether the High Court or the Court of Appeal) for consent to proceed to taxation forthwith."

FORMAL ORDER

The Notice of Commencement is set aside. Subject to any representation which the parties wish to make, I propose to order that Bottin pay the costs of the application to be assessed at the conclusion of the proceedings if not agreed and set off. If Bottin wishes to seek permission to appeal then there is liberty to apply to me for this purpose.