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

IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE

		Claim No. 5BO 03815 SCCO Reference CCD 0804153 Supreme Court Costs Office Clifford's Inn London EC4A 1DQ
		17 June 2009

1. This judgment concerns the issue whether an order to the effect that that the First Defendant should pay the Claimant's costs of the claim ought to be treated as including Claimant's costs incurred in the course of pursuing claims against the Second and Third Defendants against whom he had discontinued, a year or more before the eventual final costs order made by consent. The case accordingly concerns in part the meaning of CPR 38.6, and also the construction of the eventual settlement order upon contractual terms. In strict terms the single remaining preliminary issue is 'issue (d)' between the parties set out in my order of 22 October 2008. That order recorded four issues but the first three have been dealt with by concession and/or agreement. Accordingly the issue is "Whether the terms of the costs order include those [ie, the costs] of the Second and Third Defendants", in circumstances where the claims against the second and third defendants were discontinued during the course of the claim. Within the ostensible scope of that issue, the Claimant has conceded that he cannot recover the costs which he had to pay to the Second and Third Defendants as a result of the discontinuance but the remaining question is whether he can nonetheless recover from the First Defendant his own costs of pursuing those two other defendants.
2. The parties have I understand agreed that if I am against the Claimant on this issue then the Claimant will not be entitled to recover his costs to the extent to which they exclusively relate to the claims against the Second and Third Defendants, that unitary indivisible items (the example of a medical report was given) would in principle be allowable in full subject to the usual criteria of reasonableness and proportionality, and single but divisible items would be allowable save to the extent to which they relate only to the claims against the Second and Third Defendants. On the other hand if I am against the First Defendant on this issue the agreed approach is that costs would be allowed in principle irrespective of whether (or the extent to which) they relate to the second or third defendants, but subject to scope for argument in any given instance as to whether it was reasonable or proportionate to incur any given item against any given defendant.
3. This personal injury claim arose out of an accident on 15 May 2001 aboard a ship (the Asso Ventidue) where the Claimant worked as Chief Officer. A claim was issued against the three defendants naming them all jointly and severally, on the basis that it was unclear which of them were liable. The First Defendant was sued as an apparent owner of the ship as reported by the shipping agency, the Second Defendant was understood to be the Claimant's employer and the Third Defendant was also understood to be an owner of the ship (as reported by the claimant himself). I will henceforth refer to the parties as C, D1, D2, and D3 in this judgment.
4. On 29 April 2005 proceedings were discontinued against D3 after it was ascertained that D3 was an agent. On 16 July 2006 the claim was discontinued against D2. No orders were sought or made under CPR 38.6(1) at the time to alter the normal effect of that rule (what is its normal effect is something considered in this judgment).
5. Thereafter the matter was settled in May 2007 on the basis of a consent order dated 22 May 2007 with a clause relating to the Claimant's costs which has given rise to this dispute: "The First Defendants do pay the Claimant's costs of the claim on the standard basis such costs to be subject to detailed assessment if not agreed." The order also included a stay of "this claim" on terms, in the paragraph preceding the costs provision. The order was headed to refer to C and D1 but did not set out the names of D2 and D3 in the title.
6. The preliminary issue to which the parties have been unable to agree an answer is whether the costs order of May 2007 enables C to recover from D1 his own costs of the claims which he brought against D2 and D3 prior to the discontinuance of those claims. The parties (that is C and D1) were represented by counsel whose submissions were most helpful.

Defendant's arguments

7. Mr Arney for D1 argued that a consent order is to be construed as with any other contract. There was no dispute between the parties that such was the case. I was referred in passing by both parties to Newall v Lewis [2008] EWHC 910 to the effect that a consent order for costs was to be construed as any other contract and, as one would expect, the leading case of Investors Compensation Scheme v West Bromwich BC [1998] 1 WLR 896 at 912 was referred to more fully (also by both sides) for each of the points made there as to the process for the ascertainment of meaning of a contract. Mr Arney stressed that the task for the court was to construe this costs order and not to consider costs orders which might have been made but which were not made. This was as he put it a case for determining what the "ICS reasonable person" would have understood by the order, leaving out of account declarations of intent and the contents of negotiations.
8. He referred to various matters of background or factual context said to be relevant to the interpretation of this consent order. The first was that the claims against D2 and D3 had been discontinued long before the consent order was entered into. In other words, this was not a case of a discontinuance which took place as part of the settlement. There was a gap of more than 2 years between discontinuance against D3 and the settlement, and a gap of almost 1 year between discontinuance against D2 and the settlement. The automatic consequence of CPR 38.6 was that C had to pay the costs of D2 and D3.
9. My attention was drawn to features of the settlement order of May 2007 and specifically that the order (a) was headed as referring only to the Claimant and the First Defendant as parties such that the expression "the claim" would have been taken by a reasonable person to refer only to the claim against that named defendant; (b) the body of the order in para. 1 imposed a stay on Tomlin schedule terms and stated that "this claim" be stayed, and Mr Arney pointed out that the only claim capable of being stayed was the claim against D1 given that the claims against the other defendants had been discontinued some time before. There would, on that basis, have to be a different sense of the expression "the claim" in the costs provision if the Claimant's contention was to be correct and it was said that there was no indication in the order that the two uses of the word were intended to have different meanings.
10. Mr Arney referred to CPR 38.6. At subpara. 1 that rule states that "Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom he discontinued incurred on or before the date on which notice of discontinuance was served on him". The Court did not order otherwise and D1's position is that in the ordinary course of events it must follow, and would be the meaning conveyed to the notional reasonable person at the time of the consent order, that C cannot himself cannot later claim his own costs of the discontinued claims from D1 absent a special order to that effect.
11. The example was given of an interlocutory order which awarded a defendant his costs of that hearing, with a later outcome at the conclusion of the case that the claimant recovered his "costs of the claim". Absent express provision in the interlocutory costs order in that example, Mr Arney's point was that the claimant in that instance could not look to the defendant at the end of the case to pay the claimant's own costs relating to the interlocutory hearing as part of the 'costs of the claim'. The interlocutory costs of the claimant in that example did, he argued, simply fall away with the making of the interlocutory order which made no provision as to the claimant's costs. Similarly on discontinuance, the rules made no provision as to the discontinuing party's costs. He accepted that it would be open to the parties later to contract out of that result, but the position was that the consent order of May 2007 did not do so.
12. I was reminded that the courts have the power to make 'Sanderson' or 'Bullock' orders where it is decided to pass on to an unsuccessful defendant (directly or indirectly) the costs of claims against successful defendants and that there was no analogous provision in the consent order in this case. In view of the automatic consequences of the rules as to discontinuance it was argued that the onus fell on C to include some analogous provision if desired.
13. I was taken to an extract from Blackstone's Civil Practice 2008 at 66.42 on the general principles of Sanderson and Bullock orders where it is stated among other things that "If it was not reasonable to join the two [successful] defendants, costs should follow the event. In such a case the successful defendant will recover its costs from the claimant and the claimant will recover the costs of the claim against the unsuccessful defendant from the unsuccessful defendant. The unsuccessful defendant is not required to reimburse the claimant for the costs the claimant has to pay to the successful defendant". The point made was that absent a special costs order such as a Bullock or Sanderson order, the interpretation placed by the learned editors on the notion of "costs following the event" was that the unsuccessful defendant was required to pay the claimant's costs of the claim against him (but not against the other defendants).

The Claimant's argument

14. Mr Carpenter for the Claimant in his skeleton and submissions was clear there was no dispute that this was a matter of objective construction of a contract and indeed he too referred to Newall v Lewis (supra.) and the ICS case (supra.). The question was not what effect the order would have had on the minds of the parties per se but what the effect would have been on the 'ICS reasonable person'. That person was taken to know the law, and one then had to determine which facts that person should be taken to know. Lord Hoffman's second principle was referred to. The fact of discontinuance was known. The interpretation of CPR 38.6 was a matter of law.
15. It was his client's position that the plain unqualified wording of the order was apt to include the costs of the claims against D2 and D3. "Claim" used in a consent order or elsewhere could have two meanings, one broad (synonymous with the whole vehicle of the court proceedings) and one narrow meaning (a cause of action in respect of one particular defendant). Where the word was intended to be used in its narrow sense it usually was followed by a specification as to which defendant was meant. Unqualified, therefore, the word would be taken to mean the proceedings as a whole by the reasonable person. It was suggested that in effect D1 was asking me to read in to the consent order additional words which narrowed the meaning of the word "claim" so as to refer only to costs of the claim against D1. It was argued that it was D1 which was attempting to give the uses of the word "claim" in the consent order different meanings, while C was applying a uniform meaning to them, because the only possible meaning of the stay in clause 1 of the order was that the action as a whole was being stayed and not simply the claim against D1.
16. I was taken to CPR 2.3(1). That was a general interpretation section. "Claim for personal injuries" there meant proceedings in which a claim was made in respect of damages for personal injuries and it was argued that this indicated the ordinary meaning of the use of the word "claim" on its own. The CFA in this case was mentioned as a further example of common usage where the expression "your claim" was used in a broad sense.
17. Mr Carpenter said that it was in the mutual contemplation of the parties that those costs were included, the claim related to one single accident, and the context was that this was a case where D2 and D3 were joined only because of uncertainty as to the correct Defendant. D1 could have sought to exclude the cost of the claims against D2 and D3 but did not. The order was to be construed as covering all C's costs including the costs against D2 and D3 until discontinuance. It was a single claim with a single claim number.
18. Comparison was drawn and reliance placed on Lavery v Ewing, 11 May 1995 unrep., at pages 2-5 of the transcript where a plaintiff sued a doctor and a hospital. Lavery appears to be unavailable other than as a transcript, and I was told that it is also not readily available even via the usual electronic sources.
19. In Lavery the claim was compromised before Keene J. on day one of trial on terms that the plaintiff had leave to discontinue against the first defendant with no order as to costs between plaintiff and the first defendant. On day 4 of trial the rest of the claim was settled on terms that the second defendant, the hospital, would pay damages plus 'the plaintiff's costs of this action incurred against the second defendant'. The terms of settlement between the plaintiff and the first defendant found their way into the final order as a recital before the body of the order. The plaintiff, on taxation under the Rules of the Supreme Court, argued that the settlement order entitled him to all his costs of the action against both defendants and unsurprisingly failed before the District Judge. There was then a Review of Taxation before Keene J. which is the transcript to which I was referred.
20. I need not quote in full all the passages referred to but will mention Keene J's summary of the District Judge's decision as follows (p4 at F):

"… the District Judge concluded that the words in the costs order 'incurred against the second defendants' operated as words of limitation preventing the plaintiff from recovering costs in respect of work done which related to the claim against the first defendant. […] The District Judge … concluded that 'The plaintiff is only entitled to the costs of pursuing the claim against the second defendant and not of pursuing the claim against the first defendant."

21. Mr Carpenter argued that this case was on all fours with what he termed the mirror image of Lavery. Given that the outcome in Lavery was the exclusion of costs of the claim against the doctor where the order expressly excluded them by way of words of limitation, the implication was that the absence of such an express exclusion – as in the order in this case – would have led to the converse result. Moreover he argued that the position in this case is all the stronger because the claims in Lavery arose from separate causes of action whereas in this case the three defendants were sued in respect of one cause of action.
22. Mr Carpenter further argued that the fact that CPR 38.6 had made his client liable to pay D2 and D3's costs was not relevant. There was he accepted an automatic costs order against his client in respect of both of those discontinued claims but that automatic orders made no provision as to C's own costs and only dealt with matters as between C and D2 and D3. The starting point was the fact that D1 agreed to pay C's costs of the claim. There was only one claim, which was brought against all three defendants. Hence C's "costs of the claim" were the costs against those defendants, and there was nothing in the order which qualified that in any way.
23. In terms of the impact of the factual background on the reasonable person's understanding of the order it was said that the background supported a view that the proper understanding was that proposed by the Claimant. The claim had been brought against all three defendants only because the proper defendant was uncertain, D1 had ample opportunity to take steps to make matters clear (though it was stressed before me that I was not being asked at this point to take into account D1's conduct in that regard). It was a case where the Claim might have proceeded against some or all of the Defendants. The 'reasonable man' would be taken to know that the other defendants had been let out of the action earlier and that costs would have been incurred in pursuing those defendants, that those defendants were only involved at all because of difficulty in identifying the correct defendant. The reasonable man would know that C took steps to ascertain from D1 that it was the correct defendant but that was not forthcoming.
24. It was argued that albeit C did not seek a Sanderson or Bullock order in respect of the costs which he was liable to pay D2 and D3, that fact did not interfere with the point that C should be entitled to recover his own costs of those discontinued claims.
25. It was not the case that where an order directed a party to pay another's costs, and was silent otherwise, it necessarily always followed that the paying party's costs under that order were to be treated as being subject to "no order for costs". To that end I was referred to Daejan Investments Ltd v The Park West Club Ltd [2003] EWHC 2872 (TCC) at paras. 20 and 21 and to Charles Church Developments Ltd v Stent Foundations Ltd [2007] EWHC 855 (TCC) at para. 49 onwards. It was said that orders were deliberately made in those cases where separate provision was made for the parties' costs. In Daejean the judge made an order that there be permission to Daejean to amend, and it was expressly ordered to pay the defendant's costs; there was also an express order that Daejean should pay its own costs as well. In Charles Church, Stent recovered 50% of its costs incurred over a defined period of time to be paid by Charles Church and there was a separate provision in the order (at para. 55 of judgment) whereby Charles Church was ordered to pay 50% of its own costs in that period in any event.

D1's responses to C's arguments

26. Mr Arney argued that the two cases Daejean and Charles Church dealt with interlocutory matters whereas CPR 38.6 dealt with the termination of claims against D2 and D3. The two cases concerned orders which were made against a 'blank canvas' where the court was deciding what order to make in the circumstances, considering all the arguments, whereas in this case CPR 38.6 had already had its effect (with no alternative order made at the time) by the time the consent order of May 2007 was made. CPR 38.6 had already been triggered was part of the context. He accepted that at the time of discontinuance the court had wide powers to depart from the consequences of CPR 38.6 but those powers had not been exercised.
27. He urged me to reject the suggestion by C that the fact that the claims had been discontinued against D2 and D3 was not relevant, because the ICS approach required the court to take into account all the relevant background subject to the exceptions mentioned in that case.
28. Lavery v Ewing was he said a case which was distinguishable as being a case where the costs of all defendants were effectively being dealt with in the one costs order whereas in this case the claims against D2 and D3 were discontinued long before the consent order. Moreover Lavery was a pre-CPR case. The Claimant's argument that D1 could have sought to positively exclude the costs relating to D2 and D3 in the consent order did not therefore assist. The eventual settlement order in this case made no reference to the claims against D2 and D3.
29. During the hearing in response to points raised with the parties by myself I was taken also to CPR 44.12(1) which states that where a right to costs arises under rule 38.6 "a costs order will be deemed to have been made on the standard basis."

My decision

30. In my judgment the Claimant is not entitled to recover his own costs of his claims against D2 and D3. The starting point is the rules which applied at the times of the two discontinuances. Upon each discontinuance, CPR 38.6(1) applied thus:

"38.6 (1) Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant."

31. That goes no further than to establish that C was liable for D2 and D3's costs but matters do not stop there because the manner in which that liability is given effect is, specifically, by a deemed costs order. CPR 44.12 states:

"44.12 (1) Where a right to costs arises under –

[...] (d) rule 38.6 (defendant's right to costs where claimant discontinues), a costs order will be deemed to have been made on the standard basis."

32. Under the CPR in my judgment an order for (say) "Second Defendant's costs" (as was in effect the deemed costs order upon discontinuance against D2) implies no order for the Claimant's costs for the part of the proceedings to which the order relates (the claim against D2, in this example).
33. It seems to me that the decision by those drafting the CPR to make an express provision that a deemed costs order arises upon discontinuance, for payment of the relevant defendant's costs brings with it the implication that the usual interpretation of costs orders is also applied. The court can order otherwise, as provided by CPR 38.6(1) but the court did not so order in this case and was not asked to do so at the time C discontinued. It follows that the deemed costs order is silent as to C's costs of his claim against D2 and D3 and the implication I draw from that is that C's claims against D2 and D3's ended with no order for C's costs of those claims.
34. The parties can contract out of costs provisions after the event, for the sake of settlement such as by expressly agreeing that certain costs will be paid by a party which would not otherwise be payable. I must therefore go on to consider whether applying the ICS v West Bromwich approach, the reasonable person equipped with all the background knowledge reasonably available to the parties at the later time of the consent order would have understood it to include C's costs of the discontinued claims. In other words I ask myself whether the contract on its true construction reversed what I have concluded was the legal effect of the CPR provisions which had come into play at the times of the discontinuances.
35. In my judgment the fact that the claims against D2 and D3 had been discontinued a significant time beforehand is a pointer to the likely position that the expressions "the claim" and "this claim" in the consent order would be understood, by the reasonable person knowing all the relevant facts, as referring to the only 'live' claim which was that subsisting against D1 as at date of settlement.
36. I therefore accept Mr Arney's argument that where the consent order refers to the 'claim' it would reasonably be understood at the time as referring to the claim which was being stayed and that could only be the claim against D1. I am not however persuaded that the mere fact that the title to the consent order mentioned only the claim against D1 would be sufficient for D1's case since it was in my view more likely an error in drafting given that the title to the action ought to have reflected at least the historic position as to the parties whose details would have formed part of the court record irrespective of the discontinuance.
37. I do not accept that Lavery determines the point in issue here. It is a decision made on a Review of Taxation under the Rules of the Supreme Court, and I note that the decision of the District Judge as to the interpretation of the order itself as a matter of principle (rather that its effects on the detailed items in the bill) was not in issue before Keene J. See p. 7 of the judgment, at B, and p11 at F, which reflect counsel's acceptance of the District Judge's decision on that aspect.
38. Under the Rules of the Supreme Court, silence in a costs order was treated as an order implying that those costs would follow the ultimate event (ie 'costs in the case'). If one contrasts that with the position under the CPR, one sees the reversal of that principle. There was every reason in Lavery for the Second Defendant's lawyers to take care to negotiate words of limitation in the eventual costs order given that nothing had been said in the agreement for discontinuance against the first Defendant which had expressly excluded the possibility of the Plaintiff attempting to treat its costs against the first Defendant as remaining 'costs in the case'. In fact the Plaintiff before the District Judge did try to argue for recovery of all his costs even given the presence of words of limitation.
39. I also accept Mr Arney's point that the settlement in Lavery was reached in factual circumstances such that one would expect that the need to deal with all aspects of the costs of all the claims being concluded in the order was uppermost in the minds of all the parties (the agreements were reached during the course of one trial albeit on separate days). In this case the factual context was that the claims against D2 and D3 had been discontinued – with no special costs provision under CPR 38.6 to depart from the usual consequences – one or two years before the settlement with D1. The claim being settled was the claim against D1 and costs thereof.
40. I am not satisfied that Daejean or Charles Church take matters any further. Daejean is a straightforward case where a court directed the claimant to pay the defendant's costs and made an express order that the claimant must pay its own costs at an interlocutory hearing. The court could have left the latter aspect (claimant's costs) unstated and still achieved the same result but the question of what costs order to make had been the subject of argument and the court had rejected the notion that costs should be reserved, so that an express order to the contrary is not surprising. Charles Church resulted in an interlocutory order that the first Defendant be paid 50% of its costs incurred during a defined period and that the Claimant must pay 50% of its own costs in that period in any event. It is not clear from the judgment what the eventual form of the order was. It appears that the implication of the decision was that the order when drawn was to ensure that the remaining costs were still at large, since to provide otherwise would have departed from the judge's decision that the claimant had to pay only 50% of its own costs in any event rather than all its own costs.
41. Albeit that I do not base my decision on the following point, the extract from Blackstone's Civil Practice to which I was taken and the arguments as to Bullock and Sanderson orders suggest that an order for costs to follow the event– absent a Bullock or Sanderson order in that situation- would imply that a Claimant could not normally recover his costs of unsuccessful claims against other defendants from an unsuccessful defendant, and my decision here has the advantage of being broadly consistent with that approach.
42. I am accordingly satisfied that:

(a) the effect of CPR 38.6, absent provision to the contrary either in an order at time of discontinuance or agreement later, was that C's claims against D2 and D3 were concluded at different times a year or so apart with deemed costs orders against C for those Defendants' costs, with silence as to C's own costs of those claims; and that

(b) the consent order of May 2007 did not alter that position.

43. Even if I am wrong and the operation of CPR 38.6 was not as I have decided, I am satisfied that the wording of the settlement order in May 2007 was sufficient to ensure that the costs agreed as payable by D1 were contractually restricted to the costs referable to the claim only between C and D1 which was the only 'live' claim at that stage.
44. It is unfortunate that CPR 38.6 (when read with CPR 44.12) does not spell out precisely the terms of the deemed costs order to which it refers save to provide that the claimant must pay the costs of the defendant against whom he discontinues. The rule does not deal comprehensively with multiple defendant cases, and questions such as that asked in this case may arise. I note that in CPR Part 36 (which is another part of the CPR which can give rise to deemed costs orders) there are specific provisions in r. 36.12 dealing with joint and several defendants.
45. The consequence of my decision in this case is that where a claimant discontinues against one of a number of defendants under CPR Part 38, consideration may need to be given by the claimant as to whether an application needs to be made for a more specific costs order unless it is intended that the claimant will pay its own costs referable to the discontinued claim or claims.
46. The First Defendant accordingly succeeds. I hope that the parties can agree an order arising from this judgment and invite counsel to draft the appropriate order with consequential proposed directions. I will hear any argument which is necessary at handing down unless matters are agreed in which case attendance will not be necessary.

Deputy Master Victoria Williams, Costs Judge