England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Clifford's Inn, Fetter Lane London, EC4A 1DQ
		20/12/2007

See also: [2008] EWHC 90098 (Costs)

MR JUSTICE CHRISTOPHER CLARKE:

1. This is an appeal from a decision of 31^st May 2007 of Master Haworth, the costs judge, on a preliminary issue in relation to the assessment of costs. Master Haworth granted permission to appeal on the grounds that the appeal raised a novel point on the interpretation of the CPR in relation to the commencement of a detailed assessment. The costs in question were awarded to two successful appellants to the Court of Appeal. The first appellant, Carl Harris ("Mr Harris"), was at all relevant times the partner of the second appellant, Susan Hartless ("Ms Hartless"). The second appellant is an assured tenant of property belonging to the respondent, Moat Housing Group-South Ltd ("Moat House"). I sat for the hearing of the appeal with two assessors – Master O'Hare and Mr Simon Kenny. I was greatly assisted by the discovery by Master O'Hare of an order of the Court of Appeal, numbered 2005/0038, to which reference had not previously been made, and by the contribution of both assessors to the exchanges with counsel in the course of the argument.

The history

2. On 29^th October 2004 Moat House sought and obtained from a district judge in the Aldershot & Farnham County Court a without notice Anti-Social Behaviour Injunction ('ASBI') against both appellants, and others, pursuant to the provisions of the Housing Act 1996. The order provided, inter alia, for the appellants and their four children, of whom Mr Harris is the father, to be evicted from the property and from a substantial part of Liphook by 6.00 pm. That order, in so far as it excluded the appellants from the property and from part of Liphook, was stayed by Burnton J at about 1.50 a.m. on 30^th October.
3. On 3^rd December 2004 Moat House obtained a possession order against the second appellant and an Anti-Social Behaviour Order ('ASBO') against both appellants in the Southampton County Court. The possession order was an immediate one. At this stage both appellants were represented by R J Hawksley & Co. ('RJH').
4. The appellants appealed the orders made in the possession proceedings, permission to appeal having been granted by Lord Justice Brooke on 16^th December 2004. I call this "the possession appeal". Although the ASBI was in effect spent, on 17^th December 2004 the Court of Appeal indicated a willingness to hear a leap frog appeal out of time against it, so that the exercise of the Court's jurisdiction under the 1996 Act on without notice applications could be examined. On 30^th December 2004 the district judge who had granted the injunction of 29^th October 2004 granted Ms Hartless permission to appeal out of time and directed that the appeal should be heard by the Court of Appeal. I call this "the injunction appeal". The notice of appeal was issued on 10^th January 2005.
5. On 24^th December 2004, the second appellant, having obtained legal aid, instructed South West Law ('SWL'). On the same date the first appellant entered into a conditional fee agreement with RJH. He later entered into a further such agreement with Counsel. On 20^th January 2005 both the injunction and the possession appeal came before the Court of Appeal. The Court decided to hear argument on the injunction appeal first and judgment was reserved. On 10^th February 2005 the first appellant became entitled to LSC funding and instructed SWL. On 21^st February 2005 notice of the issue of a certificate was given to Dutton Gregory, Moat Housing's solicitors.
6. The possession appeal was heard on 23^rd February. Both appellants were represented by the same Leading Counsel but had separate Junior Counsel. Judgment was given by the Court of Appeal in respect of both appeals on 16^th March 2005. The possession order of 3^rd December 2004 was varied so as to become a postponed order. The ASBO was discharged and an ASBI was substituted. The order of 29^th October 2004 was declared to have been wrongly made insofar as it contained the exclusion provisions to which I have referred.
7. As is apparent from the above summary the appellants have been represented by different firms at different times. At the time of the stay granted by Burnton J on 30^th October and up to 24^th December 2004 they were both represented by RJH. From 24^th December 2004 to 10^th February 2005 the first appellant, Mr Harris, was represented by RJH and the second appellant, Ms Hartless, was represented by SWL. This was the position at the time of the hearing of the injunction appeal on 20^th January 2005. By the time that the possession appeal, which also involved the ASBO, came to be heard, both appellants were represented by SWL.
8. Three orders were drawn up to reflect the decision of the Court of Appeal. The order in the possession appeal, numbered 2004/2666, described both Mr Harris and Ms Hartless as first and second appellant respectively. That order provided that the Respondent should pay the appellant's costs "of this appeal and that there shall otherwise be no order for the costs of these proceedings in the courts below". In relation to the injunction appeal, for reasons which are not clear, two orders were drawn up. In the first, numbered 2005/0038, Mr Harris is the only appellant referred to. The order declares that the injunction order granted by the District Judge on 29^th October 2004 was wrongly made to the extent that it contained provisions requiring the appellant to leave the property and excluding him from an area in Liphook from 6 pm that evening and a power of arrest was attached. The respondent was ordered to pay the appellant's cost of the application for a stay made to Burnton J on 29^th/30^th October and of the appeal. The second order, numbered 2005/0042, referred only to Ms Hartless as the appellant and was in identical terms to order 2005/0038 (with the substitution of "her" for "him") save that it included an order for a CLSF assessment of her costs incurred since the grant of her certificate for legal representation in the appeal.

The notices of commencement of assessment of bills of costs and the bills

9. On 14^th June 2005, SWL sent to Dutton Gregory two notices of commencement of assessment of bill of costs, one in respect of the possession appeal, where the costs claimed amounted to £ 45,734.76, and the other in respect of the injunction appeal where the amount claimed was £ 26,898.58. The notice in relation to the injunction appeal named Ms Hartless as defendant. The title of the bill referred to her as the appellant and made no reference to Mr Harris. The notice in relation to the possession appeal named both Mr Harris and Ms Hartless as defendants. The title of the bill referred to Mr Harris as first and Ms Hartless as second appellant. Each notice was accompanied by a bill of costs. The possession appeal bill related to order 2004/2666. The injunction appeal bill related to order 2005/0042.Neither bill referred to order 2005/0038. In the covering letter SWL described the bills as the "Appellants' Bills of Costs".
10. The notices were in standard form including the words

"Following an order dated 16^th March 2005… I have prepared my bill of costs for assessment. The Bill totals [£ 45,734.76] [£ 26,898.59]. "

The notices go on to state "You must serve your points of dispute by 5 July 2005 on me South West Law .." They were signed by the solicitor who had acted at SWL. The narrative part of the bills sets out the whole history of the matter. In respect of certain items there was an apportionment as between each bill, and this was noted in the bills. There was, however, no reference (either in the bills or in Counsel's fee notes) to any other form of apportionment e.g. as between solicitors.

11. A certificate as to completeness, signed by SWL, was included in the bills

in the following terms:

"I certify that this bill is both accurate and complete and that in relation to each and every item included in the bill of costs claimed do not exceed the costs which the receiving party/parties is/are required to pay me/my firm".

12. The respondent submitted Points of Dispute on 5^th July.

The agreement

13. Negotiations ensued between Dutton Gregory and SWL. On 26^th July 2005 SWL wrote to say:

"We have considered your Points of Defence. We are writing to indicate the sums which we would be prepared to accept in settlement of Costs Order (sic) of the two proceedings"

The letter then stated what they were prepared to accept in relation to the possession and the injunction proceedings. On 29^th July Dutton Gregory replied indicating that they were minded to suggest that a "global sum of £ 37,500 plus VAT in respect of both bills may be more appropriate" inclusive of interest.

14. After an intervening letter and conversations Dutton Gregory wrote on 8^th August 2005:

"We refer to our recent telephone conversations, when agreement was reached on the bills of costs in relation to the Court of Appeal hearing"

The sum agreed was £39,298.00 + VAT plus £ 2,000 not subject to VAT for Counsel's fees. On 9^th August 2005 SWL sent their invoice in that amount.

15. At no stage in the correspondence was there any reference to another bill of costs being due to come from RJH. It appears from the witness statement of Ms Hawksley of RJH that RJH and SWL had agreed that there would be two separate bills, one from SWL and the other from RJH. Each of SWL and RJH knew, therefore, that RJH's costs had not been, and were not to be, included within the SWL Bills. Dutton Gregory was not told of this agreement.

The disputed notice and bill

16. On 19^th August 2005 RJH purported to serve a further notice of commencement and bill of costs on behalf of both appellants in the total sum of £53,127.48. The notice and the bill are described as relating to order 2004/2666 i.e. the possession appeal. The notice refers to both appellants as does the bill. The costs claimed in the bill are divided into three parts.
17. Part 1 sets out the costs of both appellants in respect of the application to Burnton J for a stay. Any entitlement to those costs does not derive from order 2004/2666 but from orders 0038 and 0042. The bill tendered by SWL in respect of order 0042 referred to the stay application but did not include any item in respect of that stay.
18. Part 2 deals with the cost of "the appeal" for both appellants between 4th December 2004 and 22^nd December 2004 i.e. the time when RJH was acting for both of them. Any entitlement to those costs derives either exclusively or predominantly from order 2004/2666. It is not clear to me whether any portion of the amount claimed relates to the injunction appeal, which was only suggested by the Court of Appeal on 17^th December. If it does, the amount would be very small and any entitlement would derive from the other two orders.
19. Part 3 relates to the first appellant, Mr Harris' costs from 5^th January 2005 until 14^th February 2005 during which time RJH was acting for him and SWL was not. Any entitlement to those costs derives from either order 2004/2666 or order 2005/0038. Since the injunction appeal was heard on 20^th January 2005 and the possession appeal stood over, a major proportion of these costs are likely to be attributable to the injunction appeal.
20. On 12^th September 2005 the respondent filed Points of Defence, amended on 12^th October 2005, which were responsive to the bill served on 19^th August. In the first entry the respondent contended that "on or about 9^th August 2005 the parties agreed the costs in the sum of £ 48, 175.00 inclusive of VAT. It is not now possible for the Appellants to serve a further Notice of Commencement and all further Points of Dispute are without prejudice to this primary contention. The Respondent will seek an order striking out the Notice of Commencement on the grounds that it is an abuse of process".
21. On 6^th October 2005 SWL wrote to Dutton Gregory in the following terms:

"We write following your letter of 8 August 2005. We understand that the delay in settlement of our costs has been caused by your client's concerns as to whether Counsel and the other firm of solicitors engaged in this case have put in claims which duplicate the work which agreement has been reached in respect of. We are not prepared to leave this matter unresolved the way it is. It is our view that settlement has been reached in relation to our claim for costs under the respective court orders. That compromise is binding on your clients. We look forward to your comments and a cheque for the sum agreed as evidenced by your letter dated 8 August 2005"

22. On a date after 31^st October Dutton Gregory sent SWL a copy of RJH's bill of costs and confirmed that they had written to Ms Hawksley of RJH for her urgent replies to the respondents' Points of Defence. On 22^nd November 2004 SWL wrote to say that they were not prepared to wait further for payment, and that they believed that there had been a binding compromise arrived at. On 8^th December 2005 the Respondent paid SWL £ 48,175.15 in respect of its invoice in that sum of 9^th August.

Master Haworth's ruling

23. Master Haworth referred to the provisions of CPR 47.6. which states:

"Commencement of detailed assessment proceedings

47.6 (1) Detailed assessment proceedings are commenced by the receiving party serving on the paying party – (a) notice of commencement in the relevant practice form; and (b) a copy of the bill of costs".

and to the provisions of the Costs Practice Direction which states at para 4.22:

"Where the receiving party was represented by different solicitors during the course of the proceedings the bill should be divided into different parts so as to distinguish between the costs payable in respect of each solicitor.

He also referred to Cost Precedent F which indicates that:

"All certificates must be signed by the receiving party or by his solicitors. Where the bill claims costs in respect of work done by more than one firm of solicitors, Certificate 1, appropriately completed, should be signed on behalf of each firm."

Certificate 1 includes a certificate that the bill is both accurate and complete and that the costs do not exceed the costs which the receiving party is required to pay "me/my firm".

24. The Master concluded from his reading of the Rules and the Practice Direction that the way in which detailed assessment proceedings are conducted is that there is one, and only one, detailed assessment of all the costs in relation to a particular claim, for a very good reason, namely that the paying party should know the full extent of his liability in relation to costs before he can make any meaningful decision as to the amount that he intended to pay or offer.
25. Master Haworth regarded Hyman and Teff v Segalov [1952] P 241 as still good law under the CPR regime. In that case the plaintiffs in a probate action were granted their costs. Their bill included most of the costs of the action but did not include the costs of administration pendente lite in respect of which subsequent bills were lodged. Wallington J said:

" I am clearly of the opinion that the plaintiffs having submitted and obtained taxation - and incidentally payment - of their costs of action, were not entitled to tax as between party and party any further bill. It appears to me to be quite clear that a litigant in possession of a judgment against an opposite party to pay his taxed costs must lodge a bill for taxation which includes all the costs to payment of which when taxed the judgment entitles him. He is not, in my opinion, entitled to select a portion of the costs, submit that portion for taxation as his costs of the action recoverable under the judgment, and, after claiming an allocatur, make a selection of a further part of his costs and successfully apply for taxation of a bill for those further items as between party and party. Nor is he, having obtained taxation, entitled to an order to pay the amount of the allocatur".

26. He held that, if he were to accede to the receiving party's request to assess the 19^th August bill, he would be in very great difficulty since he had no way of knowing what agreement was reached between the paying party and SWL in relation to the first bill of costs in circumstances where there was evidently duplication in the bill before him. He would be presented with an extremely difficult task in trying to ascertain what costs were reasonably incurred.
27. Master Haworth rejected the submission that a party was entitled to put in different bills at different periods of time if he chose to do so and determined that the 19^th August bill of costs was flawed. The paying party was entitled to rely on the original notice of commencement which clearly indicated that SWL was acting on behalf of both defendants. It was not incumbent on the paying party to ask whether there were any more costs that were being claimed. Moat Housing, through Dutton Gregory, compromised the claim to costs presented to them by SWL on behalf of the first and the second appellants. The appellants and their legal representatives had to stand by the consequences.
28. Accordingly he dismissed RJH's request for assessment of their bill of costs pursuant to the notice of 19^th August.

The appellants' submissions

29. Mr Martyn McLeish for the appellants submits that, whilst the rules envisage that only one notice or bill will be served, there is no rule or practice direction that stipulates that that must be so. Where a claim for costs is not included in the bill a receiving party is not debarred from making an additional claim for the omitted costs before the procedure for detailed assessment commences. This follows from the fact (a) that the court is not at that stage involved in the process, and (b) that the parties are allowed to vary a bill of costs without permission even after a date has been given for detailed assessment proceedings: CPR 47 PD 40.10
30. Mr McLeish accepts that there has been a failure to comply with the requirement of the practice direction that, where two or more solicitors have been involved, the bill must be divided into two parts. The Court, he submits, has various powers by which it can sanction a receiving party e.g. CPR 3.8, 44.14, or 47.8. Failure to include a claim for another solicitor's costs should not lead to the automatic disallowance of those costs. Whether or not a detailed assessment should proceed will depend on consideration of all the facts of the case and, in particular, whether or not there has been any prejudice to the receiving party and whether such prejudice can be compensated by way of costs or some other sanction.
31. Mr McLeish further submits that there was no clear evidence that Moat House compromised the first bills of costs on the basis that they constituted the appellants' entire claim. Moat Housing and its solicitors were well aware that RJH had been instructed, and that the order for costs covered work when only RJH were on the record, notably in respect of the application for a stay, or when RJH was the solicitor for one of the parties to the appeal. The certificate to the bills showed that the bills were in respect of SWL's costs alone as was also apparent from the invoice. Moreover the letter of 6^th October with its reference to "our claim for costs under the respective Court orders" showed that SWL were seeking payment only of their costs.

The respondent's submissions

32. Mr Philip Glen for the respondent submits that the starting point must be that the costs awarded by the orders of the Court of Appeal belong to the client. It is he or she who is the receiving party. The commencement of detailed assessment proceedings is, by the rules, effected by the receiving party serving a notice of commencement and a copy of the bill. It is incumbent on the receiving party to bring forward his or her whole case at once and to divide the bill into parts if there has been more than one solicitor. The proceedings that are begun by the notice can be concluded by an order following assessment, or by agreement. In either case there can be no further assessment. Segalov establishes that that is so where the Court has taxed costs under the old rules. The position can be no different in the case of an assessment under the CPR or if the proceedings are resolved by agreement. In any event it is apparent from the correspondence that there has been a compromise of the appellants' claim for costs.

Conclusion

33. The rules clearly provide that detailed assessment proceedings are commenced by the receiving party serving both a notice of commencement and the (not a) bill of costs. The bill is the receiving party's statement of what he claims is due to him pursuant to whatever order entitles him to costs. If the receiving party is entitled to recover his costs of instructing more than one solicitor the practice direction requires him to include the costs of each solicitor separately in the bill. If he fails to include the costs of his previous solicitor, and the costs judge completes his assessment of the costs without regard to the previous solicitor's costs and proceeds to a final certificate, the receiving party cannot claim a further assessment. The detailed assessment proceedings have been completed and an amount ordered to be paid. The receiving party cannot start again. The Civil Procedure Rules have introduced significant changes in relation to costs, both as to substance and nomenclature, but there is nothing in them which, in my judgment, qualifies the position as stated in Segalov. On the contrary the rules and the Costs Practice Direction are consistent with the approach taken in that case.
34. Segalov was not a case in which there was any agreement as to costs. If there is an agreement as to the costs payable, the critical question is: what has been agreed? If in the present case, the appellants had, either in their notice or in the bills or otherwise, made clear that the amount claimed was only part of their claim to costs and that they would be claiming later in respect of the work of RJH; and the agreement was that the respondents would pay a sum in respect of the costs claimed, recognising that the costs in respect of RJH were still to be dealt with, the appellants would not, in my judgment, be prevented from making a claim in respect of those costs. There would have been a failure to comply with the practice direction. But, subject to any sanction that the court thought fit to impose, there would be no reason in principle why the Court should not assess the remaining costs in dispute. The bills of costs already submitted could be amended.
35. If, on the other hand, what has been settled was the amount of the receiving party's costs pursuant to a particular order or orders, the position would be different. If the receiving party has left out of his bill part of what he should have claimed and there has been a settlement of the bill, he cannot recover more than the amount agreed. The omission is his misfortune.
36. On which side of the line does the present case fall? In my judgment it falls within the latter category. The notices of 14^th June 2005 were notices of the commencement of assessment of the bills of costs of both appellants in respect of the possession appeal and of the second appellant, in respect of the injunction appeal. The bills were those specified in the notices and accompanied them. By their letter of 26^th July 2005 SWL, the solicitors on the record for both appellants, indicated the sums which they would be prepared to accept in settlement of the respondent's liability under two costs orders made in the possession and injunction proceedings. In their letter of 1^st August 2005 SWL said that they had spent considerable time considering the elements of the two bills "comprising the claims for costs in these actions". The letter of 8^th August 2005 records agreement as to the "bills of costs in relation to the Court of Appeal hearing".
37. It is true that the respondents, or at any rate their solicitors, knew that the appellants had incurred a costs liability to RJH in respect of work carried out when RJH were either the solicitors for both or for one of them; and that the bills submitted did not include claims in respect of work done by RJH. That does not, however, as it seems to me, affect the nature of the agreement made on or about 8^th August 2005. Nor is the position affected by the fact that the bills certified that the costs claimed did not exceed the costs which the receiving party was required to pay SWL. That statement, required in order to ensure that there is no breach of the indemnity principle, does not alter the nature of what was agreed which was that the respondents would pay a certain sum in respect of the appellants' costs as ordered by the Court.
38. Reliance was placed on SWL's observation in their letter of 6th October 2005 that "settlement had been reached in relation to our claim for costs under the respective court orders". I do not regard that as affecting the matter either. The settlement was indeed of the claim made, which was a claim by the appellants for the amounts due under the respective orders.
39. Mr McLeish submitted that, if what I have decided is correct, then the agreement could be avoided for mistake. I disagree. On the assumption that there was a mistake as to the terms of what was being agreed, it was not common; and it is not shown that the respondent knew, or that any reasonable person in its position would have known that the appellants were under such a mistake, or that the respondent has acted in such a way as to render it inequitable for it to rely on the agreement made. That is particularly so in the light of the fact that the agreement did not deal with Order 2005/0038.

Order 2005/0038

40. Neither the notices, nor the bills, nor the correspondence contain any reference to order 2005/0038. No notice of commencement has ever been served pursuant to that order, and no bill has been prepared which purports to be a bill relating to it. In those circumstances the agreement cannot be regarded as compromising any liability of the respondent in respect of the costs awarded to Mr Harris under that order. Mr Harris is not precluded by what was agreed in August 2005 from issuing a notice to commence assessment in respect of that order, which constitutes a separate source of entitlement to costs.
41. Although the notice and bill of 19^th August do not refer to order 2005/0038, the bill includes items which are covered by order 2005/0038. The upshot of Master Haworth's decision was that he dismissed RJH's request for their bill of 19^th August to be assessed. In my judgment he was right to do so because that was a request to assess costs due under a different order.
42. I have considered whether the appropriate course is to vary Master Haworth's order by giving the first appellant permission to amend (a) the notice so that it becomes a notice pursuant to order 2005/0038 and refers only to the first appellant, and (b) the bill so that it includes, and includes only, a claim to costs to which he is said to be entitled under that order. I do not propose to take that course. The respondent has satisfied me that, because of the agreement, it is not open to the two appellants to proceed, as they sought to do, to a second assessment pursuant to order 2004/2666. The prospect of the first appellant being able to recover costs under 2005/0038 arose because Master O'Hare obtained and produced that order from the office file and I suggested that it might be a source of entitlement. If the first appellant seeks to recover costs on the footing of that order he must, in my judgment, serve a new notice pursuant to that order and a bill of costs which comprises only costs said to be recoverable under that order. I propose, therefore, simply to dismiss the appeal.

Postscripts

43. The result of my so doing is that the appellants will be unable to recover from the respondent an appreciable amount of costs that they might otherwise have received. I have considered whether that result is such as to demand a different conclusion. In my judgment it is not. Where there has been more than one solicitor, the absence from the bill of one solicitor's costs, if not picked up by the solicitor who has conduct of the assessment proceedings, is likely to be picked up by the costs judge himself. The appellants' problems in this case arise because RJH had no undertaking from, nor agreement with, SWL to include their costs in SWL's bill. On the contrary SWL and RJH, either oblivious or heedless of the provisions of the practice direction, made a deliberate decision not to include anything in SWL's bills in respect of RJH's costs, but did not inform Dutton Gregory that there would be a second bill in respect of those costs. SWL then agreed a figure for the two bills that had been submitted. This is, or ought to be, an unusual set of circumstances.
44. Master Haworth was influenced by the difficulty that would arise in deciding what costs were reasonably incurred, if there was a duplication of costs as between a first (compromised) bill and a subsequent one, since, in the event of a settlement which simply reduced the total by a particular amount, it would not be possible to know at what figure any particular item had settled. Whilst there may be difficulties, it appeared to me during the course of the argument that they might not be as great as at first sight appeared, and could probably be addressed either by the costs judge focusing on what was a reasonable sum for the item claimed, having regard to what items had been claimed in the compromised bill, or by treating each item in the compromised bill as having been reduced by the percentage by which the total was reduced and, in any event, resolving any doubt in favour of the paying party. Whether that is so or not, I prefer to reach my conclusion on the grounds set out above rather than on the difficulties that might be produced had I reached a different one.