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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		QB 2012/0033 Royal Courts of Justice Strand, London, WC2A 2LL
		18/05/2012

Mr Justice Tugendhat :

1. The Claimant applies for permission to appeal from the order of HH Judge Birtles ("the Judge") dated 27 May 2011. He makes this application orally, pursuant to the order of Eady J dated 31 January 2012. The Judge had given the Claimant permission to discontinue the claim pursuant to CPR r 38.2(2)(a)(ii). There is no issue about that part of his order. But the Judge declined to make an order pursuant to CPR r. 38.6(1) that the Claimant be not liable for all the costs of the Defendant upon such discontinuance. The Judge also made an order that: "The Claimant is to file his notice of discontinuance by 4 pm on 6 June 2011". He further ordered that the Claimant was to be liable for all the costs incurred by the Defendant in the action on or before 17 February to the extent that the liability for such costs had not been determined by any previous order (that being a reference to costs in respect of three hearings which had been reserved).
2. CPR r 38.6(1) provides that:

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

In this case permission was sought pursuant to CPR r 38.2(2) because an undertaking had been given to the Court of Appeal.

3. The parties agree that the law was correctly stated by HHJ Waksman QC in Teasdale v HSBC Plc [2010] EWHC 612 (QB); [2010] 4 Costs 4543 at para 7 as follows:

"1. When a party discontinues there is a presumption by reason of CPR 38.6 that the defendant will get his costs. The burden is firmly upon the claimant to show there is good reason to disapply it; see the judgment of Chadwick LJ in Walker v. Wingsale Systems Plc [2006] 1 WLR 2194 at paras [24] and [36]…

2. The fact that the claimant would have or might well have succeeded at trial (a point sometimes advanced by a discontinuing claimant) is not itself a good reason. This is because the claimant has, by discontinuing, chosen not to have a trial by which the claim could be determined. Once there is to be no trial, it is not the function of the court to attempt to decide whether or not the claim would have succeeded see Walker para [12];…

5. In most cases, in order to show good reason, the claimant will need first to show a change of circumstances since the claim was made. This will demonstrate at least that there is something more than a simple re-evaluation… But even if circumstances have changed since the commencement of the claim, if they result from the very fact of the claim, for example the defendant has run out of money because he has spent it all on defending it, the claimant cannot invoke that. It may be different where the claimant has rendered the defendant's claim worthless because of something he has done on his own initiative, for example embarking on some other successful proceedings which led to his own bankruptcy. See Walker para [39]…

6. In truth it is difficult to see how any change of circumstances could amount to good reason unless it is connected with some conduct on the part of the defendant which deserves to sound in costs against him. Thus para [11] of Maini (2009) EWHC 3036 (Ch) refers to active misconduct. And at p 541 of RTZ Pension Property Trust v ARC Property Developments [1999] 1 All ER 532 Potter LJ refers by way of example to the case of a defendant 'who perversely encourages a plaintiff into action' by concealing the existence of a defence although reasonably invited prior to proceedings to make disclosure. Another example is the unnecessarily aggressive approach and totally unreasonable and unjustified stance taken by the defendant in relation to negotiations before discontinuance, as found by Lightman J in para [53] of RBG [Resources Plc v Rastogi [2005] EWHC 994 (Ch)]…;

7. And even if there has been some conduct by a defendant which has caused a change of circumstances this should not have an adverse impact against him if, having regard to all the circumstances, it does not amount to a good reason to disapply the presumption; so a change of circumstances is simply the beginning of the enquiry not the end of it;

8. Thus the context for the court's mandatory consideration of all the circumstances under CPR 44.3 is the determination of whether there is a good reason to depart from the presumption imposed by CPR 38.6".

4. The main basis upon which the Claimant sought the order he did was that he maintained that the Defendant by his solicitor had represented that the solicitor was working for the Defendant on a "highly favourable and concessionary basis" as regards costs, and that the Claimant had acted in reliance on that representation in a number of ways. He contended that it was never said to him that the Defendant or his solicitors had any other arrangement, and if the Claimant had not been misled he would have discontinued at an earlier stage, with a correspondingly low liability in respect of the Defendant's costs. However, his evidence as to the representation described it as being in vague terms. He does not claim to have been told what the "concessionary basis" was.
5. The Claimant referred the Judge to the Costs Practice Direction, Section 6 Estimates of Costs, which provides, amongst other matters, at para 6.6 that on an assessment of the costs of a party, the court may have regard to any estimate previously filed by that party in the same proceedings. He also refers to Leigh v Mitchelin Tyre Plc [2003] EWCA Civ 176; [2004] 1 Costs LR 148, which is summarised in the White Book 2012 at 43.2.2.
6. By way of an example the Claimant cited Tribe v Southdown Gliding Club Limited [2007] EWHC 900080 (Costs). In that case the claimant had discontinued the proceedings but had not made an application under CPR r 38.6(1). On the detailed assessment the Costs Judge had referred to the Costs Practice Direction para 6.6. At para 29 of his judgment the Costs Judge said that the claimant in that case did not give evidence, but that he did address the court, and the Costs Judge formed a very clear view that he was an honest, measured, careful and reasonable man who would have purchased additional insurance cover but for the fact that he relied on the estimate of costs given by the First and Third Defendants in that case in their Allocation Questionnaire. He considered the explanation given by those Defendants for the difference between the estimate and the sum then claimed, as set out in a statement made in writing. At para [37] of his judgment the Costs Judge said that in his judgment those Defendants had not given a satisfactory explanation for the difference between the estimate of £50,000 (including trial and dealing with quantum) and the sum then claimed of £244,509 (excluding trial and dealing with quantum). He held that a reasonable figure for defending the action would have been £70,000 and, because of the low estimate that was given, the claimant's reliance on it, and the absence of a satisfactory explanation of the difference, that was the most that the Defendants should be able to recover in respect of their costs (para [41]).
7. A day was set aside for the hearing before the Judge. The Claimant submitted three witness statements dated respectively 16 February and 27 September 2010 and 7 February 2011. The Defendant's solicitors submitted a witness statement dated 25 November 2010. These are lengthy statements. In addition both sides submitted skeleton arguments. At that hearing the Claimant was represented by counsel.
8. The Claimant explained the background to the dispute to the Judge as follows. The original claim related to a dispute between the parties as to the beneficial ownership of shares in a company called London Financial News Publishing Limited. The shares were purchased by the Defendant in 1995 or 1996 for £6000, of which £5,800 had been paid to him for that purpose by the Claimant. The Claimant contended that there was an understanding that all or most of the shares would be held on trust for the Claimant. The Defendant contended that the money and shares were his payment for assisting the Claimant in setting up the company.
9. On 24 February 2003 the Claimant started proceedings in the County Court. On 3 February 2004 the parties entered into an Early Neutral Evaluation Agreement by which an Evaluator was to resolve their dispute. On 24 May 2004 the Evaluator published his decision recommending that the Claimant should withdraw his claim, and concluding that the Claimant's intention was that the Defendant should become the beneficial owner of the £5,800 and the shares purchased with this money. The Claimant did not accept the Evaluator's evaluation and did not withdraw his claim.
10. In April 2005 the claim was listed for trial on 29 and 30 June 2005. On 31 May 2005 the Claimant made a request for specific disclosure and further information. On 14 June 2005 the Defendant made an application to strike out the claim or for summary judgment. The Claimant's applications for further information and the Defendant's application to strike out or for summary judgment, led to hearings before HHJ Simpson on the following occasions on each of which the costs were reserved: 17 June 2005, 23 June 2005, 6 and 7 November 2006 and 9 March 2007.
11. There was an appeal by the Defendant against the decision of HHJ Simpson on 23 March in respect of the summary judgment application. That appeal was heard by Beatson J on 21 June 2007 and he reserved the costs. The Court of Appeal granted the Claimant permission to appeal in respect of two issues. The Defendant served a Respondent's Notice in respect of two other issues.
12. On 15 January 2009 the Court of Appeal ordered that the appeal hearing be vacated and that there be determined an issue in respect of an offer made by the Defendant and whether the proceedings had been settled.
13. On 21 July 2009 the Court of Appeal handed down a judgment on the issue of the offer, with a costs order in favour of the Defendant. The Claimant's appeal to the Court of Appeal against the judgment of Beatson J was listed for 24 and 25 February 2010. On 3 February 2010 the Claimant wrote to the Civil Appeals Office requesting an adjournment. That request was refused at an oral hearing on 10 February.
14. On 16 February 2010 the Claimant applied by notice for permission to discontinue. On 17 February the Defendant wrote to the Court of Appeal confirming that he no longer intended to pursue his application for leave to cross-appeal. On 18 February the Claimant filed a request for the dismissal of his substantive appeal against the decision of Beatson J, and the Court of Appeal dismissed the appeal with costs that day.
15. The hearing before the Judge which gives rise to the present application for Permission to appeal was on 11 February 2011.
16. A fuller account of the pleadings is set out in the Judgment of the Judge in paragraphs 7 to 77.
17. In paragraphs 78 to 81 the Judge summarises the law as submitted to him by the Claimant. In paragraphs 82 to 108 the Judge considers the question: was the Claimant misled? Having considered the written witness statements he concluded that the Claimant was never misled as to the amount of the Defendant's likely (or actual) costs. So for that reason alone he concluded that there was no basis for the application before him.
18. In paragraphs 109 to 118 the Judge considered the question: would the Claimant have behaved differently, that being on the assumption that he had been misled? The Judge concluded that the evidence demonstrated that, even if he had been given full information as to the costs the Defendant was incurring, the Claimant would have continued to pursue his arguments with vigour.
19. In paragraphs 119 to 128 the Judge considered the Claimant's submission that he should not be ordered to pay the Defendant's costs in relation to the hearings in respect of which costs had been reserved. He also considered the costs of a mediation which was unsuccessfully attempted in December 2005. He rejected the Claimant's case in respect of all of these. He dealt with two other matters, and concluded at paragraph 135 that he rejected the Claimant's application in relation to costs. He made an order for an interim payment of £100,317 on account of costs incurred before 19 February 2010 and £50,000 incurred after 19 February 2010.
20. CPR r.52.3(6) provides that permission to appeal may be given only where the court considers that the appeal would have a real prospect of success or there is some other compelling reason why the appeal should be heard. CPR r 52.11 provides that every appeal will be limited to a review of the decision of the lower court unless in the circumstances of an individual appeal it would be in the interests of justice to hold a re-hearing. The appeal court will allow an appeal where the decision of the lower court was either wrong or unjust because of a serious procedural or other irregularity in the proceedings in the lower court.
21. The main ground of appeal is that the Judge was not entitled to disbelieve the evidence of the Claimant on points on which he was not challenged under cross-examination. The three crucial issues were (a) whether he was told in January 2004 that the Defendant had a highly concessionary fee arrangement with his solicitors, (b) whether he relied on costs estimates produced by the Defendant in 2003 to 2005 in the period up to March 2007 and that it was reasonable for him to do so, and whether the Defendant should have updated them, and (c) whether he would have behaved differently i.e. withdrawn his claim, applied for a costs capping order or taken other action, if he had been given more accurate and reasonable costs estimates in the period up to March 2007.
22. In none of the cases cited to the Judge, or referred to above in this judgment, does it appear that any of the courts considering whether a claimant had shown good reason for the court to part from the presumption that a claimant who discontinues should pay the defendant's costs should not reach findings of fact adverse to a party without that party being given an opportunity to explain his conduct in cross-examination. Similarly in the case of Tribe, it does not appear that the Costs Judge heard oral evidence or that either witness was cross-examined.
23. In the hearing before the Judge, there had, prior to the hearing, been mention by the Defendant of the possibility of cross-examination of the Claimant. But at the hearing it was made clear that the Defendant did not propose to cross-examine the Claimant.
24. The skeleton arguments of the parties for the hearing before the Judge are silent on this question of procedure. I am told that it was the subject of oral submissions. The Judge does not in his judgment explain why he was able to reach the findings of fact that he did reach without cross-examination.
25. In the application for permission to appeal the Claimant relies on authorities set out in the White Book 2012 para 32.1.5. He submits that the hearing was a "trial" for the purposes of the CPR r.32.2 and cites Gardner Steel v Sheffield Brothers (Profiles Limited) [1978] 1 WLR 916 EWCA at 918-9 and Forcelux Limited v Martin Ewan Binney [2009] EWCA Civ 854, [2010] CPR p 7 paras 32 – 36.
26. Gardner Steel concerned an appeal against an order of the Judge giving the plaintiff leave to sign final judgment under RSC Order 14 for goods sold and delivered. The issue was "whether that hearing was a trial" for the purposes of the Law Reform (Miscellaneous Provisions) Act 1934 s.3. That provides for interest which may be ordered to be paid in any proceedings tried in a court. The court adopted the definition of a trial for that purpose as including the conclusion by a competent tribunal of questions in issue in legal proceedings whether civil or criminal. In Forcelux the court considered whether a hearing at which a District Judge made a possession order was a trial or not within the meanings of CPR r. 39.3. That makes provision for failure to attend a trial.
27. I do not derive any assistance from these cases. It seems plain to me that an application under CPR r.38.6(1) by a claimant who discontinues proceedings that he be not liable for the costs of the defendant is not a trial. The whole point of an application to discontinue is that there should not be a trial.
28. The reason for citing these authorities is that the Claimant intended to lay the ground work for a submission based on Socimer v Standard Bank [2008] EWCA Civ 116. The submission is to the effect that witnesses should be cross-examined, not just on those parts of their evidence which counsel intends to submit are dishonest, but on all parts counsel intends to say should be disbelieved. The passage the Claimant cited was that under the heading "Issue (3)": the unchallenged evidence issue". Rix LJ said at para [143]:

"… Of course the Judge was entitled to make up her own mind about the evidence before her: but she was not entitled, at any rate not without the most explicit warnings and possible need for an adjournment, to find that evidence which had not been challenged by any cross-examination was false evidence, or evidence which spoke to evaluation exercise which was flawed by bad faith, irrationality or negligence".

29. I note that in Tribe the Costs Judge had cited Leigh v. Michelin Tyre Plc [2004] 1 WLR 846 from which there is a passage referred to in the Claimant's skeleton argument before the Judge. Dyson LJ had included the following paragraph:

"31. We acknowledge the concerns about the danger of satellite litigation. It might be said that the guidance we have sought to give will foster dispute. Did the paying party who alleges that he relied on the estimate in fact rely on it, and to what extent? Would the court have in fact made different case management decisions if it had been provided with a realistic costs estimate and what effect that would have had on the litigation and the parties costs? What is the explanation for the difference between the costs estimate and the costs claimed at the assessment stage, and does the explanation satisfactorily account for the difference? These are all valid questions to ask. But these concerns do not justify setting at nought the important CPR provisions relating to the making of costs. If costs estimates are not to be taken into account at the assessment stage, then they will be entirely nugatory. It should not be difficult for the court to determine whether, and if so how, the paying party has relied on the costs estimate given by the receiving party without conducting an elaborate and detailed investigation. Likewise, in most cases the courts should be able without prolonged investigation to form a judgment as to whether, and if so how, the case would have been managed differently if a realistic costs estimate had been given".

30. There is nothing in that paragraph to support the submission that a judge considering such questions is bound to take the claim of a party at face value unless he has been cross-examined. On the contrary, as I read it, that would be "an elaborate and detailed investigation" of the kind that Dyson LJ is discouraging in acknowledging the court's concerns about the danger of satellite litigation.
31. In my judgment the Claimant has no real prospect of showing that the Judge erred in law in reaching the conclusions that he did reach without the Claimant having been cross-examined.
32. The Claimant submits that the Judge erred in law in a number of other respects in reaching the conclusions he did. It is not necessary for me to consider each of these in detail on this application for permission to appeal. The Claimant is a mature man who had been a financial journalist before he became a barrister in about 2003. He was a pupil in 2004 and acquired experience over the intervening period. He knew about the costs of litigation. Whether or not there are any detailed criticisms to be made about particular aspects of the Judge's judgment, the overall conclusion that the Judge reached, namely that the Claimant was not misled and that, even if he had been, he would not have conducted the litigation in a materially different manner, is hardly surprising. I see no real prospect of an appeal court finding that the Judge was wrong.
33. I turn then to the submission that the Judge should have made a separate order under CPR Rule 38.6(1) in respect of the costs of the hearings in 2005 to 2007. The Judge records that the Defendants served cumulative costs statements in relation to those hearings of respectively £11,345, £14,465, £21,907, £38,409.
34. The Claimant states that these are hearings in respect of which, in the normal course, he would have expected an order for costs in his favour. The reason why the court made no order but reserved the costs on each occasion arises out of the terms of the Early Neutral Evaluation Agreement. This contained the provision that in the event that a party did not accept the Evaluator's decision, that party would be required to pay the other party's reasonable costs, whatever the outcome of the proceedings. The Claimant does not accept that that, or any provision, of the Early Neutral Evaluation Agreement should have been a basis for depriving him of his costs.
35. I form no view as to whether he is right or wrong about that. He is critical of the brevity of the Judge's reasoning in relation to this point, and the fact that the Judge did not address specifically points made in his witness statement and skeleton argument.
36. But whether the Claimant is wrong or right about these matters, the fact is that he has applied for permission to discontinue. As stated in para [2] of Teasdale, the fact that a claimant might well have succeeded at trial is not itself a good reason why a court should make an order under CPR r. 38.6(1) that the claimant should not pay the defendant's costs. I see no real prospect that an appeal court would find that the Judge was wrong on these points.
37. I turn to the submission that the Judge had no jurisdiction to make his order that the Claimant file his Notice of Discontinuance by 6 June.
38. The Claimant demonstrated that the Judge had indeed intended that to be a specific order, and not a condition subject to which he was granting permission to discontinue.
39. On this point it seems to me that the Claimant would have a real prospect of success. But the point is a technicality. Throughout these proceedings, and indeed in the skeleton argument for this application, the Claimant has repeated that he intends to discontinue. In an exchange of e-mails on 15 and 18 July 2011 the Claimant gave an undertaking to the Defendant that he would file Notice of Discontinuance as soon as possible, and in any event within 17 days of his costs appeal being dismissed (either by a refusal of permission to appeal or a dismissal of the substantive appeal). When the Claimant raised at the hearing before me the concern that the effective date of discontinuance might be relevant to the amount of interest that he would be liable to pay to the Defendant, counsel for the Defendant intervened specifically to make clear that the Defendant would take no point to that effect.
40. In the circumstances I cannot see any purpose in granting permission to appeal on this point and I decline to do so. If I granted permission, then in accordance with the Claimant's undertaking to the Defendant, he would have discontinued the claim before the appeal would be heard.
41. The Claimant asked for an extension of time for making this application for permission to appeal. The grounds of that application arise out of confusion that arose as to whether the route of appeal was to the Court of Appeal or to the High Court. I would not have refused permission to appeal on the ground that the application had been made out of time. If I had been otherwise minded to grant the application for permission, I would have granted the necessary extension of time.

CONCLUSION

42. It is for these reasons that I refuse permission to appeal.

POST SCRIPT

43. After receiving a copy of this judgment in draft Mr Wolman sent to my clerk and e-mail. In it he wrote that, contrary to what appeared in paragraph 21 of the draft judgment, the main ground of appeal is that the Judge failed to exercise properly or reasonably his discretion in considering the application and the evidence for it by simply copying into his judgment, word for word (apart from topping and tailing), without any independent evaluation, the entire narrative and argument set out in the Defendant's skeleton argument. He asked that this argument be mentioned in the judgment.
44. In English v Emery Reimbold & Strick Ltd [2002] EWCA Civ 605 Lord Phillips MR said:

"17. As to the adequacy of reasons, as has been said many times, this depends on the nature of the case: see for example Flannery at page 382 In the Eagil Trust case, Griffiths LJ stated that there was no duty on a Judge, in giving his reasons, to deal with every argument presented by Counsel in support of his case:

"When dealing with an application in chambers to strike out for want of prosecution, a judge should give his reasons in sufficient detail to show the Court of Appeal the principles on which he has acted, and the reasons which led him to his decision. They need not be elaborate. I cannot stress too strongly that there is no duty on a judge in giving his reasons to deal with every argument presented by Counsel in support of his case. It is sufficient if what he says shows the parties, and if need be the Court of Appeal the basis on which he acted… (see Sachs LJ in Knight v Clifton [1971] 2 AER 378 at 392–393, [1971] Ch. 700 at 721)." (p.122).

In our judgment, these observations of Griffiths LJ apply to judgments of all descriptions…

118. There are two lessons to be drawn from these appeals. The first is that, while it is perfectly acceptable for reasons to be set out briefly in a judgment, it is the duty of the Judge to produce a judgment that gives a clear explanation for his or her order. The second is that an unsuccessful party should not seek to upset a judgment on the ground of inadequacy of reasons unless, despite the advantage of considering the judgment with knowledge of the evidence given and submissions made at the trial, that party is unable to understand why it is that the Judge has reached an adverse decision."

45. If a judge wishes to give his reasons by adopting the skeleton argument of one of the parties, he is entitled to do that. It does not follow from his doing that that he fails to give any independent evaluation to the other party's case, and I see no basis for such a submission in this case.