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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		17/01/2012

Mr Justice Eder :

1. This is my Judgment in relation to costs in these proceedings under CPR Part 8. The background to the dispute between the parties and my conclusions in relation to such dispute are set out in my earlier Judgment which I delivered on 12 January 2012. I do not propose to repeat what is there set out. However, for the purposes of this Judgment, it is important to note, in particular, what occurred between the original hearing on 19 December 2011 and the resumption of the hearing in the afternoon of 12 January 2012 viz the agreement reached between the defendant and Countrywide as referred to in paragraph 10 of my Judgment and the express confirmation given in the statement of Mr Edward Jones on behalf of the defendant that in consequence of the transfer to Countrywide the defendant will not be entitled to and will not require the claimant to cease using the name "Bairstow Eves Countrywide" as referred to in paragraph 11 of my Judgment. As noted in paragraph 12 of my Judgment, it was as a result of these developments that Mr Evans-Tovey informed the Court that it was no longer necessary to pursue the claims for the second and third declarations and that I decided, as a matter of my discretion, to decline to grant the first declaration.
2. The determination of an award of costs is governed by CPR 44.3. In broad terms, I did not understand that there was any dispute as to the applicable general principles. They were conveniently summarised by Gloster J in HLB Kidsons v Lloyds Underwriters [2007] EWHC 2699 paragraph 10 in terms which I gratefully adopt:

"… The court's discretion as to costs is a wide one. The aim always is to "make an order that reflects the overall justice of the case" (Travellers' Casualty v Sun Life [2006] EWHC 2885 (Comm) at paragraph 11 per Clarke J…..the general rule remains that costs should follow the event, i.e. that "the unsuccessful party will be ordered to pay the costs of the successful party": CPR 44.3(2). In Kastor Navigation v Axa Global Risks [2004] 2 Lloyd's Rep 119, the Court of Appeal affirmed the general rule and noted that the question of who is the "successful party" for the purposes of the general rule must be determined by reference to the litigation as a whole; see paragraph 143, per Rix LJ. The court may, of course, depart from the general rule, but it remains appropriate to give "real weight" to the overall success of the winning party: Scholes Windows v Magnet (No 2) [2000] ECDR 266 at 268. As Longmore LJ said in Barnes v Time Talk [2003] BLR 331 at paragraph 28, it is important to identify at the outset who is the "successful party". Only then is the court likely to approach costs from the right perspective. The question of who is the successful party "is a matter for the exercise of common sense": BCCI v Ali (No 4) 149 NLJ 1222, per Lightman J. Success, for the purposes of the CPR, is "not a technical term but a result in real life" (BCCI v Ali (No 4) (supra)). The matter must be looked at "in a realistic … and … commercially sensible way": Fulham Leisure Holdings v Nicholson Graham & Jones [2006] EWHC 2428 (Ch) at paragraph 3 per Mann J."

3. Despite broad agreement by the parties on the general principles, the developments which occurred in the course of the hearing and the change of position by the defendant as referred to above make the task of dealing with issues of costs in the present case particularly difficult. This is exemplified by the fact that there is a very wide gulf between the parties' respective positions in relation to costs. Thus, Mr Evans-Tovey on behalf of the claimant submits that the claimant should be entitled to 100% of its costs in the sum of £68,675.20 including VAT; and, on the other hand, Mr Jones QC on behalf of the defendant submits that the defendant should be entitled to 100% of its costs in the sum of £97,020.56 including VAT. Both parties have confirmed that they are content that I should summarily assess such costs if I consider it appropriate to do so.
4. As stated above, the general rule is that the starting point at least is that the unsuccessful party will be ordered to pay the costs of the successful party. As recognised by Akenhead J in Buildability v O'Donnell Developments Ltd [2009] EWHC 3196 (TCC), it is not always easy for the Court to determine "success" when the parties have agreed terms (save for costs) other than by reference to the order which the parties have agreed. A similar but perhaps even greater difficulty arises in the present case. Here, there was no agreement as such between the parties. Rather there was, as I have indicated, a change of position by the defendant with the consequences which I have summarised above. Thus, the position in the present case is even more problematic than in Buildability. Nevertheless, it seems to me that consistent with CPR Part 44.3 the starting point remains to identify so far as possible which is the successful party and, in carrying out that exercise, to bear in mind the general principles summarised above, in particular that the matter must be looked at as a matter of common sense in a realistic and commercially sensible way.
5. Mr Jones QC submitted in effect that the defendant was the "successful party" because, in particular, the claimant had failed to obtain any of the declarations sought. Indeed, as set out in paragraph 19 of his supplementary skeleton argument, it was his submission that "..the claimant has achieved nothing from this litigation. The costs have been wasted." I do not agree. In my view, such conclusion would ignore the realities in the present case and would be contrary to the principles set out above.
6. The fact is that following the acquisition of the shares in the defendant by Hunters, the position taken by Hunters and the defendant was that the claimant would be required to cease using the trade name "Bairstow Eves Countrywide" and to rebrand as "Hunters". That is plain from (amongst other things) Hunters' website Q&A page at an early stage. It is true that Hunters later suggested that the franchisees had not been required to rebrand (which, in my view, was disingenuous because the question was not about the past but what Hunters required or would require the franchisees to do in the future); and it is also true that the defendant/Hunters expressed apparent keenness to seek to persuade the claimant (and the other franchisees) to meet in order to try to persuade them that such rebrand would be in their own best interests from a commercial point of view – to perform what Mr Evans-Tovey described as a "sales-pitch". In this context, Mr Evans-Tovey put before the Court a helpful summary chronology of relevant events and took me through the contemporary correspondence in support of his broad submission that any criticism of the claimant's conduct was misplaced. Indeed, it was his submission that the defendant had acted in a "high-handed" manner. Be that as it may, it seems to me that, as submitted by Mr Evans-Tovey, despite repeated attempts by the claimant's solicitors to obtain clarification, the defendant's position oscillated between obfuscation, prevarication and evasiveness on the central issue. Certainly, the defendant's position at the commencement of the hearing on 19 December 2011 was that, at the very least, it was entitled to require the claimant to rebrand. In my view, as a matter of reality, that had been and continued to be the burning issue between the parties until the volte-face by the defendant on 11 January 2012.
7. Further, it is important, in my view, to recognise that the resolution of the issue was of great importance to the claimant – which is, on the evidence before me, a relatively small business with a small number of staff whose livelihood depends upon its continued success. In his supplementary skeleton argument, Mr Jones QC accused the claimant of setting itself up as the "cheer-leader" of a group of franchisees who may be unhappy about rebranding. That may be but it seems to me that claimant was doing no more than seeking to protect its business interest and, in particular, the goodwill that it had built up over the years in the name "Bairstow Eves Countrywide".
8. The result of the developments and the defendant's change of position announced on 11 January 2012 as summarised above is that, as a matter of reality, the claimant has secured exactly what it wanted ie the continued use of the trade name "Bairstow Eves Countrywide". It is true that the claimant has not obtained the benefit of specific answers to the questions posed in the three declarations – although, on one view, the result obtained by the claimant is in fact better than any such answer could provide. It is also true that the result obtained by the claimant is not the consequence of any order of the Court nor, unlike in Buildability, is it the consequence of any actual agreement reached between the parties to the litigation. But I have no doubt that it is the direct result of the litigation process. To my mind, it is inconceivable that the defendant would have reached this point of what can perhaps best be described as unconditional surrender by the defendant without the issuance and pursuit by the claimant of these proceedings. To that extent, the claimant is, in my view, to be regarded as the successful party both as a matter of common sense and commercial reality. On this basis, it seems to me that the starting point, at least, is that the defendant should be required to pay the claimant's costs.
9. However, as reflected in the CPR and the authorities referred to above, even if "real weight" should be given to the overall success of the winning party, gone are the days when the winner necessarily takes all – if indeed that was ever the position. So I then turn to consider whether the Court should nevertheless make a different order as expressly contemplated by CPR Part 44.3(2)(b) having regard, in particular, to "all the circumstances" including those set out in CPR Part 44.3(4). Mr Jones QC submitted that there were two main "circumstances" which should persuade the Court to make a different order.

Costs in relation to the second and third declarations

10. First, Mr Jones QC submitted that irrespective of the new developments and change of the defendant's position, it was obviously inevitable that the claimant would never have succeeded in obtaining the second and third declarations at the present hearing and that the costs incurred on the defendant's side in relation thereto were in the order of 50% of the total ie, say, £50,000. On this basis, Mr Jones QC submitted that, at the very least, the claimant should pay to the defendant such costs and be deprived of its own costs in relation to such issues; alternatively that there should, in effect, be a netting off of such costs against any award of costs in favour of the claimant.
11. Mr Jones QC advanced that submission with great persuasiveness. However, I am unable to accept it for the following reasons.
12. First, I do not accept the figure of 50% or £50,000 asserted by Mr Jones QC although I do not feel able to identify an alternative figure. In my view, there is insufficient information to carry out a proper exercise as to what the proper figure might be (assuming such exercise could be done) even on a broad brush basis; but, in my view, Mr Evans-Tovey was right when he submitted that the likelihood is that any notional figure would be substantially lower. Further, if Mr Jones QC is right that the result he suggests was so obviously inevitable, then it seems to me that there is at least a strong argument that it was unnecessary for the defendant to incur such a large amount of costs in relation to this issue at this stage – but I accept that this is perhaps debatable.
13. Second, the foundation of Mr Jones QC's submission was that the second and third declarations involved questions of fact which could not and would not have been resolved during the present hearing under CPR Part 8 and would inevitably have led to an adjournment and further hearing at some later stage; and that, in any event, as a matter of discretion, the Court would never give a declaration as to whether some possible future conduct by one party to a commercial contract would amount to a repudiatory breach. The difficulty with that submission at this stage of the proceedings is that (a) it was Mr Evans-Tovey's original submission that the relevant factual parameters were quite limited and Mr Jones QC's attempts to suggest otherwise were misconceived; (b) within such relevant parameters, there was, in truth, either no dispute of fact alternatively any dispute of fact was capable of being resolved without difficulty by the court; (c) there was, therefore, no such inevitability; (d) on the contrary, both as a matter of principle and having regard to the authorities, the claimant was entitled to the second and third declarations on the facts of the present case; and (e) the point was never reached for me to express a conclusion on this important issue between the parties.
14. Nevertheless, Mr Jones QC maintained his position and submitted that I should, in effect, express the conclusion that I would have reached on these matters for the purpose of determining the present issue on costs. I do not consider that it would be appropriate to do so both because Mr Evans-Tovey never had a proper opportunity to respond in relation to these issues in reply (because of the defendant's change of position) and also because the points raised are, in my view, far from straightforward. Further, and perhaps most importantly, these points do not seem to me of critical significance in the particular circumstances of the present case. In my view, even if Mr Jones QC were right in theory and even if I would have reached the conclusion that I could not deal with the second and third declarations immediately, I am quite sure that I would have laid down a tight timetable so far as necessary to resolve those issues.
15. Moreover, whatever the strict legal position might be as to the relevance of the factual matters which Mr Jones QC submitted required to be addressed and resolved, whatever delay might have occurred in addressing and resolving them and whatever reluctance there might be to the Court granting the type of declarations sought by the claimant, it seems to me plain that the inclusion of the claims for the second and third declarations was at least a and probably the driving force which persuaded the defendant to adopt the course it did and, in effect, to throw in the towel. I accept that this is perhaps somewhat speculative but, in my view, it is simply a matter of "common sense" and practical reality having regard to the particular circumstances of the present case. It seems to me unlikely that the defendant would have changed its position unless it perceived that there was at least a risk that it might fail in relation not only to the first declaration but also the second and third declarations. In particular, I bear in mind that the defendant's change of position occurred or at least manifested itself only a few hours before the resumption of the hearing on 11 January. As stated in the third witness statement of David Thomas: "Only after four months of legal dispute and at the eleventh hour have Hunters and Countrywide cobbled together a position whereby we can retain the brand…..it is clear to me that this legal action was wholly necessary and we would not have achieved this outcome without it.". I agree. For all these reasons, I reject Mr Jones QC's submission in this regard.

Conduct

16. The conduct of the parties in the litigation is one of the specific circumstances which the court is required to have regard to under CPR Part 44.3(4)(a) in considering an order for costs. In this context, Mr Jones QC relied upon what he submitted were two main aspects of the claimant's conduct which should justify a departure from the general rule.
17. First, Mr Jones QC submitted that the claimant's conduct was to be criticised because the claimant failed to engage with the defendant in negotiations which the defendant was keen to take place. In support of that submission, Mr Jones QC relied, in particular, on the third witness statement of Mr James Barrett. I have already dealt with this aspect to some extent above. However, it is not true that the claimant was not prepared to engage in negotiations. In particular, as Mr Barrett acknowledges, there was a meeting at an early stage ie on 5 September 2011 between Mr Hollinrake and Mr Grant (directors of the defendant) and the claimant's directors. Thereafter, as appears from the correspondence, the claimant was perfectly content for negotiations to take place provided that the defendant clarified its position on certain important questions. This developed into an impasse: neither party was apparently prepared to give up on what each apparently perceived was its legal entitlement and the claimant was apparently not interested in doing a commercial deal which meant giving up the use of the trade name "Bairstow Eves Countrywide". In such circumstances, I do not consider that it is possible or fair to criticise the claimant's conduct.
18. Second, Mr Jones QC submitted that the defendant acted in breach of clause 35.4 of the franchise agreements in failing to co-operate in a mediation. I have referred to this aspect in my Judgment. However, in my view, this point does not avail the defendant in the present circumstances. Although the defendant was certainly keen to have commercial negotiations in the sense in which I have described, it did not raise any suggestion of mediation pursuant to clause 35.4 until a few weeks after the commencement of the litigation and, even then, no application was made to the Court by the defendant to seek a stay of the present proceedings or otherwise to seek to enforce the clause. In particular, no such application was made at the hearing on 7 December 2011 before Master Kay QC. Even on 19 December, there was no formal application by the defendant to seek to enforce the clause although the point was raised in Mr Jones QC's skeleton argument; and in the event I decided to adjourn the hearing in order to enable mediation to take place in accordance with clause 35.4. However, the mediation failed and, in the event, the defendant changed its position as indicated above. In such circumstances, it does not seem to me that any costs have been wasted by reason of any failure by the claimant to comply with clause 35.4 so as to justify any departure from the general rule.
19. For these reasons, I do not consider that there are any circumstances justifying departure from the general rule that the claimant should be entitled to its costs.

Conclusion

20. In my view, it follows from the above that the claimant is entitled in principle to its costs.
21. As to the quantum of the claimant's costs, the figure stated above of £68,675.20 including VAT is an adjusted figure which already takes into account certain points raised by Mr Jones QC. In addition, Mr Jones QC makes three further points viz (i) these costs are, in general terms, unreasonably high; (ii) they include costs in the mediation (some £5,892 including VAT) which should be excluded; and (iii) these two points would leave a bill of just under £60,000 from which the Court should make a "conventional further reduction" of some 30% to take account of the normal difference between party and party costs and solicitor/own client costs. As to (i), I do not accept that these costs are unreasonably high either in general terms or with regard to the particular points raised by Mr Jones QC. This was an important matter for the claimant and, in the context of this type of litigation, my view is in fact that these costs are relatively modest. They are certainly substantially lower that the defendant's own costs although I accept that there may be particular reasons for this which would not necessarily apply to the claimant. As to (ii), the short answer is that under clause 9 of CEDR the parties expressly agree in effect that the Court may treat mediation costs as costs in any related litigation and, in my view, it is entirely appropriate to do so. As to (iii), I do not accept that there is any "conventional reduction". The hourly rates charged by the claimant's solicitors are, in my view, not excessive; and the periods charged do not seem unreasonable. However, I accept that there is at least some prospect that a party's costs may be reduced on a taxation and given that a summary assessment is necessarily broad brush, some account should probably be taken of that possibility although it is my view that any reduction here should be relatively modest.
22. Taking all these matters into account, it is my conclusion that the claimant's costs should be summarily assessed in the sum of £65,000 including VAT and that the defendant should pay this sum within 14 days ie by 4pm on 31^st January 2012.