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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ON APPEAL FROM LUTON COUNTY COURT
(HHJ L DAVIES)

		Royal Courts of Justice Strand, London, WC2A 2LL
		4 December 2013

The Hon Mr Justice Coulson:

1. This is an appeal by Norseman Holdings Ltd ("NHL"), a company incorporated in Gibraltar, against a part of the Order made by Her Honour Judge Davies at Luton County Court on 11 February 2013. Certain aspects of NHL's conduct of the litigation generally, and this appeal in particular, can only be described as extraordinary. It provides a salutary lesson for those who continue to complain about the changes to the Civil Procedure Rules brought about by Sir Rupert Jackson's Review of Costs and, in particular, the new emphasis on proportionate costs.
2. In these proceedings, the claimant, Warwick Court (Harold Hill) Management Company Ltd ("Warwick Court") seek £3,274.59 by way of arrears of service charges and reserve fund, together with interest, relating to a flat at 20, Natasha Court, Mimosa Close, Harold Hill, Romford in Essex.
3. It appears that the original proceedings were served on a United Kingdom company called Norseman Holdings Ltd rather than NHL, who are a company incorporated in Gibraltar. As a result the original judgment in default against NHL was set aside on 7 February 2012, and Warwick Court were ordered to pay NHL's costs. By the same order, the District Judge required NHL to serve a defence by 6 March 2012. That did not happen, and judgment was again entered in default on 9 March 2012. On 11 May, that judgment too was set aside, in circumstances which have not been explained to me.
4. On 4 July 2012 Warwick Court were given permission to amend their particulars of claim, and NHL were given 28 days to provide a defence following the service of that amended particulars of claim. Again, because these were their amendments, Warwick Court were ordered to pay NHL's costs but, notwithstanding that, NHL applied for permission to appeal the order that had been made in their favour, on the basis that the District Judge had included counsel's fees but refused anything by way of solicitors' costs. Permission to appeal the order was refused on 31 August 2012.
5. NHL did not serve a defence until 10 August 2012. On 6 September 2012 District Judge Valve struck out the defence because it did not deal with the substance of the claim. On my perusal of the defence, provided at my request during the appeal hearing, I am bound to say that such an order was entirely understandable. The 'defence' is no such thing; it makes no mention of the underlying claim at all. However, the following day, 7 September, NHL applied to set that order aside. The application was listed for a hearing in October but again, for reasons which have not been explained to me, that hearing did not proceed. Indeed, I am told that this matter has never been resolved, so that as things presently stand, this is a claim with no valid defence.
6. On 30 October 2012, NHL obtained a default costs certificate in the sum of £4,495. That related back to the order of 7 February 2012 and concerned the costs awarded to NHL, following Warwick Court's failure to serve the correct company and the setting aside of the original judgment in default (paragraph 3 above). It is Warwick Court's case that the default costs certificate was obtained irregularly because, they say, the relevant documents had not been served on them. That dispute too, has yet to be resolved.
7. Throughout all of this game-playing, an issue arose - and continues to arise - in relation to the nature of those representing NHL. 'Charles Henry' are on the record as their solicitors, and indeed, that is confirmed in a witness statement dated 18 January 2013 signed by Keith Gregory, who describes himself as a trainee legal executive at Charles Henry. However, it appears that Charles Henry are not an authorised body recognised by the Solicitors' Regulation Authority for the purpose of carrying out litigation and, at the contested hearing in front of Judge Davies on 21 January 2013, that was expressly confirmed by NHL's counsel, Mr Shrimpton, who described Charles Henry as "not a firm and not able to conduct litigation".
8. I have seen other formal documents and statements of truth, signed by somebody called Kevin Gregory, who describes himself as the Practice Director of Charles Henry (see his statement of 6 February 2012). Warwick Court contend that he is the subject of an order under Section 43 of the Solicitors Act 1974 prohibiting him from conducting litigation. He is apparently the same person as Keith Gregory, so he has signed statements in two different names. He is described in some of the paperwork as an officer of NHL, although he does not describe himself in such terms in either of his statements. It is difficult to see how the same person can be both a trainee legal executive with Charles Henry, a Practice Manager with the same organisation, and an officer of NHL (and therefore the client).
9. Even for the purposes of this appeal, the issue as to who is acting for NHL as their solicitor is wholly muddled. In his skeleton argument, at paragraph 22, Mr Butler said that it was 'common ground' that Dr Eiland was the solicitor conducting the litigation on behalf of NHL. I have seen nothing to confirm that Dr Eiland is or was NHL's solicitor. Orally, I was told that this was wrong and that NHL's solicitor is Mr Rory McCarthy, but again I have seen nothing to suggest that he is acting on the record as NHL's solicitor. There is, therefore, an unacceptable muddle as to who - if anyone - could be said to be the solicitor acting on behalf of NHL. That muddle lies at the heart of what happened next.
10. At the hearing on 21 January 2013, before Judge Davies, NHL were represented by Mr Shrimpton of counsel. Mr. Gregory and Mr McCarthy sat behind him. Dr Eiland was not in court. The hearing was to deal with a number of matters arising out of the various orders that had been made, although not, as far as I can tell, the striking out of the defence. One of the matters raised concerned the default costs certificate, to which I have previously referred. At some point during the hearing there was a discussion about that costs certificate, and Mr Shrimpton said:

"There was at some point an issue as to enforcement because, technically, there was an outstanding default costs certificate. I think that has now gone but for the avoidance of doubt, there is no intention to enforce…there has been an attempt to enforce that order, there will be no attempt to enforce that order and I am content for the court to note that undertaking on behalf of Dr Eiland."

11. At the end of the hearing the Judge made the following order:

"UPON hearing Counsel for the Claimant and Counsel for the Defendant

AND UPON

i) the Defendant no longer arguing that only the District Judge could hear the Claimant's application to set aside the default costs order of 30 October 2012, and

ii) it being noted that Dr Murray Eiland will put in writing his undertaking not to enforce the costs order of 30 October 2012.

AND UPON the matters to be determined in respect of the various applications being agreed as follows:

I) Whether Charles Henry is capable of conducting litigation on behalf of the Defendant;

II) Whether the Claimant company is dormant and if so whether it is capable of conducting litigation;

III) The Defendant's application for permission to appeal the order of District Judge Ayers made on 4 July 2012;

IV) The Claimant's application to stay the appeal if permission is granted;

V) The Claimant's application to set aside the costs order of 30 October 2012.

IT IS ORDERED THAT

1) The parties shall exchange witness statements and evidence upon which they seek to rely in relation to issues I) and II) above by 4p.m. on 4 February 2013.

2) The parties will file and serve skeleton arguments on issues III), IV) and V above not less than 3 days before the hearing.

3) A transcript of District Judge Ayres on 4 July 2012, or if it is not possible to obtain one, notes taken by counsel for each party are to be filed by 18 February 2013 and are to be included in the bundle.

4) An agreed bundle is to be filed by the Defendant no less than 3 days before the hearing.

5) Matter to be listed for hearing on 19 April 2013 at 10.30am, at Luton County Court with a time estimate of 3 hours, to be listed before Her Honour Judge Davies if available.

6) Any dates to avoid to be filed by 4 p.m. on Wednesday 23 January 2013.

7) Costs reserved."

12. NHL's original grounds of appeal against that order were in these terms:

"Grounds of Appeal

1. The decision by the learned Her Honour Judge Davies on 7^th February 2013 were an illegitimate exercise of the learned judge's discretion, having regard to section 6(1) of the Human Rights Act 1998, Article 6, and Article 14.

2. The learned Judge's failure to disclose the Appellant's Counsel during the hearing, of 21^st January 2013, a letter written to the Court by the Solicitors Regulation Authority dated 18^th January 2013; which was in the Judge's hand and being read by her during the hearing, had the appearance of bias.

3. The alleged undertaking referred to in paragraph ii) of the purported order made 21 January and 7^th February 2013;

[1] has never been given by Dr. Murray Eiland or Counsel

[2] was ultra vires

4. Having regard to how the hearing was conducted on 21^st January 2013, the order made on 7^th February 2013 by the learned Judge was an order that no Judge, having considered the draft order and facts in the emailed letter of Mrs Samantha Mahoney of Charles Henry on 30^th January 2013, could have reasonably made.

5. The Appellant respectfully reserves their position to amend or alter these grounds 14 days after the receipt of a transcript of the proceedings. Moreover Appellant does not wish this appeal to be considered on paper, until they and the Court has had sight of the transcript."

13. On 12 September 2013 Mr Justice Dingemans granted NHL permission to appeal on ground 3 only. Unsurprisingly, Warwick Court are neutral as to the outcome of the appeal on that point, but resist the suggestion that they should pay any part of the costs of the appeal. I shall deal with costs separately, after I have given judgment on the merits of the appeal itself.
14. Accordingly, the only point before me concerns the preamble to the judge's order and the reference to the undertaking given by Dr Eiland, which NHL say "has never been given". But that is a puzzling claim: I have already referred to the clear and unequivocal reference to Dr Eiland providing that undertaking during the hearing (see paragraph 10 above). Moreover, at the end of the hearing before Judge Davies, there was this further exchange:

"Judge Davies: Alright, so amongst other things you are going to be considering whether this is a good use of your money. I cannot emphasise strongly enough that it does seem to me to be a terrible waste of money for everybody, but there we are. Somebody will end up by picking up the tab…

As a preamble to the order, it is no longer argued that only a District Judge can hear the application to set aside the costs order. Secondly, there is an undertaking given…well, I do not know who has given it because Dr Eiland is not here. Mr Shrimpton, who is giving this undertaking not to enforce the costs order?

Mr Shrimpton: Well it's a very fair point. That can only be given by Dr Eiland as he is the solicitor of record or the instructing solicitor at the moment.

Judge Davies: OK. Upon it being noted that Dr Eiland will set out in writing his undertaking not to enforce the costs order of 30^th October 2012.

Mr Shrimpton: That is a very helpful formula. Yes, that is a very helpful formula.

Judge Davies: Has somebody noted that there?

Mr Shrimpton: Yes."

15. Subsequently, Mr Shrimpton described the draft order, in the form in which it was eventually agreed (paragraph 11 above), as 'fairly reflecting' the order made by Judge Davies. There can be no doubt that he was right about that. Unhappily, in later emails which I have seen today, it appears that Mr Shrimpton subsequently suggested that he did not give an undertaking on behalf of Dr Eiland. By reference to the two passages in the transcript to which I have now referred, that suggestion was wholly wrong.
16. Accordingly, when Dr Eiland subsequently objected to the undertaking, the judge declined to amend the order under the slip rule. She was right not to do so. There had been no slip; the order she had made was in accordance with the submissions that counsel had made to her. Warwick Court also declined to agree to any change to the order, because they too were entitled to assume that the undertaking was proffered on instructions.
17. Although Mr Butler's skeleton argument purported to make a number of criticisms of the judge's reference to the undertaking in the preamble, it was very difficult to see how any of these were sustainable, given the clear terms of the undertaking offered. In the end, his only submission was that the judge should have clarified or double-checked with counsel that the undertaking really was being offered in the way, and in the form, he was suggesting. I reject that submission out of hand. It is not for the judge to pick through the words of an unqualified undertaking, in order to try and make sure that counsel has not misunderstood his instructions. In civil litigation of this kind, if counsel indicates to a judge that he is offering an undertaking on behalf of the solicitor who (allegedly) has conduct of the case, then that is sufficient for the judge's purposes. A judge is entitled to rely on what he or she is told by counsel; if not, civil litigation becomes unworkable.
18. Accordingly, in my view, no criticism of any kind can be made of the judge. She simply recorded the undertaking that had been offered. On that basis, therefore, there can be no appeal under CPR 52.11(3)(a) (namely that the decision of the lower court was wrong) because it manifestly was not wrong. As to whether the recording of something that a judge was told in a preamble to an order is 'a decision' at all, see below.
19. As a result of the obvious difficulties with the Appellant's Notice and his skeleton argument, which erroneously put the appeal on the basis that no undertaking had been offered, Mr Butler changed tack and said that the undertaking had been offered as a result of a mistake. The fundamental difficulty with that suggestion is that there is no evidence, either from Dr Eiland or counsel, as to the nature, scope and extent of the mistake and how it could possibly have come about. Although at one point, in one of his emails, Mr Shrimpton says that he could not have given an undertaking on behalf of Dr Eiland, because Dr Eiland was not present, that does not explain the alleged mistake which led him to proffer the undertaking in the first place. Furthermore, the presence or otherwise of Dr Eiland is immaterial for two reasons; first, because undertakings are regularly proffered on instructions whether the instructor is actually physically present or not; and secondly because, here, the solicitor now said to be the instructing solicitor (Mr McCarthy) and the ubiquitous Mr Gregory were both present in court. How they have allowed the alleged mistake to happen is also not explained.
20. Even assuming, in NHL's favour, that there had been a mistake, it seems to me that the only basis of the appeal could be under CPR 52.11(3)(b), namely that the decision of the lower court was "unjust because of a serious procedural or other irregularity in the proceedings in the lower court". But in my view, there are a number of insurmountable problems with the application of that test to this appeal.
21. First, the complaint concerns the preamble rather than any decision made by the judge. Accordingly, it is difficult to fit this appeal under the rubric of CPR 52.11(3) in any event, because the criticism is not of anything that Judge Davies decided, but something that she was told, and which she duly then put into the preamble of the order.
22. Secondly, it does not seem to me that this mistake, if that is what it was, amounted to a serious irregularity. Let us look at what it actually covers. It was an undertaking not to enforce a default costs order in NHL's favour. It is agreed that the validity or otherwise of that default costs order remains to be debated and resolved by the court. If the court decides that the order was irregularly obtained, then it could not be enforced anyway, and the undertaking would become irrelevant. If the court decides that the order was properly obtained, then, at that point, NHL could apply for the undertaking to be discharged, and it is impossible to see, if the order was found to be valid, how and why they would not obtain the discharge.
23. Thirdly, the retaining of the preamble is not unjust to either side. In practical terms, it is almost certainly irrelevant to them both. I am not persuaded that the reference to an irregularity being 'unjust' can encompass an irregularity which arose because of one party's alleged misconduct of these proceedings, and which only affects that same party (or in this case, his solicitor). To justify an appeal, injustice must relate to the position as between the parties, not to the relationship between one of those parties and one of its many legal representatives. And any injustice to Dr Eiland could only arise if his own clients, NHL, sought to enforce the default costs order before the issue as to its validity had been resolved. Such a stance would, particularly in the context of this low-value case, be contrary to commonsense.
24. I have no doubt at all that what would be unjust, and what would be wholly contrary to the overriding objective, would be to allow the appeal on the basis of a recently alleged (and unevidenced) mistake; if I did that, it would mean setting aside the whole order, and almost a year would have been lost because of the default of NHL, or their representatives. That would plainly not be sensible or proportionate, particularly given the relatively modest sum at stake in this litigation.
25. What ought to have happened was that an application should have been made under CPR 3.1(7), on the simple and straightforward basis that counsel had in some way made a mistake, and there was no such undertaking. Given that the underlying validity of that default costs order is in issue anyway, I am not persuaded that such an application would have been particularly difficult. But one of the many problems here has been NHL's complete refusal to acknowledge that the alleged difficulties with the undertaking are entirely self-created.
26. For all those reasons, therefore, it seems to me that there is no basis for any appeal and the appeal is dismissed.
27. I should make two final points. Firstly, I note that NHL's costs of the appeal are said to be at £27,217. In view of the fact that i) the undertaking was most unlikely ever to have been triggered (for the reasons I have given); ii) it related to a default costs order worth £4,449; iii) the underlying claim in this case is worth just over £3,000; to spend such an amount on the appeal is both ludicrous and deplorable. It confirms all my concerns about NHL and Charles Henry and their conduct of this case.
28. Secondly, I have already quoted what Judge Davies said about the terrible waste of money represented by this case. This appeal epitomises that waste. It is precisely the sort of disproportionate incurring of costs that the Costs Review, and the subsequent changes to the CPR, were designed to address. The recent judgment of the Court of Appeal in Mitchell v Newsgroup [2013] EWCA Civ 1537 makes plain that parties to civil litigation need to conduct their case in accordance with the rules of court, so that these expensive interlocutory skirmishes (which almost always have their roots in a failure to comply with the rules in the first place, or some other form of error) become a thing of the past. Here, the best course would have been for District Judge Valve's order striking out the defence to be enforced, so that this litigation – benefiting no-one but the lawyers - would have come to an end over a year ago.