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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ON APPEAL FROM THE DECISION OF MASTER SIMONS
SENIOR COURT COSTS OFFICE

		Royal Courts of Justice Strand, London, WC2A 2LL
		10/03/2014

MR JUSTICE JAY:

Introduction

1. This is an appeal brought by the claimant, Mrs Jean Haynes, against the Order of Master Simons, sitting in the Senior Court Costs Office on 29^th October 2013, whereby it was ordered that the eighth defendant, the Department for Business, Innovation and Skills, is liable only for the costs directly attributable to the action against that defendant, and one-tenth of the common costs. Permission to appeal was granted by Males J.
2. This appeal is limited to a review of Master Simons' judgment and Order. The Court will only intervene on an appeal of this nature if satisfied that the decision of the lower Court is "wrong": see CPR r.52.11(3).

Essential Factual Background

3. The claimant is the widow and personal representative of the estate of Mr Brian Haynes who died of lung cancer on 12^th March 2009. Exposure to asbestos dust was a material cause of death. Upon investigation, ten employers were discovered to have employed Mr Haynes, and proceedings were issued against all ten of them. As previously stated, the Department is the eighth defendant.
4. On 11^th June 2012 those acting for the claimant made what they described as a Part 36 offer to the Department to settle the claim in the sum of £18,000 plus costs. It is relevant to observe that the total value of the claim against all ten Defendants was placed at £195,000, and that liability could only be several, not joint and several. One might therefore draw the inference that the claimant's solicitors were hoping to recover just under 10% of the total value of the claim from the eighth defendant. I was told that Part 36 offers were also made to five other defendants, but that none of these was accepted.
5. Submissions were made to me on the wording of the offer. I therefore set out the terms in which the offer was made, as follows:

"We now have our client's instructions to put forward an offer to settle this claim against your client pursuant to Part 36 CPR in the sum of £18,000 plus standard costs. The amount is net of benefits in full and final settlement of her claim.

…

This offer is capable of acceptance for 21 days following receipt. After which this offer may only be accepted subject to agreement for costs."

6. On 3^rd July 2012, which was just on the cusp of the expiry of the 21 day period which was mentioned (although nothing turns on this), those acting for the Department accepted 'your client's Part 36 offer (dated 11 June and received on 12 June) of £18,000 in full and final settlement of the claim against my client. I note that this offer is net of benefits and I confirm that my client will pay your client's costs in pursuing my client to date to be subject to assessment if not agreed'.
7. The claims against the other nine defendants were then abandoned, proceedings having been issued but never served. The claimant lodged a bill of costs in the sum of £58,097.31.
8. That amount was disputed by the Department, and a preliminary issue appears to have crystallised as to the basis of its liability. The claimant's contention, in essence, was that she was entitled to all the reasonable costs she had incurred, and that they should not be disaggregated, apportioned, or divided. The Department's contention, in a nutshell, was that, given that liability for the injury was several, that principle should be conveyed into the proportion of the costs which were payable by it as admitted tortfeasor.
9. The matter first came before Costs Officer Lambert. I was informed that he carried out a full detailed assessment on all the papers. He accepted the Department's contentions. When the matter came before Master Simons on a rehearing, it appears that for whatever reason the claimant's solicitors had failed to lodge the relevant files; all that the SCCO had was the bill, the Points of Dispute etc (these have been included in the appeal bundle). Master Simons refused the claimant's application for an adjournment and proceeded to uphold Costs Officer Lambert's Order. A transcript of the Judgment is available. Master Simons based his decision on the divisible nature of the underlying condition (viz. asbestos-related lung disease, c.f. mesothelioma). He also rejected the claimant's subsidiary argument that she was entitled to a detailed assessment, effectively on a line-by-line basis, because that would be disproportionate, and in any event could not be achieved in view of the non-compliance with the Costs Practice Direction.

Relevant Provisions of the Civil Procedure Rules

10. CPR r.36.10 provides:

"(1) Subject to rule 36.10A and to paragraphs (2) and (4)(a) of this rule, where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror.

[neither paragraph (2) nor (4)(a) is of any relevance here: the former, because the Defendant did not make a Part 36 offer; the latter, because the offer was not made less than 21 days before the start of the trial]

(3) Costs under paragraphs (1) and (2) of this rule will be assessed on the standard basis if not agreed."

11. CPR r.44.9 (the rule in force on 1^st April 2013: it was previously r.44.12) provides:

"(1) Subject to paragraph (2), where a right to costs arises under -

…

(b) rule 36.10(1) … (claimant's entitlement to costs where a Part 36 offer was accepted) …

a costs order will be deemed to have been made on the standard basis."

12. The Part 36 regime amounts to a self-contained code: see Gibbon v Manchester CC [2010] 1 WLR 2081 (CA). The effect of a deemed order is that the successful party becomes entitled to 100% of the costs found to be due and owing to him on a detailed assessment, and the Costs Judge has no power to vary the order: see Lahey v Pirelli Tyres Ltd [2007] 1 WLR 998 (CA).

The Rival Contentions of the Parties

13. Mr Ralph for the claimant submitted that in the particular circumstances of this case the Part 36 offer should be construed as an offer to settle the whole claim, by which he meant the claim against all ten defendants. His first alternative submission was that the term, "the costs of the proceedings" in r.36.10(1) should be interpreted as embracing the costs of proceeding against all ten defendants. His second alternative submission was that the effect of the deemed order, as generated by r.44.9, was that his client was entitled to an assessment of this defendant's costs liability which would fall to be determined with reference to considerations of reasonableness. In other words, if the claimant could show that it was reasonable to have issued proceedings against D1 or D10 or whoever, then as a matter of principle the Department should have to pay the costs referable to suing that defendant. Master Simons' approach was to view the matter through the wrong end of the metaphorical telescope or, put another way, to apply a rule of law which precluded recovery of the costs in issue on an ex ante basis. Mr Ralph repudiated the existence of such a rule of law, either generally or on the basis advanced by Master Simons, namely that this was a divisible harm case.
14. As for the general or common costs, Mr Ralph submitted that it was entirely arbitrary to apportion or divide these on the basis of a denominator equivalent to the number of defendants. What should have happened was that Master Simons should have examined the matter far more closely, and have arrived at conclusions on apportionment which were evidence-based and not mechanistic.
15. Mr Munroe for the Department submitted in the first instance that the claimant's offer did not comply with Part 36: it followed that this was a contractual arrangement reached outside the comprehensive, regulatory code mentioned in Court of Appeal authority. He relied on Master Simons' distinction between several, and joint and several liabilities. Mr Munroe contended that the term, "the costs of the proceedings", means, and can only mean, the costs of proceeding against this defendant. To contend otherwise would fly in the face of common sense and create unfair and unworkable results.
16. Mr Munroe also referred me to at least two first instance decisions (and one decision on appeal) which, he submitted, should be regarded as supporting the general rule that common or generic costs fall to be divided on a straightforward arithmetical basis. He submitted that, in any event, Master Simons had no option but to follow this approach: the claimant had failed to file evidence which might have supported a different conclusion.

Analysis

17. In my judgment, there are three issues, or series of issues, which fall to be considered in this appeal. The first issue is whether there is anything special or particular about the contractual documentation in this case which should disapply the ordinary rules regarding deemed orders, or (as the claimant has argued) should induce me to conclude that the claimant made an offer to settle the whole case, in other words the claims referable to the other defendants. The second issue is whether Master Simons was wrong to order that the Department is only liable for costs directly attributable to the action against it. The third issue is whether Master Simons was wrong to order that the Department pay one-tenth of the common costs.
18. I can dispose of the first issue expeditiously. The claimant's Part 36 offer probably did not comply with the wording of CPR Part 36, but the Department did not take that point when accepting it on 3^rd July 2012. Non-compliance was, therefore, waived and in any event cannot be raised on this appeal. The Department has not filed a Respondent's Notice.
19. As for Mr Ralph's ingenious submission that the claimant made an offer to settle what he called "all the costs", I regard that as entirely unsustainable. The submission entails removing the words "against your client" from the offer letter dated 11^th June 2012, and receives no support from other provisions of the CPR. The difficulty with this submission, and that difficulty seeps into the second issue, is that it is clear from the correspondence that the claimant was only ever intending to offer to settle her claim against the Department, leaving open the possibility of pursuing other defendants for the balance of her financial loss, and the Department was only ever intending to settle it on that basis. I am deriving the intention of the parties from the language they have used against the known factual matrix of the case, applying ordinary objective contractual principles.
20. If, for example, the claimant had pursued one or more other defendants for their rateable share of her loss, one would have expected her strongly to counter any argument advanced by those defendants to the effect that the June/July 2012 correspondence settled all the claims. Putting the point in this way serves to highlight the expedient, unprincipled nature of Mr Ralph's submissions on this issue. I should add for completeness that the claimant's grounds of appeal should probably be read as failing to cover this issue, although I would not be disposed to determine the matter solely on a pleading point.
21. The second issue turns on what is meant by the term, "the costs of the proceedings", in r.36.10(1). Here, the arguments overlap somewhat with the first issue. I have no hesitation in concluding that the term means, in this context, "the costs of proceeding against the defendant against whom the deemed order has been made". Any broader definition would achieve obvious injustice and violate the language of the rule as seen in its proper contextual setting.
22. Mr Munroe offered up an example to illustrate the point. Imagine that a late Part 36 offer is accepted, say shortly before trial, in a multi-party case. Why, Mr Munroe asks rhetorically, should the defendant in question have to pay all of the costs, even if that defendant has not caused them and/or those costs are not referable to the issues arising in the litigation with that defendant? And, I would add, what happens if the claimant or the remaining defendants wish to proceed with the action?
23. So, I entirely reject Mr Ralph's submissions on this second issue. I should make it clear that I am doing so not because there is any direct and logical connection between the divisible nature of the injury and the divisible nature of the secondary costs liability (in my view, there is none), but because the language of the rule impels a different conclusion from that he pressed on the Court.
24. This leaves the third issue, which in my judgment is more difficult.
25. My starting point is that the answer to the third issue does not depend on the meaning of "the costs of the proceedings" in r.36.10(1). At this stage of the discussion the focus has moved onto common or generic costs. These costs are capable of being accommodated within the relevant terminology of the rule, but the contest between the parties concerns the basis of what I have called disaggregation, apportionment or division.
26. I have been advised by Senior Costs Judge Hurst that common or generic costs effectively fall into two categories. First, there are the non-specific costs such as court fees, medical reports and travel expenses which would have been incurred in any event, regardless of the number of other defendants. Secondly, there are the specific costs which are, in principle, capable of identification and division. For example, if there is a conference with Counsel concerning the liability of all ten defendants, the total fee may be envisaged as ripe for division.
27. In Fourie v Le Roux and Others [2006] EWHC 1840 (Ch), in a case which did not appear to differentiate specific and non-specific costs, Warren J held that a non-scientific, broad-brush approach would be appropriate (see paragraphs 14 and 15 of his judgment). This case, along with the two first instance decisions referred to in the Solicitors Journal (20^th December 2012 edition), appear to lend support to Master Simons' approach in the instant case.
28. In Dyson Technology v Strutt [2007] EWHC 1756 (Ch), Patten J, as he then was, considered the effect of a costs order which granted the claimants the costs of the action, save that the costs referable to two matters were to be paid to the defendant. The material part of the Costs Judge's ruling was as follows:

"13. I have got to decide how I would approach common costs, and I put it in two ways. The first I call general costs and the other I call costs covering both issues. By 'general costs', I mean costs which are not specific in any way. These are costs which would be incurred anyway, even if only one of the two claims was brought. On those, the normal approach is half each. That coincides very much with the example given by Mr Justice Warren in Fourie v Le Roux, where he split travel costs: even though travel costs would be incurred in any event, nevertheless, if they have been incurred for two purposes, you should split them.

14. I am treating differently from general costs those costs which cover both issues, because here it may be possible, by examining them, to see to what extent each issue was dealt with. For this type of cost, you divide them in proportion to the time spent …"

29. Patten J disagreed with paragraph 13 of the Costs Judge's ruling, but not with the principle of paragraph 14. Specifically:

"55. On this basis the Master was wrong, I think, to divide what he identified in paragraph 13 of his ruling as general costs. The fact that those costs would have been incurred even if only the cl.19 claim had been brought requires that to be treated as costs of the action and not costs referable to the cl.18 issue. These costs are, however, relatively small in relation to the total bill and the bulk of the costs are what he described as specific or specific general costs: i.e. brief fees, refreshers, solicitors' charges for time spent in court, and the costs relating to witness statements and other pre-trial preparation.

56. It seems to me that on an application of the Medway principles the analysis contained in paragraph 14 of the Master's ruling is correct if the identification of the fees or charges for time spent in relation to work on the cl.18 claim excludes work that would have been done anyway because it also relates to the cl.19.1 claim. …"

30. Mr Ralph sought to derive assistance from this decision. On my understanding of his submissions, the non-specific costs which would have been incurred regardless of the other defendants should, at least according to paragraph 55 of Patten J's judgment, be paid in their entirety by the Department. Mr Munroe's submission was subtly different. On my understanding of his argument, the general rule was that laid down by the Costs Judge in paragraph 13 of his ruling. In other words, the general rule favoured apportionment. It was the particular circumstances of Dyson – the existence of a costs Order in precise terms - which removed that case from the application of the general rule.
31. I will be returning to these competing submissions on Dyson after I have addressed the last of the three authorities in the trilogy of decisions which were drawn to my attention on this issue.
32. In Hay v Szterbin [2010] 6 Costs LR 926, Newey J was concerned with the terms of a Tomlin Order which compromised litigation as between the claimant and three named defendants. Clause 3 of the Order provided that the third defendant would pay the claimant's costs of the action against the third defendant only. The issue was as to how common or generic costs should be apportioned or divided in the light of that Order.
33. It is right to point out that in that case no clear distinction was made between specific and non-specific common costs: these were lumped together (see paragraph 8 of the Judgment). Newey J held that those costs which were susceptible to division, as opposed to apportionment (which was inapposite as a concept, in view of Medway Oil and Storage Ltd v Continental Contractors Ltd [1929] AC 88), should be divided (see paragraphs 13-15). However, Newey J did not identify the costs which fell into the "susceptible to division" category, nor did he explain whether the requisite division was to be carried out precisely, or on the Fourie v Le Roux "rough and ready" approach. It is unclear from the Law Report whether Fourie or Dyson were cited to Newey J, but he does not mention them. In my view, Hay cannot be regarded as laying down a principle of general application which governs the instant appeal. However, Newey J did make it clear that certain common costs were amenable to division.
34. In my judgment, the most helpful authority which was drawn to my attention was Dyson. Regarding the non-specific general or common costs, the issue for me to decide is whether, as Mr Munroe submitted, what might be described as the general rule or default position was that laid down by the Costs Judge, to be disapplied by Patten J only in the light of the particular circumstances of that case.
35. I have come to the conclusion that Mr Ralph's submissions on this issue are to be preferred. The non-specific costs which I have referred to by category (see paragraph 26 above) would have been incurred in any event. In Dyson, there was an order as to costs in the claimant's favour which carved out two exceptions in favour of the defendant. In the instant appeal, there is a deemed costs order in the claimant's favour and no order either in favour of the eighth defendant or any other defendant. I cannot see that this places the instant case in any category different from Dyson. Patten J's reasoning (see paragraph 55 of his Judgment) is equally applicable to the present appeal; and, in any event, I would have arrived at the same conclusion in the absence of it.
36. I have posed to myself this thought experiment in order to test the legal principles: what would the position have been had the claimant obtained deemed costs orders against one or more additional defendants? In my view, in such circumstances – at least as regards the non-specific generic costs currently under scrutiny - the claimant would be entitled to orders against each defendant on a 100% basis leaving it to those defendants to contest issues of apportionment. True it is that as a matter of convenience or pragmatism the Costs Judge would in most cases choose to divide those costs according to the number of defendants, on the assumption that all of them are solvent, but that does not affect the correct legal analysis.
37. It follows that Master Simons' conclusion in relation to the non-specific common or generic costs, which he did not treat as a separate category, cannot be upheld, since it is wrong in principle. The matter will need to be remitted to him to identify those common or generic costs which are non-specific in the sense that they would have been incurred in any event. The claimant is entitled to these costs on a 100% basis.
38. I turn now to the issue of the specific common or generic costs, which also form part – on an undifferentiated basis – of the Costs Order made by Master Simons in this case. I suspect that the majority of the common or generic costs fall into this category. I return to Mr Ralph's submission that the approach taken by Master Simons was arbitrary. Viewing the matter in general, as opposed to case specific, terms I would be disposed to agree with him. The "rough and ready" approach favoured in at least two first instance decisions and in Fourie was deprecated by Patten J in Dyson, precisely for the reason that it was unscientific and impressionistic. The general rule must be that evidence-based decisions are required, rather than an approach which simply identifies the number of defendants.
39. But the difficulty for this claimant is that she failed to submit any evidence which would have enabled the Costs Judge to apply the sort of approach she is now contending for and which I am commending. For reasons which are unclear, the files were not submitted in line with the Costs Practice Direction. Mr Ralph sought to persuade me that an analysis of the materials which were submitted should have led Master Simons to conclude that a one-tenth division was overly coarse and simplistic, but he failed in that exercise. I simply do not know; the pleadings cannot and do not inform me one way or the other. It follows that the issue becomes this: was Master Simons acting perversely when he reverted to what might be described as "the default position" based on straightforward fractions and denominators? In my judgment, he was not. He did the best he could on the available materials and in the face of the claimant's failure properly to appraise him by evidence.
40. There is an additional factor which weighs in the balance in the instant case, that of proportionality. The general rule I mentioned in paragraph 38 above must yield in circumstances where it would be disproportionate to conduct a more punctilious exercise. Everything must turn on the facts of the individual case, but if pressed to do so I would have been slow to hold that Master Simons' decision on proportionality was clearly wrong.
41. It follows that this appeal must be allowed in part: see paragraph 37 above. The matter must be remitted to Master Simons to rule on the issue of non-specific common or generic costs. Once identified, these fall to be paid by the eighth defendant to the claimant on a 100% basis. The appeal is otherwise dismissed.
42. I would invite Counsel to agree the form of Order in the light of this Judgment. Submissions regarding the costs of this appeal and of the proceedings below should be made in writing.

Postscript

43. Since providing a copy of this Judgment to the parties in draft form, I have received submissions in relation to the form of Order and as to costs.
44. The form of Order is self-explanatory.
45. As for the costs of this appeal, I have awarded the Claimant one-third of her costs to be assessed by Master Simons if not agreed. The Claimant has succeeded on an issue in relation to which the majority of the costs are not attributable. I have considered the terms of the offers which were made 'without prejudice save as to costs', but these do not affect the outcome because neither party has achieved a result better than her or its offers in these appeal proceedings.
46. As for the costs below, the Claimant was ordered the pay the costs of the hearings before Costs Officer Lambert and Master Simons. In the event, the Claimant has achieved a slightly better result before me. In the circumstances, the 8^th Defendant should pay one-third of the Claimant's costs below, to be assessed by Master Simons if not agreed.
47. I recommend that the parties endeavour to compromise their remaining differences as soon as possible, to avoid further escalation of costs.