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United Kingdom Upper Tribunal (Lands Chamber)
You are here: BAILII >> Databases >> United Kingdom Upper Tribunal (Lands Chamber) >> Selfridges Ltd v Humphries (Valuation Officer) [2009] UKUT 296 (LC) (12 March 2010)
URL: http://www.bailii.org/uk/cases/UKUT/LC/2009/RA_49_2008.html
Cite as: [2010] RA 260, [2009] UKUT 296 (LC)
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UPPER TRIBUNAL (LANDS CHAMBER) |
UT Neutral citation number: [2009] UKUT 296 (LC)
LT Case Number: RA/49/2008
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
Rating – costs – reasonable period for acceptance of sealed offer – whether sealed offer should refer to costs – assessment of costs where sealed offer accepted after substantive hearing
IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE
CENTRAL LONDON VALUATION TRIBUNAL
BETWEEN SELFRIDGES LIMITED Appellant
and
STEVEN WILLIAM HUMPHRIES Respondent
(Valuation Officer)
Re: Selfridges
398-454 Oxford Street
London
W1C 1JS
Before: AJ Trott FRICS
Sitting at:
On 9-13 November 2009
David Holgate QC and Timothy Morshead, instructed by Herbert Smith LLP, for the appellant
Timothy Mould QC and Daniel Kolinsky, instructed by the Solicitor’s Office, HM Revenue & Customs, for the respondent
The following cases are referred to in this decision:
Shevlin v Trafford Park Development Corporation [1998] 1 EGLR 155
Tague v Lancaster City Council [1999] 2 EGLR 103
Tollgate Hotels Limited v Secretary of State for Transport [2006] RVR 315
Chapter Group plc v London Regional Transport [2006] RVR 242
Colour Quest Limited v Total Downstream UK plc [2009] EWHC 823 (Comm)
Stanford Marsh Ltd v Secretary of State for the Environment [1997] 1 EGLR 178
Purfleet Farms Limited v Secretary of State for Transport, Local Government and the Regions [2002] RVR 368
Harrods Limited v Baker (VO) [2007] RA 247
Commissioner of Valuation v Jamaica Gypsum Ltd (1971) 17 RRC 4
Austin Motor Co Ltd v Woodward (VO) (1970) 16 RRC 1
John Walsh Ltd v Elliott (VO) (1972) 17 RRC 58
DECISION
Introduction
1. This is an appeal by Selfridges Limited against a decision of the Central London Valuation Tribunal dated 1 July 2008 confirming the assessment in the 2000 local non-domestic rating list of the shop and premises known as Selfridges (excluding 5th floor, 40 Duke Street), London W1C 1JS at a rateable value of £15,500,000. The effective date is 1 April 2004.
2. The appeal was heard from 9 to 13 November 2009. At the hearing the appellant argued for a rateable value of £11,060,000 and the respondent for a rateable value of £15,250,000. After the hearing had finished, but before the parties had produced their written closing submissions, the appellant accepted an offer on 17 November 2009 to settle the rateable value in the sum of £14,000,000. That offer was made by the respondent “without prejudice save as to costs” on 8 October 2009 and formed a sealed offer lodged with the Tribunal on that date in accordance with rule 44 of the Lands Tribunal Rules 1996 (as amended). While the substantive issue in the appeal has now been settled by agreement the parties did not agree the costs of the appeal, over which the Tribunal retains jurisdiction. This decision is therefore limited to the determination of those costs about which the final written submissions were received on 8 January 2010.
Chronology
3. A chronology of the relevant correspondence is set out below. Except where otherwise stated all the correspondence was marked “without prejudice save as to costs”.
(i) 8 October 2009
The respondent made an offer to agree the rateable value in the sum of £14 million. The offer was unconditional in point of time and was said to be made on the “Calderbank” basis. It did not refer to costs and gave no breakdown of the offer figure.
(ii) 9 October 2009
The appellant replied that it needed time to consider and respond to the offer. It anticipated that it would be able to do so by 15 October 2009 provided it received further information by 5 pm on 13 October 2009 about the breakdown of the £14 million (including details of the basic rate and adjustments) and the respondent’s position on costs.
(iii) 13 October 2009
The respondent provided the following breakdown of the offer:
Basic price at £142.50 per sq m £14,584,733
Additions:
Car park £ 850,000
Petrol station £ 10,000
Less:
External maintenance costs £ (346,682)
Internal costs £ (458,386)
Exceptional running costs £ (446,615)
Listing costs £ (192,500)
Total £14,000,550
Rateable value, say £14,000,000
The offer was said to be “unconditional as to costs”.
(iv) 15 October 2009 (appellant’s first letter)
The appellant said that the breakdown of the offer would need to be considered by its expert valuer, Mr How, who was unavailable until 20 October 2009. It also wanted its other experts to consider the proposed adjustments, although it expressed the hope that the figure for external maintenance costs could be agreed. It repeated its request for the respondent to clarify his position on costs saying “we consider that your client’s offer is not yet fully effective as a Calderbank offer”. The appellant said that the respondent should pay its costs up to, and including, the time of any acceptance of the offer.
(v) 15 October 2009
The respondent expressed surprise that the appellant was not able to respond to the offer by 15 October as originally stated in its letter dated 9 October. He challenged the appellant’s position on costs and said that the Tribunal retained jurisdiction over costs, the purpose of a Calderbank offer being to enable the substantive issues to be agreed without the distraction of “consequential issues such as costs”. He did not understand why the appellant’s experts needed to consider the allowances since the offer was put at a level that favoured the appellant on these issues.
(vi) 15 October 2009 (appellant’s second letter)
The appellant argued that the offer’s failure to deal with costs was incompatible with the long established guidance of the Tribunal in cases such as Shevlin v Trafford Park Development Corporation [1998] 1 EGLR 155 and Tague v Lancaster City Council [1999] 2 EGLR 103. The offer had been made late in the proceedings at a time when it was probable that the large majority of the appellant’s costs had been incurred. It was therefore unrealistic to put forward an offer that did not address costs.
(vii) 16 October 2009
The respondent repeated that he had made a valid and genuine Calderbank offer. He accepted that the appeal had succeeded and that if the offer was accepted an award of costs in favour of the appellant should follow, but the respondent did not concede that such an award should be 100% of the appellant’s taxable costs. He said:
“Our present analysis suggests that an award of 50% of your client’s taxable costs would be appropriate. We are instructed to give you an assurance that in the event that your client accepted the Calderbank offer, our client would not advance any submissions to the effect that a lower award than this should be made.
Therefore, the room for debate as to the ultimate costs award/agreement is limited to determining where on the spectrum of a full award of taxable costs to a 50% award of taxable costs in your client’s favour, an award should be made”.
(viii) 20 October 2009
Redacted letter from the appellant marked “without prejudice” containing an offer (details unknown because the correspondence was privileged).
(ix) 21 October 2009 (first letter)
Redacted letter from the respondent marked “without prejudice” in response to the appellant’s offer (details unknown because the correspondence was privileged).
(x) 21 October 2009 (second letter)
The respondent confirmed that its offer dated 8 October 2009 remained open for acceptance.
(xi) 17 November 2009
Appellant accepted the respondent’s offer “to settle the proceedings”. It noted that costs were to be the subject of separate discussion but expected a substantial costs award in its favour.
Lands Tribunal Interim Practice Directions and Guidance
4. The Interim Practice Directions and Guidance were issued on 13 May 2009. They deal with costs in paragraph 23 and, insofar as relevant to this appeal, provide:
“23.1 Under section 29 of the Tribunals, Courts and Enforcement Act 2007 the Upper Tribunal has power to order that the costs of any proceedings incurred by one party shall be paid by any other party. …
23.2 Costs are in the discretion of the Tribunal, although this discretion is qualified by particular provisions in section 4 of the Land Compensation Act 1961… Subject to what is said below the discretion will usually be exercised in accordance with the principles applied in the High Court and county courts. Accordingly, the Tribunal will have regard to all the circumstances, including the conduct of the parties; whether a party has acted reasonably in pursuing or contesting an issue, the manner in which a party has conducted their case, and whether or not they have exaggerated their claim.
23.3 The general rule is that the successful party ought to receive their costs. …
…
23.6 In any proceedings a party may make an offer marked “without prejudice save as to costs” or similar wording (usually referred to as a Calderbank offer) in respect of the subject-matter of the appeal, application or reference. It may state a period within which it will remain open for acceptance but in order to protect the offeror fully it must be unconditional in point of time. Where an offer is accepted, the Tribunal retains jurisdiction over the costs of the proceedings except to the extent that these are covered by the agreed terms.”
Issues
5. The issues in this appeal are:
(i) The reasonable date of acceptance (the relevant date) of the respondent’s offer dated 8 October 2009.
(ii) The proportion of its costs that the appellant should receive before the relevant date.
(iii) The proportion of its costs that each party should receive after the relevant date.
Summary of the position of the parties on costs
6. The appellant said that a reasonable time to consider the respondent’s offer made on 8 October 2009 was until 30 October 2009. As the appellant was successful it should have its assessed costs down to and including 30 October 2009. After that date the appellant should pay the respondent all his assessed costs except in respect of the deductions for allowances. The respondent should pay the appellant all of its assessed costs in respect of such allowances after 30 October 2009.
7. The respondent said that a reasonable time for the appellant to consider the offer that he made on 8 October 2009 was until 16 October 2009. The respondent should pay 50% of the appellant’s costs up to 16 October 2009 and thereafter the appellant should pay all of the respondent’s costs. Alternatively there should be no order as to costs. A further alternative was for the respondent to pay 50% of the appellant’s costs up to the date of the offer, the parties to bear their own costs incurred during the period from that date to the relevant date, and thereafter for the appellant to pay all of the respondent’s costs.
Issue (i): The relevant date
8. Mr Morshead submitted that the date by which the appellant reasonably should have accepted the offer was 30 October 2009. This date was 14 days after the respondent had clarified his position on costs in his letter dated 16 October 2009 and 22 days from the date of the offer.
9. The Tribunal’s Practice Directions said that the general rule was for the successful party to receive its costs (paragraph 23.3) and that the Tribunal’s discretion on the matter would usually be exercised in accordance with the principles applied in the High Court and county courts (paragraph 23.2). Court procedure was now controlled by the Civil Procedure Rules (CPR). Part 44 of the CPR dealt with the general rules about costs and, like the Tribunal’s Practice Directions, they provided that the unsuccessful party would be ordered to pay the costs of the successful party and that the court must have regard to all the circumstances in deciding what costs order to make.
10. Part 36 of the CPR dealt with offers to settle. A Part 36 offer had to specify a period of not less than 21 days within which the defendant would be liable for the claimant’s costs in accordance with rule 36.10. That rule said that where an offer was accepted within the relevant period (21 days or such longer period as the parties agreed) the claimant would be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror.
11. Mr Morshead argued that applying the court principles to the present appeal meant that the appellant should have at least 21 days in which to consider the offer. He supported this argument by reference to two decisions of Judge Rich QC, sitting as a Member of the Lands Tribunal: Chapter Group plc v London Regional Transport [2006] RVR 242 and Tollgate Hotels Limited v Secretary of State for Transport [2006] RVR 315.
12. In Shevlin and Tague the Tribunal had held that offers made “without prejudice save as to costs” should specify the costs consequences. An offer that made no reference to costs was defective for disposing of proceedings. It was not the case that a Calderbank offer made without reference to costs was “completely consistent” with the Tribunal’s Practice Directions, especially paragraph 23.6, as suggested by the respondent. The Tribunal’s guidance merely made the obvious point that if the offer did not refer to costs then the Tribunal would have to decide the question. But it was highly undesirable that this should be so and Mr Morshead submitted that the Tribunal’s Practice Directions should not be read as being inconsistent with (its own) authority.
13. In these circumstances it was proper that the appellant should have insisted upon the respondent clarifying his position on costs, which he eventually did in his letter dated 16 October 2009. Under rule 38.6(1) of the CPR a claimant may ask for clarification of a sealed offer and if this is not provided then the claimant may ask the court to make an order requiring clarification (36.8(3)). In Colour Quest Limited v Total Downstream UK plc [2009] EWHC 823 (Comm) Steel J inferred from rule 36.8:
“… that, in the event it is concluded that further information was legitimately required, the time to accept should usually be extended beyond the original date.”
Applying this principle to the present appeal, Mr Morshead submitted that it would have been appropriate to extend the time for considering the offer until 6 November 2009, ie 21 days from the respondent’s letter dated 16 October 2009. However the appellant said that 14 days from the clarification of the respondent’s position on costs, ie to 30 October 2009 (or 22 days from the date of the offer) was sufficient time for it to have accepted the respondent’s offer.
14. Mr Mould said it was clear that the respondent’s offer should have been accepted much earlier than it was, and he submitted that the date by which the appellant reasonably should have accepted the offer was 16 October 2009. The purpose of that offer was to propose an acceptable settlement of the substantive rating appeal at a time when the hearing costs could be avoided. The offer was made in accordance with the Tribunal’s guidance as to costs and was unequivocal in its terms and unconditional as to time. The appellant’s late acceptance of the offer had meant that the respondent’s principal objective of avoiding the costs of the hearing had been defeated.
15. At the request of the appellant, the respondent, on 13 October 2009, provided a breakdown of his offer. It was clear from the respondent’s letter that the proposed rateable value was based on the allowances being resolved in the appellant’s favour. The adjustments made by the respondent were those that Mr How, the appellant’s expert valuer, had himself made in his first rebuttal report dated 8 October 2009. Under these circumstances there was no justification for the appellant to consult its experts again about the allowances. By 13 October 2009 the appellant was fully informed as to the basis upon which the settlement offer had been made.
16. The appellant was wrong to assert that it would have been inappropriate for it to respond to the offer without knowing the respondent’s position on costs. The offer had been made in accordance with the Tribunal’s Interim Practice Directions which specifically referred to the “subject-matter of the appeal…” That was the whole point of a Calderbank offer; it sought to secure agreement on the substantive issues. Of course such an offer might refer to costs as well, but its failure to do so did “not justify the offeree in receipt of a Calderbank offer in prevaricating and failing timeously to give his substantive response to that offer.” The clue was in the words “without prejudice save as to costs” (Practice Direction 23.6). The Calderbank process was predicated upon costs being dealt with separately to the substantive issue and the Tribunal retained jurisdiction to consider costs once that issue had been resolved.
17. The CPR did not apply to proceedings in the Tribunal and the Tribunal could derive no real assistance from the generality of rules for making Part 36 offers within civil litigation. The 21 days general period was not a sensible guideline for acceptance of an offer that was made shortly before the start of the hearing. Thus in Stanford Marsh Ltd v Secretary of State for the Environment [1997] 1 EGLR 178 the Tribunal, Mr P H Clarke FRICS, held that an offer made eleven days before the hearing should have been accepted within five working days of receipt.
18. Mr Mould submitted that the compensation cases relied upon by the appellant were of no assistance in rating cases since a different statutory regime applied, as described in paragraph 23.3 of the Practice Directions. None of the cases cited by the appellant concerned offers made on the Calderbank basis. In rating cases the general position was covered by paragraph 23.6 which referred to offers in respect of “the subject-matter of the appeal”. The emphasis was placed upon settling the substantive issue; it would not be proportionate if this main objective were to be delayed by arguments about costs, the largest element of which, the costs of the hearing itself, could otherwise be avoided.
19. The offer was made several weeks before the hearing of the substantive appeal, the cost of which could therefore have been avoided. The appellant, when responding to the offer, made no suggestion that it required a period of 21 days to consider it. In its letter dated 9 October 2009 the appellant said it anticipated a response by 15 October 2009. In this context it was reasonable that the date for acceptance should be 16 October 2009.
Issue (i): Conclusions
20. The appellant relies upon Part 36 of the CPR as representing the principles governing offers to settle that are followed by the courts and, by virtue of paragraph 23.2 of its Interim Practice Directions, this Tribunal also. But that paragraph has two qualifications; firstly, it says that the Tribunal’s discretion on costs will usually be exercised in accordance with court practice and, secondly, it is made subject to “what is said below” in the remainder of paragraph 23.
21. Paragraph 23.2 goes on to say that in exercising its discretion the Tribunal will have regard to all the circumstances. These include whether a party has succeeded on part of their case and admissible offers to settle. Paragraph 23.3 opens with the statement that the general rule is that the successful party ought to receive their costs but is otherwise concerned only with claims for compensation for the compulsory purchase of land where particular rules apply and which are not relevant to rating appeals. Paragraph 23.6 is concerned with Calderbank offers but gives no guidance about the time within which it is reasonable for an offer to be accepted, unlike the CPR which specify a period of 21 days.
22. Mr Morshead says that the Tribunal has adopted this period of 21 days and cites two decisions of Judge Rich QC in Chapter Group and Tollgate Hotels. In Chapter Group Judge Rich said at 245 [13]:
“In my judgment it would be difficult for a claimant to argue that the period allowed for acceptance of an offer made under Part 36 of the Civil Procedure Rules, namely 21 days, was less than reasonable. If an offer so made is accepted after the expiry of such period, such offer would leave no room for the tribunal to exercise a discretion in respect of that period, but there would be little room for argument that the claimant should be entitled to any further costs thereafter.”
23. In Tollgate Hotels Judge Rich said at 319 [21]:
“In allowing three weeks [in Chapter Group] for consideration of the sealed offer I was adopting the period during which, under CPR pt 36.11, a claimant may accept a pt 36 offer or payment without needing the permission of the Court. If a sealed offer is not accepted at all, then the statutory rule requires that the claimant should pay the acquiring authority’s costs from the date of the offer unless the tribunal finds that there is special reason for a different order. It does seem to me, however, that where the claimant does accept the offer, and the tribunal has a discretion as to costs, the claimant should be entitled to the benefit of the ordinary rule that he should have the costs of the claim for a sufficient time to enable him to be advised on and to consider the offer. The choice of three weeks in the Chapter Group case was no more than an estimate of such reasonable time, which, in the circumstances of that case, was not disputed. In the present case, the time required for advice and consideration appears to have been slightly less, namely until the 3rd November 2004, on which date the claimant “declined” the sealed offer. I would award the claimant its costs to that date.”
24. I draw two conclusions from these cases. Firstly, in Chapter Group, the period of 21 days adopted by Judge Rich as a reasonable time for accepting the offer, and which was based upon the period allowed under Part 36 of the CPR, was not disputed by the parties. I do not consider that Judge Rich intended the 21 day period to be an inflexible equivalent to that contained in the CPR. Secondly, Judge Rich said in Chapter Group that it would be difficult for a claimant to argue that a period of 21 days to consider acceptance of an offer was less than reasonable. That case says nothing about the argument that such a period, given all the circumstances of a case, may be more than is reasonable.
25. In my opinion such an argument should not be excluded simply because the CPR, which do not apply to the proceedings of this Tribunal (see Purfleet Farms Limited v Secretary of State for Transport, Local Government and the Regions [2002] RVR 368 per Potter LJ at 374 [31]), require a minimum period of 21 days within which the defendant will be liable for the claimant’s costs while an offer is being considered. The fact that the Tribunal’s Interim Practice Directions say that the Tribunal’s discretion on costs will “usually” be exercised in accordance with court practice indicates to me the possibility of exception in appropriate cases.
26. One of the factors that may affect whether a shorter period than 21 days is appropriate is the proximity of the hearing at the date the offer is made. Mr Mould referred to the decision of Mr P H Clarke FRICS in Stanford Marsh in which he held that five working days was a sufficient period for the claimant to have accepted the offer:
“…having regard to the advanced stage of the proceedings in the reference.”
27. In the present appeal the sealed offer was made by the respondent on 8 October 2009 with the hearing fixed to begin on 9 November 2009 (although at the time the offer was made both parties believed that the start date was 2 November 2009). It was therefore made at a time when the parties were completing preparations for the hearing and were thus fully aware of the issues and their own positions in respect of them. Furthermore, the parties ought by then to have had in mind the kind of figure at which they might consider compromising the proceedings. Under these circumstances I think that a shorter period than 21 days would be a reasonable period to consider the Calderbank offer. In deciding how long such a reasonable period should be I have considered whether it was necessary for the respondent to explain (i) how the offer was arrived at, and (ii) its position on costs.
28. I do not think that it was necessary for the respondent to give an analysis of its offer in order for the appellant to have considered it. In a rating appeal the substantive issue is the rateable value, a single figure, and in this appeal the appellant was fully conversant with all the relevant issues and arguments at the time the offer was made. It was for the appellant to decide, in the round, whether an offer of £14,000,000 as the rateable value was acceptable. There was nothing to be gained, in my opinion, from waiting to see how the respondent had analysed this value. There was no requirement that its component parts should be agreed. What mattered was not how the respondent had reached its figure (which was likely to have been based upon different assumptions and approaches to those adopted by the appellant) but simply whether that figure was acceptable.
29. Secondly, I do not accept that, to be effective, a Calderbank offer must specify the offeror’s position on costs. Mr Morshead submitted that the respondent’s failure to clarify its approach on costs meant that its offer was defective in disposing of the proceedings. He relied upon Shevlin and Tague, which both involved compensation claims following compulsory purchase. The Member in both cases was Mr P H Clarke FRICS and the wording of his decisions is similar. In Shevlin he said at 119M:
“The general rule is that an acquiring authority should bear the costs of proceedings in the Lands Tribunal… and therefore a sealed offer which omits any reference to the claimant’s costs is weakened in effect and reduced in amount.” (Reference omitted)
In Tague Mr Clarke said at 108C:
“The general rule is that an acquiring authority should normally bear the costs of proceedings in the Lands Tribunal and therefore an offer that makes no reference to costs is defective in that respect.”
In both cases there is a conjunction between the general rule about costs (in claims for compensation for the compulsory acquisition of land) and the consequences of not referring to such costs in an offer. Insofar as the offer is “weakened” or “defective” it is only so described in the context of a general rule that does not apply to rating appeals.
30. Paragraph 23.6 of the Interim Practice Directions deals with offers marked “without prejudice save as to costs” (Calderbank offers). It is clear from that paragraph that such offers are made in respect of the subject-matter of the appeal, in this case the rateable value. To be fully protected the offer must be unconditional in point of time. The respondent’s offer was unconditional in this respect. While the paragraph anticipates that costs may be included in such offers it is clear that it is not a requirement that they should be, the Tribunal retaining its jurisdiction in this respect.
31. The absence of an offer on costs does not, in my opinion, mean that the appellant could not have reasonably considered the offer on the subject-matter of the appeal that was contained in the respondent’s Calderbank offer. The respondent’s offer dated 8 October 2009 was silent as to costs and the necessary implication therefore was that the Tribunal would retain its jurisdiction to determine costs in the event that, following acceptance of the offer, they were not agreed, with each party being free to make submissions on the issue.
32. The governing principle is that the award of costs follows the event; that award does not form part of, nor does it determine, the event itself. An offer of costs will not be taken into account when considering whether the offeror has succeeded on the substantive issues. The key objective of such an offer must be to resolve the subject-matter of the appeal; the lack of reference to costs in the respondent’s sealed offer, although an important matter to the parties given the proximity of the hearing and the significant amounts involved, did not, in my opinion, constitute a legitimate ground for the appellant to delay a timely response on the substantive issue of rateable value while it sought clarification on the point. Mr Morshead relied upon Colour Quest as authority for extending the 21 day period under the CPR where clarification of an offer is required. In my opinion any such extension was unjustified because clarification on costs should not affect the reasonable period to consider the substantive offer and I have not allowed for it in reaching my decision.
33. In my opinion the reasonable date by which the appellant should have accepted the offer was 20 October 2009, twelve days after the offer was made and the date that Mr How returned to the office. The appellant made its own (without prejudice) offer on that day and if it was in a position to make such an offer I think that it should also have been in a position to accept the offer made by the respondent nearly two weeks before. It was also, in the event, after the date by which the respondent had stated its approach as to costs.
Issue (ii): Costs prior to the reasonable date for acceptance
34. Mr Morshead submitted that the Tribunal retained jurisdiction over costs to the extent that agreement had not been reached between the parties. In his letter dated 16 October 2009 the respondent had said that, in the event his Calderbank offer was accepted, he would not seek an award of costs to the appellant lower than 50% of its taxable costs down to the date of acceptance. The question for the Tribunal was what amount, larger than 50% of its costs, should the appellant receive.
35. The appellant was the successful party and should, in accordance with the Tribunal’s practice, receive its costs since these were necessarily incurred as the price of securing a large reduction in rateable value. The only adjustment that fell to be made was to reflect the fact that the appellant’s success was the same as it would have been had it accepted the Calderbank offer earlier.
36. The appellant had been wholly successful in relation to all the allowances and largely successful in relation to quantum and the basic rate. The respondent’s adoption of a lower basic rate was to be regarded as based wholly or partly on the effects of quantum as well as the other issues going to the basic rate per square metre. Mr How had made this point in his supplementary report and Mr Baker, the respondent’s expert valuer, had said that this was the only way to reflect quantum and that it would be wrong to make a separate end allowance. Mr Morshead submitted that the appellant should receive all of its costs to the date by which it was reasonable to have accepted the offer.
37. The respondent was wrong to argue that, because it had not succeeded on all issues, especially quantum, the appellant should only have 50% of its costs before the relevant date. The settlement offer did reflect a measure of success on quantum. The costs of this aspect of the case were slight in comparison with those incurred on other elements and the respondent’s offer came late in the proceedings. The allowances had been conceded in full by the respondent despite his insistence on maintaining an open position that was at odds with his negotiating position. The respondent’s reference to the costs award of 50% in Harrods Limited v Baker (VO) [2007] RA 247 was not relevant to this appeal, the evidence on quantum being very different in the two appeals. The respondent’s approach had the effect of denying the appellant an assessment of its costs and this was wrong in principle.
38. Mr Mould submitted that although the respondent should pay some of the appellant’s costs to the relevant date, an appropriate apportionment was 50%, because the appellant had not succeeded in respect of the majority of the issues in the appeal. The breakdown of the respondent’s offer showed that he had effectively succeeded in the principal valuation significant issue of quantum, which, if Mr How’s allowance of 20% was applied to Mr Baker’s valuation, was worth over £3 million. The respondent said that the appellant should bear sole responsibility for the parties’ costs on the quantum issue. The only possible interpretation of the appellant’s acceptance of the Calderbank offer (and its timing) was that it accepted its case on quantum stood no chance of success. The respondent should not bear that proportion of the appellant’s costs which were referable to the appellant pursuing a case which was exaggerated by some £3 million of rateable value.
39. The basic rate in the Calderbank settlement was £142.50 per sq m or approximately halfway between the experts’ respective positions. The appellant’s acceptance of the offer showed that Mr How’s adjustments to the comparable basic rate had been far too low. The appellant had not been wholly successful on this issue and this should be fairly and proportionately reflected in its costs.
40. The respondent accepted that the Calderbank offer reflected allowances on internal maintenance, running and listing costs that were resolved in the appellant’s favour. However, the offer regarding external maintenance costs was in the sum of £346,682, a figure substantially lower than the £637,875 which was the allowance made in Mr How’s valuation dated 30 January 2009. The appellant had been far from wholly successful on this issue which should be reflected in the award of costs.
41. The effect of balancing all these factors should be to limit the appellant’s recoverable costs to 50% for the period before the relevant date. This figure was supported by the order for costs in Harrods where the parties agreed to a similar 50% apportionment, reflecting the success of the appellant on some issues but also the fact that it lost in respect of the most value significant item of quantum.
42. The appellant’s reliance upon the respondent’s letter dated 16 October 2009 as an offer to limit the respondent’s application for costs to 50% up to the date of acceptance was misconceived. That aspect of the offer was made in the context of correspondence that had indicated the appellant would shortly give a substantive response to the Calderbank offer which, if accepted, would have avoided a lengthy and costly hearing. The letter expressly reserved the respondent’s position in respect of the time being taken to respond to the Calderbank offer. The appellant did not accept the offer until after the hearing and matters had moved on by then. The appellant’s reliance upon the letter of 16 October 2009 was effectively an assertion that it could delay accepting the Calderbank offer for as long as it liked and still be guaranteed 50% of its costs regardless of how unreasonably it incurred costs after that date. That assertion was untenable.
43. The appellant’s suggestion that it should not be denied a detailed assessment of its costs issue by issue was self-serving and an attempt to gain reward for incurring costs on issues of marginal significance to the overall settlement of the case. The respondent’s approach had the benefit of taking a broader overview of the case and awarding costs on a basis that was fair and proportionate to the value significance of the issues at stake in the appeal.
Issue (ii): Conclusions
44. The appellant has been successful in reducing the rateable value by a significant amount and the general rule is that the successful party ought to receive their costs. But the general rule is subject to a consideration of all the circumstances, including the conduct of the parties and whether a party has succeeded on some, if not all, of its case.
45. The respondent argues that the appellant exaggerated its case by £3 million because of its approach on quantum and that this exaggeration should be reflected in the award of costs. In Commissioner of Valuation v Jamaica Gypsum Ltd (1971) 17 RRC 4 the Privy Council considered whether it should be to a landowner’s detriment that the figure he supported was less than that finally accepted. Lord Wilberforce said at 11:
“In principle their Lordships consider that a person who successfully secures a reduction in the valuation, unless this is of a minimal amount, should be entitled to his costs, and that, unless by doing so he has added to the length or expense of the proceedings, the fact that he has supported a figure which turns out to be less than that finally accepted should not be to his detriment. It is a matter of experience that there are not many cases where a valuation body, after the full enquiry which it is its duty to make, accepts a figure which is necessarily put forward before all the relevant factors have been ascertained and weighed: to confine the right to recover full costs to such cases would bear hardly on individuals.”
46. This is not to say that there should be no sanction against a ratepayer who exaggerates his case. In Austin Motor Co Ltd v Woodward (VO) (1970) 16 RRC 1 Widgery LJ said at 11:
“…I think it would be extremely unwise if any kind of set rule were established whereby such a successful appellant became entitled to all his costs. There ought to be some control exercised in the award of costs over the temptation which sometimes besets appellants to put their figure much too low. If realistic figures are cited on both sides, the opportunities of compromise are much greater and in the end time and money can be saved; and it is right if the appellant ratepayer puts his own figure much too low that that has some influence on the award of costs, even though he has a substantial success in the end.”
47. The time spent on the issue of quantum and the costs involved were not insignificant and the issue formed an important part of the hearing. But the merits of Mr How’s arguments on the point remain undecided by the Tribunal since the appellant accepted the Calderbank offer before the subject-matter of the appeal was determined. The question to be addressed under these circumstances is whether, by its late acceptance of the Calderbank offer following the testing of its evidence (and that of the respondent) under cross-examination, the appellant has effectively acknowledged that it was unreasonable to have argued for a quantum allowance at all. I do not accept that it was. Mr How sought to distinguish the facts of this appeal from those in Harrods and in my opinion that argument was a legitimate (albeit undetermined) approach. The reasons for the appellant’s late acceptance of the Calderbank offer are not known and in my opinion it would be wrong to ascribe particular motives to what was probably a commercial judgment by the ratepayer based upon a review of the appeal as a whole. As Edmund Davies LJ said in John Walsh Ltd v Elliott (VO) (1972) 17 RRC 58 at 67:
“…the investigation of different issues in rating matters cannot be put into watertight compartments when one comes to deal with the matter of costs. The exploration of one issue has its impact on others and there may occur a sort of cross-fertilisation, important features relevant to one issue becoming clear during the course of what is ostensibly the exploration of a quite different issue.”
48. The respondent argues that the appellant should also be denied its costs regarding external maintenance because it exaggerated its claim for this item which was shown as a deduction of £637,875 in Mr How’s original valuation dated 30 January 2009. However, Mr Baker made a total allowance of £250,000 for “exceptional maintenance costs” (not specified as external or internal) in his original valuation dated 26 February 2009, and thereafter made no allowance for additional external maintenance either in his expert report dated 3 July 2009 or his rebuttal report dated 25 September 2009. That is a more exaggerated position compared with the Calderbank offer on this item of £346,682 than was the appellant’s original figure.
49. I therefore make no deduction to the award of costs to the appellant (the successful party) in respect of the issue of quantum or external maintenance prior to the relevant date and I award the appellant its costs up to and including 20 October 2009.
Issue (iii): Costs after the relevant date
50. Mr Morshead submitted that the respondent should receive his costs after the relevant date except in respect of the allowances, where the appellant should receive its costs. This request was limited to external and internal maintenance costs. He said that the appellant had achieved a very sizeable allowance of £250,000 for external costs when the respondent’s position was there should be no allowance for this item. Before the respondent’s offer on 8 October 2009, which conceded that the appellant was entitled to its entire internal maintenance allowance of £458,386, the parties were at least £300,000 apart in respect of these costs and at the hearing the respondent pursued an allowance limited to £500,000 to include both internal maintenance costs and running costs (the latter being estimated at £446,615 in the respondent’s offer). The issue of internal maintenance costs and running costs had clearly been resolved in the appellant’s favour and the respondent’s decision to pursue these points at the hearing was unreasonable. Furthermore Mr Morshead submitted that the respondent’s evidence about internal maintenance costs was based upon a self-evident misunderstanding and was “entirely hopeless” leading to the appellant having to incur costs unnecessarily in order to deal with it. The appellant should receive its costs because it was the successful party within the litigation in relation to these costs, regardless of the respondent’s offer dated 8 October 2009, and because the respondent’s conduct was unreasonable in forcing the appellant to litigate about these issues at all in view of his willingness to agree the full allowances.
51. The appellant also sought to rely upon the respondent’s letter dated 16 October 2009 (see paragraph 3 (vii) above). Mr Morshead said that the meaning of this letter was unambiguous. It told the appellant that it could accept the respondent’s offer knowing that it would not face a less favourable award than 50% of its costs down to the date of acceptance.
52. The respondent went on to say in his letter dated 16 October 2009 that:
“We also reserve our client’s position fully in respect of the time your client is taking to respond to the Calderbank offer.”
Mr Morshead said that this was not directed at the assurance given earlier in the letter. That assurance was a contractual one and the respondent’s position that “matters have moved on” from when it was made was misconceived. The respondent could not unilaterally renege from his assurance; it was an integral part of the offer and of the contract of settlement that had been accepted by the appellant. Mr Mould had subsequently sought to rely upon the argument that the respondent’s letter of 16 October 2009 could only reasonably be read as a limited commitment by the respondent that he would not argue that he should pay less than 50% of the appellant’s costs relating to the period prior to the date of reasonable acceptance. But those were not the words contained in the letter, the meaning of which were clear and relied upon by the appellant.
53. Mr Mould submitted that the opportunity to avoid the costs of preparing for and appearing at the hearing were lost because the appellant was slow to accept the respondent’s offer. It did not do so until after a five day hearing. It was fair and reasonable that the appellant should bear the sole responsibility for those costs being incurred unnecessarily by both parties. The appellant should pay all of the respondent’s costs after the relevant date.
54. The appellant must be taken to have accepted the fact that the hearing was avoidable because it accepted the offer before the hearing had closed (rather than letting the hearing run its full course to determination by the Tribunal). It was not open now for the appellant to argue that particular issues should have been dealt with differently by the respondent at the abortive hearing. That was no basis for reducing the respondent’s entitlement to costs in respect of the wasted expense of a hearing process that was unnecessary and frustrated by the appellant’s late acceptance of the offer. It was untenable for the appellant to suggest that the costs referable to specific issues such as running costs after the date of reasonable acceptance should be dealt with any differently from the remainder of the wasted hearing costs.
55. The assurance given by the respondent in his letter dated 16 October 2009 was made at a time when the course of correspondence between the parties showed that the appellant was very close to responding to the Calderbank offer (it had indicated that a response would be forthcoming by 20 October 2009). The assurance was made as an indication of the respondent’s position in the event that early acceptance of that offer would avoid the costs of the hearing. The respondent reserved his position about the time the appellant was taking to respond. By the time the appellant accepted the offer on 17 November 2009 the hearing had taken place and matters had moved on considerably from those which set the context of the letter of 16 October 2009. The appellant’s continuing reliance on that letter had the effect that it could delay accepting the Calderbank offer for as long as it wanted knowing that it would be certain to receive 50% of its costs no matter how unreasonably it incurred costs after 16 October 2009. That assertion was untenable. The respondent’s letter could only reasonably be read as a limited commitment by the respondent that related to the appellant’s costs incurred in the period to the date of reasonable acceptance.
Issue (iii): Conclusions
56. I find the respondent’s arguments on this issue to be compelling. The appellant failed, without giving reasons, to accept the Calderbank offer timeously and this resulted in an unnecessary five day hearing. The costs of preparing for and attending the hearing were avoidable as from the relevant date which I have determined was 20 October 2009. The appellant gained nothing by not accepting the offer for a further four weeks. In fact by the time of the hearing the parties had agreed a figure for external maintenance costs of £250,000, considerably less than the respondent’s offer of £346,682 as detailed in its letter dated 13 October 2009.
57. The argument that the respondent should not have pursued the issue of internal maintenance costs and running costs at the hearing because it had clearly been resolved in the appellant’s favour is unattractive. The failure of the appellant to accept the respondent’s offer within a reasonable time meant that nothing had been resolved in either party’s favour apart from those issues where agreement had been reached by the start of the hearing. Internal maintenance costs and running costs were still in dispute although the respondent had made an unconditional offer. That offer was an attempt to compromise the substantive issue of the rateable value and did not necessarily mean that the respondent agreed with each component figure that it contained.
58. Mr Morshead submits that the respondent’s witness, Mr Lagos, proceeded on “a self-evident misunderstanding” and that he “maintained a number of fundamentally bad points. This was evident even without the Tribunal having to make a ruling.” Although I heard the evidence I was not in the event called upon to determine this, or any other, issue, apart from costs. The matter was not determined and the merits of the parties’ respective cases remain unresolved. Mr Morshead is wrong to suppose that I would, inevitably, have found in favour of the appellant on this point. The matter was simply undecided.
59. I must also consider the effect of the respondent’s letter dated 16 October 2009. The assurance in that letter upon which Mr Morshead relies must be viewed in context. From the paragraphs preceding that relied upon by the appellant I consider that the assurance given in the letter about the appellant’s costs was intended to relate to those costs as incurred up to the reasonable date upon which the Calderbank offer should have been accepted (20 October 2009). The respondent fully reserved his position in respect of the time the appellant was taking to respond to the offer. It is clear that the 50% figure relates to a period when, being the successful party, the appellant could usually expect to receive 100% of its costs. I do not believe that the respondent intended it to remain open as an offer after it should have been accepted. The consequences of allowing the appellant to benefit from the 50% assurance after that time are unconscionable; it would amount to giving the appellant an indemnity of 50% of its costs however unreasonable its conduct in failing to accept the offer until after the hearing had taken place.
60. In considering this issue I have had regard to, and agree with, the comments of Judge Rich QC in Tollgate Hotels where he said at 319 [23]:
“This does not however mean that a party can accept an offer so as to avoid a determination of the merits and thereby avoid the cost consequences of his delay in acceptance.”
And at 320 [24]:
“It will be a disincentive to the proper consideration of sealed offers if the claimant can rely on being able to accept it at any time without being liable to costs incurred during any period after the offer. I accept that if such an offer, which made unconditionally remains open even during the hearing, were accepted only during the hearing, that would be a special reason for an adverse order as to costs.”
In Chapter Group Judge Rich QC said at 245 [15]:
“On the other hand, in the absence of explanation as to why the acceptance was delayed, I think that the delay [of the claimants] beyond a reasonable time for acceptance must be treated as unreasonable conduct in the proceedings.”
61. These comments, when put into the evidential context of the current appeal, and the other reasons I have given above, lead me to conclude that the appellant should pay all the respondent’s costs after 20 October 2009.
Determination
62. I conclude as follows:
(i) The rateable value of the appeal hereditament is £14,000,000 with effect from 1 April 2004 as agreed by the parties.
(ii) The respondent shall pay the appellant’s costs of the appeal up to and including 20 October 2009.
(iii) The appellant shall pay the respondent’s costs of the appeal from and including 21 October 2009.
(iv) I do not accept the respondent’s alternative approaches to the assessment of costs.
(v) Each party shall pay its own costs in respect of the issue of costs.
(vi) The costs of the appeal, if not agreed, shall be subject of detailed assessment by the Registrar on the standard basis.
Dated 12 March 2010
A J Trott FRICS