Consortium Commercial Developments Ltd and Another v Prestigic Holdings Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Master Fontaine |
| Judgment Date | 04 June 2014 |
| Judgment citation (vLex) | [2014] EWHC J0604-2 |
| Docket Number | No: HQ12X01287 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 04 June 2014 |
[2014] EWHC J0604-2
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand
London
WC2A 2LL
Master Fontaine
No: HQ12X01287
Mr Tim Penny (Instructed by Tubervilles Solicitors) appeared on behalf of the Claimant
Mr Andrew Lenon QC (Instructed by Stevens Drake) appeared on behalf of the Defendant
Approved Judgment
Wednesday, 4 June 2014
This is the defendants' application by an application notice dated 9 April 2014 for an order that the first claimant, Consortium, pays the costs of these discontinued proceedings on the indemnity basis. The application is supported by the fourth statement of Ian Price, dated 2 May 2014, responded to by the fifth witness statement of William Fattal and replied to by the fifth witness statement of Ian Price.
The background to the claim is a joint venture between the first claimant and the first defendant, which involved property purchase and development. The second claimant is a special purpose vehicle formed for the purchase of commercial premises in Ashton-under-Lyme, Manchester, and the second claimant is the director of the first defendant and was also at the time the proceedings were issued, the sole director of the second claimant.
Amongst the transactions which the joint venture partners were involved in was the purchase of the commercial property in Ashton-under-Lyme in March 2006. At the very end of the limitation period, on about 28 March 2012, these proceedings were issued by the claimants, alleging that the claimants had been induced to invest in the Ashton property in reliance on negligent representations by the defendants as to the profitability of the Ashton property.
The proceedings were served on 27 July 2012 at the end of the fourth month period permitted for service, and the matter proceeded to a week before trial. The trial was listed for commencement on 24 February 2014, but a notice of discontinuance was served on 17 February 2014. It is accepted by the claimants that in those circumstances under the rules they are liable to pay the defendants' costs, but the default position under rule 38.6 is that such costs are paid on the standard basis. The defendants make this application for costs on the indemnity basis, which application is opposed.
The parties are agreed as to the legal principles applicable to the exercise of the court's discretion in relation to an award of indemnity costs. Rules 44.2 and 44.3 set out principles to be applied generally in the exercise of the court's discretion as to costs and various authorities have addressed this issue, the most important being Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspen & Johnson [2002] EWCA Civ 879, which held that the court has a wide discretion but that costs can be awarded on an indemnity basis where the court considers that the conduct of the paying party was outside the norm. In Three Rivers v Bank of England [2006] 5 CLR 714 at paragraph 25.2, it was held that the court should have regard to all the circumstances of the case and it was confirmed that the discretion was extremely wide.
In National Westminster Bank Plc v Rabobank Nederland [2008] 3 CLR 396at paragraph 28, Sir Anthony Colman stated:
"Where one is dealing with a losing party's conduct, the minimum nature of that conduct required to engage the court's discretion would seem, except in very rare cases, to be a significant level of unreasonableness or otherwise inappropriate conduct in its widest sense in relation to that party's pre-litigation dealings with the winning party or in relation to the commencement or conduct of the litigation itself."
In this case, the fourth witness statement of Mr Price sets out in clear and detailed terms the various matters upon which the defendants rely in seeking the order for indemnity costs, which I will deal with briefly in turn.
First, the claimant's pre-action conduct is relied upon. The proceedings were issued at the very end of the limitation period, on 28 March 2012 and not served until the very end of the period for service. No attempt was made to notify the defendants of either the forthcoming claim or the claim once it was issued or any attempt to engage in any relevant pre-action protocol or relevant pre-action conduct in accordance with the rules. The defendants were unaware of the proceedings until they were served at the end of July 2012.
I am also told that Mr Fattal, who provides the witness statement on behalf of the first claimant, was the controlling body of the first claimant company and that the second defendant was the director of the second claimant and Mr Fattal had caused proceedings also to be issued in the name of the second claimant, for which he had no authority and of which the second defendant was unaware. I will come to that issue separately in a moment.
The defendants rely also on the fact that during the period between issue of proceedings and service of them, despite not having been notified of the existence of such proceedings, Mr Fattal sent an email to the second defendant, Mr Goldsmith, on 17 May 2012, in which he raised a number of issues in relation to the subject matter of the claim, namely issues on the rental space in the Ashton premises and asked questions about this but made no reference to the issued proceedings.
In Mr Price's witness statement at paragraph 22 he says that, if the practice direction on pre-action conduct had been followed, the claimants would have known earlier what case they wanted to bring, avoiding the three amendments to their statement of case that followed. They would have obtained expert evidence before issuing, so that the parties could have avoided wasting costs on at least a substantial part of the claim in respect of the pre-let space, which was dropped in the month before trial because the claimants' own expert did not support that case. They would perhaps not have issued at all if they had realised that the defendants' view at the time of the likely rental value of the vacant space at £14 per square foot could not be shown to be wrong, or at least not so wrong that no reasonable surveyor could have come to that opinion, given the factual evidence that then became clear in the proceedings.
The defendants also rely upon the lack of authority of Mr Fattal in bringing proceedings in the name of the second claimant through his then solicitors, Murphy & Co. In particular I am referred to an email between Mr Murphy, the claimants' then solicitor, to Mr Fattal dated 29 March 2012, where he refers to the bringing of proceedings, or the intended bringing of proceedings (in fact by that time they had already been brought) by the second claimant and says, "I need to ensure I have the proper authority to do so, namely to act for the second claimant, which normally means those instructions come from a director or employee authorised to instruct a solicitor. In this case it seems Mr Goldsmith is the only director and you are not an employee. I appreciate that you are probably a beneficial owner, but there is a principle of company law that a company is run by its directors and not by its shareholders or, as in this case, the beneficial owner."
He then says, and I think it is a reference to Mr Goldsmith, "I see he was copied in to my original instructing email, so I assume he is in agreement with me acting. For good order, I would be grateful if you would ask him to confirm I am able to act on your instructions." That is a reference to intended proceedings against the vendors of the Ashton property and not to these proceedings, but is relied upon by the defendants as demonstrating that both Mr Murphy and Mr Fattal were aware that they needed the director's authority to take proceedings in the name of the second claimant but failed to do so. Both Mr Fattal and Mr Murphy signed statements of truth stating that they were duly authorised by the claimants to sign the claim form and the Particulars of Claim, and I think also further statements of case and further information served, when they both knew that the second claimant had not authorised them to bring the proceedings. Indeed, in relation to the claim form and particulars of claim, Mr Goldsmith, the sole director, was unaware of the proceedings at that time.
It is said that when proceedings were issued, the defendants pointed out to the claimants that there was no authority to bring the proceedings in the name of the second claimant, but that it took over a year for the claimants to do anything about putting the situation in order and regularising the position by making Mr Fattal a director and ratifying the proceedings.
It is also said that the claimants' conduct of the proceedings was unreasonable and conduct that merits an award of indemnity costs, or at least contributes to the pre-action conduct which the defendants say alone would entitle them to an award of indemnity costs.
The defendants first of all rely upon the three amendments to the Particulars of Claim, the last two coming shortly before trial. It is said that the case changed on a number of occasions and that, had the claimants made the proper preparation for the proceedings, including the obtaining of expert evidence, then those amendments would not have been required and that that was only one of the consequences of the failure to engage properly in pre-action conduct.
Secondly, the defendants rely upon the...
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