Kotonou v National Westminster Bank Plc (Costs)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Chadwick,Lord Justice Lloyd,Mr Justice Stanley Burnton |
| Judgment Date | 26 February 2007 |
| Neutral Citation | [2007] EWCA Civ 223 |
| Docket Number | Case No: 1) A3/2006/1474, 2) A3/2006/1474(Z), 3) A3/2006/1475 |
| Court | Court of Appeal (Civil Division) |
| Date | 26 February 2007 |
[2007] EWCA Civ 223
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JULES SHER QC)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Chadwick
Lord Justice Lloyd and
Mr Justice Stanley Burnton
Case No: 1) A3/2006/1474, 2) A3/2006/1474(Z), 3) A3/2006/1475
MR A GOURGEY QC (instructed by Messrs Berwin Leighton Paisner LLP) appeared on behalf of the Appellant in 1) & 2) and on behalf of the Respondent in 3).
MR N BACON (instructed by Messrs JW Reeves & Co) appeared on behalf of the Appellant in 3) and on behalf of the Respondent in 1) & 2).
The appeal before the court under reference 2006/1474 is from paragraphs 4 and 5 of the order made on 19 June 2006 by Mr Jules Sher QC sitting as a deputy judge of the High Court in proceedings HC04CO1190 (“the guarantee proceedings”) brought by National Westminster Bank Plc against Mr Angeli Kotonou for payment under a guarantee dated 12 July 2001. The order of 19 June 2006 was concerned only with the costs of those proceedings. By paragraph 4 of that order the judge ordered that the bank, as claimant, should pay 50% of Mr Kotonou's costs of the case including counterclaim; and by paragraph 5 of the order he ordered that Mr Kotonou, as defendant, should pay 50% of the bank's costs of the case. Permission to appeal from those two paragraphs of that order was granted by Lloyd LJ on 27 September 2006.
Paragraphs 1 and 2 of the order of 19 June 2006 in the guarantee proceedings required Mr Kotonou to pay costs which had been reserved of hearings before Master Bragge on 21 February and 25 April 2005. Paragraph 3 provided that, subject to paragraph 2, there should be no orders as to the costs reserved by orders of Pumfrey J dated 3 May, 6 May, 27 May and 1 July 2005. Permission to appeal from paragraph 3 of the order in the guarantee proceedings was refused by Lloyd LJ on 27 September 2006 after consideration on the papers. Mr Kotonou renews the application for permission to appeal, as he is entitled to do, in relation to paragraph 3 of the order. That renewed application is also before the court.
On the same day, 19 June 2006, Mr Sher made an order for costs in related proceedings (“the mortgage proceedings”)—reference HC05CO1080—brought by Mr Kotonou and his wife, Mrs Deborah Kotonou, against the bank seeking declarations as to the true construction of a mortgage, also dated 12 July 2001, in respect of property known as Domani, Mount Park Road, Harrow on the Hill, Middlesex. Paragraph 1 of the costs order in the mortgage proceedings reflected paragraph 3 of the order in the guarantee proceedings: that is to say, there should be no order as to costs reserved by the orders of Pumfrey J dated 3 and 6 May, 27 May and 1 July 2005. Paragraph 2 in the costs order in the mortgage proceedings ordered the bank to pay the claimant's costs of the case in those proceedings. By an appellant's notice under reference 2006/1475 Mr and Mrs Kotonou seek to appeal paragraph 1 of the order of the 19 June 2006 made in the mortgage proceedings. There is no appeal from paragraph 2 of that order. Permission to appeal from paragraph 1 of the order in the mortgage proceedings was also refused by Lloyd LJ on 27 September 2006 after consideration on the papers. Mr and Mrs Kotonou renew their application for permission to appeal and that renewed application is also before the court.
The guarantee proceedings were heard before Mr Sher QC over some nine days in March 2006. They were heard with the mortgage proceedings; but the mortgage proceedings seem to have occupied little more than an hour or so of those nine days. The substantive judgment in the mortgage proceedings, [2006] EWHC 1021 (Chancery), was delivered by Mr Sher on 12 April 2006; although, as he said, those proceedings were no more than ancillary to the guarantee proceedings which had been commenced a year earlier. But as the judge also observed, the dispute as to the proper interpretation of the mortgage was unaffected by the substantial issues of fact in the guarantee proceedings and so he felt able—and was urged—to give his judgment on that question of construction at an early opportunity.
The question in the mortgage proceedings was whether the property charged was security only for a maximum amount of £425,000—being the amount of a loan made by the bank to Olympic Resources and Services Plc (referred to as ORS in the judgment) repayment of which had been guaranteed by Mr Kotonou under the guarantee of 12 July 2001—or was security also for (1) the amount of interest on that loan “from demand hereunder” and (2) the bank's costs and expenses on a full indemnity basis incurred in connection with the enforcement of the mortgage. It was said that those two additional elements, if added to the loan, would have the effect of increasing by 100% or thereabouts the amount for which the property charged stood as security. That had the consequential effect that, if the bank's contention was correct, there was little equity in that property on which Mr Kotonou could draw for the purposes of funding the guarantee proceedings. The judge decided that issue of construction in favour of Mr and Mrs Kotonou on the 12 April 2006. The declaration sought is contained in an order which was not made until 22 May 2006. By that order the costs of the mortgage proceedings were reserved.
The substantive judgment in the guarantee proceedings was handed down on 22 May 2006. The judge had to decide in those proceedings whether certain representations had been made by or on behalf of the bank; any one of which, if made, would have had the effect that the guarantee should be set aside. The judge found against Mr Kotonou's case on what he described as the first representation—paragraphs 32 to 38 of his judgment—and on three further representations introduced by amendment on the second day of the trial, summarised at paragraph 39 and discussed at paragraphs 41 to 81 of the judgment. A convenient synopsis of the judge's findings is set out at paragraphs 81 to 84 of his judgment. It is sufficient, I think, to indicate that the judge dismissed the allegations that the representations were made as alleged or at all.
The fifth and final representation alleged—again, added by amendment on the second day of the trial—was to the effect that an officer of the bank dealing with the ORS account (Mr Wilson) had represented to Mr Kotonou that, if the guarantee and the mortgage were put in place, then the ORS account would continue to be dealt with within the bank by himself and by his subordinate Mr Brown, the account manager, and would not be in danger of immediate transfer to the specialised lending services (SLS) department of the bank.
The judge examined that issue with obvious care at paragraphs 85 to 93 of his judgment. He held that the representation was made. He went on to hold that the representation as to non-transfer to SLS was of importance to Mr Kotonou in making his decision whether or not to execute the guarantee: paragraphs 94 to 107 of the judgment. Although true at the time when made, the representation was a continuing representation which had ceased to be true at the date when the guarantee was executed on 12 July 2001. There had, in fact, been a last minute change of mind on the part of Mr Wilson: see paragraph 108 of the judgment. By that date, 12 July 2001, Mr Wilson had decided to refer the ORS account to SLS.
On the basis therefore that there had been a change in the bank's intention between the time when the representation as to intention was first made and the time when the guarantee was executed—a change in intention which had not been disclosed to Mr Kotonou—Mr Kotonou was entitled to succeed in his claim to have the guarantee set aside. Accordingly, by an order made in the guarantee proceedings on 22 May 2006 the bank's claim on the guarantee was dismissed. The guarantee was set aside and the costs of that claim and counterclaim were reserved.
Costs of both the mortgage proceedings and the guarantee proceedings were argued before the judge on 22 May 2006. He delivered his judgment on costs on 19 June 2006. At paragraph 1 of that judgment he identified five heads of costs for consideration.
1. Costs of the mortgage proceedings;
2. (a) Costs of hearings before Master Bragge on 25 February 2005;
(b) Costs of hearing before Master Bragge on 5 April 2005;
(c) Costs of hearings before Pumfrey J on 3, 6 and 27 May and
1 July 2005;
3. Costs of the guarantee proceedings.
As I have said, the judge awarded Mr and Mrs Kotonou their costs of the mortgage proceedings. He required Mr Kotonou to pay the costs of the hearings before Master Bragge. There is no appeal from those parts of his order. He made no order as to costs of the hearings before Pumfrey J. Mr and Mrs Kotonou seek, in each set of proceedings, permission to appeal from that order. The judge made a split order for costs of the guarantee proceedings and that is contained in paragraphs 4 and 5 of the costs order, in those proceedings in respect of which Mr Kotonou has permission to appeal.
I will consider, first, the renewed application for permission to appeal from the judge's orders in both the mortgage and the guarantee proceedings: that is to say, that there be no order for the costs of the hearings before Pumfrey J. The judge explained the factual position at paragraph 11 of his...
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