Lahey v Pirelli Tyres Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Dyson |
| Judgment Date | 14 February 2007 |
| Neutral Citation | [2007] EWCA Civ 91 |
| Docket Number | Case No: A2/2006/1418 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 February 2007 |
[2007] EWCA Civ 91
The Master of the Rolls
Lady Justice Arden
Lord Justice Dyson and
Master Hurst
Case No: A2/2006/1418
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM PRESTON COUNTY COURT
HIS HONOUR JUDGE APPLETON
Royal Courts of Justice
Strand, London, WC2A 2LL
Judith Ayling (instructed by Cost Advocates Ltd) for the Appellant
Jeremy Roussak (instructed by Messrs Hough, Halton & Soal) for the Respondent
Hearing dates: 24 January 2007
this is the judgment of the court.
1. This is a second appeal which raises the question whether a costs judge has the jurisdiction at the outset of a detailed assessment of costs to order that a paying party must pay only a proportion of the costs that are ultimately assessed to be payable (“the assessed costs”). The issue arose in the present case in the context of a detailed assessment following the claimant's acceptance of a payment made by the defendant under CPR Part 36. But the point can also arise in the context of a detailed assessment following the acceptance of a Part 36 offer and following an order for costs already made after a trial, where the court has not made an order under rule 44.3(6)(a) allowing only a proportion of the costs of the successful party.
The facts
2. The claim arose from a personal injury suffered by the claimant during the course of his employment by the defendant. On 7 September 2003 and before proceedings were started, the defendant offered £5,000 in settlement. This offer was not accepted. Proceedings were issued on 31 March 2004. The claim was quantified at approximately £150,000. On 13 September 2004, the defendant made a Part 36 payment of £2,000. On 7 January 2005, this was increased to £4,000. On 27 January 2005, the claimant accepted the £4,000. He thereby became entitled to his costs of the proceedings up to the date of serving notice of acceptance on the standard basis if not agreed: see rule 36.13(1) and (4).
3. The claimant's solicitors started proceedings for a detailed assessment. The total sum claimed in the bill of costs was £27,029.63. This figure included a 75% success fee and disbursements. The element for solicitor's base profit costs was £11,487.
4. The defendant served points of dispute. He said that the success fee should be reduced to 25%. He also contended that the solicitors' costs of £14,279.50 were disproportionate to the settlement figure of £4,000 and that the manner in which the claim had been conducted by the claimant's solicitor had led to disproportionate costs, so that the costs judge should only allow those costs that were necessary, following the general guidance given in Lownds v Home Office [2002] 1 WLR 2450. He said that the claim as originally advanced was in respect of a repetitive strain injury. Later, this claim was abandoned and replaced by one based on an injury allegedly suffered as a result of an incident on 2 April 2001. The claimant's medical evidence did not support this revised case and the trial was abandoned on 20 January 2005. The defendant also relied on the fact that he had made the offer of £5,000 before the issue of proceedings, a figure less than that eventually accepted by the claimant.
5. The detailed assessment was conducted by District Judge James on 21 February 2006. A preliminary issue was raised before the judge. Unfortunately, the issue was not reduced to writing, and this has given rise to considerable confusion. Indeed, there even seemed to be disagreement between counsel in their skeleton arguments in this appeal as to the terms of the preliminary issue. This is most unfortunate. What happened in this case shows how important it is in any form of proceedings to formulate a preliminary issue with care and precision and then reduce it to writing.
6. It is now common ground that, at the outset of the hearing, the defendant asked the district judge to order, before embarking on the detailed assessment, that the claimant should be awarded only 25% of the assessed costs. The district judge decided to determine as a preliminary issue whether he had jurisdiction to make such an order. The defendant's principal argument that such jurisdiction existed was based on rule 44.3, but it seems that rule 44.4 and 5 (and possibly 44.14) were relied on as well. The district judge said that he was not satisfied that these rules gave him the necessary jurisdiction when carrying out an assessment consequent upon an automatic order for costs following acceptance of a Part 36 payment. He said:
“13. I am satisfied therefore that the regime is clear, namely that if the Defendant elects to make a payment in without any conditions as to costs, and that is accepted by a Claimant within the appropriate timescale, then the Claimant is entitled to his costs, his full costs, subject only to any reduction that will arise during the usual assessment process. In those circumstances, I do not accept that there is any power for the Court, never mind whether it should be done, to order any reduction in the incidence of the costs arising out of the Part 36 payment and its acceptance within time.
14. Having dealt with that, we then have to go on to the next point, which will be addressed by Mr. Vincent, it seems to me, of the general terms, and that is the question of proportionality, because we are now going on with the assessment of the costs as it has now been put to me by the Claimant in the bill.”
7. Having given judgment on the preliminary issue, the district judge carried out the detailed assessment of the bill of costs line by line in the usual way. He found that the bill as presented was disproportionate and applied the higher standard of necessity (rather than reasonableness) enunciated by Lord Woolf CJ in Lownds: see further paragraph 14 below. He reduced the bill to £15,182.71 inclusive of VAT. There was no appeal from this part of his decision. Indeed, the defendant's skeleton argument accepts that it was “an unimpeachable and rigorous assessment of the individual items in the bill”.
8. The defendant was given permission to appeal by His Honour Judge Baker on 24 March 2006. Judge Baker said that the preliminary issue was whether the district judge “may have regard to the conduct of the parties and to the proportionality between the costs and the matters in issue in the proceedings”. This plainly was not the preliminary issue decided by the district judge and is a manifestation of the confusion that resulted from the failure to define the issue and record it in writing.
9. The appeal was heard by His Honour Judge Appleton. On 6 June 2006, he dismissed the appeal. He said that CPR 44.3 was irrelevant and could not be relied on to confer the necessary jurisdiction. He concluded that the district judge reached the right conclusion for the reasons that he gave.
10. Brooke LJ gave permission to appeal to this court because he thought that it raised an important point.
The relevant rules of the CPR
11. “ Court's discretion and circumstances to be taken into account when exercising its discretion as to costs
44.3
(1) The court has discretion as to—
(a) whether costs are payable by one party to another;
(b) the amount of those costs; and
(c) when they are to paid
….
(4) in deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including—
(a) the conduct of all the parties;
(b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and
(c) any payment into court or admissible offer to settle made by a party which is drawn to the court's attention (whether or not made in accordance with Part 36).
(Part 36 contains further provisions about how the court's discretion is to be exercised where a payment into court or an offer to settle is made under that Part.)
(5) The conduct of the parties includes—
(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed any relevant pre-action protocol;
(b)whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c)the manner in which a party has pursued or defended his case or a particular allegation or issue; and
(d) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.
(6) The orders which the court may make under this rule include an order that a party must pay –
(a) a proportion of another party's costs;
(b) a stated amount in respect of another party's costs;
(c) costs from or until a certain date only;
(d) costs incurred before proceedings have begun;
(e) costs relating to particular steps taken in the proceedings;
(f) costs relating only to a distinct part of the proceedings; and
….
Basis of assessment
44.4
(1) Where the court is to assess the amounts of costs (whether by summary or detailed assessment) it will assess those costs—
(a) on the standard basis; or
(b) on the indemnity basis,
but the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount.
…
(2) Where the amount of costs is to be assessed on the standard basis, the court will—
(a) only allow costs which are proportionate to the matters in issue; and
(b) resolve any doubt which it may have as to whether costs were reasonably incurred or reasonable and proportionate in amount in favour of the paying party.
(Factors which the court may take into account are set out in rule 44.5.)
….
Factors to be taken into account in deciding the amount of costs
44.5
(1) The...
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