Mr Anup Shah v Mr Ketan Shah
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Collins Rice |
| Judgment Date | 21 June 2021 |
| Neutral Citation | [2021] EWHC 1668 (QB) |
| Date | 21 June 2021 |
| Docket Number | Case No: QA-2020-000213 |
| Court | Queen's Bench Division |
[2021] EWHC 1668 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ON APPEAL FROM THE COUNTY COURT AT CENTRAL LONDON
ORDER OF HHJ SAGGERSON DATED 22 OCTOBER 2020
CLAIM NUMBER E25YJ950
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HONOURABLE Mrs Justice Collins Rice
Case No: QA-2020-000213
Mr Stephen Goodfellow (instructed by Bishopsgate Law) for the Appellants
Mr Yash Bheeroo (instructed by CVS Law) for the Respondents
Hearing date: 26 th May 2021
Approved Judgment
Introduction
This is an appeal against a costs decision.
The parties are caught up in an intense and protracted family dispute. Amongst other things, they had been litigating over an apartment in Goa, India. They settled one round of that argument by agreement, the terms of which were incorporated by consent into a County Court Order dated 14 th December 2016. That required the Appellants to ‘take all necessary steps’ to transfer their ownership of the apartment to a company nominated by the Respondents by a certain date. The Respondents later brought an action claiming breach of that obligation and seeking damages in the order of £30,000.
The claim went to trial in the County Court in October 2020. The Judge found the Appellants in breach of their obligation. He awarded the Respondents nominal damages of £10. He invited written submissions on costs, which the parties made.
By a judgment of 22 nd October, the Judge ordered the Appellants to pay the Respondents their costs. The Respondents had made a ‘Part 36 offer’ which the Judge considered operative. So he ordered the Appellants to pay costs on the standard basis up until the effective date of the offer, and on the more onerous Part 36 basis thereafter. The Appellants say he went wrong as a matter of law in doing so.
The Legal Framework
(i) Awarding Costs
The starting point is that the award of costs is at the discretion of a Judge ( CPR 44.2). In exercising that discretion, a Judge must have regard to all the circumstances of the case. Those include the conduct of the parties; whether a party has succeeded on part of its case, even if it has not been wholly successful; and whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim. The decided cases give further guidance, but are also clear that the discretion is broad, and highly fact sensitive.
The general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but a court may make a different order. Again, the caselaw gives guidance on how to identify the ‘successful’ party, including in cases where nominal damages have been awarded.
Part 36 of the Civil Procedure Rules is ‘a self-contained procedural code about offers to settle’. Its policy is to encourage settlement of disputes without recourse to litigation. One of the ways it does that is by setting out the components and procedure for parties to make settlement offers the refusal of which can have adverse costs consequences. Where a claimant has made a Part 36 offer, the defendant does not accept it, and the case goes to trial, then if judgment is given against the defendant which is at least as advantageous to the claimant as the proposals contained in the claimant's Part 36 offer, the costs penalties set out in CPR 36.17(4) will fall on the defendant. Those consequences are mandatory, unless a court considers it would be ‘unjust’ to impose them. The caselaw confirms that the test of injustice sets a high bar or ‘formidable obstacle’ for a defendant ( Smith v Trafford Housing Trust [2012] EWHC (Ch) 3320 at [13]).
In cases involving effective Part 36 offers, the award of costs will be a two-part process. The offer will contain a date at which a failure to accept it will trigger the costs penalties. Costs arising after that date fall to be assessed on the more onerous Part 36.17 basis. Costs arising before that date fall to be assessed on the usual CPR 44 basis.
(ii) Appeals Against Costs Decisions
The breadth of the discretion under CPR 44.2, and conversely the specificity and mandatory nature of the Part 36 code – and the extent to which both turn on the factual matrix of any given case and the manner in which it has been conducted – have led the Court of Appeal to sound a distinct note of caution in its guidance as to how appellate courts are to approach costs appeals ( Webb v Liverpool Women's NHS Foundation Trust [2016] EWCA Civ 365). An appeal court:
must exercise self-restraint in substituting its views for the views of the judge who has the feel of the case he has tried, as well as knowledge of its progress and nuances of detail which are not suitable for an investigation on an appeal concerning costs.
More specifically, an appellant will need to show that a judge:
erred in principle, took into account matters which should have been left out of account, left out of account matters which should have been taken into account, or reached a conclusion which is so plainly wrong that it can be described as perverse.
One way of testing that last point is to ask whether a Judge's decision is ‘ wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale’ ( AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1991] 1 WLR 1507 at 1523).
Procedural History
(i) The Respondents' Part 36 Offer
The trial of the Respondents' claim had originally been listed for November 2019, and the parties had prepared themselves for trial on that basis. That date was however vacated for administrative reasons, and the trial was not reinstated until October 2020.
The Respondents meanwhile made a Part 36 offer on 21 st April 2020. They offered to settle their claim for the nominal sum of £1. The terms included the payment by the Appellants of the Respondents' costs to date. Substantial costs had already been incurred. Both parties' costs budgets had been set above £100,000, and the Respondents' costs to date then stood at more than £200,000.
The Appellants were given 21 days to accept the offer. That expired on 12 th May, which was therefore the point at which the CPR 36.17(4) costs consequences would be triggered. The Appellants did not accept the offer.
(ii) The Award of Nominal Damages
The County Court judgment of 14 th October, handed down shortly after the end of the trial of liability, found the Appellants in breach of their legal obligations, but observed that whether damages were recoverable was ‘another matter’. In fact the Judge had already informed the parties at the close of the proceedings on 13 th October of the result on liability and quantum.
There were two aspects to the damages claim. The first related to the delay in the transfer of the apartment. The terms of the settlement Order had been that the Appellants were to transfer the apartment not directly to the Respondents but to a company nominated by them. The arrangement between the Respondents and the company about the apartment was complicated and apparently artificial. The Respondents were claiming for a form of notional monthly rental income to be realised from the (untransferred) apartment which was in fact a notional interest rate on a notional sum owed by the company to the Respondents attributed to a notional value of the apartment (which bore a relationship of some sort to the costs of the settled litigation). In his judgment, the Judge described this complicated arrangement as ‘contrived’ and hence found problems with the way in which the losses had been identified.
He also found the losses unproven. There was no valuation evidence as to what the apartment was worth. There was no evidence of prevailing interest rates. He found an ‘imbalance between the evidence and the pleading’ demonstrating ‘some contortions on the Claimants' part to justify an alleged loss’. He noted that if the Respondents had suffered loss it would be the loss of the use of the capital sum agreed as the purchase price of the apartment for the period of the delay. A ‘loss of use’ claim, he thought, was capable of being expressed as a lost monthly rental income; however in the absence of market valuation and potential rental income evidence the Judge was ‘not prepared to speculate’ on what the figures might be. His conclusion was that ‘ Because the Claimants’ case on this aspect of their alleged losses faces two ways: towards “rent” and towards “interest”, none of this has been gone into. I am simply not satisfied that this aspect of the damages claim has been adequately made out, even on balance.’
The second part of the damages claim related to legal costs. The Judge noted there was no witness evidence about this. Some invoice bundles were relied on, but there was unexplained discrepancy between the totals and the sum claimed, the periods of the invoices did not relate straightforwardly to the conveyancing history of the apartment, and there was no evidence the invoices had been paid or that any outstanding sums were liable to be paid. In these circumstances, the Judge found ‘ such evidence as there is on the legal costs, at best perfunctory, and unnecessarily so. It is not good enough to establish the claim.’
The Judge had framed his judgment in the general terms that the dispute was part of a broader background in which ‘ the parties have fallen out and lost their sense of proportion’. He concluded it in similar terms.
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McLelland v McLelland,
... In conclusion, we echo the recent observations made in Shah and another v Shah and another, [2021] EWHC 1668 (QB), at para Litigation consumes public resource. It is both discouraged and constrained by rules of court, on the basis that it should be a last resort, avoided where p......