Sarah Knight v Richard Knight
| Jurisdiction | England & Wales |
| Judge | Paul Matthews |
| Judgment Date | 17 June 2019 |
| Neutral Citation | [2019] EWHC 1545 (Ch) |
| Court | Chancery Division |
| Date | 17 June 2019 |
| Docket Number | Case No: D31BS660 |
[2019] EWHC 1545 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BRISTOL DISTRICT REGISTRY
Bristol Civil Justice Centre
2 Redcliff Street, Bristol, BS1 6GR
HHJ Paul Matthews
(sitting as a Judge of the High Court)
Case No: D31BS660
Richard Dew (instructed by Samuels) for the Claimants
Alex Troup (instructed by Beviss & Beckinsale) for the Defendants
Hearing date: 12 June 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is my judgment on costs, following the written judgment (under neutral citation [2019] EWHC 915 (Ch)) which I handed down on 29 April 2019 in the absence of the parties, after the trial which took place in March 2019. The trial was essentially of the issue of the beneficial ownership of the proceeds of sale of a property known as Close Court, Eddys Lane, Newport, Barnstaple, Devon. Those proceeds were held after the sale in the client account of conveyancing solicitors who had received them from the purchasers, pending the resolution of the question to whom they belonged. The rival claimants to those proceeds were the administrators of the estate of Ralph Stephen Knight, who in fact brought the claim and were therefore the claimants, and his brother and sister-in-law, who defended it. In my judgment I held that the claim brought by the claimants for a declaration that those proceeds were held on trust for them succeeded. At the hearing to decide questions of costs both the claimants and the first and second defendants were represented before me. The third defendant (joined so that she was bound by the result) took no part in the trial and was not represented at the costs hearing.
In his skeleton argument, Mr Troup, for the first and second defendants (whom I shall refer to hereafter simply as “the defendants”), says that his clients accept that they have lost, and that they do not seek to appeal. Moreover, they accept that in principle they should pay the claimants' costs of the action, and also that they should make a payment on account of those costs, which has now been agreed between the parties in the sum of £72,321.98, payable by 4 pm on 9 July 2019. The issues which still divide the parties are (i) whether an offer contained in a letter from the claimant's solicitors to the defendant's solicitors dated 27 July 2017 amounts to an offer within CPR Part 36, (ii) if so, what the consequences of that are, and (iii) if not, whether there is any other basis for the costs to be assessed on the indemnity rather than standard basis.
The offer
The letter of 27 July 2017 is headed “Part 36 Offer: Without Prejudice Save As to Costs”. The substance of the letter reads as follows:
“Following Monday's failed mediation (in respect of which privilege is not waived) we are instructed to make the following offer.
The offer is made pursuant to CPR Part 36. As such, if it is not accepted within the relevant period (see below) but is (without having been withdrawn) later accepted then your client will be liable to our clients' costs. If Administrators succeed in obtaining a greater sum at trial then your clients will be liable to our clients costs on the indemnity basis and with interest thereon at a rate not exceeding 10% above base rate together with the additional sum set out in CPR 36.17(4)(d).
The offer is to pay, from the net proceeds of sale of Close Court, the sum of £35,000. This sum is inclusive of your clients' costs, which we understand to be under £20,000. The offer also excludes any payment by your client of our clients' costs, which as you also know are around £30,000.
The remainder of the net proceeds will be paid to our client as the administrators of Steven Knight's estate.
Pursuant to CPR Part 36:
• The relevant period means a period of not less than 21 days from the date of this offer.
• The offer is made in respect of the whole claim over the net proceeds of Close Court
This offer will remain open until it is expressly withdrawn but the court's permission will be required to accept it where any of 36.11(3) applies.”
On 9 August 2017 the defendant's solicitors responded to that letter in a letter also headed “Without prejudice save as to costs”. They acknowledged receipt of the letter of 27 July 2017, but commented that it did not indicate whether the offer was intended to be a claimants' Part 36 offer or a defendants' Part 36 offer. They also said that the offer
“does not make sense in accordance with Part 36, as it refers to the sum of £35,000 being inclusive of our clients' costs…”
Those letters were written some months before proceedings were issued. So when they were written it was not yet known what would be the form of the future proceedings (if any). For example, it could have been a stakeholder claim under CPR Part 86, brought by the conveyancing solicitors in whose client account the funds were still sitting, against the various claimants to the fund, or it could have been (as in the result it was) a claim brought by one set of claimants to the fund against the other. If the form of the proceedings was the latter (as it turned out), then it was not at that time certain who would be claimants and who defendants.
CPR Part 36 or not?
Terms as to costs
Mr Troup, on behalf of the defendants, submits that the letter of 27 July 2017 does not amount to a Part 36 offer, because it contains terms as to costs. He relies on the decisions of the Court of Appeal in Mitchell v James [2004] 1 WLR 158, and in French v Groupama Insurance Co Ltd [2011] 4 Costs LO 547, [2012] CP Rep 2. In the former case, the claimants having brought an action against the defendants thereafter sent the defendants an offer to settle the proceedings, on terms, inter alia, for each party to bear its own costs. Peter Gibson LJ (with whom Potter LJ and Sir Murray Stuart Smith agreed) held that, for four separate reasons which I do not need to rehearse, the draughtsman of CPR Part 36 did not intend terms as to costs to be included in a Part 36 offer. Accordingly, the offer made in that case was not a Part 36 offer.
In the latter case, the claimant had issued her claim (for breach of contract) in March 2009. After judgment had been handed down, the defendant relied on offers made in December 2006 and February 2007 ( ie before proceedings were issued) of a sum to cover the entirety of the claimant's claims, “inclusive of interest and costs”. Rix LJ (with whom Lloyd and Toulson LJJ agreed) said:
“[39] … the offers were all embracing, so that to that extent they were clear, or at any rate the February offer was so; but, although Mr Brown on behalf of Groupama submitted, and the judge accepted, that it was inclusive of everything, including costs, it is not entirely clear to me that costs were included. However, if it was, and Mr Brown has on this appeal continued to submit then it was, then it was not to that extent a quasi Part 36 offer, for such an offer must not include an offer as to costs: see Mitchell v James…”
Mr Dew, on behalf of of the claimants, says that, notwithstanding these authorities, it is open to an offeror to include terms in the offer which limit payment of its own costs by the offeree. He relies on the decision of Hildyard J in Proctor & Gamble Co v Svenska Celluslosa AB SCA [2013] 1 WLR 1464. In that case the claimant had sold part of its business to the defendants pursuant to an agreement providing for an adjustment of the purchase price in certain circumstances. A dispute arose as to the amount of that adjustment. The claimant said it was zero, whereas the defendants said it was £19 million. The claimant sought declarations and other relief in legal proceedings. It also made an offer, expressed to have Part 36 consequences, to settle its claim on the basis that the adjustment due to the defendants was £3 million and (critically) that the claimant would be liable for the defendants' costs up to the date of acceptance. The offer was not accepted, but at trial the claimant obtained two of the three declarations it sought, and the adjustment due to the defendants was held to be less than £3 million.
The claimant sought its costs on the basis that it had made a Part 36 offer, and that the statutory consequences should follow. The judge first held that overall the claimant had been the successful party. He also held that, even though the claimant had sought declaratory relief about the extent of its liability to the defendants, formally it was nonetheless the claimant for the purposes of Part 36. Finally, the judge held that it was open to a claimant making a Part 36 offer to agree to forsake its entitlement to costs on acceptance of the offer and instead to pay the defendant his costs, and therefore the claimant's offer was compliant with Part 36.
In so deciding, the judge considered the decision of the Court of Appeal in F & C Alternative Investments (Holdings) Ltd v Barthelemy (No 3) [2013] 1 WLR 548. That was a case in which an offer to settle had been made, but deliberately and expressly “outside the terms of Part 36”. It was nonetheless sought to apply Part 36 by analogy. However, the Court of Appeal held that there was no reason or justification for extending Part 36 beyond its expressed ambit. Davis LJ (with whom both Arden and Tomlinson LJJ agreed) said:
“[63] … in my view it is not permissible wholly to discount a number of failures to comply with the requirements of CPR Part 36 as the merest technicality. Perhaps there can be de minimis errors or obvious slips which mislead no one: but the general rule, in my opinion, is that for an offer to...
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Part 36 - The Dynamic Approach To Settlement
...a party can only accept a Part 36 offer if it is validly drafted. In the recent case of Knight and another v Knight and others [2019] EWHC 1545 (Ch), the claimants' Part 36 offer was struck out by the court because it included provisions which limited the payment of costs. So, how do you av......