Smiths Ltd v Middleton
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE O'CONNOR,SIR DENYS BUCKLEY,LORD JUSTICE BALCOMBE |
| Judgment Date | 20 December 1985 |
| Judgment citation (vLex) | [1985] EWCA Civ J1220-13 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 85/0889 |
| Date | 20 December 1985 |
[1985] EWCA Civ J1220-13
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LIVERPOOL DISTRICT REGISTRY
Royal Courts of Justice
Lord Justice O'Connor
Lord Justice Balcombe
Sir Denys Buckley
85/0889
&
MR T. SCOTT-BAKER, Q.C., and MR B. K. LEVY, instructed by Messrs Barlow Lyde & Gilbert, appeared for the Appellant (Defendant).
MR J. M. PRICE, Q.C., and MR J. D. NEWTON, instructed by Messrs Wilson Cowie & Dillon (Wirral), appeared for the Respondent (Plaintiff).
The trial of these consolidated actions lasted for forty-five days spread over three periods in January. June and November of 1984. The plaintiffs had claimed sums in excess of £300,000 from the defendant. On 12th December 1984 the learned judge gave judgment for the plaintiffs in the sum of £13,176 which, together with interest of £8,711.62, made up a sum of £21,887.62. On 27th February 1985 the learned judge heard argument on the question of costs. On 1st November 1983 the defendant had paid £25,000 into court and on 16th January 1984 increased, that sum to £35,000. The payments into court were made "in satisfaction of all the causes of action in respect of which the plaintiffs claim". The plaintiffs submitted that the ordinary consequences of recovering less than the sum of money in court should not follow because the payment into court was bad as this was not an action for debt or damages and so no valid payment into court could be made under Order 22 rule 1. The defendant, while accepting that one of the three actions consolidated claimed an account only, submitted that, as the other two actions were for damages, the payment in was valid. In the alternative he submitted that if there was any technical defect in the payment in, the court should treat it as equivalent to a Calderbank letter 1976 Fam. 93 and in either event follow the usual practice and order the plaintiffs to pay the costs subsequent to the date of payment in.
The learned judge held that the payment in was technically out of order, was not an order of the Calderbank type but nevertheless was something that he had to take into account and, for reasons which I shall have to state in detail later, he ordered the defendant to pay the plaintiffs' costs up to the date of the first payment in and ordered that thereafter there should be no order as to costs. Leave to appeal against the order for costs was refused. Because of the way in which the refusal was expressed, the defendant concluded that the learned judge may have been under the misapprehension that the defendant could apply to the Court of Appeal for leave to appeal as in other cases where an application to the trial judge is a prerequisite of such application. On 26th March 1985 there was a further hearing before the judge in which the defendant renewed his application for leave to appeal against the costs order. The learned judge refused leave.
The defendant's appeal to this court is confined to the matter of costs. The plaintiffs take a preliminary objection that we have no jurisdiction to entertain the appeal. It is well known that for over a hundred years the Court of Appeal has been prohibited by statute from entertaining an appeal on costs only unless the trial judge has given leave so to do. The present statutory provision is found in Section 18(1)(f) of the Supreme Court Act 1981 which provides: "18(1) no appeal shall lie to the Court of Appeal…(f) without the leave of the Court or Tribunal in question, from any order of the High Court or any other Court or Tribunal…relating only to costs which are by law left to the discretion of the Court or Tribunal".
Despite this prohibition it is common ground that the Court of Appeal can and will in some circumstances entertain an appeal as to costs only despite the absence of leave by the trial judge. On behalf of the plaintiffs Mr Price has submitted that the circumstances in which this court can entertain such an appeal are strictly limited. He submitted that the appellant must establish either (i) that the judge failed to exercise his discretion at all or (ii) based the exercise of his discretion on no material or on some extraneous matter wholly unconnected with the case. Mr Baker on behalf of the defendant has submitted that in addition the Court of Appeal can entertain an appeal where it is shown that the trial judge in making his decision on costs has acted on an erroneous view of the law. Where a judge had purported to exercise his discretion on a mistaken view of the law, it could not be a judicial exercise of discretion, and that was the same thing as saying that he had not exercised his discretion at all.
Section 51(1) provides: "Subject to the provisions of this or any other Act and to rules of court, the costs of and incidental to all proceedings in the civil division of the Court of Appeal and in the High Court, including the administration of estates and trusts, shall be in the discretion of the court, and the court shall have full power to determine by whom and to what extent the costs are to be paid…(3) Provision may be made by rules of court for regulating any matters relating to the costs of proceedings in the civil division of the Court of Appeal or in the High Court, including the administration of estates and trusts."
The relevant rules with which we are concerned are found in Order 62. Rule 3(1) provides: "Subject to the following provisions of this Order, no party shall be entitled to recover any costs of or incidental to any proceedings from any other party to the proceedings except under an order of the Court. (2) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings, the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs."
Rule 5 provides: "The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account—(a) any such offer of contribution as is mentioned in Order 16, rule 10, which is brought to its attention in pursuance of a reserved right to do so; (b) any payment of money into court and the amount of such payment."
The leading case on the powers of this court in these circumstances is Donald Campbell and Company Limited v Pollak (1927) A.C. 732. Pollak had been employed by the appellant company and its predecessor firm. Two actions were commenced against him, one by the firm claiming that he had made a secret profit in transactions with Borris Said, and the other by the company claiming an account of transactions with Said on the ground that Pollak was his partner. The actions were consolidated and the plaintiffs succeeded in both of them. The Court of Appeal ordered a new trial of both actions. The House of Lords ordered that the decision in the action by the firm should stand but confirmed that there should be a new trial of the action by the company. On the retrial judgment was given for Pollak, but the judge refused to make any order for costs in his favour on the ground that his misconduct in the action by the firm was the real reason that had caused the liquidator to bring the company's action.
The Court of Appeal allowed the appeal upon the ground that the trial judge was not entitled to take into account proceedings in the other action and had therefore no material upon which to exercise his discretion.
At that time by Order 65 rule 1 the requirement that costs should follow the event was limited to cases tried with a jury, which the company's action was not.
The proceedings in the House of Lords were protracted. The House first of all considered an objection that it was not entitled to entertain an appeal on costs only from the Court of Appeal. After fully reviewing the authorities, their Lordships held that they did have power to entertain the appeal. There are many passages in the speeches which are relevant to the present appeal. I will confine myself to citing four short passages. The first three are from the speech of Viscount Cave L.C. He said at page 740: "It would seem that, if the appeal to the Court of Appeal, which was an appeal as to costs only, was competent notwithstanding the statutory prohibition of such appeals, the appeal to this House must be equally competent notwithstanding the rule of the House which prohibits such appeals."
At page 741 he said: "My Lords, if the authorities are carefully examined, I think it will appear that there is no rule of the House which prevents a party from asking to have a decision reviewed on the ground that it is wrong in law, even though the only result of a reversal of the decision would be to alter the incidence of costs. In my opinion, the true rule is that, while this House will not review an exercise of discretion as to costs, it will not refuse to entertain an argument that an order as to costs is founded on an error of law."
Lastly, at page 747 he said: "that in this House, as in the Court of Appeal, an appeal from a discretionary order as to costs will not be received, except, perhaps, in cases where there is also a bona fide appeal on merits; but (3.) that when it is alleged that the Court of Appeal in dealing with costs has fallen into error on a point of law which governs or affects costs, an appeal on that question will be heard. There are (as will have been seen) many cases in which an appeal under...
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