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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Dixon & Anor v Radley House Partnership & Ors [2016] EWHC 3485 (QB) (25 November 2016) URL: http://www.bailii.org/ew/cases/EWHC/QB/2016/3485.html Cite as: [2016] EWHC 3485 (QB)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		25/11/2016

Mr Justice Stuart-Smith:

1. This afternoon's issue arises out of the application to amend the defences made by both parties and the judgment which I gave on 17 October refusing permission to amend: [2016] EWHC 2511 (TCC).
2. In the light of that judgment, the claimants apply for the costs of the application on an indemnity basis, and for those costs to be subject to a detailed assessment with an interim payment being made.
3. There is no real dispute about the relevant principles. They are stated in many places in similar terms. For today's purposes, it is sufficient to refer to the statement of principle by Coulson J in the case of Van Oord v. All Seas Ltd. [2015] EWHC 3385 (TCC) at [27] ff, and his citation from his own decision in Elvanite Full Circle Ltd v. AMEC Earth & Environmental (UK) Ltd. [2013] 4 Costs LR 612, at [16]. In particular at sub-paras.(c) and (d) Coulson J said,

"(c) The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable. But the pursuit of a hopeless claim (or a claim which the party pursuing it should have realised was hopeless) may well lead to such an order…"

At (d) he said,

"(d) If a claimant casts its claim disproportionately wide, and requires the defendant to meet such a claim, there was no injustice in denying the claimant the benefit of an assessment on a proportionate basis given that, in such circumstances, the claimant had forfeited its rights to the benefit of the doubt on reasonableness …"

4. Similarly territory is traversed in the notes to the 2016 White Book, at p.1503. The Editors say,

"The making of a costs order on the indemnity basis would be appropriate in circumstances where the facts of the case and/or the conduct of the parties was such as to take the situation away from the norm"

citing the well-known decisions of the Court of Appeal in Excelsior Commercial and Industrial Holdings Ltd. v. Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879. The Editors continue:

"The abandonment of issues was not something which the courts should discourage where parties could be adequately compensated for work done in anticipated preparation for defending or advancing issues by a standard costs order: Catalyst Investment Group v Lewishon [2009] EWHC 3501 (Ch), Barling J. The judgment summarises earlier guidance in relation to when it is appropriate to grant costs to a successful party on the indemnity basis. Where the court is considering whether a losing party's conduct is such as to justify an order for costs on the indemnity basis, the minimum nature of the conduct required is, except in very rare cases, that there has been a significant level of unreasonableness or otherwise inappropriate conduct in its wider sense in relation to that party's prelitigation dealings with the winning party, or in relation to the commencement or conduct of the litigation itself."

5. I agree with the submission of Mr. Goodkin that the court should focus on the parties' conduct rather than simply the merits of the losing parties' position. To that effect, the note at p.1504 of the White Book says,

"When considering an application for the award of costs on the indemnity basis the court is concerned principally with the losing party's conduct of the case rather than the substantive merits of the position. The Guide to the Summary Assessment of Costs helps to clarify the distinction for the purposes of CPR Pt 44 between proportionality and reasonableness. Proportionality concerns the relationship of the costs claimed for such things as the amount of money at stake in the proceedings, the importance of the case, the complexity of the issues and the means of the parties. Whether the costs, proportionate or not, were reasonably incurred is therefore a different question. Although the two may overlap, the object of an indemnity costs order is to take proportionality out of the picture and to place on the paying party the burden of persuasion as to reasonableness: Simms v Law Society [2005] EWCA Civ 849; (2005) 155 N.L.J. 1124. The fact that a substantial part of a claimant's case had failed at the stage of summary judgment did not warrant an award of indemnity costs. The giving of summary judgment against the party, who had a hopeless case, was itself the norm. The requirement of proportionality was a useful brake on the escalation of costs and should not be lightly removed from any assessment of costs. The claimant was ordered to pay 90 per cent of the defendant's costs on the standard basis: Easy Air Ltd v Opal Telecom Ltd [2009] EWHC 779 (Ch), Lewison J."

6. Taking those two points in turn, it is clear that the degree of badness of a point may go into the scales when considering whether indemnity costs should be awarded even though the mere fact that a point has been rejected or would have been rejected on an application for summary judgment is not of itself in the normal case reason for awarding indemnity costs. What one is looking for, overall, is always something that takes the situation away from the norm, be it the nature of the application or issue being raised or the manner in which it has been raised.
7. Here, as is probably clear from my judgment, I thought that the point being taken by the defendants on the application was thoroughly bad. Whether it is right to describe it as an unarguable when Miss Lee manfully argued it for most of the day is another question, but it seems to me that it was as close to being unarguable as one is likely to get.
8. The only comfort that can be found, as I pointed out in my original judgment, is that as well as a number of authorities which went nowhere near supporting the defendants' position there was a brief mention in the decision of Warby J in Bhatti which did, on the face of it, lend support to their position. For reasons which I set out in my original judgment, I do not think that it would be right to place weight upon that passage, but it is there. The amount of comfort RHP can take from it is limited by the fact that they did not refer to Bhatti either in their application notice or in their written submissions for the application; but Bhatti was raised and considered at the hearing.
9. On the first question i.e. (whether the point was so bad that its badness goes into the scales when considering whether to award indemnity costs) in my judgment, it was so bad that the badness of the point is a feature to be taken into account. It is not of itself sufficient to justify an award of indemnity costs.
10. I therefore turn to look at the question of conduct. Here life becomes complicated because there is a significant difference between the position of RHP and the position of CRA in relation to conduct. I have been told by counsel and, of course, accept that CRA did not think of this point until it was raised by RHP issuing their proposed amendments. The worst that can be said about CRA's conduct is that they then jumped on the bandwagon, for reasons which one can understand, but reasons which were not compelling in an absolute sense. They were not obliged to follow RHP's lead. They could have taken a different course, for example writing a letter saying that, if RHP were successful, they would take the same position; but it seems to me that it is better to acknowledge that in litigation of this kind it is not particularly surprising that once RHP, as Mr.Goodkin put it, pulled the trigger, CRA went too. Certainly, that is not of itself conduct which takes their conduct out of the norm.
11. The position with RHP is different and, to my mind, difficult. I have been told by Miss Lee, and I accept, that the point occurred to her clients (by which I mean compendiously, the legal team and, maybe, insurers as well) shortly after Lewis v. Hadaway was decided; and I am told, and accept from Miss Lee, that the point arose in February 2016 at which point she considered the point with her instructing solicitors. RHP's original defence was served in March and is an entirely conventional defence. It certainly takes no point which forewarns of the steps that were then in contemplation and were taken at the beginning of April, just a week or so later. What we have in the case of RHP, which is lacking in the case of CRA, is a decision that this was a point that they wished to run, a decision not to plead anything which forewarned or to do anything in the original defence or to do anything else and then waiting until time was up and, if I were to adopt Mr. Owen's phrase, "springing the trap".
12. I think that it is important to recognise that this is not simply the taking of a normal limitation defence, nor is it closely analogous to the situation, such as arose in Ace v. Seechurn [2002] 2 Lloyd's Ref 390, [2002] EWCA Civ 67 and in many other cases, where a defendant negotiates with a claimant in the knowledge that time is ticking and then takes a limitation point. The authorities in these circumstances are clear: the defendant is entitled to do that so long as he does not mislead and in that sense entrap a claimant.
13. What we have here is a resolution to take a point, the effect of which, as Miss Lee made clear at the application, is that the proceedings (or what have been looking like proceedings) in which the original defence is served are, in fact, said not to be proceedings at all. If they are not effective proceedings, whether they are described as being a nullity or whether simply as ineffective, really does not matter. I was and remain unable to understand the concept of a set of proceedings which are in existence but which do not stop time running. At fear of repeating myself, Miss Lee was constrained to say (although Mr. Goodkin tried to avoid the conclusion) that the impact of the proposed amendment was that the proceedings simply were not properly constituted.
14. In those circumstances, this is not like Ace v. Seechurn and other similar cases and, to my mind, it is not within the norm to act in such a way that continues to acknowledge the validity of the proceedings whilst storing up for a few weeks later the contrary suggestion. In my judgment the participation of RHP, specifically in serving the defence in the terms that it did, constituted an acknowledgement and, in that sense, a representation that it accepted that the proceedings were properly constituted. Otherwise the short answer to the proceedings would have been "these proceedings are ineffective". That was not done.
15. If, as was RHP's case on the application to amend, there were no proceedings or no proceedings validly on foot, to my way of thinking that could and should have been said when the original defence was served. It is no answer in an application for indemnity costs to say, "Well, what difference would it have made to people's conduct?" because the question of indemnity costs, as the authorities make clear, is not dependent upon the alteration in the amount of costs a party is caused to incur.
16. It is not necessary for me to go so far as to say that the conduct was improper with all the connotations that that has. For my purposes it is sufficient to say that the conduct is beyond the norm. If it were necessary to say so in addition, I would hold that it included a significant level of unreasonableness or otherwise inappropriate conduct. I say that fully recognising that a lawyer's first obligation is to the client; but that does not answer the question of what conduct should be normative in contested litigation.
17. For these reasons it seems to me that there is a significant difference between the position of CRA, on the one hand, and RHP. Against CRA it can only really be said that they took a bad point and pursued it, whereas against RHP there is this additional element of conduct in the run-up to the issuing of the amended defence which cannot be levelled at CRA's door. The reason why that is significant is that I have concluded, applying the tests as outlined in Van Oord and in the notes, that RHP's conduct does tip the balance from costs on the standard basis to costs on an indemnity basis for this application, whereas CRA's does not.
18. What that means is that the order for costs as between the parties will be different in that the order for costs of and occasioned by the application against RHP will be on an indemnity basis, whereas the costs order against CRA will be on a standard basis.
19. That lays the ground for moving on to the second point which is whether I should assess them summarily. Had I not concluded that they were different bases of assessment to be applied, I would have assessed summarily. As it is, I think that the nature of the order that I am making on the basis of costs adds a level of complexity which means that it is inappropriate, applying the normal tests, for me to try to assess costs today. I will, however, make an order for an interim payment. That interim payment will take into account the comments that I have read and looked at in the context of possibly having to do a summary assessment and some of the observations that I have made to counsel in the course of the hearing about the level of costs being incurred. I will hear counsel, but at the moment my provisional view is that there should be an interim payment of £20,000 to be paid £10,000 by RHP and £10,000 by CRA.