Little Rhoden Farm v Susan Lesley Law & Anor

(Via MS Teams Hearing) MRS JUSTICE JOANNA SMITH: 1 Following a three-day trial, Her Honour Judge Venn (“ the Judge ”) found in the Claimant’s favour on its claim of trespass. In her judgment (“ the Judgment ”), she identified eight issues requiring determination by the court, two of which arose in respect of the claim, and six of which arose on the Defendants’ counterclaim against the Part 20 Defendants, the owners and controllers of the Claimant company. The claim of trespass was the main claim made by the Claimant, and, in circumstances where a second minor issue raised by the Claimant was not pursued at trial, the Judge ordered that the Defendants should pay 90% of the Claimant’s costs of its claim. This is recorded at paragraph 5.1 of her order of 20 October 2021 (dated on its face 2 November 2021) (“ the Order ”). There is no appeal against this aspect of the Order. 2 In dealing with the issues arising on the Counterclaim, the judge rejected two claims in trespass and two claims in nuisance against the Part 20 Defendants, but found them liable for £450, being half of a survey fee charged by Technics (“ the Technics Fee ”). She also recorded in the Judgment that the Defendants had succeeded on an issue raised in the Counterclaim as to their entitlement to widen an access road (“ the Access Issue ”). At paragraph 81 of the Judgment she said this: “In respect of the counterclaim, the defendants succeeded on their claim in respect of the Technics fee and their claim to widen the access road to the south (two issues), but they failed on their claim for proprietary estoppel, the allegation of trespass in respect of peg 11, the allegation of trespass in relation to the drainage ditch, the claim for nuisance in respect of horse riders using the access road (five issues). Of these issues, proprietary estoppel and widening the access road were the most significant; the other issues were smaller and ancillary.” 3 In the circumstances, the Judge held that the Claimant/Part 20 Defendants should pay 50% of the Defendants’ costs of the Counterclaim. This is reflected in the Order at paragraph 5.2. Paragraph 5.3 of the Order goes on to say this: “For the avoidance of doubt, the Defendants will not recover any of their costs of responding to the claim and the Claimant and Part 20 Defendants will not recover any of their costs of responding to the Counterclaim or Part 20 claim”. 4 The recitals to the Order record that the Claimant was no longer pursuing aspects of its claim and that the parties had agreed the Access Issue. 5 The Claimant/Part 20 Defendants appeal paragraphs 5.2 and 5.3 of the Order essentially on the grounds that “[t]he effect of the Order is that costs do not follow the event”. 6 In summary, they contend (in Ground 1 of the Grounds of Appeal), that the Counterclaim against the Part 20 Defendants was defeated in all major respects and that, where “the overwhelming bulk” of the costs incurred on both sides in fact related to the Counterclaim, the effect of the Order is to leave the Claimant/Part 20 Defendants as net losers; i.e. the sum that will be paid to the Defendant by the Claimant/Part 20 Defendants pursuant to paragraph 5.2 of the Order, they say, will dwarf the sum payable by the Defendants to the successful Claimant/Part 20 Defendants pursuant to paragraph 5.1 of the Order. They also say that in arriving at this result, (i) the Judge failed to have regard to an admissible offer made by the Claimant ( Ground 2 of the Grounds of Appeal); (ii) the Judge failed to have regard to the fact that the Judgment against the Claimant/Part 20 Defendants for the Technics Fee would have fallen into the small claims track and that the likely costs that would be recovered by the Defendants were disproportionate ( Ground 3 of the Grounds of Appeal); and (iii) the Judge failed to have regard to the fact that the Defendants’ right to widen the access way was never disputed, and that the Access Issue had been introduced by way of counterclaim into the proceedings without complying with the Practice Direction as to pre-action conduct ( Ground 4 of the Grounds of Appeal). In all the circumstances, the Claimant/Part 20 Defendants say that the Judge erred in the exercise of her discretion ( Ground 5 of the Grounds of Appeal). 7 Although at times Mr Oakley’s submissions on behalf of the Claimant/Part 20 Defendants appeared to invite me to re-hear the matter, it is common ground, or at least it should be common ground, that the key issue for this court on appeal is whether the Judge misdirected herself in the sense that she arrived at a decision that was wrong. The appeal court may only interfere when it considers that the judge at first instance has not merely preferred an imperfect solution which is different from an alternative imperfect solution which the court of appeal might or would have adopted, but that she has exceeded the generous ambit within which a reasonable disagreement is possible (see Tanfern v Cameron-MacDonald (Practice Note) [2000] 1 WLR 1311 , per Brooke LJ at [32]). 8 Mr Evans, on behalf of the Defendants, took me to Straker v Tudor Rose (a Firm) [2008] 2 Costs LR 205, per Waller LJ at [2]: “The key issue is whether the judge misdirected himself. It is well known that this court will be loath to interfere with the discretion exercised by a judge in any area but so far as costs are concerned that principle has a special significance. The judge has the feel of a case after a trial which the Court of Appeal cannot hope to replicate and the judge must have gone seriously wrong if this court is to interfere.” 9 That the trial judge is in a better position than this court to assess where the costs should lie, appears to me to be of the utmost importance in the context of the submissions made by Mr Oakley to me this morning in support of the appeal. I shall return to this in a moment. The approach of the Judge 10 The Judge gave a detailed and reasoned judgment on the issue of costs. At the outset, from paragraphs 71 to 78 of the Judgment, she set out in detail the relevant provisions from CPR 44.2 as to the approach to take to costs, together with relevant extracts from the commentary to that rule, addressing the circumstances in which issue-based costs may be appropriate, and the approach to take in a case where there is a claim and counterclaim, and each party, as she put it, “succeeds on one”. In particular, the Judge identified the discussion of the rule in Medway Oil in the commentary, and set out her understanding of that rule at paragraph 78. There is no appeal from the approach that the Judge took to the relevant provisions, and nor is there any express appeal from her identification of, and reliance upon, the rule in Medway Oil (although Ground 1 is effectively an attack on that approach). Applying the CPR, the guidance and the authorities to which she had referred, the Judge decided that an issue based approach would not be appropriate and (at paragraphs 82(iii)-82(v) of the Judgment) she said this: “(iii) There is no reason based on justice for departing from the general rule and the general position in respect of a successful claim and counterclaim. (iv) The practical difficulties of making an issue based order mean that an order expressed as a percentage would be more practicable. (v) The claim should be treated as if it stood alone and the counterclaim should bear only the amount by which costs of the proceedings have been increased by it.” 11 Having decided that the Claimant/Part 20 Defendants must pay 50% of the Defendants’ costs of the Counterclaim, the Judge acknowledged that the Claimant/Part 20 Defendants had relied on the Defendants’ non-compliance with the pre-action protocol (in paragraph 86), observing that “whilst that is relevant conduct, it does not follow that any party not complying with the pre-action protocol will, automatically, not recover any of their costs; the non-compliance is only one of the factors the court must consider”. 12 The Judge also referred (in paragraph 87) to an additional argument that the outcome she had decided upon was unfair to the Claimant/Part 20 Defendants because “almost the entirety of the defendants’ costs budget is taken up with the counterclaim, because the counterclaim overlaps the claim”. However she observed that this latter point “misstates what the costs of the counterclaim are”. This was plainly a reference back to her analysis and application of the Medway Oil principle. This point arises in the context of Ground 1 of the appeal, to which I shall return in a moment because it requires some unpacking. I shall first deal with the other Grounds of appeal which allege a failure to have regard to relevant issues in the exercise of the Judge’s discretion. Ground 2 13 The Claimant made an offer to the Defendants dated 5 February 2019 (“ the Offer ”) to pay £4,000, inclusive of costs, in consideration for the Defendants removing fencing they had erected around the disputed land within 28 days, relinquishing possession of that land to the Claimant, and providing a key to the fencing within 14 days. Payment of the £4,000 was to be made upon removal of the fencing. The Offer was made after the issue of the Particulars of Claim, but before the service of the Defence and Counterclaim. It offered to settle “this matter”, which at that stage can only have been the matter identified in the Particulars of Claim. The issues relating to the access way and the trench had not yet been raised. No time period for acceptance of the Offer was identified and, following service of the Defence and Counterclaim, the Offer was never expressly renewed, although Mr Oakley is correct to say that it was never expressly withdrawn. 14 The Claimant says that the terms of the Order and the Judgment on costs took no account of the Offer, notwithstanding that it was a relevant consideration. Although it was not a formal Part 36 Offer, the Claimant points to CPR 44.2(4)(c) which provides that in deciding what order to make as to costs, the court will have regard to all the circumstances, including: “… any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.” It is clear from the transcript of the final day of the hearing that the Offer was drawn to the Judge’s attention in the context of a submission from Mr Oakley that the Claimant should get 90% of its costs of the action. However, it is common ground that the Offer was not expressly mentioned by the Judge in the Judgment. 15 Nevertheless, I do not consider that I can interfere with the Judgment on this ground. The Judge was plainly made aware of the existence of the Offer, and she expressly set out the provisions of CPR 44.2 which included 44.2(4)(c). Judges are not required to mention every aspect of their reasoning in their judgments, and on an ex tempore judgment such as this I consider that some leeway is to be accorded to the Judge in circumstances where she had only just heard submissions from the parties on the existence of the Offer and so must have had it firmly in mind. 16 The Offer related specifically to the claim, and the Judge decided that on the claim the Defendant was to pay 90% of the Claimant’s costs. There is no reason to suppose, in my judgment, that the Judge did not take the Offer into account in making this determination. In dealing with the costs of the Counterclaim, it was entirely open to the Judge to conclude that the Offer was of no relevance whatever to the issues raised, and that it would be inappropriate to have regard to it in determining where the costs should lie on the Counterclaim. 17 In all the circumstances I reject Ground 2 of the appeal. Ground 3 18 In my judgment, the complaint that the Technics Fee would have been on the small claims track and so, in the words used in the Grounds of Appeal, “the potential award of costs in excess of £50,000 for recovering this sum is vastly and obviously disproportionate”, is misconceived. As the Judge made clear in her Judgment at paragraph 79, she considered that the Defendants had succeeded on two issues: the Technics fee and the Access Issue. In paragraph 81 (which I have already set out in full above), she recorded the seven issues arising in the Counterclaim (including proprietary estoppel which was a defence to the claim and had not been identified in paragraph 79 as one of the eight issues to which I have already referred), noting that the Defendants had won on two issues but lost on five. It bears repetition that she expressly recorded that: “Of these issues, proprietary estoppel and widening the access road were the most significant; the other issues were smaller and ancillary.” 19 Mr Oakley spent a great deal of time at the hearing making submissions about what had happened at the trial in relation to the Access Issue, suggesting that it had never really been in dispute – as he said was reflected by the recitals to the Order - albeit acknowledging that it was a “substantive issue” and that the witnesses had been “taken through it”. However, I am not in a position to make any findings about that. As I have already said, the Judge was in the best possible position to determine which of the issues was significant from a costs perspective and she made her views on that subject plain in paragraph 81 of the Judgment. As the appeal court, I am not in a position to gainsay those views. Given that the Judge considered the Access Issue to be one of the two “most significant” issues, it would be wrong, in my Judgment, to consider the Defendants’ success on the Technics Fee in isolation, as this ground of appeal invites me to do. There is no appeal against the Judge’s determination as to the significance to be attached to the Access Issue. 20 It was well within the Judge’s discretion to award 50% of the Defendants’ costs on the basis that the Defendants had won on two issues, one of which had been “significant”. I reject the Claimant’s argument that, in the circumstances, it is impossible to discern how the judge arrived at her conclusion. Further, and in any event, the submission that £450 is to be compared with a costs recovery of some £50,000 is, in my judgment, unsustainable, for reasons to which I shall turn when I come back to Ground 1. Accordingly Ground 3 is dismissed. Ground 4 21 The Judge referred in the Judgment to the asserted non-compliance by the Defendants with the pre-action protocol, a reference that can only have been to the Claimant’s submissions as to the Access Issue, as is clear from the transcript. In essence, the Claimant contended before the Judge that the Access Issue had not been raised at the pre-action protocol stage, that the issue was not in any event contentious, that it should never have been raised and that the Claimant had not disputed it. Mr Oakley confirmed all of this before me today. In response, the transcript records that the Defendants’ counsel (not Mr Evans, who appears for the Defendants in respect of this appeal only) said that the Access Issue had been raised in the Counterclaim because the view was taken that it was important to raise all issues between the parties; that there had been ample time over the last three years to deal with it, but that it had not been conceded by the Claimant/Part 20 Defendants. The transcript shows that the Defendants’ counsel referred the Judge to correspondence in the week before trial on this point. Ultimately, it was the Defendants’ submission that they had been forced to litigate the Access Issue because the point had only been conceded in closing submissions. 22 Before me, Mr Oakley submitted that the Defendants’ counsel was wrong in his assertion that the Access Issue had not been conceded prior to closing submissions. However, as I have already made clear, I am not in a position now to determine that question one way or the other, and I have no need to do so for the purposes of this appeal; just as I have had no need to see the transcripts of the earlier days of the trial which were not, in any event, put before me by the Claimant/Part 20 Defendants (the Defendants providing only the transcript of the final day of the hearing). What is clear is that the Judge asked during closing submissions whether the issue remained in dispute, and was told that it did not. Accordingly, beyond recording that the point was “significant” in the context of costs, she made no finding on the point and the matter was dealt with in the recitals to the Order in the manner I have described. It was plainly open to the Judge to form a view as to the significance of the Access Issue in the context of the overall costs of the Counterclaim, notwithstanding that it had been conceded, and she was in the best possible position to do so. As I have said, her decision as to that is not the subject of appeal. Furthermore it was open to her to take the view, as she did, that non-compliance with the pre-action protocol was just one factor to be taken into account. There is no basis for this court to interfere with that finding, and certainly no basis for the court to find that the Judge gave no, or no adequate, consideration to the principles in CPR 44.2(5). She expressly set those principles out in paragraph 73 of the Judgment and she alluded to them in paragraph 86. In the circumstances, Ground 4 is dismissed. Ground 1 23 Returning then to Ground 1, which appears to lie at the heart of the Claimant’s complaint in this appeal. In his skeleton argument, Mr Oakley correctly identifies the principles around the identification of the successful party for the purposes of the general costs rule that the unsuccessful party will be ordered to pay the costs of the successful party. He refers to the well-known principles as set out in HLB Kidsons (a firm) v Lloyds Underwriters [2007] EWHC 2699 (Comm) per Gloster J at [10] and [11], and also to the decision of Nugee J (as he then was) in R (Viridor Waste Management Ltd. & Ors) v HM Revenue and Customs [2016] EWHC 2502 (Admin) at [22]. In short, he submits that if the court stands back from the detail, as Nugee J did in Viridor , then it is clear that the Judge’s conclusion on costs must be unsound. This is justified by reference to what he calls a “rough back-of-the-envelope calculation”, which assumes that the outcome of the Judge’s Order will be that the Claimant will receive £9,000 (i.e. 90% of the circa £10,000 of its costs bill which Mr Oakley appears to suggest is to be allocated to its claim, from its total £80,000-odd costs budget) whereas the Defendants will receive approximately £53,416 (i.e. 50% of their total costs budget of £106,833). 24 This submission, which appears also to have been made before the Judge and rejected by her in the final paragraph of her Judgment, need only to be stated for its flaws to become clear. 25 First, the Claimant’s reliance on authorities which focus on the identity of the successful party is not, in my judgment, a complete answer. Whilst the Judge could have viewed this case in the round and assessed which of the parties was overall the successful party with a view to awarding a proportion of that party’s costs, and whilst this may have been the preferable approach, it was not wrong, in a case involving claims and counterclaims, to look at those separately and to consider which party was the successful party in the context of each claim, as the Judge did. Indeed, that will very often be the usual approach, as the notes to the White Book confirm at 44.2.14. The Judge also (rightly) considered whether to adopt an issues-based approach, but dismissed that. 26 Second, as Mr Evans points out, the effect of the rule in Medway Oil and Storage Company Ltd v Continental Contractors Ltd [1929] AC 88 , is that, barring any special order (and none was made here), the only costs of the Counterclaim which are recoverable are those which have been incurred which increase the costs of the proceedings. This is often regarded as a reason why the rule can sometimes operate harshly. In this case, however, the effect of the rule is to ensure that the costs of the Defendants’ defence to the claim together with the costs of the Defendants’ Counterclaim, insofar as the Counterclaim in fact amounted to a defence of the claim (i.e. their case in proprietary estoppel and their case of breach of contract pleaded in the Counterclaim and referred to by the Judge in the Judgment at paragraph 14) are all to be treated as costs of the claim, in respect of which the Claimant has been awarded 90% of its costs. Paragraph 5.3 of the Order makes it clear that the Defendants are not to recover any of their costs of responding to the claim. The Defendants will have to show on a detailed assessment which of their costs have been incurred purely by reason of the existence of the Counterclaim and they will be able to recover only 50% of those costs. 27 Third, the issue of trespass as it arose in the claim and the defence of proprietary estoppel to that claim appear from the Judgment and the statements of case to have been the main issue in the proceedings, albeit not the only issue. Indeed, proprietary estoppel was accepted during submissions before the Judge, as I can see from the transcript, by Mr Oakley as “the major part of the counterclaim”. The Claimant will recover 90% of its costs of this issue. In the circumstances, it seems very likely that the costs of the Counterclaim will be a minority of the total costs expended, although the likely amounts are for assessment and I am certainly not in a position to predict what these might be. I observe that determining the amount by which the costs of the proceedings have been increased by a Counterclaim may very well be difficult and may lead to a complicated assessment. Mr Oakley is right that there can be no certainty around the true effect of the Order at this stage. However, I am not in a position, on the facts of this case as set forth in the Judgment, to say that the Judge was obviously wrong, and nor am I in a position safely to substitute any alternative order for that made by the Judge, who, as I have already said, was in the best possible position to determine the levels of success and failure in respect of the issues arising in the claim and counterclaim, the vast majority of which were not about the recovery of damages. 28 Fourth, in the circumstances, the suggestion from Mr Oakley that the Defendants will recover as much as half of their total budgeted costs is, in my judgment, unsustainable. A very substantial part of that budget is likely to amount to costs of the claim, which will be irrecoverable. Equally, the suggestion that some £70,000 of the Claimant’s total circa £80,000 costs budget was in fact spent on the Counterclaim is also unsustainable, as a close analysis of the costs budget and the Judgment makes clear. I note, for example, that of the eight witnesses identified by the Judge in paragraph 8 of the Judgment, she mentions five in the context of the claim. She also observes that much of the evidence overlapped on the issues. Any such overlap will be regarded as falling within the costs of the claim and not the counterclaim. In any event, the amount of money spent on the issues involves not just the money spent at trial, as Mr Evans rightly pointed out during his submissions, but also the money spent on pre-action stages. I am not in a position to assess where the balance lies in that regard, whereas the Judge was readily able to do so. 29 Finally, the judge was alive to the Claimant’s argument and rejected it in the final paragraph of the Judgment. In my judgment, this was well within her discretion. Having regard to Ground 5, whether the Grounds of Appeal are considered separately, or taken together, the Judge did not fail in the exercise of her discretion and nor did she fall into error or exceed the generous ambit within which reasonable disagreement is possible. 30 For all those reasons, I dismiss this appeal. __________ CERTIFICATE Opus 2 International Limited hereby certifies that the above is an accurate and complete record of the Judgment or part thereof. Transcribed by Opus 2 International Limited Official Court Reporters and Audio Transcribers 5 New Street Square, London, EC4A 3BF Tel: 020 7831 5627 Fax: 020 7831 7737 [email protected] As approved by the Judge.