Smolen v Solon Co-Operative Housing Services Ltd.

J U D G M E N T

Tuesday, 28th June 2005

1. LORD JUSTICE THOMAS: There is before the court an application for permission to appeal in two actions which arise out of proceedings brought in the Technology and Construction Court ("TCC") by the appellant ("Mr Smolen") against the respondent ("Solon"). Mr Smolen owned some property at 93/95 Scalater Street in Spitalfields, London. He let it to Solon under a lease for six years, subject to certain conditions. The rent was to be £11,440 a year. At the time the premises were in disrepair and Solon had agreed to carry out repair works with the aid of a Housing Corporation grant. Once repaired, the premises would be let by Solon on assured short-hold tenancies.

2. There was a dispute about certain of the terms of the lease. There was a covenant to maintain the premises in good repair and condition, as shown in the schedule, although in no better state of repair than the premises were at the end of the first works undertaken with the Housing Corporation grant. There was also a covenant to yield up the premises in such repair and condition equal to normal wear and tear on the property, following repair works carried out utilising shortlife HAG funding.

3. In February 2002 Mr Smolen issued a claim alleging breach of the covenants. Solon's defence was that they had carried out the works which the terms of the lease required. Directions were given in the TCC for a single joint expert. An expert was chosen at the suggestion of the solicitors to Solon. When the matter came on for trial on 20th January 2003, HHJ Rich QC was first asked by Mr Smolen to rule on the impartiality of the expert. It appeared the expert had, on previous occasions, been instructed by Solon's solicitors. The learned judge decided that that expert should be removed, with each side paying half the expert's costs. The judge then went on to hear legal argument on the terms of the lease and, essentially, decided that issue in favour of Solon.

4. A new joint expert was appointed at a case management hearing before HHJ Rich on 11th April 2003. The Judge ordered Mr Smolen on that occasion to pay Solon's costs of the hearing, which he assessed at £2,697.21.

5. On 23rd April HHJ Havery ordered Mr Smolen to pay £1,175 into court on account of the fee for the new joint expert. Mr Smolen did not do this and also failed to pay the costs ordered against him on 11th April. On the 6th May 2003 the court ordered that Mr Smolen should pay into court the two sums already ordered to be paid, and a sum of £830, being the assessed costs of the hearing on 6th May 2003. The order provided that in default of the payment the action would be struck out.

6. Mr Smolen sought permission to appeal, but was refused permission by Buxton LJ, who refused a stay. On 9th May 2003 the court made the order that had been envisaged in the order of 6th May, that because Mr Smolen had failed to comply with paragraph 1 of the order of the 6th May, his claim would be struck out, judgment would be entered in favour of Solon for the sum of £17,953.14 and that Mr Smolen was to pay the costs of Solon, to be assessed if not agreed.

7. The renewed application for leave to appeal came on before a court presided over by Sedley LJ on 12th August 2003. Mr Smolen added applications for permission to appeal against the earlier orders to which I have referred, including the orders of 23rd January, 11th April and 23rd April. The Court of Appeal dismissed the application for leave to appeal. Sedley LJ said at paragraphs 25 to 28 as follows:

"25. As to these four proposed grounds of appeal I see no realistic prospect of success in any of them. The allegations relating to fraud and dishonesty had still not been acceptably formulated at this stage, even though Mr Smolen was again represented. The main focus in the transcript is on the appointment of a fresh expert. Solon's solicitors had put forward three possible names, none of which Mr Smolen was prepared to accept. He preferred instead that there should be a nomination made by the President of the Royal Institute of Chartered Surveyors. The judge tried to encourage agreement but failed. The hearing therefore took most of the day. For the rest the judge gave routine directions. There is no reason why he should not have conducted what was a routine case management conference, even though an earlier order of his was under appeal. There is no basis whatever for suggesting that such a fact is even a primary indicator of animus. There is no proper objection, it seems to me, that can be taken to the costs order of 20 January. The costs order for the hearing on 11 April was made in circumstances in which it was rightly accepted on Mr Smolen's behalf that he should pay the costs. One sees at page 18A of the transcript that the only challenge to the summary assessment concerned the hours spent by counsel on the case.

26. So far as concerned Judge Havery's decision of 23 April 2003 the proposed ground of appeal is simply that the preceding orders were inappropriately made and that accordingly an order for payment into court of a share of Mr Hartley's fee was inappropriate. If the preceding orders stand, as in my judgment they should, there can be no proper ground of appeal against the order of 23 April.

27. The grounds of appeal against the order of 6 May 2003 are that Solon knew that the three other appeals were in progress and that in two of them Mr Smolen was asking for a stay of execution. Again, therefore, there is nothing of substance in the proposed appeal against the 6 May order; it is merely consequential on the other matters.

28. I would therefore refuse permission to appeal on all the applications presently before the court."

8. After that decision, various steps were taken by Solon to have the costs assessed, and I shall refer to those in a moment, but it is first necessary to refer to what happened in June 2004. On 30th June 2004 Mr Smolen issued an Application Notice seeking to set aside the orders made on 23rd April, 6th May and 9th May 2003. In those orders he complained of various irregularities, and he also relied on a provision in the terms of the lease to this effect.

Clause 3(15) The Tenant covenants:

"to indemnify the Landlord against all actions, costs, claims, damages, demands which may be brought against the Landlord by virtue of the state or condition of the demised premises or any loss or damage or injury from or caused by the same or by virtue of occupation of the demised premises by the Tenant or any sub-tenants."

9. The application came on before Jackson J on 22nd October 2004. Jackson J concluded that the orders of 23rd April and 6th May 2003 had already been considered by this court. He therefore considered there was no ground for him to examine the correctness of the decision of the court presided over by Sedley LJ. As to the order of 9th May 2003, the Judge referred to the fact that an application had been made to set aside that order, that Mr Smolen had applied to the Court of Appeal for leave to appeal, that he had failed to comply with certain procedural requirements of the Court of Appeal and his appeal was dismissed on 27th August. He also pointed out that the order of 9th May 2003 was an order which the court was bound to make; it simply gave effect to the claimant's earlier non-compliance with the order made.

10. The learned judge concluded that the claimant's application to set aside the orders was misconceived and that the application was an abuse of the process of this court. He observed he had listened to lengthy submissions from Mr Smolen, none of which addressed the difficulties which he faced in making the application.

11. I have also listened to submissions from Mr Smolen today. He asked me if I would consider adjourning the matter and I asked him to set out the arguments he wished to make to this court. I had refused an adjournment yesterday because he gave no reasons for it. He has outlined the arguments he wishes to make in considerable detail and I have carefully considered them. It seems to me that this hearing has served the full purpose which Mr Smolen intends, namely to put before this court the grounds upon which this court could consider whether there are any grounds on which it could be said that leave to appeal should be given against the judgment of Jackson J. He told me that he considered that when the issues had been considered by this court in August 2003, the correct facts and evidence were not before the court. However, it seems to me quite clear from the judgment of Sedley LJ and all the other papers in this case that the relatively straight forward issues that were raised in the appeal before Sedley LJ were all properly before the court. I can see no grounds whatever to question that decision. I entirely agree with the decision of Jackson J that there is no prospect of success whatsoever in this application in respect of the matters already decided by this court.

12. As to the order of 9th May 2003, again, there can be no prospect of that order being set aside. It was, as the learned judge pointed out, consequential upon the earlier orders. The court was bound (in the absence of extenuating circumstances) to give effect to its earlier orders and, as this court has already upheld the validity of those previous orders, and on the material before me, I can see no basis for arguing that that judgment was in any way wrong. It follows that the application for permission to appeal from the judgment of Jackson J must be refused.

13. I therefore turn to consider the other matter that is before the court, namely the application for leave to appeal from the judgment of Pitchers J. The background was as follows. Pursuant to the order made on 9th May 2003, the costs of the TCC action were to be assessed if not agreed. A default costs certificate was issued and the costs were claimed in the sum of £96,052.74.

14. An application was made to set aside this certificate to Deputy Master McKay on 7th November 2003. For reasons that I will set out in a moment, the Deputy Master dismissed the application and awarded costs in favour of Solon, summarily assessed at £2,937.50.

15. An appeal was brought on 13th July 2004 before Gage J. Unfortunately, at the time of the hearing before Gage J there was no transcript of the Deputy Master's judgment and there was a dispute as to his reasons. The Judge therefore took the view that he should allow a limited basis of appeal. He said this at paragraphs 4 and 5 of his judgment:

"The court is still faced with the difficulty that there is a dispute about the reasons given by the Deputy Master in his decision. If they are as recorded in the note of the judgment prepared by counsel for the respondent and agreed by the Deputy Master, then it would seem that there is nothing whatever in the appeal and it is bound to fail, as McKay J pointed out when refusing permission on the papers. If, on the other hand, it is as set out by the appellant, it may be that he has some prospect of success. In the circumstances, the only way of dealing with the matter, it seems to me, is for me to give permission. The respondent may then attend and the matter can be dealt with either by way of rehearing or by the judge resolving as to which of the two judgments is correct. For those reasons I grant permission."

16. Following the grant of permission, the matter came on for hearing before Pitchers J on 27th October 2004. By that time, there was a note of the Deputy Master's decision. It is only necessary to refer to two paragraphs:

"Despite being a litigant in person, Mr Smolen has failed to come near to saying why the default costs certificate should be set aside for a good reason. Surely a good reason is the guiding discretion? That having been said, Mr Smolen is a litigant in person and I have to be sensitive to ensure that a litigant in person is given a full and just hearing. I have attempted to do this.

In respect of Mr Smolen's medical condition, the evidence supporting his condition is of no standing. This evidence has been referred to by the Court of Appeal as not adequate. I understand, however, from the defendants' case that the charging orders which they had embraced, both the order for damages and also later embraced the costs order, one suspects at first flush this gives the receiving party something of a benefit. Another matter, however, to be taken into account with Mr Smolen's status as a litigant in person and his persistent and regular applications to the court is that the defendant is entitled to receive its costs."

17. The note then referred to the over-riding objective and continued:

"I asked Mr Smolen about the bill of costs itself and he made comment about the bill being defective but he was not able to elaborate on that comment. Mr Smolen has shown himself to have more experience than he admits in these matters."

18. The learned Master then went on to dismiss the application, determining it was not appropriate to set aside the default costs certificate.

19. Pitchers J, who was sitting with Master Rogers and Mr Haslam, concluded that that reasoning was, in their judgment, "impeccable". He said:

"The matters that impressed the Deputy Costs Master, rightly, were that no points of dispute had been forwarded by the appellant so as to give him a basis for seeing what was in issue in relation to the default costs. No reasons for the failure to put in points of dispute had been given. As Master McKay says, the earlier order should have alerted the appellant for the need to take legal advice so as to set out grounds for disputing the bill. The appellant relied, as he had on earlier occasions, on medical evidence. The reference by the Deputy Master to the Court of Appeal was a reference to an earlier decision of that court when they had declined to accept what is colloquially known as the sick note which the appellant had put in, simply a note and certificate from his General Practitioner, saying he was unfit for three months because of stress and anxiety. The appellant knew that that was inadequate medical evidence. He said before us in argument that his reason for not putting in proper medical evidence was that the respondents would pounce on it and, in some way, use it to his disadvantage. That certificate did not provide a basis for excusing the appellant from putting in points of dispute or setting out even in some informal way why he disputed this bill of costs."

20. For those reasons and other reasons set out in the judgment, Pitchers J, Master Rogers and Mr Haslam dismissed the appeal. After dismissing the appeal, they dealt with an application for costs. As is the case, at such hearings the solicitors had put in a bill of costs. The learned judge was fortunate in having sitting with him someone expert in costs who went through the note and reduced some of the large items that had been put in. On the piece of paper that it appears the Master used, he totalled the costs at £5,540.10. Pitchers J said this:

"I am afraid the drawback from your point of view is that you are not facing a judge who knows very little about costs - well, you are facing a judge who knows very little about costs but on either side of him are two people who know a great deal about it and the figure, and I happily acknowledge that it was not my own calculation but the figure from those who know much more about it than I do, is £5,500, which in fact is what you got - or not you, but what was provided. The breakdown is in ink on this if you want to dispute it."

21. Subsequent to the hearing, it appears, and the manuscript note shows this, that the costs judge had made an arithmetical error and he had miscounted the figure by a sum of £2,000. If he had done his arithmetic correctly, the amount of costs awarded would have been £7,500, not £5,500. That was drawn to the attention of Mr Smolen, who, in a letter addressed to the solicitors for Solon, said that, as far as he was concerned, the Court of Appeal had reduced the costs from £9,790 to £5,500 and that that was the decision and it should not be reopened. He was then given notice on 8th November that there was to be a hearing on 10th November before Pitchers J. That was a Monday, sent by post to him, it appears, and also by fax. In the course of an ordinary first class post, that should have reached him on Tuesday, 9th, and certainly by Wednesday, 10th. As the hearing was not until 2 pm on Wednesday, 10th, he should have received notice of it.

22. He did not appear before Pitchers J, who, in that hearing, went on and amended the order. He said this:

"Unfortunately, in totalling the figures, Master Rogers made an arithmetical error. It should not have been £5,500, but nearly £7,500. In view of the clear intention of the court, despite the comment I made when making the order that costs should be assessed in the sum as amended on the costs schedule, I now amend the order and that is done on notice to Mr Smolen, who has written a letter dated 5th November which I have considered."

23. Mr Smolen in his argument before me seeks, first of all, to say that the over-riding objective, if properly applied, would have meant that he should have had permission to dispute the default costs order made; and that it was contrary to that over-riding objective of disposing of cases justly and the other matters set out in the over-riding objective, that he was not given that opportunity.

24. It seems to me on that first ground, however, that the learned Master who considered the matter, then Gage J and Pitchers J, all looked at the one matter that troubled them, namely that Mr Smolen had not put forward any grounds for disputing the costs certificate. It seems to me that if someone is to dispute a costs certificate made by default, then it is obviously incumbent upon him to do so by setting out what is disputed and the reasons for disputing the item or items. A court cannot determine whether that costs certificate was right or not. Ample opportunity seems to have been given to Mr Smolen and I cannot see any basis upon which it can be suggested that the over-riding objective was in any way breached and Mr Smolen was not given a proper opportunity.

25. Secondly, it seems to me clear that as regards the increase in costs that were made in relation to the second hearing before Pitchers J, there can be no properly arguable complaint about what happened. It is obvious and regrettable that the Master made an arithmetical error, but having looked at the piece of paper on which he had made it, it seems to me quite clear how that happened. It is unfortunate, but Mr Smolen was given notice, the Judge properly considered the matter and rightly stated the court's intention.

26. Thirdly, Mr Smolen contends that it was wrong of the court not to have taken into account the sick note. However, Pitchers J considered that matter in an entirely fair way. He asked Mr Smolen why it was that a sick note had not been provided and Mr Smolen's answer is recorded in the passage I have set out. I have read the sick note myself. I will assume for these purposes that it was adequate because it set out his diagnosis of why he was off work. Taking that diagnosis as adequate and treating that in full, it seems to me that there was no reason why, in summary form even, Mr Smolen could not have set out the full, or at least some of the reasons why he disputed the bill.

27. There is also one further argument in relation to clause 3(15), which is the clause I have mentioned earlier in this judgment. It seems to me quite clear that that clause has absolutely no application to the circumstances in which costs were ordered in this case. For all those reasons, therefore, having considered matter fully, I have no doubt that there are no arguable grounds on which there is any basis for appealing against the two judgments to which I have referred.

28. There is one further matter to which I should refer. There was before the court a bundle put in by a gentleman known as Mark Anthony London, who is a solicitor at Salisbury House. That bundle was put before the court and received by this court on 24th June 2005 and apparently given to Mr Smolen today. The bundle was of no assistance whatsoever to this court in the matters it considered on the papers it read prior to it. It seems to me that if any application is made for costs in respect of that, it should be wholly disallowed. I thought initially that it was a mistake to put this document in and the court was not in any way assisted by it. However, it did transpire that there were certain documents in it to which I have referred in the course of this judgment. Had that matter not been before the court, I might, because it was not clear to me what had happened when the order for costs was increased, it might have been necessary to adjourn this application so that the documents could be provided by Mr Smolen. However, that cost has been avoided. I therefore wish to make it quite clear that Solon Co-operative Housing Services Ltd should not be entitled to make any claim whatsoever in respect of the costs of putting the bundle in before the court because the court would have had to have adjourned the matter for Mr Smolen to have put in the requisite documents. He would have borne that cost. All that has happened is that he has been saved by the production of those few documents the costs. What otherwise is in this statement has in no way played any part whatsoever in the decision the court has reached.

29. MR SMOLEN: Thank you, my Lord. Firstly, my Lord, I would request for you to amend your judgment. Your Lordship has failed to mention and put in the sentence of Pitchers J's judgment that states quite clearly that Solon's solicitors' costs should not be higher than the costs in the Technology and Construction Court at the end of the hearing five days earlier. This is a judgment which is important. As I explained to you, my Lord, there was no calculation so I would ask you to amend this, please.

30. Secondly, my Lord, you referred to a note by Deputy Master McKay. It was not a note by Deputy Master McKay and I would want you to amend this as well, my Lord. It was a note --

31. LORD JUSTICE THOMAS: It was a note by counsel which Deputy Master McKay approved.

32. MR SMOLEN: Yes, which the Deputy Master approved, but it was not the correct note.

33. The other point which I would like to make is you referred to an order on page 32 of my bundle, an order dated 11th April 2003, my Lord, which was made by HHJ Rich QC, and you referred to costs of £2,693, I believe, 2,600 and something. If I may take you to page 32 at the end of the page, it says of this particular order, it is a two pages order, exhibited on page 31 and 32 of my bundle, claimants to pay the defendants' costs. There has never been any specification of the £2,600, et cetera. It has never been official because these costs were never specified. So I would like you to --

34. LORD JUSTICE THOMAS: I will look at that.

35. MR SMOLEN: Thank you, my Lord. There is another problem. Well, I find this to be a problem and that is I submitted to Jackson J a document which states quite clearly that I have not presented my case fully in response to Jackson J's permission to appeal, but I will try to refer you to one item which is, in my view, very, very important. Your Lordship kindly mentioned clause 3(15), which I am grateful to you for, my Lord, and this basically states that I would not be responsible for anything if it was disputed, the property was either uninhabitable or I had problems with it and there would be a breach of the lease and this would then trigger off immediately the costs issue. I would not be responsible for costs, ie, costs for experts.

36. If I may take your Lordship to page 49, this is a document which is in fact four council tax bills on page 49, 50, 51 and 52. These are A, B, C and D of 1993 to 1995. I will just stick here to one document because the others are just copies. On page 49 is a council tax bill 2002/03 and quite clearly -- I have indicated it with an arrow -- it says that council tax due on 10th September 2001 to 31st March 2002 was zero because it was an uninhabitable property. Now this only came to my knowledge round about June or July 2004. It means to say that the defendants and their solicitors withheld from the court in various affidavits and witness statements which they gave, and they gave to the court numerous witness statements that the property was habitable and therefore I was not entitled to any -- my claim was null and void and I was burdened with the cost of any expert evidence, et cetera. This only came into my possession, these four pages only came into my possession round about July 2004 and it clearly shows that the property was uninhabitable. This confirms what I have been saying all along, that at the time the property was uninhabitable, which would have triggered off clause 3(15), my Lord. So this is something that was before Jackson J, and I asked him to look at this because this was new information which was not before the Court of Appeal. Thank you, my Lord.

37. LORD JUSTICE THOMAS: Thank you very much indeed. I will now deal with the other matter that is before me.

38. MR SMOLEN: So you are not going to amend your judgment?

39. LORD JUSTICE THOMAS: I will look at the points you have made when I look at the transcript of the judgment.

40. MR SMOLEN: Thank you very much, my Lord. Would I be able to ask in the normal way, because I pay for my own applications, but would I be able to ask for half of the costs from the other party, as on previous occasions, or is it something to which I am not entitled. Would you be kind enough to direct, sir?

41. LORD JUSTICE THOMAS: The court will supply you with a transcript when it is done.

42. MR SMOLEN: Will that be the proceedings and the judgment?

43. LORD JUSTICE THOMAS: Not the proceedings.

44. MR SMOLEN: Can I apply to have the proceedings transcribed at my own expense?

45. LORD JUSTICE THOMAS: It will cost you a very large sum of money. If you want to make that application, please put it in writing. I see no earthly point, Mr Smolen, for yourself. It will just waste money for yourself, but put that application in writing.

46. MR SMOLEN: What is a large sum of money?

47. LORD JUSTICE THOMAS: That is what you will have to find out. That is all there is.

48. MR SMOLEN: I am grateful to your Lordship for the transcript. So this will be, I imagine, the amended transcript?

49. LORD JUSTICE THOMAS: Yes.

50. MR SMOLEN: Roughly how long?

51. LORD JUSTICE THOMAS: It may take some time, but I have dealt with this matter now. I just want to deal with the other matter in front of me.