Allen v Matthews

LADY JUSTICE ARDEN: This is an appeal from the order of HHJ Simpson dated 12 July 2005 dismissing the claimant’s action and making no order on the counterclaim and ordering the claimant to pay the defendant’s costs to be assessed if not agreed.

The appellant, who was the claimant in the action, appeals with the permission of Sir Peter Gibson and May LJ against the order for costs. These proceedings were begun on 10 June 2004. Mr Allen claims possession of two parcels of land in Canning Town in East London. At the time the proceedings were commenced the title to the property was registered in Mr Allen’s name, but Mr Allen had been bankrupt and no step had been taken to diverse the Trustee of Title invested in Mr Allen. On 7 February 2005, Mr Allen and his Trustee in Bankruptcy entered into a Deed of Assignment whereby the Trustee assigned to Mr Allen the right to proceed with the claim in these proceedings.

These proceedings came on for trial before HHJ Simpson on 11 July 2005. The defendant took the point that Mr Allen had no locus to start the proceedings. The judge heard argument and decided the point against Mr Allen. Counsel for both parties then asked the judge to reissue the proceedings forthwith and so utilise the remainder of the period of time set aside for the trial of the action, which was three days.

There is a dispute as to whether this would have enabled any part of the trial to proceed, as there was only one to one and-a-half days remaining. However, in any event, the judge refused permission for the proceedings to be reissued and dismissed the action with the order for costs which I have already described. He therefore made no provision that any of the costs already incurred in this action should be deferred and left to be dealt with when any new action had been heard.

Mr Gary Lindington, for the appellant, submits that the costs order made by the judge enables the respondent to recover all his costs of the action even though the pleadings, disclosure and other preparatory steps will be the same in the new trial. The only exception would be the costs associated with the legal point as to whether the appellant had locus without an assignment from the Trustee in Bankruptcy. He concedes those costs should be borne by the appellant in any event. If the judge had permitted Mr Allen to reissue his claim immediately, the additional costs of a new claim would have been saved.

As I have said the judge refused that application. He held that Mr Allen had no locus to bring the proceedings and he refused permission to reissue the claim forthwith. The entire costs of the action incurred by Mr Matthews are said to total some £38,000. Mr Allen started the new proceedings; they came on for trial before HHJ Collins sitting in the Kingston Crown Court. Mr Allen won. However, the judgment of HHJ Collins is under appeal to this court, though we are not concerned with that appeal. HHJ Collins also dismissed the counterclaim as to costs; he ordered that the claimant be paid two thirds of his costs by the defendants.

Mr Lindington submits that if the respondent loses the new action then he will nevertheless become entitled to recover almost all of his costs under the order of HHJ Simpson. Likewise, if the appellant obtained an order for costs in the second action that would be of little practical benefit to him because of HHJ Simpson’s order. We now know, of course, the result in the second action but it is under appeal as I have described.

Mr Lindington submits that the judge should have ordered the appellant to pay only the costs thrown away and should have reserved the rest of the costs to the judge to be dealt with after the second action was finally determined.

Mr Lindington submits that in making the order which he made, the judge effectively awarded to Mr Matthews most of its costs in respect of a matter which, at the time the judge was dealing with the matter, had still to be tried, and it was not known whether he would succeed. Likewise, as I have explained, Mr Lindington submits that if Mr Allen were to succeed then he would not recover the majority of his costs.

The respondent’s notice has now been amended. In the respondent’s notice, the respondent submits that the judge was not in error in failing to adjourn the case because it was not practical to commence a second trial in the time remaining. Eight witnesses were due to be called, there was a further witness who had indicated that he was unwilling to give evidence notwithstanding a previous witness statement, and the judge was told that an application for a witness statement would have to be made.

The respondent also submits that they had through counsel made an offer to the appellant’s counsel before the second day of the hearing commenced. Under the offer the appellant would pay the costs thrown away on the first day, which had been taken up with the locus argument, and the respondents would not rely on the locus point. The respondent alleges that the appellant was not happy to pay any costs and said that the costs should be reserved to the conclusion of the trial. The respondent submits that if the appellant had accepted that offer, the trial might have proceeded with the two full days being still available. As it happens, the second action was tried comfortably within two days although there were more documents before the judge.

I should say that the matter I have just referred to between counsel is not fully accepted by the appellant’s counsel. He says that he was unable to consult his client about the offer and therefore could not have refused it.

In his skeleton argument Mr Falkowski, for the respondent, relies on the reasons given by the judge and seeks to uphold the judge’s ruling on costs. He submits the appellant advanced no argument as to costs. He further submits that the judge was entitled to make the order he did in the exercise of his judicial discretion. The judge was not prepared to agree to reserve any cost, and he refers again to the eight witnesses which were to be called and that it would not have been practical to start the hearing on that second day. He also submits that in fact it was not the case that the disclosure and other preparatory steps would have been the same in the new trial.

I now turn to my conclusions. There is little doubt as to the principles to be applied in an appeal against the exercise of a judge’s discretion as to costs. The appellant has to meet a high hurdle. Stephenson LJ in Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394 stated as follows:

In this case, in my judgment, the judge should not have dealt with all the costs of the first action without making some provision for the situation that would arise if the second action was started and the costs incurred in the proceedings being dismissed would in fact be saved by the steps taken in the second proceedings. The costs incurred in the first proceedings would in fact save costs in the second proceedings. He could have done this by some qualification to his order. In my judgment, it is wrong in principle that he should make an order which dealt with the whole of the costs, because that would enable the party who gets the benefit of that order to receive a benefit in the second proceedings. That is, in the second proceedings if the defendant were to be liable for the costs, he would escape, in practical terms, responsibility for the costs because he has the benefit of the order in the first proceedings.

It therefore falls to this court to re-exercise the judge’s discretion. At this stage, of course, it is known that a second set of proceedings had been issued and indeed they have been tried and are under appeal to this court. Accordingly, I consider that the form of order which should be made as to costs in the first action is an order that those costs should not be dealt with until the second action has been finally determined. I would make an exception for the costs thrown away by the locus point on which the appellant lost in the first action. I would also provide in the order that the matter as to costs should be dealt with if possible by HHJ Collins, but if not by some other judge of the County Court.

To that I would make one qualification it is this: if, on an appeal, it is determined that the second action should be retried, then the name of the judge who retries it should be substituted for the name of HHJ Collins in the form of order that I have given. I say that because if there were a retrial, it seems to me that it would be appropriate for the judge who heard the retrial to consider whether any of the costs incurred in the first action to determine how the costs borne in the first action should be borne, other than those which I have already identified as having to be borne by Mr Allen in any event, namely the costs thrown away by the locus point.

I now need to deal with a number of points which have been made in argument and as to why I have not accepted them. The first point is that, of course, there was a risk that no new action would be started and if that had happened but the judge had ordered that the costs be deferred simply to the judge hearing the trial in the second action, the position may have been left up in the air if a second action had not been started. But that could have been dealt with in the form of the drafting or by the extracting an undertaking from the claimant, that is the appellant before us, that he would in fact proceed with a new action. The order of the judge could alternatively have provided that the costs would follow the event in the first action if the second action was not expeditiously issued and brought to trial.

The second point I wish to deal with is this: the appellant seeks to challenge the judge’s dismissal order collaterally in this appeal but has not challenged it substantively. In my judgment that is not something that can be done but there is no need for the dismissal order made by the judge to be challenged. In my judgment, all that is necessary is that the judge’s exercise of discretion following dismissal of the action should have been challenged.

The next point I wish to deal with is simply an observation of my own. The court below did not use the remaining court time before it to hold a case conference and I should wish to state that one of the things which the judge could have done was to hold a case conference in the second action, having taken an undertaking that new proceedings would be started forthwith, and that would have enabled court time to be used. It would also have enabled directions to be given forthwith so that the second action could have been brought to trial speedily and costs of getting new interim directions in the second action saved.

The next point I wish to deal with, the fourth point, is that the form of order that I propose is not for the costs of the first action other than those thrown away by the locus point to follow the event in the second action. In my judgment such an order would be wrong in principle because it is not yet been determined the extent to which the costs incurred in the first action have saved costs in the second action. The appellant, indeed, does not invite this court to make an order that the costs of the first action, save that as already mentioned, should follow the out-turn in the second action. He accepts that events may show that the costs were not in fact saved.

The fifth point is that the trial has now taken place so that it is not possible to make an order as HHJ Simpson should in my judgment have done, simply that the costs be dealt with by the judge hearing the second trial immediately after he disposes of that matter. Accordingly, in my judgment, the costs of the first action should be dealt with in an application in the first action but before a judge of the County Court and, as I have already explained in my judgment, that the matter should preferably be heard by HHJ Collins after the second action has been finally determined, unless of course there is an order for a retrial, in which event, in my judgment, the matter of course should be dealt with by the judge who hears the retrial after of course that matter has been finally determined. I will expect him to deal with the matter immediately after any second trial.

The next point I wish to deal with is this: Mr Falkowski argues persuasively that counsel did not take the point that is now taken on appeal before the judge. In other words, the parties made an application jointly for the judge to proceed to hear the matter on the basis that a claim form was reissued. The judge, as I have explained, rejected that application. The matter of costs was not specifically dealt with; the judge dealt with it in his judgment as I have explained. I can, of course, see an argument that where a party fails to raise a point before a judge he cannot then raise it on appeal, but that has to be seen against the point with which we are dealing and against the context of the Civil Procedure Rules, which now require a judge to take a much more active and managerial role in managing proceedings for the purpose of saving costs. Gone are the days when the trial judge was, as one American writer put it, “in the position of an oyster - anchored in one place, unable to take the initiative, unable to go out after things, restricted to working on and digesting what the fortuitous eddies and currents of litigation may wash his way” (C. Magruder, (1941) 55 Harvard L Rev. 193, 194). A judge has to take the initiative and think of points from time to time even if they are not put before him fairly and squarely. The point with which we are dealing is one which was fairly obvious on what the judge knew. He knew that it was the claimant’s stated intention to start a second action, so the question of deferring some costs was, as I see it, sufficiently before the court for the matter to have been dealt with by the court of its own initiative and if not certainly to have been raised in this court.

The next point I wish to deal with is this: the question of what order HHJ Simpson should have made in the circumstances with which he was faced is a matter which has to be assessed at the time the judge made his order. Therefore, this court cannot on this appeal go into the point that the new action turned on different facts; that is a submission of Mr Falkowski, which I note. It is not one which we can deal with. That was not the expectation at the time the judge was dealing with the matter and is catered for by an order simply that the costs be reserved and that they do not simply follow the event of the second action.

The next point is, as the appellant accepts, they still have to pay the wasted costs, and so far as Mr Falkowski’s submission that the appellant was at fault for failing to take point at the start of the trial is concerned, that only goes to those wasted costs and does not prevent an order made on this appeal in the terms that I have indicated.

For those reasons, I would allow the appeal and make the order which I have described.

LORD JUSTICE PILL: I agree that the appeal should be allowed and I do so for the reasons given by my Lady, Lady Justice Arden.