Aspin v Metric Group Ltd

This is an appeal from an order as to costs made on 31 October 2006 by HHJ Wyn Williams QC, as he then was, sitting as a Deputy Judge of the High Court in the Cardiff District Registry of the Chancery Division, in proceedings brought by the appellant, Mr Kevin Aspin, against his former employers, Metric Group Limited. Permission to appeal to this court was granted by Sir Henry Brooke on 9 February 2007.

From 22 May 1995 until 10 July 2001 the appellant, Mr Aspin, was employed by the defendant company, first as business development manager of its Almex Transport Division, and latterly (from December 1999) as sales director involved in the running of its wider business. That employment was terminated summarily on 9 July 2001 with effect from the following day. The reason given for the termination, in a subsequent letter dated 20 July 2001, was that Mr Aspin had been dismissed for gross misconduct.

Mr Aspin commenced proceedings in the Employment Tribunal seeking an award in respect of unfair dismissal wrongful dismissal, and breach of contract. Although, at first, the company maintained its stance that the claimant had been dismissed for gross misconduct that allegation was withdrawn at a hearing in those employment proceedings on 7 February 2002; and on 3 October 2002 the company was granted permission to amend its notice of appearance by substituting redundancy as the reason for dismissal.

The present proceedings were commenced shortly thereafter, on or about 8 November 2002. In these proceedings Mr Aspin claimed damages for breach of contract, unpaid commission and a quantum meruit arising out of his terms of employment. In addition he claimed damages in respect of the prejudice which (as he said) he had suffered in connection with his attempts to obtain re-employment by reason of the allegation that he had been dismissed for gross misconduct. He sought an account of sums alleged to be due in respect of commission, interest for late payment of other monies, pension contributions and unpaid expenses.

In a letter dated 3 October 2002 - that is to say shortly before the commencement of these proceedings - and written in response to an offer of settlement at a figure of some £50,000, Mr Aspin (in rejecting that offer in strong terms) put his claim at “anything up to £400,000 of which at least £170,000 is without question”. Following the rejection of its offer, the company made an unconditional payment of £25,457 in respect of statutory redundancy pay, payment in lieu of contractual notice and pension losses. On 10 April 2003 the company made payment into court in the sum of £25,000; of which £3,924-odd was stated to be in respect of interest.

The proceedings came before HHJ Price QC, sitting in the Queen’s Bench Division of the High Court, for trial on liability. In a judgment delivered on 11 March 2004 ([2004] EWHC 1265 (QB)), HHJ Price rejected one of the elements in the claimed commission - that is to say, a claim that Mr Aspin was entitled to commission on what were described as large orders (those being orders over £500,000) in addition to the commission which he had already received; he accepted that Mr Aspin was entitled, in addition to commission on sales, to a percentage of gross margin (which the judge equated to an additional 1 per cent on sales); but he went on to hold that that arrangement for commission on gross margin had ended in November 1995. The judge rejected Mr Aspin’s claim to bonuses dependent on the company’s performance; and, importantly, he rejected the claim for damages in respect of prejudice said to have been suffered by Mr Aspin in connection with his attempts to obtain re-employment. We do not have before us the order which HHJ Price made, following his judgment on 11 March 2004, but it is reasonable to conclude that he must have directed that judgment be entered for the claimant on the heads on which he had succeeded - such damages to be assessed - and he must have directed that the costs of the trial be reserved to the judge dealing with the assessment of damages.

HHJ Price had anticipated that questions of quantum of damages, following from the findings on liability which he had made, would be capable of being agreed, and would be agreed, between the parties. But that was not to be. The matter came back to the court for assessment of damages. It came before HHJ Wyn Williams, sitting in the Chancery Division in 2005. He handed down a written judgment on 16 December 2005. The sums claimed by Mr Aspin had been set out in a schedule. Most of those sums, other than the amount of commission on sales during the notice period, had been agreed, or were agreed, in the course of the hearing. There remained for decision by HHJ Wyn Williams on that occasion an issue as to the date upon which commission on sales was earned. The judge decided that issue in favour of the claimant. He rejected claims to commission, or to damages in respect of the loss of a chance of earning commission, in respect of certain contracts which were concluded after the expiry of the six-month notice period; but he accepted that loss of a chance for damages in respect of the commission on one such contract (which he described as “the Greek contract”). The judge returned to that issue in the supplementary judgment which he delivered in April 2006. He accepted, in his judgment, that there was in fact a second Greek contract in relation to which the claimant had lost a chance to earn commission.

The effect of the findings as to quantum which were made by HHJ Wynn-Williams was set out in paragraphs 1 to 3 of the order which was eventually made on 31 October 2006. The paragraphs are in these terms:

“1.

There be judgment for the claimant in the claim in the sum of £31,152.43 together with interest thereon of £12,245.66 a total of £43,388.09;

2.

There be judgment for the claimant [Metric Group Limited] in the counterclaim on the counterclaim in the sum of £1,195.50 together with interest thereon of £275.89 a total of £1,471.39 which would be set off against the claim;

3.

The net total of the judgment for the claimant against the defendant including interest and after setting off counterclaim and interest shall be £41,926.70.”

Paragraph 4 of the order provides that part of that sum an amount equal to £7,526-odd be deducted and paid to the Inland Revenue under the PAYE Regulations 1993. The basis for that deduction had been explained by the judge in his judgment of April 2006.

The matter came back to HHJ Wyn Williams on 31 October 2006 so that he could deal with the outstanding questions of costs. The figures to which I here just referred had, by then, been agreed between the parties. The judge referred to them in the first two paragraphs of the judgment which he delivered on 31 October 2006. The order for costs which the judge made is found in paragraph 8 of the order of 31 October 2006:

“There shall be no order for costs as between the parties up to and including the date when HHJ Philip Price QC delivered judgment. Thereafter the defendant shall pay to the claimant his costs to be the subject of a detailed assessment on the standard basis if not agreed.”

It is from the first sentence of that paragraph that Mr Aspin appeals: that is to say, he appeals from the order that there be no order as to costs incurred up to and including 11 March 2004, the date of HHJ Price’s judgment. The appellant has had his costs thereafter; and there is no cross-appeal from that part of the order.

Orders for costs are peculiarly in the discretion of the trial judge. An appellate court does not interfere on the basis that it thinks that it might have made a different order if it had been exercising the discretion that is entrusted by statute to the trial judge: see the observations at paragraph 22 of my judgment in this Court in Johnsey Estates 1990 Limited v Secretary of State for Environment [2001] EWCA Civ 353. Indeed, as I observed, it is not for an appellate court even to consider whether it would have exercised the discretion differently unless it has first reached the conclusion that the judge’s exercise of his discretion is flawed.

It is necessary therefore to examine the reasons given by the judge for his conclusion that, in effect, the parties should bear their own costs down to the conclusion of the trial on liability. At paragraph 4 of his costs judgment, delivered on 31 October 2006, HHJ Wyn Williams observed, correctly, that, on the basis of the findings as to liability that had been made by HHJ Price, Mr Aspin had recovered more than the amount paid into court on 10 April 2003. So there was no reason to deprive Mr Aspin of any costs on the basis that he had failed to beat the payment in. At paragraph 5 of the judgment HHJ Wyn Williams pointed out, again correctly, that the effect of the judgment of HHJ Price was that claims for substantial monetary value had been rejected in March 2004.

A summary of those claims was conveniently set out at paragraph 79 of the submissions which had been put before HHJ Wyn Williams on behalf of Metric, the defendant. I need refer only to the larger elements. They included first, the failure to establish a claim to gross margin commission in respect of the whole of the period. The effect of HHJ Price’s judgment - that that arrangement had come to an end in November 1995 - was to leave a shortfall on that claim of some £68,000-odd. Second, the failure to establish an entitlement to commission on the large orders at a rate in excess of the 1 per cent which had been received. The effect of the claim being rejected was a shortfall of some £83,000. Third, the failure to establish the discretionary bonuses and what was alleged to be a guaranteed bonus. Together a that resulted in a shortfall of some £45,000. Fourth, the two claims for the lost opportunity to be re-employed: totalling together £225,000.

At paragraph 6 of his judgment HHJ Wyn Williams said this:

“It is true of course that the claimant succeeded in his claim that he had been wrongfully dismissed. I have no doubt that this was a significant part of his claim. A glance at the judgment of HHJ Price however shows that there were other difficult issues litigated. I do not accept that the main thrust of the trial before HHJ Price was concerned with the allegation of wrongful dismissal. In many ways that issue was one of the most straightforward. It centred simply on whether the claimant had grounds to dismiss the claimant summarily. The learned judge found that no such grounds existed, a conclusion that he was able to reach without difficulty having read his judgment with some care.”

I interpose to note that HHJ Price was able to reach that conclusion without difficulty because, in the event, it seems that the defendant company called no evidence to support its allegations of gross misconduct arising from the copying of confidential information.

At paragraph 7 HHJ Wyn Williams referred to attempts which had been made to settle and recorded that they had failed without imputing any bad faith to either party. At paragraph 8 he said this:

“In my judgment, as at the end of the trial before HHJ Price QC, the position was that the Claimant had done enough to lay the ground to recover damages which would be more than the payment into court but his most valuable heads of claim had been dismissed.”

He repeated that observation in his concluding paragraph - paragraph 12. At paragraphs 10 and 11 of his judgment HHJ Wyn Williams rejected the suggestion, which had been made on behalf of Mr Aspin, that the defendant company’s conduct of the litigation - and in particular its conduct in relation to its disclosure obligations - should be reflected in an adverse order for costs.

On analysis, therefore, it can be seen that the judge’s conclusion that this was a case in which the just order was an order that the claimant should recover none of the costs which he had incurred up to the date of judgment on liability was founded exclusively on the fact that although the claimant had succeeded on the claims which led to an award of damages in excess of the amount paid into court by the defendant, his most substantial heads of claim (in money terms) had been dismissed. There is no other basis in the judgment which can have led the judge to the conclusion which he reached.

In considering whether the judge erred in his approach it is important to have in mind the provisions in CPR 44.3. Rule (1) sets out the principle that the court has a discretion as to whether costs are payable by one party to another, and as to the amount of those costs. Rule (2) is in these terms:

“(2)

If the court decides to make an order about costs –

(a)

the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b)

the court may make a different order.”

Rule (3) indicates that the general rule expressed in rule 2(a) does not apply in certain proceedings, not relevant in the present context. Rule (4) is important. It is in these terms:

“(4)

In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including –

(a)

the conduct of all the parties;

(b)

whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(c)

any payment into court or 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.”

In that context the conduct of the parties includes conduct described in paragraphs (b) and (d) of rule (5):

“(b)

whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

[…]

“(d)

whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.”

There was no adverse finding on the judge under (b) or (d) of rule (5) in this case.

The fact that the claimant failed on certain heads of claim and so recovered less than the full amount which he had claimed does not, in my view, fall within the phrase “exaggeration of the claim”. If it were reasonable for the claimant to raise the heads of the claim on which he failed, the amounts claimed under those heads were amounts which if liability had been established would at least prima facie have been likely to have been recoverable. Rule (4)(b) is, however, in point. This is a case in which the defendant company was successful in resisting substantial parts of the claimant’s case against it. In particular, the defendant was successful, as to a large part, in resisting the claim for commission in respect of gross margin. It was successful on the claim for commission on large orders. It was successful in resisting the claim for bonuses; and it was successful in resisting the claim for prejudice in respect of future employment prospects. Those were matters to which, under CPR 44.3, the court was bound to have regard.

Rule (6) provides that the orders which the court may make under CPR 44.3 include (a) an order that a party must pay a proportion of another party’s costs and (f) an order that a party must pay costs relating only to a distinct part of the proceedings. Rule (6)(f), when read in conjunction with rule 4(b), invites the court to consider whether to make different orders in relation to distinct parts of the proceedings. If the court were otherwise minded to do that, then rule (7) requires the court to make instead, if practicable, a proportionate order: that is to say, to reflect the consequences of an issue - based costs order in an order that one party pays and the other receives only a proportion of the whole costs of the proceedings. A proportionate order has the advantage that it avoids the need for the separate assessment of the costs of separate issues in the proceedings: a task which would be usually time-consuming and inconvenient.

In the case to which I have already referred, Johnsey Estates v the Secretary of State for the Environment [2001] EWCA Civ 353, I sought to explain the manner in which those provisions of CRP 44.3 were to be applied. At paragraph [21] I said this:

“The principles applicable in the present case may, I think, be summarised as follows: (i) costs cannot be recovered except under an order of the court; (ii) the question to make any order as to costs – and, if so, what order – is a matter entrusted to the discretion of the trial judge; (iii) the starting point for the exercise of discretion is that costs should follow the event; nevertheless, (iv) the judge may make different orders for costs in relation to discreet issues – and, in particular, should consider doing so where a party has been successful on one issue but unsuccessful on another issue and, in that event, may make an order for costs against the party who has been generally successful in the litigation; and (v) the judge may deprive a party of costs on an issue on which he has been successful if satisfied that the party has acted unreasonably in relation to that issue; (vi) an appellate court should not interfere with the judge’s exercise of discretion merely because it takes the view it would have exercised that discretion differently.”

That paragraph was cited with approval and followed in Summit Property Limited v Pitmans (a Firm) [2001] EWCA Civ 2020 (see the judgment of Longmore LJ at paragraph [16]). Longmore LJ went on, at paragraph [17], to say this:

“It is thus a matter of ordinary common sense that if it is appropriate to consider costs on an issue basis at all, it may be appropriate, in a suitably exceptional case, to make an order which not only deprives a successful party of his costs of a particular issue but also an order which requires him to pay the otherwise unsuccessful party’s costs of that issue, without it being necessary for the court to decide that allegations have been made improperly or unreasonably.”

Those passages points out that, in deciding what order to make on an issue-based approach, the court may decide that, in relation to an issue which the party successful overall has lost, that party should be deprived of his costs of that issue; or even, in a suitable case, that that party should pay the costs of the otherwise unsuccessful party on that issue.

This was a case in which, as it seems to me, the judge was required to consider whether to make an issue-based costs order; he had to consider that question if he were to comply with the guidance given in CPR 44.3 rule (4)(b). Although it might have been said that the commission issues did not raise discreet points - because they turned on questions of construction which had to be decided in any event, and on some of which the claimant was successful and on some of which he failed - the claims in respect of gross misconduct and loss of employment prospects clearly did raise quite separate issues: perhaps distinct from each other and clearly distinct from the commission issues. The matters for consideration, and the evidence in relation to those two claims were, as it seems to me, quite distinct from the matters which had to be considered in relation to the claimant’s terms of employment: that is to say, not only the basis upon which he was to be paid commission but also the basis upon which he was to receive bonuses.

In a case of this nature where there were distinct and discreet issues, it was important for the judge to keep in mind the observations of Lord Woolf MR in AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507 at 1522H to 1523B. Lord Woolf said this:

“I draw attention to the new Rules because, while they make clear that the general rule remains, that the successful party will normally be entitled to costs, they at the same time indicate the wide range of considerations which will result in the court making different orders as to costs. From 26 April 1999 the, ‘follow the event principle’ will still play a significant role, but it will be a starting point from which a court can readily depart. This is also the position prior to the new Rules coming into force. The most significant change of emphasis of the new Rules is to require courts to be more ready to make separate orders which reflect the outcome of different issues. In doing this the new Rules are reflecting a change of practice which has already started. It is now clear that too robust an application of the ‘follow the event principle’ encourages litigants to increase the costs of litigation, since it discourages litigants from being selective as to the points they take. If you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your effort to do so.”

HHJ Wyn Williams clearly did have in mind the need to consider whether this was a case in which to depart from the “follow the event principle” in respect of the overall result. But his reasoning was not that he should make separate orders in respect of discrete or distinct issues; not even that, if there were discrete issues, he should make an order of a proportionate nature which reflected the success on one issue and failure on another. The order which he made was not. On analysis, an issue-based order at all. It was a global order which deprived the claimant of any costs, because as the judge saw it he had obtained so much less by way of damages than he had originally been claiming. The judge did not explain why he did not choose to adopt a conventional issue based approach. The possibility of such an approach had been canvassed in the skeleton arguments that were before him; although, in fairness to him, it should be said that it is less than clear that either party was urging him to approach the matter on an issue basis. Nevertheless, that was what the rules required.

In those circumstances it seems to me that this is a case in which the judge’s approach to the discretion which he was required to exercise was not flawed. He did not approach the award of costs in accordance with the principles laid out in CPR 44.3 and explained in subsequent decisions of this court. Had he done so he might or might not have reached the result which he did. Because he did not approach the matter in the way in which the law requires we must, I think, set aside the order which HHJ Wyn Williams made.

It is necessary, therefore, for this court to consider whether to remit the matter to HHJ Price (who may, I understand, have since retired); or to Wyn Williams J (as he has become); or to deal with it ourselves. For my part I would make an order in this court. It seems to me that such time has passed since the matter was before HHJ Price that (even if he were available to deal with the costs consequences of his order) the advantage that a trial judge would normally be expected to have in relation to questions of costs has now largely been lost. There is little point in remitting the matter to Wyn Williams J, because he was, and is, in no better position to decide the question than we are. So I think that we should decide it.

It seems to me that the correct approach is to regard the trial as comprising at least two, if not three, discrete issues. The first of those issues were the questions of construction arising from the terms of employment and on which the amount of commission payable and the bonuses turned. On those issues the claimant won in part, but lost in part. The second and third issues - which can be run together - were the issue of misconduct (on which the claimant clearly won) and the issue relating to loss of employment prospects (on which the claimant lost) we can do no more than make an assessment of the time that was taken up in dealing with these various issues.

My impression from the judgment of HHJ Price is that most of the time at trial was occupied in dealing with the issue of misconduct and the issue of loss of income and prospects. The claimant won on one issue and lost on the other. In relation to the commission issues, again the claimant won on some and lost on others. That leads me to the preliminary view that the claimant should have the costs of the issues on which he won; quantified as 50 per cent of the whole costs of the action. I have considered whether it would be right to reduce that figure of 50 per cent; to reflect the defendant’s costs of the issues on which the plaintiff did not succeed. But I have reached the conclusion that it would not be right to do that. In my view the question of loss of employment prospects arises directly from the allegation raised and pursued by the defendant - without apparently any supporting evidence - that the claimant had been guilty of gross misconduct. In those circumstances it seems to me that in relation to the issue as to loss of employment prospects, the proper result is that the claimant should not recover his costs - having lost on that issue - but the defendant should not have his own costs of that issue. There was no proper reason why that issue should have arisen. But for the defendant’s unsupported allegations of gross misconduct, it would not have done so.

For those reasons I would substitute for the order made by the judge an order that the claimant has 50 per cent of his costs up to the conclusion of the trial of liability and all his costs thereafter.

I agree and do not think I can usefully add anything.

I also agree.