Milkovics (t/a Milkovics & Co) v Keppel-Palmer

This appeal, from a decision of HHJ Morgan on 16 April 2007, is about the costs of an action brought by Mrs Keppel-Palmer in respect of a disastrous holiday in a Barbados villa over the millennium of 1999 to 2000. She first instructed her brother, Mr Marc Hadrill, who was a sole practitioner practising under the name of Redmans. He instructed counsel, who advised her to issue proceedings against Exsus Travel Limited (whom I will call “Exsus”), her UK travel agent, which she did on 13 December 2000. For whatever reason, she transferred her instructions to Mr Milkovics, the claimant, in August 2002. He advised her to add Royal Westmoreland Villas (whom I will call “RWV Limited”), who actually provided the villa as a second defendant to the proceedings, which she did in November 2002.

On 13 June 2003 Gage J, as he then was, gave judgment in Mrs Keppel-Palmer’s favour in the sum of £29,760 against RWV Limited. He ordered RWV Limited to pay her costs of the action on the standard basis. He also ordered that there should be no order as to the costs of the action as between Mrs Keppel-Palmer and Exsus. That left Mrs Keppel-Palmer to bear her own costs of suing Exsus, but HHJ Morgan held that Gage J had intended to delegate to the costs judge, who was to hear the assessment of costs, the question whether Mrs Keppel-Palmer’s costs as against Exsus should be payable by RWV Limited and, if so, the extent to which that should happen.

In due course the costs judge, Deputy Master Haworth, decided on 16 April 2004 that Mrs Keppel-Palmer could recover against RWV Limited costs as from the original initiation of proceedings of December 2000 that were relevant to the subsequent claim against RWV Limited, but not any costs which only and directly related to Exsus. That meant that, to some extent at any rate, Mr Hadrill’s costs incurred between 13 December 2000 and August 2002 would be recoverable.

He had originally acted pursuant to an ordinary retainer, but, as from April 2001, pursuant to a conditional fee agreement (which I will refer to as a “CFA”) with a success fee by way of uplift.

The assessment was not a success from Mrs Keppel-Palmer’s point of view. The sum claimed on the assessment was £105,160. On 12 January 2004 Mr Milkovics had made a part 47.19 offer on Mrs Keppel-Palmer’s behalf to accept about £80,000, but Deputy Master Howarth only awarded £39,122.24.

In due course, Mr Milkovics submitted his bill to Mrs Keppel-Palmer and Mrs Keppel-Palmer paid part of it. The unpaid part amounted to £25,722.24; and on 9 November 2004 Mr Milkovics instituted proceedings for his fees in a sum then reduced to that amount plus interest. Mrs Keppel-Palmer has declined to pay that sum on various grounds.

HHJ Morgan accepted the claim to some extent, inasmuch as he awarded to Mr Milkovics, the claimant, a sum of £13,550.70 inclusive of interest. He rejected a cross-claim by Mrs Keppel-Palmer that she would have recovered the costs of the assessment but for his negligence in failing to provide the costs draughtsman, who argued the costs assessment, Mr Watson, with copies of Mr Hadrill’s retainer and CFA. He accepted that one of the reasons for Mrs Keppel-Palmer’s failure to recover her costs was that Mr Milkovics had failed to provide his costs agent with those copies. The judge held that, if that had been done, Mrs Keppel-Palmer would have been awarded 40% of Mr Hadrill’s otherwise irrecoverable costs in the sum of £7,768.68. He therefore held that Mrs Keppel-Palmer was entitled to counterclaim that amount with interest and he gave judgment on her counterclaim in the sum of £10,918.95 inclusive of interest. That was not, of course, sufficient to defeat Mr Milkovics’s judgment, so Mrs Keppel-Palmer has emerged as the overall loser. She now appeals with the permission of HHJ Morgan, saying that the judgment she obtained on her counterclaim was too small, and indeed that the amount awarded to Mr Milkovics was too great.

She submits that she ought to have recovered the costs of the assessment from RWV which, in the absence of any offer from RWV Limited as the paying party, should automatically have been awarded to her; and she only failed to do that because of Mr Milkovics’s negligence in not providing the documentation which I have referred to. And secondly she says that, by reason of Mr Milkovics’s negligence in not including the retainer and the CFA, she should have recovered a larger sum than the sum awarded to her of £7,768 plus interest.

Those are the two broad matters which have been argued in front of us this morning. I deal first with the costs of the assessment. The two figures with which we are concerned are, firstly, the costs of the assessment as they have now been assessed in the sum of £2,657.85; and secondly, Mr Watson’s own fee of £2,716.60, which Mr Hadrill has in fact paid to Mr Milkovics but which his sister, Mrs Keppel-Palmer, now claims she has become liable to pay to Mr Hadrill. The first figure, if the appellant’s submissions are correct, would come off the amount of the claim; the second figure, if the appellant’s submissions are correct, would be in addition to the counterclaim. The argument is that, normally, a receiving party will get the costs of the assessment, but that did not happen in this case due to Mr Milkovics’s negligence in not providing the retainer and the CFA to Mr Watson who argued the case before the costs judge, and also in not providing proper advice as to the extent to which the costs claim was likely to be reduced as a result of the Exsus factor.

The judge considered the Exsus factor in his judgment. He discounted it largely because he thought that Mrs Keppel-Palmer had been sufficiently advised by Mr Hadrill as to the likely result of the Exsus factor; and, in relation to the argument that is now put, he said this, apparently not appreciating that the argument applied to the first figure which I have mentioned of £2,657.85 as well as the second figure which I have mentioned of £2,716.60:

“The defendant’s counsel submitted that, in addition, the defendant is entitled to be reimbursed as to the sum of £2,716.60 paid by Redmans to Legalex in respect of the costs of the assessment on the basis that, but for the claimant’s said negligent failures, she would have obtained an order for the costs of the assessment against Royal Westmoreland Villas Limited. I am not satisfied that the costs judge would have awarded her the costs of the assessment, but for those failures, in that he appears to have taken great exception to the number of hours claimed by Redmans unjustifiably, in his view; what he called time dumping. Therefore, I am not satisfied that the defendant is entitled to add the figure of £2,716.60 to the figure of £7,768.68.”

As to that, in relation to both these figures, Mr Mallalieu submits that the judge has failed to take into account, as he should have done, the evidence given by Mr Watson, who was called by Mr Milkovics before HHJ Morgan and cross-examined by Mr Mallalieu on behalf of Mrs Keppel-Palmer. In particular, he relies on two questions and answers in the course of that cross-examination as follows:

“Q: So he [that is the costs judge] did not give you the costs and he halved your costs that originally had been incurred in preparing the bill. Now, in the absence of 47.19 offers, Mr Watson, if you had not been in the position where you lost the success fee, you lost the whole of part 1, what do you think would have happened to the costs of the assessment?

A: I should have been awarded the costs of the assessment or the claimant in this case would have been awarded the costs of the assessment.

Q: So even just without those two points, … on retainer points, if that had not happened you think you would have got costs of the assessment?

A: Yes.”

Mr Mallalieu submits that the judge should not have concluded as he did without saying why he disagreed with Mr Watson who, after all, was there, was the expert costs legal draughtsman and was offering his opinion as to what would have happened if the retainer and the CFA had been reduced.

The finding made by the judge in paragraph 48 of his judgment, which I have recited, is of course a finding of fact. Mr Mallalieu has to submit that it was a perverse finding of fact, but in my judgment the judge was not bound to accept what Mr Watson had said in evidence about that. It was merely -- and this is without seeking to denigrate Mr Watson’s evidence in any way -- his own opinion about what would or would not have happened in litigation in which he was participating. The judge who, after all, must have as much experience of litigation as Mr Watson, was, in my view, entitled to rely on his own intuition that what incensed deputy Master Haworth was what the deputy Master had called the “time dumping” included in the bill of costs, amounting to unnecessary charging of 80 out of 120 hours’ work said to have been done by Mr Hadrill. It was that that the judge concluded had incensed the deputy Master, not the mistake of Mr Milkovics in not providing Mr Watson with the retainer and the CFA. The fact that the deputy Master did include some of the profit costs in relation to part 2 of the costs bill in his ultimate assessment of costs shows, in my view, that he was not treating the absence of those documents as a complete reason as to why costs should not be awarded in the usual way.

I am somewhat encouraged in the view that I have formed by my doubts as to whether this was put to the judge in quite the way it was put to us this morning in relation to those two questions and answers in Mr Watson’s evidence and the fact that no reference is even made to that evidence in Mr Mallalieu’s skeleton argument for this appeal. I would not therefore reverse the judge on this aspect of the matter.

I turn then to the sums which are recoverable for the negligence as found on the part of Mr Milkovics in not providing Mr Watson with the retainer and the CFA for the purposes of the costs assessment.

The judge adopted a broad brush approach in relation to this question, largely on the urging of Mr Mallalieu who had said in his closing submissions that there were two options: one would be to send the claim off for yet another assessment of what precisely would have been recovered if the documents had been produced, or, if that alternative was not acceptable, to adopt a broad brush solution to that question. In my view, the judge was clearly right to accept Mr Mallalieu’s invitation to adopt a broad brush approach since the incurring of yet further costs on the question of costs would be almost as disproportionate as this appeal is likely to be.

What is now said, however, is that the broad brush should have been done in two separate halves; that it was necessary, if one had adopted this broad brush approach, to look first at the part 1 costs which had been wholly disallowed and would have been allowed if the retainer had been before the costs judge and that it would be difficult to complain of the percentage figure adopted by the judge of 40%; but, submitted Mr Mallalieu, it was wrong to apply that 40% to the appropriate success fee in relation to part 2, which should be added to those part 1 costs -- that success fee being 50% payable on the profit costs as found, amounting to £5,784.07 inclusive of VAT. The reason for that, said Mr Mallalieu, was that it would mean that the success fee effectively was reduced to a success fee of 50% of 40% viz 20%, which is lower than any acceptable success fee.

This argument was not in terms put to the judge in the closing submissions and has really only emerged in its final form this morning. It does not normally lie in a litigant’s mouth to ask a judge to perform a broad brush exercise but then say he ought to have adopted a different broad brush to one part of the exercise from that which he has adopted in relation to the other. This argument has, in my judgment, all the elements of afterthought, after the result of the broad brush has been produced to the judge but disliked by the appellant.

It seems to me that an overall percentage figure of 40% was within the reasonable bounds of an order which the judge could have made and I myself would not interfere with it, and I would leave the figure that the judge has arrived at for the counterclaim of £7,768.68 plus interest.

In those circumstances I would dismiss this appeal.

I entirely agree.

I also agree.