Newman v Framewood Manor Management Company Ltd

This is a very sad and unfortunate case, in which the costs of successful litigation far, far exceed the amounts recovered by the claimant. Sadly, it is a situation, particularly where people are living in close quarters with others, that we see too frequently in these courts.

This is the hearing of an appeal relating to the costs order made by Mr Recorder Pullman QC sitting in the Slough County Court. The appeal on the merits of the claims of the appellant in these proceedings was determined by the Court of Appeal in a judgment handed down on 21 October 2012, with the citation [2012] EWCA Civ 959.

Having read the skeleton argument of each side for the purposes of this hearing and heard the oral arguments of Mr Peter Knox QC, for the appellant, and Mr Mark Jones, counsel for the respondent, I do not consider that the appeal in relation to costs raises any important issue of principle or procedure. I propose, therefore, to address the issue without any great elaboration of the background. That can be found set out in the judgment of the Recorder on the merits and on costs and in the judgment of Arden LJ.

There is no dispute that the appellant should recover her costs of the counterclaim. We are concerned with the costs relating to the appellant's claims.

The judgment and order of the Recorder on costs must plainly be set aside because his order proceeded on a view of the merits which has been substantially reversed by the Court of Appeal. He gave substantive relief only in a damages award of approximately £1,200 in respect of the wardrobe claim. The table at the end of the judgment of Arden LJ sets out the seven heads of claim by the appellant and her recovery in respect of each head. She also won the argument on the exoneration clause. The only item for which she recovered nothing was the tree roots claim. She did not succeed in her claim for specific performance of work to the doorway, but that was because the respondent offered an undertaking in the course of the proceedings. As Arden LJ said in paragraph [34] of her judgment, the appellant is to be treated as having won the doorway claim. The appellant also did not succeed in her claim for specific performance on the jacuzzi claim, but she was awarded £2,500 in lieu of specific performance and must be regarded as having won that claim also.

It follows that the appellant was substantively the overall winner in the litigation. There must be, in my judgment, a small discount of 5 per cent. to take account of the one head of claim on which she lost, that is to say the tree roots claim. There should also be a deduction or an exclusion in respect of the costs of the appellant's expert’s report on the alleged loss of capital value to the appellant's property. That expert's report was on the hypothesis that none of the work would be carried out. That was never persisted in as a realistic claim. It was advanced for the purpose of illustrating the loss of amenity value in respect of the various infringements of the appellant's rights which were the substance of her claims. No expert’s report was adduced by the respondent in opposition to the report of the appellant's expert and no time was taken up at the trial in relation to the contents of the appellant's expert's report. It therefore is sufficient simply to exclude the costs to the appellant of that report.

Subject to that exclusion and the deduction of the 5 per cent on the one head of claim on which the appellant lost, the starting point under CPR 44 is that the appellant should recover her other costs unless there is some good reason to make a different order. Various points have been put forward on behalf of the respondent as to why there should be some different order, but in broad terms they fall under the headings of proportionality and conduct.

So far as concerns proportionality, it is said, and is undoubtedly true, that the appellant has recovered much less than she claimed in her proceedings. It is further submitted that the costs are wholly disproportionate to the amount of her recovery.

I have already addressed the claim for loss of capital value, which is by far and away the largest claim in money terms in the appellant's claim. As I have pointed out, no time was spent at the trial on that issue and no expert evidence was adduced on behalf of the respondent in relation to it. That point is suitably addressed by excluding the appellant’s expert evidence from the costs recoverable by the appellant.

So far as concerns the general issue of proportionality, that is to say the balance of the costs of the proceedings compared with the value of her claims as ultimately established, one has to bear in mind that the appellant has had to take these proceedings in order to recover the damages which she has recovered and to secure the undertaking regarding the reinstatement of the doorway. Whether or not the costs of achieving those results are disproportionate, and the way in which any disproportionate element is to be taken into account, must be addressed on the assessment of costs. Accordingly, I would not qualify the appellant's right to recover her costs on grounds of disproportionality.

Turning to the issues of the appellant's conduct, a large number of points are made. It is said that the appellant is to be criticised for not complying with the arbitration clause in her lease. That is true, but on the other hand, as is accepted, the respondent never applied for a stay pending arbitration and indeed the respondent has engaged in these proceedings throughout. This objection is plainly unfounded.

It is then said that the proceedings were commenced prematurely. This is said to be the case because, in broad terms, after a lapse of some considerable time between exchanges of correspondence and communications between the parties, a letter was written on 2 April 2009 indicating that proceedings would be commenced by the appellant unless, before the expiry of the twenty working day period mentioned in that letter, certain steps had been taken and assurances given. In the event, proceedings were commenced on 1 May 2009, whereas the expiry of the twenty day period would not have occurred until 5 May. It seems to me that, while it is accurate to say that the proceedings were commenced prematurely in the context of the twenty day period mentioned in the letter of 2 April 2009, this has been completely irrelevant to the course of the proceedings and, in particular, the need of the appellant to pursue them to judgment and from there to appeal. The shortfall in the time allowed for expiry of the twenty day period has been irrelevant in terms of any material development that might have occurred during the course of that time and which might have deflected the course of the proceedings.

The next point, which is a general point in relation to prematurity, is that the respondent says the appellant's conduct was unreasonable in taking proceedings when the respondent was seeking to pursue an orderly refurbishment funded, so far as possible, by funds which, as and when they were available, were raised from the tenants. But that must be placed in the context of the issues relating to the work or lack of work having been the subject of complaint by the appellant as early as June 2008 in correspondence from the solicitors that she had instructed at that time. The reality was that, despite that correspondence and then subsequently the sending to the respondent of a report commissioned by the appellant from Mr Colin Little FRICS setting out the current items of disrepair of which she complained, the appellant’s complaint about disrepair was not substantially addressed prior to the commencement of the litigation. The fact that the respondent did not consider it had adequate funds available to complete that repair is irrelevant to the question of the claimant's entitlement. As has subsequently been established by the court judgments in this case, in relation to six of the seven heads of her claim the appellant was right to insist upon her legal rights under her lease to have the premises maintained and repaired in the manner which she claimed and in respect of which she succeeded. In short, I do not consider that it was unreasonable of the appellant to have commenced proceedings at the time and in the manner which she did.

It is then said, by way of general unreasonable conduct, that following the commencement of the proceedings the appellant did not negotiate and did not engage in proposals for compromise in a reasonable way.

So far as concerns mediation, it seems to me that the correspondence belies the criticism of the respondent in this regard. It is clear on the correspondence that the appellant, or those acting on her behalf, did indeed put forward dates in 2009 -- that is, both in the summer of that year and in November -- for meetings, but those were not convenient or considered appropriate by the respondent.

It is true that the respondent put forward dates for meetings in December 2009 and January 2010, but the appellant and her husband spent the winter months out of this country. In the event, a further offer was made by the appellant in December 2009 for a meeting on 19 February 2010.

Accordingly, I do not consider that the case has been made out that the appellant unreasonably refused to enter into discussions or mediation.

It is said, on behalf of the respondent, that the appellant did not have a reasonable approach to negotiations in terms of both making and responding to offers by the respondent to settle the proceedings.

Mr Jones has placed particular weight on the offer made, on behalf of the appellant, in a without prejudice letter of 7 December 2009 which, among other things, requested that two directors of the respondent resign, that the doorway be reinstated immediately and that the respondent pay the appellant's costs in full. He also referred to a without prejudice letter of 18 January 2010 on behalf of the appellant, in which the appellant sought to impose several non-negotiable conditions in relation to a proposal for a without prejudice meeting.

It seems to me that all this misses the points. The question is not what offers, reasonable or unreasonable, were put forward by the appellant. What is sought to be established by the respondent in this case is that, notwithstanding that the appellant effectively succeeded in the claims, the appellant should be deprived of all or part of her costs for unreasonable conduct. What we need to concentrate on, and what the respondent should concentrate on, are the offers which it made, which it says were reasonable and which the appellant failed to accept. In that respect my attention was directed to three offers made on behalf of the respondent which were rejected by the appellant. The best of those three, which is the one at the end of the day that Mr Jones really relied upon, was contained in a without prejudice letter of 7 September 2010 from the respondent's solicitors to the appellant's solicitors which was on the eve of the trial of the proceedings. The offer was for each party to pay their own costs and for careful consideration to be given to the alternative proposals between the parties' mutual experts as to what should be done and at what cost in order to reopen the doorway.

It is relevant, however, that the offer was that each party pay their own costs and that there was no offer to pay any compensation of any kind to the appellant for the interference with her rights. I do not consider in the circumstances that that offer can properly be described as anything like a "near miss", or as being the type of offer the refusal of which discloses such unreasonable conduct on the part of the appellant as to deprive her of what would ordinarily be her right to recover costs as the successful party.

Accordingly, having considered all these points that have been made on behalf of the respondent for either denying the appellant completely her costs or for disturbing what would otherwise be her right to recover, as I have said, 95 per cent of her costs but also excluding the cost of the appellant's expert's report, I consider that none of those grounds succeed. I would therefore order, in relation to the costs below, that the respondent pay the appellant 95 per cent of her costs in those proceedings but excluding the cost of the appellant's expert’s report as to diminution of capital value.

The appellant has asked that in those circumstances an order be made pursuant to Section 20C of the Landlord and Tenant Act 1985 to the effect that the respondent's costs incurred in relation to this action up to and including the trial are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by her pursuant to clauses 16 and 17 of the second schedule and the eleventh schedule of the lease or indeed any other clause of the lease. That is not resisted in principle by Mr Jones and, accordingly, I will make that order.

I agree.

I agree.