Hutchinson & Anor v Neale & Anor

This is an appeal against orders for costs made on 17 December 2010 following the trial of a boundary dispute at Birmingham County Court before HH Judge Simon Barker QC. The appellants, Peter Hutchinson and Susan Penning, are the owners of ‘Whitecrest’. They were defendants in the action and claimants in the counterclaim. Their immediately adjoining neighbours to the east side of Whitecrest were Michael and Ann Neale, the owners of ‘Headley’. They were claimants in the action, defendants in the counterclaim, and are respondents in this appeal. Both houses front on to Newlands Drive in Leominster. Their gardens are aligned north to south. For convenience I shall refer to Mr and Mrs Neale as the claimants and to Mr Hutchinson and Ms Penning as the defendants. The judge found that in the course of defending the claim the defendants, who were successful in the action, had acted dishonestly. The issue raised by this appeal is the legitimate extent to which that finding should have influenced the judge’s orders as to costs.

The dispute concerned the boundary between the parties’ two properties. In 1936 Mrs Helen Newman Neild was the owner of a property in the Newlands area of Leominster. On 14 August 1936 Mrs Neild conveyed the plot of land now called Whitecrest, to the defendants’ predecessor in title. The western boundary of Whitecrest was described in the plan annexed to the conveyance as adjoining OS field number 1464, part of Mrs Neild’s retained land. Mrs Neild covenanted to erect either a concrete and wire fence or a privet hedge along that western boundary. There was already in existence along the eastern boundary a mature privet hedge. The post and wire fence was erected along Whitecrest’s western boundary and some of the concrete posts remained in place at the time of the hearing. The position of the eastern boundary of Whitecrest was described on the plan annexed to the 1936 conveyance by a measurement handwritten along its northern frontage with what is now Newlands Drive. The measurement was indistinctly written. It was either 78 feet or 72 feet from the eastern boundary. A dwelling was subsequently erected on Whitecrest. The defendants became registered owners of Whitecrest on 11 August 1998.

Mrs Neild retained land to the west of Whitecrest. The plot, part of the OS field number 1464 immediately adjoining the western boundary of Whitecrest, was, in 1944, conveyed by Mrs Neild’s executors to Joseph Duffield. This property became known as Cedar Roofs.

On 29 January 1999 the land now known as Headley, adjoining the eastern boundary of Whitecrest, was conveyed to a developer, JW Passey Ltd. During the summer of the same year Mr Passey erected a larch fence along the boundary between Whitecrest and Headley on the Headley side of the hedge. The judge was provided with several photographs taken over the years. The developer subsequently erected a dwelling house and on 18 February 2000 Headley was conveyed to the claimants.

In their Particulars of Claim the claimants contended that the length of the frontage of Whitecrest on to Newlands Drive described in the 1936 conveyance was 72 feet. If that was so, 72 feet measured from the concrete post boundary with Cedar Roofs, meant that the hedge, which the judge found was some 5 feet in width, was wholly on Headley’s side of the boundary, as, at least for the most part, was a garden shed erected by the defendants at the southern extremity of the hedge at the bottom of the defendants’ garden. The claimants sought a declaration in the following terms:

“The true boundary between Headley and Whitecrest is a straight line 72 feet from the western boundary [with Cedar Roofs], the said western boundary of Whitecrest being marked by the concrete posts referred to in the 1936 conveyance; alternatively,

The Hedge is situated on Headley and the true boundary between Headley and Whitecrest is the outer (western) limit of the Hedge.”

In their Defence the defendants pleaded that the hedge on their eastern boundary and the shed recently erected were wholly on Whitecrest’s land. At the time when JW Passey purchased Headley, Mr Passey and Peter Hutchinson had orally agreed the boundary line along which Mr Passey erected the larch fence. It was further contended that Mr Hutchinson and Mr Neale reached an identical oral agreement in 2005. It was admitted that the boundaries of Whitecrest were delineated in the plan annexed to the 1936 conveyance by a measurement along Whitecrest’s frontage with Newlands Drive. It was denied that the measurement in the 1936 plan was 72 feet; it was averred that the measurement was 78 feet. The defendants in their counterclaim sought an appropriate declaration and an award of damages for disturbance of their hedge.

Judgment was handed down in writing on 17 December 2010. The judge dismissed the claim. He found that there was nothing conclusive as to the position of the boundary in any of the title documents of the respective properties, The Sheiling, Whitecrest, Headley and Cedar Roofs. He noted that a 1948 Abstract of Title for Cedar Roofs, produced by the solicitor who had acted for the vendor when the defendants purchased Whitecrest, referred to Whitecrest’s frontage as 78 feet. This, however, was also inconclusive. There was attached to the Abstract a plan (which was referred to at trial as the “Smith plan”) on which Whitecrest’s frontage was written as 73 feet in length. It will be necessary to make further reference to the Smith plan later in this judgment.

The judge turned to the physical features on the ground. He noted that the structure of the Passey fence was intended to be permanent. The hedge on Whitecrest’s side of the fence, on the evidence which he accepted, had been maintained by the defendants’ predecessor for upwards of 25 years. The hedge had over time varied between 4 feet and 10 feet in width at different points along its length and had not followed a straight line. The trunks or stems of its double roots deviated from a notional mid line by +/- 9 inches. There were a wooden post and the remnants of chicken wire within the roots of the hedge, but these features were insufficient to support any inference as to the position of the boundary. One of the witnesses, who had maintained “the flank” of the hedge on Headley’s side for Mr Passey’s predecessor for 12 years, said that he had never noticed a fence within and along the line of the hedge.

The expert evidence was also inconclusive. Measured from the northernmost concrete post erected in 1936 at the boundary between Whitecrest and Cedar Roofs (which was the starting point agreed between the experts), the distance from the post to the Passey fence was 77.96 feet which, of course, closely correlated with the defendants’ case that the measurement in the 1936 plan was 78 feet.

The judge, having considered several authorities on the issues of construction and interpretation of documents, the admissibility of extrinsic evidence and informal boundary agreements, concluded that the central question was whether the correct measurement in the 1936 conveyance was 72 or 78 feet. He described the alleged measurement of 72 feet as the “lynchpin” of the claimants’ case. The judge concluded [at §90-91] that the claimants had failed to establish on a balance of probability that the handwritten measurement on the 1936 conveyance was 72 feet rather than 78 feet. In the judge’s view it was improbable that in 1936 the boundary between Whitecrest and Headley lay on the western side of the hedge, a finding he would have to make if the claimants’ contention was correct. He concluded, “A measurement of 72 feet eastwards from W’s western boundary posts would, in my view, lead to an absurd result: since before 1936, the owners of the plot on which W stands have been responsible for the maintenance of W’s eastern boundary feature, and for upwards of 25 years before the dispute between Cs and Ds the owners of W have maintained the Hedge. If C’s primary contention is correct, they must have crossed or stood on their neighbour’s land to trim and maintain the hedge”.

The judge concluded that the hedge was conveyed to the defendants in 1998. He concluded that the hedge was not conveyed to Mr Passey in 1999. He accepted that Mr Hutchinson and Mr Passey orally agreed the line of the boundary in 2000 as being the line along which Mr Passey then erected his fence. However, the judge rejected Mr Hutchinson’s evidence that the same boundary line was orally agreed with Mr Neale in 2005.

The claim was dismissed. Judgment was given for the defendants on their counterclaim. The judge gave declaratory relief in favour of the defendants and awarded damages to the defendants in the agreed sum of £250.

It is necessary at this stage to make reference to three additional factors material to the judge’s decision as to costs. The first trial of the action commenced before HH Judge Rubery on Monday, 12 January 2010. The trial estimate was three days. On 12 January the court sat a normal day ending at about 4.30 pm. On 13 January the court rose early at about 3.30 pm because snow was falling. On 14 January the evidence for the claimants was completed but the court rose at 1.25 pm at the close of the claimants’ case. Judge Rubery adjourned the hearing to 4 February 2009 because it seemed likely that, even if the hearing continued on 14 January, at least one of the defendants would still be giving evidence at the end of the day. On 2 February Mrs Penning attended her father’s funeral. At 5.20 pm on the evening of 3 February Mr Hutchinson’s mother was taken to hospital in a condition which was said to be grave. On arrival at court on 4 February the defendants so informed their counsel, Mr Brennan, who agreed to make an application for an adjournment. The defendants left court but could be contacted by telephone should the application be refused. Mr Brennan made the application and Judge Rubery granted it. Unfortunately, and without fault by either party, it was not possible to re-arrange an adjourned hearing date because Judge Rubery was nearing retirement and required surgery which involved a prolonged convalescence. He ordered a re-trial before another judge.

The re-trial before HH Judge Barker QC commenced on Monday, 29 November 2010 at 2.10 pm. The claimant’s case was completed by 3.05 pm on Tuesday, 30 November. The defendants’ case commenced with Mr Hutchinson’s evidence at 3.15 pm and his evidence was completed at 11.50 am on the following morning of Wednesday, 1 December. Mr Chandler and Mr Cooper, both of whom gave evidence as to the maintenance of the hedge, completed their evidence at 12.50 pm. Ms Penning, the second defendant, completed her evidence by 3.30 pm. Speeches of counsel occupied Thursday, 2 December and half of Friday 3 December when, at lunchtime, the case was adjourned for judgment. Judgment was handed down and costs orders were made on Friday, 17 December between 12.30 pm and 5.00 pm.

I have referred to the Cedar Roofs’ 1948 Abstract of Title and the Smith plan obtained by the defendants from their neighbour. On the original plan the measurement of Whitecrest’s frontage was not 78 feet but 73 feet. The abstract itself read 78 feet. Judge Barker found that Mr Hutchinson had made a photocopy of the Smith plan. On the copy he altered the figure ‘73’ to the figure ‘78’. He then made a further photocopy of the altered plan and presented it to Mr Jackson, an expert appointed by the defendants to reach an opinion as to the correct line of the boundary. Mr Jackson produced a report and a plan (‘Plan B’) which was subsequently annexed to the Defence. It showed that the Passey fence was 77.96 feet from the concrete posts at the boundary between Cedar Roofs and Whitecrest, entirely consistent with the Abstract and the altered plan attached to it. Mr Jackson’s report did not resolve the dispute and the claimants obtained disclosure of the unaltered plan in December 2006 from the defendants’ solicitors. It revealed the original figure ‘73’. Instead of admitting their dishonesty the defendants subsequently made witness statements alleging that Mr Neale had been responsible for the forgery. That was the defendants’ position in the second as well as the first trial. Only under cross examination did the defendants resile from the accusation made against the claimant and, even then, persisted in their denial that one or other or both of them had been responsible for the alteration of the plan. The judge was explicit in his condemnation of the defendants’ dishonesty, a finding behind which Mr Brennan conceded he could not go.

At the time when the defendants were maintaining, in the pre-trial stages, a false case against a party they knew to be innocent of wrongdoing, they made several offers of settlement in terms which, ultimately, the claimants failed to beat. On 5 February 2009 the defendants made an offer to settle for a declaration that the boundary lay along the line drawn by Mr Jackson in consequence, at least in part, of the altered Smith plan and 50% of their costs. On 26 November 2009 the defendants purported to make a Part 36 offer open until 10 am on 21 December 2009 which again invited acceptance of Mr Jackson’s plans and demanded 50% of the defendants’ costs. Modified offers marginally favourable to the claimants were made on 18 and 20 January 2010 but sought 85% and 70% costs of the defendants respectively. On 19 February 2010 the defendants were prepared to concede the boundary as lying along the eastern edge of the hedge but again they required the claimants to pay one half of their costs. In response the claimants sought agreement to a declaration that the line of the boundary lay 75 feet from the concrete posts on the boundary with Cedar Roofs, each side to pay its own costs. The offer was not accepted.

At paragraph 6 of his order the judge made no order as to costs between the parties, save as follows:

The judge gave the following reasons for his decision in his costs judgment:

The defendants first argue that the judge incorrectly failed to take as his starting point the general rule that an order for costs will, under CPR 44.3(2)(a), be made in favour of the successful party. The judge had accepted the defendants’ case on the central issue, largely for the reasons advanced on their behalf. Neither counsel could cast light on the judge’s conclusion that the defendants had succeeded on one only of their five arguments. That was not supported by the judgment on liability. Furthermore the defendants had made repeated and reasonable efforts to settle the proceedings, efforts which were rebuffed by the claimants. The claimants’ case is that the judge did not adopt an incorrect starting point. He started with the general rule and proceeded to examine the conduct of the parties. He properly concluded, Mr McCluskey submits, that the defendants’ dishonesty so infected the action that they should not recover any part of their costs. The relevant paragraphs of CPR 44.3 provide as follows:

“(1)

...

(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.

(3)

...

(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.

(5)

The conduct of the parties includes –

(a)

conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction (Pre-Action Conduct) or any relevant pre-action protocol;

(b)

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

(c)

the manner in which a party has pursued or defended his case or a particular allegation or issue; and

(d)

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

(6)

The orders which the court may make under this rule include an order that a party must pay –

(a)

a proportion of another party’s costs;

(b)

a stated amount in respect of another party’s costs;

(c)

costs from or until a certain date only;

(d)

costs incurred before proceedings have begun;

(e)

costs relating to particular steps taken in the proceedings;

(f)

costs relating only to a distinct part of the proceedings; and

(g)

interest on costs from or until a certain date, including a date before judgment.

(7)

Where the court would otherwise consider making an order under paragraph (6)(f), it must instead, if practicable, make an order under paragraph (6)(a) or (c)...”

I shall commence an examination of the judge’s order by considering whether there is any principle or practice which justifies the assumption of a starting point that there should be no order for costs when the successful party is guilty of dishonesty in the conduct of his defence. It can be seen immediately that under the rule the starting point is an order in favour of the successful party but the court may make a different order upon assessment of the conduct of both parties. Rule 44.3 contemplates at paragraphs (5)(a) and (5)(c) the assessment of misconduct before and during the trial comprised in the manner in which a party has pursued or defended his case or a particular allegation or issue.

In Northstar Systems Ltd v Fielding [2006] EWCA Civ 1660, [2007] 2 Costs LR 264, the full court granted permission to appeal from the trial judge’s order for costs in order to consider whether there was any general principle that, where the successful party has by the conduct of a dishonest case greatly prolonged the trial, the ordinary rule that costs follow the event should be displaced by an order that each side should pay its own costs. The trial judge, Lewison J, as he then was, having considered the impact of dishonesty by the defendants in the generation of false documents, dishonesty in which they had persisted at trial, ruled that their dishonesty had no legal relevance to the outcome of the trial, a factor which the judge found he was entitled to take into account in mitigation of the costs consequences of that dishonesty. The claimants had incurred, he found, a disproportionate sum in costs of some £2.5m in order to prove the dishonesty in respect of which they had suffered no loss. Their purpose had been to improve the prospects of recouping costs of £250,000 incurred in an earlier action. The judge ordered the unsuccessful claimant to pay a proportion of the costs of the successful but dishonest defendants. The appellants acknowledged on appeal that they could not in these circumstances maintain an argument that there should be no order for costs. Upon that part of the order relevant to the current appeal, the appellants concentrated upon the issues (1) whether the judge’s orders had adequately compensated the claimants for the costs incurred in seeking to prove the defendants’ dishonesty, and (2) whether the orders had the wrongful effect of compensating the dishonest defendants for the pursuit of that part of their defence which was dishonest. The court concluded that the judge was entitled to rule that the claimant’s conduct was disproportionate, and further concluded that, on the detailed assessment of the defendants’ costs, the dishonest parties would not be able to recover as reasonable any part of their costs incurred in advancing a dishonest case. If a judge intended any other approach on detailed assessment, he should say so in his order. On that basis the appeal was dismissed.

In Multiplex Constructions (UK) Ltd v Cleveland Bridge (UK) Ltd and Cleveland Bridge Dorman Long Engineering Ltd [2008] EWHC 2280 (TCC), [2009] 1 costs CLR 1, Jackson J, as he then was, approved and confirmed the structured approach required by rule 44.3. The starting point is that the successful party is entitled to its costs. The judge must then consider what departures are required from the starting point, having regard to all the circumstances of the case including those listed.

In Bank of Tokyo-Mitsubishi UFJ Ltd and Another v Baskan Gida Sanayi Ve Pazarlama AS and Others [2009] EWHC 1696, [2010] 5 Costs LR 657 the claimant banks claimed damages for misrepresentation and conspiracy. The trial lasted some 80 days. During the course of the trial the judge, Briggs J, concluded that the defendants had conducted a dishonest case in three respects which did not, however, go to the heart of the claim which was dismissed. In the costs proceedings the judge noted the requirement, in reaching his conclusion as to costs, to have regard to the overriding objective to do justice between the parties. As to the impact of misconduct upon his judgment under CPR 44.3(2) and (4), at paragraph 19, he extracted the following principles from Molloy v Shell UK Ltd [2001] EWCA Civ 1272; AL Barnes Ltd v Time Talk (UK) Ltd [2003] EWCA Civ 402; Ultraframe (supra); and Grupo Torras v Al-Sabah (Mance LJ) (CA 5 July 1999):

“(i)

There is no general principle that where an otherwise successful party has put forward a dishonest case in relation to an issue in the litigation, the general rule that costs follow the event is thereby wholly displaced. I leave on one side cases such as Molloy and Arrow Nominees Inc v. Blackledge [2000] 2 BCLC 167, where the conduct in question is so grave that the entire case of the party can properly be described as amounting to an abuse of process. In such cases it is difficult to conceive how that party would ever be the successful party in the litigation....

(ii)

The court's powers in relation to the putting forward of a dishonest case include (a) disallowance of that party's costs in advancing that case, (b) an order that he pay the other party's costs attributable to proving that dishonesty, and (c) the imposition of an additional penalty which, while it must be proportionate to the gravity of the misconduct, may in an appropriate case extend to a disallowance of the whole of the successful party's costs, or an order that he pay all or part of the unsuccessful party's costs.

(iii)

In framing an appropriate response to such misconduct, the trial judge must constantly bear in mind the effect of his order upon the process of detailed assessment which will follow, in the absence of agreement, in particular to avoid unintended double jeopardy: see per Waller LJ in Ultraframe at paragraphs 33 to 34.

(iv)

"There is no general rule that a losing party who can establish dishonesty must receive all his costs of establishing that dishonesty, however disproportionate they may be.": per Waller LJ in Ultraframe at paragraph 36.”

The judge examined the question whether pre-action misconduct would be reflected in a costs order only if it was that conduct which caused the unsuccessful claim to be brought. He concluded that it did not, but proceeded at paragraph 24:

“24...[T]he question whether a particular piece of undesirable pre-action conduct has in fact caused the bringing of an unsuccessful claim, or increased expense in the subsequent litigation, is plainly of primary relevance in the court's decision to what extent, if at all, to penalise a party for inappropriate pre-action conduct when making, or refusing, an order for costs.”

Briggs J found that there had been no dishonesty by the defendants before the commencement of the claim. They had, however, cynically advanced a false case on an important issue in the litigation. That conduct encouraged the claimants to continue to advance a claim based on conspiracy, but it had not been the defendants’ pre-trial conduct or their conduct in the action which had prompted the claimants’ unsuccessful allegations of misrepresentation and conspiracy. The judge awarded the defendants their costs on the standard basis subject to a deduction of 30% to act “as a sufficient mark of the courts disapprobation of the cynical abuse of the process which I have described”. Were it not for the defendants’ dishonesty, the judge said that (by reason of the claimants’ own unreasonable behaviour) he would have ordered that the claimants pay 50% of the defendants’ costs award on the indemnity basis.

I accept that the relevant principles were accurately identified by Briggs J.

I now turn to the facts of the present case. The dispute appears to have been generated because the defendants erected a garden shed wholly on their own land. The claimants chose to challenge the correctness of the physical boundary which had existed at the time of their purchase of Headley. They were not influenced in that challenge by any misconduct of the defendants. They relied solely upon the 1936 conveyance of Whitecrest to the defendants’ predecessors in title, maintaining that its frontage was 72 feet, and disputed the admissibility of extraneous evidence as to the actual position of the boundary at the relevant times since the 1936 conveyance. As the judge found, the claimants were wrong about the measurement, wrong in law as to the admissibility of extraneous evidence, and failed to ask the correct legal question. Although the plan attached to the 1948 Abstract of Title was altered at some time before February 2006 (the date of Mr Jackson’s Plan B) the proceedings were not commenced until November 2008, two years after the original plan had been inspected by the claimants in December 2006. It would appear that the claimants relied on the altered plan for two purposes, first, to rebut the allegation of dishonesty made against Mr Neale and, secondly, in an attempt to undermine the credibility of the defendants’ claim that the disputed boundary had been settled orally in 1998 and 2005. The defendants did not themselves at trial seek any advantage from the plan but falsely denied the accusation that they were responsible for its alteration. The allegation of forgery made against Mr Neale first appeared in the witness statement of Mrs Penning served shortly before the first trial. As Mr McCluskey said in his written note of opening, there had been a good deal of correspondence between solicitors by which the history of the tainted document and its use in pre-action negotiations could be traced. It was clear that Mr Neale was not the culprit.

Standing back from the detail of the judge’s order, the defendants, against whom the action was unsuccessfully commenced, retrieved none of the costs of defending the claim, even those reasonably and necessarily incurred. They were, in addition, ordered to pay on the indemnity basis those costs of the claimants which reflected issues upon which the defendants were unsuccessful and those costs incurred in meeting the defendants’ dishonest allegation against Mr Neale. There is, submits Mr Brennan, a significant element of double counting the penalty to which the defendants should properly be subject for conducting a dishonest defence.

In my view, there is merit in the appeal. The starting point for the consideration of any order for costs of an action is (CPR 44.3(2)(a)) that costs should follow the event. It is from this point that the court will, in an appropriate case, consider the conduct of the parties (rule 44.3(2)(b)). There is no general rule that a finding of dishonest conduct by the successful party will replace the usual starting point. What is required is an evaluation of the nature and degree of the misconduct, its relevance to and effect upon the issues arising in the trial, and its tendency to create an unwarranted increase in the costs of the action to either or both of the parties. As Briggs J observed at para 19 of his judgment in Bank of Tokyo the full range of measures is available to ensure that the dishonest but successful party does not gain, and the honest but unsuccessful party does not lose, in consequence of the wrongdoing established.

I acknowledge immediately that the trial judge was in a much better position than this court is to reach a view as to the nature, extent and effect of the defendants’ wrongdoing. Furthermore, this court will only interfere with a costs order made by the trial judge if (AEI Rediffusion Music Ltd v Phonographic Performers Ltd [1999] 1 WLR 1507 at page 1523) it is:

“shown that the judge has either erred in principle in his approach or has left out of account or has taken into account some feature that he should, or should not, have considered, or that his decision was wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale.” (per Lord Woolf MR)

We have the advantage of the judge’s fully reasoned decision as to costs and I propose to follow the judge’s conclusions upon the seriousness of the defendants’ dishonest conduct.

In my judgment, the judge erred in his unreserved acceptance of the sweeping proposition that the defendants should not expect to be able to fabricate documents and lie under oath in support of their case and still recover their costs if they succeed at trial. While it may be a proposition which is literally true, it is a proposition which obscures the proper starting point and the process required by the rules, which is careful analysis before reaching the conclusion that the justice of the case requires an order other than the usual order and, if it does, a conclusion as to what that order should be. The fact that the claimants acted ‘reasonably’ in pursuing the claim was, in my opinion, not a factor of any significant weight. The fact is that they launched an action on grounds which failed. Furthermore, the judge’s use of the adverb ‘reasonably’ in his costs judgment must be viewed in the context of his description in his judgment on liability that the practical consequences for the basis of the claim advanced were ‘absurd’, and his observation that the claimants had failed to ask themselves the correct legal question (What would the reasonable layman think he was buying?). Those conclusions suggest that the claimants’ claim was doomed from the start. The judge does not seem to have brought into account the fact that, by the time the claimants instituted proceedings, the defendants’ misconduct was entirely isolated from the issue upon which the claim was founded. True it is that the parties’ credibility was material to the issue of informal boundary agreements raised in the alternative by the defendants, but the claim had failed at the first hurdle. While there is no doubt that the defendants abused the proceedings in which they were engaged, this is not a case in which the grounds upon which the claim was brought, and failed, were infected by that abuse.

At issue is whether the defendants’ dishonesty so infected the action that justice requires that they should recover no costs at all in successfully defending the action. For the reasons I have given, it cannot be said that the defendants brought the action on themselves or conducted the proceedings as a whole as an abuse of the process of the court. The judge placed weight upon the fact that Mr Neale was justified in proceeding to trial in order to clear his name. However, it must be remembered that the judge separately provided for the costs of that exercise. In my view, the judge’s starting point should have been an order for costs in the defendants’ favour subject to adjustments to ensure that they did not recover any costs which may have been incurred in advancing a dishonest case.

Those costs included the costs of pursuing in pre-action correspondence and in witness statements their denial of wrongdoing, their accusation against Mr Neale and their making of Calderbank offers implicitly advanced on the basis that their accusations were honestly made. They included also court time engaged in advancing the false case. In my view, that objective can properly be achieved by awarding the defendants only a proportion of their costs on the standard basis. This court cannot bring mathematical precision to the exercise because, unlike the judge, we have not heard the evidence and we have not been addressed on comparative costs figures. My objective is to deprive the defendants of the costs of pursuing the dishonest aspect of their claim and, for the reasons given in paragraph 35 below, to deprive the defendants of the costs of pursuing their argument based upon the OS maps for 1904 and 1968. I would achieve that by deleting paragraph 6 of the judge’s order and replacing it with the following:

“Subject to the following paragraphs of this order, the claimants shall pay 70% of the defendants’ costs of the action, such costs to be subject to a detailed assessment on the standard basis if not agreed”.

I would, in addition, delete paragraph 14 of the judge’s order requiring the defendants to pay £12,500 on account of costs by noon on Friday, 28 January 2011. I would replace it with the following direction:

“On a detailed assessment of the defendants’ costs as provided in paragraph 6 of this order, there shall be no further deductions or disallowances by the costs judge solely or mainly on the ground of the misconduct of the defendants arising from the alteration of the plan attached to the 1948 Abstract of Title or on the ground of their reliance upon the OS maps of 1904 and 1968”.

Costs against the defendants on the indemnity basis

I have thus far considered the need to deprive the defendants of their costs of pursuing the dishonest aspects of their case. I now turn to the need to compensate the claimants for their costs of responding to the dishonest aspects of the defendants’ case. No criticism can be fairly directed at the judge’s decision to make an assessment of the expense incurred by the claimant, Mr Neale, in exploring the allegation that he had forged a document, and Mr Brennan does not seek to make any such criticism; neither, in my view, can the decision to award those costs on the indemnity basis be said to be wrong in principle or on the merits. What distinguishes the present case from others in which dishonesty has occurred is that these defendants maintained to trial a denial of their own dishonesty and a false accusation against their opponent. There can be no realistic challenge to the judge’s decision to award the claimants their costs of dealing with the subject of the 1948 plan. While Mr Brennan sought to criticise the details of the assessment, I consider that the judge was in the best position to make the assessment and I would not interfere with it.

I am also unable to conclude that the judge was wrong to reach the conclusion that the defendants acted improperly in seeking to advance a further oral boundary agreement with the claimants. In his judgment on liability the judge pointed to the inherent unlikelihood that Mr Neale had made any such agreement with Mr Hutchinson. He was entitled to conclude that there was not just a difference of impression between two participants in the same conversation, but that this was another wrongful assertion by the defendant amounting to misconduct.

However, the judge also awarded the claimants on the indemnity basis their costs of meeting the opinion of the defendants’ expert, Mr Jackson, to the effect that the Ordnance Survey maps of 1904 and 1968 had not mapped a feature on the ground close to the location of the line where the claimant alleged the original boundary would have been. This opinion was proffered by Mr Jackson in response to a request by the defendants to examine any relevant material outside the conveyancing documents. Mr Powell, the expert retained by the claimants, agreed that the maps as drawn did not show such a feature. However, it was also his opinion that the exercise was “futile” by reason of the generally acknowledged limitations of historical OS surveys which, in turn, Mr Jackson accepted. The judge preferred Mr Powell’s conclusion and proceeded to award the claimants their costs upon the issue. The expert evidence was tendered in writing and, save for the question of interpretation, the experts were largely agreed. It does not seem to me that this attempt by the defendants, supported by their expert, to demonstrate the improbability of the claimants’ case should be characterised as misconduct sufficient to warrant an award of costs against them. On the other hand, it was an issue which took time and preparation and it was an issue on which the defendants failed at trial. I would adopt the judge’s criticism to the extent of disallowing their costs upon this issue. I have sought to achieve that end by making the inclusive adjustment, referred to at paragraph 32 above, to paragraph 6 of the judge’s order.

We were informed by Mr McCluskey that if we were to reach the conclusion that the claimants should not receive an award of their costs of resisting the argument based upon the OS maps, the appropriate course would be to delete paragraph 11 of the judge’s order and replace it with the following:

“The defendants shall pay the costs of and occasioned by the allegation that there was an informal boundary agreement reached in 2005. The Court assesses these costs as being the equivalent of one-half refresher fee for counsel at the second trial and any disbursements associated therewith plus one day of the claimants’ solicitor’s attendance at the second trial.”

That is the order which I would make.

Costs of the first trial

Mr Brennan argued, as he did to the trial judge, that the defendants should not have been ordered to pay two-thirds of the claimants’ costs of the first trial on the standard basis. The occasion for the adjournment to 4 February involved no ‘fault’ by the defendants, and the need to order a re-trial was the fault of neither party. Mr Brennan submitted that the appropriate order would have been no order as to the costs of the first trial. I am unable to conclude that the judge erred in principle or was otherwise demonstrably wrong. There was a reasonable prospect that the trial would have been completed on 5 February had the adjournment not been granted on 4 February. That the trial exceeded its estimate of three days was, at least in part, due to the need to explore the 1948 Smith plan which was the responsibility of the defendants. While the occasion for the adjournment on 4 February was extremely distressing for the defendants, the adjournment was an indulgence sought by them for which the claimants were in no sense responsible. It cannot be said that the order made was outside the generous ambit of the judge’s discretion.

The judge ruled that none of the defendants’ offers complied with CPR 36.2(2)(c). Mr Brennan does not dispute the lack of form. However, he argues that these were part 36 offers in all but name and should have been so treated by the judge. Had the defendants made a Part 36 offer as claimants in the counterclaim and had they obtained (as they did) judgment at least as advantageous to them as the proposals contained in the Part 36 offer, the usual consequence under rule 36.14(1)(b) and (3)(b) would have been an award of costs on the indemnity basis after the expiration of the period limited for acceptance of the offer. If, on the other hand, the offer was made by the defendants in the action and the claimant failed to obtain a judgment more advantageous than the defendants’ Part 36 offer, the usual consequence would have been a similar award of costs but on the standard basis under rule 36.14(2)(a). However, the usual orders are subject in each case to the court’s judgment whether it would be “unjust” to make them and in considering that issue the court must consider all the circumstances under rule 36.14(4).

Mr Brennan submitted that the defendants should have been awarded all of their costs, perhaps on the standard basis, following the claimants’ failure to accept offers more generous than the judge’s order. It is my view that the weight to be afforded to the defendants’ Calderbank offers was slight at best. While making offers to the claimants ‘without prejudice save as to costs’ the defendants at no stage acknowledged their own dishonesty, but made matters worse by accusing the claimant, Mr Neale, of forging the plan. The judge would have been justified, in my view, in ruling that it would defeat justice to give to the defendants the fruits of their hypocrisy.

I would allow the appeal to the extent I have indicated and, subject to my Lord’s views, would invite the parties to agree an order in accordance with its terms.

I agree.