Whaleys (Bradford) Led v Bennett& Anor

This is an appeal by the claimant, Whaleys (Bradford) Limited (“Whaleys”), against an order made by His Honour Judge Bartfield, sitting in the County Court at Bradford, on 18 August 2016. That order provided for the defendants, Mr Garry Bennett and Mr Jonathan Cubitt, to pay Whaleys certain sums by way of costs, assessed summarily on the standard basis. The key question raised by the appeal was whether the Judge ought to have decided that the costs should be assessed on the indemnity basis.

At the conclusion of the hearing, we announced that the appeal would be allowed. These are my reasons for concurring in that decision.

The proceedings in which Judge Bartfield made his order arose out of the parties’ occupation of neighbouring premises in Bradford. Whaleys made allegations of nuisance, trespass and conversion. The claim related in part to an alleged leak into Whaleys’ property which it attributed to a defective gutter on land owned by Mr Bennett and Mr Cubitt.

The matter came on for trial before His Honour Judge Davey QC in September 2015. On 28 October 2015, Judge Davey QC ordered Mr Bennett and Mr Cubitt to pay Whaleys sums totalling £10,152.25 by way of damages and its costs of the action on the indemnity basis. £52,157.31 (comprising the £10,152.25, a payment on account of costs of £40,000 and small additional amounts pursuant to CPR 36.17(4)) was to be paid by 18 November. Mr Ian Hopkinson, a solicitor with mb LAW, who act for Whaleys, has explained in a witness statement that Judge Davey QC ordered costs to be paid on the indemnity basis “on account of the Defendants’ conduct and lies given in evidence”. There has been no appeal from Judge Davey QC’s decision.

In the event, Mr Bennett and Mr Cubitt paid nothing at all to Whaleys by 18 November 2015. Instead, their solicitors, Butcher & Barlow, wrote to “insist upon an inspection of the relevant parts of the building” and asking for confirmation that Whaleys would not seek to enforce the judgment for the time being. In a further email dated 20 November, Butcher & Barlow requested confirmation that Whaleys would not seek to take any steps to enforce the judgment or “to formalise the costs claim”, continuing:

“We repeat that our client has indicated an intention to pay the Judgment – and to engage meaningfully on costs issues – as soon as he is satisfied that the leak has not persisted.”

Judge Bartfield said of this correspondence:

“Mr Sandland [of Butcher & Barlow], on behalf of the Defendants, said that was entirely reasonable request for the Defendants to make; I could not disagree more. It was arrogant and disobedient towards the Court’s Order.

The Order of His Honour Judge Davey QC was not a suggestion or an offer about how the case should move forward; it was a final judgment and was not open to Mr Sandland, on his clients’ behalf, to make that kind of request with any justification….

It was a court Order which was, in my judgment, deliberately disobeyed. I am entitled to draw the inference that the same kind of dishonesty as had been found during the judgment continued afterwards.”

On 24 November 2015, Whaleys applied for Mr Bennett and Mr Cubitt to attend Court for questioning about their means and a hearing was fixed for 19 January 2016. Mr Bennett was served with the papers on 20 December, but proved to be away on a cruise on 19 January, with the result that his examination had to be adjourned. A process server also tried to serve Mr Cubitt, but (as Judge Bartfield observed) he “persistently and deliberately avoided service”. The 19 January hearing was therefore vacated.

A new date was fixed. On 15 January 2016, District Judge Geddes made orders requiring Mr Bennett and Mr Cubitt to attend for examination on 29 March and to produce at Court all documents in their control relating to their means of paying the judgment debt. This time, the process server had trouble serving both Mr Bennett and Mr Cubitt. Judge Bartfield commented:

“Mr Cubitt … was no more compliant with the papers’ service upon him than he had been before. There were repeated visits to his business premises and attempts to find out where he lived, and I am satisfied that he was avoidant.

I am equally satisfied that Mr Bennett was also avoidant of having the papers served upon him, as the inquiry agent wrote.”

In time, Mr Bennett and Mr Cubitt were both served. Mr Cubitt nonetheless failed to attend the 29 March hearing and, while Mr Bennett did so, he was uncooperative. Judge Bartfield said:

“[Mr Bennett] did not have anything useful on him. Mr Bennett suggested that he had not realised he was supposed to bring all the papers related to his property, bank accounts and so forth, which is nonsense. He had been informed with a full pack of all the questions he needed to answer and what he needed to bring with him.

I have come to the view that at that point and indeed from the time of the judgment he was going to prolong matters as long as he possibly could until the moment came when he was absolutely forced to pay, and it is conceded that he always had the means to pay.”

On 31 March 2016, Judge Davey QC, without a hearing, made suspended committal orders against Mr Bennett and Mr Cubitt, on the footing that they had each been guilty of contempt of court by disobeying the orders of 15 January, in Mr Bennett’s case by refusing to answer questions and in Mr Cubitt’s by not attending. The orders were, however, suspended so long as Mr Bennett and Mr Cubitt attended Court on 26 April.

On 11 April 2016, Mr Bennett issued an application for all enforcement action by Whaleys to be stayed “pending the outcome of Police Economic Fraud Unit Investigations into alleged Perjury & Property Fraud” by Whaleys. Mr Bennett said in a witness statement that “a dossier of nearly 100 pages has been handed to the Police to assist in their ongoing investigations of alleged Perjury and Fraudulent Misrepresentation”. That application was in due course, on 20 May, dismissed by District Judge Cahill and characterised as totally without merit.

In the meantime, Mr Bennett and Mr Cubitt had both attended Court on 26 April 2016. They applied for an adjournment on the strength of their application for a stay, but this was refused and they were each cross-examined. In his witness statement, Mr Hopkinson said, among other things, the following about this hearing:

“neither of them [i.e. Mr Bennett and Mr Cubitt] produced any documentation relating to their means, rendering the process of little value to Whaleys…. The Defendants claimed they understood from their solicitor that the hearing was not going ahead and therefore they did not need to bring paperwork. Mr Cubitt answered questions on oath and was able to provide some banking information via the internet, but nothing else. Mr Bennett gave evidence on oath and was obstructive and hostile throughout and had to be reminded by the Judge of his obligation to cooperate. Due to his conduct, the hearing was elongated and lasted several hours. During the adjournments, Mr Bennett was hostile and unreasonable to me…. District Judge Wright then certified that notwithstanding the order of 15 January 2016 and the suspended order for committal dated 31 March 2016 …, the Defendants failed to bring documents relating to their means of paying the debt….”

At this stage, the overwhelming majority of the £52,157.31 that Judge Davey QC had ordered to be paid remained outstanding. (Payments totalling just £3,000 had been made between 30 November and 15 December 2015.) The balance of the debt was, however, paid in full by late July 2016.

On 6 July 2016, Whaleys issued the application that came before Judge Bartfield on 18 August. This asked that Whaleys be awarded more than fixed costs in respect of the three scheduled oral examination hearings (on 19 January, 29 March and 26 April 2016) and that their costs be assessed on the indemnity basis.

Judge Bartfield concluded that the fixed costs regime set out in CPR Part 45 should not apply but declined to order assessment on the indemnity basis. He said this in his judgment:

“22.

In my view, having read the papers and listened to what has been said, the Defendants decided to raise complex issues at the oral examinations at the same time as failing to comply with what the examinations asked of them. They did so deliberately to avoid payment as long as they possibly could.

23.

I was referred to the case of Amber Construction Services Ltd v London Interspace HG Ltd [2007] EWHC 3042 (TCC). Mr Justice Akenhead acknowledged there that circumstances may arise in which it is appropriate for the Court to order otherwise than the fixed costs which is set out in the Civil Procedure Rules unless the circumstances demand it.

24.

This is a simple procedure, which has a simple and modest table of costs to deal with such simple procedures. However, because of what happened, I am satisfied that there was a good deal more involved in these oral examinations than would ordinarily be the case, for which the defendants have only themselves to blame because of the way they decided ‘to play this’.

25.

I do not regard this as an exceptional case because many debtors try to avoid paying that which is due. I have seen more sophisticated attempts to avoid judgments than this.

26.

I was sorely tempted to make an order for the payment of indemnity costs, but, looked at in the round, I believe that the Claimant will be properly and adequately compensated in relation to costs by a standard award. To that extent, I am prepared to step outside the fixed costs table. That is the basis upon which I will assess costs….”

Like the present case, Amber Construction Services Ltd v London Interspace HG Ltd [2007] EWHC 3042 (TCC), [2008] 5 Costs LR 715, which Judge Bartfield mentioned, involved CPR Part 45, which deals with fixed costs. CPR 45.1 explains that Section I of Part 45 “sets out the amounts which, unless the court orders otherwise, are to be allowed in respect of legal representatives’ charges”. CPR 45.3, which was in issue in the Amber Construction case, provides that, where the only claim is for a specified sum of money and the defendant pays the amount claimed and “fixed commencement costs” within 14 days after service of the particulars of claim, the defendant is “not liable for any further costs unless the court orders otherwise”. Judge Bartfield was concerned with CPR 45.8, which is similarly contained in Section I of Part 45, and lays down “Fixed Enforcement Costs”.

In the Amber Construction case, proceedings had been brought to enforce an adjudication award. The defendant admitted the claim in its acknowledgment of service and argued that, in consequence, the claimant was entitled to no more than the “fixed commencement costs” of £100. Akenhead J, however, concluded that, on the facts, it was “wholly appropriate for the court to exercise its discretion to order costs at a greater level than the costs fixed by CPR 45” (see paragraph 25 of the judgment). He had observed earlier in his judgment (in paragraph 23):

“Thus in both Rules 45.1 and 45.3 it is clear that the court retains a discretion to ‘order otherwise’. Thus, in appropriate cases, the court retains its discretion to order such costs as are appropriate. That said, the fixed cost regime applies, so to speak, in default if the court does not otherwise order. CPR 45 recognises that many sets of proceedings brought in court will be in the nature of debt collection exercises. Many such claims will not involve the use of independent solicitors but will be handled internally by the claimants in question. In many such cases the claimants will not incur significant costs and may well not want to incur further costs arguing that they are entitled to more than the fixed amounts. CPR 45 applies amounts and formulas to determine what the fixed costs are in any case.”

In the present case, Judge Bartfield decided that he should “step outside the fixed costs table”, noting “there was a good deal more involved in these oral examinations than would ordinarily be the case, for which the Defendants have only themselves to blame”. Mr Bennett and Mr Cubitt have not attempted to suggest that the Judge was not entitled to take this view. What has been challenged, by Whaleys, is Judge Bartfield’s decision not to order costs to be assessed on the indemnity basis.

Guidance as to when an indemnity order might be appropriate is to be found in Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879, [2002] CP Rep 67. In that case, Lord Woolf CJ said (at paragraph 32) that the “critical requirement” was that “there must be some conduct or some circumstance which takes the case out of the norm”. Likewise, Waller LJ said (at paragraph 39):

“The question will always be: is there something in the conduct of the action or the circumstances of the case which takes the case out of the norm in a way which justifies an order for indemnity costs?”

Excelsior was one of the cases considered by the Court of Appeal in Esure Services Ltd v Quarcoo [2009] EWCA Civ 595. There, a Recorder had found the claimant to have been dishonest but declined to order him to pay costs on the indemnity basis. An appeal by the defendant was allowed. In the course of his judgment, Waller LJ said:

“25 The Recorder seems to have construed the word ‘norm’ as indicating that if the situation facing the court was one that quite often occurred that would mean that the situation was within the norm. In my view the word ‘norm’ was not intended to reflect whether what occurred was something that happened often so that in one sense it might be seen as ‘normal’ but was intended to reflect something outside the ordinary and reasonable conduct of proceedings. To bring a dishonest claim and to support a claim by dishonesty cannot be said to be the ordinary and reasonable conduct of proceedings.

26 In my view the Rules entitle a court to take account of the conduct of the parties whether that conduct occurs on many occasions or whether it is rare. So in my judgment, as I say, the Recorder has misdirected himself. That being so, it is for this court to exercise the discretion anew.

27 I have already recited the Rules and it is to the Rules that one must first go. Once one sees the type of conduct that the court must have regard to, it seems to me clear that this was a case in which the conduct of the claimant was one where the court should be inclined to mark its disapproval of the bringing of a dishonest claim and the supporting of that claim by lies, including a lie about whether he had produced a key which did not belong to the car, and which included in fact an attack on the integrity of the claims handler although that was not pursued in cross-examination. The best method by which a court can mark its disapproval when, as here, the claimant would be the paying party, is by making an order for indemnity costs. I for my part have no hesitation in saying that, where insurers establish that a claim has been brought dishonestly, they should on the whole be entitled to an order for indemnity costs not just because of the extra cost they may incur in defending such a claim — though that is considerable — but so that others are discouraged. It is both in the interests of insurers and indeed any defendants, and in the interests of the court, that persons should be discouraged from bringing dishonest claims and from supporting dishonest claims by lies.

28 In my view the appropriate order in this case was to order Mr Quarcoo to pay the costs and to pay those on an indemnity basis. I would allow the appeal against the Recorder’s order in this case and make that order.”

In a similar vein, Longmore LJ said (at paragraph 31):

“A fraudulent claim is, in my judgment, indeed out of the norm and it would be a sad day if this court were to give the impression that fraudulent claims being brought at first instance were in any way within the norm.”

In the present case, Mr Jonathan Gale, who then, as before us, appeared for Whaleys, submitted to Judge Bartfield that there were circumstances taking the case “outside the norm such that indemnity costs should be awarded”. When giving judgment, the Judge did not use the phrase “out of the norm” but rather said that he did not regard the case as “exceptional”. Mr Gale submitted that an “exceptionality” test cannot be equated with asking whether there are circumstances taking the case “out of the norm in a way which justifies an order for indemnity costs”. It seems to me, however, that a reference to whether the case is “exceptional” by a Judge considering whether or not to order indemnity costs need not show him to have adopted the wrong test. Much will depend on the context. While it must be preferable for a Judge to ask himself in terms whether the case is “out of the norm”, not whether it is “exceptional”, in the particular circumstances use of the word “exceptional” may be consistent with the Judge having applied the principles explained in the Excelsior case. In this connection, it is appropriate to remember, as we were reminded by Mr James Malam, who appeared for Mr Bennett and Mr Cubitt, that the “exigencies of daily court room life are such that reasons for judgment will always be capable of having been better expressed”, that “[t]hese reasons should be read on the assumption that, unless he has demonstrated the contrary, the judge knew how he should perform his functions and which matters he should take into account” and that “[a]n appellate court should resist the temptation to subvert the principle that they should not substitute their own discretion for that of the judge by a narrow textual analysis which enables them to claim that he misdirected himself” (to quote from Lord Hoffmann in Piglowska v Piglowski [1999] 1 WLR 1360, at 1372).

Judge Bartfield, however, said that the case before him was not “exceptional because many debtors try to avoid paying that which is due” (emphasis added) and went on to say that he had “seen more sophisticated attempts to avoid judgments”. It can thus be seen, I think, that he fell into the same sort of error as the Recorder in Esure Services Ltd v Quarcoo. As Waller LJ explained in that case, a Court can take account of the conduct of the parties “whether that conduct occurs on many occasions or whether it is rare”. As he also said, the word “norm” “was not intended to reflect whether what occurred was something that happened often so that in one sense it might be seen as ‘normal’ but was intended to reflect something outside the ordinary and reasonable conduct of proceedings”. It follows that Judge Bartfield could not properly conclude that the circumstances did not take the case “out of the norm in a way which justifies an order for indemnity costs” on the basis that “many debtors” behave in the same way as Mr Bennett and Mr Cubitt had. Even if that could be said to make the conduct “ordinary”, it would not mean that it was “reasonable”.

In the circumstances, it is evident, I think, that Judge Bartfield was not applying the correct test and having regard to the correct considerations. That being so, it fell to us to decide for ourselves whether to order assessment on the indemnity basis.

Mr Gale submitted to us, as to Judge Bartfield, that the indemnity basis was appropriate in this case. If ever there was a case for indemnity costs, he said, this was it. In contrast, Mr Malam argued that, while his clients should not have behaved as they did, their conduct was not quite sufficient to warrant indemnity costs.

In my view, the conduct on the part of Mr Bennett and Mr Cubitt to which Judge Bartfield referred in his judgment called for indemnity costs. Regardless of whether their behaviour could be described as “ordinary”, it was not “reasonable” and was such as to take the case “out of the norm in a way which justifies an order for indemnity costs”. Despite having the means to pay, Mr Bennett and Mr Cubitt “deliberately” sought “to avoid payment as long as they possibly could” (to quote from Judge Bartfield). They were (again in Judge Bartfield’s words) “arrogant and disobedient” towards Judge Davey QC’s order and, when required to attend for oral examination, evaded service. When orders were made for them to attend a rearranged hearing, they failed to comply with these, with the result that suspended committal orders were made. They then tried to use an application totally without merit to obtain the adjournment of a further hearing and were otherwise uncooperative, including by failing to bring with them documents relating to their means. In consequence, Whaleys were needlessly put to considerable trouble and expense. This is not “reasonable conduct of proceedings” or behaviour that the Court should in any way sanction or encourage.

In all the circumstances, we concluded that it was appropriate to order Mr Bennett and Mr Cubitt to pay costs on the indemnity basis. The assessment of those costs will be remitted to the County Court.

I agree with the reasons given by Newey LJ for allowing this appeal and, exercising our discretion, for varying the order dated 18 August 2016 of HH Judge Bartfield by directing an assessment on the indemnity basis of the costs that Mr Bennett and Mr Cubitt were ordered to pay.

In my view, it was unfortunate that the judge used the word “exceptional” to describe the circumstances that may justify an order for indemnity costs. The formulation repeatedly used by this court is “out of the norm”, reflecting, as Waller LJ said in Esure Services Ltd v Quarcoo [2009] EWCA Civ 595 at [25], “something outside the ordinary and reasonable conduct of proceedings”. Whatever the precise linguistic analysis, “exceptional” is apt as a matter of ordinary usage to suggest a stricter test and is best avoided. Its use in this case gave rise to an arguable ground of appeal and while I am satisfied, particularly in the light of the submissions made to him, that the judge was not applying a stricter test, for the future it would be preferable if judges expressly used the test of “out of the norm” established by this court.