Kaye (Dalmar Properites Ltd) v Kingstars Ltd & Ors

I am going to deal with questions 6 and 7, namely, should an order for costs of the underlying application and of the trial of the preliminary issues be made in favour of the first to third respondents and against (a) Mrs Zeital and (b) Mrs Zeital and Ms Zeital in their capacity as administratixes? Additionally, should a like order for costs be made in favour of the liquidator?

Let me indicate that I am persuaded that it is correct for me to consider as a whole the costs of the underlying application and of the trial of the preliminary issues. Everything I say from this point will involve that in totality.

Obviously anything I say is subject to the court at any interlocutory stages up to this point, having made a specific order for costs in relation to a particular interim stage. I have been assured sufficiently that there are no reserved costs still waiting to be determined.

Let me also indicate that both the liquidator and the first to third respondents, through their counsel, confine the request for an order for costs against Mrs Zeital personally to the period up to 20 February 2007 with the consequence that their request for an order for costs from 20 February 2007 is directed to Mrs Zeital and Ms Zeital in their capacity as administratixes of Mr Zeital’s estate.

For the avoidance of doubt, 20 February 2007 itself falls within the window where costs are sought against Mrs Zeital personally. It is from immediately after 20 February 2007 that we are concerned with costs directed to the two ladies in their capacity as administratixes.

It is from 20 February 2007 that there occurred what has positively, usefully and fairly been described by Mr Banks as an effective shift to the action or proceedings being against the estate rather than Mrs Zeital alone in her personal capacity. Clearly Mrs Zeital, as she has sometimes put it herself, has a personal interest by reason of her claim to be one of the beneficiaries, or the beneficiary, under her husband’s intestate estate. That explains the logic of Mrs Zeital, at least for a period, having been involved personally in the issue or issues the subject of the application and tried before me.

The relevant key provisions of the rules of court applicable on which all concerned have addressed me include above all CPR 44.3. The contention by counsel for the first to third respondents is that the general rule should both apply and govern the outcome of these questions. The first to third respondents have been successful. Mrs Zeital and Ms Zeital, in their capacity as administratixes, have been the unsuccessful parties. The general rule is that the unsuccessful party would be ordered to pay the costs of the successful party.

Of course, as CPR 44.3 indicates, the court may make a different order. In deciding what order to make the rule indicates that the court must have regard to all of the circumstances, including the conduct of all the parties, whether a party has succeeded on part of the case, even if not wholly successful, and also, amongst other things, any admissible offer to settle made by a party which is drawn to the court’s attention and which is not an offer to which cost consequences apply under Part 36. The rule gives further amplification of what is included within the rubric of conduct of the parties.

Mrs Zeital and Ms Zeital between them have raised a number of circumstances, many of which are concentrated on the alleged conduct of the parties, but some of which range a little wider. These include, both to illustrate by reference to the broad allegation made and at times to give an example or two in relation to the broad allegation, the following. First, it is suggested that unnecessary allegations were raised in connection with Mr Zeital’s relationship with the company. It is suggested that the first to third respondents and potentially the liquidator, or at least one or other of them, only admitted certain issues after a struggle. An example is given of an issue over the address of Mr Zeital. It is suggested that unnecessary information was provided to the court by, for example, the solicitor to the first to third respondents before one of the judges at one of the interim hearings before the final trial of issues before me.

It is suggested that the first to third respondents are guilty of unnecessary treatment of the evidence including the part in the sequence of events of a Dr Carla and the part in the sequence of events of a Mr Rafatjoo, both names which feature in my judgment.

It is also suggested that there has been unduly aggressive behaviour, even following the warning given by His Honour Judge Pelling QC which I recorded in my own judgment. When I asked Ms Zeital to give me illustrations of the asserted unduly aggressive behaviour she pointed to the suggestion of a refusal of inspection, her implication being that that was deliberate rather than unfortunate; the provision of copy documents being not as it should be; the service of an application in the course of the proceedings for an assessment of costs that she saw as inserting an unhelpful ‘spoke into the wheel’ of the proceedings. Also, reference was made to alleged delay or failure by the liquidator to provide an exhibit. By contrast, it is suggested by Mrs Zeital that she and her daughter have complied with all orders of the court throughout the proceedings.

In relation to the provision of copy documents Ms Zeital urges that the alleged unsatisfactory aspects of that meant that much of the proceedings were unnecessary. This is on the basis that it is Ms Zeital’s belief, as I understand it, that had she had those documents at an earlier point, or at all, she would have been successful, and been successful at an early point on the substantive issues.

That gives an indication of the range of allegations made, both broadly and in terms of examples of conduct.

Probably more under the heading of whether a party has succeeded on part of their case, an example is given in relation to the point at which a passage in Mrs Appostolova’s, the third respondent’s, witness statement had to be corrected for it to remain truthful. Also under this rubric again the suggestion on the part of Mrs Zeital and Ms Zeital of success lies exemplified, they would say, by the result in relation to Mr Zeital’s address. And, in relation to Mr Zeital’s original position of beneficial ownership of the company, an original position which does not provide the ultimate outcome of the preliminary issue that I had to decide, which is where the interest, including beneficial interest, lies today rather than in the past.

Those examples are placed under the heading of areas of where Mrs Zeital and Ms Zeital would say they have succeeded even though they have failed overall.

Also some reference has been made to ADR. This is prompted by the reference at CPR 44.3(4)(c). I can deal with this shortly. On the material available to me I am satisfied that this is not one of those cases in which any party has unreasonably refused to engage in alternative dispute resolution. It might well have had its complications in a case like this. Ms Zeital says to me that she expected one of the judges who has seen this matter in the course of its history to order ADR at one point but that did not happen. Although I am not privy to the full reasons for that, clearly that was the position taken by the judiciary at earlier interim stages.

I have sought to emphasise, as I review the thrust of the points that Mrs Zeital and Ms Zeital make, that there are many allegations there. I do not propose, and it is not suitable for me, to reach decisions on the truth or falsity, the correctness or incorrectness of each and every one of them and of each of the examples. Suffice it to say that in my judgment, and having regard to the scheme of the CPR, and in particular within CPR 44.3 as I have mentioned, I am quite satisfied in the present case that the right approach is to follow the general rule subject to just one or two comments that I will make.

I take the view that the range of allegations made and the examples given do not in the present case deflect me from the view that in substantial terms this litigation has had to happen and had to go all of the way through a contested trial up to now because of the opposition of conviction on the part of Mrs Zeital and Ms Zeital. I do not accept that any of the points I have mentioned deflect me from the general approach that I take. I do bear in mind that one or more of those allegations or examples may be taken into account by the costs judge when the question of assessment arrives. It does seem to me, whilst some of them have no appreciable effect at all on the overall costs of proceedings, others might. The best place for the matters that need to be determined to be determined in the process available on an assessment is indeed in the assessment itself.

I need to say a word in relation to the liquidator’s costs. The liquidator in reality is not a successful party here. Quite clearly in contrast to the first to third respondents the liquidator made it clear throughout that he has no stake in the outcome of the matter, but he needs to know as much as anybody what the answer to the issue is and has had to be involved to the extent that he has been. I am satisfied that there has been a consciousness not to over-involve. He has had to be involved to the extent that he has been in order to take things through to a conclusion which it was necessary that there be at various points. I am told and accept the liquidator sought to find a way of reducing still further the directness of his engagement but that proved impossible in the tense atmosphere of this litigation as a whole.

Notwithstanding that he is not a successful party in the strict form, but bearing in mind that his involvement has been necessary and appropriate in the way I have indicated, in the overall exercise of my discretion I do propose to make an order for costs in his favour against Mrs Zeital for the period up to 20 February 2007 and against Mrs Zeital and Ms Zeital in their capacity as administratixes for the period from 20 February 2007. Subject to this there will be a qualification in the case of an order for costs, that is that it will apply only to the extent that the insolvent corporate estate is insufficient to meet the costs. I say the “insolvent estate” because the signs are, from what I was told by counsel for the liquidator this morning, that that is what it is.

By my ruling at an earlier point today the liquidator has the right to take reasonable legal costs from the estate. I add to that a right in the form of an order for costs against the Zeitals as I have mentioned. That is to apply only to the extent that the costs cannot come from the estate.

Broadly speaking, in addition to the points I have made generally, I feel it appropriate to deal with matters in this particular case in that way because this was, when it comes to it, one of the issues that the liquidator and the estate in question can find that they come across. It is all about the administration of the estate - in the present case a particularly complicated and fraught question for the administration of the estate - but there often are those episodes. Sometimes one will look to pass on the cost to the estate to another party; sometimes the cost to the estate will just have to be borne by the estate. In the exercise of my discretion I come down in the way I have indicated on the facts of this case.

The question of an uplift in the likelihood of there being a conditional fee agreement entered into between the first to third respondents and their solicitors was mentioned at a point in the course of these proceedings. I take the view myself that the question of the uplift and the percentage of that uplift is best in the present case dealt with within the assessment that will lie ahead, and should not in the present case attract comment or decision from myself. It is a matter best explored with the expertise of a costs judge and the fuller information that the costs judge will have available to him/her.

The order is that there is to be an order for costs of the underlying application and the trial of the preliminary issues in favour of the first to third respondents against Mrs Zeital up to and including 20 February 2007 and against Mrs Zeital and Ms Zeital in their capacity as administratixes from 20 February 2007.

In the case of the liquidator there be a like order for costs but it is to apply only to the extent that the liquidator does not recover his reasonable legal costs under the order I have already made entitling him to look to the estate for those reasonable legal costs.

We will now turn to the question of the basis on which costs are to be assessed. The choice is between indemnity basis and standard basis. My finding is to make the orders for costs on the standard basis and not on the indemnity basis. I have an overall discretion to exercise, having regard in particular to the provisions of CPR 44.4 which describe the different characters of the two bases of assessment available and of course in the light of the submissions that have been made with reference to the provisions of part 36.

A driving consideration for me in the present case has been a concern, in a matter in which what is in issue is comparatively modest compared with the scale of costs that have been incurred, that the costs judge look very carefully at all points on the subjects of proportionality and reasonableness. My view in the present case is that it is particularly appropriate that the review in those areas is not dislodged by the type of reversal of presumption that can occur in relation to an order made on the indemnity basis. It is appropriate that proportionality and reasonableness are demonstrated to the satisfaction of the costs judge by the first to third respondents, and by the liquidator to the extent that the liquidator’s costs are also involved.

I do not overlook what I have been told about offers on the way. I must say I am left in a position of some uncertainty about the early offer described in 2005. Indeed one of the letters dealing with the early offer is marked simply “Without Prejudice” rather than “Without Prejudice Save as to Costs”. I am not at all sure how much weight I should put on to that.

I move forward to test the matter by reference to later more specific episodes, one of which is described by Mr Azzopardi in a witness statement of 4 July accompanied by a transcript before a judge dealing with an earlier hearing. The other stems from a letter of 2 April 2007. This is no criticism of the settlement offers made, but I notice that the settlement offers made were bespoke settlement offers that involved not just proposals in relation to any principal sums that might be left but also in relation to the instance of costs. The presence of those offers and the refusal of those offers do not sway me away from standard basis costs towards indemnity costs in this case.

I have had to pause the longest on the 2 April 2007 letter. I have had to consider with the help of Mr Banks whether that is technically a CPR part 36 offer as it claimed to be. I do think the best way of characterising matters in the present case is to treat the first to third respondents in a position akin to defendants. I am not able in that context to treat the first to third respondents’ letter of 2 April 2007 as clearly amounting to a part 36 offer because part of it proposed that the first to third respondents’ costs were provided for and did not propose that the effective claimants would be entitled to their costs of the proceedings up to the point of their accepting the 2 April proposal had they done so.

I am in a very real sense grateful to Mr Banks in the course of exchanges on this for his frank and realistic acceptance that there are difficulties in achieving any level of certainty as to whether the 2 April letter was strictly a part 36 letter. Even if it was strictly a part 36 letter I indicate very briefly in the present case in the exercise of my discretion, in the light of the particular priority of there being a very careful review on assessment without indemnity basis type presumptions, I would nonetheless have made a standard basis order.

In the present case the costs, whatever they end up as, are currently estimated at amounts that are quite frightening both in the context of the case and no doubt towards Mrs Zeital and Ms Zeital. They may exceed £250,000 by the time the liquidator’s costs are added in as well. They would be frightening also to the parties who have incurred them, and that includes the first to third respondents. I do bear that in mind. When it comes to the question, if it did, of attaching interest by reason of the refusal of a part 36 offer to settle, at a rate within the court’s discretion, I think that that would be leaving this matter on an excessive footing. Here again I confine the outcome simply to an order on the standard basis.

I now move on to the question of set off. Let me indicate briefly: I am aware there are previous orders and they are going both ways. In the context of this case, and having regard also to the way in which CPR 44.3(9) is relevant to this case, my view is the better point for any question of set off of one order against another is the point at which the costs have been assessed, in which case the court can do the mathematics. Unless I am pressed I do not propose to say anything in relation to set off today.

I turn now to the question of an appeal. In that regard, it is a matter for Mrs Zeital and Ms Zeital if they wish to appeal. In order to be allowed to appeal you have to have the permission of a court. You are entitled to ask the court for permission. I will either give you permission, in which case you can go to the Court of Appeal, or I will refuse permission. If I refuse permission you are entitled to approach the Court of Appeal using the appropriate written form and ask the Court of Appeal to consider whether you should have permission to appeal.

I will treat the points made by Ms Zeital as a request that I adjourn the point at which an application for permission to appeal is made. I am going to refuse that request. I will not reiterate the reasons I gave at the beginning of today for my decision to proceed with the business of today. I do highlight in particular that one of the reasons for my allowing the approximately two week postponement from the point at which I gave judgment was to give the opportunity for Mrs Zeital and Ms Zeital to collect their thoughts on the question of permission to appeal. Ms Zeital has told me that she wishes to seek permission to appeal. I require Ms Zeital to tell me now why it is she believes I should give permission. In the normal way that argument is put very shortly indeed.

This is a distressing case and one that I am bound to say will not be helped by further litigation. Permission to appeal is sought by Mrs Zeital and Ms Zeital. I refuse permission to appeal. The findings at trial in this case are driven by conclusions of fact informed by an assessment of the credibility and the reliability of witnesses and of the genuineness of documents. In those circumstances I believe an appeal would have no reasonable prospect of success. A request for permission to appeal to the Court of Appeal can be made to the Court of Appeal itself.

I now move to my decision in relation to interim payment on account of costs. Such a payment is requested by the first to third respondents and also by the liquidator. In both cases the request is confined to an order against Mrs Zeital and Ms Zeital in their capacity as administratixes, having regard in particular to the fact that the bulk of costs would have been incurred post 20 February 2007 when there was the effective shift to an action against the estate rather than Mrs Zeital personally.

The sums sought are £50,000 in the case of the first to third respondents and £6,000 in the case of the liquidator, these being in their submission the absolute bare minimum figures that could be expected on the detailed assessment that lies ahead.

I have taken from both Mrs Zeital and Ms Zeital the submissions that in the present case it would be more just to await altogether the detailed assessment proceedings, the submission the figures proposed here are more than the appropriate figures on an absolute bare minimum basis and also the submission that the estate (of Mr Zeital, deceased) at the moment is in no position to pay any amount and, therefore, time at least would be needed, even if the passage of time would allow the resource in any event to meet a substantial costs liability.

The types of overall figures canvassed in this case are very large indeed. There will be a fine toothcomb through those figures on the detailed assessment that lies ahead. One of the things that increases the figures for the first to third respondents’ costs quite considerably is the presence of a conditional fee arrangement with a 100 per cent uplift. I know that that will be scrutinised closely by the costs judge, not least because the 100 per cent uplift must be seen against a sentence in the letter of 2 April 2007 to Ms Zeital from Azzopardi & Co for the first to third respondents, where it was indicated that after receiving counsel’s opinion the view was that if the matter went to trial it was likely that the first to third respondents would be successful. That likelihood of success expressed at that point will need to be brought into the equation when the costs judge considers the appropriateness of an uplift of the size of 100 per cent. On any view there will be an appreciable amount left as an absolute bare minimum.

I am not persuaded at all that it would be unjust to require an interim payment on account. Indeed it seems to me the justice is in favour of doing something modest in that way which will mean that those entitled to costs, the first to third respondents and the liquidator, do not have to wait right to the end of the detailed assessment proceedings before they receive anything.

I propose to make orders for interim payment on account of costs. I do the best I can, taking into account all that I have read and heard and also my overall feel for the case, and therefore for the matters the costs judge will be looking at when coming to the question of amount. Doing the best I can the amounts that I have come to are the sum of £30,000 in the case of the first to third respondents and the sum of £5,000 in the case of the liquidator. These are still appreciable sums. I do not leave out of account what I have been told about the financial condition of the estate of Mr Zeital (deceased) at this point in time. I do weigh that as well as the desirability of the first to third respondents and the liquidator being able to start to recover some of the costs to which they are entitled.

Weighing all those matters together I propose to allow an extended period of time for the payment of the interim payment on account. That extended period of time will be three months.

I indicate that in the event that the request that I have declined for permission to appeal is renewed before the Court of Appeal, and renewed successfully so that the Court of Appeal decides there will be an appeal in this case, there is to be liberty to Mrs Zeital and Ms Zeital to apply to vary the timetable for the interim payment. I make that adjustment because it is a relevant consideration in an interim payment case where ability to pay is in question that an appeal is on foot. If the Court of Appeal decides there should be an appeal in this case I do not want the presence of an interim payment effectively to stifle it. In that limited context there will be liberty to apply.