Pritchard Englefield v Steinberg (No.2)

The root of the dispute that led to the hearing before me is to be found on 13 April 1995 when the Defendant instructed the Claimant, concerning a possible negligence action against his Counsel, William Poulton (later HHJ Poulton and who, sadly died earlier this year), arising out of landlord and tenant proceedings in relation to a garage 43 at Flat 49, 22 Park Crescent, London, W1 (Flat 49). He contended that if counsel had given him correct advice he would never have disputed the proceedings against him, or would have sought to settle them.

The Claimant (by Mr Cohn) proceeded to progress that matter during 1995 and 1996, during the course of which it rendered various bills to the Defendant. However, when these remained unpaid it started, on 28 April 1997, proceedings in the Queen’s Bench Division claiming payment of the outstanding amounts.

Summary judgment was obtained against the Defendant by the Claimant on 29 September 1997 for the amount of the bills, interest and scale costs totalling £9,327.94. The Defendant was not present at the hearing at which summary judgment was given, and so, on 7 October 1997, he applied to set aside that summary judgment.

On 23 January 1998 Master Ungley dismissed the Defendant’s application to set aside judgment with costs. An attempt by the Defendant to appeal against that decision was unsuccessful.

In February 1998 the Claimant carried out a search at HM Land Registry, but the search did not reveal that the Defendant had any interest in a long lease of Flat 49, and so the following month, March 1998, they started proceedings in the Civil Court of New York State to enforce their English judgment. The Defendant counterclaimed in those proceedings, which were ultimately abandoned in circumstances with which I will deal later in this judgment, the Claimant having incurred irrecoverable costs of £14,487.43,since no between the parties costs are recoverable in New York State.

Meanwhile the Claimant proceeded to detailed assessment of the costs, pursuant to the order of Master Ungley dismissing the Defendant’s application to set aside the summary judgment, and, on 4 June 1998, those costs were assessed by Mrs Boyce, a costs officer in the Supreme Court Costs Office, in the sum of £8,831.94.

A couple of weeks later the Claimants became aware of a letter on the Defendant’s website which they considered defamatory, and as a result of which they brought proceedings against the Defendant for defamation, and the course of and present state of those proceedings will be dealt with also later in this judgment.

On 30 June 1998 Master Tennant made a charging order over property owned by the Defendant in this country, namely 11 Avenue Close, Avenue Road (Flat 11). That charging order nisi was made absolute on 20 July 1998, but it was known that at that time the flat was occupied by the Defendant’s mother.

On 5 August 1998 the Claimant issued proceedings by originating summons in the Chancery Division seeking the sale of Flat 11, and on 14 October 1998 Master Bragge made an order on the application for sale. This order included provision that the costs of the action should be assessed in Chambers and paid by the Defendant, and that unless the Defendant redeemed the charge and paid the costs the property should be sold with a vesting order in favour of Stuart McInnes, a partner in the Claimant firm.

By November 1998 the Claimant had discovered that from 8 July 1998 the Defendant had a long leasehold interest in Flat 49, and obtained from Master Foster, on 10 November 1998, a charging order nisi in respect of that flat in respect of their unpaid costs, which order was made absolute on 1 December 1998.

On 4 January 1999 the Chancery proceedings came back before Master Bragge, who ordered the Defendant to give possession of Flat 11 to the Claimant, but, provided access was given to the Claimant’s valuer, then that order would not be enforced without further order. Again the Defendant was ordered to pay the costs of that application.

On 29 March 1999 the Defendant Solicitors remitted to the First Claimant’s bank the sum of £29,951.64 out of proceeds of sale of Flat 49 to discharge the judgment debt, taxed costs and scale costs on the charging orders over Flats 49 and 11 and interest. However this sum did not include the costs arising from the orders made by Master Bragge on 14 October 1998 and 4 January 1999.

The parties then concentrated on the libel proceedings, and it was not until 20 May 2002 that the Defendant wrote to Mr McInnes for the first time asking him to remove the charge on Flat 11. Mr McInnes replied two days later to the effect that until the costs flowing from the orders of 14 October 1998 and 4 January 1999 had been assessed and paid, the charge over Flat 11 remained in force.

On 6 June 2002 the Claimant wrote to the Chancery Division enclosing a bill of costs in respect of those costs orders for assessment in Chambers by Master Bragge. As the CPR had, of course, come into force since those orders were made, the question arose in the Master’s mind as to whether or not the matter could proceed where there had been an automatic stay, and indeed the procedure generally in the light of extensive changes made to practice in this field by the CPR. Accordingly, on 4 July, at the invitation of Master Bragge, Mr Cohn, a partner in the Claimant firm (becoming a consultant thereto on 1 October 2002) and Mr Torrance attended before Master Bragge. There is controversy about the circumstances surrounding that hearing, which I will have to deal with later in this judgment.

What is quite clear however is that the Master gave directions for a further hearing before him, which in actual fact took place on 1 November 2002. By this time the Claimant had issued a notice of commencement of detailed assessment proceedings in respect of the above orders on 6 August 2002 in the SCCO.

I have a transcript of what transpired before Master Bragge on 1 November 2002. He considered that the detailed assessment proceedings could continue, but that all questions of delay, etc, should be dealt with by the costs officer dealing with this matter, because if he were to deal with one aspect of the case, and the SCCO were to deal with another, it could give rise to problems. Master Bragge did, however, award the Claimant its costs of the issues he had been asked to determine.

Fearing that the Defendant might be about to dispose of his assets, by selling Flat 11 without the Claimants knowing about it, the Claimants obtained from Davis J a freezing order in respect of Flat 11 in January 2003.

Although the two bills were for £5,000 odd and £17,000 odd, at a hearing before me in relation to an interlocutory costs order in favour of the Defendant in the libel proceedings, on 13 February 2003, I directed that in view of the importance of the matter, and with the parties’ consent, that these two bills should be dealt with at Costs Judge level, and that I personally should assess them, and deal with the application in respect of delay/misconduct which, of course, a costs officer could not have done.

That hearing was fixed to take place, and did take place before me on 25 September 2003.

I was presented with, and fortunately had the opportunity to read in advance, two large lever arch files of correspondence and orders, together with the Defendant’s skeleton, which he had used for the hearings before Master Bragge, and a revised skeleton on behalf of the Claimant by Mr Huttton, which was put in pursuant to a direction that I made at the February hearing.

A bare five weeks before that hearing, however, Mr Cohn sought to put in a further witness statement, with substantial exhibits, which detailed the subsequent history of the libel proceedings, and which, he contended, was relevant to the decisions that I needed to take on 25 September.

In the absence on holiday of Mr Torrance, and not being sure of the Defendnat’s attitude to this additional evidence, Bernard Oberman & Co issued an application returnable before me, for permission to rely on this evidence. After his return from holiday the Defendant instructed Mr Torrance not to take any point on the admissibility of that evidence, though Mr Torrance reserved the right to challenge its relevance.

At the hearing before me Mr Torrance suggested that I should pay little or no attention to what was in that witness statement, because it related to the libel proceedings with which the applications before me were not directly concerned, and necessarily presented a one sided version of events in relation thereto.

In view of Mr Torrance’s earlier concession I had, of course, read the witness statement, but I did consider long and hard whether or not it should be admitted, and the extent to which I should take it into account.

In summary, the situation in February this year was that the libel proceedings were stayed due to the Defendant’s ill health. What the witness statement indicated was that that stay had been removed by Mr Justice Eady, who had proceeded to deal with the matter under the statutory summary procedure laid down by Sections 8 to 10 of the Defamation Act 1996. Under this, the Claimant, and Mr Cohn who was a co-claimant with them, limited their claims to £10,000, but Mr Justice Eady indicated that it had been plain throughout that the Claimant’s principal aim in relation to the defamation proceedings was to vindicate their name and not to recover damages.

In the event Mr Justice Eady awarded the Claimant firm £1,000, and Mr Cohn £4,000 on 25 July 2003.

Two of Mr Justice Eady’s judgments are exhibited to Mr Cohn’s most recent witness statement, and Mr Hutton specifically referred me to paragraphs 8 and 9 of the latter of those two judgments, which was delivered on 25 July 2003 when the Judge was actually awarding the damages I mentioned above, having heard evidence from Mr Cohn in the witness box. These paragraphs read as follows:

At the hearing before me on 25 September Mr Torrance indicated that his client was seeking permission to appeal out of time against the decision of Mr Justice Eady, given on 25 July this year, on the basis that because his client had not been present it had not been a fair decision. I cannot of course comment on that, but, as I told Mr Torrance at the time, I had to proceed at that hearing on the basis that Mr Justice Eady’s judgment and remarks would not be upset on appeal.

The Defendant sought total disallowance of both bills of the Claimants on the basis of the long delay, since the orders were made in their favour, coupled with misconduct arising over that delay.

The relevant paragraph of the CPR relating to misconduct is 44.14, which reads in part as follows:

Sub paragraph 2(a) then gives the court making such an order the power totally to disallow those costs.

In his admirably succinct submissions Mr Torrance suggested that the Claimants were guilty of misconduct because they maintained the charge over Flat 11 for the improper purpose of stifling, or attempting to stifle, on financial grounds, the Defendant’s genuine libel claim. So far as delay was concerned the argument was that these bills were not presented for assessment until well outside the primary three month period, which applied equally before CPR (Order 62 rule 29) and post CPR (CPR 47.7).

So far as delay was concerned Mr Torrance accepted that as no application had been made by the Defendant, pursuant to CPR 47.8(1)(b), the only sanction that I could apply to the Claimant was to disallow the interest.

However, in his skeleton Mr Hutton, at paragraph 37, conceded the whole of the interest in question in the following terms:

Accordingly, Mr Torrance directed his submissions to the question of misconduct, and this necessitated some fairly detailed consideration of the correspondence and attendance notes of the Claimant.

I do not intend to go into this matter in great detail, but will summarise the main submissions of Mr Torrance.

Firstly, he alleged that the Claimant knew perfectly well that the charge over Flat 11 should have been removed once the capital sum had been paid, and indeed his client believed that had happened. The wording of the order however makes it very clear that the charge should subsist until not only the principal sum had been cleared, but also the costs issue had been resolved and those costs had been paid.

Mr Torrance said that in the Spring of 2001 he received a letter from the new Defendant’s bank manger who had taken over at his local branch indicating that that manager was aware of the continuing existence of the charge, and the necessity for the Defendant to do something about its removal. Mr Torrance, without immediate reference to the correspondence, suggested that that concern was immediately communicated to Mr Cohn at the Claimant firm, but Mr Cohn deliberately did nothing for a year to put pressure on the Defendant.

The correspondence, when examined by Mr Hutton in his reply, however indicated that the complaint from the Defendant to Mr McInnes was in May 2002, and not in the Spring of 2001. Mr Hutton pointed out also that as soon as the complaint was made, within a matter of less than a fortnight, the Claimant had in fact prepared and lodged a bill for assessment in Chambers by Master Bragge.

Mr Torrance complained that a copy of that bill had not, as it should have been, been served on Mr Steinberg. Neither Mr Hutton nor Mr Cohn, who was also present in court, could explain why that had not happened, but it transpired that Mr Torrance had been to inspect the file and had seen a copy of the bill very shortly after Mr Cohn notified Mr Torrance that he was reactivating the matter.

Next in the list of complaints by Mr Torrance is the suggestion that Mr Cohn misled Master Bragge at the hearing of 4 July. Mr Cohn prepared an attendance note for that hearing which was put in evidence before me, in the sense that it formed part of the corpus of the documents upon which the Claimant was relying for the actual detailed assessment of its bills. I will set out below part of that attendance note:

Mr Torrance acknowledged that he had made his own attendance note of that hearing, and that Mr Cohn’s appeared to be accurate, but his real complaint seemed to be that, very shortly after adopting the line that Master Bragge had to give leave to proceed, Mr Cohn had changed his mind and started detailed assessment proceedings, and this was evidence of an ulterior motive, but I do not accept that. The matter was fully aired before Master Bragge who had expressed no concluded view. As a result of further research Mr Cohn considered he could properly proceed in the way that he did.

Mr Torrance also argued that by pursuing his client in the New York courts the Claimant was guilty of misconduct, since, he said, it was apparent throughout that the Defendant had an interest in Flat 11. Indeed he told me on instructions that the Claimant itself had acted for Mr Steinberg when he had purchased that flat!

Mr Cohn acknowledged that this was the case, but the purchase had been many years before, perhaps as many as 20; the file had long since been archived, and it was not something of which he was aware, or to which his attention had been drawn. Again, it does not seem to me that the allegation of misconduct can really stand up, but I will consider this again in relation to the authorities quoted by Mr Hutton in his reply.

It does seem to me however that in the state of Mr Cohn’s then knowledge, it was not an unreasonable step for his firm to take to try to recover their outlay in the New York courts when it appeared to them, from Land Registry searches, that the Defendant had no assets in this country which could be attached for that purpose.

Mr Hutton ably developed the arguments set out in some detail in his skeleton, and dealt first with the question of delay, and secondly with that of misconduct.

So far as delay was concerned he made the point that the orders of 14 October 1998, and 4 January 1999, provided for the costs to be "assessed in Chambers". That power was contained in Order 62 rule 13, which reads as follows:

He made the point that the sub rules of Order 62 referred to in that Rule did not include sub-rule 29, which was the pre CPR delay provision.

Accordingly, he submitted that pre the introduction of CPR there was no time limit laid down under the self contained code of Order 62 for the assessment of costs in Chambers under Order 62 rule 13. He further submitted that although that procedure had "evaporated" under the CPR, in that there was no equivalent procedure, nevertheless there was nothing in CPR which retrospectively imposed a time limit on an order which had no time limit pre CPR.

Although that conclusion may seem anomalous, I think it is correct. It necessarily follows, as Mr Torrance conceded, that the only remedy for pure delay, if I can use that expression, is the disallowance of interest, as his client has not made the necessary application under CPR, and since the full amount of interest had been conceded by Mr Hutton in his skeleton, which concession was repeated orally before me in his submissions, that really is the end of the argument in relation to penalising the Claimant for delay.

Mr Hutton submitted that on the facts the conduct did not amount to misconduct, as defined within the authorities of which he referred me to a number.

Although Counsel did refer to the case of Bufton v Hill [2002] 3 Costs LR 381, I am inclined to agree with Mr Torrance’s submission that that case is not directly in point, and need not be referred to further.

Mr Hutton then turned to the case of Ridehalgh v Horsefield [1994] Ch 205 (CA) and in particular referred me to the classic statement of the law, as he contended, to be found on pages 232, letters C/D down to G:

It is unnecessary to go on to consider what Sir Thomas Bingham said in relation to "negligence", because the word negligence does not appear in CPR 44.14(1)(b).

As Mr Hutton rightly pointed out the decision of Sir Thomas Bingham in the Ridehalgh v Horsefield case has been expressly affirmed by the House of Lords, in the more recent case of Medcalf v Mardell [2002] 3 WLR 172; [2002] 3 Costs LR 428.

Finally, Mr Hutton referred me to the even more recent Court of Appeal case of Persaud v Persaud [2003] P.N.L.R.519. The leading judgment is that of Peter Gibson LJ, and this was delivered on March 6, this year. After reviewing the decisions of Ridehalgh v Horsefield and Medcalf v Mardell and in particular what Lord Hobhouse said at paragraph 56 of Medcalf he said in paragraph 27:

In his reply Mr Torrance suggested that the cases referred to were all wasted costs cases, and that some different and lower level of conduct would suffice totally to disallow the costs. I do not consider that "misconduct" in CPR 44.14 materially differs from "misconduct" in a wasted costs application, and therefore reject that submission.

If Mr Cohn had deliberately misled either the court or Mr Torrance as to the position regarding the charge then I think his conduct would probably have amounted not merely to something which would justify disallowance of the costs for misconduct, but also might even expose him to a disciplinary charge. However I am quite satisfied, on the analysis of all the evidence in this case, that no such charge can properly be laid at Mr Cohn’s door.

He was engaged in lengthy, expensive and bitterly fought litigation. His firm had a judgment for unpaid costs, and the Defendant appeared to be putting every possible obstacle in his way to prevent his enforcing that judgment. It is true that there was a period when both parties were concentrating on the libel proceedings, at the expense of the enforcement proceedings, but I think this was perfectly understandable, and does not imply any improper motive on the part of Mr Cohn.

Then, of course, there were the transitional provisions relating to cases that were pending pre-CPR but were continued afterwards. That, as a number of cases have shown, is a notoriously difficult field, and it would appear from a transcript of his judgment on 2 November that even Master Bragge was not quite sure of the precise procedure to be followed. I therefore acquit Mr Cohn of any improper conduct such as would disentitle his firm to recover these costs.

As I indicated to the parties at the end of their oral submissions the application failed, and above are my reasons for making that finding. Subsequently, the detailed assessment of the Claimant’s two bills went ahead, and the issue of costs was also dealt with at the conclusion of that assessment.

It therefore follows that unless either party wishes to seek permission to appeal in respect of either this decision, or any of my detailed decisions in relation to the individual items in the bill of costs, assessed on 25 September (which I extended until the date this judgment is handed down) it will be unnecessary for either party to attend when this judgment is formally handed down.