Aaron v Shelton

Judgment

Mr. Justice Jack :

Introduction

1. This is an appeal from rulings made by Master Simons on 28 October 2003 in the course of a detailed assessment of costs. It concerns the extent to which a paying party under a costs order can rely on the conduct of the receiving party as a reason for reducing the amount of costs which would otherwise be payable under the order, when that conduct might have been raised at the time the costs order was made.

2. The assessment of costs is being made in an action which was brought by the appellant, Joseph Aaron, in the Queen’s Bench Division against the respondent, Michael Shelton. Both are solicitors. Mr Shelton’s firm, Blackman & Blackman had acted for under-lessees of premises in Gants Hill, Ilford Essex. Mr Aaron had contracted with those under-lessees for an assignment of the underlease, and had gone into possession. That situation gave rise to six actions between various parties prior to the present action. The first four were in the High Court and were followed by two in the Ilford County Court. In the latter two actions the head-lessors obtained against Mr Aaron, first, an order for possession and rent over four quarters, and second further rent. In each of the latter the conduct of Mr Aaron was criticised by the judge, and in the second he was ordered to pay costs on an indemnity basis. I take these facts from the judgment of Cresswell J. in the present action delivered on 1 December 2000.

3. In the present action, commenced on 2 December 1997, Mr Aaron relied on three causes of action against Mr Shelton: breach of warranty of authority, abuse of civil proceedings and conspiracy. The gist of the claim as it appears from the statement of claim was that Mr Shelton improperly signed a consent order in the second of the previous actions. That action had been brought by intermediate landlords, Starmex Ltd, against Mr Aaron’s assignors, Mr Solomon and Mr Davis, for whom Mr Shelton’s firm had acted, and was for forfeiture. The consent order provided for possession to be given. It was later set aside by Sir Peter Pain, acting as a High Court Judge, by order of 31 May 1993, and he was critical of how the consent order had come into being. The present action came before Cresswell J. for trial on 27 November 2000. On the fourth day of the trial, 30 November 2000, after Mr Aaron and Mr Shelton had given evidence, a document, an attendance note made by Mr Wheldon, the solicitor acting for Starmex, was produced by Mr Aaron. The consequences of its production was one of the reasons, perhaps the major reason, why on the next day Mr Aaron consented to his action being dismissed. (Cresswell J. referred to the document as ‘central and crucial’ in paragraph 4 of the matters he referred to the Office for Supervision of Solicitors.) By the order made by consent on 1 December 2000 the action was dismissed, Mr Aaron was to pay Mr Shelton’s costs on an indemnity basis subject to a detailed assessment if not agreed, and Mr Aaron was to pay £7,500 on account of costs by 28 December 2000.

4. Cresswell J. also ordered that a transcript of the proceedings should be sent to the Office for the Supervision of Solicitors, and he invited the Office to look into eight aspects of Mr Aaron’s conduct in particular. Disciplinary proceedings against Mr Aaron followed, and appear to have been heard in February 2002. I do not have the documents showing the outcome, but it appears that one charge, possibly two, was upheld and that Mr Aaron was criticised in respect of others.

5. I have not found it easy to unravel the history of the assessment of costs pursuant to the order of 1 December 2000. It was not until 16 May 2002 that Mr Shelton’s solicitors, Merricks, served a bill of costs. It totalled £62,000. On 21 June a default certificate was obtained by Merricks under CPR.47.9(4) because Mr Aaron had not served any points of dispute with 21 days as required by CPR 47.9(2). On 12 August Mr Aaron did serve his points of dispute consisting of 3 pages. The default certificate was set aside on 10 September. Mr Shelton appealed against that. By order of 17 February 2003 Sir Richard Rougier sitting as a Judge of the High Court dismissed the appeal on terms relating to security provided by Mr Aaron. On 7 May 2003 Principal Costs Officer Lambert held that there was an irreducible minimum of £17,500. He referred the assessment to a costs judge because Mr Aaron had raised issues as to conduct. The finding as to the irreducible minimum was the subject of an appeal, which I understand was dismissed by Master Rogers on 2 July 2003.

6. Most of Mr Aaron’s points of dispute relate to particular items in the bill, but there were first two general points, the first was as follows:

D’s conduct [CPR 44.5]: (a) although D’s (a solicitor) defence denied this, in X-exam D admitted that he had no authority to enter into the consent order; (b) D swore an affidavit to justify the consent order – in X-exam D admitted he had lied in the affidavit – the defence made no admission of the lie; (c) D executed an assignment purportedly on client’s behalf – this was a forgery.

Such matters went to the issues of abuse of civil process, want of authority, conspiracy. Costs, including D’s request for further information, were generally unreasonable incurred by D’s conduct and should be disallowed.

The second point related to charging rates and is not relevant to this appeal. Mr Aaron attached to his points of dispute 24 pages of transcript of Mr Shelton’s cross-examination at the trial.

7. Mr Shelton’s solicitors filed points of reply dated 18 February 2003. In answer to the first general point it was stated:

If the claimant felt that the defendant’s conduct throughout the trial warranted any sanction, his counsel should have raised this at the trial when the question of costs fell to be considered. It is too late to argue this issue now and the costs involved would be disproportionate. It is submitted that, had the claimant, during the trial, genuinely believed the defendant’s conduct warranted any sanction, he would not have submitted to the consent order on 1 December 2000 dismissing his action with costs on an indemnity basis.

As Mr Shelton’s conduct relating to the consent order lay at the heart of Mr Aaron’s claim and Mr Aaron had submitted to his action being dismissed with indemnity costs, one can understand the concern that Mr Aaron was now seeking on the assessment of costs to re-open the issues relating to that conduct.

8. Following a directions hearing before Master Simons on 3 October 2003, Mr Aaron had made a statement dated 8 October 2003 in order to clarify the issues raised by him as to conduct. This had been responded to by Mr Robert Muskath on behalf of Mr Shelton in a statement dated 23 October 2003. In his statement Mr Aaron set out at some length his view of the involvement of Mr Shelton in the previous actions and he quoted at length from the judgment of Sir Peter Pain of 21 May 1993. He stated that the suggestion that Mr Shelton had had authority to act for his clients, the assignors, in relation to the consent order was shown to be untrue and misleading. He said that Mr Shelton should have made admissions as to his lack of authority which would have saved time and costs in the action and its trial. He also referred to Mr Shelton having made an affidavit dated 9 February 1993 relating to the consent order, in which Mr Shelton had said he had the authority of his clients, Mr Solomon and Mr Davis, to make it. He also referred to an assignment signed by Mr Shelton purportedly on behalf of Mr Solomon and Mr Davis.

9. In his statement Mr Aaron also raised two separate matters. One was the preparation on behalf of Mr Shelton of trial bundles. The other was the time taken at the trial discussing the reference to the Office for the Supervision of Solicitors.

10. In his statement Mr Muskath stated that Mr Aaron should not be allowed to raise the matter of Mr Shelton’s authority, which had been at the heart of a trial, which Mr Aaron had conceded by the consent order that he was going to lose. He took issue with the facts alleged by Mr Aaron. In paragraphs 7 and 8 he sought to demonstrate that the admissions, or concessions, which Mr Shelton made in cross-examination were of no importance.

11. I have read the cross-examination of Mr Shelton, on which Mr Aaron relies. Mr Shelton said (page 65, line 11) that he thought his firm had authority to sign the consent order on behalf of Mr Davis and Mr Solomon, the under-lessees/assignors, because the firm was told in a letter from Black Graf & Co dated shortly prior to 11 April 1991 that they had agreed. The attendance note which I have mentioned as being produced by Mr Aaron after the conclusion of Mr Shelton’s evidence showed that Mr Weldon of Black Graf & Co had spoken to Mr Davis on 9 April 1991. This supported the suggestion that Black Graf & Co were correct in saying that at least Mr Davis had agreed. This was at the heart of Mr Aaron’s claim against Mr Shelton.

12. In contrast with that, Mr Shelton accepted in his cross-examination that he should not have said that he had the authority of Mr Solomon and Mr Davis to make the affidavit of 9 February 1993 (page 67, line 45 of the transcript). He also agreed that he should not have signed the assignment (page 70 lines 54 to 57, where Mr Aaron’s counsel suggested that ‘no great harm’ was done by it). Those are the second and third matters raised by Mr Aaron in the passage I have quoted from the start of his points of dispute. On page 76 of the transcript the substance of Mr Aaron’s case was put to Mr Shelton by counsel in five questions: he did not accept any of it.

13. The adjourned detailed assessment came before Master Simons on 28 October 2003. After hearing submissions concerning the points as to conduct which Mr Aaron sought to raise, the Master made three rulings. I can summarise them as follows:

(1) By seeking to raise issues as to Mr Shelton’s authority on behalf of Mr Davis and Mr Solomon Mr Aaron was seeking to dilute the effect of the costs order to which he had consented. Mr Justice Cresswell could have been asked by Mr Aaron to determine whether a reduction in costs should be made on account of this, but he was not asked. It would be disproportionate to incur the time and costs that an investigation of these allegations would incur and contrary to the overriding objective of the CPR. He would not allow Mr Aaron to suggest that the amounts claimed on behalf of Mr Shelton were unreasonable by reason of the alleged conduct of Mr Shelton which was relied on.

(2) In the light of what Cresswell J. and the Disciplinary Tribunal had said about the trial bundles prepared by Mr Aaron, he would proceed on the basis that Mr Shelton’s solicitors were entitled to make up bundles themselves to use in place of those provided by Mr Aaron. He would not bar Mr Aaron from raising issues as to whether Mr Shelton’s bundles had been made up in a proper manner: I take as examples of that questions as to the inclusion of unnecessary documents and the duplication of documents.

(3) He would not hear argument as to the costs of the fifth day of the trial.

14. It is next necessary to look at the relevant provisions of the CPR. CPR 44 is headed ‘The court’s discretion and circumstances to be taken into account when exercising its discretion as to costs’. It covers the making of orders by the court in relation to costs. The relevant provisions are:

44.3 – (1) The court has discretion as to –

(a) whether costs are payable by one party to another;

(b) the amount of those costs; and

(c) when they are to be paid.

(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 (whether or not made in

in accordance with Part 36).

(Part 36 contains further provisions …. .)

(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 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;

(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 the judgment.

(7), (8), (9) ……

15. CPR 44.4 is headed ‘Basis of assessment’ and covers the bases on which costs are to be assessed. It provides that costs will be assessed on the standard basis or the indemnity basis and defines them.

16. CPR 44.5 is headed ‘Factors to be taken into account in deciding the amount of costs’. It covers what the court is to have regard to when assessing costs. It provides:

44.5 – (1) The court is to have regard to all the circumstances in deciding whether costs were-

(a) if it is assessing costs on the standard basis-

(i) proportionately and reasonably incurred; or

(ii) were proportionate and reasonable in amount, or

(b) if it is assessing costs on the indemnity basis-

(i) unreasonably incurred; or

(ii) unreasonable in amount.

(2) In particular the court must give effect to any orders which have already been made.

(3) The court must also have regard to -

(a) the conduct of all the parties, including in particular-

(i) conduct before, as well as during, the proceedings; and

(ii) the efforts made, if any, before and during the proceedings in order to try to resolve the dispute;

(b) the amount or value of any money or property involved;

(c) the importance of the matter to all the parties;

(d) the particular complexity of the matter or the difficulty or novelty of the questions raised;

(e) the skill, effort, specialised knowledge and responsibility involved;

(f) the time spent on the case; and

(g) the place where and the circumstances in which work or any part of it was one.

(Rule 35.4(4) gives the court power to limit the amount that a party may recover with regard to the fees and expenses of an expert.)

17. By CPR 44.3 (4)(a), in deciding what order to make, the court must have regard to the conduct of all the parties, and by paragraph (5)(a) conduct includes conduct before, as well as during, the proceedings. Likewise by CPR 44.5 (3) in assessing the amount of costs the court must have regard to conduct before, as well as during, the proceedings. Although it is not relevant to the facts here, it is relevant to the understanding of the rules that in each case the court must have regard to offers to settle. CPR 44.3 (b) sets out a number of kinds of order which the court may make which are particularly appropriate to reflect matters of conduct. This indicates that where the conduct relied on is of a kind which it is suggested should result in one of these orders, it will, in the majority of cases at least, be raised before the court making the costs order. For there is no equivalent provision in CPR 44.5.

18. Mr Aaron submitted that, where a paying party wished to say that the conduct of his opponent was such that he should not receive all the costs he might otherwise be entitled to, the paying party had the opportunity to raise the matter of conduct either at the time when the order for costs was made or at the stage of assessment. He accepted that, if the paying party did raise it before the court making the order, for example, before a trial judge, and the judge decided not to make any special order on account of it, that was conclusive: but, he said, the paying party need not do so, he may keep silent and make his point on the assessment.

19. If Mr Aaron’s submission was correct, it would mean that, if a party who had lost an action wished to say, for example, that his opponent had wasted a day of the trial by an unnecessarily prolonged cross-examination of a witness, or has contested an issue unsuccessfully, he need not raise it before the trial judge as a matter to be reflected in the order for costs, but could do so before the costs judge on the assessment. The trial judge would, of course, have heard the cross-examination, or would have considered the issue, and would be able to decide the point quickly. In contrast the costs judge would have to instruct himself as to the relevant issues in the action and would then have to read the transcript. He would still not be in the same advantageous position as the trial judge. There is also the possibility that an unscrupulous litigant, knowing that the trial judge would give his point short shrift, might obtain a more favourable hearing from the less-informed costs judge. That might be the case here.

20. In my judgment, where a party wishes to raise in relation to costs a matter concerning the conduct of his opposing party (either before the litigation or during it), it is his duty to raise it before the judge making the costs order where it is appropriate to do so. One situation where it will be appropriate is where the judge making the costs order is in a position to deal with the matter by reason of his involvement in the case. So I would hold that, where a party faces the making of an order that he pay the costs of an action because he is the ‘unsuccessful party’ as referred to in CPR 44.3(2), but he considers that he should not be liable to pay the whole of those costs and an order should be made exercising one or more of the court’s powers in relation to costs set out in CPR 44.3(6), he should make an application to that effect to the judge who is considering what orders as to costs should be made, that is, the trial judge in the case of a trial. If he does not do so, it is not open to him when the costs come to be assessed to raise the same matter under CPR 44.5(3) as a ground for the reduction of the costs which he would otherwise have to pay. If he is uncertain whether a matter he wishes to raise fails within that category, he should raise the matter before the judge. The judge can then consider whether he should deal with it or specifically direct that it should be considered by the costs judge on assessment. Where a costs order is made by consent, the paying party can seek to include in the consent order a provision which takes account of the matter he wishes to raise by providing that he is not to pay the whole of the costs or which specifically refers the matter in question to the costs judge for determination. Otherwise a party who thinks he has achieved an order which will get him his costs subject to the reasonableness of the amount, may on the assessment face an argument intended to deprive him of what he justifiably thought he had obtained. Where the consent order is made during a trial and by it the paying party, if claimant, abandons his claim, or, if defendant, concedes the claim, the position is particularly clear. A paying party who does not protect himself in these ways, runs the risk that the costs judge will decide that the matter in question was one which it was appropriate to raise before the judge making the costs order, and which should not be raised before him, as happened here.

21. The rationale is that it is an abuse of the court’s process to raise an issue before the costs judge which was not but should have been raised before the judge making the order for payment of costs. An analogy can be found in the principle that, if a party could properly have raised an issue in proceedings but does not, he will not be permitted to do so subsequently. I refer to Yat Tung Investment v Dao Heng Bank [1975] A.C. 581 at 590:

But there is a wider sense in which the doctrine may be appealed to, so that it becomes an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings. The locus classicus of the aspect of res judicata is the judgment of Wigram V.-C. in Henderson v. Henderson (1843) 3 Hare 100, 115, where the judge says:

“. . . where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which the parties, exercising reasonable diligence, might have brought forward at the time.”

Henderson v. Henderson was cited in Skuse v. Granada Television Ltd. [1994] 1 W.L.R. 1156 where on rather special facts arising under the old rules it was held that a party was barred from raising an argument as to costs before a taxing master because it had not been raised before the Court of Appeal, the court which had made the order for costs: see [1994] 1 W.L.R. at 1162B to 1164C.

22. I do not think that there is any conflict here with the mandatory provisions of CPR 44.5(3)(a). For by CPR 44.5(2) the court must have regard to the order for costs, and I would include with that the circumstances in which the order was made. Further, in the operation of CPR 44.5 as with any other rule it is permissible for the court, and the court’s duty is, to avoid abuse, that is the misuse, of its process. Nor do I think that there is any conflict with the concept that by the consent order the parties have agreed that the costs should be assessed in accordance with the CPR. The assessment will be carried out in accordance with the CPR as the rules apply to the situation which has arisen. That was an alternative way in which Mr Aaron put his case.

23. Mr Aaron referred to Burrows v Vauxhall Motors Limited [1998] PIQR 48. There the Court of Appeal was concerned with two personal injury actions proceeding under the old County Court Rules. It was alleged that the plaintiffs had issued proceedings when it was unnecessary because it was clear that the defendants would settle. In each case the action had settled by the acceptance of a payment into court. In one the acceptance had been within time, and the plaintiff was automatically entitled to his costs to be taxed. In the other the acceptance was out of time and the plaintiff had to come before the court. It was held appropriate that in each case the plaintiff's unreasonable conduct should be reflected in the costs recovered. In the first case the opportunity only arose on taxation and it was held that the rules gave the power on taxation to effect that. Plainly in similar circumstances today the court would have power under CPR 44.5. There could be no question of any misuse of the court’s procedure because no prior opportunity would have arisen for the conduct in question to be raised.

24. On the basis of the principles which I have set out Mr Aaron is not here entitled to raise on the assessment the issues of Mr Shelton’s conduct which he refers to in his points of dispute. If he wanted to rely on these matters, he should not have consented to an order for costs in the terms which he did. He should have raised them before Cresswell J.

25. On the particular facts, however, the position is even more plain. For, as I have set out, the issues which Mr Aaron seeks to raise as to conduct were at the heart of his action. He consented to the dismissal of that action. Just as it would be an abuse of the court’s process to start a second action raising those issues, so is it an abuse to seek to raise them on the assessment of costs. Although I have thought it right to deal with the matter of general principle, which is how it was approached in Mr Aaron’s submissions, this provides a short and clear ground on which the first ruling of Master Simons should be upheld.

26. The second ruling related to the production of trial bundles by Mr Shelton. This point can be dealt with much more shortly. The seventh of the matters referred to the Office for Supervision of Solicitors by Cresswell J. was:

‘Mr. Aaron’s approach to compliance with the court order of 5.5.2000 in this action as to the preparation of documents for trial as reflected in the witness statement of Catherine Hudson dated 27.11.2000 and the exhibits thereto.

In the course of submissions before him Master Simons quoted from paragraph 217 of the finding of the Disciplinary Tribunal:

‘The respondent has demonstrated a high degree of negligence in the preparation of the trial bundles. Again he created a shambles and the effect was grotesque. The Tribunal were deeply troubled by what the perception of a member of the public would be if he had learned of the considerable deficiencies in the preparation of the respondent’s papers and the very considerable waste of court time which ensued.’

In the light of these passages the Master was entitled to conclude that the trial bundles prepared by Mr Aaron were so inadequate that it was reasonable for Mr Shelton’s advisers to prepare bundles themselves. The Master would have been wholly wrong in the light of this material to embark on an investigation of the adequacy of the bundles prepared by Mr Aaron.

27. Lastly, there is the matter of the last day of trial. When I referred Mr Aaron to the fact that this had been raised before Cresswell J. and that Cresswell J. had dealt with it saying that the costs should be included among those to be paid by Mr Aaron, Mr Aaron abandoned the point. Although I had not then located a copy of the order made on 1 December 2000, I found one subsequently: it expressly includes the costs of 1 December. It is astounding that the point was raised.

28. For these reasons the appeal is dismissed. It is to be hoped that the assessment of these costs, which were ordered to be paid three and a half years ago, will now be completed.