Angel Airlines v Dean and Dean

This appeal raises three separate issues, the first two arising out of a detailed judgment from Master Seager Berry, Costs Judge, dated 18 August 2006, and the third arising out of a decision of the same Costs Judge dated 12 September 2006. Permission to bring this appeal was granted by Tugendhat J as long ago as 18 June 2007.

This appeal comes at the end of what can only be described as an extraordinary saga. In May 2004, the appellant solicitors rendered a bill of costs to the respondent for some non-contentious work they had carried out for them in the sum of £444,705. The bill was subsequently assessed under s.70 of the Solicitors Act 1974. Following numerous hearings and unsuccessful appeals on the part of the appellant, the bill of costs was finally assessed by the Costs Judge in the sum of £99,449.65. This triggered a further round of complaints and appeals on the part of the appellant. Thus far the disputes relating to the detailed assessment of these costs, including the numerous appeals, have occupied 50 days of court time and the participation of 24 different judges. There have been a total of 20 unsuccessful appeals thus far. The total costs incurred by the parties in respect of the detailed assessment, together with all of these appeals, are likely to be in the order of £1m.

When he dismissed an appeal on another aspect of this dispute, on 18 January 2007, Mackay J described this case as “an appalling piece of litigation”. When, three months later, the same judge had to deal with another aspect of these disputes, he said:

“The multiplicity of proceedings, appeals and applications is the product of what I consider to be an abuse of the process of the court by the proposed applicants, Dean and Dean”.

Nor was Mackay J the only senior judge to express grave concerns about the appellant’s conduct in this case. Earlier this year, Dobbs J noted that, although a number of costs orders had been made against the appellants, they had not paid any of them. She herself ordered them to pay the sum of £7,090.42 by way of costs by 6 March 2008. This sum too has not been paid. As I pointed out to Lord Brennan QC during the course of oral argument, it was unusual and highly unsatisfactory for a party who was in flagrant breach of other orders to expect the court to ignore such conduct, whilst at the same time asking for the court’s assistance on other matters, as the appellant does on this appeal. Whilst, in other circumstances, the court might have adjourned this hearing until, for example, the sums due to the respondents had been paid, it is difficult to see how that would have been anything other than counter-productive, since the respondent is as anxious as the court to achieve some sort of finality in this matter.

Perhaps unsurprisingly in view of these difficulties, Lord Brennan QC argued that the court should put out of its mind the conduct sketched out above, and should instead concentrate solely on the merits or otherwise of the three individual points that arise on this appeal. I certainly accept the proposition that, if the points raised in this appeal are demonstrated to be correct, the appellant should not be deprived of the fruits of that victory as a result of its earlier conduct. However, it is impossible for the court to consider this appeal without setting out at least some of the relevant background facts.

The appellant was retained by the respondent to act as its solicitors in connection with a dispute as to aircraft leasing with BAE. In April 2004, before proceedings were issued, this claim was settled by the payment of $529,000 odd from BAE to the respondent. This sum was paid to the appellant, who was acting as the respondent’s solicitors. On 6 May 2004, the appellant issued an invoice for £140,000 in relation to its fees and said that this money was to be transferred from the client account (where the money from BAE had been deposited) to the office account. The respondent obtained a pre-action order from Grigson J that the money in the client account was to be paid into court, which happened on the 19 May. Five days later, on 24 May 2004, the appellant revised its bill of costs and issued a further invoice in the significantly larger sum of £444,705. On the same day the appellant issued the first of a number of without prejudice offers in the sum of £150,000.

There were a number of delays and difficulties in obtaining from the appellant the detail of its draft bill of costs. Unless orders were made both by the High Court Judges who were involved in the proceedings, and subsequently by Costs Judge Seager Berry, who dealt with the matter throughout at the Supreme Court Costs Office. In May 2005, the Costs Judge dealt with various preliminary issues on the appellant’s bill, which were the subject of a detailed judgment dated 29 September 2005. The detailed assessment was then to be heard in December 2005 but, in circumstances which are relevant to the third point raised on this appeal, the detailed assessment was delayed until January 2006. Following a hearing on the 16 January 2006, on the 18 January the Costs Judge gave a ruling on a further round of preliminary issues. Thereafter there were three further days of detailed assessment on 23, 24 and 25^th January 2006.

At that point there was just one further day of detailed assessment to come, which had been fixed for the 15 February 2006. On 31 January, the appellant made a without prejudice offer to the respondent in relation to the detailed assessment, in the sum of £100,000. The details of that offer, and the responses, are highly relevant to the first ground of appeal before the court and are dealt with in greater detail in Section D below.

As it turned out, because of the nature and scope of the difficulties arising out of the appellant’s draft bill of costs, the detailed assessment was not completed on 15 February. Indeed, there was a further six days devoted to that assessment process, namely 20 and 21 February, the 3 March, 25 April and 5 and 22 May. A detailed judgment dealing with that assessment was provided by the Costs Judge on 18 August 2006.

Both at the same time as the detailed assessment, and thereafter, there were a plethora of applications to the court for permission to appeal, payments out of court, security for costs and the like. I note that, on the only occasion prior to this appeal when the appellant successfully obtained permission to appeal from an aspect of the Costs Judge’s earlier judgment, the Court of Appeal ultimately set aside the permission that had been obtained, on the ground that the judge who had given permission had been misled by the appellant. In the light of all that, Mackay J’s description of this litigation, referred to paragraph 3 above, might be thought to be something of an understatement.

As noted above, there are three separate points before the court on this appeal. They are:

I deal with the issues arising out of the without prejudice offer in Section D below; the issues arising as to interest in Section E below; and the issue as to the costs of the hearing on 5 December 2005 in Section F below.

On 16 January 2006 the Costs Judge provided a short note of his answers to the second set of preliminary issues relevant to the detailed assessment of the appellant’s bill. A number of these findings were against the appellant, particularly that relating to the hourly rate. However, notwithstanding that position, the appellant continued with the detailed assessment between the 23 and 25 January. When the hearing adjourned on the 25 January, there was only one further day booked for the detailed assessment before the Costs Judge, to take place on the 15 February.

On 31 January 2006 the appellant wrote to the respondent in the following terms:

“We offer to accept the sum of £100,000 in respect of our detailed bill of costs. The said offer does not include any interest applicable. We invite your prompt reply to save further wasted costs.”

The respondent’s solicitors replied the following day, 1 February 2006, noting that the offer made no mention of the costs of the proceedings. It went on:

“If you were awarded £100,000 you would be saddled with the entire costs of the proceedings which you estimated to be £210,000. What is the position about the costs of the proceedings?”

On 3 February 2006, the appellant wrote again, the material paragraph of their letter being as follows:

“We had hoped that the position regarding costs in our offer of 31 January was self evidence (sic). The offer relates to the quantum of our detailed bill of costs. The issue of the costs of assessment would remain at large to be argued before the Master as necessary. We do not have any indication from Angel as to such costs and would naturally not be in a position to consider the matter properly.”

There was no further response from the respondent’s solicitors. The detailed assessment of the bill continued in the circumstances set out in paragraphs 9 and 10 above.

The relevance of the offer was something that was the subject of detailed submissions by the appellant at the end of the detailed assessment and is referred to at paragraph 63 of the judgment of the Costs Judge. From paragraph 64 onwards the Costs Judge had to consider the relevance of the offer pursuant to section 70 of the Solicitors Act 1974 and CPR 47.8 and 47.9. In short, he considered that, in all the circumstances, the offer that was made on 31 January did not amount to a special circumstance pursuant to section 70(10) of the Solicitors Act, so that the presumption applied that, because the bill had been reduced on assessment by more than one-fifth, the appellant solicitors were obliged to pay the costs of the assessment. As to CPR 47.19, at paragraph 71 of his judgment of August 2006, he set out his reservations as to whether an offer pursuant to CPR 47.19 to settle could be made by a solicitor in an assessment of costs required by his own client. He went on to say that, if he was wrong about that, he was of the firm view that, on the facts of this particular case, the offer dated the 31 January did not assist the appellant.

Somewhat belatedly, for the purposes of the hearing on 23 June 2008, the claimant sought to identify what, on its case, the argument about the offer was actually worth. It was submitted on behalf of the appellant that the offer should have been accepted immediately, or certainly within 7 days of its being made, and that therefore the appellant was entitled to all of the costs of the assessment from 7 February 2006 onwards. The appellant indicated that their costs of the remainder of the detailed costs assessment were in the region of £40,000. It was said that the respondent’s costs for the same period were about £25,000.

The starting point for any consideration of this issue is Section 70 of the Solicitors Act 1974. Sub-sections 9 and 10 provide as follows:

“(9)

Unless-

a)

the order for taxation was made on the application of the solicitor and the party chargeable does not attend the taxation, or

b)

the order for taxation or an order under sub section (10) otherwise provides

the costs of the taxation shall be paid according to the event of the taxation, that is to say, if one-fifth of the amount of the bill is taxed off, the solicitor shall pay the costs, but otherwise the party chargeable shall pay the costs.

(10)

The taxing officer may certify to the court any special circumstances relating to a bill or to the taxation of a bill, and the court may make such order as respects the costs of the taxation as it may think fit”.

These sub-sections are of direct relevance in the present case because considerably more than one-fifth of the amount of the appellant’s bill was taxed off. Thus, pursuant to sub-section (9), the appellant was liable to pay the costs of the assessment unless, pursuant to sub-section (10), there was “a special circumstance” which reversed or otherwise altered the statutory presumption.

Also relevant are CPR 47.18 and 47.19, and the associated Practice Direction. They provide as follows:

In Wills and Others v The Crown Estate Commissioner and Others [2003] EWHC 1718(Ch), Peter Smith J had to deal with an appeal from a deputy master in which he had concluded that only one offer under CPR 47.19 was in proper form and where he had given much less weight to later offers, in respect of which no good reason had been given for their lateness. The judge agreed with the master, going on to say;

“33.

There [these?] were matters entirely within his discretion and I do not see that he exercised his discretion wrongly. This appeal emphasises the need for paying parties who wish to protect themselves against the costs consequences of CPR 47.19 to make realistic settlement offers at the beginning of the detailed assessment proceedings and not at the end. The court is bedevilled with late settlements. Procedures in CPR 47.19 are designed to promote reasonable offers and parties should bear this in mind in the future.”

There is one other point of general principle which I consider should be emphasised. A solicitor who prepares a detailed bill of costs, and then makes a without prejudice offer to settle the assessment, is in a unique position because only he can know how the detailed assessment breaks down and where, if at all, it might be found to be exaggerated or irrecoverable. Therefore, a certain amount of caution will always be necessary in considering the validity and effect of offers made by a solicitor in such circumstances. In the course of his judgment, Costs Judge Seager Berry said at paragraph 66:

“Where solicitors act for a client, they will know far better than the client about the work which has been carried out. A client can only know the full extent of the work when the bill has been rendered and, where appropriate, a detailed breakdown provided. By contrast, in inter-parties proceedings the paying party will only know the extent of the work undertaken by the receiving party when the detailed bill of costs has been served. Even then it will not know in any detail work that has been covered by the cloak of privilege. The paying party’s solicitors will of course know the information contained in, for example, pleadings, witness statements, disclosed documents, expert’s reports, inter-party correspondence and the like. They will not know the extent of work involved, for example, in correspondence with the client, communications with counsel, experts and witnesses, and in matters discussed in conference with counsel and the details of documents drafted or the internal discussions undertaken by the receiving party’s solicitors.”

I respectfully agree with that summary. It seems to me that one of the consequences of these observations must be that the paying party is entitled to proper time and full information to enable him to consider the effect of any offer that might be made.

The appellant’s application for leave at the oral hearing before Tugendhat J on this issue was based on the contention that the Costs Judge decided that, under section 70(9)and(10) of the Solicitors Act 1974, special circumstances did not include the making of without prejudice offers. That position was maintained in the hearing before me, thereby allowing the appellant to argue that the Costs Judge had made an error of principle.

However, on a proper analysis of his careful judgment, I do not believe that this is a fair criticism. As Mr Browne noted, at paragraph 64 of his judgment, the Costs Judge said that the issue was whether the offer made by the appellant “can in effect reverse the statutory provision”. It seems to me therefore that the Costs Judge was making it plain that a without prejudice offer could be a special circumstance under section 70(10); the question for him was whether, on the facts of this case, it was a special circumstance. If I am right about that, then the appeal on the first point has been advanced on a false premise, and is, in reality, an attack on the Costs Judge’s conclusion that, on the facts, the offer was not a special circumstance.

For the avoidance of doubt, I am in no doubt that a clear without prejudice offer, made in proper time and in proper form, can be a special circumstance which might otherwise reverse the statutory presumption in section 70(9). One of the underlying principles behind the CPR is to encourage parties in any form of litigation to resolve their differences without incurring further costs, and it seems to me that it would be contrary to the CPR to find that a party involved in a detailed costs assessment under the Solicitors’ Act could not seek to protect its position on costs by making an offer. Accordingly, the question becomes whether, on the facts of this case, the offer of 31 January 2006 was a special circumstance. That was, in my view, the very issue which the Costs judge addressed in his judgment of August 2006. Like him, I have concluded that, for a whole raft of reasons, outlined below, it was not a special circumstance.

Timing

The offer of 31 January 2006 was some 18 months too late. By the time it was made, the parties had already been through two rounds of detailed assessment, and just one day remained for the conclusion of that assessment, namely 15 February. Bearing in mind the clear warning as to the potential irrelevance of late offers in the judgment of Peter Smith J in Wills, I consider that an offer made immediately before the last projected day of the hearing is not an offer to which any real weight can be given. It cannot be a special circumstance within the meaning of section 70.

Form

It is always important for offers to be in the proper form. This is not, as Lord Brennan QC hinted, to encourage pedantry or nit-picking; for an offer to have costs consequences, it must be clear to the addressee what those consequences will be if the offer is accepted and if it is not. Clarity is therefore vital. That is particularly so in a dispute about a bill of costs, where the party who made the offer also prepared the bill: see paragraphs 21 and 22 above.

The terms of the offer in this case are set out at paragraph 14 above. It was not in proper form. It did not address the consequences of acceptance and non-acceptance. In particular, it wholly failed to deal with the costs consequences of acceptance: for the reasons set out by Donaldson J (as he then was) in Tramountana v Armadora SA v Atlantic Shipping [1978] 1 Lloyds Rep 391, the usual rule is that, to be valid, an offer must deal with costs. Although that cannot be regarded as an inflexible rule applicable in every case (see for example the authorities discussed in Lindner Ceilings PLC v How Engineering Services [2001] BLR 90), it is a sensible starting-point. Furthermore when the position was clarified on 2 February 2006, the problems in respect of costs were exacerbated because, instead of providing any certainty as to costs, the appellant was suggesting that the entirety of the costs of the assessment (which even by then were far in excess of the amount at stake) were left completely up in the air, with the prospect of yet further costs being incurred on a lengthy debate before the Costs Judge as to who should pay the costs of the assessment.

Throughout his submissions, Lord Brennan QC was fond of remarking that it was “cloud cuckoo land” to suggest that the respondent was entitled to ignore the offer. On the contrary, I consider that, at the time that the offer was made, it would have been commercially unwise for the respondent to accept such an unclear and potentially disadvantageous offer. In order to save the costs of what was then anticipated to be one last day of the detailed assessment, the respondent would, by accepting the offer, have signed up to an entirely uncertain process which would have necessitated further detailed arguments before the Costs Judge as to the costs of the assessment.

Time For Acceptance and Other Consequences

The offer was entirely silent as to the time that the respondent had to accept it, let alone the detailed consequences of acceptance or non-acceptance. Before this court, it was contended that the offer should have been accepted immediately, or certainly by 7 February 2006. It was wholly unclear whether this was said to be some sort of express or implied term of the offer. However, given that there was no evidence that the date of 7 February had ever been discussed between the parties, and no other authority was relied on in support of such a short acceptance period, I reject any such submission. Under the CPR, unless it is expressly provided otherwise, a party has 21 days to accept a without prejudice offer. In the absence of any other material, I would consider that the 21 day period would be implied into this offer. That therefore took the parties to the 21 February, which was after the last projected date for the costs assessment hearing. Again, therefore, there was simply no incentive on the part of the respondent to accept the offer.

Amount

The appellant’s submissions were to the effect that, although the offer was slightly more than was recovered, the difference was minimal and was ultimately irrelevant. This seemed to rely on a sort of ‘near-miss theory’, which, despite my invitation, was not further elaborated. Of course, I accept the principle that, where an offer from the receiver was only slightly more than the amount awarded, that is not, in itself, a reason to disregard the offer altogether. Pursuant to the CPR, it is factor to be taken into account: in a recent decision of the Court of Appeal, Carver v BAA [2008] EWCA Civ 412, a claimant who just beat an offer still had to pay the costs from the date of that offer. But equally, as the authorities (including Carver) make plain, it is always necessary for the court to consider all the circumstances, including the competing figures which the parties were contending for in the proceedings themselves. On the evidence, at the time that the offer was made, the appellant was contending that it was entitled to at least £220,000 by way of the detailed costs assessment, and possibly more. The respondent, on the other hand, had made an offer of £40,000. It is therefore of relevance that the eventual assessment was closer to the respondent’s figure than the appellant’s figure.

Accordingly, although much less significant than the deficiencies in timing, form, time for acceptance and clarity of consequences, it does seem to me that the fact that the offer was not even beaten is a further factor which justifies the conclusion that the offer was not a special circumstance under s.70(10) of the 1974 Act.

Summary

For all these reasons, I conclude that the Costs Judge was entirely right to say that, in all the circumstances, the offer was not a special circumstance under s.70(10) of the Solicitors Act and did not reverse the statutory assumption in s.70(9). Accordingly, I consider that the appellant’s argument on the first point in this appeal is unsustainable.

Now let us assume that I am wrong about the validity of the offer, and that this was an offer which should have been accepted by the respondent no later than 21 days after it was made, namely by 21 February 2006. Would that mean that, in all the circumstances, the respondent should pay the appellant’s costs from then on, as contended for by the appellant? The answer is plainly No, for reasons which the appellant does not seek to challenge on this appeal.

Paragraph 87 of the Cost Judge’s judgment deals with the inordinate time taken by the detailed assessment. It contains a number of trenchant criticisms of the appellant’s conduct, ranging from the inadequate material supporting the original bill to the failure to provide proper documents during the assessment itself. It also criticises the appellant for failing to provide in advance written summaries of its submissions. The Costs Judge concluded that, but for these deficiencies in the appellant’s conduct, the detailed assessment “could have been completed by the 21 February 2006”.

Accordingly, on the Costs Judge’s specific findings of fact, which, as I have indicated, is not the subject matter of this appeal, the costs on both sides incurred in the detailed assessment after 21 February 2006 were the result of the appellant’s default. Accordingly, it must follow that there can be no adverse costs consequences to the respondent arising out of the failure to accept the belated offer by the 21 February.

This, of course, provides a second, but entirely separate, reason why the belated offer was not a special circumstance under the 1974 Act. On a proper analysis of the facts as found by the Costs Judge, once allowance is made for the period of 21 days for acceptance, all of the costs thereafter would have been incurred in any event, in consequence of the appellant’s conduct. That must serve only to confirm the applicability in this case of the statutory presumption under s.70(9); it could not possibly overturn it.

It is unnecessary to spend very much time on CPR 47.18 and 47.19. For the reasons that I have set out, this was an assessment on the application of the party chargeable and was therefore covered by s.70 of the Solicitors Act 1974. I therefore agree with the Costs Judge that CPR 47.18 does not apply at all: there is a separate statutory code. As to CPR 47.19, I share the Cost Judge’s reservations as to whether that too is applicable, in the light of the clear statutory assumption at s.70(9).

However, for the purpose of this appeal, I am prepared to assume that CPR 47.19 could apply to the offer of 31 January. If it did, then all of the considerations that I have addressed at paragraphs 26-37 above become directly relevant all over again. The lateness of the offer, the deficiencies in form, the absence of any date for acceptance or clarity as to the consequences of acceptance and non-acceptance, and (to a much lesser extent) the amount of the offer, are all matters which are relevant to any consideration of whether the offer should now have any costs consequences. For the reasons which I have given, I consider that the offer was invalid and/or of no or negligible weight and/or irrelevant on the facts, and can have no costs consequences.

Thus the alternative argument pursuant to CPR 47.19 is of no avail to the appellant. For precisely the same reasons as set out in Sections D4 and D5 above, the Costs Judge was not only entitled but was right to accord the offer of 31 January 2006 no weight in assessing liability for the vast costs of the detailed assessment.

When Tugendhat J gave leave to appeal on the issue as to interest, he did so expressly on the basis that paragraphs 25-35 of the skeleton argument provided by the appellant were arguable. On analysis, those paragraphs contend that interest was chargeable as of right as a result of the provisions of the Solicitors (Non-Contentious) Remuneration Order 1994 and that the Costs Judge had been wrong to deal with the question of interest as a matter of discretion. The argument was based on the assumption that the appellant had an entitlement to interest which was not removed or altered by any other statute. However, before me, the principal submission advanced by the appellant was not linked to this point of principle, but was instead to the effect that the Cost Judge had wrongly exercised his discretion, because he had considered the parties’ conduct for various periods during the assessment itself and decided interest accordingly. It was asserted by Lord Brennan QC on behalf of the appellant that this amounted to double jeopardy and that the appellant had been penalised twice over as a result of this approach.

There was also a separate issue as to the appellant’s failure to pay money into court into an interest-bearing account. More space in the appellant’s skeleton argument produced for the purposes of the hearing of the 23 June 2008 was devoted to that issue than any other.

It has previously been decided that this work was non-contentious, the dispute with BAE having been resolved without proceedings. Thus, on one view, the relevant rules were set out in the Solicitor’s (Non-Contentious) Remuneration Order 1994. The relevant parts of that order are as follows;

“6.

Before a solicitor brings proceedings to recover costs against a client on a bill for non-contentious business he must inform the client in writing of the matters specified in article 8, except where the bill has been taxed.

7(1). If a solicitor deducts his costs from monies held for or on behalf of a client or an estate in satisfaction of a bill and an entitled person objects in writing to the amount of the bill within the prescribed time, the solicitor must immediately inform the entitled person in writing of the matter specified in article 8, unless he has already done so…

8.

When required by article 6 or 7, a solicitor must inform an entitled person in writing of the following matters…

(b)

that sections 70, 71 and 72 of the Solicitors Act 1974 set out the entitled person’s rights in relation to taxation;

(c)

that (where the whole of the bill has not been paid, by deduction or otherwise) the solicitor may charge interest on the outstanding amount of the bill in accordance with article 14…

14(1). After the information specified in article 8 has been given to an entitled person in compliance with article 6 or 7, a solicitor may charge interest on the unpaid amount of its costs or disbursements and value added tax, subject to paragraphs (2) and (3) below.”

The Costs Judge made no mention of the 1994 Order in his judgment of August 2006, and instead dealt with interest under section 35A of the Supreme Court Act 1981. That alleged omission is the principal criticism made of him in the appellant’s original skeleton argument. There are two separate reasons why I consider that this criticism is entirely unjustified.

First, the Costs Judge was never asked to consider interest under the 1994 Order. At no time did the appellant ever suggest that it was entitled to interest as of right pursuant to the articles of that Order. It is therefore hardly surprising that the Costs Judge did not address it.

Secondly, the appellant was quite correct not to make a claim before the Costs Judge pursuant to the 1994 Order. As Mr Browne has comprehensively demonstrated, interest is only due under article 14 of the Order if sufficient notice has been given under articles 6, 7 and particularly 8(c). There was no evidence of any such notice having been given. At one point Lord Brennan QC asserted that the original bill had some pro-forma words on it which referred to the 1994 Order, but the original bill was not produced to the court and this assertion was in any event contested by Mr Browne. Accordingly, on the material before the court, the argument under article 14 simply does not get of the ground: it was not argued before the Costs Judge and it was not applicable anyway, given the appellant’s failure to provide the information specified in article 8.

However, if I was wrong about that, so that the 1994 Order was of relevance, I must then address an important point of principle by which the appellant’s skeleton arguments appeared to set much store. The suggestion was that, under the 1994 Order, interest arose as a matter of right. I reject that contention. If (which did not happen here) a solicitor provides the information identified in articles 6, 7 and 8, then, pursuant to article 14, he “may” charge interest. Thus, so it seems to me, if the matter subsequently comes before a Costs Judge, the Costs Judge too “may” award interest on the unpaid costs. But there is nothing in the Order which makes the award mandatory.

I consider that it is wrong in principle to suggest that the Order gives rise to a mandatory entitlement to interest. There is nothing in the Order which makes such a provision. Furthermore, the common law has viewed awards of interest with a certain amount of suspicion over the years, and both the Supreme Court Act 1981 and the Late Payment of Commercial Debts (Interest) Act 1998 contain provisions pursuant to which interest can be reduced or disallowed altogether at the discretion of the court. There is nothing in the words of this Order which would lead me to operate it in a different way. Thus, to the extent that it matters, I would conclude that an award of interest under article 14 of the 1994 Order is in the discretion of the court and is not a mandatory entitlement.

Accordingly, rather like the situation in respect of the first issue raised by this appeal, the appellant’s alleged point of principle is, on analysis, no such thing. What matters is the Costs Judge’s exercise of his discretion and whether, in all the circumstances, it could be said that such an exercise was wrong in principle. On that point, I remind myself that this court should always be wary about interfering with the exercise of discretion in the court below. In G v G (Minors: Custody Appeal) [1985] 1WLR 647 at 652, Lord Fraser said;

“….. the appellate court should only interfere when they consider that the judge of first instance has not merely preferred an imperfect solution which is different from an alternative imperfect solution which the Court of Appeal might or would have adopted, but has exceeded the generous ambit within which a reasonable disagreement is possible.”

Similarly, in AEI Rediffusion Music Limited v Phonographic Performance Limited [1999] 1WLR 1507 at 1523, Lord Woolf MR said;

“Before the court can interfere it must be shown that the judge has either erred in principle in his approach or has left out of account or has taken into account some feature that he should, or should not, have considered, or that his decision is wholly wrong because the court is forced to the conclusion that he has not balanced various factors fairly in the scale.”

It is only necessary to consider what the Costs Judge did in the instant case by way of interest to see that any attack on the exercise of his discretion would be wholly misconceived. At paragraphs 77-89 of his careful judgment, the Costs Judge embarked on a detailed analysis of the protracted costs assessment hearings, and concluded that, for various periods, and for various factual reasons, the appellant should not be entitled to interest. The parties are broadly agreed that the effect of this was to deprive the appellant of about £9,000 or £10,000, by way of interest.

The Costs Judge was fully entitled to conclude that, in the exercise of his discretion, conduct which he considered to be unsatisfactory, which led to delays in the protracted process in which he had been so closely involved, should be reflected in periods in which no interest was awarded to the appellant. He embarked on a painstaking analysis of the different periods, saying how and why the period in question should or should not attract interest. This was an entirely fair and balanced approach. The appellant has not begun to show that it was somehow erroneous in principle, or that the Costs Judge failed to balance the various factors fairly in the scale; on the contrary, it seems to me that he did just that.

In response to questions from the court, Lord Brennan QC was driven to argue that the exercise of the Costs Judge’s discretion was erroneous because he had penalised the appellant for its conduct in terms of the costs assessment itself and had then penalised them again on interest. Thus, so it was said, the appellant had been penalised twice over for the same events; it was a case of ‘double jeopardy’.

The difficulty with this argument was that the appellant was quite unable to identify any part of the Costs Judge’s assessment where an item of costs had been reduced or disallowed altogether as a result of the same conduct or delay which had given rise to a disallowance of interest for a particular period. Mr Browne submitted that there was no such evidence and that the costs bill had been reduced for reasons which were concerned with the work actually done, the burden of proof and the like, and not because of the conduct of the costs assessment proceedings itself. On the material before me, I accept that submission; there is nothing which could justify any contrary finding.

It is perhaps worth taking as an example one of the periods for which interest was disallowed. It was submitted on behalf of the appellant that it was wrong for the Costs Judge to disallow interest for the period between the 24 November 2004 and 14 January 2005 because the parties were taking steps in relation to the second round of preliminary issues. In fact, as we shall see in Section F below, this was a period in which the appellant was seeking to stay the costs assessment altogether, because it wished to pursue (ultimately unsuccessful) appeals against earlier findings by the Costs Judge. It seems to me that, on that ground alone, the Costs Judge was fully entitled to identify that as a period for which no interest would be recoverable.

The Costs Judge was in a far better position than this court to identify the various elements that made up the protracted period of the costs assessment itself and to work out which elements of that period, if any, should not attract interest. He undertook that exercise carefully. There is no evidence to suggest that he did so on an incorrect view of the facts or on an erroneous legal basis. There are no grounds to interfere with the Costs Judge’s exercise of his discretion. The second ground of this appeal must fail.

As noted in paragraph 42 above, the Costs Judge found that the appellant should have paid the money in court into a interest-bearing account and that the respondent was entitled to set off the interest lost as a result of their failure to do so against any interest due to the appellant. This decision is criticised on the basis that it was a novel finding and that the money in court always belonged to the respondent. It was said that any claim against the appellant would only sound in damages and that the Supreme Courts Costs Office had no jurisdiction to allow claims for damages.

In the light of the history of this case, I ought to express my surprise that this point was persisted in by the appellant. Since it was, I summarise my views as follows:

Furthermore, if that were not enough, I note that no set-off has in fact been applied by the respondent and that any sums would be in the region of a few hundred pounds, because interest on the Courts Office Foreign Account is low. In all those circumstances, I reject this criticism of the Costs Judge.

The costs of the hearing on 5 December 2005 were reserved. Later, on 6 September 2006, the Costs Judge awarded the costs of that hearing to the respondent. Thereafter, further correspondence was brought to his attention and six days later, on 12 September 2006, he modified his order with the consequence that the appellant was obliged to pay half the costs of the hearing, with the other half being in the assessment.

The notice of appeal alleged that it was wrong for the Costs Judge to make the appellant pay any part of the costs of the hearing of 5 December. Originally, it appeared that the appellant was contending that the right order on the 5 December was that costs should be in the assessment. However, in his oral submissions on behalf of the appellant, Lord Brennan QC indicated that the appellant wanted the respondent to pay its costs of that hearing. The basis for that submission was never made clear.

It should also be noted that no point of principle was identified by the appellant as arising in relation to this third ground of appeal. The case was put on the basis that it was “perverse” to conclude that the appellant should pay any part of the costs.

What happened was this. On 10 November 2005, the Costs Judge wrote to the parties to indicate that the concluding part of the detailed assessment would take place on 12 and 13 December 2005. The following day, the appellant informed the Costs Judge that those dates were inconvenient because their principal solicitor was out of the country. Unhelpfully, no alternative dates were offered. On 24 November, the Costs Judge indicated that the replacement dates therefore would be 5 and 6 December. The respondent’s solicitors agreed to those dates. There was no immediate response from the appellant. On 27 November, they wrote to the clerk to the Costs Judge, referring rather cryptically to “the irrefutable factual position” and indicating that they would make a formal application for an adjournment. On 29 November, and only after a chasing letter from the respondent’s solicitors, the appellant said that the dates of 5 and 6 December were inconvenient and again said that they would make an application to the Costs Judge. No details were given. When eventually an application was made on 2 December, it was an application to stay the costs assessment because of an appeal from the Costs Judge’s judgment on the first round of preliminary issues, which appeal was ultimately unsuccessful. The statement provided in support of that application talked of some of the practical difficulties that the appellant had in being ready for the hearing on 5 and 6 December.

At the hearing on 5 December, the respondent made it plain that they were ready to go ahead. The claimant sought a stay and/or adjournment. The Costs Judge considered those applications. He rejected the application for a stay. However, he accepted that, in relation to questions of readiness, there had been a misunderstanding on the part of the appellant and he adjourned the matter to January.

As noted above, he changed his first order, that all of the costs should be borne by the appellant, to an order that they bear one half of the costs of that hearing, because he said that he had not seen the letter of 27 November, which was the appellant’s first formal indication that they needed to make a formal application in relation to the proposed dates of the 5 and 6 December.

On the face of it, therefore, the Costs Judge had to deal with two distinct disputes at the hearing on 5 December. One was the appellant’s application for an adjournment, and Mr Browne properly concedes that, in considering that aspect of the dispute between the parties, the Costs Judge made a number of useful case management directions. Mr Browne therefore accepted that the right order in relation to that part of the hearing was costs in the assessment. However, the other part of the hearing was devoted to the appellant’s application for a stay. That application failed.

The Costs Judge therefore awarded half of the costs of the hearing against the appellant because they had made a formal application for a stay and that application had been rejected. Costs followed the event. There can be no grounds whatsoever for interfering with that order; indeed, on the face of the papers, it seems to me to be entirely right.

On behalf of the appellant, it was submitted that it was perverse to make the appellant pay the costs when the need for an adjournment and the case management directions had arisen out of what the Costs Judge described as a misunderstanding. That argument completely misses the point; the reason for the Costs Judge’s decision to amend his order was because he accepted that the adjournment part of the hearing on 5 December was indeed something which should be dealt with by way of costs in the case. The appellant has consistently failed to realise that the remaining part of the order, that they pay the other half of the costs of that hearing, was wholly justified as a result of their failed application for a stay. Furthermore, as to the Costs Judge’s reference to a ‘misunderstanding’ on which the appellant relied, that was a misunderstanding on the appellant’s part only; it was not shared by the respondent. In addition, no basis was ever outlined by the appellant for the belated suggestion that, somehow, the Costs Judge should have required the respondent to pay the appellant’s costs of that hearing.

Accordingly, the appeal against the order of the 12 September 2006 is misconceived and must fail. Far from being perverse, the Costs Judge’s order was, so it seems to me, entirely right.

For the reasons set out above, I am in no doubt that the Costs Judge approached these lengthy and difficult matters on a proper basis. He was throughout fair and methodical in his consideration of the various issues before him. His approach to the law and to the relevant principles was correct and the exercise of his discretion was beyond criticism. This appeal is therefore dismissed in its entirety.